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1. G.R. No.

199852 November 12, 2014

SPS. FELIPE SOLITARIOS and JULIA TORDA, Petitioners,


vs.
SPS. GASTON JAQUE and LILIA JAQUE, Respondents.

Facts:

In a Complaint for Ownership and Recovery of Possession with the RTC of Calbayog City, the respondents spouses
Jaque alleged that they purchased Lot 4089 from the petitioners, spouses Solitarios in stages. According to respondents,
they initially bought one-half of Lot No. 4089 for ₱7,000.00. This sale is allegedly evidenced by a notarized Deed of Sale
dated May 8, 1981. Two months later, the spouses Solitarios supposedly mortgaged the remaining half of Lot 4089 to the
Jaques via a Real Estate Mortgage (REM) dated July 15, 1981, to securea loan amounting to ₱3,000.00.

After almost two (2) years, the spouses Solitarios finally agreed to sell the mortgaged half. However, instead of executing
a separate deed of sale for the second half, they executed a Deed of Sale dated April 26, 1983 for the whole lot to save
on taxes, by making it appear that the consideration for the sale of the entire lot was only ₱12,000.00 when the Jaques
actually paid ₱19,000.00 in cash and condoned the spouses Solitarios’ ₱3,000.00 loan.

On the basis of this second notarized deed, the Jaques had OCT No. 1249 cancelled and registered Lot 4089 in their
name under Transfer Certificate of Title (TCT) No. 745.

In spite of the sale, the Jaques, supposedly out of pity for the spouses Solitarios, allowed the latter to retain possession of
Lot 4089, subject only to the condition that the spouses Solitarioswill regularly deliver a portion of the property’s produce.
In an alleged breach of their agreement, however, the spouses Solitarios stopped delivering any produce sometime in
2000. Worse, the spouses Solitarios even claimed ownership over Lot 4089. Thus, the Jaques filed the adverted
complaint with the RTC.

For their part, the spouses Solitarios denied selling Lot 4089 and explained that they merely mortgaged the same to the
Jaques after the latter helped them redeem the land from the Philippine National Bank (PNB).

On April 15, 2004, the RTC rendered a Decision2 upholding the validity of the deeds of sale in question and TCT No. 745,
rejecting the allegations of forgery and fraud. However, in the same breath, the RTC declared that what the parties
entered into was actually an equitable mortgage as defined under Article 1602 in relation to Article 1604 of the New Civil
Code, and not a sale. Consequently, the RTC ordered, among others, the reformation of the Deeds ofSale dated May
9,1981 and April 26, 1983, and the cancellation of TCT No. 745 in the name of the Jaques

On appeal, the CA4 reversed and set aside the RTC Decision, rejecting the trial court’s holding that the contract between
the parties constituted an equitable mortgage.

Issue:

Whether the parties effectively entered into a contract of absolute sale or anequitable mortgage of Lot 4089?

Held:

The petition is impressed with merit.

The Court is, therefore, not precluded from looking into the real intentions of the parties in order to resolve the present
controversy. For that reason, the Court takes guidance from Article 1370 of the Civil Code, which instructs that "if the
words [of a contract] appear to be contrary to the evident intention of the parties, the latter shall prevail over the former."
Indeed, it is firmly settled that clarity of contract terms and the name given to it does not bar courts from determining the
true intent of the parties.

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale withright to repurchase is unusually inadequate;

(2) When the vendor remains inpossession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or
granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure
the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall
be considered as interest which shall be subject to the usury laws. 11 Art. 1604. The provisions of Article 1602 shall also
apply to a contract purporting to be an absolute sale.
As evident from Article 1602 itself, the presence of anyof the circumstances set forth therein suffices for a contract to be
deemed an equitable mortgage. No concurrence or an overwhelming number is needed. 12

With the foregoing in mind, We thus declare that the transaction between the parties of the present case is actually one of
equitable mortgage pursuant to the foregoing provisions ofthe Civil Code. It has never denied by respondents that the
petitioners, the spouses Solitarios, have remained in possession of the subject property and exercised acts of ownership
over the said lot even after the purported absolute sale of Lot 4089. This fact is immediately apparent from the testimonies
of the parties and the evidence extant on record, showing that the real intention of the parties was for the transaction to
secure the payment of a debt. Nothing more.

This Court had held that a purportedcontract of sale where the vendor remains in physical possession of the land, as
lessee or otherwise, is an indiciumof an equitable mortgage. 15 In Rockville v. Sps. Culla,16 We explained that the reason
for this rule lies in the legal reality that in a contract of sale, the legal title to the property is immediately transferred to the
vendee. Thus, retention by the vendor of the possession of the property is inconsistent with the vendee’s acquisition of
ownership under a true sale. It discloses, in the alleged vendee, a lack of interest in the property that belies the
truthfulness of the sale.

During the period material to the present controversy, the petitioners, spouses Solitarios, retained actual possession of the
property. This was never disputed. If the transaction had really been one of sale, as the Jaques claim, they should have
asserted their rights for the immediate delivery and possession of the lot instead of allowing the spouses Solitarios to
freely stay in the premises for almost seventeen (17) years from the time of the purported sale until their filing ofthe
complaint. Human conduct and experience reveal that an actual owner of a productive land will not allow the passage of a
long period of time, as in this case, without asserting his rights of ownership.

Not only is there a presumption that the deeds of sale are an equitable mortgage, it has been amply demonstrated by
petitioners that the deed of sale is intended to be one of mortgage based on the proof presented by petitioners and
propped up even by the admissions of respondents. The intention of the parties was for the transaction to secure the
payment of a debt

To stress, Article 1602(6) of the Civil Code provides that a transaction is presumed to be an equitable mortgage:

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure
the payment of a debt or the performance of any other obligation.

This provision may very well be applied in this case. There is sufficient basis to indulge in the presumption that the
transaction between the parties was that of an equitable mortgage and that the spouses Solitarios never wanted to sell
the same to the Jaques.

The foregoing presumption finds support in the following: First, the very testimony of Gaston Jaque and the documents he
presented establish the existence of two loans, which the Jaques extended to the spouses Solitarios, that were secured
by the subject property; and, second, the testimonies of the parties reveal that they came to an agreement as to how
these loans would be paid.

The law favors the least transmission of rights

It is further established that when doubt exists as to the true nature of the parties’ transaction, courts must construe such
transaction purporting to be a sale as an equitable mortgage, as the latter involves a lesser transmission of rights and
interests over the property in controversy. 34 Thus, in several cases, the Court has not hesitated to declare a purported
contract of sale to be an equitable mortgage based solely on one of the enumerated circumstances under Article 1602. So
it should be in the present case.

The only reasonable conclusion that may be derived from the execution of the Deeds of Sale in favor of the Jaques is to
ensure that the Solitarios will pay their obligation.

The transfer of the subject property is a pactum commissorium

Further, We cannot allow the transfer of ownership ofLot 4098 to the Jaques as it would amount to condoning the
prohibited practice of pactum comissorium. Article 2088 of the Civil Code clearly provides that a creditor cannot
appropriate or consolidate ownership over a mortgaged property merely upon failure of the mortgagor to pay a debt
obligation,36 viz.:

Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.

The essence of pactum commissorium is that ownership of the security will pass to the creditor by the mere default of the
debtor. This Court has repeatedly declared such arrangements as contrary to morals and public policy. 37

As We have repeatedly held, the only right of a mortgagee in case of non-payment of debt secured by mortgage would be
to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. The
mortgagor’s default does not operate to automatically vest on the mortgagee the ownership of the encumbered property,
for any such effect is against public policy, as earlier indicated. 38

It does not appear, under the premises, that the Jaques availed themselves of the remedy of foreclosure, or that they
bought the subject property in an auction sale after the spouses Solitarios failed to pay their debt obligation. What seems
clear is that the Jaques took advantage of the spouses Solitarios’ intellectual and educational deficiency and urgent need
of money and made it appear that the latter executed in their favor the questioned Deeds of Sale, thereby automatically
appropriating unto themselves the subject property upon their debtors’ default. The amount reflected in the 1981 Deedof
Sale is telling. The sum of ₱7,000.00 representing the alleged purchase price of one-half of the subject property in the
1981 Deed of Sale is actually the amount advanced to the spouses Solitarios by way of loan. Other than the testimony of
Gaston Jaque, there is no evidence showing that this purchase price was actually paid or that the subject property was
bought in a foreclosure sale.

Further, it can be gleaned from the testimony of Gaston Jaque that when the spouses Solitarios failed to pay their loan of
₱3,000.00, reflected in the July 15, 1981 REM covering the remaining half of the subject property, 41 the Jaques did not
foreclose the mortgage and purchase the said lot in an auction sale. Rather, they supposedly bought the lot directly from
the spouses Solitarios and offset the loan amount against a portion of the supposed purchase price they agreed upon. 42

Indubitably, the subject property was transferred to the Jaques in a prohibited pactum commisorium manner and,
therefore, void. Thus, the foregoing transaction and the registration of the deeds of sale, by virtue of which the Jaques
were able to obtain the impugned TCT No. 745 must be declared void. 43

2. G.R. No. L-45164 March 16, 1987

DOMINICO ETCUBAN, petitioner,


vs.
THE HONORABLE COURT OF APPEALS, JESUS C. SONGALIA & GUADALUPE S. SONGALIA, respondents.

Facts:

Plaintiff inherited a piece of land with an area of approximately 14.0400 hectares together with his co-heirs from their
deceased father. Said piece of land was declared in their names as heirs of Eleuterio Etcuban under Tax Declaration No.
06837 and was the subject matter in dispute in SP No. 1192-R, of the Court of First Instance of Cebu, a case for the
settlement of the estate of the late Eleuterio Etcuban In said case, petitioner Dominico Etcuban the spouse of the decease
Demetria Initan and Pedro, Vicente, Felicitas, Anastacio, Froilan, Alfonso, Advincula, Anunciaciori Jesus, Aguinaldo,
surnamed Etcuban were declared as co-owners of the property in question. Thereafter the 11 co-heirs executed in favor of
defendants (private respondents herein) 11 deeds of sale of their respective shares in the co-ownership for the total sum
of P26,340.00. It is not disputed that the earliest of the 11 deeds of sale was made on December 9, 1963 and the last one
in December 1967. (Annexes " 1-11 ").

In his complaint before the trial court, plaintiff alleged that his co-owners leased and/or sold their respective shares without
giving due notice to him as a co-owner notwithstanding his intimations to them that he was willing to buy all their
respective shares. He further maintained that even upon inquiry from his co-heirs/co-owners, and also from the alleged
buyers (defendants) he elicited nothing from them. Plaintiff discovered for the first time the existence of these 11 deeds of
sale during the hearing on January 31, 1972 of Civil Case No. BN-87, entitled Jesus C. Songalia vs. Dominico ETCUBAN
in the Court of First Instance of Cebu, Branch XI. When he verified the supposed sales with his co-owners only 3 of them
admitted their respective sales. Hence, the filing of Civil Case No.BN-109 by petitioner for legal redemption.

Defendants (private respondents herein) in denying the material allegations of the complaint, argued by way of affirmative
and special defenses that plaintiff has no cause of petition against them; that the action is barred by prescription or laches;
that the complaint is barred by the pendency of Civil Case No. BN-87 involving the same parties, same subject matter and
same cause of action; that the provisions of the law pertaining to legal redemption have been fully complied with in
respect to the sale of the disputed land to them; that plaintiff came to know of the sale of the land in question to them in
August, 1968 or sometime prior thereto; that acting on this knowledge, plaintiff thru his lawyers wrote defendants on
August 15, 1968 about the matter; that Jesus Songalia personally went to the office of Atty. Vicente Faelner or counsel for
plaintiff to inform him of the sale of the disputed land to them; that again another demand letter was received on May 30,
1969 by defendants from the lawyers of plaintiff but on both occasions, no action was taken by plaintiff despite the
information plaintiff received from defendants thru his counsel and that consequently plaintiff lost his right to redeem under
Art. 1623 of the new Civil Code because the right of redemption may be exercised only within 30 days from notice of sale
and plaintiff was definitely notified of the sale years ago as shown by the records.

During the pre-trial conference, the parties failed to agree on any stipulation of facts. Judgment was rendered after due
trial with the following dispositive portion:

WHEREFORE, JUDGMENT is hereby rendered in favor of the plaintiff and against the defendants as follows.

1. Allowing the plaintiff to exercise his right of redemption over the land in question;

2. Ordering the defendants to accept the redemption price of P26,340.00 which plaintiff should deposited with this Court
within 30 days from and after this decision becomes final and executory and thereafter to execute a deed of reconveyance
in favor of the plaintiff and to surrender the possession and ownership of the property in question to the plaintiff; and

3. The defendants are ordered to pay the costs.

Defendants appealed to the Court of Appeals assigning several errors but the appellate court centered its dissertation on
the first assignment of error as the issue to be most decisive and, therefore confined its discussion to it.

Defendants in their first assignment of error assailed the lower court in not holding that the failure of the plaintiff-appellee
to tender to the defendants-appellants the redemption price or to consign the same in court or to make a specific offer to
redeem the property before filing the complaint for legal redemption has barred the appellee's right to redeem the property
pursuant to the doctrine of the Supreme court in Conejero vs. Court of Appeals (16 SCRA 775).

Held:
The appellate court in tackling this issue declared that plaintiff failed to make a valid tender of the sale price of the land
paid by the defendants within the period fixed by Art. 1623 of the Civil Code which provides as follows:

ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty (30) days from the
notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded
in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners.

The right of redemption of co-owners excludes that of adjoining owners. (1524a)

The respondent court found that written notice was given to plaintiff-appellee in the form of an answer with counterclaim to
the complaint in Civil Case No. BN-109 which appears on the records to have been filed on March 18, 1972. Said court
ruled that "this notice is sufficient to inform the plaintiff about the sale and the reckoning date for the 30-day period
commenced upon receipt thereof. No other notice is needed under the premises because it is the substance conveyed
rather than the form embodying it, that counts.

The records reveal that on May 27, 1974, plaintiff-appellee deposited with the lower court the amount of P26,340.00 the
redemption price. Since the answer with counterclaim was filed on March 18, 1972, the deposit made on May 27, 1974
was clearly outside the 30-day period of legal redemption. The period within which the right of legal redemption or
preemption may be exercised is non-extendible.

Petitioner contends that vendors (his co-heirs) should be the ones to give him written notice and not the vendees
(defendants or private respondent herein) citing the case of Butte vs. Manuel Uy & Sons, Inc., 4 SCRA 526. Such
contention is of no moment. While it is true that written notice is required by the law (Art. 1623), it is equally true that the
same "Art. 1623 does not prescribe any particular form of notice, nor any distinctive method for notifying the redemptioner.
"So long, therefore, as the latter is informed in writing of the sale and the particulars thereof, the 30 days for redemption
start running, and the redemptioner has no real cause to complain. (De Conejero et al v. Court of Appeals, et al., 16 SCRA
775). In the Conejero case, We ruled that the furnishing of a copy of the disputed deed of sale to the redemptioner, was
equivalent to the giving of written notice required by law in "a more authentic manner than any other writing could have
done," and that We cannot adopt a stand of having to sacrifice substance to technicality. More so in the case at bar, where
the vendors or co-owners of petitioner stated under oath in the deeds of sale. (Annexes "1" to "11 ") that notice of sale had
been given to prospective redemptioners in accordance with Art. 1623 of the Civil Code. "A sworn statement or clause in a
deed of sale to the effect that a written notice of sale was given to possible redemptioners or co-owners might be used to
determine whether an offer to redeem was made on or out of time, or whether there was substantial compliance with the
requirement of said Art. 1623. 2

In resume, We find that petitioner failed to substantially comply with the requirements of Art. 1623 on legal redemption and
We see no reason to reverse the assailed decision of the respondent court.

WHEREFORE, premises considered, the petition is hereby DISMISSED and the appealed decision is hereby AFFIRMED.

SO ORDERED.

3. G.R. No. 137677 May 31, 2000

ADALIA B. FRANCISCO, petitioner,


vs.
ZENAIDA F. BOISER, respondent.

Facts:

Petitioner Adalia B. Francisco and three of her sisters, Ester, Elizabeth and Adeluisa, were co-owners of four parcels of
registered lands1 on which stands the Ten Commandments Building at 689 Rizal Avenue Extension, Caloocan City. On
August 6, 1979, they sold 1/5 of their undivided share in the subject parcels of land to their mother, Adela Blas, for
P10,000.00, thus making the latter a co-owner of said real property to the extent of the share sold.

On August 8, 1986, without the knowledge of the other co-owners, Adela Blas sold her 1/5 share for P10,000.00 to
respondent Zenaida Boiser who is another sister of petitioner.

On August 5, 1992, petitioner received summons, with a copy of the complaint in Civil Case No. 15510, filed by
respondent demanding her share in the rentals being collected by petitioner from the tenants of the building. Petitioner
then informed respondent that she was exercising her right of redemption as a co-owner of the subject property. On
August 12, 1992, she deposited the amount of P10,000.00 as redemption price with the Clerk of Court. This move to
redeem the property was interposed as a permissive counterclaim in Civil Case No. 15510. However, said case was
dismissed after respondent was declared non-suited with the result that petitioner's counterclaim was likewise dismissed.

On September 14, 1995, petitioner instituted Civil Case No. C-17055 before the Regional Trial Court in Caloocan City.
She alleged that the 30-day period for redemption under Art. 1623 of the Civil Code had not begun to run against her
since the vendor, Adela Blas, never informed her and the other owners about the sale to respondent. She learned about
the sale only on August 5, 1992, after she received the summons in Civil Case No. 15510, together with the complaint.

Respondent, on the other hand, contended that petitioner knew about the sale as early as May 30, 1992, because, on that
date, she wrote petitioner a letter 2 informing the latter about the sale, with a demand that the rentals corresponding to her
1/5 share of the subject property be remitted to her. Said letter was sent with a copy of the Deed of Sale 3 between
respondent and Adela Blas. On the same date, letters 4 were likewise sent by respondent to the tenants of the building,
namely, Seiko Service Center and Glitters Corporation, informing them of the sale and requesting that, thenceforth, they
pay 1/5 of the monthly rentals to respondent. That petitioner received these letters is proved by the fact that on June 8,
1992, she wrote5 the building's tenants advising them to disregard respondent's request and continue paying full rentals
directly to her.

Issue:

Whether the letter of May 30, 1992 sent by respondent to petitioner notifying her of the sale on August 8, 1986 of Adela
Blas' 1/5 share of the property to respondent, containing a copy of the deed evidencing such sale, can be considered
sufficient as compliance with the notice requirement of Art. 1623 for the purpose of legal redemption?

Whether a notice sent by the vendee may be given in lieu of that required to be given by the vendor or prospective
vendor?

Held:

Art. 1623 of the Civil Code provides:

The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by
the prospective vendor, or by the vendor, as the case maybe. The deed of sale shall not be recorded in the Registry of
Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible
redemptioners.

The right of redemption of co-owners excludes that of adjoining owners.

The reasons for requiring that the notice should be given by the seller, and not by the buyer, are easily divined. The seller
of an undivided interest is in the best position to know who are his co-owners that under the law must be notified of the
sale. Also, the notice by the seller removes all doubts as to fact of the sale, its perfection, and its validity, the notice being
a reaffirmation thereof; so that that party notified need not entertain doubt that the seller may still contest the alienation.
This assurance would not exist if the notice should be given by the buyer.

In the case at bar, the plaintiffs have not been furnished any written notice of sale or a copy thereof by Eufemia Omole,
the vendor. Said plaintiffs' right to exercisethe legal right of preemption or redemption, given to a co-owner when any one
of the other co-owners sells his share in the thing owned in common to a third person, as provided for in Article 1623 of
the Civil Code, has not yet accrued.

Now, it is clear that by not immediately notifying the co-owner, a vendor can delay or even effectively prevent the
meaningful exercise of the right of redemption. In the present case, for instance, the sale took place in 1986, but it was
kept secret until 1992 when vendee (herein respondent) needed to notify petitioner about the sale to demand 1/5 rentals
from the property sold. Compared to serious prejudice to petitioner's right of legal redemption, the only adverse effect to
vendor Adela Blas and respondent-vendee is that the sale could not be registered. It is non-binding, only insofar as third
persons are concerned. 17 It is, therefore, unjust when the subject sale has already been established before both lower
courts and now, before this Court, to further delay petitioner's exercise of her right of legal redemption by requiring that
notice be given by the vendor before petitioner can exercise her right. For this reason, we rule that the receipt by
petitioner of summons in Civil Case No. 15510 on August 5, 1992 constitutes actual knowledge on the basis of which
petitioner may now exercise her right of redemption within 30 days from finality of this decision.

In the present case, as previously discussed, receipt by petitioner of summons in Civil Case No. 15510 on August 5, 1992
amounted to actual knowledge of the sale from which the 30-day period of redemption commenced to run. Petitioner had
until September 4, 1992 within which to exercise her right of legal redemption, but on August 12, 1992 she deposited the
P10,000.00 redemption price. As petitioner's exercise of said right was timely, the same should be given effect.

4. G.R. No. 202358 November 27, 2013

GATCHALIAN REALTY, INC., Petitioner,


vs.
EVELYN M. ANGELES, Respondent.

Facts:

On 28 December 1994, [Angeles] purchased a house (under Contract to Sell No. 2272) and lot (under Contract to Sell No.
2271) from [GRI] valued at Seven Hundred Fifty Thousand Pesos (Php 750,000.00) and Four Hundred Fifty Thousand
Pesos (Php 450,000.00), respectively, with twenty-four percent (24%) interest per annum to be paid by installment within a
period of ten years.

The house and lot were delivered to [Angeles] in 1995. Nonetheless, under the contracts to sell executed between the
parties, [GRI] retained ownership of the property until full payment of the purchase price.

After sometime, [Angeles] failed to satisfy her monthly installments with [GRI]. [Angeles] was only able to pay thirty-five
(35) installments for Contract to Sell No. 2271 and forty-eight (48) installments for Contract to Sell No. 2272. According to
[GRI], [Angeles] was given at least twelve (12) notices for payment in a span of three (3) years but she still failed to settle
her account despite receipt of said notices and without any valid reason. [Angeles] was again given more time to pay her
dues and likewise furnished with three (3) notices reminding her to pay her outstanding balance with warning of
impending legal action and/or rescission of the contracts, but to no avail. After giving a total of fifty-one (51) months grace
period for both contracts and in consideration of the continued disregard of the demands of [GRI], [Angeles] was served
with a notice of notarial rescission dated 11 September 2003 by registered mail which she allegedly received on 19
September 2003 as evidenced by a registry return receipt.
Consequently [Angeles] was furnished by [GRI] with a demand letter dated 26 September 2003 demanding her to pay the
amount of One Hundred Twelve Thousand Three Hundred Four Pesos and Forty Two Centavos (Php 112,304.42) as
outstanding reasonable rentals for her use and occupation of the house and lot as of August 2003 and to vacate the
same. She was informed in said letter that the fifty percent (50%) refundable amount that she is entitled to has already
been deducted with the reasonable value for the use of the properties or the reasonable rentals she incurred during such
period that she was not able to pay the installments due her. After deducting the rentals from the refundable amount, she
still had a balance of One Hundred Twelve Thousand Three Hundred Four Pesos and Forty Two Centavos (Php
112,304.42) which she was required to settle within fifteen (15) days from receipt of the letter.

Allegedly, [Angeles] subsequently sent postal money orders through registered mail to [GRI]. In a letter dated 27 January
2004 [Angeles] was notified by [GRI] of its receipt of a postal money order sent by [Angeles]. More so, she was requested
to notify [GRI] of the purpose of the payment. [Angeles] was informed that if the postal money order was for her monthly
amortization, the same will not be accepted and she was likewise requested to pick it up from [GRI’s] office. On 29
January 2004, another mail with a postal money order was sent by [Angeles] to [GRI]. In her 6 February 2004 letter, [GRI]
was informed that the postal money orders were supposed to be payments for her monthly amortization. Again, in its 8
February 2004 letter, it was reiterated by [GRI] that the postal money orders will only be accepted if the same will serve as
payment of her outstanding rentals and not as monthly amortization. Four (4) more postal money orders were sent by
[Angeles] by registered mail to [GRI].

For her continued failure to satisfy her obligations with [GRI] and her refusal to vacate the house and lot, [GRI] filed a
complaint for unlawful detainer against [Angeles] on 11 November 2003. 8

The MeTC of Branch 79, Las Piñas City ruled in favor of GRI. The MeTC determined that the case was for an unlawful
detainer, and thus assumed jurisdiction.

Angeles’ appeal before Branch 197 of the Las Piñas RTC initially produced a result favorable to her. The RTC found that
the case was one for ejectment. As an ejectment court, the MeTC’s jurisdiction is limited only to the issue of possession
and does not include the title or ownership of the properties in question.

The RTC pointed out that Republic Act No. 6552 (R.A. 6552) provides that the non-payment by the buyer of an installment
prevents the obligation of the seller to convey title from acquiring binding force. Moreover, cancellation of the contract to
sell may be done outside the court when the buyer agrees to the cancellation. In the present case, Angeles denied
knowledge of GRI’s notice of cancellation. Cancellation of the contract must be done in accordance with Section 3 of R.A.
6552, which requires a notarial act of rescission and refund to the buyer of the cash surrender value of the payments on
the properties. Thus, GRI cannot insist on compliance with Section 3(b) of R.A. 6552 by applying Angeles’ cash surrender
value to the rentals of the properties after Angeles failed to pay the installments due. Contrary to the MeTC’s ruling, there
was no legal compensation between GRI and Angeles.

The CA dismissed GRI’s complaint for unlawful detainer, and reversed and set aside the RTC’s decision. Although the CA
ruled that Angeles received the notice of notarial rescission, it ruled that the actual cancellation of the contract between
the parties did not take place because GRI failed to refund to Angeles the cash surrender value. The CA denied GRI’s
motion for reconsideration.

Issue:

The court a quo committed reversible error when it declared that there was no refund of the cash surrender value in favor
of [Angeles] pursuant to R.A. No. 6552; and

The court a quo erred in holding that the actual cancellation of the contract between the parties did not take place. 18

Held:

GRI’s petition has no merit. We affirm the ruling of the CA with modification.

Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment Buyer Protection Act, has the declared
public policy of "protecting buyers of real estate on installment payments against onerous and oppressive
conditions."19 Section 3 of R.A. 6552 provides for the rights of a buyer who has paid at least two years of installments but
defaults in the payment of succeeding installments. Section 3 reads:

Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including
residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred
eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case
he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is
hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this
right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per
cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total number of installment
payments made.

The sixth paragraph of the contracts between Angeles and GRI similarly provides:

SIXTH - Should the VENDEE/S fail to pay due any monthly installment the VENDOR shall have the right to cancel this
Contract and resell the lot/s subject matter of this contract to another buyer, provided, however, that where the VENDEE/S
has/have already paid at least two years of installments, the VENDEE/S will have the right:

a) to pay without additional interest, the installments in arrears within the total grace period earned by him/her/them which
is hereby fixed at the rate of one (1) month grace period for every one (1) year of installment payment made, but this right
can be exercised by the VENDEE/S only once in every five (5) years of the life of this contract and its extension, if any,
and

b) if the contract is cancelled, the VENDOR shall refund to the VENDEE/S the cash surrender value of the payments
made on the lot/s equivalent to fifty per cent (50%) of the total payments made, and after five (5) years of installment, an
additional five per cent (5%) every year but not to exceed ninety per cent (90%) of the total payments made; Provided,
that the actual cancellation of the contract shall take place after thirty (30) days from the receipt by the VENDEE/S of the
notice of cancellation or the demand for rescission of the contract by a notarial act upon full payment of the cash
surrender value to the VENDEE/S; where, however, the VENDEE/S has/have paid less than two (2) years of installments,
the VENDOR shall give the VENDEE/S [a] grace period of sixty (60) days from the date the installment became due; and
if the VENDEE/S fail/s to pay the installment due after the expiration of the grace period, the VENDOR may cancel the
contract after thirty (30) days from receipt by the VENDEE/S of the notice of cancellation or the demand for rescission of
the contract by a notarial act; and in case of cancellation and/or rescission of this contract, all improvements on the lot/s
above-described shall be forfeited in favor of the VENDOR, and in this connection, the VENDEE/S obligate/s
himself/herself/themselves to peacefully vacate the premises mentioned above without necessity of notice or demand by
the VENDOR.20

Grace Period

It should be noted that Section 3 of R.A. 6552 and paragraph six of Contract Nos. 2271 and 2272, speak of "two years of
installments." The basis for computation of the term refers to the installments that correspond to the number of months of
payments, and not to the number of months that the contract is in effect as well as any grace period that has been given.
Both the law and the contracts thus prevent any buyer who has not been diligent in paying his monthly installments from
unduly claiming the rights provided in Section 3 of R.A. 6552.

The MeTC, the RTC, and the CA all found that Angeles was able to pay 35 installments for the lot (Contract No. 2271) and
48 installments for the house (Contract No. 2272). 21 Angeles thus made installment payments for less than three years on
the lot, and exactly four years on the house.

Section 3(a) of R.A. 6552 provides that the total grace period corresponds to one month for every one year of installment
payments made, provided that the buyer may exercise this right only once in every five years of the life of the contract and
its extensions. The buyer’s failure to pay the installments due at the expiration of the grace period allows the seller to
cancel the contract after 30 days from the buyer’s receipt of the notice of cancellation or demand for rescission of the
contract by a notarial act. Paragraph 6(a) of the contract gave Angeles the same rights.

Both the RTC and the CA found that GRI gave Angeles an accumulated grace period of 51 months. 22 This extension went
beyond what was provided in R.A. 6552 and in their contracts.

Receipt of the Notice of Notarial Rescission

The registry return of the registered mail is prima facie proof of the facts indicated therein. 23 Angeles failed to present
contrary evidence to rebut this presumption with competent and proper evidence. To establish its claim of service of the
notarial rescission upon Angeles, GRI presented the affidavit of its liaison officer Fortunato Gumahad, 24 the registry receipt
from the Greenhills Post Office,25 and the registry return receipt.26 We affirm the CA’s ruling that GRI was able to
substantiate its claim that it served Angeles the notarial rescission sent through registered mail in accordance with the
requirements of R.A. 6552.

Actual Cancellation of the Contracts

There was no actual cancellation of the contracts because of GRI’s failure to actually refund the cash surrender value to
Angeles.

Cancellation of the contracts for the house and lot was contained in a notice of notarial rescission dated 11 September
2003.31 The registry return receipts show that Angeles received this notice on 19 September 2003. 32GRI’s demand for
rentals on the properties, where GRI offset Angeles’ accrued rentals by the refundable cash surrender value, was
contained in another letter dated 26 September 2003. 33 The registry return receipts show that Angeles received this letter
on 29 September 2003.34 GRI filed a complaint for unlawful detainer against Angeles on 11 November 2003, 61 days after
the date of its notice of notarial rescission, and 46 days after the date of its demand for rentals. For her part, Angeles sent
GRI postal money orders in the total amount of ₱120,000. 35

The MeTC ruled that it was proper for GRI to compensate the rentals due from Angeles’ occupation of the property from
the cash surrender value due to Angeles from GRI. The MeTC stated that compensation legally took effect in accordance
with Article 1290 of the Civil Code, which reads: "When all the requisites mentioned in Article 1279 are present,
compensation takes effect by operation of law and extinguishes both debts to the concurrent amount, even though the
creditors and debtors are not aware of the compensation." In turn, Article 1279 of the Civil Code provides:
In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist of a sum of money, or if the things due are consumable, they be of the same kind, and also of
the same quality if the latter has been stated;

(3) That the two debts are due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in
due time to the debtor.

However, it was error for the MeTC to apply Article 1279 as there was nothing in the contracts which provided for the
amount of rentals in case the buyer defaults in her installment payments. The rentals due to GRI were not liquidated. GRI,
in its letter to Angeles dated 26 September 2003, unilaterally imposed the amount of rentals, as well as an annual 10%
increase.

This Court has been consistent in ruling that a valid and effective cancellation under R.A. 6552 must comply with the
mandatory twin requirements of a notarized notice of cancellation and a refund of the cash surrender value.

In view of the absence of a valid cancellation, the Contract to Sell between GRI and Angeles remains valid and subsisting.

We observe that this case has, from the institution of the complaint, been pending with the courts for 10 years. As both
parties prayed for the issuance of reliefs that are just and equitable under the premises, and in the exercise of our
discretion, we resolve to dispose of this case in an equitable manner. Considering that GRI did not validly rescind
Contracts to Sell Nos. 2271 and 2272, Angeles has two options:

1. The option to pay, within 60 days from the MeTC’s determination of the proper amounts, the unpaid balance of the full
value of the purchase price of the subject properties plus interest at 6% per annum from 11 November 2003, the date of
filing of the complaint, up to the finality of this Decision, and thereafter, at the rate of 6% per annum. 43 Upon payment of
the full amount, GRI shall immediately execute Deeds of Absolute Sale over the subject properties and deliver the
corresponding transfer certificate of title to Angeles.

In the event that the subject properties are no longer available, GRI should offer substitute properties of equal
value. Acceptance of the suitability of the substitute properties is Angeles’ sole prerogative. Should Angeles refuse the
substitute properties, GRI shall refund to Angeles the actual value of the subject properties with 6% interest per
annum44 computed from 11 November 2003, the date of the filing of the complaint, until fully paid; and

2. The option to accept from GRI ₱574,148.40, the cash surrender value of the subject properties, with interest at 6% per
annum,45 computed from 11 November 2003, the date of the filing of the complaint, until fully paid. Contracts to Sell Nos.
2271 and 2272 shall be deemed cancelled 30 days after Angeles’ receipt of GRI’s full payment of the cash surrender
value. No rent is further charged upon Angeles as GRI already had possession of the subject properties on 10 October
2006.

5. G.R. No. 131679 February 1, 2000

CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST COMPANY, petitioners,
vs.
SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS, respondents.

Facts:

Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are banking institutions
duly organized and existing under Philippine laws. On or about June 15, 1983, a certain Rodolfo Guansing obtained a
loan in the amount of P90,000.00 from CDB, to secure which he mortgaged a parcel of land situated at No. 63 Calavite
Street, La Loma, Quezon City and covered by TCT No. 300809 registered in his name. As Guansing defaulted in the
payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15, 1984, the mortgaged
property was sold to CDB as the highest bidder. Guansing failed to redeem, and on March 2, 1987, CDB consolidated title
to the property in its name. TCT No. 300809 in the name of Guansing was cancelled and, in lieu thereof, TCT No. 355588
was issued in the name of CDB.

On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios Gatpandan, offered to
purchase the property from CDB. The written Offer to Purchase, signed by Lim and Gatpandan, states in part:

We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma, Quezon City for P300,000.00 under
the following terms and conditions:

(1) 10% Option Money;

(2) Balance payable in cash;

(3) Provided that the property shall be cleared of illegal occupants or tenants.
Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option Money, for which she
was issued Official Receipt No. 3160, dated June 17, 1988, by CDB. However, after some time following up the sale, Lim
discovered that the subject property was originally registered in the name of Perfecto Guansing, father of mortgagor
Rodolfo Guansing, under TCT No. 91148. Rodolfo succeeded in having the property registered in his name under TCT
No. 300809, the same title he mortgaged to CDB and from which the latter's title (TCT No. 355588) was derived. It
appears, however, that the father, Perfecto, instituted Civil Case No. Q-39732 in the Regional Trial Court, Branch 83,
Quezon City, for the cancellation of his son's title. On March 23, 1984, the trial court rendered a decision 2 restoring
Perfecto's previous title (TCT No. 91148) and cancelling TCT No. 300809 on the ground that the latter was fraudulently
secured by Rodolfo. This decision has since become final and executory.

Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company, FEBTC, on their ability
to sell the subject property, Lim, joined by her husband, filed on August 29, 1989 an action for specific performance and
damages against petitioners in the Regional Trial Court, Branch 96, Quezon City, where it was docketed as Civil Case No.
Q-89-2863. On April 20, 1990, the complaint was amended by impleading the Register of Deeds of Quezon City as an
additional defendant.

On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses.

Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in toto the decision of the
Regional Trial Court. Petitioners moved for reconsideration, but their motion was denied by the appellate court on
December 9, 1997. Hence, this petition.

Issue:

Whether or not the money paid is option money or earnest money?

Held:

The contention has no merit. Contracts are not defined by the parries thereto but by principles of law. 6 In determining the
nature of a contract, the courts are not bound by the name or title given to it by the contracting parties. 7 In the case at bar,
the sum of P30,000.00, although denominated in the offer to purchase as "option money," is actually in the nature of
earnest money or down payment when considered with the other terms of the offer. In Carceler v. Court of Appeals,8 we
explained the nature of an option contract, viz. —

An option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified
conditions, the power to decide, whether or not to enter into a principal contract, it binds the party who has given the
option not to enter into the principal contract with any other person during the period; designated, and within that period, to
enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a
separate agreement distinct from the contract to which the parties may enter upon the consummation of the option.

An option contract is therefore a contract separate from and preparatory to a contract of sale which, if perfected, does not
result in the perfection or consummation of the sale. Only when the option is exercised may a sale be perfected.

In this case, however, after the payment of the 10% option money, the Offer to Purchase provides for the payment only of
the balance of the purchase price, implying that the "option money" forms part of the purchase price. This is precisely the
result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually
entered into a contract of sale, partially consummated as to the payment of the price.

Given CDB's acceptance of Lim's offer to purchase, it appears that a contract of sale was perfected and, indeed, partially
executed because of the partial payment of the purchase price. There is, however, a serious legal obstacle to such sale,
rendering it impossible for CDB to perform its obligation as seller to deliver and transfer ownership of the property.

Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not have. In applying this
precept to a contract of sale, a distinction must be kept in mind between the "perfection" and "consummation" stages of
the contract.

A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price.10 It is, therefore, not required that, at the perfection stage, the seller be the owner of the thing sold or
even that such subject matter of the sale exists at that point in time. 11 Thus, under Art. 1434 of the Civil Code, when a
person sells or alienates a thing which, at that time, was not his, but later acquires title thereto, such title passes by
operation of law to the buyer or grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of the
Civil Code.However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is required that the
seller be the owner of the thing sold. Otherwise, he will not be able to comply with his obligation to transfer ownership to
the buyer. It is at the consummation stage where the principle of nemo dat quod non habet applies.

In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing must, therefore, be deemed
a nullity for CDB did not have a valid title to the said property. To be sure, CDB never acquired a valid title to the property
because the foreclosure sale, by virtue of which, the property had been awarded to CDB as highest bidder, is likewise
void since the mortgagor was not the owner of the property foreclosed.

A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of the Civil Code, under
which the mortgagor in default, the forced seller, becomes obliged to transfer the ownership of the thing sold to the
highest bidder who, in turn, is obliged to pay therefor the bid price in money or its equivalent. Being a sale, the rule that
the seller must be the owner of the thing sold also applies in a foreclosure sale. This is the reason Art. 2085 16 of the Civil
Code, in providing for the essential requisites of the contract of mortgage and pledge, requires, among other things, that
the mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in anticipation of a possible
foreclosure sale should the mortgagor default in the payment of the loan.
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his
title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public
policy. This is the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property
covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the
face of the title.17 The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful
ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what
appears on the face of the certificate of title.

This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to make a detailed
investigation of the history of the title of the property given as security before accepting a mortgage.

We are not convinced, however, that under the circumstances of this case, CDB can be considered a mortgagee in good
faith. While petitioners are not expected to conduct an exhaustive investigation on the history of the mortgagor's title, they
cannot be excused from the duty of exercising the due diligence required of banking institutions. In Tomas v. Tomas,18 we
noted that it is standard practice for banks, before approving a loan, to send representatives to the premises of the land
offered as collateral and to investigate who are real owners thereof, noting that banks are expected to exercise more care
and prudence than private individuals in their dealings, even those involving registered lands, for their business is affected
with public interest.

In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the validity of Rodolfo Guansing's
title. It appears that Rodolfo Guansing obtained his fraudulent title by executing an Extra-Judicial Settlement of the Estate
With Waiver where he made it appear that he and Perfecto Guansing were the only surviving heirs entitled to the property,
and that Perfecto had waived all his rights thereto. This self-executed deed should have placed CDB on guard against any
possible defect in or question as to the mortgagor's title. Moreover, the alleged ocular inspection report 20 by CDB's
representative was never formally offered in evidence. Indeed, petitioners admit that they are aware that the subject land
was being occupied by persons other than Rodolfo Guansing and that said persons, who are the heirs of Perfecto
Guansing, contest the title of Rodolfo.21

We now come to the civil effects of the void contract of sale between the parties. Article 1412(2) of the Civil Code
provides:

If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall
be observed:

xxx xxx xxx

(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or
ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he
has given without any obligation to comply with his promise.

Private respondents are thus entitled to recover the P30,000,00 option money paid by them. Moreover, since the filing of
the action for damages against petitioners amounted to a demand by respondents for the return of their money, interest
thereon at the legal rate should be computed from August 29, 1989, the date of filing of Civil Case No. Q-89-2863, not
June 17, 1988, when petitioners accepted the payment. This is in accord with our ruling in Castillo v. Abalayan24 that in
case of avoid sale, the seller has no right whatsoever to keep the money paid by virtue thereof and should refund it, with
interest at the legal rate, computed from the date of filing of the complaint until fully paid. Indeed, Art. 1412(2) which
provides that the non-guilty party "may demand the return of what he has given" clearly implies that without such prior
demand, the obligation to return what was given does not become legally demandable.

6. G.R. No. 199648 January 28, 2015

FIRST OPTIMA REALTY CORPORATION, Petitioner,


vs.
SECURITRON SECURITY SERVICES, INC., Respondent.

Facts:

Petitioner First Optima Realty Corporation is a domestic corporation engaged in the real estate business. It is the
registered owner of a 256-square meter parcel of land with improvements located in Pasay City, covered by Transfer
Certificate of Title No. 125318 (the subject property). 6 Respondent Securitron Security Services, Inc., on the other hand, is
a domestic corporation with offices located beside the subject property.

Looking to expand its business and add toits existing offices, respondent – through its General Manager, Antonio Eleazar
(Eleazar) – sent a December 9, 2004 Letter 7 addressed to petitioner – through its Executive Vice-President, Carolina T.
Young (Young) – offering to purchase the subject property at ₱6,000.00 per square meter. A series of telephone calls
ensued, but only between Eleazar and Young’s secretary; 8 Eleazar likewise personally negotiated with a certain Maria
Remoso (Remoso), who was an employee of petitioner. 9 At this point, Eleazar was unable to personally negotiate with
Young or the petitioner’s board of directors.

Sometime thereafter, Eleazar personally went to petitioner’s office offering to pay for the subject property in cash, which
he already brought with him. However, Young declined to accept payment, saying that she still needed to secure her
sister’s advice on the matter.10 She likewise informed Eleazar that prior approval of petitioner’s Board of Directors was
required for the transaction, to which remark Eleazar replied that respondent shall instead await such approval. 11

On February 4, 2005, respondent sent a Letter 12 of even date to petitioner. It was accompanied by Philippine National
Bank Check No. 24677 (the subject check), issued for ₱100,000.00 and made payable to petitioner.
Despite the delicate nature of the matter and large amount involved, respondent did not deliver the letter and check
directly to Young or her office; instead, they were coursed through an ordinary receiving clerk/receptionist of the petitioner,
who thus received the same and therefor issued and signed Provisional Receipt No. 33430.

The check was eventually deposited with and credited to petitioner’s bank account.

Thereafter, respondent through counsel demanded in writing that petitioner proceed with the sale of the property. 16In a
March 3, 2006 Letter17 addressed to respondent’s counsel, petitioner wrote back:

Dear Atty. De Jesus:

Anent your letter dated January 16, 2006 received on February 20, 2006, please be informed of the following:

1. It was your client SECURITRON SECURITY SERVICES, INC. represented by Mr. Antonio Eleazar who offered to buy
our property located at corner Layug and Lim-An St., Pasay City;

2. It tendered an earnest money despite the fact that we are still undecided to sell the said property;

3. Our Board of Directors failed to pass a resolution to date whether it agrees to sell the property;

4. We have no Contract for the earnest money nor Contract to Sell the said property with your client;

Considering therefore the above as well as due to haste and demands which we feel [are forms] of intimidation and
harassment, we regret to inform you that we are now incline (sic) not to accept your offer to buy our property. Please
inform your client to coordinate with us for the refund of this (sic) money.

Very truly yours,

(signed)
CAROLINA T. YOUNG
Executive Vice[-]President18

On April 18, 2006, respondent filed with the Pasay RTC a civil case against petitioner for specific performance with
damages to compel the latter to consummate the supposed sale of the subject property.

In ruling for the respondent, the trial court held that petitioner’s acceptance of ₱100,000.00 earnest money indicated the
existence of a perfected contract of sale between the parties; that there is no showing that when respondent gave the
February 4, 2005 letter and check to petitioner’s receiving clerk, the latter was harassed or forced to accept the same; and
that for the sale of the subject property, no resolution of petitioner’s board of directors was required since Young was "free
to represent" the corporation in negotiating with respondent for the sale thereof.

On September 30, 2011, the CA issued the assailed Decision affirming the trial court’s February 16, 2009Decision.

Issue:

Whether or not there was a perfected contract of sale?

Held:

The Court grants the Petition. The trial and appellate courts erred materially in deciding the case; they overlooked
important facts that should change the complexion and outcome of the case.

It cannot be denied that there were negotiations between the parties conducted after the respondent’s December 9, 2004
letter-offer and prior to the February 4, 2005 letter. These negotiations culminated in a meeting between Eleazar and
Young whereby the latter declined to enter into an agreement and accept cash payment then being tendered by the
former. Instead, Young informed Eleazar during said meeting that she still had to confer with her sister and petitioner’s
board of directors; in turn, Eleazar told Young that respondent shall await the necessary approval.

Thus, the trial and appellate courts failed to appreciate that respondent’s offer to purchase the subject property was never
accepted by the petitioner at any instance, even after negotiations were held between them. Thus, as between them,
there is no sale to speak of. "When there is merely an offer by one party without acceptance of the other, there is no
contract."33 To borrow a pronouncement in a previously decided case,

The stages of a contract of sale are: (1) negotiation, starting from the time the prospective contracting parties indicate
interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the
essential elements of the sale; and (3) consummation, which commences when the parties perform their respective
undertakings under the contract of sale, culminating in the extinguishment of the contract.

In the present case, the parties never got past the negotiation stage. Nothing shows that the parties had agreed on any
final arrangement containing the essential elements of a contract of sale, namely, (1) consent or the meeting of the minds
of the parties; (2) object or subject matter of the contract; and (3) price or consideration of the sale. 34

Respondent’s subsequent sending of the February 4, 2005 letter and check to petitioner – without awaiting the approval of
petitioner’s board of directors and Young’s decision, or without making a new offer – constitutes a mere reiteration of its
original offer which was already rejected previously; thus, petitioner was under no obligation to reply to the February 4,
2005 letter. It would be absurd to require a party to reject the very same offer each and every time it is made; otherwise, a
perfected contract of sale could simply arise from the failure to reject the same offer made for the hundredth time.Thus,
said letter cannot be considered as evidence of a perfected sale, which does not exist in the first place; no binding
obligation on the part of the petitioner to sell its property arose as a consequence. The letter made no new offer replacing
the first which was rejected.

Since there is no perfected sale between the parties, respondent had no obligation to make payment through the check;
nor did it possess the right to deliver earnest money to petitioner in order to bind the latter to a sale. As contemplated
under Art. 1482 of the Civil Code, "there must first be a perfected contract of sale before we can speak of earnest
money."35 "Where the parties merely exchanged offers and counter-offers, no contract is perfected since they did not yet
give their consent to such offers. Earnest money applies to a perfected sale." 36

This Court is inclined to accept petitioner’s explanation that since the check was mixed up with all other checks and
correspondence sent to and received by the corporation during the course of its daily operations, Young could not have
timely discovered respondent’s check payment; petitioner’s failure to return the purported earnest money cannot mean
that it agreed to respondent’s offer.

Besides, respondent’s payment of supposed earnest money was made under dubious circumstances and in disregard of
sound business practice and common sense. Indeed, respondent must be faulted for taking such a course of action that is
irregular and extraordinary: common sense and logic dictate that if any payment is made under the supposed sale
transaction, it should have been made directly to Young or coursed directly through her office, since she is the officer
directly responsible for negotiating the sale, as far as respondent is concerned and considering the amount of money
involved; no other ranking officer of petitioner can be expected to know of the ongoing talks covering the subject property.
Respondent already knew, from Eleazar’s previous meeting with Young, that it could only effectively deal with her; more
than that, it should know that corporations work only through the proper channels. By acting the way it did – coursing the
February 4, 2005 letter and check through petitioner’s mere receiving clerk or receptionist instead of directly with Young’s
office, respondent placed itself under grave suspicion of putting into effect a premeditated plan to unduly bind petitioner to
its rejected offer, in a manner which it could not achieve through negotiation and employing normal business practices. It
impresses the Court that respondent attempted to secure the consent needed for the sale by depositing part of the
purchase price and under the false pretense that an agreement was already arrived at, even though there was none.
Respondent achieved the desired effect up to this point, but the Court will not be fooled.

Thus, as between respondent’s irregular and improper actions and petitioner’s failure to timely return the ₱100,000.00
purported earnest money, this Court sides with petitioner. In a manner of speaking, respondent cannot fault petitioner for
not making a refund since it is equally to blame for making such payment under false pretenses and irregular
circumstances, and with improper motives. Parties must come to court with clean hands, as it were.

In a potential sale transaction, the prior payment of earnest money even before the property owner can agree to sell his
property is irregular, and cannot be used to bind the owner to the obligations of a seller under an otherwise perfected
contract of sale; to cite a well-worn cliché, the carriage cannot be placed before the horse. The property owner-
prospective seller may not be legally obliged to enter into a sale with a prospective buyer through the latter’s employment
of questionable practices which prevent the owner from freely giving his consent to the transaction; this constitutes a
palpable transgression of the prospective seller’s rights of ownership over his property, an anomaly which the Court will
certainly not condone. An agreement where the prior free consent of one party thereto is withheld or suppressed will be
struck down, and the Court shall always endeavor to protect a property owner’s rights against devious practices that put
his property in danger of being lost or unduly disposed without his prior knowledge or consent. As this ponente has held
before, "[t]his Court cannot presume the existence of a sale of land, absent any direct proof of it." 37

Nor will respondent's supposed payment be 'treated as a deposit or guarantee; its actions will not be dignified and must
be called for what they are: they were done irregularly and with a view to acquiring the subject property against petitioner's
consent.

Finally, since there is nothing in legal contemplation which petitioner must perform particularly for the respondent, it should
follow that Civil Case No. 06-0492 CFM for specific performance with damages is left with no leg. to stand on; it must be
dismissed.

7. G.R. No. 179965 February 20, 2013

NICOLAS P. DIEGO, Petitioner,


vs.
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.

Facts:

In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered into an oral contract to
sell covering Nicolas’s share, fixed at ₱500,000.00, as co-owner of the family’s Diego Building situated in Dagupan City.
Rodolfo made a downpayment of ₱250,000.00. It was agreed that the deed of sale shall be executed upon payment of the
remaining balance of ₱250,000.00. However, Rodolfo failed to pay the remaining balance.

Meanwhile, the building was leased out to third parties, but Nicolas’s share in the rents were not remitted to him by herein
respondent Eduardo, another brother of Nicolas and designated administrator of the Diego Building. Instead, Eduardo
gave Nicolas’s monthly share in the rents to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and
Eduardo failed to render an accounting and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.

Thus, on May 17, 1999, Nicolas filed a Complaint 6 against Rodolfo and Eduardo before the RTC of Dagupan City and
docketed as Civil Case No. 99-02971-D. Nicolas prayed that Eduardo be ordered to render an accounting of all the
transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the rents; and
that Eduardo and Rodolfo be held solidarily liable for attorney’s fees and litigation expenses.
Rodolfo and Eduardo filed their Answer with Counterclaim 7 for damages and attorney’s fees. They argued that Nicolas
had no more claim in the rents in the Diego Building since he had already sold his share to Rodolfo. Rodolfo admitted
having remitted only ₱250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas
only after the latter shall have executed a deed of absolute sale.

After trial on the merits, or on April 19, 2005, the trial court rendered its Decision 8 dismissing Civil Case No. 99-02971-D
for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment by the latter of
the ₱250,000.00 balance of the agreed purchase price.

Nicolas appealed to the CA which sustained the trial court’s Decision in toto

Issue:

Whether or not there was a perfected contract of sale?

Held:

The Court finds merit in the Petition.

The contract entered into by Nicolas and Rodolfo was a contract to sell.

a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and
distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title to the property until
full payment.

There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the Diego Building for the price of ₱500,000.00.
There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received, ₱250,000.00. Significantly, it
is also not disputed that the parties agreed that the remaining amount of ₱250,000.00 would be paid after Nicolas shall
have executed a deed of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and
distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation in the
contract, "[w]here the vendor promises to execute a deed of absolute sale upon the completion by the vendee of
the payment of the price," indicates that the parties entered into a contract to sell. According to this Court, this
particular provision is tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court ruled
that the agreement to execute a deed of sale upon full payment of the purchase price "shows that the vendors reserved
title to the subject property until full payment of the purchase price." 16

The Court further held that "[j]urisprudence has established that where the seller promises to execute a deed of
absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to
sell."19

b) The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the parties show that
they agreed on a contract to sell, not of sale. The absence of a formal deed of conveyance is indicative of a
contract to sell.

In the instant case, records show that Nicolas signed a mere receipt 24 acknowledging partial payment of ₱250,000.00 from
Rodolfo. It states:

July 8, 1993

Received the amount of [₱250,000.00] for 1 share of Diego Building as partial payment for Nicolas Diego.

(signed)
Nicolas Diego25

As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the parties could have executed a document
of sale upon receipt of the partial payment but they did not. This is thus an indication that Nicolas did not intend to
immediately transfer title over his share but only upon full payment of the purchase price. Having thus reserved title over
the property, the contract entered into by Nicolas is a contract to sell. In addition, Eduardo admitted that he and Rodolfo
repeatedly asked Nicolas to sign the deed of sale 27 but the latter refused because he was not yet paid the full amount. As
we have ruled in San Lorenzo Development Corporation v. Court of Appeals, 28the fact that Eduardo and Rodolfo asked
Nicolas to execute a deed of sale is a clear recognition on their part that the ownership over the property still remains with
Nicolas. In fine, the totality of the parties’ acts convinces us that Nicolas never intended to transfer the ownership over his
share in the Diego Building until the full payment of the purchase price. Without doubt, the transaction agreed upon by the
parties was a contract to sell, not of sale.

In fine, "the need to execute a deed of absolute sale upon completion of payment of the price generally indicates
that it is a contract to sell, as it implies the reservation of title in the vendor until the vendee has completed the
payment of the price."36 In addition, "[a] stipulation reserving ownership in the vendor until full payment of the price is x x
x typical in a contract to sell."37 Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this
case only entered into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the
agreed purchase price.

c) Nicolas did not surrender or deliver title or possession to Rodolfo.


Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo. This was
made clear by the nature of the agreement, by Nicolas’s repeated demands for the return of all rents unlawfully and
unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo’s repeated demands for Nicolas to execute a deed
of sale which, as we said before, is a recognition on their part that ownership over the subject property still remains with
Nicolas.

It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the property to
the prospective buyer pending the latter’s payment of the price in full. It certainly is absurd to assume that in the absence
of stipulation, a buyer under a contract to sell is granted ownership of the property even when he has not paid the seller in
full. If this were the case, then prospective sellers in a contract to sell would in all likelihood not be paid the balance of the
price.

This ponente has had occasion to rule that "[a] contract to sell is one where the prospective seller reserves the transfer of
title to the prospective buyer until the happening of an event, such as full payment of the purchase price. What the seller
obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been
delivered to him. ‘In other words, the full payment of the purchase price partakes of a suspensive condition, the
nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.’ It does not, by itself, transfer ownership to the buyer." 43

The remedy of rescission is not available in contracts to sell.

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price, the contract to sell
was deemed terminated or cancelled. 49 As we have held in Chua v. Court of Appeals,50 "[s]ince the agreement x x x is a
mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of
the condition prevents the obligation to sell from arising and ownership is retained by the seller without further
remedies by the buyer." Similarly, we held in Reyes v. Tuparan51 that "petitioner’s obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive condition, which is the respondent’s full
payment of the purchase price. Without respondent’s full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondent’s failure to pay in full the purchase price in
full is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that
prevents the petitioner from being bound to convey title to respondent." Otherwise stated, Rodolfo has no right to compel
Nicolas to transfer ownership to him because he failed to pay in full the purchase price. Correlatively, Nicolas has no
obligation to transfer his ownership over his share in the Diego Building to Rodolfo. 52

8. G.R. No. 109696 August 14, 1995

THELMA P. OLEA, petitioner,


vs.
COURT OF APPEALS, ELENA VDA. DE PACARDO, JESUS PALENCIA, ELIZABETH PALENCIA AND MONSERRAT
PACIENTE, respondents.

Facts:

On 27 January 1947 spouses Filoteo Pacardo and Severa de Pacardo executed a deed of Sale Con Pacto de Retroover
Lot No. 767 of the Passi Cadastre covered by Transfer Certificate of Title No. 26424 in their name for a consideration of
P950.00 in favor of Maura Palabrica, predecessor in interest of petitioner.

The contract of sale with right to repurchase was acknowledged by the vendors before Notary Public Victorio Tagamolila
on the same day the contract was executed in the Municipality of Passi, Province of Iloilo. The vendors also delivered to
the vendee their owner's copy of the title.

After the execution of the sale, the Pacardo spouses as vendors remained in possession of the land and continued the
cultivation thereof. Since the sale on 27 January 1947 up to August 1987, or for a period of about 40 years, the spouses
delivered annually one-third (1/3) of the produce of the land to Maura Palabrica and kept for themselves the remaining
two-thirds (2/3).

On 27 January 1950, despite the lapse of three (3) years, the Pacardo spouses did not repurchase the land but faithfully
continued to give 1/3 of the produce to Maura Palabrica. When the spouses died, their son Filoteo Jr., took over the
possession and assumed the cultivation of the land and, like his parents, gave 1/3 of the produce to Maura Palabrica and
later to her daughter, petitioner herein, who would eventually buy from her the lot subject of the litigation.

On 22 September 1966 Maura Palabrica caused the registration of the Sale Con Pacto de Retro with the Register of
Deeds of Iloilo and its annotation on Transfer Certificate of Title No. 26424 covering the subject lot.

On 10 May 1978 Maura Palabrica sold Lot No. 767 for P40,000.00 to one of her daughters, petitioner Thelma Olea. From
then on it was petitioner who received the one-third (1/3) share of the annual produce of the land from Filoteo Pacardo,
Jr., until he died in August 1987. His widow Elena Vda.de Pacardo however refused to give to petitioner the one-third (1/3)
share of the produce. After Elena transferred residence to another barangay the spouses Jesus and Elizabeth Palencia
took over the possession and cultivation of the property. Elizabeth Palencia is a sister of Filoteo Jr., and is one of the
children of spouses Filoteo and Severina Pacardo. The Palencias delivered the share of the produce not to petitioner but
to respondent Elena Pacardo.

Hence, on 25 January 1989, petitioner filed a complaint against Elena Pacardo and the spouses Jesus and Elizabeth
Palencia for recovery of possession with damages. She alleged that she was the owner of Lot No. 767 having acquired
the same from her mother Maura Palabrica through a deed of sale, who in turn acquired the lot from the spouses Filoteo
and Severa Pacardo through a pacto de retro sale, and that due to the failure of the spouses to redeem the property three
(3) years thereafter ownership thereof passed on to Maura Palabrica who later caused the registration of the Sale Con
Pacto de Retro with the Registry of Deeds of Iloilo and its annotation on TCT No. 26424.

Private respondents Elena Vda.de Pacardo and Jesus and Elizabeth Palencia filed their answer alleging that their parents
intended the disputed transaction to be an equitable mortgage and not a sale with right to repurchase. Respondent
Monserrat Paciente, another daughter of the vendor-spouses Filoteo and Severa Pacardo, filed an answer in intervention
raising likewise as defense that the Sale Con Pacto de Retro was indeed an equitable mortgage.

On 19 February 1991 the trial court rendered judgment dismissing the complaint. Petitioner appealed to the Court of
Appeals which on 16 December 1992 affirmed the judgment of the trial court.

Issue:

Whether or not the subject document is a contract of sale or equitable mortgage?

Held:

We cannot sustain petitioner. Art. 1602 of the New Civil Code provides that the contract of sale with right to repurchase
shall be presumed to be an equitable mortgage in any of the following cases: (a) when the price of the sale is unusually
inadequate; (b) when the vendor remains in possession as lessee or otherwise; (c) when upon or after the expiration of
the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (d)
when the purchaser retains for himself a part of the purchase price; (e) when the vendor binds himself to pay the taxes on
the thing sold; and, (f) in any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation. Being remedial in nature, Art.
1602 may be applied retroactively to cases prior to the effectivity of the New Civil Code 3 Hence it may apply to the instant
case where the deed of sale with right to repurchase was executed on 27 January 1947.

It has been held that a contract should be construed as a mortgage or a loan instead of a pacto de retro sale when its
terms are ambiguous or the circumstances surrounding its execution or its performance are incompatible or inconsistent
with the theory that it is a sale. 4 Even when a document appears on its face to be a sale with pacto de retro the owner of
the property may prove that the contract is really a loan with mortgage by raising as an issue the fact that the document
does not express the true intent and agreement of the parties. In this case, parol evidence then becomes competent and
admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan. And
upon proof of the truth of such allegations, the court will enforce the agreement or understanding in consonance with the
true intent of the parties at the time of execution of the contract. 5 This principle is applicable even if the purported Sale
Con Pacto de Retro was registered in the name of the transferee and a new certificate of title was issued in the name of
the latter.6

There is no dispute that when Maura Palabrica "bought" the land on 27 January 1947 the vendors, the Pacardo spouses,
remained in possession of the property and cultivated the same. Their son continued the cultivation when the spouses
died, which cultivation was continued later by his widow Elena Vda. de Pacardo and then by his sister Elizabeth Palencia.

The rule is settled that where in a contract of sale with pacto de retro the vendor remains in physical possession of the
land sold as lessee or otherwise, the contract should be considered an equitable mortgage. 9 The same presumption
applies when the vendee was given the right to appropriate the fruits thereof in lieu of receiving interest on the loan. 10

Moreover, the terms of the document itself can aid in arriving at the true nature of the transaction. Where the contract
contains a stipulation, as in this case, that upon payment by the vendor of the purchase price within a certain period the
document shall become null and void and have no legal force or effect, the purported sale should be considered a
mortgage contract. In pacto de retro sale the payment of the repurchase price does not merely render the document null
and void but there is the obligation on the part of the vendee to sell back the property. 11

It has been consistently held that the presence of even one of the circumstances enumerated in Art. 1602 of the New Civil
Code is sufficient to declare a contract of sale with right to repurchase an equitable mortgage. 12 This is so because pacto
de retro sales with the stringent and onerous effects that accompany them are not favored. In case of doubt, a contract
purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. 13

Petitioner, to prove her claim, cannot rely on the stipulation in the contract providing that complete and absolute title shall
be vested on the vendee should the vendors fail to redeem the property on the specified date. Such stipulation that the
ownership of the property would automatically pass to the vendee in case no redemption was effected within the
stipulated period is void for being a pactum commissorium which enables the mortgagee to acquire ownership of the
mortgaged property without need of foreclosure. Its insertion in the contract is an avowal of the intention to mortgage
rather than to sell the property. 14

Consequently, there was no valid sale to Maura Palabrica. Ownership over the property was not transferred to her for she
was merely a mortgagee. There being no title to the land that Palabrica acquired from the spouses Filoteo and Severa
Pacardo, it follows that Palabrica had no title to the same land which could be conveyed to petitioner. 15Hence there is no
legal basis for petitioner to recover possession of the property.

There is no dispute that the Pacardo spouses or their successors in interest failed to pay the amount of the loan on 27
January 1950 as stipulated in the contract although they continued to deliver the produce to Palabrica and petitioner until
1987 by way of interest on the loan. Even if we treat petitioner's action to recover possession of Lot No. 767 as one for the
enforcement of her right as mortgagee, the same has already prescribed. Art. 1142 of the New Civil Code provides that a
mortgage action prescribes after ten (10) years. Since 27 January 1950 when the Pacardo spouses failed to pay the loan
up to 1989 when the action for recovery of possession was filed, thirty-nine (39) years had already elapsed. As a result,
petitioner is not only barred by prescription from instituting her action; she is also guilty of estoppel by laches.
9. G.R. No. L-33182 December 18, 1987

PEDRO A. FELICEN SR. (Deceased), substituted by his widow, BEATRIZ LANUEVO and his children, ELEUTERIO,
PEDRO, JR., CLARITA, FERNANDO and JOSE MARIA, all surnamed FELICEN petitioners,
vs.
SEVERINO ORIAS, MILAGROS ORIAS DE LIM, and the COURT OF APPEALS, respondents.

Facts:

Under a "Deed of Sale With Right to Repurchase," 4 the spouses Severino Orias and Milagros O. Lim (private
respondents herein) sold to Pedro A. Felicen, Sr. (petitioner) a parcel of land in the Municipality of Salcedo, Province of
Samar with an area of 7.8 hectares at the price of P 3,000.00. The deed expressly reserved to the vendors the right to
redeem within two (2) years. That period expired without any offer having been made by the vendors a retroto repurchase
the land.

Some eight (8) years afterwards" 5 the vendors a retro filed suit in the Court of First Instance against the vendees to
compel the latter to resell and reconvey the property to them. After due proceedings, the Trial Court rendered judgment,
finding that the contract between the parties was in truth one of sale with pacto de retro, and that the period stipulated for
the repurchase had already expired; but this notwithstanding, the vendors a retro still had the right to repurchase the
property within thirty (30) days from the time the judgment becomes final, in accordance with the third paragraph of Article
1606 of the Civil Code, by complying with the requirements of Article 1616. 6

The Court of Appeals affirmed the decision of the Trial Court.

The thesis of both the Trial Court and the Appellate Court, in other words, was that although the vendors a retro had failed
in their suit to prove that their contract with the vendees was actually one of loan with mortgage, the contract having on
the contrary been confirmed to be a sale with conventional redemption, they could nonetheless still repurchase the
property "within thirty days from the time final ' judgment was rendered in a civil action on the basis that the contract was a
true sale with right to repurchase, 11 pursuant to said third paragraph of Article 1606. The thesis cannot upon the
undisputed facts be sustained.

Issue:

Whether or not the vendors can still redeem the property?

Held:

The application of the third paragraph of Article 1606 is predicated upon the bona fides of the vendor a retro. It must
appear that there was a belief on his part, founded on facts attendant upon the execution of the sale with pacto de retro,
honestly and sincerely entertained, that the agreement was in reality a mortgage, one not intended to affect the title to the
property ostensibly sold, but merely to give it as security for a loan or other obligation. In that event, if the matter of the
real nature of the contract is submitted for judicial resolution, the application of the rule is meet and proper: that the
vendor a retro be allowed to repurchase the property sold within 30 days from rendition of final judgment declaring the
contract to be a true sale with right to repurchase. 8 Conversely, if it should appear that the parties' agreement was really
one of sale — transferring ownership to the vendee, but accompanied by a reservation to the vendor of the right to
repurchase the property — and there are no circumstances that may reasonably be accepted as generating some honest
doubt as to the parties' intention, the proviso is inapplicable. The reason is quite obvious. If the rule were otherwise, it
would be within the power of every vendor a retro to set at naught a pacto de retro, or resurrect an expired right of
repurchase, by simply instituting an action to reform the contract — known to him to be in truth a sale with pacto de retro
— into an equitable mortgage. As postulated by the petitioner, 9 "to allow herein private respondents to repurchase the
property by applying said paragraph .. to the case at bar despite the fact that the stipulated redemption period had already
long expired when they instituted the present action, would in effect alter or modify the stipulation in the contract as to the
definite and specific limitation of the period for repurchase (2 years from date of sale or only until June 25, 1958) thereby
not simply increasing but in reality resuscitating the expired right to repurchase ..and likewise the already terminated and
extinguished obligation to resell by herein petitioner." The rule would thus be a made a tool to spawn protect and even
reward fraud and bad faith, a situation surely never contemplated or intended by the law.

This Court has already had occasion to rule on the proper interpretation of the provision in question. In Adorable v.
Inacala 10 where the proofs established that there could be no honest doubt as to the parties' intention, that the
transaction was clearly and definitely a sale with pacto de retro, the Court adjudged the vendor a retro not to be entitled to
the benefit of the third paragraph of Article 1606.

The case at bar is on all fours with Adorable. Here, as in the earlier case, the evidence persuasively establishes not only
the utter paucity of the vendors' assertion that they had tried to exercise the right to repurchase within the stipulated
period, but also that the contract was clearly and distinctly a contract of sale with pacto de retro and contained no
provision from which another kind of contract could fairly and reasonably be deduced, and furthermore exhibited none cf
the familiar badges of a covert mortgage specified by the Civil Code. The Court perceives no reason to deviate from the
doctrine in Adorable, and a disposition in accord therewith is thus inevitable.

WHEREFORE, the judgments of the Court of Appeals and the Trial Court are reversed, and another entered declaring the
private respondents' right to repurchase to have expired upon expiration of the period stipulated therefore, and that
ownership of the property in question has long since been acquired by and now rests in the petitioner, his heirs,
successors and assigns. Costs against private respondents.

10. G.R. No. 146651 August 6, 2002


RONALDO P. ABILLA and GERALDA A. DIZON, petitioners,
vs.
CARLOS ANG GOBONSENG, JR. and THERESITA MIMIE ONG, respondents.

Facts:

Respondent contracted a loan from petitioner in the sum of P550,000.00, secured by a real estate mortgage over two
parcels of land, covered by TCT Nos. 13607 and 13535. Respondent defaulted in the payment of the loan, which had
reached the amount of P700,000.00. He sought a renewal of the loan and issued two postdated checks, one for
P10,000.00 and the other for P690,000.00, representing the full amount of his obligation.

The second check was dishonored by the drawee bank. Respondent promised to pay petitioner the sum of P690,000.00
upon approval of his pending loan application with the State Investment House, Inc. However, the said lending institution
required a collateral before approving and releasing the loan, for which reason respondent borrowed from petitioner the
two titles, TCT Nos. 13607 and 13535, so he can mortgage the same. Thus, petitioner cancelled the mortgage in his favor
and delivered the two titles to respondent. Despite approval of the loan, respondent failed to make good on his promise to
pay his outstanding obligation to petitioner. Hence, the latter threatened to sue him for Estafa. Respondent thus executed
a deed of absolute sale over his seventeen lots in Dumaguete City in favor of petitioner. On the same day, the parties
executed an Option to Buy whereby respondent was allowed to repurchase the lots within a period of six months.

Respondent failed to repurchase the seventeen lots within the stipulated period of six months. Consequently, petitioners
instituted an action for specific performance, praying that respondent be made to pay the capital gains tax and registration
expenses for the transfer of title to the said lots, pursuant to the deed of absolute sale. In his answer, respondent
interposed the defense that the transaction was in reality an equitable mortgage. On October 29, 1990, the Regional Trial
Court of Dumaguete City, Branch 42, rendered judgment in favor of petitioner and ruled that the Option to Buy was
rendered null and void by respondent's failure to exercise the option within the period of six months. 4 On appeal, the Court
of Appeals affirmed the decision of the trial court, but further declared that "the deed of sale and option to buy actually
constitute a pacto de retro sale."5 Respondent's motion for reconsideration was denied, 6 and the petition filed with this
Court was dismissed.7 Hence, the decision became final on February 8, 1999 and was duly entered in the Book of Entries
of Judgments.8

On February 27, 1999, respondent filed with the court of origin a motion to repurchase the lots with tender of payment,
which was denied.9 Subsequently, the trial court issued an Order granting respondent's motion for reconsideration and
allowing him to repurchase the lots within thirty days from finality thereof. 10Thus, petitioner brought the instant petition for
review.

On January 17, 2002, we rendered the assailed Decision reversing the Order of the Regional Trial Court of Dumaguete
City, in effect denying respondent the right to repurchase the subject lots.

Respondent's claim of the right to repurchase the lots is anchored on the third paragraph of Article 1606 of the Civil Code,
which states:

However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered
in a civil action on the basis that the contract was a true sale with right to repurchase.

Held:

The above-quoted provision applies only where the nature and character of the transaction – whether as a pacto de
retro sale or as an equitable mortgage – was put in issue before the court. 11 In other words, it applies in a situation where,
in a case, one of the contending parties claims that the transaction was a sale with right to repurchase and the other
counters that the same was an equitable mortgage, and the court declares in a final judgment that the transaction was
really a sale with pacto de retro.

In our Decision, we ruled that Article 1606 of the Civil Code does not apply to the case at bar because the transaction
between the parties was a pacto de retro sale, citing the case of Vda. de Macoy v. Court of Appeals.12However, upon a
careful review and analysis of the antecedent facts, we are convinced that the right granted under the third paragraph of
Article 1606 may be invoked by respondent.

In Vda.de Macoy,13 citing the earlier ruling in Felicen, Sr. v. Orias,14 we held:

The application of the third paragraph of Article 1606 is predicated upon the bona fides of the vendor a retro.It must
appear that there was a belief on his part, founded on facts attendant upon the execution of the sale with pacto de
retro, honestly and sincerely entertained, that the agreement was in reality a mortgage, one not intended to affect the title
to the property ostensibly sold, but merely to give it as security for a loan or other obligation. In that event, if the matter of
the real nature of the contract is submitted for judicial resolution, the application of the rule is meet and proper; that the
vendor a retro be allowed to repurchase the property sold within 30 days from rendition of final judgment declaring the
contract to be a true sale with right to repurchase. Conversely, if it should appear that the parties' agreement was really
one of sale — transferring ownership to the vendee, but accompanied by a reservation to the vendor of the right to
repurchase the property — and there are no circumstances that may reasonably be accepted as generating some honest
doubt as to the parties' intention, the proviso is inapplicable. The reason is quite obvious. If the rule were otherwise, it
would be within the power of every vendor a retro to set at naught a pacto de retro, or resurrect an expired right of
repurchase, by simply instituting an action to reform the contract — known to him to be in truth a sale with pacto de
retro — into an equitable mortgage. xxx xxx xxx. (Underscoring ours)

Therefore, the applicability of Article 1606 rests on the bona fide intent of the vendor a retro, i.e., respondent in this case.
If he honestly believed that the transaction was an equitable mortgage, the said article applies and he can still repurchase
the property within thirty days from finality of the judgment declaring the transaction as a sale with pacto de
retro. Parenthetically, it matters not what the vendee intended the transaction to be. As we stated above, we analyzed the
peculiar factual background of this case in order to determine the true intent of respondent. We noted that his contractual
relations with petitioner commenced with a loan secured by a real estate mortgage over two parcels of registered land.
Said mortgage was cancelled by petitioner when respondent borrowed the titles to the properties so that he can mortgage
the same to the State Investment House, Inc. Respondent applied for a loan with the said lending institution precisely to
settle his unpaid obligation to petitioner. However, respondent still failed to settle his obligation to petitioner.

When petitioner lent the two titles to respondent, the loan he extended to respondent became unsecured. Naturally, there
was a need to secure respondent's obligation after he reneged on his promise to pay the same out of the loan proceeds
from State Investment House. Thus, it may well be that the deed of sale, together with the option to buy executed on the
same day, was meant to serve as security for the indebtedness of respondent which had become long overdue. Said
obligation would have been satisfied had respondent exercised the option to buy within the stipulated period. These
circumstances, peculiar to the case at bar, make this case fall squarely within the situation contemplated in the above-
quoted doctrine – that there was a belief on the part of the vendor a retro, founded on facts attendant upon the execution
of the sale with pacto de retro, honestly and sincerely entertained, that the agreement was in reality a mortgage, one not
intended to affect the title to the property ostensibly sold, but merely to give it as security for a loan or other obligation.
Consistently therewith, respondent has maintained throughout the proceedings that transaction between him and
petitioner was really an equitable mortgage. As such, respondent may avail of the third paragraph of Article 1606 of the
Civil Code and repurchase the lots affected by the deed of absolute sale and option to buy.

The trial court, however, erred in holding that respondent shall be allowed to repurchase the subject lots within thirty days
from finality of its Order dated January 14, 2001. Pursuant to Article 1606, third paragraph, of the Civil Code, the thirty-day
period shall be counted from the date of finality of the decision declaring the transaction to be a pacto de
retro sale, i.e., February 8, 1999.15 Consequently, the urgent motion to repurchase the lots with tender of payment which
respondent filed on February 27, 1999 was on time. Petitioners should, therefore, be ordered to accept the tendered
payment for the lots and to execute the necessary deed of sale conveying the same to respondents.

11. G.R. No. 194846 June 19, 2013

*HOSPICIO D. ROSAROSO, ANTONIO D. ROSAROSO, MANUEL D. ROSAROSO, ALGERICA D. ROSAROSO, and


CLEOFE R. LABINDAO, Petitioners,
vs.
LUCILA LABORTE SORIA, SPOUSES HAM SOLUTAN and **LAILA SOLUTAN, and MERIDIAN REALTY
CORPORATION, Respondents.

Facts:

Spouses Luis Rosaroso (Luis) and Honorata Duazo (Honorata) acquired several real properties in Daan Bantayan, Cebu
City, including the subject properties. The couple had nine (9) children namely: Hospicio, Arturo, Florita, Lucila, Eduardo,
Manuel, Cleofe, Antonio, and Angelica. On April 25, 1952, Honorata died. Later on, Luis married Lourdes Pastor Rosaroso
(Lourdes).

On January 16, 1995, a complaint for Declaration of Nullity of Documents with Damages was filed by Luis, as one of the
plaintiffs, against his daughter, Lucila R. Soria (Lucila); Lucila’s daughter, Laila S. Solutan (Laila); and Meridian Realty
Corporation (Meridian). Due to Luis’ untimely death, however, an amended complaint was filed on January 6, 1996, with
the spouse of Laila, Ham Solutan (Ham); and Luis’ second wife, Lourdes, included as defendants. 3

In the Amended Complaint, it was alleged by petitioners Hospicio D. Rosaroso, Antonio D. Rosaroso (Antonio), Angelica
D. Rosaroso (Angelica), and Cleofe R. Labindao (petitioners) that on November 4, 1991, Luis, with the full knowledge and
consent of his second wife, Lourdes, executed the Deed of Absolute Sale 4 (First Sale) covering the properties with
Transfer Certificate of Title (TCT) No. 31852 (Lot No. 8); TCT. No. 11155 (Lot 19); TCT No. 10885 (Lot No. 22); TCT No.
10886 (Lot No. 23); and Lot Nos. 5665 and 7967, all located at Daanbantayan, Cebu, in their favor. 5

They also alleged that, despite the fact that the said properties had already been sold to them, respondent Laila, in
conspiracy with her mother, Lucila, obtained the Special Power of Attorney (SPA), 6 dated April 3, 1993, from Luis (First
SPA); that Luis was then sick, infirm, blind, and of unsound mind; that Lucila and Laila accomplished this by affixing Luis’
thumb mark on the SPA which purportedly authorized Laila to sell and convey, among others, Lot Nos. 8, 22 and 23,
which had already been sold to them; and that on the strength of another SPA 7 by Luis, dated July 21, 1993 (Second
SPA), respondents Laila and Ham mortgaged Lot No. 19 to Vital Lending Investors, Inc. for and in consideration of the
amount of ₱150,000.00 with the concurrence of Lourdes. 8

Petitioners further averred that a second sale took place on August 23, 1994, when the respondents made Luis sign the
Deed of Absolute Sale9 conveying to Meridian three (3) parcels of residential land for ₱960,500.00 (Second Sale); that
Meridian was in bad faith when it did not make any inquiry as to who were the occupants and owners of said lots; and that
if Meridian had only investigated, it would have been informed as to the true status of the subject properties and would
have desisted in pursuing their acquisition.

After the case was submitted for decision, the RTC ruled in favor of petitioners.

On appeal, the CA reversed and set aside the RTC decision.

Held:

After an assiduous assessment of the records, the Court finds for the petitioners.

The First Deed Of Sale Was Valid


The fact that the first deed of sale was executed, conveying the subject properties in favor of petitioners, was never
contested by the respondents. What they vehemently insist, though, is that the said sale was simulated because the
purported sale was made without a valid consideration.

Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have
been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for
a contract.29 These presumptions operate against an adversary who has not introduced proof to rebut them. They create
the necessity of presenting evidence to rebut the prima facie case they created, and which, if no proof to the contrary is
presented and offered, will prevail. The burden of proof remains where it is but, by the presumption, the one who has that
burden is relieved for the time being from introducing evidence in support of the averment, because the presumption
stands in the place of evidence unless rebutted.30

In this case, the respondents failed to trounce the said presumption. Aside from their bare allegation that the sale was
made without a consideration, they failed to supply clear and convincing evidence to back up this claim. It is elementary in
procedural law that bare allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules of Court. 31

Granting that there was no delivery of the consideration, the seller would have no right to sell again what he no longer
owned. His remedy would be to rescind the sale for failure on the part of the buyer to perform his part of their obligation
pursuant to Article 1191 of the New Civil Code. In the case of Clara M. Balatbat v. Court Of Appeals and Spouses Jose
Repuyan and Aurora Repuyan,33 it was written:

The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the
bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment only
creates a right to demand the fulfillment of the obligation or to rescind the contract.

Meridian is Not a
Buyer in Good Faith

Respondents Meridian and Lucila argue that, granting that the First Sale was valid, the properties belong to them as they
acquired these in good faith and had them first recorded in the Registry of Property, as they were unaware of the First
Sale.34

Again, the Court is not persuaded.

The fact that Meridian had them first registered will not help its cause. In case of double sale, Article 1544 of the Civil
Code provides:

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in
the absence thereof; to the person who presents the oldest title, provided there is good faith.

Otherwise stated, ownership of an immovable property which is the subject of a double sale shall be transferred: (1) to the
person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in
good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is
good faith. The requirement of the law then is two-fold: acquisition in good faith and registration in good faith. Good faith
must concur with the registration. If it would be shown that a buyer was in bad faith, the alleged registration they have
made amounted to no registration at all.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of a double
sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed the owner. Verily, the act of registration must be coupled
with good faith— that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have
been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint
him with the defects in the title of his vendor.) 35 [Emphases and underlining supplied]

When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should
investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a buyer in good
faith. When a man proposes to buy or deal with realty, his duty is to read the public manuscript, that is, to look and see
who is there upon it and what his rights are. A want of caution and diligence, which an honest man of ordinary prudence is
accustomed to exercise in making purchases, is in contemplation of law, a want of good faith. The buyer who has failed to
know or discover that the land sold to him is in adverse possession of another is a buyer in bad faith. 36

In another case, it was held that if a vendee in a double sale registers the sale after he has acquired knowledge of a
previous sale, the registration constitutes a registration in bad faith and does not confer upon him any right. If the
registration is done in bad faith, it is as if there is no registration at all, and the buyer who has first taken possession of the
property in good faith shall be preferred.38

In the case at bench, the fact that the subject properties were already in the possession of persons other than Luis was
never disputed.
From the above testimony, it is clear that Meridian, through its agent, knew that the subject properties were in possession
of persons other than the seller. Instead of investigating the rights and interests of the persons occupying the said lots,
however, it chose to just believe that Luis still owned them. Simply, Meridian Realty failed to exercise the due diligence
required by law of purchasers in acquiring a piece of land in the possession of person or persons other than the seller.

In this regard, great weight is accorded to the findings of fact of the RTC. Basic is the rule that the trial court is in a better
position to examine real evidence as well as to observe the demeanor of witnesses who testify in the case. 40

WHEREFORE, the petition is GRANTED. The December 4, 2009 Decision and the November 18, 201 0 Resolution of the
Court of Appeals, in CA-G.R. CV No. 00351, are REVERSED and SET ASIDE. The July 30, 2004 Decision of the
Regional Trial Court, Branch 8, 7th Judicial Region, Cebu City, in Civil Case No. CEB-16957, is hereby REINSTATED.

SO ORDERED.

12. G.R. No. 193787 April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C. Roque represented by his
substitute heir JOVETTE ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE
PHILIPPINES (NCCP), represented by its Secretary General SHARON ROSE JOY RUIZ-DUREMDES, LAND BANK
OF THE PHILIPPINES (LBP), represented by Branch Manager EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, in
his Official Capacity as Register of Deeds for Rizal, Morong Branch, and CECILIO U. PULAN, in his Official
Capacity as Sheriff, Office of the Clerk of Court, Regional Trial Court, Binangonan, Rizal,Respondents.

Facts:

On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and the original owners
of the then unregistered Lot 18089 – namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela Gonzales, Herminia R.
Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio, and Augusto Rivero (Rivero, et al.) – executed a Deed of
Conditional Sale of Real Property6 (1977 Deed of Conditional Sale) over a 1,231-sq. m. portion of Lot 18089 (subject
portion) for a consideration of ₱30,775.00. The parties agreed that Sps. Roque shall make an initial payment of
₱15,387.50 upon signing, while the remaining balance of the purchase price shall be payable upon the registration of Lot
18089, as well as the segregation and the concomitant issuance of a separate title over the subject portion in their names.
After the deed’s execution, Sps. Roque took possession and introduced improvements on the subject portion which they
utilized as a balut factory.7

On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of Churches in the
Philippines (NCCP), applied for a free patent over the entire Lot 18089 and was eventually issued Original Certificate of
Title (OCT) No. M-59558 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in her personal
capacity and in representation of Rivero, et al., executed a Joint Affidavit 9 (1993 Joint Affidavit), acknowledging that the
subject portion belongs to Sps. Roque and expressed their willingness to segregate the same from the entire area of Lot
18089.

On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute Sale 10 (1999 Deed of Absolute Sale), sold Lot
18089 to one Ma. Pamela P. Aguado (Aguado) for ₱2,500,000.00, who, in turn, caused the cancellation of OCT No.M-
5955 and the issuance of Transfer Certificate of Title (TCT) No. M-96692 dated December 17, 1999 11 in her name.

Thereafter, Aguado obtained an ₱8,000,000.00 loan from the Land Bank of the Philippines (Land Bank) secured by a
mortgage over Lot 18089.12 When she failed to pay her loan obligation, Land Bank commenced extra-judicial foreclosure
proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to redeem the subject
property, Land Bank consolidated its ownership, and TCT No. M-115895 13 was issued in its name on July 21, 2003.14

On June 16, 2003, Sps. Roque filed a complaint 15 for reconveyance, annulment of sale, deed of real estate mortgage,
foreclosure, and certificate of sale, and damages before the RTC, docketed as Civil Case No. 03-022, against Aguado,
Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U. Pulan, seeking to be
declared as the true owners of the subject portion which had been erroneously included in the sale between Aguado and
Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its entirety.

Meanwhile, on January 18, 2005, NCCP filed a separate complaint 19 also for declaration of nullity of documents and
certificates of title and damages, docketed as Civil Case No. 05-003. It claimed to be the real owner of Lot 18089 which it
supposedly acquired from Sabug, Jr. through an oral contract of sale 20 in the early part of 1998, followed by the execution
of a Deed of Absolute Sale on December 2, 1998 (1998 Deed of Absolute Sale). 21 NCCP also alleged that in October of
the same year, it entered into a Joint Venture Agreement (JVA) with Pilipinas Norin Construction Development Corporation
(PNCDC), a company owned by Aguado’s parents, for the development of its real properties, including Lot 18089, into a
subdivision project, and as such, turned over its copy of OCT No. M-5955 to PNCDC. 22 Upon knowledge of the purported
sale of Lot 18089 to Aguado, Sabug, Jr. denied the transaction and alleged forgery. Claiming that the Aguados 23 and
PNCDC conspired to defraud NCCP, it prayed that PNCDC’s corporate veil be pierced and that the Aguados be ordered to
pay the amount of ₱38,092,002.00 representing the unrealized profit from the JVA. 24 Moreover, NCCP averred that Land
Bank failed to exercise the diligence required to ascertain the true owners of Lot 18089. Hence, it further prayed that: (a)
all acts of ownership and dominion over Lot 18089 that the bank might have done or caused to be done be declared null
and void; (b) it be declared the true and real owners of Lot 18089; and (c) the Register of Deeds of Morong, Rizal be
ordered to cancel any and all certificates of title covering the lot, and a new one be issued in its name. 25 In its answer,
Land Bank reiterated its stance that Lot 18089 was used as collateral for the ₱8,000,000.00 loan obtained by the
Countryside Rural Bank, Aguado, and one Bella Palasaga. There being no lien and/ or encumbrance annotated on its
certificate of title, i.e., TCT No. M-115895, it cannot be held liable for NCCP’s claims. Thus, it prayed for the dismissal of
NCCP’s complaint.26
After due proceedings, the RTC rendered a Decision 28 dated July 8, 2008, dismissing the complaints of Sps. Roque and
NCCP.

On appeal, the Court of Appeals (CA) affirmed the foregoing RTC findings in a Decision 34 dated May 12, 2010.

Issue:

Whether or not the CA erred in not ordering the reconveyance of the subject portion in Sps. Roque’s favor?

Held:

The petition lacks merit.

The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or erroneously
registered in another person’s name to its rightful owner or to one with a better right. 49 Thus, it is incumbent upon the
aggrieved party to show that he has a legal claim on the property superior to that of the registered owner and that the
property has not yet passed to the hands of an innocent purchaser for value. 50

Sps. Roque claim that the subject portion covered by the 1977 Deed of Conditional Sale between them and Rivero, et al.
was wrongfully included in the certificates of title covering Lot 18089, and, hence, must be segregated therefrom and their
ownership thereof be confirmed.

Examining its provisions, the Court finds that the stipulation above-highlighted shows that the 1977 Deed of Conditional
Sale is actually in the nature of a contract to sell and not one of sale contrary to Sps. Roque’s belief. 52 In this relation, it
has been consistently ruled that where the seller promises to execute a deed of absolute sale upon the completion by the
buyer of the payment of the purchase price, the contract is only a contract to sell even if their agreement is denominated
as a Deed of Conditional Sale,53 as in this case. This treatment stems from the legal characterization of a contract to sell,
that is, a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the subject property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, such as, the full payment of the purchase price. 54 Elsewise stated, in a
contract to sell, ownership is retained by the vendor and is not to pass to the vendee until full payment of the purchase
price.

Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price. 57 As such, the condition
which would have triggered the parties’ obligation to enter into and thereby perfect a contract of sale in order to effectively
transfer the ownership of the subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be
deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over the subject portion even if they
had made an initial payment and even took possession of the same. 58

The Court further notes that Sps. Roque did not even take any active steps to protect their claim over the disputed portion.
This remains evident from the following circumstances appearing on record: (a) the 1977 Deed of Conditional Sale was
never registered; (b) they did not seek the actual/physical segregation of the disputed portion despite their knowledge of
the fact that, as early as 1993, the entire Lot 18089 was registered in Sabug, Jr.’s name under OCT No. M-5955; and (c)
while they signified their willingness to pay the balance of the purchase price, 59Sps. Roque neither compelled Rivero et al.,
and/or Sabug, Jr. to accept the same nor did they consign any amount to the court, the proper application of which would
have effectively fulfilled their obligation to pay the purchase price. 60 Instead, Sps. Roque waited 26 years, reckoned from
the execution of the 1977 Deed of Conditional Sale, to institute an action for reconveyance (in 2003), and only after Lot
18089 was sold to Land Bank in the foreclosure sale and title thereto was consolidated in its name. Thus, in view of the
foregoing, Sabug, Jr. – as the registered owner of Lot 18089 borne by the grant of his free patent application – could
validly convey said property in its entirety to Aguado who, in turn, mortgaged the same to Land Bank. Besides, as aptly
observed by the RTC, Sps. Roque failed to establish that the parties who sold the property to them, i.e., Rivero, et al.,
were indeed its true and lawful owners. 61 In fine, Sps. Roque failed to establish any superior right over the subject portion
as against the registered owner of Lot 18089, i.e., Land Bank, thereby warranting the dismissal of their reconveyance
action, without prejudice to their right to seek damages against the vendors, i.e., Rivero et al. 62 As applied in the case of
Coronel v. CA:63

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at
bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the
fulfilment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property.

There is no double sale in such case.1âwphi1 Title to the property will transfer to the buyer after registration because
there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the intending
buyer. (Emphasis supplied)

On the matter of double sales, suffice it to state that Sps. Roque’s reliance 64 on Article 154465 of the Civil Code has been
misplaced since the contract they base their claim of ownership on is, as earlier stated, a contract to sell, and not one of
sale. In Cheng v. Genato,66 the Court stated the circumstances which must concur in order to determine the applicability of
Article 1544, none of which are obtaining in this case, viz.:

(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales
transactions;

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting
interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the
same seller.

13. G.R. No. 195975, September 05, 2016

TAINA MANIGQUE-STONE, Petitioner, v. CATTLEYA LAND, INC., AND SPOUSES TROADIO B. TECSON AND
ASUNCION ORTALIZ-TECSON, Respondents.

Facts:

Sometime in July 1992, Cattleya Land, Inc. (Cattleya) sent its legal counsel, Atty. Federico C. Cabilao, Jr. (Atty. Cabilao,
Jr.), to Tagbilaran City to investigate at the Office of the Register of Deeds in that city the status of the properties of
spouses Col. Troadio B. Tecson (Col. Tecson) and Asuncion Tecson (collectively, Tecson spouses), which Cattleya wanted
to purchase. One of these properties, an 8,805-square meter parcel of land located at Doljo, Panglao, Bohol, is registered
in the name of the Tecson spouses, and covered by Transfer Certificate of Title (TCT) No. 17655 (henceforth, the subject
property). Atty. Cabilao, Jr. found that no encumbrances or liens on the subject property had been annotated on the TCT
thereof, except for an attachment issued in connection with Civil Case No. 3399 entitled "Tantrade Corporation vs. Bohol
Resort Hotel, Inc., et al."5

On November 6, 1992, Cattleya entered into a Contract of Conditional Sale with the Tecson spouses covering nine
parcels of land, including the subject property. In this transaction the Tecson spouses were represented by Atty. Salvador
S. Pizarras (Atty. Pizarras). The Contract of Conditional Sale was entered in the Primary Book of the Office of the Register
of Deeds of Bohol that same day, per Entry No. 83422. On August 30, 1993, the parties executed a Deed of Absolute Sale
covering the subject property. This Deed of Absolute Sale was also entered in the Primary Book on October 4, 1993, per
Entry No. 87549. However, neither the Contract of Conditional Sale nor the Deed of Absolute Sale could be annotated on
the certificate of title covering the subject property because the then Register of Deeds of Bohol, Atty. Narciso S. De la
Serna (Atty. De la Serna) refused to annotate both deeds. According to Atty. De la Serna it was improper to do so because
of the writ of attachment that was annotated on the certificate of title of the subject property, in connection with the said
Civil Case No. 3399.6

On December 1, 1993, Atty. Cabilao, Jr. and Atty. Pizarras, in representation of their respective clients, again requested
Atty. De la Serna to annotate the Deed of Absolute Sale and all other pertinent documents on the original certificate of title
covering the subject property. But Atty. De la Serna refused anew – this time saying that he would accede to the request
only if he was presented with a court order to that effect. Atty. De la Serna still refused the request to annotate, even after
Atty. Cabilao, Jr. had told him that all that he (Atty. Cabilao, Jr.) was asking was for the Deed of Absolute Sale to be
annotated on the original certificate of title, and not for Atty. De la Serna to issue a new transfer of title to the subject
property.7

The writ of attachment on the certificate of title to the subject property was, however, lifted, after the parties in Civil Case
No. 3399 reached an amicable settlement or compromise agreement. Even then, however, Cattleya did not still succeed
in having the aforementioned Deed of Absolute Sale registered, and in having title to the subject property transferred to its
name, because it could not surrender the owner's copy of TCT No. 17655, which was in possession of the Tecson
spouses. According to Cattleya, the Tecson spouses could not deliver TCT No. 17655 to it, because according to the
Tecson spouses this certificate of title had been destroyed in a fire which broke out in Sierra Bullones, Bohol. 8

This claim by the Tecson spouses turned out to be false, however, because Atty. Cabilao, Jr. came to know, while
following up the registration of the August 30, 1993 Deed of Absolute Sale at the Office of the Register of Deeds of Bohol,
that the owner's copy of TCT No. 17655 had in fact been presented by Taina at the Office of the Register of Deeds of
Bohol, along with the Deed of Sale that was executed by the Tecson spouses, in favor of Taina covering the subject
property.9

It appears that when Taina's then common-law husband, Michael (Mike) Stone, visited Bohol sometime in December
1985, he fell in love with the place and decided to buy a portion of the beach lot in Doljo, Panglao, Bohol. They met with
Col. Tecson, and the latter agreed to sell them a portion of the beach lot for US$8,805.00. Mike and Taina made an initial
downpayment of US$1,750.00 (or equivalent P35,000.00 at that time) for a portion of a beach lot, but did not ask for a
receipt for this initial downpayment. On June 1, 1987, a Deed of Absolute Sale covering the subject portion was executed
by Col. Tecson in Taina's favor. Subsequent payments were made by Mike totalling P40,000.00, as of August 29, 1986,
although another payment of P5,000.00 was made sometime in August 1987. The last payment in the amount of
P32,000.00, was made in September 1987. 10 In 1990, Troadio Tecson, Jr., the son of Col. Tecson and Taina's brother-in-
law, delivered to Taina the owner's copy of TCT No. 17655. 11

In the meantime, in October 1986, Taina and Mike got married.

On April 25, 1994, Taina filed a Notice of Adverse Claim covering the subject portion, after she learned that Col. Tecson
and his lawyer had filed a petition for the issuance of a second owner's copy over TCT No. 17655. 12

On February 8, 1995, Taina sought to have her Deed of Absolute Sale registered with the Office of the Register of Deeds
of Bohol, and on that occasion presented the owner's copy of TCT No. 17655. Taina also caused a Memorandum of
Encumbrance to be annotated on this certificate of title. The result was that on February 10, 1995, a new certificate of title,
TCT No. 21771, was issued in the name of Taina, in lieu of TCT No. 17655, in the name of the Tecson spouses.

Whereupon, Cattleya instituted against Taina a civil action for quieting of title and/or recovery of ownership and
cancellation of title with damages.

Taina likewise filed a motion for leave to admit a third-party complaint against the Tecson spouses; this motion was
granted by the RTC.17
After due proceedings, the RTC of Bohol gave judgment 18 for Cattleya.

Held:

This Petition is bereft of merit.

Section 7, Article XII of the 1987 Constitution states that:

Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain.

Given the plain and explicit language of this constitutional mandate, it has been held that "[a]liens, whether individuals or
corporations, are disqualified from acquiring lands of the public domain. Hence, they are also disqualified from
acquiring private lands. The primary purpose of the constitutional provision is the conservation of the national
patrimony."39

In the case at bench, Taina herself admitted that it was really Mike who paid with his own funds the subject lot; hence,
Mike was its real purchaser or buyer. More than that, it bears stressing that if the deed of sale at all proclaimed that she
(Taina) was the purchaser or buyer of the subject property and this subject property was placed under her name, it was
simply because she and Mike wanted to skirt or circumvent the constitutional prohibition barring or outlawing foreigners or
aliens from acquiring or purchasing lands in the Philippines. Indeed, both the CA and the RTC exposed and laid bare
Taina's posturing and pretense for what these really are: that in the transaction in question, she was a mere dummy, a
spurious stand-in, for her erstwhile common-law husband, who was not a Filipino then, and never attempted to become a
naturalized Filipino citizen thereafter.

Given the fact that the sale by the Tecson spouses to Taina as Mike's dummy was totally abhorrent and repugnant to the
Philippine Constitution, and is thus, void ab initio, it stands to reason that there can be no double sale to speak of here. In
the case of Fudot v. Cattleya Land, Inc.,43 which fortuitously also involved the Tecson spouses and Cattleya, we held thus

The petition is bereft of merit.

Petitioner's arguments, which rest on the assumption that there was a double sale, must fail.

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code, which provides the rule on double sale,
applies only to a situation where the same property is validly sold to different vendees. In this case, there is only one sale
to advert to, that between the spouses Tecson and respondent.

In Remalante v. Tibe, this Court ruled that the Civil Law provision on double sale is not applicable where there is only one
valid sale, the previous sale having been found to be fraudulent. Likewise, in Espiritu and Apostol v. Valerio, where the
same parcel of land was purportedly sold to two different parties, the Court held that despite the fact that one deed of sale
was registered ahead of the other, Art. 1544 of the Civil Code will not apply where said deed is found to be a forgery, the
result of this being that the right of the other vendee should prevail.

The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it bears the forged signature
of Asuncion. x x x44 (Citations omitted; Emphasis supplied)

14. G.R. No. 142618 July 12, 2007

PCI LEASING AND FINANCE, INC., Petitioner,


vs.
GIRAFFE-X CREATIVE IMAGING, INC., Respondent.

Facts:

On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement, 1whereby the
former leased out to the latter one (1) set of Silicon High Impact Graphics and accessories worth ₱3,900,00.00 and one
(1) unit of Oxberry Cinescan 6400-10 worth ₱6,500,000.00. In connection with this agreement, the parties subsequently
signed two (2) separate documents, each denominated as Lease Schedule. 2Likewise forming parts of the basic lease
agreement were two (2) separate documents denominated Disclosure Statements of Loan/Credit Transaction (Single
Payment or Installment Plan)3 that GIRAFFE also executed for each of the leased equipment. These disclosure
statements inter alia described GIRAFFE, vis-à-vis the two aforementioned equipment, as the "borrower" who
acknowledged the "net proceeds of the loan," the "net amount to be financed," the "financial charges," the "total
installment payments" that it must pay monthly for thirty-six (36) months, exclusive of the 36% per annum "late payment
charges." Thus, for the Silicon High Impact Graphics, GIRAFFE agreed to pay ₱116,878.21 monthly, and for Oxberry
Cinescan, ₱181.362.00 monthly.

By the terms, too, of the Lease Agreement, GIRAFFE undertook to remit the amount of ₱3,120,000.00 by way of
"guaranty deposit," a sort of performance and compliance bond for the two equipment. Furthermore, the same agreement
embodied a standard acceleration clause, operative in the event GIRAFFE fails to pay any rental and/or other accounts
due.
A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment obligations. And following a
three-month default, PCI LEASING, through one Atty. Florecita R. Gonzales, addressed a formal pay-or-surrender-
equipment type of demand letter4 dated February 24, 1998 to GIRAFFE.

The demand went unheeded.

Hence, on May 4, 1998, in the RTC of Quezon City, PCI LEASING instituted the instant case against GIRAFFE. In its
complaint,5 docketed in said court as Civil Case No. 98-34266 and raffled to Branch 227 6 thereof, PCI LEASING prayed
for the issuance of a writ of replevin for the recovery of the leased property.

Upon PCI LEASING’s posting of a replevin bond, the trial court issued a writ of replevin, paving the way for PCI LEASING
to secure the seizure and delivery of the equipment covered by the basic lease agreement.

Instead of an answer, GIRAFFE, as defendant a quo, filed a Motion to Dismiss, therein arguing that the seizure of the two
(2) leased equipment stripped PCI LEASING of its cause of action. Expounding on the point, GIRAFFE argues that,
pursuant to Article 1484 of the Civil Code on installment sales of personal property, PCI LEASING is barred from further
pursuing any claim arising from the lease agreement and the companion contract documents, adding that the agreement
between the parties is in reality a lease of movables with option to buy. The given situation, GIRAFFE continues, squarely
brings into applicable play Articles 1484 and 1485 of the Civil Code, commonly referred to as the Recto Law.

Issue:

Whether or not the underlying Lease Agreement, Lease Schedules and the Disclosure Statements that embody the
financial leasing arrangement between the parties are covered by and subject to the consequences of Articles 1484 and
1485 of the New Civil Code?

Held:

We are not persuaded.

The Court can allow that the underlying lease agreement has the earmarks or made to appear as a financial leasing, 9 a
term defined in Section 3(d) of R.A. No. 8556 as -

a mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the
instance of the lessee, machinery, equipment, … office machines, and other movable or immovable property in
consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy
(70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory
period of not less than two (2) years during which the lessee has the right to hold and use the leased property … but with
no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract.

On the whole, then, we rule, as did the trial court, that the PCI LEASING- GIRAFFE lease agreement is in reality a lease
with an option to purchase the equipment. This has been made manifest by the actions of the petitioner itself, foremost of
which is the declarations made in its demand letter to the respondent. There could be no other explanation than that if the
respondent paid the balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly
an option to purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply.

The present case reflects a situation where the financing company can withhold and conceal - up to the last moment - its
intention to sell the property subject of the finance lease, in order that the provisions of the Recto Law may be
circumvented. It may be, as petitioner pointed out, that the basic "lease agreement" does not contain a "purchase option"
clause. The absence, however, does not necessarily argue against the idea that what the parties are into is not a straight
lease, but a lease with option to purchase. This Court has, to be sure, long been aware of the practice of vendors of
personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object
of the sale from passing to the vendee until and unless the price is fully paid.

Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question
are subject to the provision that when the lessor in such case "has chosen to deprive the lessee of the enjoyment of such
personal property," "he shall have no further action" against the lessee "for the recovery of any unpaid balance" owing by
the latter, "agreement to the contrary being null and void."

In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the petitioner waived its
right to bring an action to recover unpaid rentals on the said leased items. Paragraph (3), Article 1484 in relation to Article
1485 of the Civil Code, which we are hereunder re-reproducing, cannot be any clearer.

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise
any of the following remedies:

xxx xxx xxx

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover
two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance
of the price. Any agreement to the contrary shall be void.

ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to
buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.
As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals, 23 the remedies provided for in Article 1484 of the
Civil Code are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to
contracts purporting to be leases of personal property with option to buy by virtue of the same Article 1485. The condition
that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485
was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer for replevin to recover
possession of the office equipment. 24 By virtue of the writ of seizure issued by the trial court, the petitioner has effectively
deprived respondent of their use, a situation which, by force of the Recto Law, in turn precludes the former from
maintaining an action for recovery of "accrued rentals" or the recovery of the balance of the purchase price plus interest. 25

15. G.R. No. 156405 February 28, 2007

SPS. GIL TORRECAMPO and BRENDA TORRECAMPO, Petitioners


vs.
DENNIS ALINDOGAN, SR. and HEIDE DE GUZMAN ALINDOGAN, Respondents.

Facts:

On May 24, 1997, spouses Jose and Lina Belmes executed a deed of sale in favor of spouses Dennis and Heide
Alindogan, respondents, over Lot No. 5524-H and the house constructed thereon located in Rawis, Legazpi City.

On July 4, 1997, Lina Belmes wrote respondents wherein she delivered the constructive possession of the house
and lot to them. However, on July 5, 1997, before they could take actual possession of the property, spouses Gil and
Brenda Torrecampo, petitioners, and spouses Jonathan Lozares and Jocelyn Torrecampo, entered and occupied the
premises.

Despite respondents’ repeated demands, petitioners failed and refused to vacate the property. Thus, respondents
filed with the Regional Trial Court (RTC) Branch 10, Legazpi City, a Complaint for Recovery of Ownership,
Possession and Damages against petitioners, docketed as Civil Case No. 9421.

In their Answer to the complaint, petitioners claimed that on March 25, 1997, spouses Belmes received from them
₱73,000.00 as advance payment for the sale of the house and lot. On April 8, 1997, petitioners and spouses Belmes
executed a "Contract to Buy and Sell" covering the same property. The parties agreed as follows: that the total
consideration is ₱350,000.00; that upon the signing of the contract, petitioners shall pay spouses Belmes
₱220,000.00; and that the balance of ₱130,000.00 shall be paid upon the issuance of the certificate of title in the
names of petitioners. To complete the agreed partial payment of ₱220,000.00 mentioned in the contract,
petitioners paid spouses Belmes ₱130,000.00, but the latter refused to accept the amount. Thus, on July 7, 1997,
petitioners filed with the RTC, Branch 18, Tabaco, Albay, Civil Case No. T-1914, a Complaint for Specific
Performance against spouses Belmes.

On July 14, 2000, the RTC, in Civil Case No. 9421, now before us, rendered a Decision 3 in favor of respondents.

On appeal, the Court of Appeals, in its assailed Decision, 4 affirmed in toto the RTC judgment.

Held:

Nevertheless, in order to put rest all doubts on the matter, we hold that the agreement between petitioners and
spouses Belmes is not a contract of sale but only a contract to sell. The distinction between a contract of sale and a
contract to sell is well-settled:

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract
to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the
vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition,
failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from
becoming effective. (Underscoring supplied)6

Indeed, the true agreement between petitioners and spouses Belmes is a contract to sell. Not only did the parties
denominate their contract as "Contract to Buy and Sell," but also specified therein that the balance of the purchase
price in the amount of ₱130,000.00 is to be paid by petitioners upon the issuance of a certificate of title. That
spouses Belmes have in their possession the certificate of title indicates that ownership of the subject property did
not pass to petitioners.

In Ursal v. Court of Appeals, et al.,7 we held:

Indeed, in contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the
suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of
the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior
to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if
there is a contract to sell between them.
Petitioners further contend that when respondents bought the property on May 24, 1997 from spouses Belmes,
they knew that the same property was previously sold to them (petitioners). Therefore, since respondents are
buyers in bad faith, ownership of the property must pertain to petitioners who, in good faith, were first in
possession.

The argument is misplaced.

Petitioners invoke Article 1544 of the Civil Code which reads:

Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession;
and in the absence thereof, to the person who presents the oldest title, provided there is good faith. (Emphasis
ours)

The above provision does not apply to the instant case considering that the transaction between petitioners and
spouses Belmes is a mere contract to sell, not a contract of sale.

16. G.R. No. 80058 February 13, 1989

ERNESTO R. ANG and ROSALINDA ANG, petitioners,


vs.
THE COURT OF APPEALS and LEE CHUY REALTY CORP., respondents.

Facts:

Petitioners Ernesto Ang and Rosalinda Ang, brother and sister, are the owners of three (3) parcels of land located at
A. Bonifacio St., Balintawak, Quezon City with an aggregate area of 2,096 square meters covered by Transfer
Certificates of Title Nos. 258870, 258871 and 258872 which they acquired by purchase from the Cruz family on
July 3, 1979 at a price of P680,000.00. 3

Sometime in November 1979, negotiations were undertaken for the sale of the aforementioned properties between
the petitioners as sellers and private respondent Lee Chuy Realty Corporation, through its president Henry Lee
Chuy as buyer.

On December 4, 1979, private respondent issued in favor of petitioners Manila Banking Corporation Check No.
30022695 in the amount of P50,000.00 4 which it transmitted to petitioners together with a receipt supposedly
embodying the terms and conditions of their agreement.

The check for P50,000.00 was received and thereafter encashed by petitioners. However, the accompanying receipt
was not returned by petitioners and instead another receipt prepared and signed by petitioners was forwarded to
private respondent.

On January 12, 1980, petitioner Rosalinda R. Ang sent private respondent a letter giving the latter up to January 24,
1980 to pay the balance of the purchase price, and informing it that failure to do so will result in the cancellation of
their agreement. 7

In reply thereto, private respondent wrote petitioners on January 25, 1980 expressing surprise over the demand
for payment made by petitioners since private respondent had been ready since December 1979 to perform its part
of the agreement while petitioners had not yet complied with their undertaking to clear the subject properties of
the obstructions thereon. 8

On March 3, 1980, private respondent, through its counsel, wrote petitioners demanding the refund of the P
50,000.00 down payment made by private respondent on account of the failure of the petitioners to comply with
their undertaking and their subsequent withdrawal from the sale. 9

Upon the failure of the petitioners to return the P50,000.00 down payment, private respondent filed a complaint
for the collection of a sum of money with damages before the Court of First Instance (now Regional Trial Court) of
Rizal on May 9, 1980.

The petitioners sought the dismissal of the complaint. They also filed a counterclaim, praying for actual damages of
P20,000.00 a month counted from November 1979 to continue while their deprivation of rental income persists, as
well as moral and exemplary damages, plus attorney's fees.

After trial where the parties presented only one (1) witness each, the trial court rendered its decision dated June
23, 1983 10 in favor of petitioners and ordered private respondent to pay to petitioners the amounts of P170,000.00
with interest of 12% per annum to commence from the date of the filing of the complaint, P 25,000.00 as
exemplary damages and P 20,000.00 as attorney's fees.

The Court of Appeals held that petitioners were the ones who breached the agreement. In a decision dated June 22,
1987, 11 the appellate court reversed the decision of the trial court and ordered petitioners to pay private
respondent the amount of P50,000.00 with legal interest computed from March 3, 1980 plus P 10,000.00 attorney's
fees.

Issue:

Hence, this petition for review on certiorari wherein petitioners raise several errors which all boil down to the
issue of which party, the petitioners or the private respondent, breached the agreement.

Held:

After a careful examination of the records of the case, this Court rules in favor of the private respondent.

There is no doubt that there was a perfected contract for the sale of subject properties between petitioners and
private respondent as evidenced by the down payment of P50,000.00. 13 What needs to be resolved is the agreed
price for the sale of subject properties. In the receipt prepared by private respondent which was not signed by
petitioners, the stated purchase price is P1,600,000.00. However, the receipt signed by petitioners, which
substantially reproduced the terms and conditions embodied in the original receipt, did not state the agreed price.

Henry Lee Chuy testified that the second receipt did not indicate the agreed price because petitioners wanted to
undervalue the price of P1,600,000.00 so that they will not pay a large amount of capital gains tax considering that
the prior acquisition price for the property was only P680,000.00. 14 Initially, he refused to agree but upon the
assurance of petitioners' father Ang Kilin that the clearing work in the property will be completed in a week or two,
he agreed to keep the receipt.

On the other hand, Ang Kilin testified that the real price for the sale is P2,340,000.00 and not P1,600,000.00 as
claimed by private respondent so that they (the petitioners) did not sign the receipt prepared by the latter. He
claimed that it was Mrs. Lee, the mother of Henry Lee Chuy, who did not want to state the correct price since she
wanted to undervalue the property. He adds that they have received offers for the properties in the amount of
P2,160,000.00 from Dolora Chua, 15 and Pl,300.00 per square meter from Eusebio Chang of the Ching Chua Printing
Press. 16 He also testified that inasmuch as the offer of private respondent was made earlier, petitioners were not in
a position to negotiate with the other buyers.

The respondent Court of Appeals arrived at the conclusion that the petitioner committed a breach of their contract
and acted in bad faith in dealing with private respondent.

We agree.

Petitioners did not offer any plausible explanation as to why Mrs. Lee did not want to state the correct price except
that the latter wanted to undervalue the property. The reason why Mrs. Lee wanted to undervalue the property was
not clear. On the other hand, Henry Lee Chuy categorically stated that petitioners did not want to state the correct
price for purposes of reducing their capital gains tax liability.

The Court finds that the latter explanation appears to be the more logical reason why petitioners did not state any
specified amount for the agreed price in the receipt they signed. Since petitioners acquired the property for only
P680,000.00 and the purchase price of the same was set at P1,600,000.00, they would have been liable to pay quite
a large amount of capital gains tax for the profits to be realized from the sale, and even more had the price been set
at P2,340,000.00.

Moreover, the original receipt prepared by private respondent recites in detail the manner of payment of the
balance of the purchase price, to wit: P750,000.00 to be paid after the property is cleared of occupants and
obstructions and upon delivery of the deed of absolute sale; and the balance of P800,000.00 to be paid within 45
days thereafter. On the other hand, the receipt prepared and signed by petitioners merely indicates that 50% of the
price minus the deposit shall be paid upon delivery of the deed of absolute sale and the other 50% would be paid
within 45 days thereafter without stating the price. If the price was really P2,340,000.00 as claimed by petitioners,
they could have easily written the amount in the receipt. With or without a lawyer to assist them, petitioners must
have been aware of the importance of indicating the correct amount in the receipt since they claim that they did not
sign the receipt prepared by private respondent because the price indicated thereon was wrong. Petitioners were
the ones who clearly caused the obscurity when they omitted the purchase price in the receipt they prepared and
signed. Hence, such obscurity must be construed against them. 17

Having settled the issue as to the agreed purchase price, We are now faced with the question of who breached the
agreement and, as a corollary to this, who has the right to withdraw from the sale.

The Court of Appeals found that the petitioners breached the agreement when they failed to undertake fulfillment
of the two conditions embodied in the same; (1) that petitioners will undertake to remove and clear the subject
property of all occupants and obstructions within the month of December 1979 and (2) that when the subject
property is cleared of all occupants and obstructions, the petitioners shall deliver a deed of absolute sale in favor of
private respondent with all pertinent papers necessary for the registration and issuance of a certificate of title in
the name of private respondent.

Said conclusion of the Court of Appeals that petitioners failed to comply with their part of the agreement is
conclusive upon this Court. 20 The appellate court discussed in detail its findings on the matter. We have gone
through the records of this case and find no cogent reason to disturb such findings.

However, such breach of the agreement by petitioner does not warrant a resolution of the contract. 21 While it is
true that in reciprocal obligations, such as the contract of purchase and sale in this case, the power to rescind is
implied and any of the contracting parties may, upon non-fulfillment by the other party of his part of the obligation,
resolve the contract, 22 rescission wig not be permitted for a slight or casual breach of the contract. Rescission may
be had only for such breaches that are so substantial and fundamental as to defeat the object of the parties in
making the agreement. 23 The two aforementioned conditions that were breached by petitioners are not essential
for the fulfillment of the obligations to sen on their part but merely an incidental undertaking. The rescission of the
contract may not be allowed on this ground alone.

At any rate, private respondent at first did not seek to rescind the contract on the basis of the non-fulfillment of
these conditions. Private respondent in fact sought definite advice from petitioners as to when they can comply
with the conditions since it was ready to perform its part of the agreement since December 1979. This was after it
received the letter of petitioners demanding payment of the balance of the purchase price on or before January 24,
1980 with the threat that failure to do so will lead to the repudiation of the agreement. Of course, petitioners
cannot unilaterally repudiate the contract for the slight delay in payment incurred by private respondent which,
even if true, cannot also be a ground for rescission since the same amounts to a slight breach. 24 Indeed, it was the
failure of the petitioners to comply with the aforementioned conditions of the agreement that caused the delay in
the payment by private respondent. However, when petitioners still failed to comply with their obligation and
refused to proceed with the sale unless the purchase price is increased, that was the time private respondent
demanded the resolution of the sale by asking for the refund of the downpayment.

The Court holds that when petitioners refused to proceed with the sale unless private respondent agreed to pay the
higher price of P2,340,000.00, the petitioners thereby committed a serious breach of the agreement. There was a
perfected contract of sale between the parties and the purchase price was set at P1,600,000.00. Petitioners cannot
increase the purchase price agreed upon without the consent of private respondent. As private respondent was
willing to buy the subject property at the price of P1,600,000.00 as agreed upon and petitioners were not willing to
sell unless the price is increased to P2,340,000.00, 25 private respondent had the right to rescind the agreement as
petitioners committed a serious breach of the terms of the same.

Moreover, as the Court of Appeals correctly observed, since petitioners had already sold the subject properties to
Dolora Chua, they can no longer perform what was incumbent upon them under the terms of the agreement, that is,
to deliver the subject property to private respondent. This is another breach of their agreement. The appellate
court aptly characterized the actuations of petitioners to be "double-dealing."

As a consequence of the resolution of the contract of sale, the parties should be restored to their original
situation. 26Petitioners should, therefore, be liable to refund the P50,000.00 down payment they have received from
private respondent with legal interest computed from the date of the extrajudicial demand made on March 3,
1980. 27

17. G.R. No. 211175

ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR., ERNALDO YAMBOT and LYDIA
BUSTAMANTE,Petitioners,
vs.
LA PAZ HOUSING AND DEVELOPMENT CORPORATION and GOVERNMENT SERVICE INSURANCE SYSTEM,
Respondents.

Petitioners Atty. Reyes G. Geromo (Geromo), Florencio Buentipo, Jr. (Buentipo), Ernaldo Yambot (Yambot), and Lydia
Bustamante (Bustamante) acquired individual housing units of Adelina 1-A Subdivision (Adelina) in San Pedro,
Laguna from La Paz, through GSIS financing, as evidenced by their deeds of conditional sale. 4 The properties were
all situated along the old Litlit Creek.

In 1987, Geromo, Bustamante and Yambot started occupying their respective residential dwellings, which were all
located along Block 2 (Pearl Street) of the said subdivision. Buentipo, on the other hand, opted to demolish the
turned-over unit and build a new structure thereon. After more than two (2) years of occupation, cracks started to
appear on the floor and walls of their houses. The petitioners, through the President of the Adelina 1-A
Homeowners Association, requested La Paz, being the owner/developer, to take remedial action. They collectively
decided to construct a riprap/retaining wall along the old creek believing that water could be seeping underneath
the soil and weakening the foundation of their houses. Although La Paz was of the view that it was not required to
build a retaining wall, it decided to give the petitioners ₱3,000.00 each for expenses incurred in the construction of
the said riprap/retaining wall. The petitioners claimed that despite the retaining wall, the condition of their
housing units worsened as the years passed. When they asked La Paz to shoulder the repairs, it denied their
request, explaining that the structural defects could have been caused by the 1990 earthquake and the
renovations/improvements introduced to the units that overloaded the foundation of the original structures.

In 1998, the petitioners decided to leave their housing units in Adelina. 5

In May 2002, upon the request of the petitioners, the Municipal Engineer of San Pedro and the Mines and
Geosciences Bureau (MGB) of the Department of Environment and Natural Resources (DENR) conducted an ocular
inspection of the subject properties. They found that there was "differential settlement of the area where the
affected units were constructed. "6

On the basis thereof, Geromo filed a complaint for breach of contract with damages against La Paz and GSIS before
the HLURB. 7 On May 3, 2003, Buentipo, Yambot and Bustamante filed a similar complaint against La Paz and
GSIS. 8 They all asserted that La Paz was liable for implied warranty against hidden defects and that it was negligent
in building their houses on unstable land. Later on, the said complaints were consolidated.

La Paz, in its Answer, averred that it had secured the necessary permits and licenses for the subdivision project;
that the houses thereon were built in accordance with the plans and specifications of the National Building Code
and were properly delivered to the petitioners; that it did not violate Presidential Decree (P.D.) No. 957 as it was
issued compliance documents, such as development permits, approved alteration plan, license to sell, and
certificate of completion by HLURB; that the Philippine Institute of Volcanology and
Seismology (PHILVOLCS), based on the serial photo interpretation of its field surveyors in 1996, reported that a
portion of the topography of the subdivision developed an active fault line; and lastly, that there were unauthorized,
irregular renovation/alteration and additional construction in the said units. Hence, it argued that it should not be
held liable for any damage incurred and that the same should be for the sole account of the petitioners. 9

In its defense, GSIS moved for the dismissal of the complaint for lack of cause of action. It asserted that the deeds of
conditional sale were executed between La Paz and the petitioners only and that its only participation in the
transactions was to grant loans to the petitioners for the purchase of their respective properties. 10

In its August 9, 2004 Decision, 11 the HLURB Arbiter found La Paz liable for the structural damage on the
petitioners' housing units, explaining that the damage was caused by its failure to properly fill and compact the soil
on which the houses were built and to maintain a three (3) meter easement from the edge of the creek as required
by law. As to GSIS, the HLURB ruled that there was no cogent reason to find it liable for the structural defects as it
merely facilitated the financing of the affected units.

In its September 12, 2005 Decision, 13 the HLURB Board of Commissioners set aside the Arbiter's decision,
explaining that there was no concrete evidence presented to prove that the houses of the petitioners were indeed
damaged by the failure of La Paz to comply with the building standards or easement requirements.

On January 11, 2012, the OP finally rendered a decision dismissing the appeal for lack of merit.

Not in conformity, the petitioners appealed the OP decision, dated January 11, 2012, before the CA. On September
26, 2013, the CA affirmed the ruling of the OP and found that the petitioners had no cause of action against La Paz
for breach of warranty against hidden defects as their contracts were merely contracts to sell, the titles not having
been legally passed on to the petitioners. It likewise ruled that La Paz could not be held liable for damages as there
was not enough evidence on record to prove that it acted fraudulently and maliciously against the petitioners. 18

Issue:

Whether La Paz should be held liable for the structural defects on its implied warranty against hidden defects?

Held:

After a judicious review of the records of this case, the Court finds merit in the petition.

Under the Civil Code, the vendor shall be answerable for warranty against hidden defects on the thing sold under
the following circumstances:

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to
such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower
price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those
which are not visible if the vendee is an expert who, by reason of this trade or profession, should have known them.
(Emphasis supplied)

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he
was not aware thereof.

This provision shall not apply if the contrary has been stipulated and the vendor was not aware of the hidden faults
or defects in the thing sold.
For the implied warranty against hidden defects to be applicable, the following conditions must be met:

a. Defect is Important or Serious

i. The thing sold is unfit for the use which it is intended

ii. Diminishes its fitness for such use or to such an extent that the buyer would not have acquired it had he been
aware thereof

b. Defect is Hidden

c. Defect Exists at the time of the sale

d. Buyer gives Notice of the defect to the seller within reasonable time

Here, the petitioners observed big cracks on the walls and floors of their dwellings within two years from the time
they purchased the units. The damage in their respective houses was substantial and serious. They reported the
condition of their houses to La Paz, but the latter did not present a concrete plan of action to remedy their
predicament. They also brought up the issue of water seeping through their houses during heavy rainfall, but again
La Paz failed to properly address their concerns. The structural cracks and water seepage were evident indications
that the soil underneath the said structures could be unstable. Verily, the condition of the soil would not be in the
checklist that a potential buyer would normally inquire about from the developer considering that it is the latter's
prime obligation to ensure suitability and stability of the ground.

One of the purposes of P.D. No. 957, also known as The Subdivision and Condominium Buyers' Protective Decree, is
to discourage and prevent unscrupulous owners, developers, agents, and sellers from reneging on their obligations
and representations to the detriment of innocent purchasers.26

Considering the nature of the damage sustained by the structures, even without the findings of the local
governmental agency and the MGB-DENR, La Paz is still liable under the doctrine of res ipsa loquitur. In the case
of D.M Consunji, Inc. v. CA, 27 the Court expounded on this doctrine in this wise:

The concept of res ipsa loquitur has been explained in this wise:

While negligence is not ordinarily inferred or presumed, and while the mere happening of an accident or injury will
not generally give rise to an inference or presumption that it was due to negligence on defendants part, under the
doctrine of res ipsa loquitur, which means, literally, the thing or transaction speaks for itself, or in one jurisdiction,
that the thing or instrumentality speaks for itself, the facts or circumstances accompanying an injury may be such
as to raise a presumption, or at least permit an inference of negligence on the part of the defendant, or some other
person who is charged with negligence.

x x x where it is shown that the thing or instrumentality which caused the injury complained of was under the
control or management of the defendant, and that the occurrence resulting in the injury was such as in the ordinary
course of things would not happen if those who had its control or management used proper care, there is sufficient
evidence, or, as sometimes stated, reasonable evidence, in the absence of explanation by the defendant, that the
injury arose from or was caused by the defendant's want of care.

Under the said doctrine, expert testimony may be dispensed with to sustain an allegation of negligence if the
following requisites obtain: a) the event is of a kind which does not ordinarily occur unless someone is negligent; b)
the cause of the injury was under the exclusive control of the person in charge; and c) the injury suffered must not
have been due to any voluntary action or contribution on the part of the person injured. 29

In this case, the subdivision plan/layout was prepared and approved by La Paz. The actual excavation, filling and
levelling of the subdivision grounds were exclusively done under its supervision and control. There being no
contributory fault on the part of the petitioner, there can be no other conclusion except that it was the fault of La
Paz for not properly compacting the soil, which used to be an old creek.

As to the petitioners' prayer to make GSIS jointly and severally liable with La Paz, the Court finds that there is no
legal basis to juridically bind GSIS because it was never a party in the contracts between La Paz and the petitioners.
The housing loan agreements that the petitioners entered into with GSIS were separate and distinct from the
purchase contracts they executed with La Paz. GSIS merely agreed to pay the purchase price of the housing unit that
each petitioner purchased from La Paz. It was merely the lender, not the developer.

18. VIRGILIO A. CADUNGOG, G.R. No. 161223


Petitioner,

Present:
PUNO, J., Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

JOCELYN O. YAP, Promulgated:


Respondent.
September 12, 2005

Facts:

Franklin Ong and his sister, Jocelyn Ong-Yap, are first cousins of Virgilio Cadungog. Cresenciano Ong Aranas, the
Municipal Mayor of Ginatilan, Cebu, from 1955 to 1978, [2] is their uncle.

On August 17, 1979, Virgilio executed a Deed of Sale with Right of Repurchase [3] in which he sold to his
cousin, Franklin Ong, the following six parcels of land located in Ginatilan, Cebu for P7,144.28:
Parcel Number Tax Dec. No. Area
1 000821 1,170 square meters
2 4978 1,444 square meters
3 29586 4,257 square meters
4 5478 1,140 square meters
5 5486 980 square meters
6 5486 1,020 square meters

Under the deed, Virgilio had the right to repurchase the property within 10 years from the said date. [5]

Virgilio failed to redeem the property. Nevertheless, upon the prodding of Franklin, Virgilio, who was
merely a letter-carrier, executed a Deed of Absolute Sale [6] in favor of Jocelyn in which it appears that he sold Parcel
Nos. 1, 2 and 3 for the price of P5,000.00. Virgilio declared therein that he inherited Parcel Nos. 2 and 3 from his
mother, Soledad, who inherited the same from her parents, Jose Aranas and Basilia Rocaberte, under a Deed of
Partition executed by their heirs. Franklin signed as one of the witnesses to the deed. [7]

On December 23, 1996, Cresenciano Ong executed a Deed of Absolute Sale of Parcel No. 2 in favor of the
APC Group, Inc. for P32,380.00. Cresenciano declared that he was the sole and absolute owner, in fee simple, of the
said lot.[8] On January 23, 1997, Virgilio executed a Deed of Absolute Sale of Parcel No. 1 in favor of the APC Group,
Inc. for P35,400.00, alleging therein that he was the sole and exclusive owner of the property. [9]

When Franklin learned of the said sales, he objected. Virgilio, thus, delivered to Franklin Check No.
0000997[10] dated May 24, 1997, drawn and issued by Cresenciano against his account with the Prudential Bank, in
the amount of P25,000.00. Virgilio also delivered to Franklin Check No. 0000999 [11] drawn and issued by
Cresenciano against his account with the same bank in the amount of P25,000.00. On May 26, 1997, Franklin signed
Receipts dated May 25 and 26, 1997, embodied in a piece of paper. [12] In the Receipt dated May 26, 1997, Franklin
acknowledged to have received the P25,000.00 check representing full payment for the refund of the lot sold in
Ginatilan.[13]

When Jocelyn learned that Virgilio had sold Parcel No. 1 to the APC Group, Inc., she filed a criminal complaint
for estafa against him.

By way of riposte, Virgilio filed a Complaint before the RTC, on December 8, 1998, against Jocelyn for the
declaration of nullity of the September 30, 1991 Deed of Absolute Sale. He alleged therein that he had executed the
subject deed in favor of Jocelyn only because her brother, Franklin, had requested him to do so to lessen Jocelyns
tax liability in Canada. He also alleged that he agreed to execute the deed on the belief that it would not be
notarized, as no consideration was involved. He further claimed that he informed Franklins emissary (who brought
the deed for his signature) that he owned Parcel No. 1, Cresenciano owned Parcel No. 2, and he did not know who
owned Parcel No. 3. To his surprise, Jocelyn filed a criminal complaint for estafa against him before the Provincial
Prosecutors Office, and later an Information before the RTC of Oslob, Cebu. He further claimed that he and his wife
signed a one-page document; the acknowledgment page was merely added to it, as it, in fact, did not contain their
signatures.

Virgilio further stated that his uncle, Cresenciano Ong, sold Parcel No. 2, one of the lots included in the Deed
of Sale dated September 30, 1991, to the APC Group, Inc. He himself then sold Parcel No. 1, with an area of 1,770
square meters, to the same vendee for P35,400.00.

After the trial, the court rendered judgment in favor of Virgilio.

The CA reversed the ruling of the trial court.

Held:

The petition is meritorious.


We agree with the CA that the petitioner, as vendor a retro, failed to repurchase the property within the 10-
year period fixed by the parties in the Deed of Sale with Right of Repurchase. Consequently, Franklin Ong, the
vendee a retro, had acquired absolute title and ownership over the six parcels of land after August 17, 1979 when
the petitioner, as vendor a retro, failed to repurchase the same within the stipulated period.

A sale with pacto de retro transfers the legal title to the vendee a retro.[46] The essence of a pacto
de retro sale is that the title and ownership of the property sold are immediately vested in the vendee a
retro, subject to the resolutory condition of repurchase by a vendor a retro within the stipulated period.[47] Failure
on the part of a vendor a retro to repurchase the property within the period agreed upon by them, or, in the
absence thereof, as provided for by law, vests upon the vendee a retro absolute title and ownership over the
property sold by operation of law. [48] The failure of the vendee a retro to consolidate his title under Art. 1607 of the
New Civil Code does not impair such title and ownership because the method prescribed thereunder is merely for
the purpose of registering and consolidating titles to the property. [49] Franklin Ong, and not the petitioner, was the
lawful owner of the six parcels of land. The petitioner, thus, had no right to mortgage or sell the same to the
respondent on September 30, 1991 under the deed of absolute sale. As the Latin adage goes: NEMO DAT QUOD NON
HABET.[50] Hence, the ruling of the CA that the respondent acquired ownership over the three parcels of land from
the petitioner under the Deed of Absolute Sale dated September 30, 1991 is erroneous. Not being the owner of the
parcels of land, the petitioner could not have lawfully sold the same to the respondent.

We are not convinced that the petitioner and the respondent had agreed to the sale of Parcel Nos. 1, 2 and 3
for P5,000.00. The respondent was a resident of Canada on September 30, 1991. There is no evidence that on or
before said date, the petitioner had talked to the respondent relative to the sale of the said lots. Although Franklin
testified that he talked to the respondent relative to the sale and that the latter had agreed, no evidence was
adduced to show a special power of attorney authorizing him (Franklin) to agree to the purchase of the property
for P5,000.00. The declaration in the September 30, 1991 Deed of Absolute Sale with Right of Repurchase, that the
petitioner received P5,000.00 from the respondent on September 30, 1991, or prior thereto, is negated by the fact
that the respondent was then in Canada.

What is so worrisome is that Franklin, a law graduate, even induced the petitioner to execute the deed of
sale in favor of his sister, the respondent herein, despite the fact that he, and not the petitioner, was the owner of
the three parcels of land. Franklin even falsely declared in the September 30, 1991 deed, which he prepared for the
petitioner, that the latter was the owner of the parcels of land, when he knew, for a fact, that he was the lawful
owner of the property. In fact, when he learned that Cresenciano Ong Aranas had sold Parcel No. 2 to the APC
Group, Inc. and that the petitioner had also sold Parcel No. 1, Franklin vehemently objected. He relented only when
the petitioner gave the P50,000.00 to him in consideration for his agreement to the said sale of Parcel Nos. 1 and 2
to the APC Group, Inc. There is no evidence on record that the P50,000.00 which the petitioner paid was a refund of
the purchase price of Parcel Nos. 5 and 6 as regards the sale to APC Group, Inc. In fact, there is no evidence on
record to show that the petitioner had sold Parcel Nos. 5 and 6 to the APC Group, Inc.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV
No. 72761 is REVERSED and SET ASIDE. The decision of the Regional Trial Court nullifying the September 30,
1991 Deed of Absolute Sale executed by the petitioner in favor of the respondent is REINSTATED.