2022 BAR REVIEW CIVIL LAW

Handout No. 15
SALES & LEASE

SALES

NATURE AND FORM

Article 1458 of the Civil Code describes a contract of sale as a transaction by which “one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefore a price certain in money or its equivalent.”

The elements of a perfected contract of sale are the following: (1) the meeting of the minds of
the parties or their consent to a transfer of ownership in exchange for a price; (2) the determinate
object or subject matter of the contract; and (3) the price certain in money or its equivalent as
consideration for the sale. The absence of any of these elements renders a contract void. Agnes
Guison v. Heirs of Loreño Terry, et al., G.R. No. 191914, August 9, 2017

The law requires a definite agreement as to a “price certain”; otherwise, there is no true
meeting of the minds between the parties.

The price must be certain, otherwise there is no true consent between the parties. There can be
no sale without a price. In the instant case, however, what is dramatically clear from the evidence
is that there was no meeting of mind as to the price, expressly or impliedly, directly or indirectly.
Sale is a consensual contract. He who alleges it must show its existence by competent proof.
Here, the very essential element of price has not been proven. As there was no sufficient
evidence of a meeting of the minds between the parties with regard to the consideration for the
sale, we are compelled to declare the transaction null and void. Agnes Guison v. Heirs of Loreño
Terry, et al., G.R. No. 191914, August 9, 2017 citing Villanueva v. Court of Appeals, 267 SCRA
89, 1997

Under Article 1482 of the Civil Code, whenever earnest money is given in a contract of sale, it
shall be considered as “proof of the perfection of the contract.”

However, this is a disputable presumption, which prevails in the absence of contrary evidence.
The delivery of earnest money is not conclusive proof that a contract of sale exists. The existence
of a contract of sale depends upon the concurrence of the following elements: (1) consent or
meeting of the minds; (2) a determinate subject matter; and (3) price certain in money or its
equivalent. The defining characteristic of a contract of sale is the seller’s obligation to transfer
ownership of and deliver the subject matter of the contract. Without this essential feature, a

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contract cannot be regarded as a sale although it may have been denominated as such. Victoria
N. Racelis v. Sps. Germil and Rebecca Javier, G.R. No. 189609, January 29, 2018

“Contract of Sale” and “Contract to Sell,” Distinguished.

In a contract of sale, title to the property passes to the buyer upon delivery of the thing sold. In
contrast, in a contract to sell, ownership does not pass to the prospective buyer until full payment
of the purchase price. The title of the property remains with the prospective seller.

In a contract of sale, the nonpayment of the purchase price is a resolutory condition that entitles
the seller to rescind the sale. In a contract to sell, the payment of the purchase price is a positive
suspensive condition that gives rise to the prospective seller’s obligation to convey title.
However, non-payment is not a breach of contract but “an event that prevents the obligation of
the vendor to convey title from becoming effective.” The contract would be deemed terminated
or cancelled, and the parties stand “as if the conditional obligation had never existed. Victoria N.
Racelis v. Sps. Germil and Rebecca Javier, G.R. No. 189609, January 29, 2018

In a contract to sell, earnest money is generally intended to compensate the seller for the
opportunity cost of not looking for any other buyers.

Earnest money, under Article 1482 of the Civil Code, is ordinarily given in a perfected contract of
sale. However, earnest money may also be given in a contract to sell.

It is a show of commitment on the part of the party who intimates his or her willingness to go
through with the sale after a specified period or upon compliance with the conditions stated in
the contract to sell. Opportunity cost is defined as “the cost of the foregone alternative.” In a
potential sale, the seller reserves the property for a potential buyer and foregoes the alternative
of searching for other offers. Victoria N. Racelis v. Sps. Germil and Rebecca Javier, G.R. No.
189609, January 29, 2018

“Contract to Sell” and “Conditional Contract of Sale,” Distinguished.

In a contract to sell, the fulfillment of the suspensive condition will not automatically transfer
ownership to the buyer although the property may have been previously delivered to him. The

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prospective seller still has to convey title to the prospective buyer by entering into a contract of
absolute sale.

On the other hand, in a conditional contract of sale, the fulfillment of the suspensive condition
renders the sale absolute and the previous delivery of the property has the effect of automatically
transferring the seller’s ownership or title to the property to the buyer. Ventura vs. Heirs of
Spouses Eustacio T. Endaya, G.R. No. 190016, October 2, 2013

Where both the area and the boundaries of the immovable are declared in a sale of real estate
for a lump sum, the area covered within the boundaries of the immovable prevails over the
stated area.

The vendor is obliged to deliver all that is included within the boundaries regardless of whether
the actual area is more than what was specified in the contract of sale and he/she shall do so
without a corresponding increase in the contract price. This is particularly true when the stated
area is qualified to be approximate only, such as when the words “more or less” were used.
Dasmariñas T. Arcaina, et al. v. Noemi L. Ingram, G.R. No. 196444, February 15, 2017

In a lump sum contract, a vendor is generally obligated to deliver all the land covered within
the boundaries, regardless of whether the real area should be greater or smaller than that
recited in the deed.

However, in case there is conflict between the area actually covered by the boundaries and the
estimated area stated in the contract of sale, he/she shall do so only when the excess or
deficiency between the former and the latter is reasonable. Dasmariñas T. Arcaina, et al. v.
Noemi L. Ingram, G.R. No. 196444, February 15, 2017

The use of ‘more or less’ or similar words in designating quantity covers only a reasonable
excess or deficiency.

The difference of 5,800 sq. m. is too substantial to be considered reasonable. We note that only
6,200 sq. m. was agreed upon between petitioners and respondent (Ingram). Declaring Ingram
as the owner of the whole 12,000 sq. m. on the premise that this is the actual area included in
the boundaries would be ordering the delivery of almost twice the area stated in the deeds of
sale. Article 1542 does not contemplate such an unfair situation to befall a vendor — that he/she

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would be compelled to deliver double the amount that he/she originally sold without a
corresponding increase in price. Dasmariñas T. Arcaina, et al. v. Noemi L. Ingram, G.R. No.
196444, February 15, 2017

Despite the document embodying the agreement on the sale not being acknowledged before a
notary public, the non-observance of the form prescribed by Article 1358(1) of the Civil Code
did not render the sale invalid.

It is required under Article 1403(2) of the Civil Code that the sale of real property, to be
enforceable, should be in a writing subscribed by the party charged for it. This requirement was
met herein by the Franciscos even in the absence of any formal deed of sale. Considering that
the agreement between the parties on the sale was reduced in writing: and signed by the late
Spouses Alipio and Vivina Barredo as the sellers, the sale was enforceable under the Statute of
Frauds.

The form required by Article 1358 was only for convenience of the parties and was not essential
to the validity or enforceability of the sale. Lourdes J. Estrellado, et al. v. Presiding Judge of the
Municipal Trial Court in Cities, 11th Judicial Region, Branch 3, Davao City, G.R. No. 164482,
November 8, 2017

Under Articles 1461 and 1462, things having a potential existence and “future goods,” i.e.,
those that are yet to be manufactured, raised, or acquired, may be the objects of contracts of
sale.

Article 1347 provides that “[a]ll things which are not outside the commerce of men, including
future things, may be the object of a contract.” Under Articles 1461 and 1462, things having a
potential existence and “future goods,” i.e., those that are yet to be manufactured, raised, or
acquired, may be the objects of contracts of sale.

[In this case] the narrow interpretation advocated by the Spouses Villaluz would create a
dissonance between Articles 1347, 1461, and 1462, on the one hand, and Article 1409(3), on the
other. A literal interpretation of the phrase “did not exist at the time of the transaction” in Article
1409(3) would essentially defeat the clear intent and purpose of Articles 1347, 1461, and 1462
to allow future things to be the objects of contracts. To resolve this apparent conflict, Justice
J.B.L. Reyes commented that the phrase “did not exist” should be interpreted as “could not come
into existence” because the object may legally be a future thing. [The Court] adopt this

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interpretation. Sps. May S. Villaluz and Johnny Villaluz, Jr. v. Land Bank of the Philippines, et
al., G.R. No. 192602, January 18, 2017

CAPACITY TO BUY OR SELL

The sale (or encumbrance) of conjugal property without the consent of the husband was not
merely voidable but void; hence, it could not be ratified.

Here, the falsity of the SPA could not be cured even if respondent Magtanggol later on informed
petitioner Delfin of the mortgage transaction and of the proceedings leading to the property’s
foreclosure, consolidation of title, and issuance of a new title.

A void contract is equivalent to nothing and is absolutely wanting in civil effects; it cannot be
validated either by ratification or prescription. Delfin Domingo Dadis v. Sps. Magtanggol De
Guzman, et al., G.R. No. 206008, June 7, 2017

Article 1505 of the Civil Code instructs that “where goods are sold by a person who is not the
owner thereof, and who does not sell them under authority or with the consent of the owner,
the buyer acquires no better title to the goods than the seller had, unless the owner of the
goods is, by his conduct, precluded from denying the seller’s authority to sell.

The Court settled that respondent Peña acquired the properties by virtue of a null and void
execution sale. In effect, his buyers acquired no better title to the goods than he had. By virtue
of Article 1505, the true owners of the goods are definitely not legally precluded from claiming
the ownership of their actual properties. Delfin C. Gonzales, Jr. v. Magdaleno M. Peña, G.R. No.
214303, January 30, 2017

EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST

In the absence of an express assumption of risk by the buyer, the things sold remain at seller’s
risk until the ownership thereof is transferred to the buyer.

Article 1496 of the Civil Code which provides that “in the absence of an express assumption of
risk by the buyer, the things sold remain at seller’s risk until the ownership thereof is transferred
to the buyer,” is applicable to this case, for there was neither an actual nor constructive delivery

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of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the
owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-
known doctrine of res perit domino. Norkis Distributors, Inc. v. Court of Appeals and Alberto
Nepales. G.R. No. 91029, February 7, 1991

[T]he general rule is that before delivery, the risk of loss is borne by the seller who is still the
owner, under the principle of res perit domino.

From the evidentiary record, Negros Navigation was the party negligent in failing to deliver the
complete shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial Court found,
petitioner failed to comply with the conditions precedent to the filing of a judicial action. Thus,
in the last analysis, it is petitioner that must shoulder the resulting loss. The general rule that
before delivery, the risk of loss is borne by the seller who is still the owner, under the principle
of “res perit domino”, is applicable in petitioner’s case. Chrysler Philippines Corporation v. Court
of Appeals and Sambok Motors Co. (Bacolod), No. L-55684. December 19, 1984

When the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss
is borne by the buyer.

ART. 1504. Unless otherwise agreed, the goods remain at the seller’s risk until the ownership
therein is transferred to the buyer, but when the ownership therein is transferred to the buyer
the goods are at the buyer’s risk whether actual delivery has been made or not, except that: (1)
Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk
from the time of such delivery; (2) Where actual delivery has been delayed through the fault of
either the buyer or seller the goods are at the risk of the party in fault.

Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of
loss is borne by the buyer. Gaisano Cagayan, Inc. v. Insurance Company of North America, G.R.
No. 147839, June 8, 2006

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OBLIGATION OF THE VENDOR

A warranty is a statement or representation made by the seller of goods — contemporaneously

and as part of the contract of sale — that has reference to the character, quality or title of the
goods; and is issued to promise or undertake to insure that certain facts are or shall be as the
seller represents them.

A warranty is not necessarily written. It may be oral as long as it is not given as a mere opinion or
judgment. Rather, it is a positive affirmation of a fact that buyers rely upon, and that influences
or induces them to purchase the product. Philippines Steel Coating Corp. v. Eduard Quiñones,
G.R. No. 194533, April 19, 2017

Under Article 1546 of the Civil Code, “no affirmation of the value of the thing, nor any statement
purporting to be a statement of the seller’s opinion only, shall be construed as a warranty,
unless the seller made such affirmation or statement as an expert and it was relied upon by the
buyer.”

Despite its claims to the contrary, petitioner PhilSteel was an expert in the eyes of the buyer
Quiñones. The latter had asked if the primer-coated G.I. sheets were compatible with Amianan
Motors’ acrylic painting process. Petitioner’s former employee, Lopez, testified that he had to
refer Quiñones to the former’s immediate supervisor, Angbengco, to answer that question. As
the sales manager of PhilSteel, Angbengco made repeated assurances and affirmations and even
invoked laboratory tests that showed compatibility. In the eyes of the buyer Quiñones, PhilSteel
— through its representative, Angbengco — was an expert whose word could be relied upon.
Philippines Steel Coating Corp. v. Eduard Quiñones, G.R. No. 194533, April 19, 2017

There being an express warranty, the prescription period applicable is that prescribed for
breach of an express warranty. The applicable prescription period is therefore that which is
specified in the contract; in its absence, that period shall be based on the general rule on the
rescission of contracts: four (4) years.

In this case, no prescription period specified in the contract between the parties has been put
forward. Respondent Quiñones filed the instant case on 6 September 1996 or several months
after the last delivery of the thing sold. His filing of the suit was well within the prescriptive period
of four years; hence, his action has not prescribed. Philippines Steel Coating Corp. v. Eduard
Quiñones, G.R. No. 194533, April 19, 2017

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A warranty is a collateral undertaking in a sale of either real or personal property, express or

implied; that if the property sold does not possess certain incidents or qualities, the purchaser
may either consider the sale void or claim damages for breach of warranty.

A warranty may either be express or implied. An express warranty pertains to any affirmation of
fact or any promise by the seller relating to the thing, the natural tendency of which is to induce
the buyer to purchase the same. It includes all warranties derived from the language of the
contract, so long as the language is express — it may take the form of an affirmation, a promise
or a representation. On the other hand, an implied warranty is one which the law derives by
application or inference from the nature of transaction or the relative situation or circumstances
of the parties, irrespective of any intention of the seller to create it.

In other words, an express warranty is different from an implied warranty in that the former is
found within the very language of the contract while the latter is by operation of law. Pilipinas
Makro, Inc. v. Coco Charcoal Philippines, Inc., et al., G.R. No. 196419, October 4, 2017

A seller is generally responsible for warranty against hidden defects of the thing sold.

As stated in Article 1561 of the New Civil Code: “The vendor shall be responsible for warranty
against the hidden defects which the thing sold may have, should they render it unfit for the use
for which it is intended, or should they diminish its fitness for such use to such an extent that,
had the vendee been aware thereof, he would not have acquired it or would have given a lower
price for it; but said vendor shall not be answerable for patent defects or those which may be
visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or
profession, should have known.” Article 1566, paragraph 2 states the seller’s liability for hidden
defects shall be inapplicable if there is a stipulation made to the contrary. However, a mere
stipulation does not suffice. To be fully absolved of liability, Article 1566, paragraph 2 also
requires a seller to be unaware of the hidden defects in the thing sold.

In this case, respondent Union Bank’s reliance on [Section 12’s] as-is-where-is stipulation is
misplaced for two (2) reasons. First, a stipulation absolving a seller of liability for hidden defects
can only be invoked by a seller who has no knowledge of hidden defects. Respondent here knew
that the Unit’s area, as reckoned in accordance with the Condominium Act, was not 95 square
meters. Second, an as-is-where-is stipulation can only pertain to the readily perceptible physical
state of the object of a sale. It cannot encompass matters that require specialized scrutiny, as
well as features and traits that are immediately appreciable only by someone with technical
competence. Joseph Harry Walter Poole-Blunden v. Union Bank of the Philippines, G.R. No.
205838, November 29, 2017

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As-is-where-is stipulations can only encompass physical features that are readily perceptible by
an ordinary person possessing no specialized skills.

A bank that wrongly advertises the area of a property acquired through foreclosure because it
failed to dutifully ascertain the property’s specifications is grossly negligent as to practically be in
bad faith in offering that property to prospective buyers. Any sale made on this account is
voidable for causal fraud. In actions to void such sales, banks cannot hide under the defense that
a sale was made on an as-is-where-is basis. Joseph Harry Walter Poole-Blunden v. Union Bank
of the Philippines, G.R. No. 205838, November 29, 2017

Under the Civil Code, the vendor shall be answerable for warranty against hidden defects on
the thing sold.

For the implied warranty against hidden defects to be applicable, the following conditions must
be met: a. Defect is Important or Serious; i. The thing sold is unfit for the use which it is intended;
ii. Diminishes its fitness for such use or to such an extent that the buyer would not have acquired
it had he been aware thereof; b. Defect is Hidden; c. Defect Exists at the time of the sale; d. Buyer
gives Notice of the defect to the seller within reasonable time.

Here, the petitioners observed big cracks on the walls and floors of their dwellings within two
years from the time they purchased the units. The damage in their respective houses was
substantial and serious. They reported the condition of their houses to La Paz, but the latter did
not present a concrete plan of action to remedy their predicament. They also brought up the
issue of water seeping through their houses during heavy rainfall, but again La Paz failed to
properly address their concerns. The structural cracks and water seepage were evident
indications that the soil underneath the said structures could be unstable. Verily, the condition
of the soil would not be in the checklist that a potential buyer would normally inquire about from
the developer considering that it is the latter’s prime obligation to ensure suitability and stability
of the ground. Atty. Geromo, et al. v. La Paz Housing and Development Corp., et al., G.R. No.
211175, January 18, 2017

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The term “procuring cause,” in describing a broker’s activity, refers to a cause originating a
series of events which, without break in their continuity, results in the accomplishment of the
prime objective of employing the broker — to produce a purchaser ready, willing and able to
buy real estate on the owner’s terms.

To be regarded as the procuring cause of a sale, a broker’s efforts must have been the foundation
of the negotiations which subsequently resulted in a sale. “The broker must be the efficient agent
or the procuring cause of the sale. The means employed by him and his efforts must result in the
sale. He must find the purchaser, and the sale must proceed from his efforts acting as broker.”

When there is a close, proximate and causal connection between the agent’s efforts and the sale
of the property, the agents are entitled to their commission. Ma. Lorena Ticong v. Manuel A.
Malim, et al., G.R. Nos. 220785 & 222887, March 1, 2017

DOUBLE SALES

The rule on double sale applies only when there are two perfected “Contracts of Sale”.

If there is only one valid sale and another contract to sell where full payment has never been
made, the rule on double sales under Article 1544 of the Civil Code does not apply. Spouses
Domingo vs. Manzano and Aquino, G.R. No. 201883, November 16, 2016

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of a double sale of immovable property.

The Court has consistently ruled 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.

The requirement of the law then is two-fold: acquisition in good faith and registration in good
faith. Good faith must concur with the registration — that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or must not have been aware of facts which
should have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor. If it is shown that a buyer was in bad faith, the alleged

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registration they have made amounted to no registration at all. Spring Homes Subdivision Co.,
Inc., et al. v. Sps. Pedro Tablada, Jr. and Zenaida Tablada, G.R. No. 200009, January 23, 2017

Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights
except only as provided by law, as in cases where the second buyer first registers in good faith
the second sale ahead of the first.

Such knowledge of the first buyer does bar her from availing of her rights under the law, among
them, first her purchase as against the second buyer. But conversely, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register the second sale, since
such knowledge taints his prior registration with bad faith. Spring Homes Subdivision Co., Inc.,
et al. v. Sps. Pedro Tablada, Jr. and Zenaida Tablada, G.R. No. 200009, January 23, 2017

In order for the second buyers [Spouses Lumbres] to obtain priority over the first buyers
[Spouses Tablada], the law requires a continuing good faith and innocence or lack of knowledge
of the first sale that would enable their contract to ripen into full ownership through prior
registration.

In this case, the Spouses Lumbres had already known from the very beginning of the fact that the
subject property had previously been sold to the Spouses Tablada, by virtue of a valid Deed of
Absolute Sale. In fact, the Spouses Tablada were already in possession of said property and had
even constructed a house thereon. Clearly then, the Spouses Lumbres were in bad faith the
moment they entered into the second Deed of Absolute Sale and thereafter registered the
subject property in their names. For this reason, the Court cannot consider them as the true and
valid owners of the disputed property and permit them to retain title thereto. Spring Homes
Subdivision Co., Inc., et al. v. Sps. Pedro Tablada, Jr. and Zenaida Tablada, G.R. No. 200009,
January 23, 2017

BREACH OF CONTRACT

Warranty, defined.

A warranty is a collateral undertaking in a sale of either real or personal property, express or

implied; that if the property sold does not possess certain incidents or qualities, the purchaser

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may either consider the sale void or claim damages for breach of warranty. Pilipinas Makro, Inc.
v. Coco Charcoal Philippines, Inc., et al., G.R. No. 196419, October 4, 2017

The Supreme Court (SC) ruled in a number of cases that the sale of conjugal property by a spouse
without the other’s consent is void.

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.

In Bucoy v. Paulino, 23 SCRA 248 (1968): As the statute now stands, the right of the wife is
directed at “the annulment of any contract,” referring to real property of the conjugal
partnership entered into by the husband “without her consent.” The plain meaning attached to
the plain language of the law is that the contract, in its entirety, executed by the husband without
the wife’s consent, may be annulled by the wife. Melinda M. Malabanan v. Francisco
Malabanan, Jr., et al. G.R. No. 187225, March 6, 2019

A person is a buyer in good faith or an “innocent purchaser for value” when he or she purchases
and pays the fair price for a property, absent any notice that another has a right over it.

If the property is covered by a certificate of title, the buyer may rely on it and is not obliged to go
beyond its four (4) corners. Sigaya v. Mayuga, 467 SCRA 341 (2005), however, provides for
situations where this rule does not apply: [T]his rule shall not apply when the party has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make such
inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of
sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the
property in litigation. x x x

To justify good faith in merely relying on the certificate of title, the following must be present:
[F]irst, the seller is the registered owner of the land; second, the latter is in possession thereof;
and third, at the time of the sale, the buyer was not aware 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. Melinda M. Malabanan v. Francisco Malabanan, Jr., et al. G.R. No.
187225, March 6, 2019

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EXTINGUISHMENT

In a sale with right to repurchase (pacto de retro), the title and ownership of the property sold
are immediately vested in the vendee, subject to the resolutory condition of repurchase by the
vendor within the stipulated period.

The right of repurchase agreed upon is one of conventional redemption governed by Article 1601,
in relation to Article 1616, of the New Civil Code. This right is separate and distinct from the legal
redemption granted to co-owners under Article 1620 of the New Civil Code. More importantly,
the right to repurchase is separate from the title or ownership over the property subject of the
sale with pacto de retro. Heirs of Roger Jarque v. Marcial Jarque, et al., G.R. No. 196733,
November 21, 2018

As a rule, the right to repurchase under Article 1601 may only be exercised by the vendor, or
his successors. If so exercised, the ownership of the property reverts back to the vendor or his
successor.

On the other hand, if a third person redeems the property on behalf of the vendor, he or she
does not become owner of the property redeemed, but only acquires a lien over the property for
the amount advanced for its repurchase. As such, the third person's right merely consists of the
right to be reimbursed for the price paid to the vendee.

In this case, the right to repurchase belonged to Servanda which she may, undoubtedly, transfer
to anyone, including Dominga. However, the Court finds that the claim that Servanda transferred
her right of repurchase to Dominga so as to make the latter acquire title to or ownership over
the aliquot share of Servanda in her own right is not supported by evidence. Heirs of Roger Jarque
v. Marcial Jarque, et al., G.R. No. 196733, November 21, 2018

A contract where the vendor/mortgagor remains in physical possession as lessee or otherwise

has been held to be an equitable mortgage.

An equitable mortgage has been defined as one which although lacking in some formality, or
form or words, or other requisites demanded by a statute, nevertheless reveals the intention of
the parties to charge real property as security for a debt, there being no impossibility nor
anything contrary to law in this intent.

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In determining the nature of a contract, the Court is not bound by the title or name given to it by
the parties, but by their intention, as shown not necessarily by the terminology used in the
contract but by their conduct, words, actions and deeds prior to, during and immediately
after executing the agreement. Sps. George and Mercedes Gallent v. Juan G. Velasquez, G.R.
Nos. 203949 & 205071, April 6, 2016

ASSIGNMENT OF CREDITS

An assignment of credit has been defined as an agreement by virtue of which the owner of a
credit, known as the assignor, by a legal cause - such as sale, dation in payment or exchange or
donation - and without need of the debtor's consent, transfers that credit and its accessory
rights to another, known as the assignee, who acquires the power to enforce it to the same
extent as the assignor could have enforced it against the debtor.

The obligations between assignor and assignee will depend upon the judicial relation which is the
basis of the assignment. An assignment will be construed in accordance with the rules of
construction governing contracts generally, the primary object being always to ascertain and
carry out the intention of the parties. This intention is to be derived from a consideration of the
whole instrument, all parts of which should be given effect, and is to be sought in the words and
language employed. UCPB v. Sps. Walter Uy and Lily Uy, G.R. No. 204039, January 10, 2018

LEASE

Being a consensual contract, a lease is perfected at the moment there is a meeting of the minds
upon the thing and the cause or consideration which are to constitute the contract.

Thereafter, the lessor is obliged to deliver the thing which is the object of the contract in such a
condition as to render it fit for the use intended, and the lessee is obliged to use the thing leased
as a diligent father of a family, devoting it to the use stipulated or that which may be inferred
from the nature of the thing leased. Hilltop Market Fish Vendors’ Association, Inc. v. Hon.
Braulio Yaranon, et al., G.R. No. 188057, July 12, 2017

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In a contract of lease, the cause or essential purpose is the use and enjoyment of the thing.

The thing or subject matter of the contract in this case was clearly identified and agreed upon as
the lot where the building would be constructed by Hilltop. The consideration were the annual
lease rental and the ownership of the building upon the termination of the lease period.
Considering that Hilltop and the City of Baguio agreed upon the essential elements of the
contract, the contract of lease had been perfected. From the moment that the contract is
perfected, the parties are bound to fulfill what they have expressly stipulated. Thus, the City of
Baguio gave the use and enjoyment of its lot to Hilltop. Hilltop Market Fish Vendors’ Association,
Inc. v. Hon. Braulio Yaranon, et al., G.R. No. 188057, July 12, 2017

The continuance, effectivity, and fulfillment of a contract of lease cannot be made to depend
exclusively upon the free and uncontrolled choice of the lessee.

In a reciprocal contract like a lease, the period must be deemed to have been agreed upon for
the benefit of both parties, absent language showing that the term was deliberately set for the
benefit of the lessee or lessor alone. Hilltop Market Fish Vendors’ Association, Inc. v. Hon.
Braulio Yaranon, et al., G.R. No. 188057, July 12, 2017

Article 1658 of the Civil Code allows a lessee to postpone the payment of rent if the lessor fails
to either (1) “make the necessary repairs” on the property or (2) “maintain the lessee in
peaceful and adequate enjoyment of the property leased.”

This provision implements the obligation imposed on lessors under Article 1654(3) - to maintain
the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the
contract - of the Civil Code. The failure to maintain the lessee in the peaceful and adequate
enjoyment of the property leased does not contemplate all acts of disturbance. Lessees may
suspend the payment of rent under Article 1658 of the Civil Code only if their legal possession is
disrupted. Victoria N. Racelis v. Sps. Germil and Rebecca Javier, G.R. No. 189609, January 29,
2018

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SALES & LEASE

Assuming that respondents were entitled to invoke their right under Article 1658 of the Civil
Code, this does exonerate them from their obligation under Article 1657 of the Civil Code “to
pay the price of the lease according to the terms stipulated.”

In this case, the disconnection of electrical service over the leased premises on May 14, 2004 was
not just an act of physical disturbance but one that is meant to remove respondents from the
leased premises and disturb their legal possession as lessees. Ordinarily, this would have entitled
respondents to invoke the right accorded by Article 1658 of the Civil Code.

However, this rule will not apply in the present case because the lease had already expired when
petitioner requested for the temporary disconnection of electrical service. Petitioner demanded
respondents to vacate the premises by May 30, 2004. Instead of surrendering the premises to
petitioner, respondents unlawfully withheld possession of the property. Respondents continued
to stay in the premises until they moved to their new residence on September 26, 2004. At that
point, petitioner was no longer obligated to maintain respondents in the “peaceful and adequate
enjoyment of the lease for the entire duration of the contract.” Therefore, respondents cannot
use the disconnection of electrical service as justification to suspend the payment of rent. Lessees
who exercise their right under Article 1658 of the Civil Code are not freed from the obligations
imposed by law or contract. Victoria N. Racelis v. Sps. Germil and Rebecca Javier, G.R. No.
189609, January 29, 2018

Once a lease is recorded, it becomes binding on third persons.

From the time of the execution of the lease contract, its efficacy continues until it is terminated
on the grounds provided for by law. In this case, assuming that petitioner PMO was a third party
to the Lease Agreement, it is still bound by it. Respondent PIC’s leasehold rights have been clearly
annotated on TCT No. 90816. Republic v. Philippine International Corporation, G.R. No. 181984,
March 20, 2017

The act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease.

It has been ruled that where a customer simply pays a fee, parks his car in any available space in
the lot, locks the car and takes the key with him, the possession and control of the car -necessary
elements in bailment- do not pass to the parking lot operator, hence, the contractual relationship
between the parties is one of lease. Mamaril vs. The Boy Scout of the Philippines, G.R. No.
179382, January 14, 2013

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