Arra Realty Corporation vs.

Spouse Arguelles
Facts:
Arra Realty Corporation (ARC) was the owner of a parcel of land, located in Alvarado Street,
Legaspi Village, Makati City. Through its president, Architect Carlos D. Arguelles, the ARC
decided to construct a five-story building on its property and engaged the services of Engineer
Erlinda Peñaloza as project and structural engineer. In the process, Peñaloza and the ARC,
through Carlos Arguelles, agreed on November 18, 1982 that Peñaloza would share the
purchase price of one floor of the building, consisting of 552 square meters for the price of
₱3,105,838: ₱901,738, payable within sixty (60) days from November 20, 1982, and the balance
payable in twenty (20) equal quarterly installments of ₱110,205. Sometime in May 1983,
Peñaloza took possession of the one-half portion of the second floor, with an area of 552 square
meters where she put up her office and operated the St. Michael International Institute of
Technology. Unknown to her, ARC had executed a real estate mortgage over the lot and the
entire building in favor of the China Banking Corporation as security for a loan on May 12, 1983.
From February 23, 1983 to May 31, 1984, Peñaloza paid ₱1,175,124.59 for the portion of the
second floor of the building she had purchased from the ARC. She learned that the property had
been mortgaged to the China Banking Corporation sometime in July 1984. Thereafter, she
stopped paying the installments due on the purchase price of the property.

Peñaloza wrote the China Banking Corporation on August 1, 1984 informing the bank that the
ARC had conveyed a portion of the second floor of the building to her, and that she had paid
₱1,175,124.59 out of the total price of ₱3,105,838. She offered to open an account with the bank
in her name in the amount of ₱300,000, and to make monthly deposits of ₱50,000 each, to serve
as payments of the equivalent loan of the ARC upon the execution of the appropriate
documents. She also proposed for the bank to assist her in requesting the ARC to execute a
deed of absolute sale over the portion of the second floor she had purchased and the issuance
of the title in her name upon the payment of the purchase price. However, the bank rejected her
proposal.8 She then wrote the ARC on August 31, 1984 informing it of China Banking
Corporation’s rejection of her offer to assume its equivalent loan from the bank and reminded it
that it had conformed to her proposal to assume the payment of its loan from the bank up to the
equivalent amount of the balance of the purchase price of the second floor of the building as
agreed upon, and the consequent execution by the ARC of a deed of absolute sale over the
property in her favor.

She later discovered that her office had been padlocked.11 She had the office reopened and
continued holding office thereat. To protect her rights as purchaser, she executed on November
26, 1984 an affidavit of adverse claim over the property which was annotated at the dorsal
portion of TCT No. 112269 on November 27, 1984. However, the adverse claim was cancelled
on February 11, 1985.

When the ARC failed to pay its loan to China Banking Corporation, the subject property was
foreclosed extrajudicially, and, thereafter, sold at public auction to China Banking Corporation
on August 13, 1986 for ₱13,953,171.07. On April 29, 1987, the ARC and the Guarantee
Development Corporation and Insurance Agency (GDCIA) executed a deed of conditional sale
covering the building and the lot for ₱22,000,000, part of which was to be used to redeem the
property from China Banking Corporation. With the money advanced by the GDCIA, the
property was redeemed on May 4, 1987. On May 14, 1987, the petitioner executed a deed of
absolute sale over the lot and building in favor of the GDCIA for ₱22,000,000. The ARC obliged
itself under the deed to deliver possession of the property without any occupants therein.

On May 28, 1987, Peñaloza filed a complaint against the ARC, the GDCIA, and the Spouses
Arguelles, with the Regional Trial Court of Makati, Branch 61, for "specific performance or
damages" with a prayer for a writ of preliminary injunction. On April 17, 1995, the trial court
rendered judgment in favor of Peñaloza and the GDCIA, and against the ARC and the Spouses
Arguelles.

Issue:
Whether or not no contract of sale over the subject property was perfected between the
petitioner ARC, on the one hand, and respondent Peñaloza, on the other, because the latter
failed to pay the balance of the total purchase price of a portion of the second floor of the
building as provided in their November 18, 1982 agreement.

Petitioner’s arguments:
● The petitioners posit that no contract of sale over the subject property was perfected
between the petitioner ARC, on the one hand, and respondent Peñaloza, on the other,
because the latter failed to pay the balance of the total purchase price of a portion of the
second floor of the building as provided in their November 18, 1982 agreement. They
aver that respondent Peñaloza bound and obliged herself to pay the downpayment of
₱901,738 on or before January 1983, and the balance in twenty (20) equal quarterly
payments of ₱110,205. However, the petitioners aver, respondent Peñaloza was able to
complete the downpayment only on March 4, 1983 and managed to pay only three
quarterly installments, and part of the fourth quarterly installment.
● The petitioners further contend that respondent GDCIA was a purchaser of the property
in bad faith because it purchased the lot and building despite its presumed knowledge of
the claims of respondent Peñaloza and the fact that the building was occupied by private
individuals and/or corporations. The petitioners aver that they even offered to return the
₱21,000,000 paid by the respondent GDCIA for the property, less the retained
₱1,000,000, but that the latter rejected the offer. Hence, the deed of absolute sale
executed by the petitioner ARC and the respondent GDCIA over the property was
automatically rescinded.

Respondent’s arguments:
● In her comment on the petition, respondent Peñaloza averred that her November 18,
1982 agreement with the petitioner ARC is a perfected contract of sale.

Ruling:
As gleaned from the agreement, the petitioner ARC, as vendor, and respondent Peñaloza, as
vendee, entered into a contract of sale over a portion of the second floor of the building yet to be
constructed for the price of ₱3,105,838 payable in installments, the first installment of ₱901,738
to be paid within sixty (60) days from November 20, 1982 or on or before January 20, 1983, and
the balance payable in twenty (20) equal quarterly payments of ₱110,205. As soon as the
second floor was constructed within five (5) months, respondent Peñaloza would take
possession of the property, and title thereto would be transferred to her name. The parties had
agreed on the three elements of subject matter, price, and terms of payment. Hence, the
contract of sale was perfected, it being consensual in nature, perfected by mere consent, which,
in turn, was manifested the moment there was a meeting of the minds as to the offer and the
acceptance thereof. The perfection of the sale is not negated by the fact that the property
subject of the sale was not yet in existence. This is so because the ownership by the seller of
the thing sold at the time of the perfection of the contract of sale is not an element of its
perfection. A perfected contract of sale cannot be challenged on the ground of non-ownership
on the part of the seller at the time of its perfection. What the law requires is that the seller has
the right to transfer ownership at the time the thing is delivered. Perfection per se does not
transfer ownership which occurs upon the actual or constructive delivery of the thing sold. In
May 1983, respondent Peñaloza took possession of a portion of the second floor of the building
sold to her with an area of 552 square meters. She put up her office and operated the St.
Michael International Institute of Technology. Thenceforth, respondent Peñaloza became the
owner of the property, conformably to Article 1477 of the New Civil Code.

In a contract of sale, until and unless the contract is resolved or rescinded in accordance with
law, the vendor cannot recover the thing sold even if the vendee failed to pay in full the initial
payment for the property. The failure of the buyer to pay the purchase price within the stipulated
period does not by itself bar the transfer of ownership or possession of the property sold, nor
ipso facto rescind the contract. Such failure will merely give the vendor the option to rescind the
contract of sale judicially or by notarial demand as provided for by Article 1592 of the New Civil
Code. Admittedly, respondent Peñaloza failed to pay the downpayment on time. But then, the
petitioner ARC accepted, without any objections, the delayed payments of the respondent;
hence, as provided in Article 1235 of the New Civil Code, the obligation of the respondent is
deemed complied. The respondent cannot be blamed for suspending further remittances of
payment to the petitioner ARC because when she pushed for the issuance of her title to the
property after taking possession thereof, the ARC failed to comply. She was aghast when she
discovered that in July 1984, even before she took possession of the property, the petitioner
ARC had already mortgaged the lot and the building to the China Banking Corporation; when
she offered to pay the balance of the purchase price of the property to enable her to secure her
title thereon, the petitioner ARC ignored her offer. Under Article 1590 of the New Civil Code, a
vendee may suspend the payment of the price of the property sold.
 Laforteza vs. Machuca
Facts:
The property involved consists of a house and lot located at No. 7757 Sherwood Street, Marcelo
Green Village, Parañaque, Metro Manila. The subject property is registered in the name of the
late Francisco Q. Laforteza, although it is conjugal in nature. January 20, 1989, the heirs of the
late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr.
entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff over the subject
property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS (P630,000.00).

Significantly, the fourth paragraph of the Memorandum of Agreement (Contract to Sell) dated
January 20, 1989 (Exh. "E", supra.) contained a provision as follows:

. . . . Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified
in writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of
P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the
Extrajudicial Settlement with sale.
On January 20, 1989, plaintiff paid the earnest money of THIRTY THOUSAND PESOS
(P30,000.00), plus rentals for the subject property (Exh. "F", Plaintiff, record, p. 339).

On September 18, 1998 , defendant heirs, through their counsel wrote a letter (Exh. 1,
Defendants, record, p. 370) to the plaintiff furnishing the latter a copy of the reconstituted title to
the subject property, advising him that he had thirty (3) days to produce the balance of SIX
HUNDRED PESOS (sic) (P600,000.00) under the Memorandum of Agreement which plaintiff
received on the same date.

On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an extension of the
THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the balance of
SIX HUNDRED THOUSAND PESOS (P600,000.00) (Exh. "G", Plaintiff, record, pp. 341-342).
The extension, however, does not appear to have been approved by Gonzalo Z. Laforteza, the
second attorney-in-fact as his conformity does not appear to have been secured.

On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z.
Laforteza, that he already had the balance of SIX HUNDRED THOUSAND PESOS
(P600,000.00) covered by United Coconut Planters Bank Manager's Check No. 000814 dated
November 15, 1989 (TSN, August 25, 1992, p. 11; Exhs. "H", record, pp. 343-344; "M", records
p. 350; and "N", record, p. 351). However, the defendants, refused to accept the balance (TSN,
August 24, 1992, p. 14; Exhs. "M-1", Plaintiff, record, p. 350; and "N-1", Plaintiff, record, p. 351).
Defendant Roberto Z. Laforteza had told him that the subject property was no longer for sale
(TSN, October 20, 1992, p. 19; Exh. "J", record, p. 347).

On November 20, 1998 4 , defendants informed plaintiff that they were canceling the
Memorandum of Agreement (Contract to Sell) in view of the plaintiff's failure to comply with his
contractual obligations (Exh. "3").
Thereafter, plaintiff reiterated his request to tender payment of the balance of SIX HUNDRED
THOUSAND PESOS (P600,000.00). Defendants, however, insisted on the rescission of the
Memorandum of Agreement. Thereafter, plaintiff filed the instant action for specific performance.
The lower court rendered judgment on July 6, 1994 in favor of the plaintiff.

Petitioner’s arguments:
● The petitioners contend that the Memorandum of Agreement is merely a lease
agreement with "option to purchase". As it was merely an option, it only gave the
respondent a right to purchase the subject property within a limited period without
imposing upon them any obligation to purchase it. Since the respondent's tender of
payment was made after the lapse of the option agreement, his tender did not give rise
to the perfection of a contract of sale.
● Petitioner adds that at most, the Memorandum of Agreement (Contract to Sell) is a mere
contract to sell, as indicated in its title. The obligation of the petitioners to sell the
property to the respondent was conditioned upon the issuance of a new certificate of title
and the execution of the extrajudicial partition with sale and payment of the
P600,000.00. This is why possession of the subject property was not delivered to the
respondent as the owner of the property but only as the lessee thereof. And the failure of
the respondent to pay the purchase price in full prevented the petitioners' obligation to
convey title from acquiring obligatory force.

Issue:
1. Whether or not the six-month period during which the respondent would be in
possession of the property as lessee was a period within which to exercise an option
2. whether the failure of the respondent to pay the balance of the purchase price within the
period allowed is fatal to his right to enforce the agreement.

Ruling:
1. However, the balance of the purchase price was to be paid only upon the issuance of the new
certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the
execution of an extrajudicial settlement of his estate. Prior to the issuance of the "reconstituted"
title, the respondent was already placed in possession of the house and lot as lessee thereof for
six months at a monthly rate of three thousand five hundred pesos (P3,500.00). It was stipulated
that should the issuance of the new title and the execution of the extrajudicial settlement be
completed prior to expiration of the six-month period, the respondent would be liable only for the
rentals pertaining to the period commencing from the date of the execution of the agreement up
to the execution of the extrajudicial settlement. It was also expressly stipulated that if after the
expiration of the six month period, the lost title was not yet replaced and the extrajudicial
partition was not yet executed, the respondent would no longer be required to pay rentals and
would continue to occupy and use the premises until the subject condition was complied with
the petitioners. The six-month period during which the respondent would be in possession of the
property as lessee, was clearly not a period within which to exercise an option. An option is a
contract granting a privilege to buy or sell within an agreed time and at a determined price. An
option contract is a separate and distinct contract from that which the parties may enter into
upon the consummation of the option. An option must be supported by consideration. In the
present case, the six-month period merely delayed the demandability of the contract of sale and
did not determine its perfection for after the expiration of the six-month period, there was an
absolute obligation on the part of the petitioners and the respondent to comply with the terms of
the sale.

The issuance of the new certificate of title in the name of the late Francisco Laforteza and the
execution of an extrajudicial settlement of his estate was not a condition which determined the
perfection of the contract of sale. Petitioners' contention that since the condition was not met,
they no longer had an obligation to proceed with the sale of the house and lot is unconvincing.
The petitioners fail to distinguish between a condition imposed upon the perfection of the
contract and a condition imposed on the performance of an obligation. Failure to comply with
the first condition results in the failure of a contract, while the failure to comply with the second
condition only gives the other party the option either to refuse to proceed with the sale or to
waive the condition. In the case at bar, there was already a perfected contract. The condition
was imposed only on the performance of the obligations contained therein. Considering
however that the title was eventually "reconstituted" and that the petitioners admit their ability to
execute the extrajudicial settlement of their father's estate, the respondent had a right to
demand fulfillment of the petitioners' obligation to deliver and transfer ownership of the house
and lot.

We do not subscribe to the petitioners' view that the Memorandum Agreement was a contract to
sell. There is clearly no express reservation of title made by the petitioners over the property, or
any provision which would impose non-payment of the price as a condition for the contract's
entering into force.

2. It is not disputed that the petitioners did not make a judicial or notarial demand for rescission.
The November 20, 1989 letter of the petitioners informing the respondent of the automatic
rescission of the agreement did not amount to a demand for rescission, as it was not notarized.
This offer to pay prior to the demand for rescission is sufficient to defeat the petitioners' right
under article 1592 of the Civil Code. Besides, the Memorandum Agreement between the parties
did not contain a clause expressly authorizing the automatic cancellation of the contract without
court intervention in the event that the terms thereof were violated. A seller cannot unilaterally
and extrajudicially rescind a contract or sale where there is no express stipulation authorizing
him to extrajudicially rescind. Thus, when the respondent filed his complaint for specific
performance, the agreement was still in force inasmuch as the contract was not yet rescinded.
At any rate, considering that the six-month period was merely an approximation of the time if
would take to reconstitute the lost title and was not a condition imposed on the perfection of the
contract and considering further that the delay in payment was only thirty days which was
caused by the respondents justified but mistaken belief that an extension to pay was granted to
him, we agree with the Court of Appeals that the delay of one month in payment was a mere
casual breach that would not entitle the respondents to rescind the contract. Rescission of a
contract will not be permitted for a slight or casual breach, but only such substantial and
fundamental breach as would defeat the very object of the parties in making the agreement.
Vda. De Mistica vs. Naguiat
Facts:
"Eulalio Mistica, predecessor-in-interest of herein [petitioner], is the owner of a parcel of land
located at Malhacan, Meycauayan, Bulacan. A portion thereof was leased to [Respondent
Bernardino Naguiat] sometime in 1970. "On 5 April 1979, Eulalio Mistica entered into a contract
to sell with [Respondent Bernardino Naguiat] over a portion of the aforementioned lot containing
an area of 200 square meters.

"Pursuant to said agreement, [Respondent Bernardino Naguiat] gave a downpayment of

₱2,000.00. He made another partial payment of ₱1,000.00 on 7 February 1980. He failed to
make any payments thereafter. Eulalio Mistica died sometime in October 1986.

"On 4 December 1991, [petitioner] filed a complaint for rescission alleging inter alia: that the
failure and refusal of [respondents] to pay the balance of the purchase price constitutes a
violation of the contract which entitles her to rescind the same; that [respondents] have been in
possession of the subject portion and they should be ordered to vacate and surrender
possession of the same to [petitioner] ; that the reasonable amount of rental for the subject land
is ₱200.00 a month; that on account of the unjustified actuations of [respondents], [petitioner]
has been constrained to litigate where she incurred expenses for attorney’s fees and litigation
expenses in the sum of ₱20,000.00.

"In their answer and amended answer, [respondents] contended that the contract cannot be
rescinded on the ground that it clearly stipulates that in case of failure to pay the balance as
stipulated, a yearly interest of 12% is to be paid. [Respondent Bernardino Naguiat] likewise
alleged that sometime in October 1986, during the wake of the late Eulalio Mistica, he offered to
pay the remaining balance to [petitioner] but the latter refused and hence, there is no breach or
violation committed by them and no damages could yet be incurred by the late Eulalio Mistica,
his heirs or assigns pursuant to the said document; that he is presently the owner in fee simple
of the subject lot having acquired the same by virtue of a Free Patent Title duly awarded to him
by the Bureau of Lands; and that his title and ownership had already become indefeasible and
incontrovertible. The Court dismissed the complaint.

CA’s decision:
CA held that respondents did not breach the Contract of Sale. It explained that the conclusion of
the ten-year period was not a resolutory term, because the Contract had stipulated that payment
-- with interest of 12 percent -- could still be made if respondents failed to pay within the period.
According to the appellate court, petitioner did not disprove the allegation of respondents that
they had tendered payment of the balance of the purchase price during her husband’s funeral,
which was well within the ten-year period.

Moreover, rescission would be unjust to respondents, because they had already transferred the
land title to their names. The proper recourse, the CA held, was to order them to pay the
balance of the purchase price, with 12 percent interest.
Issue:
Whether or not the Honorable Court of Appeals erred in the application of Art. 1191 of the New
Civil Code, as it ruled that there is no breach of obligation inspite of the lapse of the stipulated
period and the failure of the private respondents to pay.

Ruling:
The transaction between Eulalio Mistica and respondents, as evidenced by the Kasulatan, was
clearly a Contract of Sale. A deed of sale is considered absolute in nature when there is neither
a stipulation in the deed that title to the property sold is reserved to the seller until the full
payment of the price; nor a stipulation giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period. In a contract of sale, the
remedy of an unpaid seller is either specific performance or rescission. Under Article 1191 of
the Civil Code, the right to rescind an obligation is predicated on the violation of the reciprocity
between parties, brought about by a breach of faith by one of them. Rescission, however, is
allowed only where the breach is substantial and fundamental to the fulfillment of the obligation.

In the present case, the failure of respondents to pay the balance of the purchase price within
ten years from the execution of the Deed did not amount to a substantial breach. In the
Kasulatan, it was stipulated that payment could be made even after ten years from the
execution of the Contract, provided the vendee paid 12 percent interest. The stipulations of the
contract constitute the law between the parties; thus, courts have no alternative but to enforce
them as agreed upon and written.

Moreover, it is undisputed that during the ten-year period, petitioner and her deceased husband
never made any demand for the balance of the purchase price. Petitioner even refused the
payment tendered by respondents during her husband’s funeral, thus showing that she was not
exactly blameless for the lapse of the ten-year period. Had she accepted the tender, payment
would have been made well within the agreed period.
Fedman Development Corporation vs. Federico Agcaoili
Facts:
FDC was the owner and developer of a condominium project known as Fedman Suites Building
(FSB) located on Salcedo Street, Legazpi Village, Makati City. On June 18, 1975, Interchem
Laboratories Incorporated (Interchem) purchased FSB’s Unit 411 under a contract to sell. On
October 10, 1980, Interchem, with FDC’s consent, transferred all its rights in Unit 411 to
respondent Federico Agcaoili (Agcaoili). As consideration for the transfer, Agcaoili agreed: (a) to
pay Interchem ₱150,000.00 upon signing of the deed of transfer; (b) to update the account by
paying to FDC the amount of ₱15,473.17 through a 90 day-postdated check; and (c) to deliver to
FDC the balance of ₱137,286.83 in 135 equal monthly installments of ₱1,857.24 effective
October 1980, inclusive of 12% interest per annum on the diminishing balance.

In December 1983, the centralized air-conditioning unit of FSB’s fourth floor broke down.7 On
January 3, 1984, Agcaoili, being thereby adversely affected, wrote to Eduardo X. Genato
(Genato), vice-president and board member of FSCC, demanding the repair of the
air-conditioning unit. Not getting any immediate response, Agcaoili sent follow-up letters to
FSCC reiterating the demand, but the letters went unheeded. He then informed FDC and FSCC
that he was suspending the payment of his condominium dues and monthly amortizations.

On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 and cut off the
electric supply to the unit. Agcaoili was thus prompted to sue FDC and FSCC in the RTC,
Makati City, Branch 144 for injunction and damages. The parties later executed a compromise
agreement that the RTC approved through its decision of August 26, 1985. As stipulated in the
compromise agreement, Agcaoili paid FDC the sum of ₱39,002.04 as amortizations for the
period from November 1983 to July 1985; and also paid FSCC an amount of ₱17,858.37 for
accrued condominium dues, realty taxes, electric bills, and surcharges as of March 1985. As a
result, FDC reinstated the contract to sell and allowed Agcaoili to temporarily install two
window-type air-conditioners in Unit 411.

On April 22, 1986, FDC again disconnected the electric supply of Unit 411. Agcaoili thus moved
for the execution of the RTC decision dated August 26, 1985. On July 17, 1986, the RTC issued
an order temporarily allowing Agcaoili to obtain his electric supply from the other units in the
fourth floor of FSB until the main meter was restored.

On March 6, 1987, Agcaoili lodged a complaint for damages against FDC and FSCC in the
RTC, which was raffled to Branch 150 in Makati City.

FDC contended that Agcaoili failed to comply with the terms of the contract to sell; that despite
demands, Agcaoili did not pay the amortizations due from November 1983 to March 1985 and
the surcharges, the total amount of which was ₱376,539.09; that due to the non-payment, FDC
cancelled the contract to sell and forfeited the amount of ₱219,063.97 paid by Agcaoili.

On August 28, 1998, the RTC rendered judgment in favor of Agcaoili, holding that his complaint
for damages was not barred by res judicata; that he was justified in suspending the payment of
his monthly amortizations; that FDC’s cancellation of the contract to sell was improper; that FDC
and FSCC had no separate personalities; and that Agcaoili was entitled to damages.

Issue:
Whether or not the RTC and the CA erred in ruling: (a) that Agcaoili had the right to suspend
payment of his monthly amortizations; (b) that FDC had no right to cancel the contract to sell

Ruling:
Among the obligations of FDC and FSCC to the unit owners or purchasers of FSB’s units was
the duty to provide a centralized air-conditioning unit, lighting, electricity, and water; and to
maintain adequate fire exit, elevators, and cleanliness in each floor of the common areas of
FSB. But FDC and FSCC failed to repair the centralized air-conditioning unit of the fourth floor
of FSB despite repeated demands from Agcaoili. To alleviate the physical discomfort and
adverse effects on his work as a practicing attorney brought about by the breakdown of the
air-conditioning unit, he installed two window-type air-conditioners at his own expense. Also,
FDC and FSCC failed to provide water supply to the comfort room and to clean the corridors.
The fire exit and elevator were also defective. These defects, among other circumstances,
rightly compelled Agcaoili to suspend the payment of his monthly amortizations and
condominium dues. Instead of addressing his valid complaints, FDC disconnected the electric
supply of his Unit 411 and unilaterally increased the interest rate without justification.

It was also grave error on the part of the FDC to cancel the contract to sell for non-payment of
the monthly amortizations without taking into consideration Republic Act 6552, otherwise known
as the Maceda Law. The policy of law, as embodied in its title, is "to provide protection to buyers
of real estate on installment payments." As clearly specified in Section 3, the declared public
policy espoused by Republic Act No. 6552 is "to protect buyers of real estate on installment
payments against onerous and oppressive conditions." Thus, in order for FDC to have validly
cancelled the existing contract to sell, it must have first complied with Section 3 (b) of RA 6552.
FDC should have refund the appellee the cash surrender value of the payments on the property
equivalent to fifty percent of the total payments made. At this point, we, find no error on the part
of the lower court when it ruled that:
"There is nothing in the record to show that the aforementioned requisites for a valid
cancellation of a contract where complied with by defendant FDC. Hence, the contract to sell
which defendant FDC cancelled as per its letter dated August 17, 1987 remains valid and
subsisting.
Heirs of Cardenas vs. The Christian and Missionary Alliance of the Philippines, Inc.
Facts:
On October 26, 2009, [Remedios], heir of [Sps. Cardenas], represented by her attorney-in-fact,
[Janet], filed a Complaint for Recovery of Possession and Use of Real Property and Damages
against [respondents] The Christian and Missionary Alliance Churches of the Philippines, Inc.
(CAMACOP), Reo Repollo [(Repollo)] and Leocadio Duque, Jr. [(Duque, Jr.)] before the
Regional Trial Court (RTC) of Midsayap, Cotabato. In her Complaint, Janet alleged that her
mother Remedios is the heir of the late [Sps. Cardenas], who are the registered owners of Lot
90, Psd-37322, with an area of 410 square meters, located at Poblacion 6, Midsayap, Cotabato.

Janet further alleged that sometime in the year 1962, CAMACOP unlawfully occupied the
subject property for their church activities and functions; that CAMACOP continues to unlawfully
occupy the subject property to the damage and prejudice of [Janet]; that their repeated oral and
written demands fell on deaf ears; and that CAMACOP failed to accede to the demands and
continues to occupy the subject property. Thus, her mother Remedios, through her, was
constrained to file the case before the court a quo.

For their part, [the respondents] admitted in their Answer that [Cardenas] is the registered owner
of the subject property, which is adjacent to Lot No. 3924-A, Psd-12-013791 owned by the
CAMACOP. They further aver in their Answer that their occupation of the subject property is not
illegal since they had lawfully purchased it from its registered owners [(referring to Pastora)],
who surrendered the owner's duplicate copy to the representative of the church.

They further asseverate that their continued occupation of the subject property for a period of
forty-seven (47) years had reduced the claim as barred by prescription and the inaction of
[Janet] for such period of time had rendered their claim as a stale demand which is barred by
laches. [The respondents] alleged that on May 31, 1962, Atty. Rodofolo T. Calud (Calud),
counsel and representative of CAMACOP, sent the owner's duplicate copy of the subject
property to the Secretary of Agriculture and Natural Resources and four (4) copies of the Deed
of Sale, signed by the registered owners, for the Secretary's prior approval, pursuant to
Commonwealth Act (C.A.) 141.

RTC’s Decision:
Thereafter, on June 6, 2012, the [RTC] rendered the assailed Decision dismissing the complaint
for lack of merit. [In sum, according to the RTC, CAMACOP was able to provide sufficient
documentary and testimonial evidence that the subject property was indeed sold to it by
Pastora. Hence, the RTC found as a fact the existence of a sale transaction between
CAMACOP and the predecessor-in-interest of Janet and Remedios, i.e., Pastora.

CA’s Decision:
The CA held that the Heir of Sps. Cardenas "failed to overcome the burden of proving her claim
by preponderance of evidence [and found] that the court a quo did not err in its appreciation of
the evidence and in ruling that there was in fact a sale of the subject property by the late
spouses in favor of [CAMACOP.] The failure of [Janet] to prove her claim makes [the] appeal
vulnerable to denial."

Issue:
the determination of who between the Heir of Sps. Cardenas (Remedios, as represented by
Janet) and CAMACOP has a better right to possess the subject property.

Ruling:
Upon close examination of the evidence on record, the Court holds that CAMACOP was not
able to provide any sufficient secondary evidence to establish the existence and contents of the
supposed 1962 Deed of Sale covering the subject property. In other words, CAMACOP failed to
present sufficient evidence proving that a sale indeed occurred between Pastora and
CAMACOP over the subject property.

First, CAMACOP was not able to present even a photocopy or any other copy of the purported
Deed of Sale.

It is alleged by CAMACOP that no copy of the document is available because its counsel, Atty.
Calud, submitted to the then Secretary of Agriculture and Natural Resources of the Department
of Agriculture and Natural Resources (DANR), now Department of Environment and Natural
Resources (DENR), all the copies of the Deed of Sale. To say the least, it is quite unbelievable
and extraordinary that not even a single copy of the purported Deed of Sale was retained by
CAMACOP or its counsel, considering the grave importance of such a document. If it is indeed
true that the purported documents of sale are in the possession of the then DANR or now the
DENR, then it would have been easy for CAMACOP to ask for the issuance of a subpoena to
compel the presentation of the said documents before the RTC. To make matters worse, the
secondary evidence presented by CAMACOP are all inauthentic and inadmissible documents.
Hence, the very witness of CAMACOP itself confirmed under oath that if ever there really was a
sale covering the subject property entered into by CAMACOP and Pastora, such sale did not
cover the entire subject property which they are currently occupying, but only One Hundred Ten
(110) square meters out of the entire Four Hundred Ten (410) square meters, which is adjacent
to Lot 3924-A, Psd-12-01379 currently owned and occupied by CAMACOP

Considering the foregoing, the Court finds the Heir of Sps. Cardenas' Complaint for Recovery of
Possession and Use of Real Estate meritorious. Having said that, the Court does not find that
the Heir of Sps. Cardenas has the right to recover possession of the entire subject property.

In Catholic Bishop of Balanga v. CA, the Court enumerated the essential elements of laches,
namely: (1) Conduct on the part of the defendant, or of one under whom he claims, giving rise to
the situation complained of; (2) Delay in asserting complainant's right after he had knowledge of
the defendant's conduct and after he has an opportunity to sue; (3) Lack of knowledge or notice
on the part of the defendant that the complainant would assert the right on which he bases his
suit; and (4) Injury or prejudice to the defendant in the event relief is accorded to the
complainant. However, when asked by the RTC as to when was the first time she gained any
knowledge as to CAMACOP's act of constructing a building on the subject property, the Heir of
Sps. Cardenas testified on the witness stand that it was only in the year 2000 that she
discovered CAMACOP's construction activities on the subject property. Janet also testified
under oath that since 2000, "we were meeting already with the barangay regarding this
problem" and that since 2000, Janet had already been in contact and had engaged into
negotiation with CAMACOP with respect to the dispute. On cross examination, Janet testified
that CAMACOP intimated to her in 2000 that they are supposedly in possession of a Deed of
Sale. Hence, Janet decided to give CAMACOP sufficient time to produce this document.59
When it was apparent to Janet that CAMACOP would not be able to produce the purported
Deed of Sale, it was then that a formal action for recovery of possession was instituted. Such
testimony was left unrebutted by CAMACOP.
Malabanan vs. Spouses Montano
Facts:
Melinda Malabanan (Melinda) is the widow of Jose Malabanan (Jose). In a December 18, 1984
Deed of Absolute Sale, they acquired a 310-square meter lot, a portion of a 2,000-square meter
land registered under Maria Cristina Rodriguez (Rodriguez). Subsequently, on February 21,
1985, Transfer Certificate of Title No. T-188590 was issued to "Jose[,] married to Melinda[,]"
covering the disputed property. The spouses built a house on the lot which the family had
possessed since 1984. Later on, Melinda discovered that Transfer Certificate of Title No.
T-188590 had long been canceled through a string of transactions, and that the property was
registered under the name of Spouses Dominador III and Guia Montano (the Montano
Spouses). When Melinda's mother-in-law, Adelfina Mendoza (Adelfina) died, her family
executed an Extrajudicial Settlement of her estate. The property, then covered by Transfer
Certificate of Title No. T-198039, was adjudicated to Ramon Malabanan (Ramon), who was
Jose's brother.

On June 1, 1994, Melinda filed before the Regional Trial Court a Complaint for Annulment of
Title with Damages against Spouses Ramon and Prescila Malabanan (the Malabanan Spouses)
and Francisco Malabanan (Francisco).

On June 17, 1994, Ramon sold the property to the Montano Spouses, with whom Transfer
Certificate of Title No. T-467540 was issued.

Melinda later filed an Amended Complaint to implead the Montano Spouses. She argued that
the Special Power of Attorney was void as her signature in it was forged, and that she and Jose
remained the real owners of the property.

Francisco and the Malabanan Spouses, in their Amended Answer with Counterclaim, countered
that Francisco and Adelfina bought the property for their son, Jose, and Melinda as an advance
on Jose's legitime. Francisco, they added, paid for the construction of the house on the
property. They contended that Melinda consented when Francisco reacquired the property upon
his son's death.

In its July 9, 2004 Decision, the Regional Trial Court ruled in favor of Melinda. It found that she
has proved her ownership over the property, which was fraudulently transferred through
Francisco's clever scheme. The trial court gave credence to the expert witness' testimony that
Melinda's signature was forged. It noted that Francisco himself had admitted that Melinda was
abroad when the Special Power of Attorney was executed.

The Court of Appeals further held that under Article 1448 of the Civil Code, there is a disputable
presumption that a gift was in favor of the child when a parent pays for a property but its title is
conveyed to the child. Likewise, the Court of Appeals cited Article 153 of the Civil Code, in
relation to Article 148 of the Civil Code and Article 109, Paragraph 2 of the Family Code. Based
on these statutes, it found that since Jose acquired the gift by gratuitous title during marriage,
the property was excluded from the conjugal partnership of gains. As it was his exclusive
property, Jose can dispose it without Melinda's consent. Hence, Melinda's signature being
forged in the Special Power of Attorney did not invalidate the authority Jose had given his
father.

Issue:
whether or not the property formerly covered by Transfer Certificate of Title No. T-188590 was
conjugal, and thus, rendering its sale without the wife's consent void.

Petitioner’s Arguments:
Petitioner maintains that she has provided sufficient evidence to support her claim.48 She
argues that respondents failed to rebut the disputable presumption that a property acquired by
spouses during their marriage forms part of their community of properties.49 Furthermore, under
Article 15650 of the Family Code, the family home may only be disposed upon the written
consent of the family constituting it.51 Her signature, she avers, must be obtained to sell the
house. Finally, she contends that the Montano Spouses were buyers in bad faith for not
exercising ordinary prudence as respondent Dominador purchased the property knowing that
respondent Ramon did not possess it.

Ruling:
The circumstances here transpired prior to the effectivity of the Family Code on August 3, 1988.
Thus, petitioner and Jose's marriage and property relations are governed by the Civil Code.

Under the Civil Code, property acquired during marriage is presumed to be conjugal. There is
no need to prove that the money used to purchase a property came from the conjugal fund.
What must be established is that the property was acquired during marriage. Only through
"clear, categorical, and convincing" proof to the contrary will it be considered the paraphernal
property of one (1) of the spouses.

Here, the pieces of evidence presented by respondents, who had the burden of proving that the
property was not conjugal, were insufficient to overturn this presumption.

To recall, on September 20, 1984, Jose executed a Deed of Conditional Sale with Rodriguez,
where respondent Francisco's down payment was allegedly reflected. The following month, on
October 13, 1984, Melinda left for Libya. On December 18, 1984, the Deed of Absolute Sale
between Jose and Rodriguez was executed. The house underwent construction while Melinda
was in Libya and before Jose's death on June 12, 1985.

These events refute Francisco's claim that petitioner and Jose had no means to purchase the lot
as they were jobless. Petitioner was then working in Libya, presumably earning income when
the Deed of Absolute Sale was executed and the house was constructed. These
circumstances—along with the execution of the Deed of Absolute Sale between Jose and
Rodriguez, and the title over the property being in Jose's name ("Jose[,] married to Melinda
Malabanan")—sufficiently show that the property was, indeed, conjugal.
A certificate of title is the best evidence of ownership of a property. Respondents neither alleged
fraud nor assailed the issuance of the title in Jose's favor. This certificate of title, when taken
with the Deed of Absolute Sale between Jose and Rodriguez, as well as the tax declarations in
petitioner's name, weigh more heavily than respondents' bare claims in establishing petitioner
and Jose's ownership of the property. Respondent Francisco, on the contrary, failed to present
any evidence to prove that he paid for the kind and the construction of the house on the
property.

Moreover, the trial court was in a better position to evaluate the evidence and assess the
veracity of the parties' allegations, since it had observed the litigants' demeanors when they took
the stand. The totality of evidence adduced during trial leads this Court to sustain the trial court's
finding that the property was, indeed, conjugal.

This Court, applying those Civil Code provisions, ruled in a number of cases that the sale of
conjugal property by a spouse without the other's consent is void.81 All subsequent transferees
of the conjugal property acquire no rights whatsoever from the conjugal property's unauthorized
sale. A contract conveying conjugal properties entered into by the husband without the wife's
consent may be annulled entirely. Here, Jose had no right to either unilaterally dispose the
conjugal property or grant respondent Francisco this authority through the supposed Special
Power of Attorney.
 EEG Development Corporation vs. Heirs of De Castro
Facts:
The disputed sale pertains to the parcel of land with an area of 480 square meters located at
No. 19 Spencer St., Cubao, Quezon City and covered by Transfer Certificate of Title (TCT) No.
67024 of the Register of Deeds of Quezon City registered under the name of Joseph De Castro,
Sr. (De Castro, Sr.), married to Dionisia De Castro (Dionisia). De Castro, Sr. and Dionisia
(spouses) had built their family home on the lot, and had been living therein with their 13
children. A mortgage was constituted on the property in favor of the Development Bank of the
Philippines (DBP) to secure the performance of the obligation of the spouses under the loan
taken in April 1973. After they defaulted, DBP extrajudicially foreclosed the mortgage in January
1982. On October 25, 1990, Dionisia passed away. On December 14, 1990, or almost eight
years from the lapse of the reglementary period within which to redeem the foreclosed subject
property, the property was redeemed. In 1996, De Castro, Sr. obtained a new loan from the
International Exchange Bank (IBank), and secured the performance thereof by constituting a
real estate mortgage on the subject property. De Castro, Sr. defaulted, and IBank extrajudicially
foreclosed the mortgage. The property was sold at public auction in which IBank emerged as
the highest bidder.

In July 1998, De Castro, Sr., together with his sons Alton and Hubert, fearing the loss of the
property for a measly price and to a stranger, offered to petitioner Eduardo E. Gonzalez
(Gonzalez) to buy the subject property by paying the redemption price to IBank. They agreed on
the offer. On July 29, 1998, Gonzalez settled De Castro, Sr.'s debt with IBank in the amount of
P7,000,000.00. As proof of payment, IBank issued Official Receipt No. 075111 dated July 20,
1998. IBank delivered to Gonzalez TCT No. N-161693 free from any encumbrance except for
the mortgage in favor of IBank. On July 21, 1998, IBank issued the cancellation of the
mortgage.

Meanwhile, Gonzalez transferred the subject property to co-petitioner EEG Development

Corporation (EEG) by the deed of sale also dated July 24, 1998. However, due to EEG's
incorporation being then still pending approval by the Securities and Exchange Commission
(SEC), the deed of sale was not immediately registered in the Registry of Deeds. Upon approval
by the SEC of EEG's incorporation, De Castro, Sr. executed in favor of EEG another deed of
absolute sale on August 14, 1998.8 Thereafter, TCT No. N-161693, registered under the name
of De Castro, Sr., was cancelled and a new title, TCT No. N-194773, was issued in the name of
EEG.

On August 7, 1998, De Castro, Sr. and Alton, together with a few personnel from the Office of
the City Engineer of Quezon City and some policemen, proceeded to the property to demolish
the house constructed thereon, by virtue of the demolition permit dated July 10, 1998. This
alarmed respondents, who sought the help of then Quezon City Mayor Ismael G. Mathay to try
to prevent the demolition.

On August 8, 1998, respondents learned that the property had been sold to petitioners.
Asserting that De Castro, Sr., their father, had no authority to sell the property by himself,
respondents annotated their adverse claim on the title on August 12, 1998. Thus, upon the
release of TCT No. N-194773, petitioners were surprised to find thereon the annotation of the
affidavit of adverse claim dated August 12, 1998 stating that affiant Don Emil was a co-owner by
virtue of inheriting an aliquot part corresponding to his mother's share.

Respondents submitted that the subject property was conjugal because it had been acquired
during the marriage of De Castro, Sr. and Dionisia; that the sale to petitioners was void because
De Castro, Sr. had no authority to sell the property by himself and without their consent; that
respondents had inherited Dionisia's share upon her demise, thereby making them co-owners of
the property; that the extrajudicial settlement of the estate of Dionisia in favor of De Castro, Sr.
did not confer any authority upon him to dispose of the property by himself because not all of his
children had signed the settlement; and that petitioners were buyers in bad faith by virtue of
their knowledge of respondents' adverse claim, and because the property was not in the
exclusive possession of De Castro, Sr. at the time of sale.

In contrast, petitioners contended that they were buyers in good faith because the title was free
from any liens and encumbrances at the time of purchase, and they had no knowledge of any
adverse interest in the property; that the sale had been made prior to the annotation of
respondents' adverse claim inasmuch as the cancellation of the mortgage, as proof of the sale,
had been annotated prior to the same.

RTC’s Decision:
RTC ruled in favor of respondents, holding that De Castro, Sr. had no authority to sell the
property without their consent; that as co-owners, they had a right in the property; that the sale
between Gonzalez and De Castro, Sr. was void, and prejudiced respondents' interest in the
property; and that petitioners were buyers in bad faith because at the time of the sale, they had
been aware of the respondents' adverse claim.

CA’s Decision:
CA affirmed the judgment of the RTC on appeal, and declared that petitioners were buyers in
bad faith for having failed to inquire into the condition of the property despite its being then in
the possession of respondents and because of the adverse claim annotated on the title. The CA
observed that "[t]he subsequent sale of [a] property covered by a certificate of title cannot
prevail over an adverse claim, duly sworn to and annotated on the certificate of title previous to
the sale."

Issue:
Were petitioners buyers in good faith?

Ruling:
As to registered and titled land, the buyer has no obligation to inquire beyond the four corners of
the title. To prove good faith, he must only show that he relied on the face of the title to the
property; and such proof of good faith is sufficient. However, the rule applies only when the
following conditions concur, namely: one, the seller is the registered owner of the land; two, the
latter is in possession thereof; and, three, the buyer was not aware at the time of the sale of any
claim or interest of some other person in the property, or of any defect or restriction in the title of
the seller or in his capacity to convey title to the property.19 Absent any of the foregoing
conditions, the buyer has the duty to exercise a higher degree of diligence by scrutinizing the
certificate of title and examining all factual circumstances in order to determine the seller's title
and capacity to transfer any interest in the property.

All the foregoing conditions obtained herein. To start with, the face of the title reveals that the
seller, De Castro, Sr., was the registered owner. Secondly, De Castro, Sr. was the person in
actual possession of the property. Although the property was also under the possession of
respondents, there was nothing extraordinary with this circumstance that could arouse any
suspicion on the part of the buyer because De Castro, Sr. and his children were all expected to
live therein. Petitioners were also aware that the property had always been in the possession of
respondents and their parents. As a matter of fact, Don Emil testified that he and some of his
siblings had lived therein even after their respective marriages. Thirdly, contrary to the lower
courts' findings that petitioners had actual knowledge of respondents' adverse claim, the records
showed otherwise. The sale had been undoubtedly entered into prior to the annotation of
respondents' adverse claim on August 12, 1998, as borne out by the cancellation of the
mortgage in favor of IBank on July 27, 1998 by virtue of Gonzalez's paying the redemption price
to IBank on July 20, 1998.

For sure, Don Emil's testimony indicated that respondents annotated their adverse claim only
after learning of the sale between Gonzalez and De Castro.

Worthy to stress is that the title (TCT No. N-161693) showed no defect of or restriction on De
Castro, Sr.'s capacity to convey title. The only encumbrance then annotated thereon was the
mortgage entered into in favor of IBank on July 19, 1996, but the mortgage was cancelled on
July 21, 1998 following the payment by Gonzalez of De Castro, Sr.'s unpaid debt in pursuance
of the former's purchase of the property. This transaction occurred prior to the annotation of the
adverse claim of respondents on August 12, 1998. As such, petitioners had no duty to inquire
beyond the four corners of the title.

Yet, even assuming, arguendo, that De Castro, Sr. had no authority to sell the property,
Gonzalez's reliance on the face of the certificate of title was warranted under the Torrens
system. Even granting that De Castro, Sr. had registered the property under his name through
fraud, and that he had no authority to sell it, the sale thereof by him in favor of petitioners
nonetheless validly conveyed ownership to the latter because no defect, cloud, or vice that
could arouse any suspicion on their part had appeared on the title. Verily, any buyer or
mortgagee of realty covered by a Torrens certificate of title, in the absence of any suspicion, is
not obligated to look beyond the certificate to investigate the titles of the seller appearing on the
face of the certificate; he is charged with notice only of such burdens and claims as are
annotated on the title. Being innocent purchasers for value, petitioners merited the full protection
of the law.
 Pablo Uy vs. Heirs of Julita Uy
Facts:
A parcel of land (Lot No. 43, of the Cadastral Survey of Catbalogan, Cadastral Case No. 4,
L.R.C. Cadastral Record No. 1378), situated in the Poblacion, Municipality of Catbalogan,
Province of Samar. The subject lot is covered by Transfer Certificate of Title No. (TCT) T-1467
(subject TCT) registered in the name of petitioner Uy's mother, Eufronia Labnao (Labnao).

Hence, petitioner Uy is the uncle of the respondents Heirs of Julita. Julita died intestate on May
9, 1976.

In his Complaint for Declaration of Nullity of Deed of Sale, Reconveyance and Damages,
petitioner Uy maintains that upon the death of Labnao in 1995, as the surviving offspring of
Labnao, he became the owner of one-half share of the subject lot and subject building owned by
his deceased mother, with the other half pertaining to the respondents Heirs of Julita as
co-owners.

However, petitioner Uy discovered that the subject lot was allegedly fraudulently sold by Labnao
in 1990 in favor of the respondents Heirs of Julita through a Deed of Absolute Sale dated April
11, 1990 (Deed of Absolute Sale) purportedly executed by Labnao. Petitioner Uy asserted that
the signature of Labnao in the Deed of Absolute Sale is a patent forgery as shown by the
findings of the Philippine National Police (PNP) Crime Laboratory, Region VII.

Upon discovery of the falsification, petitioner Uy confronted his nieces and nephew before the
Barangay Chairman of Brgy. IV, Catbalogan, Samar for a possible settlement of the matter, but
to no avail. Having been deprived of his hereditary rights and co-ownership over the subject lot
and the subject building through the fraudulent sale, he prayed for the nullification of the Deed
of Absolute Sale, the reconveyance of one-half portion of the subject lot, partition, and
damages.

In his Complaint, petitioner Uy also noted that the subject lot and subject building have been
subject of a prior action for Interpleader filed before the RTC by the lessee of the subject
building, Josefa I. Uy (Josefa), who filed the said action in order to determine who between
petitioner Uy and the respondents Heirs of Julita should collect the lease rentals. The RTC
rendered a Decision dated November 5, 1998 adjudging the respondents Heirs of Julita as the
exclusive and absolute owners of the subject lot and subject building. However, on February 7,
2001, in CA-G.R. CV No. 62971, the CA reversed the said Decision and, without ruling
definitively on the ownership of the said properties, held that the respondents Heirs of Julita and
petitioner Uy are entitled to an equal share of the proceeds of the rent due from Josefa. The CA
also ruled that the issue of ownership over the subject lot and subject building should be
threshed out in a separate action.

And prior to the said sale and during the lifetime of their mother Julita, the latter allegedly
constructed the subject building on the subject lot. That upon the death of Julita in 1976, as
surviving heirs of the latter, they became the rightful and exclusive owners of the subject
building by operation of law. Hence, the respondents Heirs of Julita maintain that their claim of
ownership over the subject lot and the subject building is now absolute and that petitioner Uy's
demand for reconveyance constituted a cloud obscuring their title and thus should be quashed.

The respondents Heirs of Julita also assert that petitioner Uy's allegation that the Deed of
Absolute Sale is fictitious is belied by the prior dismissal of a criminal case for Falsification, filed
by petitioner Uy against the respondents Heirs of Julita.

RTC’s Decision:
The RTC rendered its Joint Decision favoring the respondents Heirs of Julita. Believing that
there was indeed a contract of sale that was entered into between Labnao and the respondents
Heirs of Julita, the RTC held that any and all cloud on the title of the respondents Heirs of Julita
over the subject lot should be erased, declaring the latter as the owners of the subject lot. The
RTC also stressed on the fact that the Deed of Absolute Sale was notarized, explaining that a
notarial document must be sustained in full force and effect.

CA’s Decision:
The CA affirmed the RTC's Joint Decision because "the Deed of Absolute Sale dated April 11,
1990 which conveyed and transferred the ownership of the subject land covered by TCT No.
T-1467 to [the respondents Heirs of Julita], being duly acknowledged before a Notary Public,
has in its favor the presumption of regularity and x x x is conclusive as to the truthfulness of its
contents." Further, the CA explained that "[f]orgery cannot be presumed. It must be proved by
clear, positive and convincing evidence. The burden of proof lies in the party alleging forgery."

Issue:
whether there was a contract of sale that was entered into between the parties'
predecessor-in-interest, Labnao, and the respondents Heirs of Julita, transferring ownership
over the subject lot in the latter's favor

Ruling:
In the instant case, as confirmed by the RTC, the notary public, i.e., Atty. Mendiola, admitted
that he did not ask from Labnao any competent evidence of her identity and merely asked if she
was the one who signed the document. On cross-examination, Atty. Mendiola unequivocally
admitted that he "no longer verified the identity of the old woman[.]" Because the Deed of
Absolute Sale was not properly notarized, it cannot be presumed, contrary to the CA's holding,
to have been regularly executed. Applying the foregoing to the instant case, as made clear in
the respondents Heirs of Julita's Formal Offer of Exhibits/Documentary Evidence, 32 there is no
other documentary evidence that had been offered to prove that a contract of sale was entered
into by the parties aside from the Deed of Absolute Sale. The only other evidence presented to
prove the existence of a contract of sale is the testimony of respondent Jessica.

A careful review of the sworn testimony of respondent Jessica reveals that the respondents
Heirs of Julita never consented to enter into any contract of sale, completely belying the
contents of the Deed of Absolute Sale. Otherwise stated, respondent Jessica's testimony
establishes that there was, in fact, no meeting of the minds with respect to the alleged sale of
the subject lot.

Respondent Jessica never testified that the respondents Heirs of Julita approached Labnao to
offer to buy the subject lot. Nor did she testify that the respondents Heirs of Julita consented to
purchase the subject lot. As well, she never testified that Labnao had approached them to offer
to sell the subject lot. In short, the testimony of respondent Jessica is devoid of any contention
that there was any offer and any acceptance of such offer to buy the subject lot.

In other words, the sole witness presented by the respondents Heirs of Julita to prove the
existence of the contract of sale actually testified that there was never any agreement on the
part of the respondents Heirs of Julita to purchase the subject lot from their grandmother and
that they were even surprised that the Deed of Absolute Sale even existed in the first place. To
the mind of the Court, therefore, there was no valid contract of sale in the instant case.
Spouses Carlos vs. Tolentino
Facts:
The subject matter of the action is a parcel of land with an area of 1,000 square meters and all
the improvements thereon located in Novaliches, Quezon City, covered by Transfer Certificate
of Title (TCT) No. RT-90746 (116229) issued on March 17, 1967 and registered in the name of
Juan C. Tolentino, married to Mercedes Tolentino (the subject property).

Without Juan's knowledge and consent, Mercedes and Kristoff, who were then residing in the
subject property, allegedly forged a Deed of Donation dated February 15, 2011, thereby making
it appear that Juan and Mercedes donated the subject property to Kristoff. Thus, by virtue of the
alleged forged Deed of Donation, Kristoff caused the cancellation of TCT No. RT-90764
(116229), and in lieu thereof, TCT No. 004-20110033208 was issued in his name on March 9,
2011.

In April 2011, Kristoff offered the sale of the subject property to Julieta's brother, Felix Bacal
(Felix), who is also the administrator of the lot owned by Julieta which is adjacent to the subject
property. When Felix informed Julieta of the availability of the subject property, Spouses Carlos
then asked him to negotiate for its purchase with Kristoff. Kristoff and Felix then arranged for the
ocular inspection of the subject property. Thereafter, Kristoff surrendered to Felix copies of the
title and tax declaration covering the said property.

After a series of negotiations, Kristoff and Julieta executed a Memorandum of Agreement

(MOA) dated April 12, 2011 stating that Kristoff is selling the subject property to Julieta in the
amount of Two Million Three Hundred Thousand Pesos (P2,300,000.00), payable in two (2)
installments. On May 28, 2011, Julieta made the first payment in the amount of Two Million
Pesos (₱2,000,000.00) while the second payment in the amount of Three Hundred Thousand
Pesos (P300,000.00) was made on June 30, 2011. On the same day, a Deed of Absolute Sale
was executed between Kristoff and Julieta. Upon learning of the foregoing events, Juan
executed an Affidavit of Adverse Claim.

Meanwhile, Kristoff and Julieta executed another Deed of Absolute Sale dated September 12,
2011 over the subject property and, by virtue thereof, the Register of Deeds of Quezon City
cancelled TCT No. 004- 2011003320 and issued TCT No. 004-201101350219 on December 5,
2011 in favor of Spouses Carlos. The affidavit of adverse claim executed by Juan was duly
carried over to the title of Spouses Carlos.

On February 23, 2012, Juan filed a complaint for annulment of title with damages against
Mercedes, Kristoff, Spouses Carlos, and the Register of Deeds of Quezon City before the R TC
of Quezon City.

RTC’s Decision:
It dismissed Juan's complaint. The R TC found that at the time Spouses Carlos fully paid the
agreed price in the MOA on June 30, 2011, which culminated in the execution of the Deed of
Absolute Sale on even date, Kristoff was the registered owner of the subject property covered
by TCT No. 004-2011003320. Further, when the MOA and the Deed of Absolute Sale dated
June 30, 2011 were executed, nothing was annotated on the said title to indicate the adverse
claim of Juan or any other person. It was only on July 15, 2011 when Juan's adverse claim was
annotated on Kristoff's title. The fact that a second Deed of Absolute Sale dated September 12,
2011 was executed is immaterial since the actual sale of the subject property took place on
June 30, 2011 when Spouses Carlos fully paid the purchase price. Thus, relying on the face of
Kristoff s title without any knowledge of irregularity in the issuance thereof and having paid a fair
and full price of the subject property before they could be charged with knowledge of Juan's
adverse claim, the RTC upheld Spouses Carlos' right over the subject property.

CA’s Decision:
On appeal, the CA found that Spouses Carlos were negligent in not taking the necessary steps
to determine the status of the subject property prior to their purchase thereof. It stressed that
Julieta failed to examine Kristoff s title and other documents before the sale as she merely relied
on her brother, Felix. Accordingly, the CA ruled that Juan has a better right over the subject
property.

Issue:
who, between Juan and Spouses Carlos, has the better to right to claim ownership over the
subject property.

Ruling:
Juan and Mercedes appear to have been married before the effectivity of the Family Code on
August 3, 1988. There being no indication that they have adopted a different property regime,
the presumption is that their property relations is governed by the regime of conjugal partnership
of gains. Since the subject property was acquired on March 17, 1967 during the marriage of
Juan and Mercedes, it formed part of their conjugal partnership. It follows then that Juan and
Mercedes are the absolute owners of their undivided one-half interest, respectively, over the
subject property.

Meanwhile, as in any other property relations between husband and wife, the conjugal
partnership is terminated upon the death of either of the spouses. In respondent Juan's
Comment filed before the Court, the Verification which he executed on February 9, 2018 states
that he is already a widower. Hence, the Court takes due notice of the fact of Mercedes' death
which inevitably results in the dissolution of the conjugal partnership.

In retrospect, as absolute owners of the subject property then covered by TCT No. RT-90746
(116229), Juan and Mercedes may validly exercise rights of ownership by executing deeds
which transfer title thereto such as, in this case, the Deed of Donation dated February 15, 2011
in favor of their grandson, Kristoff.

With regard to Juan's consent to the afore-stated donation, the RTC, however, found that such
was lacking since his signature therein was forged. Notably, the CA did not overturn such
finding, and in fact, no longer touched upon the issue of forgery. On the other hand, it must be
pointed out that the signature of Mercedes in the Deed of Donation was never contested and is,
therefore, deemed admitted.

In the present case, while it has been settled that the congruence of the wills of the spouses is
essential for the valid disposition of conjugal property, it cannot be ignored that Mercedes'
consent to the disposition of her one-half interest in the subject property remained undisputed. It
is apparent that Mercedes, during her lifetime, relinquished all her rights thereon in favor of her
grandson, Kristoff.

Furthermore, Mercedes' knowledge of and acquiescence to the subsequent sale of the subject
property to Spouses Carlos is evidenced by her signature appearing in the MOA dated April 12,
2011 and the Deed of Absolute Sale dated September 12, 2011. We are also mindful of the fact
that Spouses Carlos had already paid a valuable consideration in the amount of Two Million
Three Hundred Thousand Pesos (P2,300,000.00) for the subject property before Juan's adverse
claim was annotated on Kristoff s title. The said purchase and acquisition for valuable
consideration deserves a certain degree of legal protection.

Given the foregoing, the Court is disinclined to rule that the Deed of Donation is wholly void ab
initio and that the Spouses Carlos should be totally stripped of their right over the subject
property. In consonance with justice and equity, We deem it proper to uphold the validity of the
Deed of Donation dated February 15, 2011 but only to the extent of Mercedes' one half share in
the subject property.
Villamil vs. Spouses Erguiza
Facts:
Plaintiff is the absolute and exclusive owner of that certain parcel ofland more particularly
described as follows:
''A parcel of land (Lot 3371-C) of the subdivision plan (LRC) Psd-111002, being a portion of Lot
3371 Dagupan Cadastre

On 20 September 1972, plaintiff together with her deceased sister, Corazon Villamil, and
deceased brother, Teddy Villamil, entered into an agreement with Juanito Erguiza for the
purpose of selling the above-described property to the latter subject to the condition that plaintiff
and her siblings would file a petition to secure authorization for minor children from the proper
courts. Likewise, that in case of failure of the plaintiff and her siblings to obtain said authority,
the partial payment made by the defendant Juanito Erguiza shall be applied as rent for twenty
(20) years of the premises. During the course of time, TCT No. 23988 was cancelled and TCT
No. 30049 was issued by virtue of a quitclaim executed by Corazon Villamil and her children in
favor of the plaintiff. Likewise, TCT No. 30049 was cancelled and TCT No. 31125 (Annex "A")
was issued by virtue of a Deed of Sale executed by Efren Villamil and Teddy Villamil in favor of
the plaintiff. Copies of TCT No. 30049 are hereto attached and marked as Annex "E"; Sometime
in 1992 or after the lapse of twenty (20) years and the expiration of the twenty (20) years lease,
plaintiff demanded from the defendants to return possession of the property but the latter failed
and refused, and still fails (sic) and refuses (sic) to return possession of the property to the
damage and prejudice of the plaintiff; The Agreement, which petitioner and respondent-spouses
entered into in the sale and purchase of the subject property.

Respondents argue that the agreement between the co-heirs of plaintiff and defendants is for
the sale on condition of the subject property. A sale even if conditional transfers ownership to
the vendees. And before plaintiff could claim any right, there are certain proceedings which
must first be complied [with]. Defendants did not violate any of the terms and conditions
contained in the agreement to which plaintiff is trying to base her cause of action. It was plaintiff
who made sure that the condition contained under the contract to sell will not be complied with.
She caused the execution of documents to violate such rights and it was only now that
defendants learned of the same;

MTCC’s Decision:
In its decision, dated 15 November 2006, the MTCC ruled in favor of petitioner. It gave credence
to petitioner's claim that she communicated to respondent-spouses the fact of consolidation of
ownership in her name. The MTCC held that being an interested party in the collection of the
remaining balance, petitioner would naturally have made respondent-spouses aware of the
consolidation of ownership over the subject property. It declared that it was unbelievable that
respondent-spouses did not exert any effort to inquire from petitioner about the status of their
agreement. The MTCC concluded that respondent-spouses had no intention to pay the balance
of the purchase price and that they had become lessees of the subject property for twenty (20)
years with their down payment being treated as rentals.
RTC’s Decision:
In its decision, the RTC affirmed the ruling of the MTCC. It opined that the condition with respect
to judicial approval of the sale had become irrelevant when ownership over the subject property
was consolidated in favor of petitioner in 1973; thus, at that time, respondent-spouses were
bound to comply with their undertaking to pay the balance of the purchase price which they
failed to do.

CA’s Decision:
In its decision, the CA reversed and set aside the decision of the RTC. With respect to the
substantive issue, the appellate court declared that the agreement between the parties was a
contract to sell involving the subject property because the vendors reserved ownership and it
was subject to a suspensive condition, i.e., submission of the sellers of lacking documents or
court approval of the sale of the shares of the minor owners. The CA opined that
respondent​-spouses' passive and complacent position in not asserting from the sellers what
was incumbent under the subject agreement should not be taken against the former. It stressed
that the obligation to secure the necessary documents or approval of the court for the minor
children to be represented in the Deed of Absolute Sale, was incumbent upon the sellers. On
the contrary, the sellers had the positive duty to make known to the buyers that they were ready
to comply with what was mandated upon them, which act petitioner failed to prove by any
evidence. Thus, the CA concluded that respondent-spouses had more right to possess the
subject property pending consummation of the agreement or any outcome thereof.

Issue:
1. Whether or not Parties entered into a contract to sell.
2. whether the suspensive condition, i.e., judicial approval of the sale of the minor owners'
shares, upon which the obligation of the sellers to execute a deed of sale depends, is fulfilled.
3. Who has the better right?

Ruling:
1. An examination of the agreement would reveal that the parties entered into a contract to sell
the subject property. First, petitioner and her siblings who were then co-owners merely promised
to sell the subject property, thus, signifying their intention to reserve ownership. Second, the
execution of a deed of absolute sale was made dependent upon the proper court's approval of
the sale of the shares of the minor owners. Third, the agreement between the parties was not
embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication
that the parties did not intend immediate transfer of ownership.Fourth, petitioner retained
possession of the certificate of title of the lot. This is an additional indication that the agreement
did not transfer to private respondents, either by actual or constructive delivery, ownership of
the property.Finally, respondent Juanito admitted during trial that they have not finalized the
sale in 1972 because there were minor owners such that when they constructed their house
thereon, they sought the permission of petitioner.

2. Petitioner and her then co-owners undertook, upon receipt of the down payment from
respondent-spouses, the filing of a petition in court, after which they promised the latter to
execute the deed of absolute sale whereupon the latter shall, in turn, pay the entire balance of
the purchase price. The balance of the consideration shall be paid only upon grant of the court's
approval and upon execution of the deed of absolute sale.

Here, there is no doubt that petitioner prevented the fulfillment of the suspensive condition. She
herself admitted that they did not file any petition to seek approval of the court as regards the
sale of the shares of the minor owners. In addition, the other co-owners sold their shares to
petitioner such that she was able to consolidate the title in her name. Thus, the condition is
deemed constructively fulfilled, as the intent to prevent fulfillment of the condition and actual
prevention thereof were definitely present. Consequently, it was incumbent upon the sellers to
enter into a contract with respondent-spouses for the purchase of the subject property.

Respondent-spouses' obligation to pay the balance of the purchase price arises only when the
court's approval of the sale of the minor owners' shares shall have been successfully secured, in
accordance with Article 1181 of the New Civil Code. Judicial approval is a condition the
operative act of which sets into motion the period of compliance by respondent-spouses of their
own obligation, i.e., to pay the balance of the purchase price. Accordingly, an obligation
dependent upon a suspensive condition cannot be demanded until after the condition takes
place because it is only after the fulfillment of the condition that the obligation arises. Petitioner
cannot invoke the non-fulfillment of the condition in the contract to sell when she and her then
co-owners themselves are guilty of preventing the fulfillment of such condition. When it has
become evident that the condition would no longer be fulfilled, it was incumbent upon petitioner
to inform respondent​-spouses of such circumstance because the choice whether to waive the
condition or continue with the agreement clearly belongs to the latter. Petitioner's claim that
respondent-spouses should have known that the condition would no longer be necessary
because the latter knew that the minor owners had already reached the age of majority and that
they should have been more proactive in following up the status of the contract to sell, deserves
scant consideration. While petitioner may have been right in the aforementioned instances, the
same will not negate her obligation to inform respondent-spouses of the non-fulfillment of the
condition especially in view of the fact that it was her fault that the condition became irrelevant
and unnecessary.

3. Inasmuch as petitioner has not yet complied with her obligation to execute a deed of sale
after the condition has been deemed fulfilled, respondent-spouses are still entitled to possess
the subject property. Petitioner cannot anchor her claim on the supposed conversion of their
agreement from a contract to sell into a contract of lease as provided in the third paragraph of
the agreement which provides that should the court disapprove the sale of the shares of the
minor owners, the down payment would be treated as rentals for twenty (20) years. The
agreement, however, could not have been converted into a contract of lease for the simple
reason that there was no petition filed before any court seeking the approval of the sale as
regards the shares of the minor owners. Hence, the court did not have any occasion to approve
much less disapprove the sale of such shares. As a result, there was no reason for the contract
to sell to be converted into a contract of lease.
Respondent-spouses did not become lessees. They remained to be prospective buyers of the
subject property who, up to now, are awaiting fulfillment of the obligation of the prospective
sellers to execute a deed of sale. Hence, inasmuch as the sellers allowed them to have the
subject property in their possession pending the execution of a deed of sale,
respondent-spouses are entitled to possession pending the outcome of the contract to sell.