G.R. No. 143697. January 28, 2008.

*
DIONISIA DORADO VDA. DE DELFIN, represented in
this act by her heirs, petitioner, vs. SALVADOR D.
DELLOTA, represented by his heirs, and THE
INTESTATE ESTATE OF THE LATE GUMERSINDO
DELEA, respondents.
FACTS: Petitioner Dionisia Dorado Delfin, represented by
her heirs, was the registered owner of Lot No. 1213 situated
in Panitan, Capiz with an area of 143,935 square meters
covered by Original Certificate of Title.
Dionisia executed an Escritura De Venta Con Pacto de
Retro over a 50,000-square meter portion of Lot No. 1213
in favor of spouses Ildefonso Dellota and Patricia Delfin.
However, Dionisia failed to exercise her right of
redemption.
Dionisia sold another portion of Lot No. 1213 consisting of
50,000 square meters to Gumersindo Delea (respondent
herein represented by his estate), as evidenced by a
notarized Deed of Sale with Right of Redemption, thus,
leaving an unsold area of more than 43,000 square meters.
Dionisia never redeemed this 50,000-square meter portion
from Gumersindo. Records show that Salvador Dellota (also
a respondent represented by his heirs) leased this area
from Gumersindo.
On October 12, 1956, Dionisia executed a Deed of
Mortgage and Promise To Sell in favor of Salvador over a
90,000square meter portion of Lot No. 1213, without
specifying whether it included the 50,000-square portion
sold (with right of redemption) to Gumersindo.
On June 8, 1964, Dionisia filed with the then Court of First
Instance, a complaint for recovery of possession and
damages with an application for a writ of preliminary
mandatory injunction against Salvador D. Dellota,

represented by his wife Genoveva D. Dellota and their

children.
RTC: 1.Ordered defendant Dellota to allow the plaintiffs to
redeem the 40,000-square meter portion of subject Lot
1213 after plaintiffs shall have paid the defendant the
amount of P2,000.
2.Declared the ownership over the 50,000-square meter
portion of the subject lot in the name of the Interventors
and heirs of Gumersindo Delena.
CA: affirmed in toto the judgment of the trial court.
PETITION: for review on certiorari assailing the
Decision1 of the CA.
DIONISIAS HEIRS: contend that the Court of Appeals
erred in not holding that the Deed of Sale with Right of
Redemption dated June 9, 1949 entered into by Dionisia
and Gumersindo is an equitable mortgage under Article
1602 of the Civil Code. They insist that the price of
P5,300.00 for a five-hectare portion of Lot No. 1213 is
grossly inadequate. This readily shows that the contract is
an equitable mortgage, not a sale with right of redemption.
ISSUE: WON the Deed of Sale with Right of
Redemption dated June 9, 1949 entered into by
Dionisia and Gumersindo is an equitable mortgage
under Article 1602 of the Civil Code.
LAW: ART. 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
1. (1)When the price of a sale with right to repurchase
is unusually inadequate;
2. (2)When the vendor remains in possession as lessee

or otherwise;
3. (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 extended;
4. (4)When the purchaser retains for himself a part of
the purchase price;
5. (5)When the vendor binds himself to pay the taxes
on the thing sold;
6. (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.
RULING: An equitable mortgage is one which, although
lacking in some formality, or form, or words, or other
requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security
for a debt, and contains nothing impossible or contrary to
law.3 The essential requisites of an equitable mortgage are:
(1) the parties enter into what appears to be a contract of
sale, (2) but their intention is to secure an existing debt by
way of mortgage.
Jurisprudence recognizes that there is no conclusive test to
determine whether a deed purporting to be a sale on its
face is really a simple loan accommodation secured by a
mortgage.5 However, our case law consistently shows that
the presence of even one of the circumstances enumerated
in Article 1602 suffices to convert a purported contract of
sale into an equitable mortgage.6 In this case, what should
be determined is whether the consideration of P5,300.00
paid by Gumersindo to Dionisa for a five-hectare portion of

Lot No. 1213 on June 9, 1949 is unusually inadequate.

In Aguilar v. Ribato and Gonzales Vila,7 this Court ruled that
there is gross inadequacy in price if a reasonable man will
not agree to dispose of his property.
In De Ocampo and Custodio v. Lim,8 this Court held that in
sales denominated as pacto de retro, the price agreed upon
should not generally be considered as the just value of the
thing sold, absent other corroborative evidence. This is
because, on the part of the vendor, the right to repurchase
the land makes it immaterial to him whether or not the
price of the sale is the just value thereof. As for the vendee,
the price does not induce him to enter into the contract as
he does not acquire the thing irrevocably, but subject to
repurchase at the stated period. Rather, the vendee pins
his hope on the expectancy that he will acquire the thing
absolutely at a favorable price should the vendor fail to
redeem the thing sold. Subsequently, inBuenaventura v.
Court of Appeals,9this Court ruled that there is no
requirement in sales that the price be equal to the exact
value of the thing subject matter of the sale.
Following De Ocampo andBuenaventura, this Court finds no
cogent reason to conclude that the 1949 price of P5,300.00
as agreed upon by the parties was unreasonable or
unusually inadequate. Moreover, under the rules of
evidence, it is presumed that a person takes ordinary care
of his concerns.10 In the present case, there is no evidence
herein whatsoever to show that Dionisia did not understand
the ramifications of her signing the Deed of Sale with
Right of Redemption. Nor is there any showing that she
was threatened, forced or defrauded into affixing her
signature on the said contract.
Dionisia failed to prove before the trial court that the price
agreed upon by the parties in 1949 was grossly inadequate.
Even assuming that the contract of sale with right to

repurchase executed by Dionisia and Gumersindo in 1949 is

an equitable mortgage, the fact remains that from 1949 up
to the filing of the complaint in 1964, or a period of 15
years, she failed to redeem the property. Her heirs claim
that since Dionisia had been paying the realty taxes follows
that she owns the property, not Gumersindo. Settled is the
rule that tax receipts per se are not conclusive evidence of
land ownership absent other corroborative
evidence.12 Moreover, we agree with the Court of Appeals
that the timing of the payment of realty taxes raises some
questions. We note that the real estate taxes corresponding
to the period from 1955 to 1963 were paid only on
December 27, 1963 or barely six (6) months before Dionisia
filed Civil Case No. V-2760 on June 8, 1964. The
inescapable conclusion is that she paid the taxes in
preparation for the filing of Civil Case No. V-2760.
G.R. No. 119255. April 9, 2003.*
TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS
and ENCARNACION VALDES-CHOY, respondents.
G.R. No. 165889. September 20, 2005.

Facts:
Valdes-Choy advertised for sale her paraphernal
house and lot (Property) with an area of 718 square
meters located at No. 40 Tampingco Street comer Hidalgo
Street, San Lorenzo Village, Makati City.
Chua responded to the advertisement. After several
meetings, Chua and Valdes-Choy agreed on a purchase
price of P10,800,000.00 payable in cash.
In the afternoon of 13 July 1989, Chua and Valdes-Choy met
with their respective counsels to execute the necessary
documents and arrange the payments.10Valdes-Choy as

vendor and Chua as vendee signed two Deeds of Absolute

Sale (Deeds of Sale). The first Deed of Sale covered the
house and lot for the purchase price of
P8,000,000.00.11 The second Deed of Sale covered the
furnishings, fixtures and movable properties contained in
the house for the purchase price of P2,800,000.00. 12 The
parties also computed the capital gains tax to amount to
P485,000.00.
On 14 July 1989, the parties met again at the office
of Valdes-Choys counsel. Chua handed to Valdes-Choy the
PBCom managers check for P485,000.00 so Valdes-Choy
could pay the capital gains tax as she did not have
sufficient funds to pay the tax. Valdes-Choy issued a receipt
showing that Chua had a remaining balance of
P10,215,000.00 after deducting the advances made by
Chua.
On 15 July 1989, the deadline for the payment of the
balance of the purchase price, Valdes-Choy suggested to
her counsel that to break the impasse Chua should deposit
in escrow the P10,215,000.00 balance.17 Upon such deposit,
Valdes-Choy was willing to cause the issuance of a new TCT
in the name of Chua even without receiving the balance of
the purchase price. Valdes-Choy believed this was the only
way she could protect herself if the certificate of title is
transferred in the name of the buyer before she is fully
paid. Valdes-Choys counsel promised to relay her
suggestion to Chua and his counsel, but nothing came out
of it.
On 17 July 1989, Chua filed a complaint for specific
performance against Valdes-Choy which the trial court
dismissed on 22 November 1989. On 29 November 1989,
Chua re-filed his complaint for specific performance with
damages. After trial in due course, the trial court rendered
judgment in favor of Chua

Issue:
a) Whether the transaction between Chua and
Valdes-Choy is a perfected contract of sale or a mere
contract to sell, and
(b) Whether Chua can compel Valdes-Choy to cause
the issuance of a new TCT in Chuas name even
before payment of the full purchase price.

give up the check unless the property was already in his

name.20 Although Chua demonstrated his capacity to pay,
this could not be equated with actual payment which he
refused to do.
The Court of Appeals did not consider the nonpayment of the capital gains tax as failure by Valdes-Choy
to put the papers in proper order.

RTC Ruling:
The trial court held that the parties entered into a contract
to sell on 30 June 1989, as evidenced by the Receipt for the
P100,000.00 earnest money. The trial court pointed out that
the contract to sell was subject to the following conditions:
(1) the balance of P10,700,000.00 was payable not later
than 15 July 1989; (2) Valdes-Choy may stay in the Property
until 13 August 1989; and (3) all papers must be in proper
order before full payment is made.
On the other hand, the trial court found that ValdesChoy did not perform her correlative obligation under the
contract to sell to put all the papers in order. The trial court
noted that as of 14 July 1989, the capital gains tax had not
been paid because Valdes-Choys counsel who was
supposed to pay the tax did not do so. The trial court
declared that Valdes-Choy was in a position to deliver only
the owners duplicate copy of the TCT, the signed Deeds of
Sale, the tax declarations, and the latest realty tax receipt.

SC Ruling:
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.
It is true that Article 1482 of the Civil Code provides that
[W]henever earnest money is given in a contract of sale, it
shall be considered as part of the price and proof of the
perfection of the contract. However, this article speaks of
earnest money given in a contract of sale. In this case, the
earnest money was given in a contract to sell. The Receipt
evidencing the contract to sell stipulates that the earnest
money is a forfeitable deposit, to be forfeited if the sale is
not consummated should Chua fail to pay the balance of
the purchase price. The earnest money forms part of the
consideration only if the sale is consummated upon full
payment of the purchase price.
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. Article 1458 of the Civil Code

CA Ruling:
The Court of Appeals found that all the papers were
in order and that Chua had no valid reason not to pay on
the agreed date. Valdes-Choy was in a position to deliver
the owners duplicate copy of the TCT, the signed Deeds of
Sale, the tax declarations, and the latest realty tax receipt.
The Property was also free from all liens and
encumbrances.
The Court of Appeals pointed out that Chua did not want to

defines a contract of sale as follows: Art. 1458. By the

contract of sale one of the contracting parties obligates
himself to transfer the ownership ofand to deliver a
determinate thing, and the other to pay therefor a price
certain in money or its equivalent. x x x. (Emphasis
supplied) Prior to the existence of the contract of sale, the
seller is not obligated to transfer ownership to the buyer,
even if there is a contract to sell between them. It is also
upon the existence of the contract of sale that the buyer is
obligated to pay the purchase price to the seller. Since the
transfer of ownership is in exchange for the purchase price,
these obligations must be simultaneously fulfilled at the
time of the execution of the contract of sale, in the absence
of a contrary stipulation.
Delivery is not only a necessary condition for the
enjoyment of the thing, but is a mode of acquiring
dominion and determines the transmission of ownership,
the birth of the real right. The delivery, therefore, made in
any of the forms provided in articles 1497 to 1505 signifies
that the transmission of ownership from vendor to vendee
has taken place. The delivery of the thing constitutes an
indispensable requisite for the purpose of acquiring
ownership. Our law does not admit the doctrine of transfer
of property by mere consent; the ownership, the property
right, is derived only from delivery of the thing. x x x.
(Emphasis supplied)
The buyer has more interest in having the capital gains tax
paid immediately since this is a pre-requisite to the
issuance of a new Torrens title in his name. Nevertheless,
as far as the government is concerned, the capital gains
tax remains a liability of the seller since it is a tax on the
sellers gain from the sale of the real estate.Payment of the
capital gains tax, however, is not a pre-requisite to the
transfer of ownership to the buyer. The transfer of
ownership takes effect upon the signing and notarization of
the deed of absolute sale.
An issue not raised in the court below cannot be raised for
the first time on appeal, as this is offensive to the basic

rules of fair play, justice and due process. In addition, when

a party deliberately adopts a certain theory, and the case is
tried and decided on that theory in the court below, the
party will not be permitted to change his theory on appeal.
To permit him to change his theory will be unfair to the
adverse party.
HEIRS OF SAN MIGUEL VS COURT OF APPEALS, 364
SCRA 523 (2001)
FACTS:
This case involves a parcel of land originally claimed by
Severina San Miguel (petitioners predecessor-in-interest,
hereafter, Severina) situated in Panapan, Bacoor, Cavite.
Without Severinas knowledge, Dominador managed to
cause the subdivision of the land into three (3) lots.
On September 25, 1974, Dominador, et al. filed a petition
with the Court of First Instance, Cavite, as a land
registration court, to issue title over 2 lots in their names. [5]
On July 19, 1977, the Land Registration Commission
(hereafter LRC) rendered a decision directing the issuance
of Original Certificate in the names of Dominador, et al.
On or about August 22, 1978, Severina filed with the Court
of First Instance of Cavite a petition for review of the
decision alleging that the land registration proceedings
were fraudulently concealed by Dominador from her. [6]
On December 27, 1982, the court resolved to set aside the
decision of July 19, 1977, and declared Original Certificate
of Title No. 0-1816 as null and void.
On July 13, 1987, the Register of Deeds of Cavite issued
Transfer Certificate of Title No. T-223511 in the names of
Severina and her heirs.[7]
On February 15, 1990, the trial court issued an order in
favor of Severinas heirs. However, the writ was returned
unsatisfied.
On November 28, 1991, the trial court ordered the issuance
of an alias writ of demolition in favor of Severina San

Miguel. But again, the writ was not satisfied.

On August 6, 1993, Severinas heirs, decided not to pursue
the writs of possession and demolition and entered into a
compromise with Dominador, et al. According to the
compromise, Severinas heirs were to sell the subject
lots[10] to Dominador, et al. for one and a half million pesos
(P1.5 M) with the delivery of Transfer Certificate of Title No.
T-223511 (hereafter, the certificate of title) conditioned
upon the purchase of another lot[11] which was not yet titled
at an additional sum of three hundred thousand pesos
(P300,000.00).
On the same day, on August 6, 1993, pursuant to
the kasunduan, Severinas heirs and Dominador, et al.
executed a deed of sale designated as kasulatan sa bilihan
ng lupa.[13]
On November 16, 1993, Dominador, et al. filed with the
trial court,[14] Branch 19, Bacoor, Cavite, a motion praying
that Severinas heirs deliver the owners copy of the
certificate of title to them.[15]
In time, Severinas heirs opposed the motion stressing that
under the kasunduan, the certificate of title would only be
surrendered upon Dominador, et al.s payment of the
amount of three hundred thousand pesos (P300,000.00)
within two months from August 6, 1993, which was not
complied with.[16]
Dominador, et al. admitted non-payment of three hundred
thousand pesos (P300,000.00) for the reason that
Severinas heirs have not presented any proof of ownership
over the untitled parcel of land covered by LRC- Psu1312. Apparently, the parcel of land is declared in the
name of a third party, a certain Emiliano Eugenio. [17]
Dominador, et al. prayed that compliance with
the kasunduan be deferred until such time that Severinas
heirs could produce proof of ownership over the parcel of
land.[18]
Severinas heirs countered that the arguments of
Dominador, et al. were untenable in light of the provision in

the kasunduan where Dominador, et al. admitted their

ownership over the parcel of land, hence dispensing with
the requirement that they produce actual proof of title over
it.
According to Severinas heirs, since Dominador, et al. have
not paid the amount of three hundred thousand pesos
(P300,000.00), then they were justified in withholding
release of the certificate of title.[21]
The trial court conducted no hearing and then rendered
judgment based on the pleadings and memoranda
submitted by the parties. Heirs of Severina are ordered to
surrender to the heirs of Dominador San Miguel and to pay
them capital gains and related expenses for the transfer of
the two lots subject.
ISSUE:
WON Dominador, et al. fraudulently and in bad faith?
WON the kasunduan was null and void?
RULING:
We resolve the issue in the negative, and find the petition
without merit.
Severinas heirs anchor their claim on the kasunduan,
stressing on their freedom to stipulate and the binding
effect of contracts. This argument is misplaced.[33] The Civil
Code provides:
Article 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient provided they are not contrary to law,
morals, good customs, public order or public policy
(underscoring ours).
It is basic that the law is deemed written into every
contract.[34] Although a contract is the law between the
parties, the provisions of positive law which regulate
contracts are deemed written therein and shall limit and

govern the relations between the parties. [35] The Civil Code
provisions on sales state:
Article 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay a price
certain in money or its equivalent. xxx
Article 1459. The thing must be licit and the vendor must
have a right to transfer the ownership thereof at the time it
is delivered.
Article 1495. The vendor is bound to transfer the
ownership of and deliver, as well as warrant the thing
which is the object of sale (underscoring ours).
True, in contracts of sale, the vendor need not possess title
to the thing sold at the perfection of the contract.
[36]
However, the vendor must possess title and must be
able to transfer title at the time of delivery. In a contract of
sale, title only passes to the vendee upon full payment of
the stipulated consideration, or upon delivery of the thing
sold.[37]
Under the facts of the case, Severinas heirs are not in a
position to transfer title. Without passing on the question of
who actually owned the land covered by LRC Psu -1312, we
note that there is no proof of ownership in favor of
Severinas heirs. In fact, it is a certain Emiliano Eugenio,
who holds a tax declaration over the said land in his name.
[38]
Though tax declarations do not prove ownership of the
property of the declarant, tax declarations and receipts can
be strong evidence of ownership of land when accompanied
by possession for a period sufficient for prescription.
[39]
Severinas heirs have nothing to counter this document.
Therefore, to insist that Dominador, et al. pay the price
under such circumstances would result in Severinas heirs
unjust enrichment.[40] Basic is the principle in law, Niguno
non deue enriquecerse tortizamente condano de otro.
[41]
The essence of a sale is the transfer of title or an
agreement to transfer it for a price actually paid or
promised.[42] In Nool v. Court of Appeals,[43] we held that if

the sellers cannot deliver the object of the sale to the

buyers, such contract may be deemed to be inoperative. By
analogy, such a contract may fall under Article 1405, No. 5
of the Civil Code, to wit:
Article 1405. The following contracts are inexistent and
void from the beginning: xxx
(5) Those which contemplate an impossible service.
Severinas heirs insist that delivery of the certificate of title
is predicated on a condition - payment of three hundred
thousand pesos (P300,000.00) to cover the sale of Lot 3 of
LRO Psu 1312. We find this argument not meritorious. The
condition cannot be honored for reasons aforediscussed. Article 1183 of the Civil Code provides that,
Impossible conditions, those contrary to good customs or
public policy and those prohibited by law shall annul the
obligation which depends upon them. If the obligation is
divisible, that part thereof which is not affected by the
impossible or unlawful condition shall be valid. xxx
Hence, the non-payment of the three hundred thousand
pesos (P300,000.00) is not a valid justification for refusal to
deliver the certificate of title.
Besides, we note that the certificate of title covers Lots 1
and 2 of LRC Psu-1313, which were fully paid for by
Dominador, et al. Therefore, Severinas heirs are bound to
deliver the certificate of title covering the lots.

G.R. No. 107207. November 23, 1995.*

VIRGILIO R. ROMERO, petitioner, vs. HON. COURT OF
APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG,
respondents.

FACTS: Petitioner Virgilio R. Romero was engaged in the

business of production, manufacture and exportation of
perlite filter aids, permalite insulation and processed perlite
ore. He and his foreign partners decided to put up a central
warehouse in Metro Manila. The project was made known to
several freelance real estate brokers.
Alfonso Flores and his wife offered a parcel of land in
Paraaque, Metro Manila, the lot was covered by TCT No.
361402 in the name of private respondent Enriqueta Chua
vda. de Ongsiong. Petitioner visited the property and,
except for the presence of squatters in the area, he found
the place suitable for a central warehouse.
The Flores spouses called on petitioner with a proposal that
should he advance the amount of P50,000.00 which could
be used in taking up an ejectment case against the
squatters, private respondent would agree to sell the
property for only P800.00 per square meter. Petitioner
expressed his concurrence. On 09 June 1988, a contract,
denominated Deed of Conditional Sale, was executed
between petitioner and private respondent.
It was stipulated in the contract:
That in the event that the VENDEE shall not be able to pay
the VENDOR the balance of the purchase price of ONE
MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED
PESOS (P1,511,600.00) ONLY after 45 days from written
notification to the VENDEE of the removal of the squatters
from the property being purchased, the FIFTY THOUSAND
PESOS (P50,000.00) previously paid as downpayment shall
be forfeited in favor of the VENDOR.
Alfonso Flores, in behalf of private respondent, received
and acknowledged a check for P50,000.00 2 from petitioner.
Pursuant to the agreement, private respondent filed a
complaint for ejectment against the squatter families.
judgment was rendered ordering the defendants to vacate
the premises. The decision was handed down beyond the
60-day period (expiring 09 August 1988) stipulated in the

contract. The writ of execution of the judgment was issued,

still later, on 30 March 1989.
RESPONDENT: sought to return the P50,000.00 she
received from petitioner since, she said, she could not get
rid of the squatters on the lot.
PETITIONER: - refused the tender and stated considering
the favorable decision rendered by the Court and the writ
of execution issued pursuant thereto, it is now possible to
eject squatters from the premises of the subject property,
for which reason, he proposes that he shall take it upon
himself to eject the squatters, provided, that expenses
which shall be incurred by reason thereof shall be
chargeable to the purchase price of the land.
is willing to underwrite the expenses for the
execution of the judgment and ejectment of the
occupants.
RESPONDENT: Deed of Conditional Sale had been
rendered null and void by virtue of his clients failure to
evict the squatters from the premises within the agreed 60day period and he had decided to retain the property.
filed with the RTC for rescission of the deed of
conditional sale, plus damages, and for the
consignation of P50,000.00 cash.
RTC: - dismissed the complaint and ordered, instead,
private respondent to eject or cause the ejectment of the
squatters from the property and to execute the absolute
deed of conveyance upon payment of the full purchase
price by petitioner.
respondent had no right to rescind the contract since
it was she who violated her obligation to eject the
squatters from the subject property and that
petitioner, being the injured party, was the party who

could, under Article 1191 of the Civil Code, rescind

the agreement.
CA: REVERSED and SET ASIDE the ruling of the TC. contract
entered into by the parties was subject to a resolutory
condition, i.e., the ejectment of the squatters from the land,
the non-occurrence of which resulted in the failure of the
object of the contract; that private respondent substantially
complied with her obligation to evict the squatters; that it
was petitioner who was not ready to pay the purchase price
and fulfill his part of the contract.
LAW:
Code

Art. 1545, Civil Code, Article 1191 of the Civil

ISSUE: WON the vendor may demand the rescission

of a contract for the sale of a parcel of land for a
cause traceable to his own failure to have the
squatters on the subject property evicted within the
contractually-stipulated period?
RULING: A perfected contract of sale may either be
absolute or conditional12depending on whether the
agreement is devoid of, or subject to, any condition
imposed on thepassing of title of the thing to be conveyed
or on the obligation of a party thereto. When ownership is
retained until the fulfillment of a positive condition the
breach of the condition will simply prevent the duty to
convey title from acquiring an obligatory force. If the
condition is imposed on an obligation of a party which is
not complied with, the other party may either refuse to
proceed or waive said condition (Art. 1545, Civil Code).
Where, of course, the condition is imposed upon
the perfection of the contract itself, the failure of such
condition would prevent the juridical relation itself from
coming into existence.13

In determining the real character of the contract, the title

given to it by the parties is not as much significant as its
substance.
The term condition in the context of a perfected contract
of sale pertains, in reality, to the compliance by one party
of an undertaking the fulfillment of which would beckon, in
turn, the demandability of the reciprocal prestation of the
other party. The reciprocal obligations referred to would
normally be, in the case of vendee, the payment of the
agreed purchase price and, in the case of the vendor, the
fulfillment of certain express warranties (which, in the case
at bench is the timely eviction of the squatters on the
property).
It would be futile to challenge the agreement here in
question as not being a duly perfected contract. A sale is at
once perfected when a person (the seller) obligates
himself, for a price certain, to deliver and to transfer
ownership of a specified thing or right to another (the
buyer) over which the latter agrees.15
The object of the sale, in the case before us, was
specifically identified to be a 1,952-square meter lot in San
Dionisio, Paraaque, Rizal, covered by Transfer Certificate
of Title No. 361402 of the Registry of Deeds for Pasig and
therein technically described. The purchase price was fixed
at P1,561,600.00, of which P50,000.00 was to be paid upon
the execution of the document of sale and the balance of
P1,511,600.00 payable 45 days after the removal of all
squatters from the above described property.
From the moment the contract is perfected, the parties are
bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good
faith, usage and law. Under the agreement, private

respondent is obligated to evict the squatters on the

property. The ejectment of the squatters is acondition the
operative act of which sets into motion the period of
compliance by petitioner of his own obligation, i.e., to pay
the balance of the purchase price. Private respondents
failure to remove the squatters from the property within
the stipulated period gives petitioner the right to either
refuse to proceed with the agreement or waive that
condition in consonance with Article 1545 of the Civil
Code.16 This option clearly belongs to petitioner and not to
private respondent.
We share the opinion of the appellate court that the
undertaking required of private respondent does not
constitute a potestative condition dependent solely on his
will that might, otherwise, be void in accordance with
Article 1182 of the Civil Code17 but a mixed condition
dependent not on the will of the vendor alone but also of
third persons like the squatters and government agencies
and personnel concerned.18 We must hasten to add,
however, that where the so-called potestative condition is
imposed not on the birth of the obligation but on its
fulfillment, only the condition is avoided, leaving unaffected
the obligation itself.19
In contracts of sale particularly, Article 1545 of the Civil
Code, aforementioned, allows the obligee to choose
between proceeding with the agreement or waiving the
performance of the condition. It is this provision which is
the pertinent rule in the case at bench. Here, evidently,
petitioner has waived the performance of the condition
imposed on private respondent to free the property from
squatters.20
In any case, private respondents action for rescission is not
warranted. She is not the injured party. 21 The right of
resolution of a party to an obligation under Article 1191 of
the Civil Code is predicated on a breach of faith by the

other party that violates the reciprocity between them. 22 It

is private respondent who has failed in her obligation under
the contract. Petitioner did not breach the agreement. He
has agreed, in fact, to shoulder the expenses of the
execution of the judgment in the ejectment case and to
make arrangements with the sheriff to effect such
execution. counsel for petitioner has tendered payment and
demanded the execution of the deed of absolute sale. this
offer to pay, having been made prior to the demand for
rescission, assuming for the sake of argument that such a
demand is proper under Article 159223 of the Civil Code,
would likewise suffice to defeat private respondents
prerogative to rescind thereunder.
SACOBIA HILLS DEVELOPMENT CORPORATION and
JAIME C. KOA, petitioners, vs. ALLAN U. TY,
respondent.
Facts:
Sacobia Hills Development Corporation (Sacobia) is the
developer of True North Golf and Country Club (True North)
located inside the Clark Special Economic Zone in
Pampanga which boasts of amenities that include a golf
course, clubhouse, sports complex and several vacation
villas.
On February 12, 1997, respondent Allan U. Ty wrote to
Sacobia a letter expressing his intention to acquire one (1)
Class A share of True North and accordingly paid the
reservation fee of P180,000.00 as evidenced by PCI Bank
Check No. 0038053.
However, on January 12, 1998, respondent notified
Sacobia that he is rescinding the contract and sought
refund of the payments already made due to the latters
failure to complete the project on time as represented.
Thus, on July 21, 1999, respondent filed a complaint
for rescission and damages before the SEC but the case
was eventually transferred to the Regional Trial Court of

Manila, Branch 46, pursuant to Administrative Circular AM

No. 00-11-03.9
Issue:
Petitioners motion for reconsideration was denied,
hence the instant petition for review on certiorari
which raises the issue of whether the contract
entered into by the parties may be validly rescinded
under Article 1191 of the Civil Code.
RTC Ruling:
On April 13, 2002, the trial court personnel
conducted an on-site ocular inspection and in their report.
On November 29, 2002, the trial court rendered
judgment in favor of petitioners, the decretal portion of
which reads:
WHEREFORE, the complaint is hereby dismissed without
pronouncement as to costs.
If the plaintiff desires to continue with the acquisition of the
share, he may do so by paying the balance of the
acquisition price of One Hundred Ninety Thousand Ninety
Pesos and Ten Centavos (P190,090.10) without interest
within thirty (30) days from the finality of this decision,
otherwise, he forfeits his payments.
CA Ruling:
The appellate court, in its decision dated August 19, 2004,
disposed of the appeal as follows:
WHEREFORE, the appealed November 29, 2002 decision of
the Regional Trial Court of Manila, Branch 46, is hereby
REVERSED and SET ASIDE, and a new one is hereby
entered with this Court hereby CONFIRMING the
RESCISSION of the contract of purchase of one (1) Class A
proprietary share of True North Golf and Country Club as
elected choice by plaintiff-appellant Ty

SC Ruling:
Ty did not pay the full purchase price which is his obligation
under the contract to sell, therefore, it cannot be said that
Sacobia breached its obligation. No obligations arose on its
part because respondents non-fulfillment of the suspensive
condition rendered the contract to sell ineffective and
unperfected. Indeed, there can be no rescission under
Article 1191 of the Civil Code because until the happening
of the condition,i.e. full payment of the contract price,
Sacobias obligation to deliver the title and object of the
sale is not yet extant. A non-existent obligation cannot be
subject of rescission. Article 1191 speaks of obligations
already existing, which may be rescinded in case one of the
obligors fails to comply with what is incumbent upon him.
Since the agreement between Sacobia and Ty is a
contract to sell, the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and
ownership is retained by the seller without further remedies
by the buyer. In Cheng v. Genato, we explained the nature
of a contract to sell and its legal implications in this wise: In
a Contract to Sell, the payment of the purchase price is a
positive suspensive condition, the failure of which is not a
breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an
obligatory force. It is one where the happening of the event
gives rise to an obligation. Thus, for its non-fulfillment there
will be no contract to speak of, the obligor having failed to
perform the suspensive condition which enforces a juridical
relation. In fact with this circumstance, there can be no
rescission of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. Emphasis
should be made that the breach contemplated in Article
1191 of the New Civil Code is the obligors failure to comply
with an obligation already extant, not a failure of a
condition to render binding that obligation. In a contract to
sell, the prospective seller does not consent to transfer

ownership of the property to the buyer until the happening

of an event, which for present purposes, is the full payment
of the purchase price. What the seller agrees or obliges
himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is
delivered to him. Upon the fulfillment of the suspensive
condition, ownership will not automatically transfer to the
buyer although the property may have been previously
delivered to him. The prospective seller still has to convey
title to the prospective buyer by entering into a contract of
absolute sale.

AKANG VS MUNICIPALITY OF ISULAN, 699 SCRA 745

(2013)
FACTS: Ali Akang is a Maguindanaon of Isulan, Province of
Sultan Kudarat and the registered owner of a lot located at
Kalawag III, Isulan, Sultan Kudarat.
Sometime in 1962, a two-hectare portion of the property
was sold by the petitioner to the Municipality of Isulan,
Province of Sultan Kudarat through then Isulan Mayor Datu
Ampatuan under a Deed of Sale executed on July 18, 1962.
Thirty-nine (39) years later or on October 26, 2001, the
petitioner, together with his wife, Patao Talipasan, filed a
civil action for Recovery of Possession of Subject Property
and/or Quieting of Title thereon and Damages against the
respondent, represented by its Municipal Mayor, et al. In
his complaint, the petitioner alleged, among others, that
the agreement was one to sell, which was not
consummated as the purchase price was not paid.
In its answer, the respondent denied the petitioners
allegations, claiming, among others: that the petitioners
cause of action was already barred by laches; that the
Deed of Sale was valid; and that it has been in open,

continuous and exclusive possession of the property for

forty (40) years.11
After trial, the RTC rendered judgment in favor of the
petitioner. The RTC construed the Deed of Sale as a
contract to sell, based on the wording of the contract,
which allegedly showed that the consideration was still to
be paid and delivered on some future date a
characteristic of a contract to sell.12 In addition, the RTC
observed that the Deed of Sale was not determinate as to
its object since it merely indicated two (2) hectares of the
97,163 sq m lot, which is an undivided portion of the entire
property owned by the petitioner. The RTC found that
segregation must first be made to identify the parcel of
land indicated in the Deed of Sale and it is only then that
the petitioner could execute a final deed of absolute sale in
favor of the respondent.
ISSUE:
WHETHER THE PETITIONER IS ENTITLED TO RECOVER
OWNERSHIP AND POSSESSION OF THE PROPERTY IN
DISPUTE.
Resolution of the above follows determination of
these questions: (1) whether the Deed of Sale dated
July 18, 1962 is a valid and perfected contract of
sale; (2) whether there was payment of
consideration by the respondent; and (3) whether
the petitioners claim is barred by laches.

RULING:
The Petitioners Claim for Recovery of Possession and
Ownership is Barred by Laches
Laches has been defined as the failure or neglect, for an

unreasonable and unexplained length of time, to do that

which, by exercising due diligence could or should have
been done earlier.47 It should be stressed that laches is not
concerned only with the mere lapse of time. 48
As a general rule, an action to recover registered land
covered by the Torrens System may not be barred by
laches.49 Neither can laches be set up to resist the
enforcement of an imprescriptible legal right. 50 In
exceptional cases, however, the Court allowed laches as a
bar to recover a titled property. Thus, in Romero v.
Natividad,51 the Court ruled that laches will bar recovery of
the property even if the mode of transfer was invalid.
Likewise, in Vda. de Cabrera v. CA,52 the Court ruled:
In our jurisdiction, it is an enshrined rule that even a
registered owners of property may be barred from
recovering possession of property by virtue of laches.
Under the Land Registration Act (now the Property
Registration Decree), no title to registered land in
derogation to that of the registered owner shall be acquired
by prescription or adverse possession. The same is not
true with regard to laches. x x x.53 (Citation omitted and
emphasis supplied)
More particularly, laches will bar recovery of a property,
even if the mode of transfer used by an alleged member of
a cultural minority lacks executive approval.54 Thus, in
Heirs of Dicman v. Cario,55 the Court upheld the Deed of
Conveyance of Part Rights and Interests in Agricultural
Land executed by Ting-el Dicman in favor of Sioco Cario
despite lack of executive approval. The Court stated that
despite the judicial pronouncement that the sale of real
property by illiterate ethnic minorities is null and void for
lack of approval of competent authorities, the right to
recover possession has nonetheless been barred through
the operation of the equitable doctrine of laches. 56
Similarly in this case, while the respondent may not be
considered as having acquired ownership by virtue of its

long and continued possession, nevertheless, the

petitioners right to recover has been converted into a stale
demand due to the respondents long period of possession
and by the petitioners own inaction and neglect. 57 The
Court cannot accept the petitioners explanation that his
delayed filing and assertion of rights was due to Martial
Law and the Cotabato Ilaga-Black Shirt Troubles. The
Martial Law regime was from 1972 to 1986, while the IlagaBlack Shirt Troubles were from the 1970s to the 1980s. The
petitioner could have sought judicial relief, or at the very
least made his demands to the respondent, as early as the
third quarter of 1962 after the execution of the Deed of
Sale and before the advent of these events. Moreover,
even if, as the petitioner claims, access to courts were
restricted during these times, he could have immediately
filed his claim after Martial Law and after the Cotabato
conflict has ended. The petitioners reliance on the Courts
treatment of Martial Law as force majeure that suspended
the running of prescription in Development Bank of the
Philippines v. Pundogar58 is inapplicable because the
Courts ruling therein pertained to prescription and not
laches. Consequently, the petitioners lengthy inaction
sufficiently warrants the conclusion that he acquiesced or
conformed to the sale.
Vigilantibus sed non dormientibus jura subverniunt. The
law aids the vigilant, not those who sleep on their rights.
This legal percept finds application in the petitioners case.

G.R. No. 153820.October 16, 2009.*

DELFIN TAN, petitioner, vs. ERLINDA C. BENOLIRAO,
ANDREW C. BENOLIRAO, ROMANO C. BENOLIRAO,
DION C. BENOLIRAO, SPS. REYNALDO TANINGCO and
NORMA D. BENOLIRAO, EVELYN T. MONREAL, and

ANN KARINA TANINGCO, respondents.

FACTS: Spouses Lamberto and Erlinda Benolirao and the
Spouses Reynaldo and Norma Taningco were the co-owners
of a parcel of land located in Tagaytay City and covered by
Transfer Certificate of Title (TCT) No. 26423. They executed
a Deed of Conditional Sale over the property in favor of Tan
for the price of P1,378,000.00. Pursuant thereto Tan issued
and delivered to the co-owners/vendors Metrobank Check
for P200,000.00 as down payment for the property, for
which the vendors issued a receipt.
Lamberto Benolirao died intestate. His wife Erlinda
and their children, as heirs of the deceased, executed an
extrajudicial settlement of Lambertos estate. On the basis
of the extrajudicial settlement, a new certificate of title
over the property was issued in the names of the Spouses
Reynaldo and Norma Taningco and Erlinda Benolirao and
her children.
Tan failed to pay on the agreed date and on the day after
the the expiration of the grace period. Tan asked for
another extension, which the vendors granted. Despite the
second extension, Tan still failed to pay the remaining
balance. The vendors thus wrote him a letter demanding
payment of the balance of the purchase price within five (5)
days from notice; otherwise, they would declare the
rescission of the conditional sale and the forfeiture of his
down payment based on the terms of the contract.
Tan refused to comply with the vendors demand and
instead wrote them a letter (dated May 28, 1993) claiming
that the annotation on the title, made pursuant to Section
4, Rule 74 of the Rules, constituted an encumbrance on the
property that would prevent the vendors from delivering a
clean title to him. Thus, he alleged that he could no longer
be required to pay the balance of the purchase price and

demanded the return of his down payment. When the

vendors refused to refund the down payment, Tan sent
another demand letter to the vendors. The vendors still
refused to heed Tans demand.
Tan to filed a complaint with the RTC for specific
performance against the vendors, including the heirs of
Lamberto Benolirao.
PETITIONER: alleged that there was a novation of the
Deed of Conditional Sale done without his consent since the
annotation on the title created an encumbrance over the
property. Tan prayed for the refund of the down payment
and the rescission of the contract.
RTC: rendered judgment ruling that the respondents
forfeiture of Tans down payment was proper in accordance
with the terms and conditions of the contract between the
parties.
CA: dismissed the petition and affirmed the ruling of the
trial court in toto.
LAW: Art.1458, Article 1191, NCC
ISSUE: WON Whether or not the contract between the
parties is a contract to sell or a contract of sale.
RULING: A contract is what the law defines it to be, taking
into consideration its essential elements, and not what the
contracting parties call it.
The very essence of a contract of sale is the transfer of
ownership in exchange for a price paid or promised.
In contrast, a contract to sell is defined as a bilateral

contract whereby the prospective seller, while expressly

reserving the ownership of the property despite
delivery thereof to the prospective buyer, binds himself
to sell the property exclusively to the prospective
buyer upon fulfillment of the condition agreed,i.e., full
payment of the purchase price.10 A contract to sell may not
even be considered as a conditional contract of sale
where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive
condition, because in a conditional contract of sale,
the first element of consent is present, although it is
conditioned upon the happening of a contingent event
which may or may not occur.11
In the present case, the true nature of the contract is
revealed by paragraph D thereof, which states:
x x x
d)That in case, BUYER has complied with the terms and
conditions of this contract, then the SELLERS shall execute
and deliver to the BUYER the appropriate Deed of Absolute
Sale;
x x x
Jurisprudence 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.12Thus, while the contract
is denominated as a Deed of Conditional Sale, the presence
of the above-quoted provision identifies the contract as
being a mere contract to sell.
We have held in numerous cases18 that the remedy of
rescission under Article 1191 cannot apply to mere
contracts to sell. We explained the reason for this in Santos
v. Court of Appeals,19 where we said:
[I]n a contract to sell, title remains with the vendor and
does not pass on to the vendee until the purchase price is

paid in full. Thus, in a contract to sell, the payment of the

purchase price is a positive suspensive condition.Failure to
pay the price agreed upon is not a mere breach, casual or
serious, but a situation that prevents the obligation of the
vendor to convey title from acquiring an obligatory
force. This is entirely different from the situation in a
contract of sale, where non-payment of the price is a
negative resolutory condition. The effects in law are not
identical. In a contract of sale, the vendor has lost
ownership of the thing sold and cannot recover it, unless
the contract of sale is rescinded and set aside. In a contract
to sell, however, the vendor remains the owner for as long
as the vendee has not complied fully with the condition of
paying the purchase price. If the vendor should eject the
vendee for failure to meet the condition precedent, he
is enforcing the contract and not rescinding it. x x x Article
1592 speaks of non-payment of the purchase price as a
resolutory condition. It does not apply to a contract to sell.
As to Article 1191, it is subordinated to the provisions of
Article 1592 when applied to sales of immovable property.
Neither provision is applicable [to a contract to sell].
We, therefore, hold that the contract to sell was terminated
when the vendors could no longer legally compel Tan to pay
the balance of the purchase price as a result of the legal
encumbrance which attached to the title of the property.
Since Tans refusal to pay was due to the supervening
event of a legal encumbrance on the property and not
through his own fault or negligence, we find and so hold
that the forfeiture of Tans down payment was clearly
unwarranted.

Vda. de Cabalu v. Tabu

G.R. No. 188417, 24 September 2012
Nature: Petition for Review under Rule 45.

Facts: The property subject of the controversy is a 9,000

sq. m. lot situated in Mariwalo, Tarlac, which was a portion
of a property registered in the name of the late Faustina
Maslum under Transfer Certificate of Title (TCT) No. 16776
with a total area of 140,211 sq. m. On December 8,1941,
Faustina died without any children. She left a holographic
will, dated July 27, 1939,assigning and distributing her
property to her nephews and nieces. The said holographic
will, however, was not probated. One of the heirs was the
father of Domingo Laxamana, Benjamin Laxamana, who
died in 1960. On March 5, 1975, Domingo allegedly
executed a Deed of Sale of Undivided Parcel of Land
disposing of his 9,000 sq. m. share of the land to Laureano
Cabalu. On August 1, 1994, to give effect to the
holographic will, the forced and legitimate heirs of Faustina
executed a Deed of Extra-Judicial Succession with Partition.
The said deed imparted 9,000 sq. m. of the land covered by
TCT No. 16776 to Domingo. Thereafter, on December 14,
1995, Domingo sold 4,500 sq. m. of the 9,000 square
meters to his nephew, Eleazar Tabamo. The document was
captioned Deed of Sale of a Portion of Land. On May 7,
1996, the remaining 4,500 square meters of Domingos
share in the partition was registered under his name under
TCT No. 281353.
On August 4, 1996, Domingo passed away. Two months
after his death, Domingo purportedly executed a Deed of
Absolute Sale of TCT No. 281353 in favor of Renato Tabu.
The resultant transfer of title was registered as TCT No.
286484. Subsequently, Tabu and his wife, Dolores
Laxamana (spouses Tabu), subdivided the said lot into two
which resulted into TCT Nos. 291338 and 291339. On
January 15, 1999, Dolores, together with Julieta TubilanLaxamana, Teresita Laxamana, Erlita Laxamana, and Gretel
Laxamana, the heirs of Domingo, filed an unlawful detainer
action, against Meliton Cabalu, Patricio Abus, Roger
Talavera, Jesus Villar, Marcos Perez, Arthur Dizon, and all

persons claiming rights under them. They claimed that the

defendants were merely allowed to occupy the subject lot
by their late father, Domingo, but, when asked to vacate
the property, they refused to do so. The case was ruled in
favor of Domingos heirs and a writ of execution was
subsequently issued.
On February 4, 2002, Milagros de Belen Vda. De Cabalu,
Meliton Cabalu, Spouses Angela Cabalu and Rodolfo
Talavera, and Patricio Abus (collectively petitioners), filed a
case for Declaration of Nullity of Deed of Absolute Sale,
Joint Affidavit of Nullity of Transfer Certificate of Title Nos.
291338 and 291339, Quieting of Title, Reconveyance,
Application for Restraining Order, Injunction and Damages
(Civil Case No. 9290) against the spouses Tabu before the
Regional Trial Court (RTC). In their complaint, the
petitioners claimed that they were the lawful owners of the
subject property because it was sold to their father,
Laureano, by Domingo, through a Deed of Absolute Sale,
dated March 5, 1975. Hence, being the rightful owners by
way of succession, they could not be ejected from the
subject property.
In their Answer, the spouses Tabu countered that the deed
of sale from which the petitioners anchored their right over
the 9,000 sq. m. property was null and void because in
1975, Domingo was not yet the owner of the property, as
the same was still registered in the name of Faustina.
Domingo became the owner of the property only on August
1, 1994, by virtue of the Deed of Extra-Judicial Succession
with Partition executed by the forced heirs of Faustina. In
addition, they averred that Domingo was of unsound mind
having been confined in a mental institution for a time.
After trial, the RTC dismissed the complaint as it found the
Deed of Absolute Sale, dated March 5, 1975, null and void
for lack of capacity to sell on the part of Domingo. Likewise,

the Deed of Absolute Sale, dated October 8, 1996, covering

the remaining 4,500 sq. m. of the subject property was
declared ineffective having been executed by Domingo two
months after his death on August 4, 1996. Not in
conformity, both parties appealed to the Court of Appeals
(CA). The petitioners contended that the RTC erred in
declaring void the Deed of Absolute Sale, dated March 5,
1975. They claimed that Domingo owned the property,
when it was sold to Laureano, because he inherited it from
his father, Benjamin, who was one of the heirs of Faustina.
Being a co-owner of the property left by Benjamin,
Domingo could dispose of the portion he owned,
notwithstanding the will of Faustina not being probated.
The spouses Tabu, on the other hand, asserted that the
Deed of Sale, dated March 5, 1975, was spurious and
simulated as the signature, PTR and the document number
of the Notary Public were different from the latters
notarized documents. They added that the deed was
without consent, Domingo being of unsound mind at the
time of its execution. After due consideration, the CA
rendered a decision partially granting the appeal. It held
that although Domingo was of sound mind at the time of
the sale on March 5, 1975, it sustained the RTCs
declaration of nullity of the sale on the ground that the
deed of sale was simulated.
Issue: Whether or not the March 5, 1975 deed is null
and void, since Domingo, the seller, was not yet the
owner of the subject property?
Held: Yes. Even on the assumption that the March 5, 1975
deed was not simulated, still the sale cannot be deemed
valid because, at that time, Domingo was not yet the owner
of the property. There is no dispute that the original and
registered owner of the subject property covered by TCT
No. 16776, from which the subject 9,000 sq. m. lot came
from, was Faustina, who during her lifetime had executed a

will, dated July 27, 1939. In the said will, the name of
Benjamin, father of Domingo, appeared as one of the heirs.
Thus, and as correctly found by the RTC, even if Benjamin
died sometime in 1960, Domingo in 1975 could not yet
validly dispose of the whole or even a portion thereof for
the reason that he was not the sole heir of Benjamin, as his
mother only died sometime in 1980.
Besides, under Article 1347 of the Civil Code, No contract
may be entered into upon future inheritance except in
cases expressly authorized by law. Paragraph 2 of Article
1347 [Civil Code], characterizes a contract entered into
upon future inheritance as void. The law applies when the
following requisites concur: (1) the succession has not yet
been opened; (2) the object of the contract forms part of
the inheritance; and (3) the promissor has, with respect to
the object, an expectancy of a right which is purely
hereditary in nature.
BOLLOZO VS YU TIENG
FACTS:
Bolloze filed a complaint for recovery of his parcel of
land and accounting for its used from Yu Tieng. The
plaintiffs claimed that the said land had been delivered to
him only for administration so he could apply the produce
to the indebtness of Paulino Bollozos, their predecessor in
interest.it was alleged that Yu had refused to return the
land despite demand and to make the required accounting
although the debt had long been paid.
In his answer, the defendant averred that he had acquired
ownership of the land in question by virtue of two
documents executed in his favor by Paulino Bollozos, to wit,
a deed of sale with right of repurchase dated September 1,
1934, and a deed of absolute sale dated September 21,
1936. He therefore had no obligation to return it.
Additionally, Yu claimed that the suit was barred by
prescription, the complaint having been filed only after all
of 26 years.

Issue:
WON here was a valid sale
RULING:
The Court holds that the first transaction was a valid sale
with right of repurchase and effectively transferred
ownership of the land in dispute to the defendantappellant. All the elements of a valid contract were present,
and in any case the plaintiffs-appellees themselves have
stipulated on its authenticity. As it was concluded in 1934,
the prohibition against the acquisition of agricultural lands
by aliens was not yet applicable, having become effective
only from November 15, 1935, under the Commonwealth
Constitution. Moreover, the title acquired by Yu was
recognized in the said Constitution as a vested right that
could no longer be disturbed under the new provisions of
that charter reserving ownership of such lands to Filipino
citizens. 5
The plaintiffs-appellees err in suggesting that the first
transaction, being conditional, did not effectively transfer
the ownership of the land to the vendee. It did, certainly,
subject only to the right of the vendor to redeem it within
the period specified.
XXX
In sum, we hold that the trial court erred in disregarding the
sale with right of repurchase concluded on September 1,
1934, and in considering it an equitable mortgage. The
second contract executed on September 21, 1936, could
not have validly conveyed the land in question to
defendant Yu, who was an alien, as this was already
prohibited by the Commonwealth Constitution.
Nevertheless, it was effective in affirming the earlier
contract of September 1, 1934, and, more importantly, in
making it absolute with the renunciation by the vendor of
his right to repurchase the property. Accordingly, Yu should
be recognized as the lawful owner of the land in dispute,
acquired by him by virtue of a legitimate contract of sale

with pacto de retro which became absolute when the

vendor waived his right of repurchase.
The fact that the defendant in this case was an alien cannot
be taken against him for he was not disqualified from
acquiring the land in question when the sale was concluded
in 1934. It should not deter us from ruling in his favor now.
This Court dispenses equal justice to the citizen and the
alien and judges them on the merits of their cause and not
the color of their skin. Having admitted him into our
territory, the State is committed to the recognition of all the
rights of the stranger in our midst save only where they
unduly clash with the higher interests of our own nation.
There is no such collision here. On the contrary, we see
here an opportunity to prove, as we do now, that respect
for the foreign guest is ingrained in the law of the land and
in the nature of our people.
No. L-67181. November 22, 1985.*
SPOUSES RESTITUTO NONATO and ESTER NONATO,
petitioners, us. THE HONORABLE INTERMEDIATE
APPELLATE COURT and INVESTOR'S FINANCE
CORPORATION, respondents.
FACTS: defendant spouses Restituto Nonato and Ester
Nonato purchased one (1) unit of Volkswagen from the
People's Car, Inc., on installment basis. To secure complete
payment, the defendants executed a promissory note and a
chattel mortgage in favor of People's Car, Inc. . People's
Car, Inc., assigned its rights and interests over the note and
mortgage in favor of plaintiff Investor's Finance Corporation
(FNCB). For failure of defendants to pay two or more
installments despite demands, the car was repossessed by
plaintiff.
Despite repossession, plaintiff demanded from defendants
that they pay the balance of the price of the car. Plaintiff

filed before the CFI a complaint against defendants for the

latter to pay the balance of the price of the car, with
damages and attorney's fees.
TC: rendered a decision in favor of the IFC and against the
Nonatos. It ordered the defendant to pay to the plaintiff the
amount of P1, 7,537.60 with interest
CA: affirmed the judgment.
PETITIONER: Spouses Nonato alleged that when the
company repossessed the vehicle, it had effectively
cancelled the sale of the vehicle. It is therefore barred from
exacting recovery of the unpaid balance of the purchase
price, as mandated by the provisions of Article 1484 of the
Civil Code.
RESPONDENT: contends that the repossession of the
vehicle was only for the purpose of appraising its value and
f or storage and safekeeping pending full payment by the
Nonatos of the purchasing price. The company thus denies
having exercised its right to cancel the sale of the
repossessed car.
LAW: Article 1484 of the Civil Code
ISSUE: WON a vendor, or his assignee, who had
cancelled the sale of a motor vehicle for failure of
the buyer to pay two or more of the stipulated
installments, may also demand payment of the
balance of the purchase price.

default in the payment of two or more of the agreed

installments, the vendor or seller has the option to avail of
any of these three remedieseither to exact fulfillment by
the purchaser of the obligation, or to cancel the sale, or to
foreclose the mortgage on the purchased personal
property, if one was constituted. These remedies have been
recognized as alternative, not cumulative, that the exercise
of one would bar the exercise of the others. "
It is not disputed that the respondent company had taken
possession of the car purchased by the Nonatos on
installments.
The receipt issued by the respondent company to the
Nonatos when it took possession of the vehicle states that
the vehicle could be redeemed within fifteen [15] days. This
could only mean that should petitioners fail to redeem the
car within the aforesaid period by paying the balance of the
purchase price, the company would retain permanent
possession of the vehicle, as it did in fact. Even after it had
notified the Nonatos that the value of the car was not
sufficient to cover the balance of the purchase price, there
was no attempt at all on the part of the company to return
the repossessed car.
Indeed, the acts performed by the corporation are wholly
consistent with the conclusion that it had opted to cancel
the contract of sale of the vehicle. It is thus barred from
exacting payment from petitioners of the balance of the
price of the vehicle which it had already repossessed. It
cannot have its cake and eat it too.

G.R No. L-43821. May 26, 1977.*

RULING: The meaning of the aforequoted provision has
been repeatedly enunciated in a long line of cases. Thus:
"Should the vendee or purchaser of a personal property

INDUSTRIAL
FINANCE
CORPORATION,
petitioner, vs.HON. PEDRO A. RAMIREZ, Judge of the
Court of First Instance of Manila, and CONSUELO

ALCOBA, respondents.

Industrial Finance Corporation sought to foreclose

the chattel mortgage as contemplated in article
1484 of the Civil Code, formerly Act No. 4122,
otherwise known as the Recto Installment Sale Law.

Facts:
On December 4, 1970 Arnaldo Dizon sold to
Consuelo Alcoba his 1966 model Chevrolet car for
P13,157.89, payable in eighteen monthly installments,
which were secured by a chattel mortgage on the car.
On that same date, Dizon assigned for ten thousand
pesos to Industrial Finance Corporation all his rights and
interest in the chattel mortgage. Consuelo Alcoba defaulted
in the payment of the first four installments, Because of
that default and by virtue of the acceleration clause in the
promissory note forming part of the mortgage, the whole
obligation became due and demandable.
In its complaint Industrial Finance Corporation prayed
for alternative reliefs. The main objective of its complaint
was recovery of the mortgaged car by means of a writ of
replevin. It submitted a redelivery bond. Un doubtedly, the
mortgagee-assignee wanted to foreclose extrajudicially the
chattel mortgage but before it could do so, the sheriff had
to seize the car by means of the provisional remedy of an
order for the delivery of personal property.
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 (Bachrach Motor Co. vs.
Summers,42 Phil. 3).
Issue:
Whether,

by

means

of

that

complaint,

RTC Ruling:
Consuelo Alcoba did not appeal That judgment became
final and executory. On September 27, 1973, or long after
the judgment had become final, she paid Industrial Finance
Corporation the sum of P2,000. The lower court issued writs
of execution. The writs were returned unsatisfied.
SC Ruling:
It is obvious that the facts of the Ridad case are
materially different from the facts of the instant case. Here,
there was no extrajudicial foreclosure of the mortgage.
Consuelo Alcoba, the mortgagee, acted perversely in not
surrendering the mortgaged ear to the corporation and in
preventing extrajudicial foreclosure. Had she complied with
the writ of replevin, then the corporation could have
foreclosed the mortgage and, in that event, she would not
be liable for any deficiency.
But she violated the mortgage by removing the car from
her residence at 3 Gladiola Street, Roxas District, Quezon
City. She did not comply with the stipulation that, upon her
default, the car should be delivered, on demand, to the
mortgagee in Manila.
The corporations action was for specific performance or
fulfillment of the obligation and not for judicial foreclosure
Consuelo Alcobas payment of P2,000 on account of the
money judgment against her signified that she acquiesced

in the action for specific performance. She cannot now be

heard to say that the judgment resulting from that action
could not be enforced because the mortgagees had opted
for foreclosure of the mortgage. The Civil Code provides.
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:
(1)Exact fulfillment of the obligation, should the
vendee fail to pay;
(2)Cancel the sale, should the vendees failure to
pay cover two or more installments;
(3)Foreclose the chattel mortgage on the thing sold,
if one has been constituted, should the vendees
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.
(1454-A-a).
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.
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 (Southern Motors, Inc. vs. Moscoso, 112 Phil. 94).

ACTIVE REALTY & DEVELOPMENT CORPORATION VS

DAROYA
FACTS:
This is a petition for review on certiorari under Rule 45 of
the Revised Rules of Court which seeks to reverse and set
aside the Resolution of the Court of Appeals, dated August
3, 1999, denying due course to petitioners appeal for
insufficiency of form and substance.
Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION
is the owner and developer of Town & Country Hills
Executive Village in Antipolo, Rizal. On January 2, 1985, it
entered into a Contract to Sell1 with respondent NECITA
DAROYA, a contract worker in the Middle East, whereby the
latter agreed to buy a 515 sq. m. lot forP224,025.00 in
petitioners subdivision.
The contract to sell stipulated that the respondent shall pay
the initial amount of P53,766.00 upon execution of the
contract and the balance of P170,259.00 in sixty (60)
monthly installments of P4,893.35. Adding the down
payment and installment payments, it would appear that
the total amount is P346,367.00, a figure higher than that
stated as the contract price.
On May 5, 1989, petitioner accepted respondents
amortization in the amount of P40,000.00. By August 8,
1989, respondent was in default of P15,282.85

representing three (3) monthly amortizations.

Petitioner sent respondent a notice of
cancellation2 of their contract to sell, to take effect
thirty (30) days from receipt of the letter. It does not appear
from the records, however, when respondent received the
letter. Nonetheless, when respondent offered to pay for the
balance of the contract price, petitioner refused as it has
allegedly sold the lot to another buyer.
On August 26, 1991, respondent filed a complaint for
specific performance and damages3 against petitioner
before the Arbitration Branch of the Housing and Land Use
Regulatory Board (HLURB). It sought to compel the
petitioner to execute a final Deed of Absolute Sale in
respondents favor after she pays any balance that may
still be due from her. Respondent claimed that she is
entitled to the final deed of sale after she offered to pay the
balance of P24,048.47, considering that she has already
paid the total sum of P314,816.76, which amount
isP90,835.76 more than the total contract price
of P224,025.00.
On June 14, 1993, HLURB Arbiter Alfredo M. Tan II found for
the respondent. He ruled that the cancellation of the
contract to sell was void as petitioner failed to pay the cash
surrender value to respondent as mandated by law.
However, as the subject lot was already sold to a third
party and the respondent had agreed to a full refund of her
installment payments, petitioner was ordered to refund to
respondent all her payments in the amount
ofP314,816.70, with 12% interest per annum from
August 26, 1991 (the date of the filing of the
complaint) until fully paid and to pay P10,000.00 as
attorneys fees.4
On appeal, the HLURB Board of Commissioners set aside
the Arbiters Decision. The Board refused to apply the

remedies provided under the Maceda Law and instead

deemed it fit to formulate an "equitable" solution to the
case. It ruled that, as both parties were at
fault, i.e., respondent incurred in delay in her installment
payments and respondent failed to send a notarized notice
of cancellation, petitioner was ordered to refund to
the respondent one half of the total amount she has
paid or P157,408.35, which was allegedly akin to the
remedy provided under the Maceda Law. 5
Respondent appealed to the Office of the President.
On June 2, 1998, then Chief Presidential Counsel Renato C.
Corona, acting by authority of the President, modified the
Decision of the HLURB as he found that it was not in
accord with the provisions of the Maceda Law. He held that
as petitioner did not comply with the legal requisites for a
valid cancellation of the contract, the contract to sell
between the parties subsisted and concluded that
respondent was entitled to the lot after payment of her
outstanding balance. However, as the petitioner disclosed
that the lot was already sold to another person and that the
actual value of the lot as of the date of the contract
was P1,700.00 per square meter, petitioner was ordered
to refund to the respondent the amount
ofP875,000.00, the true and actual value of the lot
as of the date of the contract, with interest at 12%
per annum computed from August 26, 1991 until
fully paid, or to deliver a substitute lot at the choice
of respondent.6
Upon denial of its motion for reconsideration, petitioner
assailed the Decision in the Court of Appeals. However, its
petition for review7 was denied due course for insufficiency
in form and substance,8 because: 1) no affidavit of service
was attached to the petition; 2) except for certified true
copies of the decision and resolution of the Office of the
President, no other material portions of the record, as
would support the allegations in the petition, were

attached; and, 3) the certification of forum-shopping was

signed by the head counsel and vice-president of the
petitioner corporation who was not authorized by a Board
Resolution to represent petitioner.
Petitioner moved for reconsideration. The Court of Appeals
denied it on an entirely new ground, i.e., for untimely filing
of the petition for review.
ISSUE:
WON the contract to sell is valid?
RULING:
We find for the respondent and rule in the affirmative.
The contract to sell in the case at bar is governed by
Republic Act No. 6552 -- "The Realty Installment Buyer
Protection Act," or more popularly known as the Maceda
Law -- which came into effect in September 1972. Its
declared public policy is to protect buyers of real estate on
installment basis against onerous and oppressive
conditions.16 The law seeks to address the acute housing
shortage problem in our country that has prompted
thousands of middle and lower class buyers of houses, lots
and condominium units to enter into all sorts of contracts
with private housing developers involving installment
schemes. Lot buyers, mostly low income earners eager to
acquire a lot upon which to build their homes, readily affix
their signatures on these contracts, without an opportunity
to question the onerous provisions therein as the contract
is offered to them on a "take it or leave it" basis. 17 Most of
these contracts of adhesion, drawn exclusively by the
developers, entrap innocent buyers by requiring cash
deposits for reservation agreements which oftentimes
include, in fine print, onerous default clauses where all the
installment payments made will be forfeited upon failure to
pay any installment due even if the buyers had made

payments for several years.18 Real estate developers thus

enjoy an unnecessary advantage over lot buyers who they
often exploit with iniquitous results. They get to forfeit all
the installment payments of defaulting buyers and resell
the same lot to another buyer with the same exigent
conditions. To help especially the low income lot buyers, the
legislature enacted R.A. No. 6552 delineating the rights and
remedies of lot buyers and protect them from one-sided
and pernicious contract stipulations.
XXX
In this case, respondent has already paid in four (4)
years a total of P314,860.76 or P90,835.76 more
than the contract price of P224,035.00. In April 1989,
petitioner decided to cancel the contract when the
respondent incurred in delay in the payment
of P15,282.85, representing three (3) monthly
amortizations. Petitioner refused to accept respondents
subsequent tender of payment of the outstanding balance
alleging that it has already cancelled the contract and sold
the subject lot to another buyer. However, the records
clearly show that the petitioner failed to comply with
the mandatory twin requirements for a valid and
effective cancellation under the law,19 i.e., he failed to send
a notarized notice of cancellation and refund the cash
surrender value. At no time, from the date it gave a notice
of cancellation up to the time immediately before the
respondent filed the case against petitioner, did the latter
exert effort to pay the cash surrender value. In fact, the
records disclose that it was only during the preliminary
hearing of the case before the HLURB arbiter when
petitioner offered to pay the cash surrender value.
Petitioner justifies its inaction on the ground that the
respondent was always out of the country. Even then, the
records are bereft of evidence to show that petitioner
attempted to pay the cash surrender value to respondent
through her last known address. The omission is surprising
considering that even during the times respondent was out
of the country, petitioner has been sending her written

notices to remind her to pay her installment arrears

through her last known address. Clearly, had respondent
not filed a case demanding a final deed of sale in her favor,
petitioner would not have lifted a finger to give respondent
what was due her actual payment of the cash surrender
value, among others. In disregard of basic equitable
principles, petitioners stance would enable it to resell the
property, keep respondents installment payments, not to
mention the cash surrender value which it was obligated to
return. The Layug20 case cited by petitioner is inapropos.
In Layug, the lot buyer did not pay for the outstanding
balance of his account and the Court found that notarial
rescission or cancellation was no longer necessary as the
seller has already filed in court a case for rescission of the
contract to sell. In the case at bar, respondent offered to
pay for her outstanding balance of the contract price but
respondent refused to accept it. Neither did petitioner
adduce proof that the respondents offer to pay was made
after the effectivity date stated in its notice of cancellation.
Moreover, there was no formal notice of cancellation or
court action to rescind the contract. Given the
circumstances, we find it illegal and iniquitous that
petitioner, without complying with the mandatory legal
requirements for canceling the contract, forfeited both
respondents land and hard-earned money after she has
paid for, not just the contract price, but more than the
consideration stated in the contract to sell.
Thus, for failure to cancel the contract in accordance
with the procedure provided by law, we hold that the
contract to sell between the parties remains valid
and subsisting. Following Section 3(a) of R.A. No.
6552, respondent has the right to offer to pay for
the balance of the purchase price, without interest,
which she did in this case. Ordinarily, petitioner would
have had no other recourse but to accept payment.
However, respondent can no longer exercise this right as
the subject lot was already sold by the petitioner to another
buyer which lot, as admitted by the petitioner, was valued

at P1,700.00 per square meter. As respondent lost her

chance to pay for the balance of the P875,000.00 lot, it is
only just and equitable that the petitioner be ordered to
refund to respondent the actual value of the lot
resold, i.e., P875,000.00, with 12% interest per annum
computed from August 26, 1991 until fully paid or to deliver
a substitute lot at the option of the respondent.
On a final note, it would not be amiss to stress that the
HLURB Board Decision ordering petitioner to refund to
respondent one half of her total payments is not an
equitable solution as it punished the respondent for her
delinquent payments but totally disregarded petitioners
failure to comply with the mandatory requisites for a
valid cancellation of the contract to sell. The Board failed
to consider that the Maceda law was enacted to remedy
the plight of low and middle-income lot buyers, save
them from the exacting default clauses in real estate sales
and assure them of a home they can call their own. Neither
would the Decision of the HLURB Arbiter ordering a full
refund of the installment payments of respondent in the
amount of P314,816.70 be justified as, under the law,
respondent is entitled to the lot she purchased after
payment of her outstanding balance which she was ready
and willing to do. Thus, to penalize the petitioner for failing
in its obligation to deliver the subject lot and to give the
respondent what is rightly hers, the petitioner was correctly
ordered to refund to the respondent the actual value of the
land (P875,000.00) she lost to another buyer, plus interest
at the rate of 12% per annum from August 26, 1991 until
fully paid or to deliver a substitute lot at the choice of the
respondent.

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

PCI LEASING AND FINANCE, INC.,

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

respondent.
FACTS: petitioner PCI LEASING and respondent GIRAFFE
entered into a Lease Agreement,1whereby the former
leased to the latter one (1) set of Silicon High Impact
Graphics and accessories worth P3,900,00.00 and one (1)
unit of Oxberry Cinescan 6400-10 worth P6,500,000.00.
The parties subsequently signed two (2) separate
documents, each denominated as Lease Schedule. Likewise
forming parts of the basic lease agreement were two (2)
separate documents denominated Disclosure Statements
of Loan/Credit Transaction (Single Payment or Installment
Plan) that GIRAFFE also executed for each of the leased
equipment for the Silicon High Impact Graphics, GIRAFFE
agreed to pay P116,878.21 monthly, and for Oxberry
Cinescan, P181.362.00 monthly for 36 months of the lease,
exclusive of monetary penalties imposable, if proper.
By the terms of the Lease Agreement, GIRAFFE undertook
to remit the amount of P3,120,000.00 by way of guaranty
deposit, a sort of performance and compliance bond for
the two equipment.
GIRAFFE defaulted in its monthly rental-payment
obligations. After a three-month default, PCI LEASING, sent
a formal pay-or-surrender equipment type of demand letter
to GIRAFFE. The demand went unheeded.
PCI LEASING instituted a complaint against GIRAFFE prayed
for the recovery of the leased property and prayed for the
issuance of a writ of replevin.
RTC: Declared the plaintiff PCI entitled to the possession
of the subject properties and Ordered the defendant to pay
the balance of rental/obligation.
issued a writ of replevin after PCI LEASINGs posting
of a replevin bond, paving the way for PCI LEASING

to secure the seizure and delivery of the equipment

covered by the basic lease agreement.
RESPODENT: filed a Motion to Dismiss, argued that 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 pursuant
to Articles 1484 and 1485 of the Civil Code on installment
sales of personal property, commonly referred to as
the Recto Law.
- argues that Article 1484 of the Civil Code applies to its
contractual relation with PCI LEASING because the lease
agreement in question, as supplemented by the schedules
documents, is really a lease with option to buy under
the companion article, Article 1485. Consequently, upon
the seizure of the leased equipment pursuant to the writ of
replevin, which seizure is equivalent to foreclosure, PCI
LEASING has no further recourse against it.
PETITIONER: PCI LEASING maintains that its contract with
GIRAFFE is a straight lease without an option to buy, and
that under the terms and conditions of the basic
agreement, the relationship between the parties is one
between an ordinary lessor and an ordinary lessee.
represents a straight lease covered by R.A. No. 5980,
the Financing Company Act, as last amended by R.A.
No. 8556, otherwise known as Financing Company
Act of 1998, and is outside the application and
coverage of the Recto Law.
RTC: granted GIRAFFEs motion to dismiss because the
lease agreement package is akin to the contract
contemplated in Article 1485 of the Civil Code, and
GIRAFFEs loss of possession of the leased equipment

consequent to the enforcement of the writ of replevin is

akin to foreclosure, . . . the condition precedent for
application of Articles 1484 and 1485 [of the Civil Code].

LAW: Articles 1484 and 1485 of the New Civil Code.

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.

ISSUE: WON 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.

The demand letter sent to the respondent, petitioner

fashioned its claim in the alternative: payment of the full
amount of P8,248,657.47, representing the unpaid balance
for the entire 36-month lease period or the surrender of the
financed asset under pain of legal action.

RULING:
R.A. No. 5980, in its original shape and as amended,
partakes of a supervisory or regulatory legislation, merely
providing a regulatory framework for the organization,
registration, and regulation of the operations of financing
companies. As couched, it does not specifically define the
rights and obligations of parties to a financial leasing
arrangement. In fact, it does not go beyond defining
commercial or transactional financial leasing and other
financial leasing concepts. Thus, the relevancy of Article 18
of the Civil Code which reads: Article 18.In matters which
are governed by . . . special laws, their deficiency shall be
supplied by the provisions of this [Civil] Code.

The demand could only be that the respondent need not

return the equipment if it paid the P8,248,657.47
outstanding balance, ineluctably suggesting that the
respondent can keep possession of the equipment if it
exercises its option to acquire the same by paying the
unpaid balance of the purchase price. Stated otherwise, if
the respondent was not minded to exercise its option of
acquiring the equipment by returning them, then it need
not pay the outstanding balance. This is the logical import
of the letter: that the transaction in this case is a lease in
name only. The so-called monthly rentals are in truth
monthly amortizations of the price of the leased office
equipment. On the whole, then, we rule, as did the trial
court, that the PCI LEASINGGIRAFFE 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

PETITION: direct petition for review to SC.

The Court can allow that the underlying lease agreement

has the earmarks or made to appear as a financial leasing,
a term defined in Section 3(d) of R.A. No. 8556 asa 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

the Civil Code should apply.

The present case reflects a situation where the financing
company can withhold and concealup 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.
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 rereproducing, cannot be any clearer. As we articulated
in Elisco Tool Manufacturing Corp. v. Court of Appeals, 307
SCRA 731 (1999), 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. 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.

G.R. No. 135602. April 28, 2000.*

HEIRS OF QUIRICO SERASPI AND PURIFICACION R.
SERASPI, petitioners, vs. COURT OF APPEALS AND
SIMEON RECASA, respondents.
Facts:
During his lifetime, Marcelino contracted three (3)
marriages. At the time of his death in 1943, he had fifteen
(15) children from his three marriages. In 1948, his
intestate estate was partitioned into three parts by his
heirs, each part corresponding to the share of the heirs in
each marriage.
In the same year, Patronicio Recasa, representing the
heirs of the first marriage, sold the share of the heirs in the
estate to Dominador Recasa, an heir of the second
marriage. On June 15, 1950, Dominador, representing the
heirs of the second marriage, in turn sold the share of the
heirs to Quirico and Purificacion Seraspi whose heirs are the
present petitioners. Included in this sale was the property
sold by Patronicio to Dominador.
In 1958, the Seraspis obtained a loan from the Kalibo
Rural Bank, Inc. (KRBI) on the security of the lands in
question to finance improvements on the lands. However,
they failed to pay the loan for which reason the mortgage

was foreclosed and the lands were sold to KRBI as the

highest bidder. Subsequently, the lands were sold by KRBI
to Manuel Rata, brother-in-law of Quirico Seraspi. It appears
that Rata, as owner of the property, allowed Quirico Seraspi
to administer the property.
In 1974, private respondent Simeon Recasa, Marcelinos
child by his third wife, taking advantage of the illness of
Quirico Seraspi, who had been paralyzed due to a stroke,
forcibly entered the lands in question and took possession
thereof.
Issue:
1) whether petitioners
extinctive prescription; and

action

is

barred

by

(2) whether private respondent Simeon Recasa

acquired ownership of the properties in question
through acquisitive prescription.

Citing Arradaza v. Court of Appeals,3 it held that an

action for recovery of title or possession of real property or
an interest therein can only be brought within ten (10)
years after the cause of action has accrued. Since the
action for recovery of possession and ownership was filed
by petitioners only on April 12, 1987,i.e., thirteen (13)
years after their predecessor-in-interest had been allegedly
deprived of the possession of the property by private
respondent, it was held that the action had prescribed.
Court of Appeals reversed on the ground that the action
of the Seraspis was barred by the statute of limitations.
Hence, this petition filed by Quirico Seraspi who, in the
meantime, had passed away and was thus substituted by
his heirs.
SC Ruling:
On this point, the Civil Code provides:

RTC Ruling:
The trial court ruled in favor of the Seraspis, stating that
they had acquired the property through a sale and
acquisitive prescription.

CA Rulinng:
The Court of Appeals, while ruling that petitioners were
able to establish the identity of the property as well as the
credibility of their titlethe elements required to prove
ones claim for recovery of property2nonetheless held
that the action was barred by prescription.

Art. 1117. Acquisitive prescription of dominion and other

real rights may be ordinary or extraordinary.
Ordinary acquisitive prescription requires possession of
things in good faith and with just title for the time fixed by
law.
Art. 1134. Ownership and other real rights over
immovable property are acquired by ordinary prescription
through possession of ten years.
Art. 1137. Ownership and other real rights over
immovables also prescribe through uninterrupted adverse
possession thereof for thirty years, without need of title or

of good faith.
Thus, acquisitive prescription of dominion and other real
rights may be ordinary or extraordinary, depending on
whether the property is possessed in good faith and with
just title for the time fixed by law.4 Private respondent
contends that he acquired the ownership of the questioned
property by ordinary prescription through adverse
possession for ten (10) years.
The contention has no merit, because he has neither just
title nor good faith. As Art. 1129 provides:
For the purposes of prescription, there is just title when
the adverse claimant came into possession of the property
through one of the modes recognized by law for the
acquisition of ownership or other real rights, but the
grantor was not the owner or could not transmit any right.
In the case at bar, private respondent did not acquire
possession
of
the
property
through
any
of
the modesrecognized by the Civil Code, to wit: (1)
occupation, (2) intellectual creation, (3) law, (4) donation,
(5) succession, (6) tradition in consequence of certain
contracts, and (7) prescription.5
Private respondent could not have acquired ownership
over the property through occupation since, under Art. 714
of the Civil Code, the ownership of a piece of land cannot
be acquired by occupation. Nor can he base his ownership
on succession for the property was not part of those
distributed to the heirs of the third marriage, to which

private respondent belongs. It must be remembered that in

the partition of the intestate estate of Marcelino Recasa,
the properties were divided into three parts, each part
being reserved for each group of heirs belonging to one of
the three marriages Marcelino entered into. Since the
contested parcels of land were adjudicated to the heirs of
the first and second marriages, it follows that private
respondent, as heir of the third marriage, has no right over
the parcels of land. While, as heir to the intestate estate of
his father, private respondent was co-owner of all of his
fathers properties, such co-ownership rights were
effectively dissolved by the partition agreed upon by the
heirs of Marcelino Recasa.
Neither can private respondent claim good faith in his
favor. Good faith consists in the reasonable belief that the
person from whom the possessor received the thing was its
owner but could not transmit the ownership thereof. 6Private
respondent entered the property without the consent of the
previous owner. For all intents and purposes, he is a mere
usurper.

PEOPLES INDUSTRIAL AND COMMERCIAL

CORPORATION vs. COURT OF APPEALS AND MAR-ICK
INVESTMENT CORPORATION
FACTS:
Private respondents Mar-ick Investment Corporation is the
exclusive and registered owner of Mar-ick Subdivision in

Barrio Buli, Cainta, Rizal. On May 29, 1961, private

respondents entered into six (6) agreements with petitioner
Peoples Industrial and Commercial Corporation whereby it
agreed to sell to petitioner six (6) subdivision lots.
All the agreements have the following provisions:
9. Should the PURCHASER fail to make the payment of any
of the monthly installments as agreed herein, within One
Hundred Twenty (120) days from its due date, this contract
shall, by the mere fact of nonpayment, expire by it self and
become null and void without necessity of notice to the
PURCHASER or of any judicial declaration to the effect, and
any and all sums of money paid under this contract shall be
considered and become rentals on the property, and in this
event, the PURCHASER should he/she be in possession of
the property shall become a mere intruder or unlawful
detainer of the same and may be ejected therefrom by
means provided by law for trespassers or unlawful
detainers. Immediately after the expiration of the 120 days
provided for in this clause, the OWNER shall be at liberty to
dispose of and sell said parcel of land to any other person
in the same manner as if this contract had never been
executed or entered into.
The breach by the PURCHASER of any of the conditions
considered herein shall have the same effect as nonpayment of the installments of the purchase price.
In any of the above cases the PURCHASER authorizes the
OWNER or her representative to enter into the property to
take possession of the same and take whatever action is
necessary or advisable to protect its rights and interest in
the property , and nothing that may be done or made by
the PURCHASER shall be considered as revoking this
authority or a denial thereof.[3]
After the lapse of ten years, however, petitioner still had
not fully paid for the six lots; It had paid only the down
payment and eight (8) installments, even after private

respondents had given petitioner a grace period of four

months to pay the arrears.[4] As of May 1, 1980, the total
amount due to private respondents under the contract
was P214,418.00.[5]
In this letter of March 30, 1980 to Mr. Tomas Siatianum
(Siatianun) who signed the agreements for petitioner,
private respondents counsel protested petitioners
encroachment upon a portion of its subdivision particularly
Lots Nos. 2, 3, 4, 5, 6, 7, and 8. A portion of the letter
reads:
Examinations conducted on the records of said lots
revealed that you once contracted to purchase said lots but
your contracts were cancelled for non-payment of the
stipulated installments.
Desirous of maintaining good and neighborly relations with
you, we caused to send you this formal demand for you to
remove your said wall within fifteen (15) days from your
receipt hereof, otherwise, much to our regret, we shall be
constrained to seek redress before the courts and at the
same time charge you with reasonable rentals for the use
said lots at the rate of One (P1.00) Peso per square meter
per month until you shall have finally removed said wall. [6]
Private respondent reiterated its protest against the
encroachment in a letter dated February 16, 1981. [7] It
added that petitioner had failed to abide by its promise to
remove the encroachment, or to purchase the lots involved
at the current price or pay the rentals on the basis of the
total area occupied, all within a short period of time. It also
demanded the removal of the illegal constructions on the
property that had prejudiced the subdivision and its
neighbors.
After a series of negotiations between the parties, they
agreed to enter into a new contract to sell [8] involving seven
(7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8, with a total
area of 1,693 square meters. The contract stipulates that

the previous contracts involving the same lots (actually

minus Lot No.2) have been cancelled due to the failure of
the PURCHASER to pay the stipulated installments. It states
further that the new contract was entered into to avoid
litigation, considering that the PURCHASER has already
made use of the premises since 1981 to the present
without paying the stipulated installments. The parties
agreed that the contract price would be P423,250.00 with a
down payment of P42,325.00 payable upon the signing of
the contract and the balance of P380,925.00 payable in
forty-eight (48) equal monthly amortization payments
of P7,935.94.
The new contract bears the date of October 11, 1983 but
neither of the parties signed it. Thereafter, Tomas
Siatianum issued the following checks in the total amount
of P37,642.72 to private respondent: (a) dated March 4,
1984 for P10,000.00; (b) dated March 31, 1984
for P10,000.00; (c) dated April 30, 1984
for P 10,000.00 ; (d) dated May 31, 1984 for P 7,079.00,
and (e) dated May 31, 1984 for P563.72.[9]
Private respondent received but did not encash those
checks. Instead, on July 12, 1984 it filed in the Regional
Trial Court of Antipolo, Rizal, a complaint for accion
publicianan de posesion against petitioner and Tomas
Siatianum, as president and majority stockholder of
petitioner.[10] It prayed that petitioner be ordered to
removed the wall on the premises and to surrender in
possession of lots Nos. 2 to 8 of Block 11 of the Mar-ick
subdivision, and that petitioner and Tomas Siatianum be
ordered to pay: (a) P259,074.00 as reasonable rentals for
the use of the lots from 1961, plus P1,680,074.00 per
month from July 1, 1984 up to and until the premises shall
have been vacated and the wall demolished;
(b) P10,000.00 as attorneys fees;(c) moral and exemplary
damages, and (d)costs of suit. In the alternative , the
complaint prayed that should the agreements be deemed
not automatically cancelled, the same agreements should

be declared null and void.

In due course, the lower court [11] rendered a decision
finding that the original agreements of the parties were
validly cancelled in accordance with provision No.9 of each
agreement. The parties did not enter into a new contract in
accordance with Art. 1403 (2) of the Civil Code as the
parties did not sign the draft contract. Receipt by private
respondent of the five checks could not amount to
perfection of the contract because private respondent
never encash and benefited from those
checks. Furthermore, there was no meeting of the minds
between the parties because Art 1475 of the Civil Code
should be read with the Statute of Frauds that requires the
embodiment of the contract in a note or memorandum.
The lower court opined that the checks represented the
deposit under the new contract because petitioner failed to
prove that those were monthly installments that private
respondent refused to accept. What petitioner prove
instead was the fact that it was not able to pay the rest of
the installments because of a strike, fire and storm that
affected its operations. Be that is as it may, what was
clearly proven was that both parties negotiated a new
contract after the termination of the first. Thus, the fact
that the parties tried to negotiate a new contract indicated
that they considered that first contract as already
cancelled.
With respect to petitioners allegation on a "free right-of-way
constituted on Lot No. 2, the lower court found that the
agreement thereon was oral and not in writing. As such, it
was not in accordance with Art. 749 of the Civil Code
requiring that, to be valid, a donation must be in a public
document. Consequently, because of the principle against
unjust enrichment, petitioner must pay rentals for the
occupancy of the property.

Petitioner elevated the case to the Court of

Appeals. However, or October 16, 1992, the Court of
Appeals affirmed in toto the lower courts
decision. Petitioners motion for reconsideration having
been denied, it instituted the instant petition for review on
certiorari.
ISSUE:
WON
RULING:
The contracts to sell of 1961 were cancelled in virtue of
provision No. 9 thereof to which the parties voluntarily
bound themselves. In Manila Bay Club Corp. v. Court of
Appeals,[20] this Court interpreted as requiring mandatory
compliance by the parties, a provision in a lease contract
that failure or neglect to perform or comply with any of the
covenants, conditions, agreements or restrictions stipulated
shall result in the automatic termination and cancellation of
the lease. The Court added:
x x x . Certainly, there is nothing wrong if the parties to the
lease contract agreed on certain mandatory provisions
concerning their respective rights and obligations, such as
the procurement of insurance and the rescission clause. For
it is well to recall that contracts are respected as thelaw
between the contracting parties, and they may establish
such stipulations, clauses, terms and conditions as they
may want to include. As long as such agreements are not
contrary to law, moral, good customs, public policy or
public order they shall have the force of law between them.
Consequently, when petitioner failed to abide by its
obligation to pay the installments in accordance with the
contracts to sell, provision No. 9 automatically took
effect. That private respondent failed to observe Section 4
of Republic Act No. 6552, the Realty installment Buyer
Protection Act, is if no moment. That section provides that
(I)f the buyers fails to pay the installment due at the
expiration of the grace period, the seller may cancel the

contract 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. Private respondents cancellation
of the agreements without a duly notarized demand for
rescission did not mean that it violated said provision of
law. Republic Act No. 6552 was approved on August 26,
1972, long after provision No.9 of the contracts to sell had
become automatically operational. As with P.D. Nos. 957
and 1344, Republic act No. 6552 does not expressly provide
for its retroactive application and, therefore, it could not
have encompassed the cancellation of the contracts to sell
in this case.
At this juncture, it is apropos to stress that the 1961
agreements are contracts to sell and not contracts of
sale. The distinction between these contracts is graphically
depicted in Adelfa Properties, Inc. v. Court of Appeals,[21] as
follows:
x x x . The distinction between the two is important for in a
contract of sale, the title passes to the vendee upon the
delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is
not to pass until the full payment of the price. In a contract
of sale, the vendor is not to pass until the full payment of
the price. In a contract of sale, the vendor has lost and
cannot recover ownership until and unless the contract is
resolved or rescinded; whereas, in a contract to sell, title is
retained by the vendor until the full payment of the price ,
such payment being a positive suspensive condition and
failure of which is not a breach but an event that prevents
the obligation of the vendor to convey title from becoming
effective. Thus, a deed of sale is considered absolute in
nature where there is neither a stipulation in the deed that
title to the property sold is reserved in the seller until the
full payment of the price, nor one giving the vendor the
right to unilaterally resolve the contract the moment the
buyer fails to pay within a fixed period.
XXX
Hence, being contracts to sell, article 592 of the Civil Code

which requires rescission either by judicial action or notarial

act is not applicable.[22]
Neither may petitioner claim ignorance of the cancellation
of the contracts. Aside from his letters of March 30, 1980
and February 16, 1981, private respondents counsel. Atty.
Manuel Villamor, had sent petitioner other formal protest
and demands.[23] These letters adequately satisfied the
notice requirement stipulated in provision No.9 of the
contracts to sell. If petitioner had not agreed to the
automatic and extrajudicial cancellation of the contracts, it
could have gone to court to impugn the same but it did
not. Instead, it sought to enter into a new contract to sell,
thereby confirming its veracity and validity of the
extrajudicial rescission.[24] Had not private respondent filed
the accion publiciana de posesion, petitioner would have
remained silent about the whole situation. It is now
estopped from questioning the validity of the cancellation
of the contracts. An unopposed rescission of a contract has
a legal effects.[25]
XXX
Because the contracts to sell had long been cancelled when
private respondents filed the accion publiciana de
posesion on July 12, 1984, it was the proper Regional Trial
Court that had jurisdiction over the case. By then, there
was no more installment buyer and seller relationship to
speak of. It had been recuded to a mere case of an owner
claiming possession of its property that had long been
illegally withheld from it by another.
Petitioner alleges that there was a new perfected and
enforceable contract of sale" between the parties in
October 1983 for two reasons. First, it paid private
respondent the down payment or deposit of
Contract[30] through the five checks. Second, the receipt
signed by private respondents representatives satisfies the
requirement of a note or memorandum under Article 1403
(2) of the Civil Code because it states the object of the
contract (six lots of Mar-Ick Subdivision measuring 1,453
square meters), the price (P250.00 per square meter with a

down payment of 10% or P 37,542.72), and the receipt

itself opens with a statement referring to the purchase of
the six lots of Mar-Ick Subdivision.
XXX
Moreover, private respondents offer to sell and petitioners
acceptance thereof are manifest in the documentary
evidence presented the (5) checks [36] that, through Atty.
Villamayor, it admitted as the down payment under the
October 1983 contract. Private respondents intentional
non- encashment of the check cannot serve to belie the
fact of its tender as down payment.For its part, petitioner
presented Exhibit 10, a receipt dated February 28, 1984,
showing that private respondents authorized representative
received the total amount of P37,642.72 represented by
said five checks as deposit of Contract (sic). As this Court
also held in the Adelfa Properties case, acceptance may be
evidenced by some acts or conduct communicated to the
offeror, either in a formal or an informal manner, that
clearly manifest the intention of determination to accept
the offer to buy or sell.[37]
XXX
The number of lots to be sold is a material component of
the contract to sell. Without an agreement on the matter,
the parties may not in any way be considered as having
arrived at a contract under the law. The parties failure to
agree on a fundamental provision of the contract was
aggravated by petitioners failure to deposit the
installments agreed upon. Neither did it attempt to make a
consignation of installments. This Courts disquisition on the
matter in the Adelfa Properties case is relevant. Thus:
The mere sending of a letter by the vendee expressing the
intention to pay, without the accompanying payment, is not
considered a valid tender of payment. Besides, a mere
tender of payment is not sufficient to compel private
respondents to deliver the property and execute the deed
of absolute sale. It is consignation which is essential in
order to extinguish petitioners obligation to pay the balance

of the purchase price. The rule is different in case of an

option contract or in legal redemption or in a sale with right
to repurchase, wherein consignation is not necessary
because this cases involves an exercise of a right privilege
(to buy, redeem, or repurchase) rather than the discharge
of the obligation, hence tender of payment would be
sufficient to preserve the right or privilege. This is because
the provision on consignation are not applicable when there
is no obligation to pay. A contract to sell, as in the case
before us, involves the performance of an obligation, not
merely the exercise of the privilege or a
right.Consequently, performance or payment may be
effected not by tender of payment alone but by both tender
and consignation.[41] (Underscoring supplied.)
As earlier noted, petitioner did not lift a finger towards the
performance of the contract other than the tender of down
payment. There is no record that it even bothered to tender
payment of the installments or to amend the contract to
reflect the true intention of the parties as regards the
number of lots to be sold. Indeed, by petitioners inaction,
private respondents may not be judicially enjoined to
validate a contract that the former appeared to have taken
for granted. As in the earlier agreements, petitioner ignored
opportunities to resuscitate a contract to sell that was
rendered moribund and inoperative by its inaction.

G.R. No. 135657. January 17, 2001.*

JOSE V. LAGON, petitioner, vs. HOOVEN COMALCO
INDUSTRIES, INC, respondent.
FACTS:

Petitioner Jose V. Lagon is a businessman and owner of a

commercial building in Sultan Kudarat. Respondent
HOOVENis a domestic corporation known as a manufacturer
and installer of aluminum materials in the country with
branch office at Davao City.
Sometime in April 1981 Lagon and HOOVEN entered into
two (2) contracts, both denominated Proposal, whereby for
a total consideration of P104,870.00 HOOVEN agreed to sell
and install various aluminum materials in Lagons
commercial building in Sultan Kudarat. Upon execution of
the contracts, Lagon paid HOOVEN P48,00.00 in advance.
In 1987 respondent HOOVEN commenced an action for sum
of money with damages and attorneys fees against
petitioner Lagon before the RTC of Davao City. HOOVEN
alleged in its complaint that on different occasions, it
delivered and installed several construction materials in the
commercial building of Lagon pursuant to their contracts;
that the total cost of the labor and materials amounted to
P117,329.00 out of which P69,329.00 remained unpaid
even after the completion of the project; and, despite
repeated demands, Lagon failed and refused to liquidate
his indebtedness.
Lagon denied liability and averred that HOOVEN was the
party guilty of breach of contract by failing to deliver and
install some of the materials specified in the proposals; that
as a consequence he was compelled to procure the
undelivered materials from other sources; that as regards
the materials duly delivered and installed by HOOVEN, they
were fully paid.
upon request of both parties, the trial court conducted an
ocular inspection of Lagons commercial building to
determine whether the items alleged in the complaint and
appearing in the invoices and delivery receipts had been
delivered and installed on the premises.
TC: rendered a decision partly on the basis of the result of
the ocular inspection finding that the total actual deliveries

and installations made by HOOVEN cost P87,140.00.

Deducting therefrom P48,000.00 which Lagon paid in
advance upon execution of their contracts with no further
payments appearing to have been made thereafter, only
P39,140.00 remained unpaid when Lagon incurred in delay.
The trial court sustained Lagons counterclaims and
awarded him P26,120.00 as actual damages representing
the value of the undelivered and uninstalled materials.
Both parties appealed to the Court of Appeals.
CA: set aside the judgment of the trial court and resolved
the case in favor of HOOVEN. It held that the trial court
erred in relying solely on the results of the ocular inspection
since the delivery and installation of the materials in
question started as early as 1981, while the ocular
inspection was conducted only in 1987 or six (6) years
later, after the entire mezzanine was altered and the whole
building renovated.
PETITIONER: contends that the CA erred in holding that
the TC could not rely on the results of the ocular inspection
conducted on his commercial building in Sultan Kudarat;
and that the assailed decision of the CA is based on
speculations and contrary to the evidence adduced during
the trial.
ISSUE: WON all the materials specified in the
contracts had been delivered and installed by
respondent in petitioners commercial building in
Sultan Kudarat.
LAW: Proposal Agreement
RULING:

Even more strange is the fact that HOOVEN instituted the

present action for collection of sum of money against Lagon
only on 24 February 1987, or more than five (5) years after
the supposed completion of the project. Indeed, it is
contrary to common experience that a creditor would take
its own sweet time in collecting its credit, more so in this
case when the amount involved is not miniscule but
substantial.
All the delivery receipts did not appear to have been signed
by petitioner or his duly authorized representative
acknowledging receipt of the materials listed therein. A
closer examination of the receipts clearly showed that the
deliveries were made to a certain Jose Rubin, claimed to be
petitioners driver, Armando Lagon, and a certain
bookkeeper. Unfortunately for HOOVEN, the identities of
these persons were never been established, and there is no
way of determining now whether they were indeed
authorized representatives of petitioner. Paragraph 3 of
each Proposal is explicit on this point
3. x x x the sellers responsibility ends with delivery of the
merchandise to carrier in good condition, to buyer, or to
buyers authorized Receiver/Depository named on the
face of this proposal (italics supplied).
As above specifically stated, deliveries must be made to
the buyer or his duly authorized representative named in
the contracts. In other words, unless the buyer specifically
designated someone to receive the delivery of materials
and his name is written on the Proposals opposite the
words Authorized Receiver/Depository, the seller is under
obligation to deliver to the buyer only and to no other
person; otherwise, the delivery would be invalid and the
seller would not be discharged from liability. In the present
case, petitioner did not name any person in
the Proposals who would receive the deliveries in his
behalf, which meant that HOOVEN was bound to deliver
exclusively to petitioner.

We are not unaware of the slipshod manner of preparing

receipts, order slips and invoices, which unfortunately has
become a common business practice of traders and
businessmen. In most cases, these commercial forms are
not always fully accomplished to contain all the necessary
information describing the whole business transaction. The
sales clerks merely indicate a description and the price of
each item sold without bothering to fill up all the available
spaces in the particular receipt or invoice, and without
proper regard for any legal repercussion for such neglect.
Certainly, it would not hurt if businessmen and traders
would strive to make the receipts and invoices they issue
complete, as far as practicable, in material particulars.
These documents are not mere scraps of paper bereft of
probative value but vital pieces of evidence of commercial
transactions. They are written memorials of the details of
the consummation of contracts.
But we agree with petitioner that he is entitled to moral
damages. HOOVENs bad faith lies not so much on its
breach of contractas there was no showing that its failure
to comply with its part of the bargain was motivated by ill
will or done with fraudulent intentbut rather on its
appalling temerity to sue petitioner for payment of an
alleged unpaid balance of the purchase price
notwithstanding knowledge of its failure to make complete
delivery and installation of all the materials under their
contracts. It is immaterial that, after the trial, petitioner
was found to be liable to respondent to the extent of
P6,377.66. Petitioners right to withhold full payment of the
purchase price prior to the delivery and installation of all
the merchandise cannot be denied since under the
contracts the balance of the purchase price became due
and demandable only upon the completion of the project.
Consequently, the resulting social humiliation and damage
to petitioners reputation as a respected businessman in
the community, occasioned by the filing of this suit provide
sufficient grounds for the award of P50,000.00 as moral

damages.

G.R. No. 133879. November 21, 2001.*

EQUATORIAL
REALTY
DEVELOPMENT,
INC.,
petitioner, vs. MAYFAIR THEATER, INC., respondent.

Facts:
Carmelo & Bauermann, Inc. (Carmelo) used to own a
parcel of land, together with two 2-storey buildings
constructed thereon, located at Claro M. Recto Avenue,
Manila, and covered by TCT No. 18529 issued in its name
by the Register of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of
Lease with Mayfair Theater, Inc. (Mayfair) for a period of
20 years. The lease covered a portion of the second floor
and mezzanine of a two-storey building with about 1,610
square meters of floor area, which respondent used as a
movie house known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into
a second Contract of Lease with Carmelo for the lease of
another portion of the latters propertynamely, a part of
the second floor of the two-storey building, with a floor area
of about 1,064 square meters; and two store spaces on the
ground floor and the mezzanine, with a combined floor area
of about 300 square meters. In that space, Mayfair put up
another movie house known as Miramar Theater. The

Contract of Lease was likewise for a period of 20 years.

Both leases contained a provision granting Mayfair a
right of first refusal to purchase the subject properties.
However, on July 30, 1978within the 20-year-lease term
the subject properties were sold by Carmelo to Equatorial
Realty Development, Inc. (Equatorial) for the total sum of
P11,300,000, without their first being offered to Mayfair.

Issue:
Whether Equatorial was the owner of the subject
property and could thus enjoy the fruits or rentals
therefrom. It declared the rescinded Deed of
Absolute Sale as void at its inception as though it
did not happen.
RTC Ruling:
The meaning of rescind in the aforequoted decision
is to set aside. In the case of Ocampo v. Court of
Appeals, G.R. No. 97442, June 30, 1994, the Supreme Court
held that, to rescind is to declare a contract void in its
inception and to put an end as though it never were. It is
not merely to terminate it and release parties from further
obligations to each other but to abrogate it from the
beginning and restore parties to relative positions which
they would have occupied had no contract ever been
made.
Relative to the foregoing definition, the Deed of
Absolute Sale between Equatorial and Carmelo dated July
31, 1978 is void at its inception as though it did not
happen.
The argument of Equatorial that this complaint for
backrentals as reasonable compensation for use of the

subject
property after
expiration
of
the
lease
contracts presumes that the Deed of Absolute Sale dated
July 30, 1978 from whence the fountain of Equatorials
alleged property rights flows is still valid and existing.
xxx

xxx

xxx

The subject Deed of Absolute Sale having been

rescinded by the Supreme Court, Equatorial is not the
owner and does not have any right to demand backrentals
from the subject property, x x x.12
The trial court added: The Supreme Court in
theEquatorial case, G.R. No. 106063, has categorically
stated that the Deed of Absolute Sale dated July 31, 1978
has been rescinded subjecting the present complaint to res
judicata.

CA Ruling:
The Court of Appeals, dated June 23, 1992, in CA-G.R. CV
No. 32918, is HEREBY DENIED. The Deed of Absolute Sale
between petitioners Equatorial Realty Development, Inc.
and Carmelo & Bauermann, Inc. is hereby deemed
rescinded; Carmelo & Bauermann is ordered to return to
petitioner Equatorial Realty Development the purchase
price. The latter is directed to execute the deeds and
documents necessary to return ownership to Carmelo &
Bauermann of the disputed lots. Carmelo & Bauermann is
ordered to allow Mayfair Theater, Inc. to buy the aforesaid
lots for P11,300,000.00.6

SC Ruling:
To better understand the peculiarity of the instant case,

let us begin with some basic parameters. Rent is a civil fruit

that belongs to the owner of the property producing it by
right of accession. Consequently and ordinarily, the rentals
that fell due from the time of the perfection of the sale to
petitioner until its rescission by final judgment should
belong to the owner of the property during that period.
Ownership of the thing sold is a real right, which the
buyer acquires only upon delivery of the thing to him in
any of the ways specified in articles 1497 to 1501, or in any
other manner signifying an agreement that the possession
is transferred from the vendor to the vendee. This right is
transferred, not merely by contract, but also by tradition or
delivery. Non nudis pactis sed traditione dominia rerum
transferantur. And there is said to be delivery if and when
the thing sold is placed in the control and possession of
the vendee. Thus, it has been held that while the
execution of a public instrument of sale is recognized by
law as equivalent to the delivery of the thing sold, such
constructive
or
symbolic
delivery,
being
merely
presumptive, is deemed negated by the failure of the
vendee to take actual possession of the land sold.
Delivery has been described as a composite act, a
thing in which both parties must join and the minds of both
parties concur. It is an act by which one party parts with the
title to and the possession of the property, and the other
acquires the right to and the possession of the same. In its
natural sense, deliverymeans something in addition to the
delivery of property or title; it means transfer of possession.
In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate the
absolute giving up of the control and custody of the
property on the part of the vendor, and the assumption of

the same by the vendee.

Let us now apply the foregoing discussion to the
present issue. From the peculiar facts of this case, it is clear
that petitioner never took actual control andpossession of
the property sold, in view of respondents timely objection
to the sale and the continued actual possession of the
property. The objection took the form of a court action
impugning the sale which, as we know, was rescinded by a
judgment rendered by this Court in the mother case. It has
been held that the execution of a contract of sale as a form
of constructive delivery is a legal fiction. It holds true only
when there is no impediment that may prevent the passing
of the property from the hands of the vendor into those of
the vendee. When there is such impediment, fiction yields
to realitythe delivery has not been effected.
However, the point may be raised that under Article
1164 of the Civil Code, Equatorial as buyer acquired a right
to the fruits of the thing sold from the time the obligation to
deliver the property to petitioner arose. That time arose
upon the perfection of the Contract of Sale on July 30,
1978, from which moment the laws provide that the parties
to a sale may reciprocally demand performance. Does this
mean that despite the judgment rescinding the sale, the
right to the fruits belonged to, and remained enforceable
by, Equatorial? Article 1385 of the Civil Code answers this
question in the negative, because [rescission creates the
obligation to return the things which were the object of the
contract, together with their fruits, and the price with its
interest; x x x. Not only the land and building sold, but
also the rental payments paid, if any, had to be returned by
the buyer.
Furthermore, assuming for the sake of argument that

there was valid delivery, petitioner is not entitled

to any benefits from the rescinded Deed of Absolute Sale
because of its bad faith. This being the law of the mother
case decided in 1996, it may no longer be changed
because it has long become final and executory.
Under the doctrine of res judicata or bar by prior
judgment, a matter that has been adjudicated by a court of
competent jurisdiction must be deemed to have been
finally and conclusively settled if it arises in any
subsequent litigation between the same parties and for the
same cause. Thus, [a] final judgment on the merits
rendered by a court of competent jurisdiction is conclusive
as to the rights of the parties and their privies and
constitutes an absolute bar to subsequent actions involving
the same claim, demand, or cause of action. Res
judicata is based on the ground that the party to be
affected, or some other with whom he is in privity, has
litigated the same matter in a former action in a court of
competent jurisdiction, and should not be permitted to
litigate it again.

MANILA GAS CORPORATION, plaintiff-appellee,

vs.
ALFREDO B. CALUPITAN, defendant-appellant.
FACTS:
On May 3, 1933, the Manila Corporation and the defendantappellant, Alfredo B. Calupitan, entered into a contract. Ten
months after the execution of the contract Exhibit A, abovequoted, the same parties entered into another contract of
the same tenor, except with respect to the article and the
terms of payment.

In accordance with the terms of both contracts, the said

defendant paid to the plaintiff, when the latter delivered to
him the stove, the sum of P5, and another sum of P5 when
the water heater "Piccolo Inst. Water Heater" was delivered
to him, and monthly thereafter.
Notwithstanding repeated demands to pay alleged rentals,
due and unpaid for months, or to return the stove and the
water heater, the said defendant paid no heed to said
demands and continued to make use of the said articles for
more than five years without compensation of any kind.
ISSUE:
WON
RULING:
For the foregoing considerations, we are of the opinion and
so hold, that when in a so-called contract of lease of
personal property it is stipulated that the alleged lessee
shall pay a certain amount upon signing the contract, and
on or before the 5th of every month, another specific
amount, by way of rental, giving the alleged lessee the
right of option to buy the said personal property before the
expiration of the period of lease, which is the period
necessary for the payment of the said amount at the rate
of so much a month, deducting the payments made by way
of advance and alleged monthly rentals, and the said
alleged lessee makes the advance payment and other
monthly installments, noting in his account and in the
receipts issued to him that said payments are on account of
the price of the personal property allegedly leased, said
contract is one of sale on installment and not of lease.
Wherefore, the appealed decision is reversed and it
is held that the contracts Exhibits A and B, entered
into between the plaintiff Manila Gas Corporation,
and the defendant, Alfredo B. Calupitan, are those of

sale on installment; and the said defendant having

failed to comply with the terms of payment, the
plaintiff may elect between compliance with or
rescission of the obligation, with indemnity for
damages and interest in either case, without special
pronouncement as to the costs. So ordered.

Custodio Doromal who filed his on October 28, 1947. Both

applications were rejected because said area were then still
considered as a communal forest and therefore not yet
available for fishpond purposes.

No. L-36847. July 20, 1983.*

Director of the Bureau of Fisheries: issued an order

on April 10, 1954 awarding the whole area in favor of the
petitioner-appellant and rejecting the claims of the
respondents-appellees. Appellants Anita V. de Gonzales and
Jose M. Lopez appealed the order.

SERAFIN B. YNGSON, plaintiff-appellant, vs. THE

HON. SECRETARY OF AGRICULTURE and NATURAL
RESOURCES, ANITA V. DE GONZALES and JOSE M.
LOPEZ, defendants-appellees.
FACTS:
The subject matter of the case at bar are
mangrove swamps with an area of about 66 hectares
situated in municipality of Escalante, Negros Occidental. In
view of the potentialities and possibilities of said area for
fishpond purposes, several persons filed their-applications
with the Bureau of Fisheries, to utilize the same for said
purposes. The first applicant was Teofila Longno de Ligasan
who filed her application on January 14, 1946, followed by

On March 19, 1952, petitioner-appellant Serafin B.

Yngson filed a similar application for fishpond permit with
the Bureau of Fisheries followed by those of the
respondents-appellees, Anita de Gonzales and Jose M.
Lopez, who filed their respective applications with the same
bureau on March 19 and April 24, 1953. When the
applications were filed by the aforesaid parties in the
instant case, said area was not yet available for fishpond
purposes and the same was only released for said purpose
on January 14, 1954. The conflicting claims of the aforesaid
parties were brought to the attention of the Director of the
Bureau of Fisheries.

Director of Fisheries to the Department of

Agriculture and Natural Resources: set aside the order
of the Director of the Bureau of Fisheries and caused the
division of the area in question into three portions giving
each party an area of one-third (1/3) of the whole area
covered by their respective applications. Appellant filed a
petition for review.
Office of the President of the Philippines: dismissed
petition for review. MR was denied. Mr. Yngson filed a
petition for certiorari with the Court of First Instance.

Petitioner-appellant: asked that the orders of the

public respondents be declared null and void and that the
order of the Director of Fisheries awarding the entire area
to him be reinstated.

priority of application or right to a permit or lease the

following rules shall be observed:
(a) When two or more applications are filed for the
same area, which is unoccupied and unimproved, the first
applicant shall have the right of preference thereto.
xxx

CFI of Negros Occidental: dismissed petition on the

ground that plaintiff had not established such capricious
and whimsical exercise of judgment on the part of the
Department of Agriculture and Natural Resources and the
Office of the President of the Philippines as to constitute
grave abuse of discretion justifying review by the courts in
a special civil action.
- upheld the orders of the Secretary of Agriculture and
Natural Resources and the Office of the President regarding
the disposition of swamplands for conversion into
fishponds.

Originally taken to the Court of Appeals, the case was

elevated to SC on a finding that only a pure question of law
was involved in the appeal.
ISSUE: Did the administrative agencies having
jurisdiction over leases of public lands for
development into fishponds gravely abuse their
discretion in interpreting and applying their own
rules?
LAW: Fisheries Administrative Order No. 14 read:
SEC. 14. Priority Right of Application.In determining the

xxx

xxx

(d) A holder of fishpond application which has

been rejected or cancelled by the Director of
Fisheries by reason of the fact that the area covered
thereby has been certified by the Director of
Forestry as not available for fishpond purposes,
SHALL NOT LOSE his right as a PRIOR APPLICANT
therefore, if LATER ON, the area applied for is
certified by the Director of Forestry as available for
fishpond purposes, provided that not more than one
(1) year has expired since the rejection or
cancellation of his application, in which case, his
fishpond application which was rejected or cancelled
before, shall be reinstated and given due course,
and all other fishpond applications filed for the same
area shall be rejected.
RULING: We see no error in the decision of the lower
court. The administrative authorities committed no grave
abuse of discretion.
The mangrove swampland was released and made
available for fishpond purposes only on January 14, 1954. It
is clear, therefore, that all five applications were filed
prematurely. There was no land available for lease permits
and conversion into fishponds at the time all five applicants

filed their applications.

It is elementary in the law governing the disposition of
lands of the public domain that until timber or forest lands
are released as disposable and alienable neither the Bureau
of Lands nor the Bureau of Fisheries has authority to lease,
grant, sell, or otherwise dispose of these lands for
homesteads, sales patents, leases for grazing or other
purposes, fishpond leases, and other modes of utilization.
The Bureau of Fisheries has no jurisdiction to administer
and dispose of swamplands or mangrove lands forming part
of the public domain while such lands are still classified as
forest land or timberland and not released for fishery or
other purposes.
All the applications being premature, not one of the
applicants can claim to have a preferential right over
another. The priority given in paragraph d of Section 14 is
only for those applications filed so close in time to the
actual opening of the swampland for disposition and
utilization, within a period of one year, as to be given some
kind of administrative preferential treatment. Whether or
not the administrative agencies could validly issue such an
administrative order is not challenged in this case. The
validity of paragraph d is not in issue because petitionerappellant Yngson is clearly not covered by the provision.
His application was filed almost two years before the
release of the area for fishpond purposes. The private
respondents, who filed their applications within the oneyear period, do not object to sharing the area with the
petitioner-appellant, in spite of the fact that the latter has
apparently the least right to the fishpond leases. As a

matter of fact, the respondent Secretarys order states that

all three applications must be considered as having been
filed at the same time on the day the area was released to
the Bureau of Fisheries and to share the lease of the 66
hectares among the three of them equally. The private
respondents accept this order. They pray that the decision
of the lower court be affirmed in toto.
The Office of the President holds the view that the only
purpose of the provision in question is to redeem a rejected
premature application and to consider it filed as of the date
the area was released and not to grant a premature
application a better right over another of the same
category. We find such an interpretation as an exercise of
sound discretion which should not be disturbed. In the
case of Salaria v. Buenviaje (81 SCRA 722) we reiterated
the rule that the construction of the officer charged with
implementing and enforcing the provision of a statute
should be given controlling weight. Similarly, in Pastor v.
Echavez (79 SCRA 220) we held that in the absence of a
clear showing of abuse, the discretion of the appropriate
department head must be respected. The records show
that the above rulings should also apply to the present
case.

G.RNo. L-17846.April 29, 1963.

EDUARDA
DUELLOME,
petitioner-appellant,
vs.
BONIFACIO GOTICO, BERNARDINA GOTICO, ET AL.,
respondents-appellees.

Facts:
In November 1945, herein petitioner, Eduarda Duellome,
entered into a lease contract with one Sixto Coronel. Under
the said agreement, the petitioner agreed to lease a
portion of her land situated in Tacloban City to Sixto
Coronel at a rental of P10.00 per month and whereon the
latter was to construct a residential house of mixed
materials. Soon thereafter, the house was constructed with
the express written consent of the petitioner.
In 1949, the respondents-appellees, spouses Bernardina
Gotico and Bonifacio Gotico, daughter and son-in-law
respectively, of Sixto Coronel, went to live in the house
above mentioned. About a year later, in 1950, Sixto
Coronel and his wife Engracia Coronel transferred residence
to Ormoc City leaving to their daughter and son-in-law, the
appellees herein, sole occupancy of the house.
For the purpose, respondents-appellees agreed to pay a
monthly rental of P20.00. The understanding between them
and their parents was than half of the amount of P10.00
would be remitted to the petitioner herein as rental for the
lot and balance of P10.00 to the Coronels. This was an
arrangement faithfully observed until September 1955.
On learning of the ejectment suit, Engracia Coronel sold
the house immediately and paid the rentals due. As a
result, the Municipal Court, on January 12, 1957, dismissed
the complaint in an order worded thus:
In the complaint the plaintiff is claiming P160.00 but
after computing instead of said amount the defendants are
only indebted to the plaintiff in the amount of P150.00
which was already paid on January 8, 1957 and on this
ground the settlement was made.

Issue:
Whether the lease of a building necessarily
includes the lease of the lot on which it is built.
CA Rluing:
The Court of Appeals answered the above query in the
negative and declared that it was maliciously false of the
herein petitioner to have written to the Superintendent of
Public Schools that appellee Bonifacio Gotico was renting
one of my lands. According to the same appellate tribunal,
the truth was Bonifacio Gotico was renting merely the
house which was constructed on the land of the petitioner
and that this fact known to her.
SC Ruling:
The lease of a building naturally includes the lease of
the lot, and the rentals of the building include those of the
lot. (See City of Manila v. Chan Kian, L-l0276, July 24, 1957;
The Philippine Consolidated Freight Lines, Inc. v. Emiliano
Ajon, et al., L-10206-08, April 16, 1958.)
In view of the provisions of Article 1652 of the Civil
Code, the sublessee can invoke no right superior to that of
his sublessor, and the moment the latter is duly ousted
from the premises, the former has no leg to stand on, the
sublessees right being, if any, to demand reparation for
damages from his sublessor, should the latter be at fault
(Sipin, et al. v. Court of First Instance of Manila, et al, 74
Phil 649.