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1. Delta Motor Sales Corp vs. Niu Kim Duan, 213 SCRA 259, September 2, 1992 (Art. 1484[2]);
a. Niu Kim Duan and Chan Fue Eng bought 3 Daikin air-conditioning units worth PHP
19,350 in total from Delta Motor Sales. According to the deed of conditional sale, Niu
and Chan must pay a downpayment of PHP 774 and pay the remaining balance of PHP
18,576 in 24 installments. Based on the stipulation, in case any two installments are not
paid by their due dates, the remaining balance shall at once become due, with interest rate
at 14% per annum. Installments initially paid would be forfeited in favor of the seller and
shall be considered rentals.
b. The 3 air-conditioners were delivered to Niu and Chan. After paying a total of PHP
6,966, they failed to pay at least 2 monthly installments. Delta tried to collect the
remaining PHP 12,920.08 from Niu and Chan but failed. Delta also attempted to
extrajudicially recover the air-conditioners, but it again failed, hence the writ of replevin
prayed for by Delta.
c. Delta was able to recover the air-conditioners, and the amount of PHP 6,966 was treated
as rentals for 2 years. However, Niu and Chan were nevertheless ordered by the trial
court to pay PHP 6,188.29 with a 14% per annum interest. They then assail the deed of
conditional sale for being contrary to law, morals, good custom, public order or public
policy, particularly because of the stipulation in the deed that in case of failure to pay, the
monthly installments would be forfeited in favor of the seller and shall be considered
rentals.
d. WON the aforesaid stipulation is valid – YES. A stipulation in a contract that the
installments paid shall not be returned to the vendee is valid insofar as the same may not
be unconscionable under the circumstances is sanctioned by Article 1486 of the New
Civil Code.
i. Since Niu and Chan were only able to pay installments for seven months and
admitted to having used the air-conditioners for twenty-two months, this means
that they did not pay fifteen monthly installments on the said air-conditioners and
were thus using the same FREE for said period — to the prejudice of Delta.
Under the circumstances, the treatment of the installment payments as rentals
cannot be said to be unconscionable.
e. WON Delta can recover PHP 6,188 with a 14% interest per annum from Niu and
Chan – NO. The three remedies by the seller under Article 1484 are alternative and not
cumulative. When the seller chooses one, he cannot anymore avail of the other two.
i. The vendor in a sale of personal property payable in installments may exercise
one of three remedies, namely, (1) exact the fulfillment of the obligation, should
the vendee fail to pay; (2) cancel the sale upon the vendee’s failure to pay two or
more installments; (3) foreclose the chattel mortgage, if one has been constituted
on the property sold, upon the vendee’s failure to pay two or more installments.
The third option or remedy, however, is subject to the limitation that the vendor
 cannot recover any unpaid balance of the price and any agreement to the contrary
is void (Art. 1484)
ii. Delta had taken possession of the three air-conditioners through a writ of replevin
when Niu and Chan refused to extra-judicially surrender the same. Clearly, Delta
chose the second remedy of Article 1484 in seeking enforcement of its contract
with defendants-appellants.
iii. Having done so, it is barred from exacting payment from defendants-appellants
of the balance of the price of the three air-conditioning units which it had already
repossessed. It cannot have its cake and eat it too.
2. Tajanlangit vs. Southern Motors, Inc., 101 Phil. 606, No. L-10789, May 28, 1957 (Art. 1484[2]);
a. Amador Tajanlangit and his wife Angeles bought two tractors and a thresher from
Southern Motors Inc. of Iloilo. They undertook via a promissory note to pay the total
purchase price of P24,755.75 by installments on stated dates from May 18, 1953
December 10, 1955. The note stipulated that if default be made in the payment of interest
or of any installment, then the total principal sum still unpaid with interest shall at once
become demandable etc. The spouse failed to meet any installment, so they were sued for
the entire amount of the promissory note.
b. The court ruled in favor of Southern Motors, ordering the Tajanlangits to pay the total
sum of P24,755.75 together with interest at 12 per cent, plus 10 per cent of the total
amount due as attorney's fees and costs of collection. Carrying out the order of execution,
the sheriff levied on the same machineries and farm implements which had been bought
by the spouses and later sold them at public auction to the highest bidder — which turned
out to be the Southern Motors itself — for the total sum of P10,000.
c. As its judgment called for much more, Southern Motors subsequently asked and
obtained, an alias writ of execution; and pursuant thereto, the provincial sheriff levied
attachment on the Tajanlangits' rights and interests in certain real properties — with a
view to another sale on execution. To prevent such sale, the Tajanlangits instituted the
present action for the purpose, among others, of annulling the alias writ of execution and
all proceedings subsequent thereto.
d. WON the sheriff can still attach and sell at public auction sale the real properties of
the Tajanlangits – YES. The Tajanlangits claim that Southern Motors has already
availed of the remedy of foreclosure, but there has been no foreclosure of the chattel
mortgage nor a foreclosure sale. Therefore, the prohibition against further collection does
not apply.
i. ART. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise of the following remedies: (1)
Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the
sale, should the vendee's failure to pay cover two or more installments; (3)
Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments.
ii. It is true that there was a chattel mortgage on the goods sold. But Southern
Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the
obligation to pay. It had a right to select among the three remedies established in
Article 1484. In choosing to sue on the note, it was not thereby limited to the
proceeds of the sale, on execution, of the mortgaged good.]
3. Northern Motors Inc. vs. Sapinoso, 33 SCRA 356, No. L-28074, May 29, 1970 (Art. 1484[3]);
a. Casiano Sapinoso bought an Opel Kadett car from Northern Motors, Inc. worth
P12,171.00. He made a down payment and executed a promissory note for the balance of
P10,540.00 payable in installments with interest at 12% per annum. To secure the
payment of the promissory note, Sapinoso executed a chattel mortgage on the car. The
 mortgage contract provided, among others, that upon default by the mortgagor in the
payment of any part of the principal or interest due, the mortgagee may elect any of the
following remedies: (a) sale of the car by the mortgagee; (b) cancellation of the contract
of sale; (c) extrajudicial foreclosure; (d) judicial foreclosure; (e) ordinary civil action to
exact fulfillment of the mortgage contract. It was further stipulated that "[w]hichever
remedy is elected by the mortgagee, the mortgagor expressly waives his right to
reimbursement by the mortgagee of any and all amounts on the principal and interest
already paid by him."
b. Sapinoso failed to pay first five installments but he was able to make several payments
with accrued interest. Because he again failed to make further payments, Northern
Motors filed the present complaint, availing itself of the option given it under the
mortgage contract of extrajudicially foreclosing the mortgage, and prayed that a writ of
replevin be issued. A writ of replevin was issued by the court and the sheriff who
executed the seizure warrant seized the car and turned over its possession to Northern
Motors.
c. The court ruled in favor of Northern Motors, giving it the right to foreclose the chattel
mortgage by filing an action of replevin to secure possession of the mortgaged car as a
preliminary step to the foreclosure sale. In availing itself of its right to foreclose the
chattel mortgage, Northern Motors thereby renounced whatever claim it may have had on
the promissory note, so whatever Northern Motors may have received from Sapinoso
after having filed the present case should be returned. Northern Motors now claims that
the court erred in ordering it to reimburse Sapinoso the sum of P1,250.00 which the latter
had paid. Under Article 1484 of the Civil Code it is the exercise, not the mere election, of
the remedy of foreclosure that bars the creditor from recovering the unpaid balance of the
debt.
d. WON Northern Motors must reimburse Sapinoso the sum of P1,250.00 – NO. The
court erred in concluding that the legal effect of the filing of the action was to bar
Northern Motors from accepting further payments on the promissory note.
i. What Article 1484(3) prohibits is "further action against the purchaser to recover
any unpaid balance of the price;" and although this Court has construed the word
"action" in said Article 1484 to mean "any judicial or extrajudicial proceeding by
virtue of which the vendor may lawfully be enabled to exact recovery of the
supposed unsatisfied balance of the purchase price from the purchaser or his
privy", there is no occasion at this stage to apply the restrictive provision of the
said article, because there has not yet been a foreclosure sale resulting in a
deficiency.
ii. That the ultimate object of the action is the foreclosure of the chattel mortgage, is
of no moment, for it is the fact of foreclosure and actual sale of the mortgaged
chattel that bar further recovery by the vendor of any balance on the purchaser's
outstanding obligation not satisfied by the sale.
iii. The payment of the sum of P1,250.00 by Sapinoso was a voluntary act on his
part and did not result from a "further action" instituted by Northern Motors. A
mortgage creditor is not barred from accepting, before a foreclosure sale,
payments voluntarily tendered by the debtor-mortgagor who admits a subsisting
indebtedness.
4. Cruz vs. Filipinas Investment and Finance Corporation, 23 SCRA 791, No. L-24772, May 27,
1968 (Art. 1484[3]);
a. Ruperto G. Cruz bought an Isuzu Diesel Bus from the Far East Motor Corporation for
P44,616.24 on installments as evidenced by a negotiable promissory note. He had to pay
P1,487.20 per month for thirty (30) months with 12 % interest per annum until fully paid.
To secure the payment of the promissory note, Cruz executed a chattel mortgage over the
 aforesaid motor vehicle. Because he made no downpayment, Cruz had to execute another
chattel mortgage over a parcel of land, together with the building, owned by Felicidad
Vda. de Reyes. At that time, the same land was also mortgaged to the Development
Bank of the Philippines to secure a loan of P2,600.00 obtained by Mrs. Reyes.
b. Far East Motor Corporation assigned all its rights and interest in the Deeds of Chattel
Mortgage and in the Deed of Real Estate Mortgage to Filipinas Investment & Finance
Corporation with due notice of such assignment to Cruz and Mrs. Reyes. Because Cruz
only paid P500.00 and defaulted on the rest, Filipinas Investment took steps to foreclose
the chattel mortgage on the bus. The same vehicle had been damaged in an accident while
in the possession of Cruz. On a foreclosure sale conducted for the sale of the bus,
Filipinas Investment was the highest bidder.
c. However, the proceeds of the sale of the bus were not sufficient to discharge fully the
indebtedness of Cruz to Filipinas Investment. Before the real estate mortgage was
foreclosed on Mrs. Reyes' land, Filipinas Investment paid the mortgage indebtedness of
Mrs. Reyes to the DBP. Filipinas Investment then requested the Provincial Sheriff of
Bulacan to take possession of, and sell, the land. Mrs. Reyes requested for the
cancellation of the real estate mortgage on her land, the provincial Sheriff of Bulacan
held in abeyance the sale of the mortgaged real estate pending the result of the present
action.
d. Filipinas Investment contended that what is being withheld from the vendor, by the
proviso of Article 1484 of the Civil Code, is only the right to recover "against the
purchaser", and not a recourse to the additional security put up, not by the purchaser
himself, but by a third person. It also argued that since the law speaks of "action", the
restriction should be confined only to the bringing of judicial suits or proceedings in
court.
e. WON Filipinas Investment can also foreclose the real estate mortgage after it has
already foreclosed the chattel mortgage executed by the buyer – NO.
i. To sustain the argument is to overlook the fact that if the guarantor should be
compelled to pay the balance of the purchase price, the guarantor will in turn be
entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil
Code) ; so that ultimately, it will be the vendee who will be made to bear the
payment of the balance of the price, despite the earlier foreclosure of the chattel
mortgage given by him. Thus, the protection given by Article 1484 would be
indirectly subverted, and public policy overturned.
ii. Additionally, considering the purpose for which the prohibition contained in
Article 1484 was intended, the word "action" used therein may be construed as
referring to any judicial or extrajudicial proceeding by virtue of which the vendor
may lawfully be enabled to exact recovery of the supposed unsatisfied balance of
the purchase price from the purchaser or his privy. Certainly, an extrajudicial
foreclosure of a real estate mortgage is one such proceeding.
5. Jestra Development and Management Corp vs. Pacifico, 513 SCRA 413 (2007)
a. Daniel Ponce Pacifico signed a Reservation Application with Fil-Estate Marketing
Association for the purchase of a house and lot located at Parañaque, Metro Manila, and
paid the reservation fee of P20,000. Under the RA, the total purchase price of the
property was P2,500,000, and the down payment equivalent to 30% of the purchase price
or P750,000 was to be paid in 6 monthly installments. As the P20,000 reservation fee
formed part of the down payment, the monthly installment on the down payment was
fixed at P121,666.66. Upon full payment of the 30%, he was to sign a contract to sell
with the owner and developer of the property, Jestra Development and Management
Corporation. The remaining 70% or P1,750,000 was to be payable in 10 years at a
monthly installment of P34,982.50.
 b. Unable to comply with the schedule of payments, Pacifico requested Jestra to allow him
to make periodic payments on the downpayment "in an amount that he could afford," to
which Jestra acceded provided that there will be penalties/surcharges. With still a
remaining balance of P260,000 on the down payment, Pacifico and Jestra executed a
Contract to Sell. The said contract was silent on the unsettled balance on the down
payment.
c. After Pacifico was able to fully pay the 30% downpayment, Jestra demanded the payment
of P444,738.885 representing the total of 11 installments due on the 70% balance of the
purchase price. It also reminded Pacifico that "as provided in Section 5 of the said
contract, [Jestra] reserves its right to automatically cancel or rescind the same on account
of [his] failure/refusal to comply with the terms thereof." Pacifico requested for a
restructuring of the unsettled obligation, to which Jestra agreed. Pacifico thus issued 12
postdated Security Bank checks to cover his monthly amortizations. Two checks were,
however, dishonored due to insufficiency of funds.
d. Pacifico informed Jestra that due to sudden financial difficulties, he was suspending
payment of his obligation during the 10-month period, and that he wanted to dispose of
the property to recover his investment. He also requested that the postdated checks he
issued be returned to him. Jestra denied Pacifico’s requests and sent a notarial Notice of
Cancellation, notifying him that it was exercising its right to cancel the Contract to Sell.
Pacifico then filed a complaint against Jestra, claiming that despite his full payment of
the down payment, Jestra failed to deliver to him the property within 90 days as provided
in the Contract to Sell, and Jestra instead sold the property to another buyer.
e. WON Jestra’s cancellation of the Contract to Sell was valid – YES. Pacifico himself
admits that Jestra was justified in canceling the contract to sell via the notarial Notice of
Cancellation for his (Pacifico’s) failure to pay within the grace period.
i. In Fabrigas v. San Francisco del Monte, Inc., this Court described the
cancellation of the contract as a two-step process. First, the seller should extend
the buyer a grace period of at least sixty (60) days from the due date of the
installment. Second, at the end of the grace period, the seller shall furnish the
buyer with a notice of cancellation or demand for rescission through a notarial
act, effective thirty (30) days from the buyer's receipt thereof.
ii. In this case, Pacifico admits that while he issued checks to cover the payment for
the remaining 70% of the purchase price, the first two were dishonored due to
insufficiency of funds. While he was notified of the dishonor of the checks, he
took no action thereon, hence, the 60 days grace period lapsed. He also made no
further payments thereafter. Instead, he requested for suspension of payment and
for time to dispose of the property to recover his investment.
6. Gatchalian Realty, Inc. vs. Angeles, 711 SCRA 163, G.R. No. 202358
a. Evelyn Angeles purchased a house and lot from Gatchalian Realty, Inc. payable by
installment within a period of 10 years. The house and lot were delivered to Angeles in
1995, but GRI retained ownership of the property until full payment of the purchase
price. Angeles was only able to pay 35 installments for the house and 48 for the lot, and
she was given a total of 51 months grace period to pay for both contracts. But in
consideration of the continued disregard of the demands of GRI, Angeles was served with
a notice of notarial rescission by registered mail which she allegedly received as
evidenced by a registry return receipt.
b. According to Angeles, she sent postal money orders through registered mail to GRI. GRI
notified her of the receipt and asked what the purpose of the payment was. However, GRI
said that if the postal money order was for her monthly amortization, the same will not be
accepted and she was likewise requested to pick it up from GRI’s office. When Angeles
explained that it was for her monthly amortizations, GRI reiterated that the postal money
 orders will only be accepted if the same will serve as payment of her outstanding rentals
and not as monthly amortization. For her continued failure to satisfy her obligations with
GRI and her refusal to vacate the house and lot, GRI filed a complaint for unlawful
detainer against Angeles.
c. WON there was a valid cancellation of the contract – NO. There was no actual
cancellation of the contracts because of GRI’s failure to actually refund the cash
surrender value to Angeles.
i. A valid and effective cancellation under R.A. 6552 must comply with the
mandatory twin requirements of a notarized notice of cancellation and a refund of
the cash surrender value. Because GRI failed to refund the cash surrender value,
there is no valid cancellation of the contract.
1. The MeTC ruled that it was proper for GRI to compensate the rentals due
from Angeles’ occupation of the property from the cash surrender value
due to Angeles from GRI because compensation legally took effect in
accordance with Article 1290 in relation to Article 1279 of the Civil
Code. However, it was error for the MeTC to apply Article 1279 as there
was nothing in the contracts which provided for the amount of rentals in
case the buyer defaults in her installment payments. The rentals due to
GRI were not liquidated. GRI unilaterally imposed the amount of rentals,
as well as an annual 10% increase.
2. In Pagtalunan v. Dela Cruz Vda. De Manzano, it was held that: Petitioner
cannot insist on compliance with the requirement by assuming that the
cash surrender value payable to the buyer had been applied to rentals of
the property after respondent failed to pay the installments due.
7. Cebu State College of Science and Technology vs. Misterio, 759 SCRA 1, G.R. 179025, June 17,
2015
a. The late Asuncion Sadaya, mother of the respondents, executed a Deed of Sale covering a
parcel of land denominated as Lot 1064 in favor of Sudlon Agricultural High School
(SAHS). The sale was subject to the right of the vendor to repurchase the property after
SAHS shall have ceased to exist, or shall have transferred its school site elsewhere. A
TCT was issued in the name of SAHS with the vendor’s right to repurchase annotated at
its dorsal portion. The Provincial Board of Cebu donated 41 parcels of land to the SAHS
subject to two (2) conditions: (1) that if the SAHS ceases to operate, the ownership of the
lots would automatically revert to the province, and (2) that the SAHS could not alienate,
lease or encumber the properties.
b. BP Blg. 412, entitled "An Act Converting the Cebu School of Arts and Trades in Cebu
City into a Chartered College to be Known as the Cebu State College of Science and
Technology, Expanding its Jurisdiction and Curricular Programs" took effect,
consolidating several schools in Cebu, including the SAHS, as part of the Cebu State
College of Science and Technology (CSCST). The law also transferred all properties of
SAHS to the CSCST. In the meantime, the Province of Cebu sought to recover the 41
parcels of land it previously donated to SAHS on the basis of an initial report of its
provincial attorney that SAHS had no personality to accept the donation, and thus, the
deed it executed was void.
c. Respondents, as heirs of the late Asuncion Sadaya, informed the Governor of the
Province of Cebu, Emilio Osmeña of their intention to repurchase the property as
stipulated in the Deed of Sale on the ground that the SAHS had ceased to exist.
Respondents filed a Complaint for Nullity of Sale and/or Redemption against CSCST.
The court ruled that the respondents are barred by prescription from exercising their right
to repurchase the subject property four years from the effectivity of BP Blg. 412, as
provided by Article 1606 of the New Civil Code. During the pendency of their appeal to
 the SC, respondents again filed an Amended Complaint, impleading the Province of Cebu
and the Register of Deeds, alleging that pursuant to CSCST’s transfer of its school site,
their right of redemption on said condition became operative.
d. WON the heirs can exercise their right of redemption against CSCST – NO.
i. In cases of conventional redemption when the vendor a retro reserves the right to
repurchase the property sold, the parties to the sale must observe the parameters
set forth by Article 1606 of the New Civil Code, which provides for a period
within which the right to repurchase may be exercised. Thus, depending on
whether the parties have agreed upon a specific period within which the vendor a
retro may exercise his right to repurchase, the property subject of the sale may be
redeemed only within the limits prescribed by the aforequoted provision. In this
case, since the parties did not agree on any period, respondents may use said right
within 4 years from the happening of the allocated conditions contained in their
Deed of Sale. However, due to respondents’ failure to exercise their right to
redeem the property within the required four (4) years from the time when SAHS
had ceased to exist, or from the date of effectivity of BP Blg. 412, respondents
are barred by prescription.
8. Abilla vs. Gobonseng, 374 SCRA 51, G.R. No. 146651, January 17, 2002 (Arts. 1602, 1606)
a. Spouses Abilla filed an action against the spouses Gobonseng for specific performance,
recovery of sum of money and damages before the RTC. The Abillas wanted to be
reimbursed for the expenses they incurred in connection with the preparation and
registration of a Deed of Sale and an Option to Buy. The Gobonsengs contend that the
transaction was not a Deed of Sale with Right of Repurchase but a mortgage. The RTC
ruled in favor of the Abillas, saying that the transaction was not an equitable mortgage.
On appeal by the Gobonsengs, the CA affirmed the RTC judgment by ruling that the
transaction was indeed a pacto de retro sale and not an equitable mortgage. They raised
the issue of the applicability of Article 1606 of the Civil Code that provided the right to
repurchase the property.
b. WON the vendors in a sale judicially declared as a pacto  de retro can exercise the
right of repurchase under Article 1606 after they have taken the position that the
same was an equitable mortgage – NO. The third paragraph of Article 1606 can be
availed of only by a vendor a retro who believed in good faith that the transaction was a
mortgage. When the sale is judicially declared as a pacto de retro, the right to repurchase
under Article 1606 cannot be availed of.
i. The third paragraph of Article 1606 of the Civil Code reads: However, the
vendor may still exercise the right to repurchase within thirty days from the time
final judgment was rendered in a civil action on the basis that the contract was a
true sale with right to repurchase.
ii. Generally, although the Gobonsengs failed in their effort to prove that the
contract was an equitable mortgage, they could nonetheless still repurchase the
property within 30 days from the finality of the judgment declaring the contract
to be truly a pacto  de retro sale.
1. However, the Court has declared in earlier cases that the third paragraph
of Article 1606 was applicable only when the vendor a retro honestly and
sincerely entertained the idea the agreement was in reality a mortgage
(Vda.  de Macoy v. Court of Appeals). Where the proofs established that
there could be no honest doubt as to the parties intention, that the
transaction was clearly and definitely a sale with pacto  de retro, the
Court adjudged the vendor a retro  not to be entitled to the benefit of the
third paragraph of Article 1606 (Adorable v. Inacala).
 iii. In the case at bar, the lower courts have already ruled that the subject transaction
was truly a pacto  de retro sale; and that none of the circumstances under Article
1602 of the Civil Code exists to warrant a conclusion that the transaction subject
of the Deed of Sale and Option to Buy was an equitable mortgage. The Court of
Appeals correctly noted that if the Gobonsengs really believed that the
transaction was indeed an equitable mortgage, as a sign of good faith, they
should have, at the very least, consigned with the trial court the amount of
P896,000.00, representing their alleged loan, on or before the expiration of the
right to repurchase.
9. Francisco vs. Boiser, 332 SCRA 792, G.R. No. 137677, May 31, 2000
a. Adalia B. Francisco and three of her sisters, Ester, Elizabeth and Adeluisa, co-owned four
parcels of registered lands on which stands the Ten Commandments Building. They sold
1/5 of their undivided share in the subject parcels of land to their mother, Adela Blas, for
P10,000.00, thus making the latter a co-owner. Without the knowledge of the others,
Adela sold her 1/5 share for P10,000.00 to Zenaida Boiser who is another sister of
Adalia.
b. Adalia received summons that Zenaida filed a complaint, demanding her share in the
rentals being collected by Adalia from the tenants of the building. Adalia then informed
Zenaida that she was exercising her right of redemption as a co-owner of the subject
property and deposited the amount of P10,000.00 as redemption price. Such complaint
was later on dismissed.
c. Adalia then instituted a case before the RTC alleging that the 30-day period for
redemption under Art. 1623 of the Civil Code had not begun to run against her since the
vendor, Adela, never informed her and the other owners about the sale to Zenaida. The
RTC dismissed the complaint for legal redemption, ruling that Art. 1623 does not
prescribe any particular form of notifying co-owners about a sale of property owned in
common to enable them to exercise their right of legal redemption. While no written
notice was given by Adela, Adalia herself admitted that she had received Zenaida’s letter
and was in fact furnished a copy of the deed evidencing such sale. The trial court
considered such letter as substantial compliance with the required written notice under
Art. 1623 of the New Civil Code.
d. WON the letter sent by Zenaida to Adalia notifying her of the sale and containing a
copy of the deed evidencing such sale can be considered sufficient as compliance
with the notice requirement of Art. 1623 for the purpose of legal redemption – NO.
The written notification should come from the vendor or prospective vendor, not from
any other person.
i. Art. 1623 of the Civil Code provides: The right of legal pre-emption or
redemption shall not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as the case maybe. The deed
of sale shall not be recorded in the Registry of Property, unless accompanied by
an affidavit of the vendor that he has given written notice thereof to all possible
redemptioners.
ii. The provision is clear in requiring that the written notification should come from
the vendor or prospective vendor, not from any other person. As explained by
this Court through Justice J B.L. Reyes in Butte, the vendor of an undivided
interest is in the best position to know who are his co-owners who under the law
must be notified of the sale. It is likewise the notification from the seller, not
from anyone else, which can remove all doubts as to the fact of the sale, its
perfection, and its validity, for in a contract of sale, the seller is in the best
position to confirm whether consent to the essential obligation of selling the
property and transferring ownership thereof to the vendee has been given.
 e. When was Adalia notified of the sale? – The receipt by Adalia of summons in the
complaint filed by Zenaida constitutes actual knowledge on the basis of which Adalia
may now exercise her right of redemption within 30 days from finality of this decision.
f. WON Adalia was able to exercise her right of redemption – YES. After she received
the summons, Adalia was able to deposit the P10,000.00 redemption price before the 30-
day period of redemption lapsed. As her exercise of said right was timely, the same
should be given effect.
10. Cavite Development Bank vs. Lim, 324 SCRA 346, G.R. No. 131679 (2000) (Art. 1505);
a. Rodolfo Guansing obtained a loan of P90,000.00 from CDB, to secure which he
mortgaged a parcel of land situated in Quezon City. This land was originally registered
under his father’s name (Perfecto Guansing), to which he later on succeeded. As
Guansing defaulted in the payment, CDB foreclosed the mortgage. At the foreclosure
sale, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to
redeem, and CDB consolidated title to the property in its name.
b. Lolita Chan Lim, assisted by a broker named Remedios Gatpandan, offered to purchase
the property from CDB for P300,000.00, with 10% of which as option money. Pursuant
to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option
Money. However, after some time following up the sale, Lim discovered that the subject
property was originally registered in the name of Perfecto Guansing. It appears, however,
that the father, Perfecto, instituted a civil case for the cancellation of his son's title. The
trial court restored Perfecto's previous title and cancelled Rodolfo’s on the ground that
the latter was fraudulently secured by Rodolfo. This decision has since become final and
executory.
c. Aggrieved by what she considered a serious misrepresentation by CDB and its mother-
company, FEBTC, on their ability to sell the subject property, Lim filed an action for
specific performance and damages against CDB and FEBTC. The trial court ruled in
favor of the Lim spouses, saying among others that there was a perfected contract of sale
between Lim and CDB, and the performance by CDB of its obligation under the
perfected contract of sale had become impossible on account of the cancellation of the
title in the name of mortgagor Rodolfo Guansing. CDB and FEBTC brought the matter to
the Court of Appeals, which only affirmed in toto the decision of the Regional Trial
Court. Petitioners moved for reconsideration, but their motion was denied. Hence, this
petition.
d. WON CDB can still perform its obligation and transfer ownership over the
property to Lim – NO.  The sale by CDB to Lim of the property mortgaged by Rodolfo
Guansing is a nullity for CDB did not have a valid title. CDB never acquired a valid title
to the property because the foreclosure sale where CDB was the highest bidder is
likewise void since the mortgagor Rodolfo was not the owner of the property foreclosed.
i. Generally, one cannot give what one does not have. Nemo dat quod non habet.
ii. There is, however, a situation where, despite the fact that the mortgagor is not the
owner of the mortgaged property, his title being fraudulent, the mortgage
contract and any foreclosure sale arising therefrom are given effect by reason of
public policy. This is the doctrine of "the mortgagee in good faith" based on the
rule that all persons dealing with property covered by a Torrens Certificate of
Title, as buyers or mortgagees, are not required to go beyond what appears on the
face of the title.
1. Under the circumstances of this case, however, CDB can be considered a
mortgagee in good faith. There is no evidence that CDB observed its
duty of diligence in ascertaining the validity of Rodolfo Guansing's title.
Rodolfo Guansing obtained his fraudulent title by executing an Extra-
Judicial Settlement of the Estate With Waiver where he made it appear
 that he and Perfecto Guansing were the only surviving heirs entitled to
the property, and that Perfecto had waived all his rights thereto. This
self-executed deed should have placed CDB on guard against any
possible defect in or question as to the mortgagor's title. Moreover, the
alleged ocular inspection report by CDB's representative was never
formally offered in evidence.
11. Aznar vs. Yapdiangco, 13 SCRA 486, G.R. No. L-18536 (1965) (Arts. 559, 1505, 1506)
a. Teodoro Santos advertised the sale of his FORD FAIRLANE 500. L. De Dios went to the
Santos residence to answer the ad. However, Teodoro was out during this call so only his
son Irineo received and talked with De Dios. De Dios told Irineo that he had come in
behalf of his uncle, Vicente Marella, who was interested to buy the advertised car.
b. Upon being informed, Teodoro instructed his son to see Marella the following day.
Marella agreed to buy the car for P14,700.00 on the understanding that the price would
be paid only after the car had been registered in his name. The deed of the sale and the
registration before the Motor Vehicles Office were executed under Marella’s name. Up to
this point, the purchase price had not been paid.
c. Teodoro gave the registration papers and a copy of the deed of sale to Irineo, instructing
him not to part with them until Marella shall have given the full payment. When Irineo
demanded payment, Marella said that the amount he had on hand was not enough so he
ordered L. De Dios to go to Marella’s sister. Irineo went with L. De Dios, leaving the
registration papers and the deed of sale behind with Marella. At the house of the alleged
sister, L. De Dios asked Irineo Santos to wait, but L. De Dios never returned. When
Irineo went back to Marella, he found the house closed and Marella gone. He reported the
matter to his father who promptly advised the police authorities. On the same day,
Marella sold the car to Jose B. Aznar for P15,000.00. While the car in question was thus
in the possession of Aznar, the Philippine Constabulary seized and confiscated the same
in consequence of the report by Teodoro.
d. Aznar filed a complaint for replevin against the head of the Philippine Constabulary unit
which seized the car in question. Teodoro moved and was allowed to intervene, with the
court later on awarding the motor vehicle to him after applying Art. 559 of the Civil
Code. Hence, this appeal by Aznar.
e. Who has a better right to the possession of the automobile? – Teodoro Santos has a
better right, based on Art. 559.
i. Aznar contends that the applicable provision is Art. 1506, and not Art. 559 as the
lower court did.
ii. ART. 1506. Where the seller of goods has a voidable title thereto, but his, title
has not been voided at the time of the sale, the buyer acquires a good title to the
goods, provided he buys them in good faith, for value, and without notice of the
seller's defect of title.
1. Under this provision, it is essential that the seller should have a voidable
title at least. It is very clearly inapplicable where, as in this case, the
seller had no title at all.
2. Marella did not have any title to the property under litigation because the
same was never delivered to him. He could have acquired ownership or
title to the subject matter thereof only by the delivery or tradition of the
car to him, but the car was never delivered to the vendee by the vendor as
to complete or consummate the transfer of ownership by virtue of the
contract. While there was indeed a contract of sale, Marella, as vendee,
took possession of the subject matter thereof by stealing the same while
it was in the custody of the latter's son.
 iii. ART. 559. The possession of movable property acquired in good faith is
equivalent to title. Nevertheless, one who lost any movable or has been
unlawfully deprived thereof, may recover it from the person in possession of the
same. If the possessor of a movable lost or of which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the owner
cannot obtain its return without reimbursing the price paid therefor.
1. The lower court was correct in applying Article 559. If the owner has lost
a thing, or if he has been unlawfully deprived of it, he has a right to
recover it, not only from the finder, thief or robber, but also from third
persons who may have acquired it in good faith from such finder, thief or
robber. There are only two exceptions to the general rule of
irrevindicability, to wit, when the owner (1) has lost the thing, or (2) has
been unlawfully deprived thereof. In these cases, the possessor cannot
retain the thing as against the owner, who may recover it without paying
any indemnity, except when the possessor acquired it in a public sale.
12. EDCA Publishing & Distributing Corp. vs. Santos, 184 SCRA 614, G.R. No. 80298 (1990) (Art.
1506)
a. Professor Jose Cruz placed an order by telephone with EDCA for 406 books, payable on
delivery. EDCA prepared the corresponding invoice and delivered the books as ordered,
for which Cruz issued a personal check covering the purchase price of P8,995.65.  Cruz
thereafter sold 120 of the books to Leonor Santos who, after verifying the seller's
ownership from the invoice he showed her, paid him P1,700.00.
b. EDCA was suspicious over the second order placed by Cruz even before the clearing of
the first check, so EDCA made inquiries with the De la Salle College where Cruz had
claimed to be a dean and was informed that there was no such person in its employ. It
was also revealed that Cruz had no more account or deposit with the Philippine Amanah
Bank where he had drawn the payment check. EDCA then went to the police, which set a
trap and arrested Cruz. Investigation disclosed his real name as Tomas de la Peña and his
sale of 120 of the books he had ordered from EDCA to Santos.
c. On the same night, EDCA sought the assistance of the police, which forced their way into
the store of Santos and threatened her with prosecution for buying stolen property. They
seized the 120 books without warrant, loading them in a van belonging to EDCA, and
thereafter turned them over to EDCA. Santos now sues for the recovery of the books after
her demands were rejected by EDCA.
d. WON the ownership over the books was validly acquired by Santos – YES.

i. The first sentence of Article 559 provides that "the possession of movable
property acquired in good faith is equivalent to a title”.

ii. Santos took care to ascertain first that the books belonged to Cruz before she
agreed to purchase them. The EDCA invoice Cruz showed her assured her that
the books had been paid for on delivery. By contrast, EDCA was less than
cautious. Although it had never transacted with him before, it readily delivered
the books he had ordered (by telephone) and as readily accepted his personal
check in payment. It did not verify his identity although it was easy enough to do
this. It did not wait to clear the check of this unknown drawer. Worse, it indicated
in the sales invoice issued to him, by the printed terms thereon, that the books
had been paid for on delivery, thereby vesting ownership in the buyer. It would
be unfair now to make Santos bear the prejudice sustained by EDCA as a result
of its own negligence.
13. Rosaroso vs. Doria, 699 SCRA 232, G.R. No. 194846 (2013) (Art.1544)
a. Spouses Rosaroso acquired several real properties in Cebu City. They had 9 children:
Hospicio, Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and Angelica. After
his wife Honorata died, the husband Luis sold the lots in favor of the children. Despite
this sale, however, Lucila and her daughter Laila obtained a Special Power of Attorney
from Luis, saying that because Luis was then sick, infirm, blind, and of unsound mind,
Lucila has the authority to sell and convey the same lots. On the strength of another SPA
by Luis, Laila and her husband mortgaged one of the lots to Vital Lending Investors, Inc.
for and in consideration of the amount of ₱150,000.00. Another sale took place when
Lucila made Luis sign the Deed of Absolute Sale conveying to Meridian 3 parcels of
residential land for ₱960,500.00.
b. Luis and his other children as petitioners filed a complaint for Declaration of Nullity of
Documents with Damages against his daughter, Lucila, Lucila’s daughter Laila, and
Meridian Realty Corporation. Meridian was allegedly a vendee in bad faith as it did not
make any inquiry as to who were the occupants and owners of said lots, because if it had
only investigated, it would have been informed as to the true status of the subject
properties and would have desisted in pursuing their acquisition.
c. Who has the better right over the properties in question? – The petitioners (other
children of Luis) have better right over the property, the first deed of sale being valid.
i. Respondents argue that the properties belong to them as they acquired these in
good faith and had them first recorded in the Registry of Property, as they were
unaware of the First Sale.
ii. Article 1544 states that ownership of an immovable property which is the subject
of a double sale shall be transferred: (1) to the person acquiring it who in good
faith first recorded it in the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3) in default thereof, to the
person who presents the oldest title, provided there is good faith. If it would be
shown that a buyer was in bad faith, the alleged registration they have made
amounted to no registration at all.
iii. In the present case, the fact that the subject properties were already in the
possession of persons other than Luis was never disputed. It is clear that
Meridian, through its agent, knew that the subject properties were in possession
of persons other than the seller. Instead of investigating the rights and interests of
the persons occupying the said lots, however, it chose to just believe that Luis
still owned them. Simply, Meridian Realty failed to exercise the due diligence
required by law of purchasers in acquiring a piece of land in the possession of
person or persons other than the seller.
14. Roman Catholic Church vs. Pante, 669 SCRA 234, G.R. No. 174118 (2012) (Art. 1544)
a. The Church, represented by the Archbishop of Caceres, owned a 32-square meter lot that
measured 2x16 meters. The Church contracted with Regino Pante for the sale of the lot
on the belief that the latter was an actual occupant of the lot. Later, the Church sold in
favor of the spouses Nestor and Fidela Rubi a 215-square meter lot that included the lot
previously sold to Pante. The spouses Rubi asserted their ownership by erecting a
concrete fence over the lot sold to Pante, effectively blocking Pante and his family’s
access from their family home to the municipal road. As no settlement could be reached
between the parties, Pante instituted with the RTC an action to annul the sale between the
Church and the spouses Rubi, insofar as it included the lot previously sold to him.
b. According to the Church, its consent to the contract was obtained by fraud when Pante, in
bad faith, misrepresented that he had been an actual occupant of the lot sold to him, when
in truth, he was merely using the 32-square meter lot as a passageway from his house to
the town proper. It was the Church policy to sell its lots only to actual occupants. Because
 of this, the Church said that the spouses Rubi were the rightful buyers. The RTC ruled in
favor of the Church, finding that the Church’s consent to the sale was secured through
Pante’s misrepresentation that he was an occupant of the 32-square meter lot. Pante
appealed the RTC’s decision with the CA, which granted Pante’s appeal and reversed the
RTC’s ruling. The CA proceeded to apply Article 1544 of the Civil Code. Since neither
of the two sales was registered, the CA upheld the sale in favor of Pante who first
possessed the lot. The Church is contesting this decision, hence the present petition.
c. Who between the spouses Rubi and Pante has the better right over the property? –
Pante has the better right over the property.
i. Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property. Should it be immovable
property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property. Should there be no inscription, the
ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest
title, provided there is good faith.
ii. As neither Pante nor the spouses Rubi registered the sale in their favor, the
rightful owner is the one first in possession of the property in good faith. Under
either actual or constructive delivery, Pante acquired prior possession of the lot,
thus giving him better right over the property.
1. Actual delivery of a thing sold occurs when it is placed under the control
and possession of the vendee. Pante claimed that he had been using the
lot as a passageway, with the Church’s permission, since 1963. He was
only prevented by the spouses Rubi’s concrete fence over the lot in 1994.
Pante’s use of the lot as a passageway after the 1992 sale in his favor was
a clear assertion of his right of ownership that preceded the spouses
Rubi’s claim of ownership.
2. Delivery of a thing sold may also be made constructively. The sale in
favor of Pante would have to be upheld since the contract executed
between the Church and Pante was duly notarized, converting the deed
into a public instrument.
15. Abrigo vs. de Vera, 432 SCRA 544, G.R. No. 154409 (2004) (Art. 1544)
a. Gloria Villafania sold a house and lot in Pangasinan to Rosenda Tigno-Salazar and Rosita
Cave-Go. The said sale became a subject of a suit for annulment of documents between
the vendor and the vendees, eventually ending in a Compromise Agreement. In the said
CA, Villafania was given 1 year to buy back the house and lot, and failure to do so would
mean that the previous sale to Salazar and Go shall remain valid and binding. Because
Villafania failed to buy back the house and lot, Salazar and Go declared the lot in their
name. Unknown to Salazar and Go, however, Villafania obtained a free patent over the
parcel of land, but the said free patent was later on cancelled.
b. Salazar and Go were able to sell the house to spouses Abrigo, while Villafania sold the
same to Romana de Vera. de Vera filed an action for Forcible Entry and Damages against
the spouses Abrigo before the MTC but was dismissed. The Abrigos then filed the instant
case for the annulment of documents, injunction, preliminary injunction, restraining order
and damages against Villafania.
c. Who between the spouses Abrigo and de Vera has a better right over the property?
– de Vera has better right over the property by virtue of Art. 1544.
i. Article 1544 of the Civil Code states that a double sale of immovables transfers
ownership to (1) the first registrant in good faith; (2) then, the first possessor in
good faith; and (3) finally, the buyer who in good faith presents the oldest
 title. There is no ambiguity in the application of this law with respect to lands
registered under the Torrens system.
ii. In this case, there was a double sale to the spouses Abrigo and de Vera. However,
the requirements of good faith and presentation of the oldest title exist only in the
case of de Vera.
1. When de Vera bought the property, Villafania appeared to be the
registered owner. The subject land was, and still is, registered in the
name of Villafania. There is nothing in her certificate of title and in the
circumstances of the transaction or sale which would urge de Verea to
look beyond the title. She had no notice of the earlier sale of the land to
the Abrigos. She ascertained and verified that her vendor was the sole
owner and in possession of the subject property by examining her
vendor’s title in the Registry of Deeds and actually going to the
premises.
2. Both the Abrigos and de Vera registered the sale of the property. Since
neither the Abrigos nor their predecessors Salazar and Go knew that the
property was covered by the Torrens system, they registered their
respective sales under Act 3344. For her part, de Vera registered the
transaction under the Torrens system because, during the sale, Villafania
had presented the TCT covering the property. This registration under the
Torrens system prevails over that of the Abrigos.
16. Consolidated Rural Bank vs. Court of Appeals, 448 SCRA 347, G.R. No. 132161 (2005) (Art.
1544)
a. Rizal, Anselmo, Gregorio, Filomeno and Domingo Madrid owned residential Lot No.
7036-A in San Mateo, Isabela. Said lot was subdivided into several lots. Rizal sold part
of his share to Aleja Gamiao and Felisa Dayag by virtue of a Deed of Sale, to which his
brothers offered no objection. The deed of sale was not registered with the Office of the
Register of Deeds of Isabela. However, Gamiao and Dayag declared the property for
taxation purposes in their names. Gamiao and Dayag sold the southern half to Teodoro
dela Cruz, and the northern half to Restituto Hernandez. Thereupon, dela Cruz and
Hernandez took possession of and cultivated the portions of the property respectively
sold to them.
b. The Madrid brothers sold the same lot to Pacifico Marquez, with the deed of sale
registered with the Office of the Register of Deeds of Isabela. Subsequently, Marquez
subdivided the lot into 8. He then mortgaged 4 of the 8 lots to the Consolidated Rural
Bank, Inc. of Cagayan Valley to secure a loan of P100,000.00. He also mortgaged the
5th lot to the Rural Bank of Cauayan (RBC) to secure a loan of P10,000.00. As Marquez
defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its
favor and the lots were sold to it as the highest bidder. Marquez thereafter sold the 9th lot
to Romeo Calixto.
c. Claiming to be null and void the issuance of the TCTs, the foreclosure sale, the mortgage
to RBC, and the sale to Calixto, the dela Cruz heirs filed a case for reconveyance and
damages.
d. Who are the lawful owners of the lots? – The heirs of dela Cruz are the lawful owners
of the southern half portion and Evangeline Hernandez-del Rosario the northern half
portion.
i. Article 1544 of the Civil Code is not applicable in the present case, however, as it
contemplates a case of double or multiple sales by a single vendor. It covers a
situation where a single vendor sold one and the same immovable property to
two or more buyers. In the case at bar, the subject property was not transferred to
 several purchasers by a single vendor. In the first deed of sale, the vendors were
Gamiao and Dayag whose right to the subject property originated from their
acquisition thereof from Rizal. On the other hand, the vendors in the second deed
were the Madrid brothers but at that time they were no longer the owners since
they had disposed of the property in favor of Gamiao and Dayag.
ii. Assuming arguendo that Article 1544 applies, the claim of Marquez still cannot
prevail over the right of the Heirs since he was not a purchaser and registrant in
good faith. He knew at the time of the sale that the subject property was being
claimed or "taken" by the Heirs. That Marquez was able to obtain a title to the
property does not mean he has a better right over the heirs. In a situation where a
party has actual knowledge of the claimant's actual, open and notorious
possession of the disputed property at the time of registration, as in this case, the
actual notice and knowledge are equivalent to registration, because to hold
otherwise would be to tolerate fraud and the Torrens system cannot be used to
shield fraud.
17. Carbonnell vs. Court of Appeals, 69 SCRA 99, G.R. No. L-29972 (1976) (Art. 1544) (???)
a. Jose Poncio owned a parcel of land with improvements, subject to mortgage in favor of
the Republic Savings Bank. Rosario Carbonell, a cousin and adjacent neighbor of Poncio
lived in the adjoining lot. Both Carbonell and Emma Infante offered to buy the said lot
from Poncio. Poncio, unable to keep up with the installments due on the mortgage,
approached Carbonell and offered to sell the said lot, excluding the house where he lived.
Carbonell accepted the offer. Poncio, accepted the price proposed, on the condition that
the purchase price would be paid to the bank.
b. The RSB agreed for Carbonell to pay the arrears on the mortgage and to continue the
payment of the installments as they fall due. When Carbonell and her counsel were about
to execute the deed of sale with Poncio, the latter said that he could not proceed anymore
because he had already given the lot to Emma Infante. Poncio executed the formal deed
of sale in favor of Infante and on the same date, the latter paid RSB the mortgage
indebtedness. The mortgage on the lot was eventually discharged.
c. Informed that the sale in favor of Infante had not yet been registered, Carbonell registered
her adverse claim on February 8, 1955, while the deed in favor of Infante was registered
only 4 days later. A TCT was issued to Infante but with the annotation of the adverse
claim of Carbonell. Infante took immediate possession of the lot involved, urging
Carbonell to file a complaint against Papio and Infante, praying that she be declared the
lawful owner of the questioned parcel of land.
d. Who has the better right over the property? – Carbonell has the better right over the
property.
i. Article 1544, New Civil Code, which is decisive of this case, recites: If the same
thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good
faith, if it should movable property. Should it be immovable property, the
ownership shall belong to the person acquiring it who in good faith first recorded
it in the Registry of Property. Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title, provided there is
good faith.
ii. It is essential that the buyer of realty must act in good faith in registering his deed
of sale. When Carbonell bought the lot from Poncio, she was the only buyer
thereof and the title of Poncio was still in his name. Carbonell was not aware —
and she could not have been aware — of any sale of Infante as there was no such
 sale to Infante then. When Carbonell wanted to confront Infante, the latter
ignored Carbonell and refused to see her. So Carbonell did the next best thing to
protect her right — she registered her adversed claim. Under the circumstances,
this recording of her adverse claim should be deemed to have been done in good
faith and should emphasize Infante's bad faith when she registered her deed of
sale 4 days later.
18. Dao Heng Bank, Inc. vs. Spouses Laigo, G.R. No. 173856 November 20, 2008
a. Spouses Lilia and Reynaldo Laigo obtained loans from Dao Heng Bank, Inc. To secure
the payment of such loan, they forged 3 Real Estate Mortgages covering 2 parcels of land
registered in Lilia’s name. The loans were payable within 12 months from the execution
of the promissory notes covering the loans. Because the spouses failed to settle their
outstanding obligation, they verbally offered to cede to Dao Heng one of the two
mortgaged lots by way of dacion en pago. Dao Heng later demanded the settlement of the
spouses’ obligation. Because the Laigos again failed to heed the demand, Dao Heng filed
an application to foreclose the real estate mortgages. The properties were sold at a public
auction to Banco de Oro Universal Bank which was the highest bidder.
b. The Laigos negotiated for the redemption of the mortgages for by letter to BDO. After
BDO’s reply about the conditions for redemption, nothing was heard from the spouses, so
the bank informed them that it would proceed to consolidate the titles immediately after
the expiration of the redemption period. 6 days before the expiration of the redemption
period, the spouses filed a complaint for Annulment, Injunction with Prayer for
Temporary Restraining Order, praying for the annulment of the foreclosure of the
properties subject of the real estate mortgages and for them to be allowed "to deliver by
way of ‘dacion en pago' one of the mortgaged properties as full payment of their
mortgaged obligation".
c. WON there was a perfected contract of dacion en pago – NO. There is no perfected
contract of dacion en pago between the parties.
i. Dacion en pago as a mode of extinguishing an existing obligation partakes of the
nature of sale whereby property is alienated to the creditor in satisfaction of a
debt in money. It is an objective novation of the obligation, hence, common
consent of the parties is required in order to extinguish the obligation. Being
likened to that of a contract of sale, dacion en pago is governed by the law on
sales. The partial execution of a contract of sale takes the transaction out of the
provisions of the Statute of Frauds so long as the essential requisites of
consent of the contracting parties, object and cause of the obligation concur and
are clearly established to be present.
ii. The spouses claim that Dao Heng’s commissioning of an appraiser to appraise
the value of the mortgaged properties, take the case out of the provisions on the
Statute of Frauds. There is no concrete showing, however, that after the appraisal
of the properties, Dao Heng approved the spouses’ proposal to settle their
obligation via dacion en pago. The delivery of the titles to the properties is a
usual condition sine qua non to the execution of the mortgage, both for security
and registration purposes. For if the title to a property is not delivered to the
mortgagee, what will prevent the mortgagor from again encumbering it also by
mortgage or even by sale to a third party. Finally, that the spouses did not deny
proposing to redeem the mortgages dooms their claim of the existence of a
perfected dacion en pago.
19. Adelfa Properties, Inc vs. Court of Appeals, 240 SCRA 565, G.R. No. 111238, January 25, 1995
a. Jose and Dominador Jimenez were the registered co-owners of a parcel of land. They
sold their share consisting of one-half of said parcel of land, specifically the eastern
 portion thereof, to Adelfa Properties, Inc. Subsequently, the Jimenezes partitioned the
property, wherein the eastern portion was adjudicated to Jose and Dominador while the
western portion was allocated to Rosario and Salud.
b. Adelfa also wanted to buy the western portion of the property, so it executed an
"Exclusive Option to Purchase" with Rosario and Salud. Before Adelfa can pay, it
received summons, together with a copy of the complaint for the annulment of the deed
of sale in favor of Household Corporation and recovery of ownership of the property. As
a consequence, Adelfa informed Rosario and Salud that it would hold payment of the full
purchase price and suggested that they settle the case first. Salud refused to heed the
suggestion of Adelfa and attributed the suspension of payment of the purchase price to
"lack of word of honor."
c. Rosario and Salud informed Adelfa that they were cancelling the transaction. When
Adelfa offered to pay the purchase price, Rosario and Salud refused. Instead, they sold
the parcel of land to Emylene Chua. They requested Adelfa to return the owner's
duplicate copy of the certificate of title but Adelfa failed to surrender the certificate of
title, hence the present complaint for annulment of contract with damages.
d. WON there was valid suspension of payment of the purchase price by Adelfa – YES.
Adelfa was justified in suspending payment of the balance of the purchase price by
reason of the complaint filed against it by the nephews and nieces of Rosario and Salud.
i. Article 1590 provides, in part, that should the vendee be disturbed in the
possession or ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a foreclosure of
mortgage, he may suspend the payment of the price until the vendor has caused
the disturbance or danger to cease, unless the latter gives security for the return
of the price in a proper case.
ii. The CA refused to apply Art. 1590 on the erroneous assumption that the true
agreement between the parties was a contract of option. However, it was not an
option contract but a perfected contract to sell. Verily, therefore, Article 1590
would properly apply.
iii. Although the complaint prayed for the annulment only of the contract of sale
executed between Adelfa and the Jimenez brothers, the same likewise prayed for
the recovery of the nephews’ and nieces’ share in that parcel of land. Such being
the case, Adelfa was justified in suspending payment of the balance of the
purchase price by reason of the aforesaid vindicatory action filed against it. The
assurance made by Rosario and Salud that Adelfa did not have to worry about the
case because it was pure and simple harassment is not the kind of guaranty
contemplated under the exceptive clause in Article 1590 wherein the vendor is
bound to make payment even with the existence of a vindicatory action if the
vendee should give a security for the return of the price.
20. Puyat vs. Arco Amusement Co, 72 Phil. 402, G.R. No. L-47538, June 20, 1941 (Arts. 1466,
1868)
a. Arco Amusement Company, then known as Teatro Arco, was a corporation engaged in
the business of operating cinematographs. Gonzalo Puyat & Sons, Inc., in addition to its
other business, was acting as exclusive agents in the Philippines for the Starr Piano
Company of Richmond, Indiana, U.S. A. Starr Piano dealt in cinematographer equipment
and machinery, and the AAC desiring to purchase equiment, approached Gonzalo Puyat
& Sons, Inc.. After negotiations, the parties agreed that Puyat on behalf of AAC would
order sound reproducing equipment from Starr Piano in exchange for payment (the price
of the equipment + a 10% commission + all expenses).
b. Puyat inquired about the equipment and its price with Starr Piano, and when Puyat
received a reply, it did not show AAC the cable of inquiry nor the reply but merely
 informed AAC of the price of $1,700. Being agreeable to this price, AAC formally
authorized the order. The equipment arrived, and upon delivery of the same and the
presentation of necessary papers, the price of $1700, plus the 10% commission agreed
upon and plus all the expenses and charges, was duly paid. The following year, AAC
again ordered sound equipment through Puyat. Upon delivery, AAC paid $1,600 for the
equipment, which was supposed to be the price quoted by the Starr Piano Company, plus
10% commission, plus $160 for all expenses incurred. This amount of $160, however,
does not represent actual out-of-pocket expenses paid by Puyat, but a mere flat charge
and rough estimate made by Puyat equivalent to 10% of the price of $1,600 of the
equipment.
c. 3 years later, the officials of the AAC discovered that the price quoted to them by Puyat
was not the net price but rather the list price, and that Puyat had obtained a discount from
the Starr Piano. Moreover, said officials were convinced that the prices charged to them
were much too high including the charges for out-of-pocket expense. For these reasons,
they sought to obtain a reimbursement from Puyat.
d. WON Puyat should reimburse the excess amount charged to AAC – NO. Puyat as
vendor is not bound to reimburse AAC as vendee for any difference between the cost
price and the sales price which represents the profit realized by the vendor out of the
transaction. This is the very essence of commerce without which merchants or
middleman would not exist.
i. The 25% discount granted by the Starr Piano Company to Puyat is available only
to the latter as the former's exclusive agent in the Philippines. AAC could not
have secured this discount from the Starr Piano Company and neither was Puyat
willing to waive that discount in favor of AAC.
ii. Moreover, Puyat was not duty bound to reveal the private arrangement it had
with the Starr Piano Company relative to such discount to its prospective
customers, and AAC was not even aware of such an arrangement. AAC,
therefore, could not have offered to pay a 10% commision to Puyat provided it
was given the benefit of the 25% discount enjoyed by Puyat. It is well known that
local dealers acting as agents of foreign manufacturers, aside from obtaining a
discount from the home office, sometimes add to the list price when they resell to
local purchasers.
iii. If the vendee later on discovers itself at the short end of a bad bargain, it alone
must bear the blame, and it cannot rescind the contract, much less compel a
reimbursement of the excess price, on that ground alone. AAC willingly paid the
price quoted; it received the equipment and machinery as represented; and that
was the end of the matter as far as AAC was concerned.
21. Commissioner vs. Engineering Equipment & Supply Company, 64 SCRA 590, G.R. No. L-
27044, June 30, 1975 (Art.1467)
a. Engineering Equipment & Supply Company, a domestic corporation, is an engineering
and machinery firm. As operator of an integrated engineering shop, it is engaged, among
others, in the design and installation of central type air conditioning system, pumping
plants and steel fabrications. Juan de la Cruz, wrote the Commissioner of Internal
Revenue denouncing Engineering for tax evasion by misdeclaring its imported articles
and failing to pay the correct percentage taxes due thereon in connivance with its foreign
suppliers. Engineering was likewise denounced to the Central Bank for alleged fraud in
obtaining its dollar allocations. Acting on these denunciations, a raid and search was
conducted, on which occasion voluminous records of the firm were seized and
confiscated.
 b. Revenue examiners reported and recommended to the Commissioner that Engineering be
assessed for deficiency advance sales tax on the theory that it misdeclared its importation
of air conditioning units and parts and accessories thereof which are subject to tax.
c. WON Engineering manufactured and sold, as alleged by the Commissioner to hold
it liable to the advance sales tax under Section 185(m), or only had its services
contracted for installation purposes to hold it liable under section 198 of the Tax
Code – Engineering did not manufacture air conditioning units for sale to the general
public, but imported some items (as refrigeration compressors in complete set, heat
exchangers or coils) which were used in executing contracts entered into by it.
i. ART. 1467. A contract for the delivery at a certain price of an article which the
vendor in the ordinary course of his business manufactures or procures for the
general market, whether the same is on hand at the time or not, is a contract of
sale, but if the goods are to be manufactured specially for the customer and upon
his special order, and not for the general market, it is a contract for a piece of
work.
ii. By the contract for a piece of work the contractor binds himself to execute a
piece of work for the employer, in consideration of a certain price or
compensation. The contractor may either employ his labor or skill, or also furnish
the material. The distinction between a contract of sale and one for work, labor or
materials or for a piece of work is tested by the inquiry whether the thing
transferred is one not in existence and which never would have existed but for the
order of the party desiring to acquire it, or a thing which would have existed and
been the subject of sale to some other person, even if the order had not been
given.
iii. The supply of air conditioning units to Engineer's various customers, whether the
said machineries were in hand or not, was especially made for each customer and
installed in his building upon his special order. The air conditioning units
installed in a central type of air conditioning system would not have existed but
for the order of the party desiring to acquire it and if it existed without the special
order of Engineering's customer, the said air conditioning units were not intended
for sale to the general public. Engineering, therefore, is a contractor rather than a
manufacturer.
22. Mate vs. Court of Appeals, 290 SCRA 463, G.R. No. 120724-25, May 21, 1998 (Art. 1471)
a. Josefina R. Rey and Inocencia Tan went to the residence of Fernando Mate at Tacloban
City. Josie solicited Mate’s help to stave off her and her family’s prosecution by Tan for
violation of B.P. 22 on account of the rubber checks that she, her mother, sister and
brother issued amounting to P4,432,067.00. She requested Mate to cede to Tan his three
(3) lots in Tacloban City in order to placate him. Mate rejected Josie’s proposal at first,
but he later on agreed to execute a fictitious deed of sale with right to repurchase
covering his 3 lots subject to the condition (among others) that the properties will be
repurchased within 6 months.
b. To assure Mate that Josie will redeem the aforesaid properties, she issued 2 BPI checks.
However, upon deposit, both of them were dishonored by the drawee bank for having
been drawn against a closed account. Realizing that he was swindled, he sent Josie a
telegram about her checks and when she failed to respond, he went to Manila to look for
her but she could not be found. Mate then filed criminal cases against her for violation of
B.P. 22 but the cases were later archived as Josie could not be found as she went into
hiding. Mate then filed a civil case against Tan for Annulment of Contract with Damages.
c. WON the Deed of Sale with Right to Repurchase was invalid for lack of
consideration – NO. There was a consideration.
 i. Consideration existed at the time of the execution of the deed of sale with right of
repurchase. It is not only Mate’s kindness to Josefina, being his cousin, but also
his receipt of P420,000.00 from her which impelled him to execute such contract.
Furthermore, while Mate did not receive the P1.4 Million purchase price from
Tan, he had in his possession a postdated check of Josie in an equivalent amount
precisely to repurchase the two lots. Unfortunately, the two checks issued by
Josie Rey were worthless. Both were dishonored upon presentment by petitioner
with the drawee banks. However, there is absolutely no basis for Mate to file a
complaint against Tan and Josie to annul the pacto de retro sale on the ground of
lack of consideration, invoking his failure to encash the two checks.
ii. If there is anybody to blame for his predicament, it is Mate himself. He was the
one who prepared the contract, so he knew what he was entering into. Surely, he
must have been aware of the risk since Josefina had a checkered history of
issuing worthless checks. When Josefina’s checks bounced, he should have
repurchased his lots with his own money. Instead, he sued not only Josefina but
also Tan for annulment of contract on the ground of lack of consideration and
false pretenses on their part.
23. PCI Leasing vs. Giraffe-X-Creative, G.R. No. 143618, Jul. 12, 2007
a. PCI LEASING and GIRAFFE entered into a Lease Agreement, whereby the former
leased out to the latter 1 set of Silicon High Impact Graphics and accessories and 1 unit
of Oxberry Cinescan 6400-10. The parties subsequently signed 2 separate documents,
each denominated as Lease Schedule. Likewise forming parts of the basic lease
agreement were 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. These disclosure statements described GIRAFFE as the
"borrower" who acknowledged the "net proceeds of the loan," the "net amount to be
financed," the "financial charges," the "total installment payments" that it must pay
monthly for 36 months, exclusive of the 36% per annum "late payment charges." By the
terms, too, of the Lease Agreement, GIRAFFE undertook to remit the amount of
₱3,120,000.00 by way of "guaranty deposit," a sort of performance and compliance bond
for the two equipment. Furthermore, the same agreement embodied a standard
acceleration clause, operative in the event GIRAFFE fails to pay any rental and/or other
accounts due.
b. After a year, GIRAFFE defaulted in its monthly rental-payment obligations. And
following a 3-month default, PCI LEASING addressed a demand letter that went
unheeded. PCI LEASING instituted the instant case against GIRAFFE for the issuance of
a writ of replevin for the recovery of the leased property.
c. 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 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.
i. The parties is in reality a lease with an option to purchase the equipment. This
can be gleaned from the demand letter made by the lessor, wherein it stated that
if the lessee 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
lessee. Being so, Article 1485 of the Civil Code should apply.
ii. While on its face the agreement does not contain a “purchase option” clause, the
same does not mean that the agreement is a straight lease. The Court noted its
awareness 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, to prevent the Recto Law from being applicable. Hence, in choosing,
through replevin, to deprive the lessee of possession of the leased equipment, the
lessor waived its right to bring an action to recover unpaid rentals on the said
leased items. Otherwise, what obtains is a most inequitable situation where even
if the lessee parts with the leased personal property voluntarily, the lessor can
still sue for its monetary claim.
24. Roberts vs. Papio, 515 SCRA 346, G.R. No. 166714, February 9, 2007 (Art. 1602)
a. The spouses Martin and Lucina Papio owned a 274-square-meter residential lot located in
Makati. In order to secure a ₱59,000.00 loan from the Amparo Investments Corporation,
they executed a real estate mortgage on the property. Upon Papio’s failure to pay the
loan, the corporation filed a petition for the extrajudicial foreclosure of the mortgage.
Since the couple needed money to redeem the property and to prevent the foreclosure,
they executed a Deed of Absolute Sale over the property on in favor of Martin Papio’s
cousin, Amelia Roberts. Of the ₱85,000.00 purchase price, ₱59,000.00 was paid to the
Amparo Investments Corporation, while the ₱26,000.00 difference was retained by the
spouses. As soon as the spouses had settled their obligation, the corporation returned the
owner’s duplicate of the TCT, which was then delivered to Amelia Roberts.
b. Thereafter, Amelia Roberts as lessor and Martin Papio as lessee executed a two-year
contract of lease. The lessee was obliged to pay monthly rentals of ₱800.00 to be
deposited in the lessor’s account at the Bank of America, Makati City branch. Martin
Papio initially was able to pay the rentals but then eventually defaulted. He and his family
nevertheless remained in possession of the property for a period of almost 13 years.
Roberts demanded that Papio vacate the property, but because he refused to pay and
continuously refused to leave, Roberts then filed a Complaint for unlawful detainer and
damages against Papio. Papio, in his defense, said that the sale between him and Roberts
was pacto de retro sale and that he was able to repurchase the land back from Roberts.
c. WON the transaction between Roberts and Papio was an equitable mortgage – NO.
The transaction was an absolute sale and Roberts is the rightful owner of the property.
i. In an equitable mortgage, the mortgagor retains ownership over the property but
subject to foreclosure and sale at public auction upon failure of the mortgagor to
pay his obligation. In contrast, in a pacto de retro sale, ownership of the property
sold is immediately transferred to the vendee a retro subject only to the right of
the vendor a retro to repurchase the property upon compliance with legal
requirements for the repurchase. The failure of the vendor a retro to exercise the
right to repurchase within the agreed time vests upon the vendee a retro, by
operation of law, absolute title over the property.
ii. In the present case, the right of Papio to repurchase the property is not
incorporated in the contract. The contract is one of absolute sale and not one with
right to repurchase. The law states that if the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning of
its stipulations shall control. Although Roberts had offered to sell the property
upon the expiration of the Contract of Lease, the offer was rejected by Papio. No
contract of repurchase was perfected between the parties.
25. A. Francisco Realty vs. Court of Appeals, 298 SCRA 349, G.R. No. 125055, October 30, 1998
(1998) (Art. 2088)
a. Spouses Romulo and Erlina Javillonar loaned P7.5 Million from A. Francisco Realty and
Development Corporation, executing the following documents as security: (a) a
promissory note stating an interest charge of 4% per month for six months; (b) a deed of
 mortgage over realty; and (c) an undated deed of sale of the mortgaged property in favor
of the mortgagee, A. Francisco Realty. The promissory note expressly provided that
upon "failure of the MORTGAGOR to pay the interest without prior arrangement with
the MORTGAGEE, full possession of the property will be transferred and the deed of
sale will be registered. For this purpose, the owner's duplicate of the TCT was delivered
to A. Francisco Realty.
b. Because the Javillonars failed to pay the interest, A. Francisco Realty registered the sale
of the land in its favor. The spouses subsequently obtained an additional loan of P2.5
Million from A. Francisco Realty for which they signed another promissory note which
stipulated that in case they fail to pay the second loan, they will vacate voluntarily and
willfully and/or allow A. Francisco Realty to appropriate and occupy for their exclusive
use their property. Because the spouses failed to pay again, A. Francisco Realty
demanded possession of the mortgaged realty and the payment of interest. As the
Javillonars refused to vacate, A. Francisco Realty filed the present action for possession.
c. WON the stipulation in the promissory note constitutes a pactum commissorium –
YES.
i. Art. 2088 states that the creditor cannot appropriate the things given by way to
pledge or mortgage, or dispose of them. Any stipulation to the contrary is null
and void. What is envisioned by this provision is a provision in the deed of
mortgage providing for the automatic conveyance of the mortgaged property in
case of the failure of the debtor to pay the loan.
ii. In the case at bar, the stipulations in the promissory notes providing that, upon
failure of the spouses to pay interest, ownership of the property would be
automatically transferred to A. Francisco Realty and the deed of sale in its favor
would be registered, are in substance a pactum commissorium. They embody the
two elements of pactum commissorium, to wit: (1) that there should be a pledge
or mortgage wherein a property is pledged or mortgaged by way of security for
the payment of the principal obligation; and (2) that there should be a stipulation
for an automatic appropriation by the creditor of the thing pledged or mortgaged
in the event of non-payment of the principal obligation within the stipulated
period. 
26. Lo vs. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182, G.R. No. 149420, October 8, 2003
(Art. 1628)
a. KJS ECO-FORMWORK System Phil., Inc. delivered to Sonny L. Lo scaffoldings worth
P540,425.80 with P150,000.00 as downpayment and the remaining balance payable in
ten monthly installments. Lo was able to pay the first two monthly installments. But
because his business encountered financial difficulties, he was unable to settle his
obligation to KJS despite oral and written demands made against him.
b. The two parties executed a Deed of Assignment, whereby Lo assigned to KJS his
receivables from Jomero Realty Corporation. However, when KJS tried to collect the said
credit from Jomero Realty Corporation, the latter refused to honor the Deed of
Assignment because it claimed that Lo was also indebted to it. KJS sent a letter to Lo
demanding payment of his obligation, but Lo refused to pay claiming that his obligation
had been extinguished when they executed the Deed of Assignment. KJS then filed an
action for recovery of a sum of money against Lo.
c. WON the deed of assignment extinguished Lo’s obligation to KJS – NO.
i. The first paragraph of Article 1628 of the Civil Code provides: The vendor in
good faith shall be responsible for the existence: and legality of the credit at the
time of the sale, unless it should have been sold as doubtful; but not for the
 solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
ii. From the above provision, Lo as vendor or assignor, is bound to warrant the
existence and legality of the credit at the time of the sale or assignment. When
Jomero claimed that it was no longer indebted to petitioner since the latter also
had an unpaid obligation to it, it essentially meant that its obligation to petitioner
has been extinguished by compensation. In other words, KJS alleged the non-
existence of the credit and asserted its claim to Lo’s warranty under the
assignment. Therefore, it behooved on Lo to make good its warranty and paid the
obligation.
iii. Lo breached his obligation under the Deed of Assignment to execute and do all
such further acts and deeds as shall be reasonably necessary to effectually enable
KJS to recover whatever collectibles Lo has. Indeed, by warranting the existence
of the credit, Lo should be deemed to have ensured the performance thereof in
case the same is later found to be inexistent. He should be held liable to pay KJS
the amount of his indebtedness.
27. Tagaytay Realty Co., Inc. vs. Gacutan, 761 SCRA 87, G.R. 160033, July 1, 2015.
a. Arturo Gacutan entered into a contract to sell with Tagaytay Realty for the purchase on
installment of a residential lot situated in the Foggy Heights Subdivision then being
developed by the latter. Tagaytay Realty executed an express undertaking in favor of the
Gacutan, saying that it undertakes to complete the development of the subdivision, and
that in case of failure on their part to complete such development within the stipulated
period, Gacutan has the option to suspend payment of the monthly amortization on the
lot/s he/she purchased until completion of such development without penalty.
b. Gacutan notified TRCI that he was suspending his amortizations because the amenities
had not been constructed in accordance with the undertaking. Despite receipt of
Gacutan’s other communications requesting updates on the progress of the construction
of the amenities so that he could resume his amortization, TRCI did not reply. Instead, it
sent Gacutan a statement of account demanding the balance of the price, plus interest and
penalty, which Gacutan refused to pay. Gacutan sued TRCI for specific performance in
the HLURB, praying that it be ordered to accept his payment of the balance of the
contract without interest and penalty, and to deliver to him the title of the property.
c. WON Gacutan should pay the amortizations plus interest and penalty – YES,
Gacutan as installment buyer should pay the annual interest of 12% but not the penalty.
i. The contract to sell stipulated that Gacutan as the vendee agrees to pay, among
others, the balance of P23,562 in 84 consecutive monthly installments of P415.95
each, including interest at the rate of 12% per annum on all outstanding balances,
the first of such monthly installment to be paid on or before the 6th day of each
month. Any unpaid installments or installments in arrears shall earn a penalty
interest of 1% per month until fully paid. This annual interest was designed to
compensate TRCI for waiting 84 months or 7 years before receiving the total
principal amount. As such, the total cost of the lot purchased by Gacutan would
be P39,097.80, which amount would be inclusive of the contract price of the lot
and the amortization interest.
ii. The 1% monthly penalty sought to be charged could not be enforced against
Gacutan because TRCI waived the penalty should the subdivision development
not be completed. The waiver should stand considering that the suspension of the
amortization payment was excusable on account of the failure to construct the
amenities, and considering further that TRCI did not contest the suspension of
payment of the monthly amortization.