69. Bautista v.

Lasam

FACTS:
Gabriel Lasam and brothers Felix and Melquiades Bautista entered into a deed of sale where the
former will sell to the latter brothers 2, 130 hectares of land. The land was registered was only up to the
extent of 1445 hectares or adifference of 671 hectares from theoriginal. Despite that, the possession of
the671 hectares remained to the brothers.
Later on, Gabriel Lasam demanded from brothers Felix and MelquiadesBaustista to pay the former
theamount of 8k as the unpaid balanceof the stipulated price of the property.
The bros insisted that the land was only 1445 hectares and not 2130 hence the amount of the 671
hectares should be discounted from the original amount.
The trial court ruled in favor of Lasam.
The brothers appealed asserting that they sent letters to Lasam about the non-registration of the
remaining671 and the reason for the non-registration was due to the claim ofthe Land and Forestry
Offices.
Brothers further asserted that Lasam had the obligation to warranty the eviction of the claim of the
Land and Forestry Offices; thus the brothers cannot be held in default of the payment of the purchase
price.

ISSUE:
Whether or not the seller was liable for the warranty against eviction

HELD:
No. It is clear that to force a seller to respond to the eviction, the following must concur: (1) there
is final judgment, (2) the buyer has been deprived in all or in part of the thing sold, (3)that this deprivation
was by virtue of a right prior to the sale made by the seller, and (4)that the seller has been previously
notified of the demand for eviction at the request of the buyer. In this case, the 2nd and 4threquirements
were not present. The brother was not deprived of any part of the land since they took possession of the
land and continue to own it, despite not having managed to register in the Registry. Also, it has been
proven that the letters sent to Lasam were not letters notifying Lasam about the eviction, but rather the
brothers’ request for an extension of time for the payment of their remaining obligation.

70. Mendoza v. Caparros

FACTS:
On June 11, 1921, Agapito Ferreras sold Paulino Pelejo two plots of land described in the
decision and located in Camagon, municipality of Alabat, province of Quezon.
On February 15, 1932 the defendant Paulino Pelejo sold the same plots to the spouses
Victoriano Mendoza and Bernabela Tolentino. When both died, their heirs Pedro, Leandro and Justiniano,
all named Mendoza, granted an extrajudicial partition declaring that, as heirs of their deceased parents,
they adjudicated these plots to Pedro Mendoza

ISSUE:
- Whether or not there is a warranty against eviction
HELD:
No. The appealed decision is affirmed.
The defendant sold the plots of land with the following condition to the parents of the plaintiff;
"defend now and always against fair claims of whoever presents them." In accordance with this condition,
the defendant responds of the sanitation, in case of eviction, or in the case that the buyer or his heir was
deprived of the thing purchased or part of it by final judgment, and, although it had not been in the deed of
sale said condition, the seller of the eviction would still be responsible (article 1548, new Civil Code, and
article 1475, old Civil Code). When the plaintiff filed the complaint, did he know positively that the
defendant's inclusion was unnecessary? It does not appear in the file: on the contrary, it requested in its
application "in case cancellation or reconveyance be impossible,

Paulino Pelejo, as a seller, was obliged to prove that he had sold land parcels with just title; if
PaulinoPelejo had not really bought such parcels of Agapito Ferreras, he had the perfect right to register
them in his name. The title of buyer Victoriano Mendoza, who inherited the applicant Pedro Mendoza
these plots, depended on the title that Paulino Pelejo had on them at the time of sale. It did not lack legal
basis, therefore, the demand to include Paulino Pelejo as one of the defendants. His inclusion was a
warning that, in case of eviction, the - as a seller - had to answer for the sanitation.

RIGHTS AND OBLIGATIONS OF THE VENDEE

71. Ramos v. Heruela

FACTS:
On February 18, 1980, the spouses Ramos made an agreement with the spouses Heruela on the
sale of land. According to the spouses Ramos, the agreement is a contract of conditional sale. The
spouses Heruela allege that the contract is a sale on installment basis. The spouses Ramos allege that
out of the P15,3004 consideration for the sale of the land, the spouses Heruela paid only P4,000. The last
installment that the spouses Heruela paid was on 18 December 1981. The spouses Ramos assert that
the spouses Heruela’s unjust refusal to pay the balance of the purchase price caused the cancellation of
the Deed of Conditional Sale.
In June 1982, the spouses Ramos discovered that the spouses Heruela were already occupying
a portion of the land. The daughter and the son-in-law of the latter erected another house on the land.
The spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses
Ramos.

ISSUE:
Whether the Maceda Law (R.A. No. 6552) in relation to Arts. 1191 and 1592 applies.

HELD:
Yes. The document does not contain the usual terms and conditions of a formal deed of sale. The
original document, elevated to this Court as part of the Records, is torn in part. Only the words “LMENT
BASIS” is legible on the title. The names and addresses of the parties and the identity of the property
cannot be ascertained.
In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA
6552 applies. However, there was neither a notice of cancellation nor demand for rescission by notarial
act to the spouses Heruela.
In Olympia Housing, Inc. v. Panasiatic Travel Corp., the Court ruled that the vendor could go to
court to demand judicial rescission in lieu of a notarial act of rescission. However, an action for
reconveyance is not an action for rescission.
In the present case, there being no valid rescission of the contract to sell, the action for
reconveyance is premature. Hence, the spouses Heruela have not lost the statutory grace period within
which to pay. The trial court should have fixed the grace period to sixty days conformably with Section 4
of RA 6552.
72. Fabrigas v. San Francisco del Monte

FACTS:

Spouses Fabrigas(petitioner) and respondent San francisco Del Monte, Inc.(Del Monte) entered into an
agreement, denominated as Contract to Sell No. 2482-V, whereby the latter agreed to sell to Spouses
Fabrigas a parcel of residential land. The said lot was worth P109,200.00 and it was registered in the
name of respondent Del Monte. The agreement stipulated that Spouses Fabrigas shall pay P30,000.00
as downpayment and the balance within ten years in monthly successive installments of P1,285.69.

After paying P30,000.00, Spouses Fabrigas took possession of the property but failed to make any
installment payments on the balance of the purchase price. Despite the demand letter made by Del
Monte and the grace period given still the said Spouses did not comply with their obligations.

On January 21, 1985, petitioner Marcelina and Del Monte entered into another agreement denominated
as Contract to Sell No. 2941-V, covering the same property but under restructed terms of payment. Under
the second contract, the parties agreed on a new purchase price of P131,642.58, the amount of
P26,328.52 as downpayment and the balance to be paid in monthly installments of P2,984.60 each.

After the said deal, the petitioner made some delinquent installments paying less than the stated amount,
to which Del Monte made a demand letter to the petitioners. And this time they ordered the cancellation of
the Contract to Sell No. 2941-V.

ISSUE:
Whether or not the Contract to Sell No. 2941-V is valid.

HELD:
Yes.The Court notes that defendant, Marcelina Fabrigas, although she had to sign contract No.
2491-V, to avoid forfeiture of her downpayment, and her other monthly amortizations, was entirely free to
refuse to accept the new contract. There was no clear case of intimidation or threat on the part of plaintiff
in offering the new contract to her. At most, since she was of sufficient intelligence to discern the
agreement she is entering into, her signing of Contract No. 2491-V is taken to be valid and binding. The
fact that she has paid monthly amortizations subsequent to the execution of Contract To Sell No. 2491-V,
is an indication that she had recognized the validity of such contract. .

In sum, Contract to Sell No. 2491-V is valid and binding. There is nothing to prevent respondent Del
Monte from enforcing its contractual stipulations and pursuing the proper court action to hold petitioners
liable for their breach thereof.

REMEDIES FOR BREACH OF CONTRACT

73. Katigbak v. CA

FACTS:
Katigbak agreed to purchase a winch from Evangelista. He was apprised that it needed some repairs. It
was stipulated that the amount necessary for the repairs will be advanced by Katigbak but deductible
from the initial payment made. The sale was not consummated and Katigbak sued Evangelista for the
refund of the amount paid.
Evangelista alleges that Katigbak refused to comply with his contract to purchase the winch and as a
result of such refusal, he was forced to sell the same to a third person at a loss.

RTC – ordered the private respondent to pay Katigbak

CA – RTC judgment reversed

ISSUE:
Whether the failure to take the delivery is a breach on the contract of sale

HELD:
Yes. The decision is affirmed. In a contract of sale which is executory as to both parties, the
vendor is entitled to resell the goods if the purchaser fails to take delivery and pay the purchase price. If
he is obliged to sell for less than the contract price, he holds the buyer for the difference, if he sells for as
much as or more than the contract price, the breach of contract by the original buyer is damnum absque
injuria. In either case there is no need of an action of rescission to authorize the vendor, who is still in
possession, to dispose of the property.

74. Song Fo & Co. v. Hawaiian Phil Co

FACTS:

Song Fo & Company, plaintiff, presented a complaint with two causes of action for breach of
contract against the Hawaiian-Philippine Co., defendant, in which judgment was asked for P70,369.50,
with legal interest, and costs. In an amended answer and cross-complaint, the defendant set up the
special defense that since the plaintiff had defaulted in the payment for the molasses delivered to it by the
defendant under the contract between the parties, the latter was compelled to cancel and rescind the said
contract.

ISSUE:
Whether or not the defendant has the right to rescind the contract of sale

HELD:
No. The general rule is that rescission will not be permitted for a slight or casual breach of the
contract, but only for such breaches as are so substantial and fundamental as to defeat the object of the
parties in making the agreement. A delay in payment for a small quantity of molasses for some twenty
days is not such a violation of an essential condition of the contract was warrants rescission for non-
performance. Not only this, but the Hawaiian-Philippine Co. waived this condition when it arose by
accepting payment of the overdue accounts and continuing with the contract. Thereafter, Song
Fo&Company was not in default in payment so that the Hawaiian-Philippine co. had in reality no excuse
for writing its letter of April 2, 1923, cancelling the contract.
We rule that the appellant had no legal right to rescind the contract of sale because of the failure of
Song Fo& Company to pay for the molasses within the time agreed upon by the parties.

75. Luneta Motor v. Salvador

FACTS:
On May 11, 1955, the Luneta Motor Company sold a Reo Truck, for P16,995.00, on installment
basis, to Maximino Salvador. Five days later, after having made a down payment of P1,001.00, the
purchaser, jointly and severally with one Angel Dimagiba, executed in favor of the seller a promissory for
P15,984.00 to cover the balance of the purchase price, payable in 18 monthly installments, at an interest
rate of 12% per annum. On the same day, the purchaser also executed in favor of the seller a chattel
mortgage on the property to secure payment of the said balance.
For alleged failure on the part of the purchaser to pay the installments, the Luneta Motor
Company, on September 9, 1955, filed with the Court of First Instance of Manila a complaint against the
vendee Maximino Salvador, Angel Dimagiba and John Doe, praying for the seizure of the truck, for the
confirmation of the company's possession and ownership thereto, and that defendants be ordered to pay
the unpaid balance of the purchase price, plus interests, attorney's fees and costs.

ISSUE:
Whether or not the appellant’s case should be dismissed upon foreclosure of property.

HELD:
Yes. There being no valid grounds to reopen the dismissed action, the order of dismissal is
hereby affirmed.
Section 1484 of the New Civil Code provides: "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:
1. Exact fulfillment of the obligation, should the vendee fail to pay;
2. Cancel the sale, should the vendee's failure to pay cover two or more installments;
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."
Paragraph 3 of the above-quoted provision is clear that foreclosure of the chattel mortgage and
recovery of the unpaid balance of the price are alternative remedies and may not be pursued
conjunctively. It appearing in the case at bar that the vendor had already foreclosed the chattel mortgage
constituted on the property and had taken possession thereof, the lower court acted rightly in dismissing
the complaint filed for the purpose of recovering the unpaid balance of the purchase price. By seizing the
truck and foreclosing the mortgage at the progress of the suit, the plaintiff renounced whatever claim it
may have had under the promissory note, and consequently, it has no more cause of action against the
promissor and the guarantor. And it has no more right either to the costs and attorney's fees that would
go with the suit.

76. Industrial Finance Corp. v. Ramirez

FACTS:
On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet car
payable in eighteen monthly installments, which were secured by a chattel mortgage on the car.
On November 20, 1971, or less than a year after Industrial Finance Corporation (Dizon assigned
for ten thousand pesos to Industrial Finance Corporation all his rights and interest in the chattel
mortgage) to which had discounted Consuelo Alcoba’s promissory note to Dizon, the corporation sued
her in the Court of First Instance of Manila. The lower court issued the writ of replevin. But the sheriff was
not able to seize the mortgaged car. Consequently, there was no extrajudicial foreclosure of the mortgage
since, for that purpose, possession of the car by the sheriff is necessary.
A second alias writ of execution was issued. The sheriff was able to levy upon the mortgaged car
which was then in the possession of the Aco Motor Service of Dagupan City. At the execution sale held
on April 25, 1974 Industrial Finance Corporation bought the mortgaged car for P4,000.
ISSUE:
Whether sale under installment wherein an action instituted is for specific performance on the
mortgaged property eventually sold amount to a foreclosure of the mortgage.

HELD:
No. The rule is that in installment sales, if the action instituted is for specific performance and the
mortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosure
of the mortgage. Hence, the seller-creditor is entitled to a deficiency judgment.
Where the mortgagee in installment sales of personal property chose the remedy of specific
performance in a replevin suit with damages, it is entitled to an alias writ of execution for the portion of the
judgment that has not been satisfied.
According to article 1484, it is only when there has been a foreclosure that the mortgagor is not
liable for any deficiency. In this case, there was no foreclosure. The mortgagee evidently chose the
remedy of specific performance. It levied upon the car by virtue of an execution and not as an incident of
a foreclosure proceeding. It is entitled to an alias writ of execution for the portion of the judgment that has
not been satisfied.

77. Northern Motors v. Sapinoso

FACTS:

On June 4, 1965, CasianoSapinoso purchased from Northern Motors, Inc. an Opel Kadett car for the
price of P12,171.00, making a down payment and executing a promissory note for the balance of
P10,540.00 payable in installments with interest at 12% per annum, as follows: P361.00 on July 5, 1965,
and P351.00 on the 5th day of each month beginning August, 1965, up to and including December, 1967.
To secure the payment of the promissory note, Sapinoso executed in favor of Northern Motors, Inc. a
chattel mortgage on the car. The mortgage contract provided, among others, that upon default by the
mortgagor in the payment of any part of the principal or interest due, the mortgagee may elect any of the
following remedies: (a) sale of the car by the mortgagee; (b) cancellation of the contract of sale; (c)
extrajudicial foreclosure; (d) judicial foreclosure; (e) ordinary civil action to exact fulfillment of the
mortgage contract. It was further stipulated that whichever remedy is elected by the mortgagee, the
mortgagor expressly waives his right to reimbursement by the mortgagee of any and all amounts on the
principal and interest already paid by him."

Sapinoso failed to pay the first installment of P361.00 due on July 5, 1965, and the second, third, fourth
and fifth installments of P351.00 each due on the 5th day of August, September, October and November,
1965, respectively. Several payments were, however, made by Sapinoso, to wit: P530.52 on November
21, 1965, P480.00 on December 21, 1965, and P400.00 on April 30, 1966. The first and third payments
aforesaid were applied to accrued interest up to April 17, 1966, while the second payment was applied
partly (P158.10) to interest, and partly (P321.90) to the principal, thereby reducing the balance unpaid to
P10,218.10.

ISSUE:
Whether or not the remedy of foreclosure bars the creditor from recovering the unpaid balance.
HELD:
No. That the ultimate object of the action is the foreclosure of the chattel mortgage, is of no
moment, for it is the fact of foreclosure and actual sale of the mortgaged chattel that bar further recovery
by the vendor of any balance on the purchaser's outstanding obligation not satisfied by the sale.

In any event, what Article 1484(3) prohibits is "further action against the purchaser to recover any
unpaid balance of the price;" and although this Court has construed the word "action" in said Article 1484
to mean "any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to
exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy.

The payment of the sum of P1,250.00 by defendant-appellee Sapinoso was a voluntary act on his
part and did not result from a "further action" instituted by plaintiff-appellant. If the mortgage creditor,
before the actual foreclosure sale, is not precluded from recovering the unpaid balance of the price
although he has filed an action of replevin for the purpose of extrajudicial foreclosure, or if a mortgage
creditor who has elected to foreclose but who subsequently desists from proceeding with the auction sale,
without gaining any advantage or benefit, and without causing any disadvantage or harm to the vendee-
mortgagor, is not barred from suing on the unpaid account (Radiowealth, Inc. vs. Lavin, et al., G.R. No. L-
18563, April 27, 1963 [7 SCRA 804, 807]), there is no reason why a mortgage creditor should be barred
from accepting, before a foreclosure sale, payments voluntarily tendered by the debtor-mortgagor who
admits a subsisting indebtedness.

78. UMC v. Dy Hian Tat

FACTS:
Hian Tat bought a truck from UMC on installment and defaulted in payment thereof. The former
filed a complaint, alleging that it was entitled, by virtue of the mortgage contract in its favor, to the
possession of the truck or in case said truck would not be recovered, to the payment of sum of money.
RTC – In favor of Hian Tat

ISSUE:
Whether UMC has the right of possession of the truck

HELD:
No. The petition is dismissed and the decision appealed is affirmed. Article 1484 shall not apply
to the case at bar. Nowhere in the stipulation of facts or even in the pleadings does it appear that
appellee has foreclosed its mortgage. Attaching a copy of the mortgage of the personality subject of the
action, to the complaint of replevin does not make the action one of foreclosure of a chattel mortgage
governed by Section 8, Rule 68.

The mere fact that the mortgage creditor has secured possession of the mortgaged personalty in question
does not necessarily mean that he will foreclose its mortgage, there being no showing that he is preparing
or causing the sale of the mortgaged property at public auction

79. Cruz v. Filipinas Investment & Finance Corp.

FACTS:
Petitioner Ruperto Cruz purchased on installments one (1) unit of Isuzu Diesel bus from Far East
Motors. Petitioner issued a promissory note as evidence of his indebtedness to Far East Motors. To
secure such promissory note, chattel mortgage was instituted on the said vehicle. Since no down
payment was made by Cruz, an additional security was required by Far East Motors. The additional
security was given by plaintiff Felicidad de Reyes over her land which at the time was mortgaged to DBP.
Later, Far East Motors assigned all its rights and interests to the Deed of Chattel Mortgage and Deed of
Real Estate Mortgage to respondent, with due notice of assignment to the petitioners. Subsequently,
petitioner defaulted on the promissory note so respondent foreclosed the chattel mortgage on the bus.
However, the proceeds from the chattel mortgage were insufficient to discharge fully the indebtedness.
Preparatory to extra-judicially foreclosing the real estate mortgage on Reyes’ land, defendant paid DBP
her unpaid balance. Petitioner Reyes sent a letter demanding cancellation of her real estate mortgage,
but defendant did not heed so the former instituted a suit against the latter for cancellation of said real
estate mortgage. RTC sustained petitioner and declared that the extrajudicial foreclosure of the chattel
mortgage on the bus barred further action against the additional security put up by Reyes. It ruled that
there is no controversy involving as it does a sale of personal property on installments, the pertinent legal
provision in this case is Article 1484 of the Civil Code.

ISSUE:
Whether or not the action referred in Art. 1484 is confined only to those actions where there is a
judicial suit or proceeding in court.

HELD:
No, the “action” referred to in Art. 1484 is not limited to judicial suits or proceedings. The word
‘action’ is without a definite or exclusive meaning. It has invariably been defined as: “…the legal demand
of one’s right, or rights; …the lawful demand of one’s right in a court of justice; …the legal and formal
demand of one’s rights from another person or party, made and insisted on in a court of justice; …a claim
made before a tribunal; …an assertion in a court of justice of a right given by law; …a demand or legal
proceeding in a court of justice to secure one’s rights; …the prosecution of some demand in a court of
justice; …the means by which men litigate with each other; …the means that the law has provided to put
the cause of action into effect;…” Considering the purpose for which the prohibition contained in Article
1484, the word “action” used therein may be construed as referring to any judicial or extrajudicial
proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed
unsatisfied balance of the purchasing price form the purchaser or his privy. Certainly, an extrajudicial
foreclosure of a real estate mortgage is one such proceeding.

80. Cadungog v. Yap

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 Repurchase3 in which he sold
to his cousin, Franklin Ong six parcel of lands. Under the deed of sale, Virgilio had the right to repurchase
the property within 10 years from the said date. However, Virgilio failed to redeem the property.
On December 23, 1996, Cresenciano Ong executed a Deed of Absolute Sale of Parcel No. 2 in
favor of the APCGroup, 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 of land, which Franklin objected.
On December 8, 1998, Virgilio filed a Complaint before the RTC against Jocelyn for the
declaration of nullity of the September 30, 1991 Deed of Absolute Sale.
Trial Court held that Franklin failed to consolidate his title to the parcels of land following the 10
year period for Virgilio to redeem the same. CA reversed the ruling.
ISSUE:
Whether or not the Absolute deed of sale is valid.
HELD:
No. Petition is granted. The Court 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. 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. 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.
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. 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 sells 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. 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.

81. Salonga v. Concepcion

FACTS:
The spouses NatalioSalonga and Felicidad Salonga were the owners of eight (8) prime parcels of
land located in Dagupan City. They had a commercial building with four floors which stood on their
property located. To finance their business, the spouses secured a loan from the Associated Bank. To
secure the payment thereof, they executed a Real Estate Mortgage in favor of the bank. A real estate
mortgage over their property was also executed, including the commercial building thereon, as security
for their loan from the Development Bank of the Philippines (DBP).
The devastating earthquake of July 16, 1990 severely damaged the spouses’ commercial
building, adversely affecting their business. Consequently, they defaulted in the payment of their loans.
The creditor banks foreclosed or threatened to foreclose their real estate mortgages.
Beleaguered, the spouses Salonga secured a loan, this time, from the spouses Manuel and
Nenita Concepcion, who were engaged in the business of lending money, to repay their loan to the PNB,
Associated Bank and DBP.
The spouses Salonga failed to pay the loans, interest and commission despite the lapse of
several months. In the meantime, they continued residing in the same house.
On August 31, 1993, the spouses Salonga executed, in favor of the spouses Concepcion, a Deed
of Absolute Sale over their property previously mortgaged to the Associated Bank. On October 18, 1993,
the Spouses Salonga executed a Deed of Absolute Sale over their properties previously mortgaged with
the PNB and DBP including the improvements therein in favor of the spouses Concepcion.

ISSUE/S:
 Whether the Deeds of Absolute Sales are mere equitable mortgages and not bona fide absolute
sale of the parcels of land.

HELD:
Mere equitable mortgages.
For the presumption in Article 1602 of the New Civil Code to arise, two requirements must
concur: (a) that the parties entered into a contract denominated as a contract of sale; and (b) that their
intention was to secure an existing debt by way of a mortgage. The nomenclature given by the parties to
the contract is not conclusive of the nature and legal effects thereof. Even if a document appears on its
face to be a sale, the owner of the property may prove that the contract is really a loan with mortgage,
and that the document does not express the true intent of the parties.
Articles 1602, 1603 and 1604 of the New Civil Code were designed to prevent the circumvention
of the use of usury and the prohibition against the creditor appropriating the mortgaged properties.
Besides, in times of grave financial distress which render persons hard-pressed to answer an emergency,
such persons would have no choice but to sign a deed of absolute sale of property if only to obtain a
muchneeded loan from unscrupulous money lenders. The notarization of the document does not
guarantee its validity because it is not the function of the notary public to validate an instrument that was
never intended by the parties to have any binding legal effect on him. Neither is the notarization of a
document conclusive of the nature of the transaction conferred by the said document, nor is it conclusive
of the true agreement of the parties thereto.
A plain reading of the two (2) deeds of absolute sale shows that the seven lots were sold to the
respondents for only P2,078,000.00. There is no provision in said deeds stating that the petitioners sold
their property in partial payment of their outstanding account to the respondents (P3,198,886.47), and
partly for an additional P2,078,000.00.

82. Go v. Bacaron

FACTS:

Eliodoro BACARON conveyed a 15.3955-hectare parcel of land in favor of Benny GO for

P20,000.00. He however averred that prior to extending said loan to him, GO required him to execute a
document purporting to be a Transfer of Rights but was told that the same would only be a formality as he
could redeem the unregistered land the moment he pays the loan. BACARON remains in possession of
the property even after the conclusion of the transaction and continued paying the real property taxes
subsequent to the alleged sale. About a year thereafter, BACARON, seeking to recover his property, went
to GO to pay his alleged "loan" but the latter refused to receive the same and to return his property saying
that the transaction between them was a sale and not a mortgage.

ISSUE:
Whether the agreement entered into by the parties was one for equitable mortgage or for
absolute sale.

HELD:
Equitable Mortgage. The instances in which a contract of sale is presumed to be an equitable
mortgage are enumerated in Article 1602 of the Civil Code as follows:

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 with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession 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.

Furthermore, Article 1604 of the Civil Code provides that the provisions of Article 1602 shall also apply to
a contract purporting to be an absolute sale.

The present Contract, which purports to be an absolute deed of sale, should be deemed an equitable
mortgage for the following reasons: (1) the consideration has been proven to be unusually inadequate; (2)
the supposed vendor has remained in possession of the property even after the execution of the
instrument; and (3) the alleged seller has continued to pay the real estate taxes on the property.
`
83. Gerardino, Sr. v. CFI Capiz Br. III

FACTS:
Gloria filed an action against Artuz for the consolidation of ownership of a parcel of land.
Artuz executed in favor of Gloria a deed of sale with right to repurchase within a period of one
year of a parcel of residential land. Artuz allegedly failed to exercise her right to repurchase within the
stipulated period. Gloria had been in possession of the property immediately after the execution of the
document and that he has been paying the taxes thereon.

In her answer, Artuz denied the legality and genuineness and alleged that the document in
question was an equitable mortgage, the real intention of the parties being merely to secure the payment
of a loan. The defendant, who was then deaf, totally blind and senile, did not understand English and was
made to affix her thumbmark upon representation that it was a mere equitable mortgage. A tender of
payment was made by Artuz to repurchase the property but Gloria refused to accept because he was
asking for a bigger amount. By reason of such refusal, the amount was consigned with the court.
Artuz died while the proceedings were conducted. He was proceeded by his successors-in-
interest.

ISSUE:
Whether Gloria or the successors-in-interest of Artuz should be vested with ownership of the
parcel of land

HELD:
The petitioners are entitled to the ownership and possession of the property in question and he
private respondent is ordered to deliver to petitioners the said property or any part thereof in his
possession.

If the document was found to be a true sale with right of repurchase, not a deed of equitable
mortgage as defendants contend, they may still exercise the right to repurchase the disputed land within
30 days from the date of final judgment; due consignation of the repurchase price validly effected
redemption. The lower court erred in not allowing the defendants, as successors-in-interest of Rosario
Artuz, to repurchase the land within thirty days from the date the decision had become final. Since the
petitioners had duly consigned the repurchase price, their consignation of the amount validly effected
redemption.

84. Yturralde v. CA

FACTS:
Francisco Yturralde died intestate, survived by his wife, Margarita de los Reyes, and theirchildren
who are the petitioners herein, Ernesto, Fortunata,Montano, Zosimo, Ramon, Guadalupe, Luis, Josefina
and Rosalia, allsurnamedYturralde.
DamasoYturralde and Margarita de los Reyes executed a deed of sale with right of repurchase in
favor of the respondent herein, IsabeloRebollos, covering the property inhereted in consideration of the
sum of P1,715.00. The vendors a retro failed to exercise the right to repurchase the property within the
three-year period agreed upon. Nine years later, Margarito died.
The respondent, IsabeloRebollos, filed a petition for consolidation of ownership naming as
respondents in the case the petitioners herein and DamasoYturralde. Only Damasorecieved the summon.
The trial court rendered the desicion consolidating the ownership of the subjectproperty in favor of
Rebollos, and ordering the Register of Deeds of Zamboanga del Sur to cancel Original Certificate of Title
No. 2356 covering said property and, in lieu thereof, to issue a transfercertificate of title in the name of
Rebollos

ISSUE:
Whether the requirements for consolidation of ownershipby vendee a retro had been complied
with

HELD:
No. Unlike the old Civil Code, Article 1607 of the new Civil Code of 1950 provides that
consolidation of ownership in the vendee a retro of real property by virtue of the failure of the vendor a
retro "to comply with the provisions of Article 1616 shall not be recorded in the Registry of Property
without a judicial order, after the vendor has been duly heard." In the case of Teodoro v. Arcenas, 1 this
Court, through Mr. Justice Jose B.L. Reyes, ruled that under the aforesaid Article 1607 of the new Civil
Code, such consolidation shall be effected through an ordinary civil action, not by a mere motion, and that
the vendor a retro should be made a party defendant, who should be served with summons in
accordance with Rule 14 of the Revised Rules of Court; and that the failure on the part of the court to
cause the service of summons as prescribed in Rule 14, is sufficient cause for attacking the validity of the
judgment and subsequent orders on jurisdictional grounds. 2 The Court in said case stressed that the
reason behind the requirement of a judicial order for consolidation as directed by Article 1067 of the new
Civil Code is because "experience has demonstrated too often that many sales with right of repurchase
have been devised to circumvent or ignore our usury laws and for this reason, the law looks upon them
with disfavor (Report of the Code Commission, pp. 63-64). When, therefore, Article 1607 speaks of a
judicial order after the vendor shall have been duly heard, it contemplates none other than a regular court
proceeding under the governing Rules of Court, wherein the parties are given full opportunity to lay bare
before the court the real covenant. Furthermore, the obvious intent of our Civil Code, in requiring a judicial
confirmation of the consolidation in the vendee a retro of the ownership over the property sold, is not only
to have all doubts over the true nature of the transaction speedily ascertained, and decided, but also to
prevent the interposition of buyers in good faith while such determination is being made. Under the former
method of consolidation by a mere extrajudicial affidavit of the buyer a retro, the latter could easily cut off
any claims of the seller by disposing of the property, after such consolidation, to strangers in good faith
and without notice. The chances of the seller a retro to recover his property would thus be nullified, even
if the transaction were really proved to be a mortgage and not a sale.
The jurisdiction over the persons of herein petitioners Josefina, Zosima and Ramon all surnamed
Yturralde, was not properly acquired by the court because they were not properly served with summons
in the manner directed by Rule 14 of the Revised Rules of Court. The said three petitioners cannot
therefore be legally declared in default.

85. Marquez v. Valencia

FACTS:
On December 4, 1928, spouses Laureano Marquez and Eusebia Capiral leased to defendant
Vicente Valencia a fishpond for ten years, expiring on December 31, 1938.
Before July 1931, Laureano Marquez had a litigation with Fortunato Santiago and to settle it, he
got P7,000.00 from Valencia with the condition that Marquez must sign a document reflecting a pacto de
retro sale.

ISSUE:
Whether or not the contract entered into by the parties is antichresis

HELD:
Yes. The decision of Court of Appeals is reversed. Although the petitioners' complaint in the
Court of First Instance alleges a case of antichresis, there is no fundamental difference\ between that
contract and an equitable mortgage, in so far as the principal subject matter is concerned, namely, a loan.
Neither the payment by the vendor of the land tax, interest, or other additional charges, nor any of
the circumstances above enumerated, taken singly, will preclude the existence of a pacto de retro sale;
and stipulations essentially not germane to a sale may be legally or morally acceptable. In this particular
case, however, the collective weight of such considerations, in our opinion, sufficiently reveals the
intention of the parties to enter into a loan agreement with security, that is, an equitable mortgage.
It may be argued that, generally, a person sells his property in view of some sort of necessity, but
in all such cases the nature of the transaction is always made clear and unmistakable not only by their
terms and incidents but by the subsequent conduct of the parties.
The payment by the petitioners of the land tax, a usual burden attached to ownership, helps in
showing that the intended deal was a loan; otherwise, there seems to be no fairness in requiring the
vendors, who have ceased to be owners, to still pay the same.
Although the petitioners' complaint in the Court of First Instance alleges a case of antichresis,
there is no fundamental difference\ between that contract and an equitable mortgage, in so far as the
principal subject matter is concerned, namely, a loan.

86. Sps. Doromal Sr. and Sales v. CA

FACTS:

A parcel of land in Iloilo were co-owned by 7 siblings all surnamed Horilleno. 5 of the siblings
gave a SPA to their niece Mary Jimenez, who succeeded her father as a co-owner, for the sale of the
land to father and son Doromal. One of the co-owner, herein petitioner, Filomena Javellana however did
not gave her consent to the sale even though her siblings executed a SPA for her signature. The
coowners went on with the sale of 6/7 part of the land and a new title for the Doromals were issued.
Respondent offered to repurchase the land for 30K as stated in the deed of sale but petitioners declined
invoking lapse in time for the right of repurchase. Petitioner also contend that the 30K price was only
placed in the deed of sale to minimize payment of fees and taxes and as such, respondent should pay the
real price paid which was P115, 250.

ISSUE:
WON the period to repurchase of petitioner has already lapsed.

HELD:
Period of repurchase has not yet lapsed because the respondent was not notified of the sale. The
30-day period for the right of repurchase starts only after actual notice not only of a perfected sale but of
actual execution and delivery of the deed of sale. The letter sent to the respondent by the other co-
owners cannot be considered as actual notice because the letter was only to inform her of the intention to
sell the property but not its actual sale. As such, the 30-day period has not yet commenced and the
respondent can still exercise his right to repurchase. The respondent should also pay only the 30K
stipulated in the deed of sale because a redem

87. Almendrada v. Ngo

FACTS:

On February 4, 1992, petitioner spouses Ricardo Almendrala and Rosario Doroja (Almendrala
spouses for brevity) filed a complaint for legal redemption and damages against respondent spouses
Wing On Ngo and Lily T. Ngo (Ngo spouses for brevity) before the RTC of Biñan, Laguna, docketed as
Civil Case No. B-3714 and assigned to Branch 24 thereof.

They alleged that: they are the registered owners of a lot situated along Mabini St., San Pedro, Laguna,
known as Lot 5-B of the Subdivision Plan Csd-04-003353 with an area of 304 square meters under
Transfer Certificate of Title (TCT) No. T-169139, on August 21, 1991, TCT No. T-234792 was issued in
the name of the Ngo spouses; the sale was registered without the requisite vendor’s affidavit regarding
service of written notices thereof to adjacent owners; the subject land is not only needed by them for a
reasonable frontage of the adjoining street but is actually occupied by their own house; and, they are
ready, able and willing to exercise their right of legal redemption.

ISSUE:
Whether or not there is a legal right of redemption?

HELD:
No. The Almendrala spouses have no right of pre-emption or redemption under Article 1622 of
the Civil Code.
Whenever a piece of urban land which is so small and so situated that a major portion thereof
cannot be used for any practical purpose within a reasonable time, having been bought merely for
speculation, is about to be re-sold, the owner of the adjoining land shall have the right of pre-emption at a
reasonable price.

If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at
a reasonable price.

When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the
owner whose intended use of the land in question appears best justified shall be preferred.
There are 4 elements necessary for the application of Article 1622, to wit: (1) that the piece of land is
urban land; (2) that the land is so small that a major portion thereof cannot be used for any practical
purpose within a reasonable time; (3) that it was bought merely for speculation; and (4) that the land is
about to be resold, or that its resale has been perfected. Before a party may avail of the right of pre-
emption or redemption under this provision, it is necessary that all these elements be alleged in the
complaint and proved at the trial.

In the present case, the Court finds, however, that the Almendrala spouses failed to prove the existence
of all of the elements for the application of Article 1622.
It is undisputed that the subject property is urban land and that it is small at 22 square meters. However,
the Almendrala spouses failed to convincingly show that a major portion of the subject property cannot be
used for any practical purpose, that the lot was bought merely for speculation and that it is about to be
resold or the sale has already been perfected.

88. Aguilar v. Aguilar

FACTS:
Senen and Virgilio purchased a house and lot for the benefit of their father. Their share in the
house and lot was equal and Senen lived with their father. When their father died, Virgilio demanded that
Senen vacate the house and that the property be sold, the proceeds to be divided between them. Senen
refused to comply with Virgilio’s demand.

Virgilio then filed a complaint for specific performance, praying to compel Senen to sell the property so
that the proceeds could be divided between them.

RTC – brothers declared as co-owners and are entitled to equal shares, ordering that the property be
sold, the proceeds to be divided equally between them

Senen then filed an action for legal redemption against Virgilio and Angel, another brother. While he
knows that the property was sold, he was not furnished any written notice of the sale. Pursuant to the
court decision, the property was sold at public auction. Virgilio then received his share of the proceeds.

RTC – dismissed Senen’s complaint on the ground of laches, holding that Senen incurred a delay of 7
years before asserting his right to redeem the property in question

ISSUE:
Whether the complaint for legal redemption is barred by laches

HELD:
Yes. The petition is denied.
The following are the requisites for the exercise of legal redemption: (1) There must be a co-
ownership; (2) one of the co-owners sold his right to a stranger; (3) the sale was made before the partition
of the co-owned property; (4) the right of redemption must be exercised by one or more co-owners within
a period of thirty days to be counted from the time that he or they were notified in writing by the vendee or
by the co-owner vendor; and (5) the vendee must be reimbursed for the price of the sale.
He has actual knowledge of the sale but asserted his right 7 years later. A co-owner with actual notice of
the sale is not entitled to a written notice for such would be superfluous. The law does not demand what
is unnecessary.

Laches is the negligence or omission to assert a right within a reasonable time warranting a presumption
that the party entitled to assert it has either abandoned or declined to assert it. Its elements are: (1)
conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation for
which the complaint seeks a remedy; (2) delay in asserting the complainant’s rights, the complainant
having had knowledge or notice of the defendant’s conduct as having been afforded an opportunity to
institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would
assert the right in which he bases his suit; and (4) injury or prejudice to the defendant in the event, relief
is accorded to the complainant, or the suit is not held barred.

By the time Senen filed the complaint for legal redemption, his right was no longer available to him. We
have held that after a property has been subdivided and distributed among the co-owners, the community
has terminated and there is no reason to sustain any right of pre-emption or redemption.

89. Villasor v. Medel

FACTS:
A large tract of land situated in the municipality of Bacolod, Negros Occidental, and covered by
several certificates of title, formerly belonged as conjugal property to Guillermo Villasor and Basilisa
Camento, man and wife. Guillermo Villasor died on September 21, 1914, leaving as universal heirs his
widow and five children died intestate while a minor and her share of the land passed to her mother,
Basilisa Camento. Basilisa Camento, as judicial administratrix of her deceased husband’s estate,
submitted to the court a project of partition, whereby 4/10 undivided part of the estate was allotted to her
four surviving children and 6/10 to herself. The partition was approved in due course. Jose C. Villasor, as
guardian and in behalf of three grandchildren of Basilisa Camento and with the necessary permission of
the court, sold their shares to Mariano Medalla, appellee. the plaintiff, who had reached majority, “through
his attorneys addressed a registered special delivery letter to Mariano Medalla, formally offering him the
amount of P12,000 for the re-purchase” of the shares of the three minors, but he made no offer for
Resureccion Villasor’s share. Rodolfo A. Medel et.al bought the shares of other co-owners of the tract.
Refusing at first to sell to the plaintiff, they were made defendants with Medalla in the same case under
separate causes of action, but the suit as to them was settled in some form or other trial or appeal.
Mariano Medalla, by way of special defense, alleged that the portions of the estate had been segregated
and adjudicated to him, that the complaint did not state facts sufficient to constitute a cause of action, that
the plaintiff at the time of the sale of those portions to Mariano Medalla on July 1, 1931, was not yet a co-
owner of the hacienda, having become such only on December 2, 1936, when for the first time he
appeared as one of its registered owners. Medalla maintained that the plaintiff became a co-owner, not
from the date of the donation but from the date of its registration.

ISSUE:
WON the plaintiff has the right of legal redemption under Article 1524 of NCC.

HELD:
Yes, according to the Supreme Court, The policy of the law with regard to the period of
conventional redemption (pacto de retro) furnishes the key to the scope of article 1524 with reference to
the period for legal redemption. It is to be noted that legal redemption and conventional redemption are of
the same nature. The provisions governing both are to be found in the same Chapter VI entitled
“Resolution of the Sale”; the same Title IV entitled “Contract of Purchase or Sale”; and the same Book
entitled “Obligations and Contracts,” all of the Civil Code. It is also to be noted that the law fixes the
duration of conventional redemption at four years, in default of an express agreement, and at ten years
the maximum period beyond which the parties themselves may not agree. (Article 1508.) Now, it would
hardly be contended that a period of grace might be claimed by a vendor with the right of repurchase or
his successor by reason of mental disability or non-age. This brings home more eloquently than anything
else can illustrate the injustice which a prolonged period for legal redemption would entail. Here, the
plaintiff would repurchase the lots nine years after the defendant bought them, during which years, the
latter claims, he has improved the property. To the argument such as that advanced, that a purchaser
does not have to improve the property and need only reap its fruits, the answer is that not all lands are in
a condition of full productivity when purchased. Some require investments of capital and toil to bring them
into a state of usefulness.

90. Ortega v. Orcine

FACTS:
On March 27,1965, Esplana sold the subject land to Orcine, which was a ricefield, an agricultural
land, amounting to PHP 10000. However, the land adjacent was urban as being used as school site of St
Anthony Academy.
Santiago Ortega, owner of the parcel of land and used as a school site by Saint Anthony
Academy, wanted to exercise his right of redemption for the property sold by defendant Andres Orcine to
his co-defendant Doroteo Esplana.

ISSUE:
Whether or not Ortega has the right to redemption for the sale of land

HELD:
No. The decision appealed is affirmed. Appellant contends under his first assignment of error that
under Article 1622, above-quoted, he has the right of legal redemption over the land in question, since, it
is not disputed that he is the owner of the urban property adjoining said land on the North and the latter
had already been converted into urban land by appellee Esplana at the time he (appellant) exercised his
right, hence the lower court erred in holding that he is not entitled to such right on the ground, stated by
His Honor, that at the time of the sale of the said land by Orcine to Esplana on March 27, 1965, the land
sought to be redeemed and his land were not of the same kind—that of appellant being urban land while
that of appellees rural. In essence, the position of appellant is that what governs for purposes of the
redemption provided for in the law is the nature or character of the adjoining land at the time redemption
is actually sought and not at the time of its sale to the person from whom redemption is asked.

An owner of urban land may not redeem an adjoining urban property where he does not allege in
his complaint, much less prove at the trial, that the latter is so small and so situated that a major portion
thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for
speculation