CEREZO, SBU-COL Mendiola A.Y.

2021-2022 *use at your own risk*

ATTY. BUSMENTE - SALES DOCTRINES
MODULE 1 - I. Contract of Sale, Concepts (Articles 1458, 1638, 1466- 1468, New Civil Code); II. Object of Sale
(Articles 1306, 1459-1465, New Civil Code); III. Price (Articles 1469-1474, New Civil Code); IV. PARTIES TO A
CONTRACT OF SALE (NCC 1327, 1489)
Dignos vs. CA SHORT FACTS: Dignos spouses sold a DOCTRINE: Valid contract of sale
parcel of land to Jabil payable in two even though the vendee paid in
(158 SCRA 375) installments, an assumption of installment, all elements for contract
indebtedness with a bank, and a deed of sale are present, and there was
of sale. Dignos spouses subsequently already an actual delivery to the
then sold the parcel of land through a vendee by the vendors and already
deed of absolute sale to Spouses exercising possession over the
Cabigas. subject land.

(Land belongs to Dignos spouses as

Tan vs. Benorilao SHORT FACTS: Petitioners executed a
Deed of Conditional Sale in favor of
(GR No. 153820) Tan, Tan then delivered a check for the
down payment. Benorilao (one of the
petitioners) died intestate, so the
widow executed an extrajudicial
settlement where a new certificate of
title was issued with an annotation.
Tan still had 2 months to pay as per
the Deed of Conditional Sale, but he
failed to do so saying that the
certificate of title is no longer a clean
title because of the annotation and
that he can no longer be obliged to pay
the remaining balance and demands
for the reimbursement of down
payment and rescission of the
contract.
Artates vs. Urbi SHORT FACTS: A public sale of a land
was conducted by the Provincial
(GR No. L-29421) Sheriff to satisfy a judgment against
Lino Artates for physical injuries
inflicted by Artates upon Urbi.
Pliaintiff-Spouses alleged that the sale
of the homestead to satisfy and
indebtedness of Artates violated the
provision of Public Land Law
exempting said property from
execution for any debt contracted
within five years from date of the
issuance of the patent
Heirs of Enrique Zambales vs. SHORT FACTS: The spouses Zambales
CA were illiterate and were the homestead
patentees of a parcel of land. Atty.
(120 SCRA 897) Reyes, and the Corporation entered
into an agreement which state, among
others, that the Zambaleses are giving
elements in Art. 1458 are present.)
DOCTRINE: Contract of sale vs.
Contract to sell: The essence of a
contract of sale is the transfer of
ownership in exchange for a price
paid or promised. A contract to sell is
a bilateral contract whereby the
prospective seller expressly
reserving the ownership of the
property binds himself to sell the
property exclusively to the
prospective buyer upon fulfillment of
the condition agreed.
(The contract between the parties
was merely a contract to sell where
the vendors retained title and
ownership to the property until Tan
had fully paid the purchase price.)
DOCTRINE: Illicit per accidens, the
land could not be subject to sale
since it is protected by the Public
Land Act that grants ownership of
the homestead patent to the
owners for 5 years hence, the land
could not be subject to pay for the
damages accrued by one of the
spouses
(The sale of homestead violated the
provision of the Public Land law.)
DOCTRINE: There was legal capacity
of the spouses Zambales even
though they were deaf, they were
able to hire prominent and credible
lawyers thus, showing that there
was no misinterpretation nor fraud
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
the Corporation full power and
authority to sell, transfer and convey or
at any time thereafter the whole or any
part of herein subject property.
Corporation then sold the land.
Spouses now seek an "Annulment of a
Deed of Sale with Recovery of
Possession and Ownership with
Damages”, alleging that Atty. de los
Reyes and the Corporation induced
them through fraud, deceit and
manipulation to sign the Compromise
Agreement.
Quiroga vs. Parsons SHORT FACTS: Quiroga and Parsons
entered into a contract making the
(38 Phil 501) latter an agent of the former. The
contract only stipulates that J.Parsons
should pay Quiroga within 6 months
upon the delivery of beds. Quiroga
then files a case against Parsons for
allegedly violating stipulations not
initially included in the contract.
Concrete Aggregates Inc. vs. SHORT FACTS: Petitioner Concrete
CTA Aggregates, Inc. is a domestic
corporation which maintains and
(185 SCRA 461) operates a plant at Longos, Quezon
City for the production of ready-mixed
concrete and plant-mixed hot asphalt
and an aggregate plant at Montalban,
Rizal which processes rock aggregates
mined by it from private lands.
People’s Homesite vs. CA SHORT FACTS: Mendoza was awarded
Lot 4 of a Consolidation Subdivision
(133 SCRA 777) Plan (CSP) but she was not able to pay
the price of the lot nor the 20% initial
deposit. The Board of directors then
awarded the lot to 5 other individuals
who complied with the 20% initial
deposit.
Toyota Shaw Inc. vs. CA SHORT FACTS:
Bernardo, acting a sales representative
(244 SCRA 320) had an Agreement with a Mr. Sosa
where the latter will pay a down
payment of 100K and Toyota will then
release a unit. However, Bernardo was
not able to release the car due to the
disapproval of BA Finance on the credit
application. Sosa then asked for a
refund on the down payment with
in acquiring their consent. However,
the homestead patent is still
covered by the Public Land Act,
thus, ownership is retained.
DOCTRINE: It is a contract of a sale
and not contract of agency to sell
because of the presence of essential
clauses in the contract and all
essential requisites of a contract of
sale were present.
DOCTRINE: They were engaged in a
contract of sale and as a
manufacturer and not a contractor
since their products was available to
the general public.
DOCTRINE: In conditional
obligations, the acquisition of rights,
as well as the extinguishment or loss
of those already acquired, shall
depend upon the happening of the
event which constitutes the
condition.
(No, there was no perfected sale of
Lot 4 to the Mendozas.)
DOCTRINE: There was no full
purchase price negotiated, thus,
there is no price certain in the
agreement, hence, lacking one of
the essential requisites for a
contract of sale. It cannot bind
appellee in the contract since the
sales representative was the only
one who contracted with the buyer
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
interest and damages. Toyota (The agreement between Toyota
conceded to the down payment, but and Sosa is not a contract of sale. A
not to the interest and damages. definite agreement on the manner
Toyota contended that there was no of payment of the price is an
perfected contract of sale, and that essential element in the formation
Bernardo had no authority to sign the of a binding and enforceable
agreement in his personal capacity. contract of sale)
Sampaguita Pictures vs. SHORT FACTS: Sampaguita Pictures DOCTRINE: Ownership is not
Jalwindor Manufacturers Inc. leased to Capitol 300, a roof deck of its transferred by perfection of the
building with the agreement that any contract but by delivery, either
(93 SCRA 420) permanent improvements made on the actual or constructive. Payment of
property by Capitol shall belong to the purchase price is not essential to
Sampaguita. Capitol then installed glass the transfer of ownership as long as
and wooden jalousies purchased from the property sold has been
credit from respondent Jalwindor delivered. Ownership is acquired
Manufacturers, Inc. Capitol failed to from the moment the thing sold was
pay for the glass and wooden jalousies delivered to vendee, as when it is
owed to Jalwindor Manufacturers and placed in his control and possession.
the rent for the roof deck owed to
Sampaguita Pictures. The glass and (Sampaguita is declared the lawful
wooden jalousies were levied by the owner of the disputed glass and
Sheriff of Quezon City. Sampaguita wooden jalousies.)
contended in Third Party Claim that
they have the right and title to the
possession of the disputed items.
MODULE 2 - I. Formation / Perfection of Contract of Sale (Articles 1475-1488, 1325-1326, 1319, 1874, 1581,
1403New Civil Code); II. Parties to the Contract of Sale (Articles 1489-1494, New Civil Code)
Limson vs. CA SHORT FACTS: Respondents offered to DOCTRINE: “Earnest money” and
sell to petitioner a parcel of lang, “option money” are not the same.
(357 SCRA 209) petitioner gave 20K as “earnest money” (a) earnest money is part of the
and gave her a 10-day option to purchase price, while option money
purchase the property. Property in is the money given as a distinct
question is mortgaged to spouses consideration for an option
Ramos. Land was then a subject of contract; (b) earnest money given
negotiation of sale to SUNVAR Realty only where there is already a sale,
Development Corporation. Petitioner while option money applies to a sale
move for the annulment of the sale and not yet perfected; and, (c) when
cancellation of title issued to SUNVAR. earnest money is given, the buyer is
bound to pay the balance, while
when the would-be buyer gives
option money, he is not required to
buy but may even forfeit it
depending on the terms of the
option.

(There is nothing in the Receipt

which indicates that the P20,000.00
was part of the purchase price.
Moreover, it was not shown that
there was a perfected sale between
the parties where earnest money
was given.)
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
San Miguel Properties vs. SHORT FACTS: SMP offered for sale two
Huang, parcels of land to which respondents
expressed their interest to buy. P500K
(336 SCRA 737)
was given as earnest-deposit money
provided that petitioner shall give SMP
exclusive option to buy the said
property within 30 days, stipulate the
terms and conditions of both parties
during the said period and a refund of
the earnest deposit money in case of
failure to agree which was confirmed
by Isidro A. Sobrecarey, petitioner’s
vice-president and operations manager
for corporate real estate. Negotiation
commenced but parties failed to agree
on the terms and conditions of the sale
despite the extension granted by
petitioner is returning the amount of
₱1 million given as “earnest-deposit”.
Atkins, Kroll & Co. vs. Cua Hian SHORT FACTS: Petitioner seeks to
Tek reverse the decision where it was
ordered to pay damages to the
(102 Phil 948)
respondent for its failure to deliver the
sardines which it offered to the latter.
It avers that there was no contract of
sale but a mere option to buy which
could not be binding upon itself as the
respondent did not secure the same
with consideration.
Bible Baptist Church vs. CA SHORT FACTS: Baptist Church entered
into a 15-year contract of lease with
(G.R. No. 126454, 26 spouses Villanueva of a property in
November 2004)
Malate, Manila. The contract includes a
stipulation of an option to buy the
leased premises within the lease
period. Baptist Church argue that the
consideration supporting the option
was their agreement to pay off the
Villanueva’s P84,000 loan with the
bank, thereby freeing the subject
property from the mortgage
encumbrance. Respondent on the
DOCTRINE: The ₱1 million “earnest-
deposit” could not have been given
as earnest money as contemplated in
Art. 1482 because, at the time when
petitioner accepted the terms of
respondents’ offer of March 29,
1994, their contract had not yet been
perfected. This is evident from the
following conditions attached by
respondents to their letter, to wit: (1)
that they be given the exclusive
option to purchase the property
within 30 days from acceptance of
the offer; (2) that during the option
period, the parties would negotiate
the terms and conditions of the
purchase; and (3) petitioner would
secure the necessary approvals while
respondents would handle the
documentation.
DOCTRINE: If the option is given
without consideration, it is a mere
offer of a contract of sale, which is
not binding until accepted. If,
however, accepted is made before a
withdrawal, it constitutes a binding
contract of sale even though the
option was not supported by a
sufficient consideration.
An option is unilateral: a promise to
sell at the price fixed whenever the
offeree should decide to exercise his
option within the specified time.
After accepting the promise
and before he exercises his option,
the holder of the option is not bound
to buy. He is free either to buy or not
to later.
DOCTRINE: A consideration that is
separate and distinct from the
purchase price is required to
support an option contract.
The second paragraph of Article
1479 provides for the definition and
consequent rights and obligations
under an option contract. For an
option contract to be valid and
enforceable against the promissor,
there must be a separate and
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Osmeña III vs. Power Sector
Assets and Liabilities
Management Corporation
(771 SCRA 559, G.R. No.
212686 September 28, 2015)
Ayala Land, Inc. vs. ASB Realty
Corporation
(G.R. No. 210043, September
26, 2018)
other hand, contended that the
P84,000 has been fully exhausted and
utilized by their occupation of the
premises and there is no separate
consideration to speak of which could
support the option. Petitioners further
insist that a consideration need not be
a separate sum of money. They posit
that their act of advancing the money
to “rescue” the property from
mortgage and impending foreclosure,
should be enough consideration to
support the option.
SHORT FACTS: Respondent PSALM was
tasked with the administration of
NAPOCOR’s assets. One of it’s assets
was a land underlying the LBGT which
was also leased out for a period of 10
years to SPC which resulted in SPC’s
acquisition of the LBGT through an
Asset Purchase Agreement (LBGT-APA)
and lease of the land under a Land
Lease Agreement (LBGT-LLA). Under
the said agreement, SPC has the “right
to top” in the event of lease or sale of
property which is not part of the leased
premises.
SHORT FACTS: EMRASON made it
appear to ALI that Ramos, Jr., Antonio,
and Januario had full authority to act on
EMRASON's behalf in relation to the
JVA. ALI alleged that Emerito Ramos, Sr.
(Ramos, Sr.), then EMRASON's
President and Chairman, wrote to ALI
and therein acknowledged that Ramos,
Jr. and Antonio were fully authorized to
represent EMRASON in the JVA, as
shown in Ramos, Sr.'s letter dated
August 3, 1993. ALI and the Ramos
children subsequently entered into a
Contract to Sell dated May 18, 1994,
distinct consideration that supports
it.
DOCTRINE: There is no basis
whatsoever for the grant to
respondent of the right of first
refusal since the right to purchase at
the time of bidding is that which is
precisely the bidding subject, not yet
existent much more vested in
respondent.
The inclusion of a right of first refusal
in a government contract executed
post-bidding, as here, negates the
essence of public bidding. Moreover,
a “right of first refusal”, “or “right to
top,” whether granted to a bidder or
non-bidder, discourages other
parties from submitting bids,
narrowing the number of possible
bidders and thus preventing the
government from securing the best
bid.
DOCTRINE: A juridical entity, like
"cannot act except through its board
of directors as a collective body,
which is vested with the power and
responsibility to decide whether the
corporation should enter in a
contract that will bind the
corporation, subject to the articles
incorporation, by-laws, or relevant
provisions of law." Although the
general rule is that "no person, not
even its officers, can validly bind a
corporation" without the authority
of the corporation's board of
directors, this Court has recognized
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Norkis Distributors, Inc. v.
Court of Appeals
(G.R. No. 91029, [February 7,
1991], 271 PHIL 726-732))
Equatorial Realty
Development v. Mayfair
Theater, Inc.
(G.R. No. 136221. May 12,
2000)
under which ALI agreed to purchase the instances where third persons'
Dasmariñas Property.
SHORT FACTS: Alberto Nepales
boughfrom Norkis Distributors, Inc. a
brand new motorcycle under a
perfected contract of sale through an
issued invoice. After registering the
motorcycle in the LTO, the motorcycle
met an accident and the unit was a total
wreck. It was returned, and stored
inside Norkis' warehouse. When Norkis
could not deliver upon demand,
Nepales filed an action for specific
performance with damages against
Norkis. The latter, in its answer,
contended that the motorcycle had
already been delivered to Nepales
before the accident, hence, the risk of
loss or damage had to be borne by him
as owner of the unit.
SHORT FACTS: The 2nd floor of a 2-
storey building owned by Carmelo and
Bauermann, Inc. was leased to Mayfair
who used it as a movie house. Mayfair
then entered into a second Contract of
Leas to lease the more ground on the
property. Both leases contained a
provision granting Mayfair the right of
first refusal to purchase the subject
properties. However, during the period
granted to Mayfair, the property was
sold to Equatorial Development, Inc.
without offering it first to Mayfair.
actions bound a corporation under
the doctrine of apparent authority or
ostensible agency.
The doctrine of apparent authority is
a species of the doctrine of estoppel.
Article 1431 of the Civil Code
provides that 'through estoppel, an
admission or representation is
rendered conclusive upon the person
making it, and cannot be denied or
disproved as against the person
relying thereon.'
DOCTRINE: The issuance of a sales
invoice does not prove transfer of
ownership of the thing sold to the
buyer. An invoice is nothing more
than a detailed statement of the
nature, quantity and cost of the thing
sold and has been considered not a
bill of sale. The critical factor in the
different modes of effecting delivery,
which give legal effect to the act, is
the actual intention of the vendor to
deliver, and its acceptance by the
vendee. Without that intention,
there is no tradition.
DOCTRINE: An option is a contract
granting a privilege to buy or sell
within an agreed time and at a
determined price. It is a separate
and distinct contract from that
which the parties may enter into
upon the consummation of the
option. It must be supported by
consideration. In the instant case,
the right of first refusal is an integral
part of the contracts of lease. The
consideration is built into the
reciprocal obligations of the parties.
(The option to purchase is a right of
first refusal. Equatorial is not the
owner as the property was not
delivered to him and he had no
possession over it.)
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Fullido vs. Grilli, 785 SCRA FACTS: Grilli (an Italian national) and
278, Fullido were in a common-law
relationship. A lot was bought by
(G.R. No. 215014 February 29,
Fullido to which Grill. Through his
2016)
funds, constructed a house. They
executed a contract of lease, a
memorandum of agreement and a
special power of attorney to define
their respective rights over the house
and lot. The lease stipulated that
Fullido was to lease the property to Gilli
for a period of 50 years, then another
50 years after expiration, that Gilli had
full administrative and managerial
power and ownership over the house,
and should they break up. Fullido can
only sell the house and lot to
whomever Grilli desired. They
eventually broke up. Grilli sent formal
letters to Fullido demanding that she
vacate the property, but these were
unheeded. Grilli filed a complaint for
unlawful detainer with prayer for
issuance of preliminary injunction
against Fullido.
DOCTRINE: The constitutional
prohibition of alien land ownership
covers leases of lands amounting to
the transfer of all or substantially all
the rights of dominion. Where a
scheme to circumvent the
Constitutional prohibition against
the transfer of lands to aliens is
readily revealed as the purpose for
the contracts, then the illicit
purpose becomes the illegal cause
rendering the contracts void.
Thus, if an alien is given not only a
lease of, but also an option to buy, a
piece of land by virtue of which the
Filipino owner cannot sell or
otherwise dispose of his property,
this to last for 50 years, then it
becomes clear that the arrangement
is a virtual transfer of ownership
whereby the owner divests himself
in stages not only of the right to
enjoy the land but also of the right
to dispose of it — rights which
constitute ownership.

Melecio Domingo v. Spouses
Genaro Molina and Elena
Molina, substituted by Ester
Molina
(G.R. No. 200274, April 20,
2016)
MODULE 3 - I. Obligations of the Seller (Articles 1163, 1495-1506, 1521-1544, New Civil Code)
SHORT FACTS: Spouses Domingo DOCTRINE: A co-owner has the right
bought a property with a one-half to freely sell and dispose of his
undivided portion parcel of lang. Ten undivided interest, but not the
years after Flora’s death, Anastacio interest of his co-owners. A sale of
Domingo then sold his interest over the the unidivided interest without the
land to the spouses Molina to answer consent of the other co-owners was
for his debts. The sale of interest was not totally void, for Anastacio's
transferred to the Spouses Molina. rights or a portion thereof were
Melecio, one of the children of thereby effectively transferred,
Anastacio and Flora, learned of the making the spouses Molina a co-
transfer and filed a Complaint for owner of the subject property to the
Annulment of Title and Recovery of extent of Anastacio's interest. This
Ownership (Complaint) against the result conforms with the well-
spouses Molina. Melecio claims that established principle that the
Anastacio gave the subject property to binding force of a contract must be
the spouses Molina to serve as recognized as far as it is legally
collateral for the money that Anastacio possible to do so (quando res non
borrowed. Anastacio could not have valet ut ago, valeat quantum valere
validly sold the interest over the subject potest).
property without Flora’s consent, as
Flora was already dead at the time of
the sale. Melecio argues that the sale of
the disputed property to the spouses
Molina is void without Flora's consent.
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
EDCA Publishing vs. Santos
(184 SCRA 614)
Phil. Suburban Development
Corp. vs. Auditor General
(63 SCRA 397)
Skunac Corporation vs.
Sylianteng
(723 SCRA 625, G.R. No.
205879 April 23, 2014)
SHORT FACTS: Person identifying
himself as Professor Cruz placed an
order with petitioner company for 406
books, payable on delivery. Petitioner
then delivered the books with an
invoice. Cruz then issued a check
covering the purchase. Cruz then sold
the books to private respondent who
after verifying seller’s ownership from
the invoice, bough it for P1,700. Turns
out that Cruz was no person such as
Professor Cruz from De La Salle and that
Cruz had no more account or deposit
with the Bank, against which he had
drawn the payment check. It was found
out that 120 of the books he had
ordered from EDCA were sold to the
private respondents. Petioner and the
police went to Santos’ store and seized
the subject books. The private
respondents sued for recovery of the
books after demand for their return
was rejected by EDCA.
SHORT FACTS: An agreement was made
between the PHHC and petitioner
where the former was to purchase two
two parcels of land under a Deed of
Absolute Sale, a public document. Prior
to the signing of the deed by the
parties, the PHHC acquired possession
of the property, with the consent of
petitioner, to enable the said PHHC to
proceed immediately with the
construction of roads in the new
settlement and to resettle the
squatters and flood victims in Manila
who were rendered homeless by the
floods or ejected from the lots which
they were then occupying. Petitioner
now claims that he is no longer the
owner, and thus, is under no obligation
to pay the real property tax from when
the land was passed to the PHHC.
SHORT FACTS: Two brothers claim
ownership of two lands based from a
Deed of Absolute Sale executed in favor
of their mother. They allege that the
said lots were acquired by their mother
from Luis Pujalte, the previous owner of
the property in dispute, as reflected
and annotated in the TCT which was
sold to them. Romeo Pujalte, who was
DOCTRINE: Ownership in the thing
sold shall not pass to the buyer until
full payment of the purchase only if
there is a stipulation to that effect.
Otherwise, the rule is that such
ownership shall pass from the
vendor to the vendee upon the
actual or constructive delivery of the
thing sold even if the purchase price
has not yet been paid. Actual delivery
of the books having been made, Cruz
acquired ownership over the books
which he could then validly transfer
to the private respondents. The fact
that he had not yet paid for them to
EDCA was a matter between him and
EDCA and did not impair the title
acquired by the private respondents
to the books.
DOCTRINE: Delivery (tradition) as a
mode of transmission of ownership
maybe actual (real tradition) or
constructive (constructive tradition).
When the sale of real property is
made in a public instrument, the
execution thereof is equivalent to
the delivery of the thing object of
the contract, if from the deed the
contrary does not appear or cannot
clearly be inferred.
In other words, there is symbolic
delivery of the property subject of
the sale by the execution of the
public instrument, unless from the
express terms of the instrument, or
by clear inference therefrom, this
was not the intention of the parties.
DOCTRINE: Art. 1544 has no
application in cases where the sales
involved were initiated not by just
one but two vendors. In the present
case, the subject lots were sold to
petitioners and respondents by two
different vendors – Emerenciana
and Romeo Pujalte (Romeo). It is a
settled rule that when two
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Manigque-Stone vs. Cattleya
Land, Inc.
(802 SCRA 173, G.R. No.
195975 September 5, 2016)
Spring Homes Subdivision
Co., Inc. vs. Tablada, Jr.
(815 SCRA 114, G.R. No.
200009 January 23, 2017)
declared by the RTC of Pasig City as the
heir of Luis Pujalte, eventually caused
the reconstitution of the Mother Title
resulting to its cancellation and the
issuance of another TCT in his favor.
Romeo Pujalte then sold the said
properties to herein petitioners.
SHORT FACTS: Cattleya entered into a
contract of conditional sale with the
sps. Tecson covering 9 parcels of land
including the subject property.
However, neither of the two could eb
annotated on the Certificate of Title
because the Register of Deeds refused
to annotate both deeds due to a writ of
attachment. However, it turns out that
the spouses could not deliver the
certificate because it was already
presented to a previous sale to Taina
Stone, a Filipina who married a
foreigner. The RTC found that Taina
was only a dummy in the contract of
sale and that her subsequent marriage
to the foreigner will not validate or
legitimize the sale. Stone asserts that as
long as the name registered is a Filipino,
the trial court is barred from inquiring
into its legality.
SHORT FACTS:. For convenience and in
order to facilitate the acquisition of
permits and licenses in connection with
the development of their land, the Sps.
Lumbres transferred the titles to the
parcels of land in the name of Spring
Homes. Spring Homes entered then
into a Contact to Sell with respondents,
Sps. Tablada, for the sale of a parcel of
land. Thus, sps. Lumbres then filed with
the RTC of Calamba City a complaint
against Spring Homes for its alleged
failure to comply with the terms of the
JVA, Spring Homes executed a Deed of
Absolute Sale in favor of Sps Tablada.
Sps. Lumbres then entered into a
Compromise agreement wherein
spring homes conveyed the subject
property to sps. Labrada. When the
latter failed to pay the rentals thereon,
sps. Lumbres filed an ejectment suit.
certificates of title are issued to
different persons covering the same
land in whole or in part, the earlier
in date must prevail, and, in case of
successive registrations where more
than one certificate is issued over
the land, the person holding a prior
certificate is entitled to the land as
against a person who relies on a
subsequent certificate.
DOCTRINE: There is no double sale
to speak of. Art. 1544 of the Civil
Code, which provides the rule on
double sale, applies only to a
situation where the same property
is validly sold to different vendees.
In this case, there is only one sale to
advert to, that between the spouses
Tecson and respondent.
DOCTRINE: Art. 1544. If the same
thing should have been sold to
different vendees, the ownership
shall be transferred to the person
who may have first taken possession
thereof in good faith, if it should be
movable property.
Should it be immovable property,
the ownership shall belong to the
person acquiring it who in good faith
first recorded it in the Registry of
Property.
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.
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Edu vs.Gomez,
(129 SCRA 601)
Spouses Manlan vs. Spouses
Beltran
(G.R. No. 222530, October 16,
2019)
Ten Forty Realty & Dev’t Corp.
vs. Cruz
(G.R. No. 151212 Sept. 10,
2003)
Spouses Tomas and Silvina
Occena vs. Esponilla
(GR No 156973, 6-4-2004)
SHORT FACTS: The subject property is a
stolen volkswagen registered under the
name of Lt. Bala but supposedly owned
by private respondent Lucila Abello.
The agents of the Anti-Carnapping Unit
(ANCAR) of the Philippine Constabulary
seized the vehicle which led to Abello
filing with the CFI a complaint for
replevin with damages.
SHORT FACTS: This case involves a
parcel of land situated in Dumaguete
City originally owned by the Orbetas.
One of the owners, Manuel Orbeta sold
a portion of the subject property to sps.
Manlan, whom he later then allowed to
occupy the land. Afterwards, the rest of
the Orbetas then sold the same
property to sps. Beltran. The subject
property was then registered to
respondent’s name.
SHORT FACTS: Ten Forty files a
complaint for ejectment against Marina
Cruz alleging that petitioner is the true
owner of a parcel of land by virtue of a
Deed of Absolute Sale issued by Galino.
They came to know Galino then sold
the property to respondent who
immediately occupied the property and
which occupation was tolerated.
SHORT FACTS: sps. Tordesillas owned a
piece of land which was inherited by
their heirs who sold the land to
Morales. Morales possessed the lot as
owner, constructed a house on it and
appointed a caretaker to oversee her
property. One of the heirs, Alberto,
DOCTRINE: The acquirer or the
purchaser in good faith of a chattel of
movable property is entitled to be
respected and protected in his
possession as if he were the true
owner thereof until a competent
court rules otherwise. In the
meantime, as the true owner, the
possessor in good faith cannot be
compelled to surrender possession
nor to be required to institute an
action for the recovery of the chattel,
whether or not an indemnity bond is
issued in his favor. The filing of an
information charging that the chattel
was illegally obtained through estafa
from its true owner by the transferor
of the bona fide possessor does not
warrant disturbing the possession of
the chattel against the will of the
possessor.
DOCTRINE: There are two sets of
vendors who sold the subject land
to two different vendees. The rule
on double sale is not applicable in
the instant case.
DOCTRINE: This Court has held that
the execution of a public instrument
gives rise only to a prima facie
presumption of delivery. Such
presumption is destroyed when the
delivery is not effected because of a
legal impediment. Pasagui v.
Villablanca had earlier ruled that
such constructive or symbolic
delivery, being merely presumptive,
was deemed negated by the failure
of the vendee to take actual
possession of the land sold.
DOCTRINE: In all cases, good faith is
essential. It is the basic premise of
the preferential rights granted to the
one claiming ownership over an
immovable. What is material is
whether the second buyer first
registers the second sale in good
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
borrowed from Alberta Morales the faith, i.e., without knowledge of any
Original Certificate of Title (OCT) and defect in the title of the property
subdivided the entire lot into three (3) sold.
sub lots and registered them all under
his name. He did not return the OCT to
Indeed, the general rule is that one
Alberta after then. Arnold then sold the
who deals with property registered
land to the Spouses Occeña, who under the Torrens system need not
before purchasing said property, go beyond the same, but only has to
conducted an ocular inspection of the
rely on the title. He is charged with
property and was warned by the notice only of such burdens and
caretaker that Arnold no longer owned
claims as are annotated on the title.
the property. However, this principle does 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. One
who falls within the exception can
neither be denominated an innocent
purchaser for value nor a purchaser
in good faith.
MODULE 4 - I. Conditions and Warranties (Articles 1545-1581, New Civil Code)
JM Tuazon & Co., Inc. vs. CA, SHORT FACTS: DOCTRINE: It was not shown that
(1) Petitioner executed in favor of they were vendees in good faith and
(94 SCRA 413) Ricardo de Leon, a contract to sell thus being entitled to warranty
the subject lot. De Leon then paid a against eviction. One who purchases
down-payment and agreed to pay real estate with knowledge of a
the balance in the monthly defect or lack of title in his vendor
installments. cannot claim that he has acquired
(2) Petitioner then signed a title thereto in good faith, as against
compromise agreement with the true owner of the land or of an
another set of people, the Deudors. interest therein; and the same rule
(3) The lot was later on sold to Ramon must be applied to one who has
Rivera. knowledge of facts which should
(4) De Leon then transferred all his have put him upon such inquiry and
rights to the lot in favor of his investigation as might be necessary
parents who paid the outstanding to acquaint him with the defects in
balance, a deed of sale over the lot the title of his vendor. A purchaser
was issued under the Register of cannot close his eyes to facts which
Deeds to the TCT. should put a reasonable man upon
(5) At the time of the execution of the his guard and then claim that he
contract to sell, the contracting acted in good faith under the belief
parties knew that a portion of the that there was no defect in the title
lot in question was actually of the vendor.
occupied by Ramon Rivera.
Escaler vs. CA SHORT FACTS: Sps. Reynoso sold to DOCTRINE: In order that a vendor’s
petitioners, a parcel of land. The Deed liability for eviction may be enforced,
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
(138 SCRA 1) of Absolute Sala (DOAS) contained a
covenant against eviction.
Subsequently, The Register of Deeds of
Rizal filed a case before the CFI for the
cancellation of the OCT in the name of
Angelina Reynoso (predecessor-in-
interest of private respondents-
vendors) on the ground that the
property covered by said title is already
previously registered under a TCT
issued in the name of A. Doronilla
Development, Inc. OCT was then
declared null and void on that ground.
A civil case was then filed by
respondents for the recovery of the
value of the property sold to them plus
damages on the ground that the latter
have violated the vendors’ “warranty
against eviction.”CFI then rendered
judgment ordering the return of the
property to the plaintiffs.
Moles vs. IAC SHORT FACTS: Moles bought from
Diolosa Publishing House a linotypw
(169 SCRA 777) printing machine (secondhand). Moles
then promised to pay the full amount
after receiving a loan from DBP. Private
respondent on return issued a
certification wherein he warranted that
the machine was in A-1 condition,
together with other express
warranties. Subsequently, petitioner
wrote private respondent that the
machine was not functioning properly.
The petitioner found out that the said
machine was not in good condition as
experts advised and it was worth lesser
than the purchase price. After several
telephone calls regarding the defects in
the machine, private respondent sent
two technicians to make necessary
repairs but they failed to put the
machine in running condition and since
then the petitioner wan unable to use
the machine anymore.
the following requisites must
concur—a) there must be a final
judgment; b) the purchaser has been
deprived of the whole or part of the
thing sold; c) said deprivation was by
virtue of a right prior to the sale
made by the vendor; and d) the
vendor has been summoned and
made co-defendant in the suit for
eviction at the instance of the
vendee.
In the case at bar, the fourth
requisite—that of being summoned
in the suit for eviction (Case No.
4252) at the instance of the
vendee—is not present.
The term “unless he is summoned in
the suit for eviction at the instance of
the vendee” -- means that the
respondents as vendor/s should be
made parties to the suit at the
instance of petitioners-vendees,
either by way of asking that the
former be made a co-defendant or by
the filing of a third-party complaint
against said vendors.
DOCTRINE:
(1) It is generally held that in the sale
of a designated and specific
article sold as secondhand, there
is no implied warranty as to its
quality or fitness for the purpose
intended, at least where it is
subject to inspection at the time
of the sale. On the other hand,
there is also authority to the
effect that in a sale of
secondhand articles there may
be, under some circumstances,
an implied warranty of fitness for
the ordinary purpose of the
article sold or for the particular
purpose of the buyer.
Exceptions: Article 1562.
(2) The defense of prescription is
waived and cannot be
considered on appeal if not
raised in the trial court.
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Nutrimix Feeds Corporation SHORT FACTS: sps. Evangelista
vs. CA procured various kinds of animal feeds
from petitioner Nutrimix Feeds
(25 October 2004)
Corporation. Petitioner issued checks in
payment for the delivery of feeds but
the checks were dishonored by reason
that the account was closed. Petitioner
then filed with the RTC a civil complaint
against respondents for the sum of
money and damages with a prayer for
issuance of writ of preliminary
attachment.
DOCTRINE: A hidden defect is one
which is unknown or could not have
been known to the vendee. Under
the law, the requisites to recover on
account of hidden defects are as
follows:
a) the defect must be hidden;
b) the defect must exist at the time
the sale was made;
c) the defect must ordinarily have
been excluded from the contract;
d) the defect, must be important
(renders thing UNFIT or considerably
decreases FITNESS);
e) the action must be instituted
within the statute of limitations

A manufacturer or seller of a product

Philippine Steel Coating Corp.
vs. Quinones
(G.R. No. 194533, February
15, 2017)
SHORT FACTS: Respondent was
producing buses while petitioner was
selling primer-coated, long-span, rolled
galvanized iron (G.I.) sheets. The
petitioner offered Quiñones their
product and the latter showed interest,
but asked if the primer-coated sheets
were compatible with its assembled
buses. Petitioner expressly represented
to respondent that the primer-coated
G.I. sheets were compatible with the
acrylic paint process used by the latter
on his bus units. This representation
was made in the face of respondent’s
express concerns regarding
incompatibility. Respondent bought
cannot be held liable for any damage
allegedly caused by the product in
the absence of any proof that the
product in question was defective.
The defect must be present upon the
delivery or manufacture of the
product; or when the product left the
seller’s or manufacturer’s control; or
when the product was sold to the
purchaser; or the product must have
reached the user or consumer
without substantial change in the
condition it was sold. Tracing the
defect to the petitioner requires
some evidence that there was no
tampering with, or changing of the
animal feeds.
DOCTRINE: Any affirmation of fact
or any promise by the seller relating
to the thing is an express warranty if
the natural tendency of such
affirmation or promise is to induce
the buyer to purchase the same, and
if the buyer purchases the thing
relying thereon. 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.
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
the G.I. sheets and made them into
buses. However, the paints peeled off The following requisites must be
and the customers complained. established in order to prove that
Respondent sued petitioner for there is an express warranty in a
damages on the basis of express contract of sale: (1) the express
warranty. warranty must be an affirmation of
fact or any promise by the seller
The RTC rendered a Decision in favor of relating to the subject matter of the
Quiñones and ordered PhilSteel to pay sale; (2) the natural effect of the
damages. The RTC found that the affirmation or promise is to induce
assurance made by petitioner the buyer to purchase the thing; and
constituted an express warranty under (3) the buyer purchases the thing
Article 1546 of the Civil Code. relying on that affirmation or
promise.
Spouses Batalla vs. SHORT FACTS: Sps. Batalla purchased a DOCTRINE: Article 1561 of the Civil
Prudential Bank brand-new Honda Civic from Honda Code provides for an implied
Cars San Pablo, Inc. (Honda). Spouses warranty against hidden defects in
(G.R. No. 200676, March 25,
Batalla received the car after Rantael, that the vendor shall be responsible
2019)
the acting manager of Pilipinas Bank, for any hidden defects which render
informed them that it was parked near the thing sold unfit for the use for
Prudential Bank who granted their car which it is intended, or should they
loan. For their part, Spouses Batalla diminish its fitness for such use to
paid the balance. In addition, they also such an extent that, had the vendee
paid an additional sum of money for been aware thereof, he would not
delivery cost and the installation of a have acquired it or would have given
remote control door mechanism and a lower price. In an implied warranty
insurance. However, after three days, against hidden defects, vendors
the rear right door of the car broke cannot raise the defense of
down. The Spouses Batalla consulted a ignorance as they are responsible to
certain Jojo Sanchez (Sanchez), who the vendee for any hidden defects
claimed that the power lock of the rear even if they were not aware of its
right door was defective and that the existence.
car was no longer brand new because
the paint of the roof was merely In order for the implied warranty
retouched. against hidden defects to be
applicable, the following conditions
Spouses Batalla sent a letter to the must be met:
manager of Prudential notifying it of a. Defect is Important or Serious
the said defects and demanding the i. The thing sold is unfit for
immediate replacement of the motor the use which it is intended
vehicle. After taking the car to the Auto ii. Diminishes its fitness for
Body Shop, Arturo Villanueva such use or to such an extent
(Villanueva) claimed that the vehicle that the buyer would not
was no longer brand new because the have acquired it had he been
rooftop was no longer shiny in aware thereof
appearance. Thereafter, the manager b. Defect is Hidden
of Prudential, together with two c. Defect Exists at the time of the sale
individuals from Honda, met Spouses d. Buyer gives Notice of the defect to
Batalla and offered to repair the the seller within reasonable time.
vehicle. Spouses Batalla rejected it
because they wanted the car to be
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Jurado vs. Spouses Chai
(G.R. No. 236516, March 25,
2019)
Engineering & Machinery
Corporation vs. CA
(G.R. NO. 52267, JAN. 24,
1996)
replaced with a brand new one without
hidden defects.
Unable to secure a brand new car in
replacement of the alleged defective
vehicle, Spouses Batalla filed a
Complaint for Rescission of Contracts
and Damages10 against Prudential and
Honda.
SHORT FACTS: Respondents claim that
a portion of a land was originally owned
and registered under the name of sps.
Pariñas and that the transfer by the
Extrajudicial Settlement of Estate with
Simultaneous Sale executed by the
Heirs of sps. Parinas was supported by
a photocopy of Parinas’ OCT.
Respondents explained that they
inspected Lot 4900 and inquired its
status from the adjoining owners, who
informed them that the same was
owned by Spouses Pariñas. After the
ocular inspection, they instructed a
certain Ms. Masa to verify the existence
and genuineness of Pariñas OCT with
the RD-Ilagan which issued a stating
that the subject Lot 4900 is free from
any liens and encumbrances. Masa
likewise went to the Office of the
Municipal Assessor of Santiago, Isabela
and found that the same was declared
for taxation purposes in the name of
Spouses Pariñas. Thereafter,
respondents purchased the said land.
Issue: Whether or not respondents are
purchasers in good faith.
SHORT FACTS: The petitioner
undertook to fabricate, furnish and
install the air-conditioning system in
the latter's building along Buendia
Avenue, Makati in consideration of
P210,000.00. Petitioner was to furnish
the materials, labor, tools and all
services required in order to so
fabricate and install said system. The
system was completed in 1963 and
accepted by private respondent, who
paid in full the contract price. However,
the air-condition units broke down and
DOCTRINE: Case law states that
reconstituted titles shall have the
same validity and legal effect as to
the originals thereof unless the
reconstitution was made
extrajudicially, or administratively.
This is because administrative
reconstitution is essentially ex-parte
and without notice, and thus,
administratively reconstituted titles
do not share the same indefeasible
character of the original certificates
of title. Anyone dealing with such
copies are put on notice of such fact
and warned to be extra-careful.
The issuance of a reconstituted title
vests no new rights and determines
no ownership issues, and shall
always be without prejudice to any
party whose right or interest in the
property was duly noted in the
original, at the time it was lost or
destroyed, but entry or notation of
which has not been made on the
reconstituted certificate of title, as
expressly provided under Section
7111 of RA 26, which was duly noted
on the reconstituted Pariñas OCT
3429.
DOCTRINE: A contract for a piece of
work, labor and materials may be
distinguished from a contract of sale
by the inquiry as to whether the
thing transferred is one not in
existence and which would never
have existed but for the order, of the
person desiring it. In such case, the
contract is one for a piece of work,
not a sale. On the other hand, if the
thing subject of the contract would
have existed and been the subject of
a sale to some other person even if
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
when evaluated under a technical
system by an Engr. Sapico, the defects
of the system and concluded that it was
"not capable of maintaining the desired
room temperature of 76ºF - 2ºF.
On the basis of this report, private
respondent filed an action for damages
against petitioner with the CFI, 9 years
after the installation of the units. The
complaint alleged that the air-
conditioning system installed by
petitioner did not comply with the
agreed plans and specifications. Also,
that the was not a contract for sale but
a contract for a piece of work under
Article 1713 of the Civil Code. Thus, in
accordance with Article 1144 (1) of the
same Code, the complaint was timely
brought within the ten-year
prescriptive period.
the order had not been given, then
the contract is one of sale
A contract for the delivery at a
certain price of an article which the
vendor in the ordinary course of his
business manufactures or procures
for the general market, whether the
same is on hand at the time or not is
a contract of sale, but if the goods are
to be manufactured specially for the
customer and upon his special order,
and not for the general market, it is a
contract for a piece of work (Art.
1467, Civil Code). The mere fact
alone that certain articles are made
upon previous orders of customers
will not argue against the imposition
of the sales tax if such articles are
ordinarily manufactured by the
taxpayer for sale to the public

The distinction between the two

contracts depends on the intention
of the parties. Thus, if the parties
intended that at some future date an
object has to be delivered, without
considering the work or labor of the
party bound to deliver, the contract
is one of sale. But if one of the parties
accepts the undertaking on the basis
of some plan, taking into account the
work he will employ personally or
through another, there is a contract
for a piece of work.
MODULE 5 - I. Documents of Title (Articles 1507-1520, New Civil Code)
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
MODULE 6 - I. Rights and Obligations of the Vendee (Articles 1582-1593, New Civil Code) • Republic Act No. 6552
Arra Realty Corporation vs.
Spouse Arguelles
(20 September 2004)
Laforteza vs. Machuca
(333 SCRA 643)
Vda. De Mistica vs. Naguiat
(418 SCRA 73)
SHORT FACTS: Petitioner decided to construct DOCTRINE: In a contract of sale, until
a building on its property and sought the and unless the contract is resolved or
service of respondent Engr. Peñaloza with the rescinded in accordance with law, the
agreement that Peñaloza share the purchase vendor cannot recover the thing sold
price of one floor of the building, payable with even if the vendee failed to pay in full
installments. Parties agreed that payments of the initial payment for the property.
Peñaloza would be credited to her account in The failure of the buyer to pay the
partial payment of her stock subscription in purchase price within the stipulated
ARC’s capital stock. Peñaloza then stopped period does not by itself bar the
paying after paying 1/3 of the purchase price transfer of ownership or possession of
after finding out that it had been mortgaged to the property sold, nor ipso facto
China Banking Corp. After countless petitions rescind the contract. Such failure will
for a consideration in her favor, the ARC and merely give the vendor the option to
GDCIA executed a deed of conditional sale rescind the contract of sale judicially
covering the building and lot, part of which was or by notarial demand as provided for
used to be used to redeem from motrtgagee by Article 1592 of the New Civil Code
bank – property was then redeemed. Peñaloza
then filed a complaint against ARC, the GDCIA,
and the spouses Arguelles. The RTC ruled in
Peñaloza’s favor.
SHORT FACTS: Petitioners entered into a MOA It is not disputed that the petitioners
with respondent Alonzo Machuca over the said did not make a judicial or notarial
property for the sum of P630K (30K for earnest demand for rescission. The November
money). Respondent then paid the earnest 20, 1989 letter of the petitioners
money plus rentals. Petitioners wrote a letter informing the respondent of the
to Respondent advising him that he has 30 automatic rescission of the
days to produce the said money (balance) but agreement did not amount to a
respondent replied with a request for demand for rescission, as it was not
extending the deadline but it was denied. notarized. It was also made five days
Upon the day of agreement, respondent after the respondent's attempt to
informed petitioners that he had already paid make the payment of the purchase
the balance but they refused to accept price.
claiming that the lot was no longer for sale.
RTC and CA ruled in favor of respondent Neither was there a judicial demand
ordering the petitioners to accept full payment for the rescission thereof.
therein.
In the sale of immovable property,
even though it may have been
stipulated that upon failure to pay the
price at the time agreed upon the
rescission of the contract shall of right
take place, the vendee may pay, even
after the expiration of the period, as
long as no demand for rescission of
the contract has been made upon him
either judicially or by a notarial act.
(Article 1592) After the demand, the
court may not grant him a new term.
SHORT FACTS: Eulalio Mistica, predecessor-in- DOCTRINE: Under Article 1191 of the
interest of petitioner, is the owner of a parcel Civil Code, the right to rescind an
of land. A portion of which was leased to obligation is predicated on the
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Fedman Development
Corporation vs. Agcaoili
(G. R. No. 165025; August
31, 2011)
Naguiat in 1970. In 1979, Mistica entered into
a contract to sell with respondent a portion of
the land. Agreed price was to pay 20K with a
downpayment of 2K. In case respondent
cannot pay on time, a 12% per annum interest
will be added at the time he can pay the full
purchase price. Eulalio died in 1986.
Petitioner then filed a petition for recission
alleging that the failure and refusal of
respondent to pay the balance constitutes a
violation of the contract.
SHORT FACTS: As Consideration for the
transfer of rights from Interchem to Agcaoili,
Agcaoili agreed to (a) pay Interchem upon
signing the deed of transfer; (b) update the
account by paying FDC through a post-dated
check; and (c) to deliver to FDC the balance in
135 monthly installments. At some point, the
centralized air condition unit broke down,
Agcaoili wrote to the VP of FSCC, demanding
for the repair of the same. If unheeded, he
would suspend payment of his dues and
amortizations. FDC then cancelled the contract
to sell and cut off the electricity supply.
Respondent then sued petitioner; as a result,
FDC reinstated the contract to sell and they
entered into a compromise agreement. After 2
years, FDC again disconnected the electric
supply therein, averring that the disconnection
was justified because respondent failed to pay
his dues (amounting P15k). The RTC and CA
ruled in respondent’s favor.
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.
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.
DOCTRINE: The obligation of
petitioner to the unit owners 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. 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 & unilaterally increased the
interest rate w/o justification.
Article 1308 of the Civil Code
provides: The contract must bind both
contracting parties; its validity or
compliance cannot be left to the will
of one of them. ; 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. (If the contract is cancelled, the
seller shall refund to the buyer the
cash surrender value of the
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Heirs of Cardenas vs. The
Christian and Missionary
Alliance of the Philippines,
Inc.
(G.R. No. 222614, March 20,
2019)
Malabanan vs. Spouses
Montano
(G.R. No. 187225, March 6,
2019)
EEG Development
Corporation vs. Heirs of De
Castro
(G.R. No. 219694, June 26,
2019)
SHORT FACTS: This is complaint for recovery of
possession against respondents where
CAMACOP unlawfully occupied the lot of Sps.
Cardenas for church activities despite
repeated demands to vacate. For their part,
CAMACOP averred that they had lawfully
purchased the subject lot from Sps. Cardenas
(Pastora) who surrendered the owner’s
duplicate copy to them. They further alleged
that their counsel sent the said duplicate copy
to the Sec of DENR. However, the said deed of
sale between Pastora and CAMACOP was
allegedly lost.
SHORT FACTS: Jose and Melinda Malabanan
were owners of lot covered by a TCT which was
issued to a “Jose, married to Melinda”. The
spouses then built a house and possessed it
since 1984. Melinda left the Philippines to
work in Libya and went back home after
finding out that the Jose was murdered.
Melinda discovered that her TCT had long been
cancelled. An SPA was executed in 1985 by her
husband, with her conformity, authorizing her-
father-in-law to mortgage/sell/lease their
property. Melinda argues that the SPA was
void as her signature was forged, and that she
and Jose remained the real owners of the
property.
Respondents aver that Francisco and Adelfina
bought the property for their son as an
advance on Jose’s legitime. For their part,
respondent spouses Montano testified that no
adverse claim was annotated on Jose’s
brother’s title when he decided to buy the
property. The RTC ruled in favor of Melinda.
The CA, however, reversed the same.
SHORT FACTS: Joseph De Castro Sr. was the
resigtered owener of a parcel of land in Cubao,
Quezon City. The land was then mortgaged as
he obtained a new loan from the IBank. As De
Castro Sr. defaulted, the property was sold at
public auction in which IBank emerged as
highest bidder. De Castro Sr., together with his
two sons, offered to petitioner Eduardo
Gonzalez to buy the property by paying the
redemption price to IBank. The property was
payments... 50%, + 5% every year not
exceeding 90%)
DOCTRINE: The right to recover
possession of registered land is
imprescriptible on the part of the
registered owner because possession
is a mere consequence of ownership.
Moreover, the Court explained that
prescription is unavailing, not only
against the registered owner, but also
against his hereditary successors
because the latter merely step into
the shoes of the decedent by
operation of law and are merely the
continuation of the personality of
their predecessor-in-interest
DOCTRINE: 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 person is a buyer in good faith when
he 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
corners. However, this 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 of 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.
DOCTRINE: 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:
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Pablo Uy vs. Heirs of Julita
Uy
(G.R. No. 227460, December
5, 2019)
Spouses Carlos vs. Tolentino
(G.R. No. 234533, June 27,
2018)
then bought by Gonzales and then transferred
the subject property to co-petitioner EEG by a
deed of sale. Petitioners then proceesed to
demolish the house contructed therein which
alarmed respondents. Respondents assert that
the sale to petitioners was void because De
Castro had no authority to sell the property by
himself and without their consent because
respondents had inherited Dionisia’s (wife of
Joseph) share upon here demise
SHORT FACTS: Subject lot was registered in the
name of petitioner Uy’s mother, Eufronia
Labnao. Labnao had 2 kids, petitioner and
Julita. Respondents are the children of Julita,
thus petitioner is their uncle. Upon the death
of Labnao, the lot was divided among her
children – ½ Uy and ½ Julita. However,
petitioner discovered that the subject lot was
fraudulently sold by Labnao in favor of
respondents. Petitioner asserted that his
mother’s signature in the DOA is a patent
forgery. The subject lot and building have been
subject of a prior action for Interpleader filed
by one Josefa Uy, who filed the said action in
order to determine who between petitioner
and respondents should collect the lease
rentals. The final decision (CA) was that the
two parties are entitled to an equal share of
the proceeds of the rent due from Josefa.
For their part, respondents allege that they
have acquired ownership when they
purchased the same from the grandmother.
During the lifetime of their mother Julita, she
allegedly constructed the subject building.
Upon her death, they became the rightful and
exclusive owners thereof.
SHORT FACTS: Juan is the owner of a lot
registered in his name. Mercedes, wife of Juan,
forged a Deed of Donation making it appear
that they donated said lot to their grandson,
Kristoff. Kristoff then offered to sell the subject
lot to Julieta’s brother, Felix. Kristoff and
(a) the seller is the registered owner
of the land.
(b) the latter is in possession thereof;
(c) 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.
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 to determine the
seller’s title and capacity transfer any
interest in the property
DOCTRINE: The donation must be
made in a public document, specifying
therein the property donated and the
value of the charges which the done
must satisfy. In the instant case, the
DOAS was not properly notified;
hence, there was no donation in a
public document. The Civil Code
requires the donee to manifest his
acceptance of the donation of the
immovable property in either the
same or separate public instrument.
In the case at bar, there was no
acceptance made by respondents.
Hence, considering that there is no
valid contract of sale or donation, the
Court holds that both the subject lot
and building are under the co-
ownership of petitioner and
respondents as the intestate heirs of
Labnao.
DOCTRINE: Note: Marriage between
Mercedes and Juan is Conjugal
Partnership as they were married
before the effectivity of the Family
Code.
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Villamil vs. Spouses Erguiza
(G. R. No. 195999, June 20,
2018)
II. Actions for Breach of Contract of Sale (Articles 1594-1599, New Civil Code)
Levi Hermanos, Inc. vs.
Gervacio
(69 Phil 52)
Julieta executed a MOA, stating that Kristoff is As the conjugal partnership is
selling the subject property to the latter. A terminated upon the death of either
DOAS was executed soon after. Upon learning of the spouses, the Court takes due
of the aforementioned events, Juan filed a notice of the fact of Mercedes’ death
notice of adverse claim. which results in the dissolution of the
conjugal partnership.
The RTC found that respondent’s signature in
the Deed of Donation was a forgery. However, As owners pro indiviso of a portion of
the RTC upheld petitioner’s right over the the lot in question, either Spouses
subject property, relying on the face of Carlos or Juan may ask for the
Kristoff’s title without any knowledge of partition of the lot and their property
irregularity. On appeal, CA found that rights shall be limited to the portion
petitioners were negligent in not taking the which may be allotted to them in the
steps to determine the status of the property division upon the termination of the
prior to the purchase, reversing the RTC’s co-ownership. This disposition is in
judgement. line with the well-established
principle that the binding force of a
contract must be recognized as far as
it is legally possible to do so—quando
res non valet ut ago, valeat quantum
valere potest.
SHORT FACTS: A parcel of land was registered DOCTRINE: An obligation dependent
in the name of Villamil’s relatives. Petitioner, upon a suspensive condition cannot
together with her deceased siblings, entered be demanded until after condition
into an agreement with respondent Juanito takes place because it is only after
Erguiza to sell the subject property. Said fulfillment of the condition that the
condition was that the former would file a obligation arises.
petition to secure authorization for minor
children from the proper courts. In case of
failure to obtain said authority, the partial
payment made by Juanito shall be applied as
rent for 20 years of the premises. After said 20
years, petitioner, who remained to be the
absolute owner of the said parcel of land,
demanded from defendants to return the
possession of the property. MTCC and RTC
ruled in favor of petitioners as respondents
failed to pay the balance. On appeal, the CA
reversed the said rulings; finding 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.”
SHORT FACTS: Plaintiff Levi Hermanos sold to DOCTRINE: For Act No. 4122 to apply,
defendant Gervacio a Packard car. Defendant, “it must appear that there was a
after making the initial payment, executed a contract for the sale of personal
promissory note for the balance of P2400. To property payable in installments and
secure payment of the note, he mortgaged the that there has been a failure to pay
care to plaintiff. Defendant failed to pay the two or more installments." The
said note at its maturity; plaintiff then contract in the case at bar, while a sale
foreclosed the mortgage and the car was sold of personal property, is not one on
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
at the public auction, at which plaintiff was the
highest bidder. The present action is for the
collection of the balance and interest of said
note.
Zayas vs. Luneta Motor SHORT FACTS: Petitioner purchased on
Company installment a motor vehicle with respondent.
The motor vehicle was delivered to petitioner
(117 SCRA 726) upon initial payment of P1,006.82. Petitioner
then executed a promissory note in the
amount of the remaining balance and a chattel
mortgage. After paying roughly P3K, petitioner
was unable to pay the further monthly
installments. Thus, the vehicle was sold at
public auction with respondent for P5K. Since
the payments made by petitioner plus the
P5000 (foreclosure) could not cover the total
of the note, respondent filed a Civil Case for
the recovery of the balance.
installments, but on straight term, in
which the balance, after payment of
the initial sum, should be paid in its
totality at the time specified in the
promissory note. The transaction is
not, therefore, the one contemplated
in Act No. 4122 and the mortgagee is
not bound by the prohibition therein
contained as to its right to the
recovery of the unpaid balance
DOCTRINE: The established rule is to
the effect that the foreclosure and
actual sale of a mortgaged chattel
bars further recovery by the vendor of
any balance on the purchaser's
outstanding obligation not so satisfied
by the sale.

Petitioner avers that Art. 1484 of the NCC

applies, extinguishing his obligation per the
promissory note by the sale of the motor
vehicle in the auction. On the other hand,
respondents filed a motion for
reconsideration, reiterating that Art. 1484 of
the NCC on sale of personal property by
installment was not applicable and that the
contract involving the parties was a mere case
of an ordinary loan secured by chattel
mortgage.
Tajanlangit vs. Southern SHORT FACTS: Petitioner bought from DOCTRINE: In a contract of sale of
Motors, Inc. respondent two tractors and thresher. In personal property the price of which
payment of the same, they executed a is payable in installments, secured by
(101 Phil 606) promissory note whereby they undertook that a mortgage on the goods sold, the
in case of default in payment of the vendor who chooses to exact
installments, the total principal sum shall be fulfillment of the obligation to pay is
demandable at once. Spouses then failed to not limited to the proceeds of the
pay the same and were sued for the amount of sale, on execution, of the mortgaged
the promissory note. The spouses defaulted goods. The vendor may still recover
and the court rendered judgment infavor of from the purchaser the unpaid
the respondents. The machineries were sold at balance of the price, if any.
public auction to the highest bidder, the
respondents. As judgment called for more, the
sheriff levied attachment on petitioner’s rights
on certain real properties.
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Cruz vs. Filipinas Investment
& Finance Corp.
(23 SCRA 791)
PCI Leasing and Finance, Inc.
vs. Giraffe-X Creative
Imaging, Inc.,
(527 SCRA 405, G.R. No.
142618 July 12, 2007)
Petitioners instituted this action for the
purpose of annulling the writ of execution.
Petitioners contend that as the respondents
had repossessed the machines purchased on
installment, they were relieved from further
responsibility, in view of the Recto Law, now
under Art. 1484 of the NCC
SHORT FACTS: Petitioner Cruz purchased from DOCTRINE: Should the vendee or
Far east Motor Corp. an Isuzu Diesel Bus for purchaser of a personal property
P44,616.24 payable in 30 monthly default in the payment of two or more
installments, with 12% interest per annum, of the agreed installments, the vendor
until fully paid. As evidence of said indebtness, or seller has the option to avail of any
plaintiff executed and delivered to said one of these three remedies—either
corporation a promissory note in the to exact fulfillment by the purchaser
aforementioned sum. To secure the same, of the obligation, or to cancel the sale,
Cruz executed a chattel mortgage over the or to foreclose the mortgage on the
aforesaid vehicle. As no down payment was purchased personal property, if one
made, the seller required Cruz to give an was constituted.
additional security, a second mortgage on a
parcel of land, owned by plaintiff Felicidad These remedies have been recognized
Vda. de Reyes, in San Miguel, Bulacan – said lot as alternative, not cumulative, that
was mortgaged to DBP to secure a loan to the exercise of one would bar the
obtain by the latter. Cruz then defaulted in exercise of the others. It may also be
payment as he has only paid P500. The bus had stated that the established rule is to
been damaged in an accident while in the effect that the foreclosure and
plaintiff’s possession. actual sale of a mortgaged chattel bar
further recovery by the vendor of any
The defendant’s bid was the highest bid (at balance on the purchaser’s
P15k). Preparatory to foreclosing its real estate outstanding obligation not so satisfied
mortgage on Reyes’ land, defendant paid the by the sale.
mortgage indebtness of Reyes to DBP.
Defendant then requested the sheriff of The claim that what is being withheld
Bulacan to take possession of, and sell the land from the vendor, by the proviso of
to satisfy plaintiff’s outstanding obligation. Article 1484 of the Civil Code, is only
Reyes then wrote a letter to defendant asking the right to recover "against the
for the cancellation of the real estate purchaser" and not a recourse to the
mortgage. additional security put up, not by the
purchaser himself, but by a third
person has no merit.
PCI Leasing and Finance, Inc. (PCI) and Giraffe- DOCTRINE: the demand letter sent by
X Creative Imaging, Inc. entered into a lease PCI to Giraffe was fashioned in the
agreement whereby the former leased to the alternative, i.e. payment of the full
latter several equipment for 36 months. The amount of the unpaid balance for the
agreement provided, among others, that in entire lease period or the surrender of
case of Giraffe’s default, PCI may recover the the financed asset. In other words,
rentals for the remaining term, and obtain should Giraffe opted to pay the
possession of the equipment (cumulative balance stated, it need not return the
remedies). Giraffe defaulted after a year. PCI subject equipment. Likewise, if Giraffe
sent a letter to Giraffe demanding payment of opted not the exercise its option of
the rentals for the remaining term of the lease acquiring the equipment by returning
OR surrender of the subject equipment. them, then it need not pay the
Giraffe did not heed the demand. outstanding balance. The legal import
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Nolasco vs. Cuerpo,
(G. R. No. 210215, December
9, 2015)
is that the transaction at hand is a
Thus, PCI filed a complaint against Giraffe, lease in name only. The so-called
praying for the issuance of a writ of replevin for monthly rentals are in truth monthly
the recovery of the leased property, and in amortizations of the price of the
addition, to pay the balance of the rental equipment. The absence of a
obligation (P8M). “purchase option” in the lease
agreement, does not negate the fact
Giraffe sought for the dismissal of the case that the true nature of the transaction
arguing that the subject transaction fall within is really a lease with an option to buy.
the coverage of Art. 1484 (Recto Law), being in
actuality, a lease with an option to buy. And Given the above, the Recto Law
that PCI’s recovery of the possession of the should apply. And PCI in choosing to
subject property was tantamount to a deprive Giraffe of the possession of
foreclosure thereof which bars recovery of the the equipment waived its right to
balance. bring an action to recover unpaid
rentals, under par. 3 of Art. 1484.
The RTC ruled in favor of Giraffe and dismissed
the complaint. The SC affirmed. Article 1485 of the Civil Code applies,
as the case clearly reflects a situation
in which the financing company can
withhold and conceal its intention,
until the last moment, to sell the
subject property in the finance lease,
so that the Recto Law provisions be
circumvented.
SHORT FACTS: Petitioners and respondent DOCTRINE: The right of rescission
entered into a contract to sell over a parcel of under Article 1191 of the NCC is
land. The contract provides that the predicated on a breach of faith that
consideration of the sale is more than Php33M violates the reciprocity between the
payable with a downpayment of more than parties to the contract. This
Php11M and Php2M earnest money. retaliatory remedy is given to the
Remaining is payable in 36 monthly contracting party who suffers the
installments. With the condition that the injurious breach on the premise that it
subject land title be transferred to a certain is ‘unjust that a party be held bound
Edilberta Santos and after full payment of the to fulfill his promises when the other
same, it be transferred to the respondents. violates his.’” The rescission (or
After four months, respondents sought to resolution) of a contract will not be
rescind the subject contract on the ground of permitted for a slight or casual
financial difficulties. They also sought the breach, but only for such substantial
return of the amount of more than twelve and fundamental violations as would
million pesos that they had paid to petitioners. defeat the very object of the parties
As their letter went unheeded, respondents making the agreement. Ultimately,
filed the instant complaint for rescission. In the question of whether a breach of
their defense, petitioners countered that contract is substantial depends upon
respondents’ act is a unilateral cancellation as the circumstances
the latter did not consent to it.
the RTC and the CA were indeed
RTC and the CA ruled in favor of respondents correct in finding that petitioners
as “petitioners substantially the subject failed to perform their obligation to
contract when they did not effect the transfer effect the transfer of the title to the
of the subject land from Edilberta Santos to subject land from one Edilberta to
petitioners’ names within 90 days from the their names within the prescribed
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Moldex Realty vs. Saberon
(G.R. No. 176289, April 8,
2013)
execution of said contract, thus, entitling period, said courts erred in concluding
respondents to rescind the same. that such failure constituted a
substantial breach that would entitle
respondents to rescind the subject
contract.
SHORT FACTS: Respondent Flora Saberon DOCTRINE: Under the Maceda Law,
asked petitioner Moldex, developer of a lot in the defaulting buyer who has paid at
Metrogate Subdivision in Dasmariñas, Cavite, least two years of installments has the
to reserve the subject lot to her. The price for right of either to avail of the grace
the land on installment basis is P583,498.20 at period to pay or, the cash surrender
monthly amortizations, payable in five years value of the payments made: Section
with 21% interest per annum based on the 3. In all transactions or contracts
balance. Flora then began making periodical involving the sale or financing of real
payments for four years, totaling almost estate on installment payments x x x,
P400k. Moldex then sent Flora notices where the buyer has paid at least two
reminding her to update her account. Upon years of installments, the buyer is
inquiry, the latter was shocked of the amount entitled to the following rights in case
that she bloated amount that she owed the he defaults in the payment of
former. Moldex then suggested for Flora to succeeding installments: x x x, (b) If
execute a written authorization for the sale of the contract is canceled, the seller
the lot to a new buyer and a written request shall refund to the buyer the cash
for refund so that she can get half of the surrender value of the payments on
payments she made. However, Flora never the property equivalent 50% of the
made said request. total payments made, and, after five
years of installments, an additional
Moldex then sent the latter a Notice of five percent every year but not to
Cancellation of Reservation Application or exceed ninety per cent of the total
Contract to Sell. Flora, on the other hand, filed payments made: x x x
before the HLURB a complaint for the
annulment of the contract, recovery of all her In the case at bar, Flora had already
payments, and imputed bad faith on the part paid more than 2 years of
of Moldex. Moldex, for their part, averred that installments. Thereafter, the only
since Flora was not able to settle her account, option available for her is under 3(b)
Moldex exercised its right under RA No. 6552, whereby Moldex shall refund to Flora
or the Maceda Law, by cancelling the Contract the cash surrender value of the
to Sell and forfeiting all payments made. payments on the property equivalent
to 50% of the total payments made.

The lack of a license to sell or the

Spouses Domingo vs. SHORT FACTS: Respondents were the
Spouses Manzano registered owners of a parcel of land in
caloocan city. Through their attorney, they
(G.R. No. 201883, executed a notarized agreement of contract to
November, 16, 2016) sell to the petitioners. However, they failed to
failure on the part of a subdivision
developer to register the contract to
sell or deed of conveyance with the
Register of Deeds does not result to
the nullification or invalidation of the
contract to sell it entered into with a
buyer. The contract to sell remains
valid and subsisting.
DOCTRINE: The execution of a
contract of conditional sale does not
immediately transfer title to the
property to be sold from seller to
buyer. In such contract, ownership or
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Gregorio vs. Crisologo
(G.R. No. 210215, December
9, 2015)
Delta Dev. And Management
Services vs. Enriquez
(G.R. No. 168646, January
12, 2011)
tender full payment of the balance when the
deadline came. Petitioners then offered to pay
the remaining balance after 9 months but the
attorney refused to accept payment and
advised them to await the return of the
respondent from abroad. When she arrived,
petitioners tendered payment but still she
refused to accept and instead told them that
the property was no longer for sale and that
she was forfeiting their payments. Soon
thereafter, petitioners found out that the
subject property was sold to a certain Aquino
with a new title issued in her name. Petitioners
filed a complaint for specific performance and
accept payment of the remaining balance,
execute a deed of sale over the subject
property in their favor, and restrain the sale in
favor of Aquino.
SHORT FACTS: Respondent Crisologo is the
widow of Alfredo Culig Sr. During his lifetime,
Alfredo was granted a homestead patent of
over a 54,730 sq.m. parcel of land. When
Alfredo dies, his heirs executed an extra-
judicial settlement of estate with simultaneous
sale of the propert in favor of petitioner
Gregorio and her husband. The property was
sold and the title thereto was issued in the
name of the latter. Respondent then filed a
complaint demanding the repurchase of the
property, but petitioners refused. For their
part, petitioner countered that respondent
had no right to repurchase the same since the
latter only wanted to redeem the property to
sell it
SHORT FACTS: DELTA, owned by Ricardo de
Leon, is a domestic corporation engaged in the
business of developing and selling real estate
properties loaned from Luzon Development
Bank for the express purpose of developing
Delta Homes I. To secure the loan, the spouses
De Leon executed in favor of the BANK a real
estate mortgage (REM) on several of their
properties, including Lot 4 (which is the
title to the property is retained by the
seller until the fulfillment of a positive
suspensive condition which is
normally the payment of the purchase
price in the manner agreed upon.
In contract to sell payment of the
price is a positive suspensive
condition, failure of which is not a
breach of contract warranting
rescission but rather just an event that
prevents the prospective buyer from
compelling the prospective seller to
convey title.
In other words, the non-fulllment of
the condition of full payment renders
the contract to sell ineffective and
without force and effect Since failure
to pay the price in full in a contract to
sell renders the same ineffective and
without force and effect, then there is
no sale to speak of.
DOCTRINE: The formal offer to
redeem, accompanied by a bona fide
tender of the redemption price,
within the period of redemption
prescribed by law, is only essential to
preserve the right of redemption for
future enforcement beyond such
period of redemption and within the
period prescribed for the action by
the statute of limitations. Where, as in
the instant case, the right to redeem
is exercised thru the filing of judicial
action within the period of
redemption prescribed by the law, the
formal offer to redeem, accompanied
by a bona fide tender of the
redemption price, might be proper,
but is not essential. The filing of the
action itself, within the period of
redemption, is equivalent to a formal
offer to redeem
DOCTRINE: A contract to sell is one
where the prospective seller reserves
the transfer of title to the prospective
buyer until the happening of an event,
such as full payment of the purchase
price. What the seller obliges himself
to do is to sell the subject property
only when the entire amount of the
purchase price has already been
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Heirs of Macalalad vs. Rural
Bank of Pola, Inc.
(G.R. No. 200899, June 20,
2018)
disputed lot). Sometime in 1997, DELTA
executed a Contract to Sell with respondent
Angeles Catherine Enriquez (Enriquez) over
the house and lot in Lot 4 for the purchase
price of P614,950.00. Enriquez made a down
payment of P114,950.00. When DELTA
defaulted on its loan obligation, the BANK,
instead of foreclosing the REM, agreed to a
dation in payment or a dacion en pago.
The Deed of Assignment in Payment of Debt
was executed on September 30, 1998 and
stated that DELTA "assigns, transfers, and
conveys and sets over to the assignee that real
estate with the building and improvements
existing thereon x x x in payment of the total
obligation owing to the Bank x x x." Unknown
to Enriquez, among the properties assigned to
the BANK was the house and lot of Lot 4, which
is the subject of her Contract toSell with
DELTA. The records do not bear out and the
parties are silent on whether the BANK was
able to transfer title to its name. It appears,
however, that the dacion en pago was not
annotated on the TCT of Lot 4.
SHORT FACTS: Leopoldo Constantino, during
his lifetime, owned a parcel of land. After the
death of Leopoldo, it was made to appear that
he sold the subject lot to spouses Pimentel, in
whose name a new TCT was issued. Thereafter,
the spouses obtained a loan from respondent
bank Rural Bank of Pola and gave the parcel of
land as collateral. Subsequently, the spouses
failed to pay their loan, leading respondent
bank to foreclose the mortgage whereby the
latter emerged as highest bidder, Hence, the
TCT in favor of the spouses Pimentel was
cancelled and a new TCT was issued in the
respondent bank’s name. Petitioners’
predecessor-in-interest, Paz Macalalad, filed
with the RTC a complaint for declaration of
nullity of respondent’s TCT as she alleged that
she was the sole heir of Leopoldo.
Respondent bank denied the material
averments and claims that it is a purchaser in
good faith who was not remiss in its duty to
conduct an ocular inspection on the subject
premises and to investigate as to the validity of
the title of the property being given as security.
delivered to him. "In other words, the
full payment of the purchase price
partakes of a suspensive condition,
the non-fulfillment of which prevents
the obligation to sell from arising and
thus, ownership is retained by the
prospective seller without further
remedies by the prospective buyer." It
does not, by itself, transfer ownership
to the buyer.
The BANK then posits that, if title to
Lot 4 is ordered delivered to Enriquez,
DELTA has the obligation to pay the
BANK the corresponding value of Lot
4. According to the BANK, the dation
in payment extinguished the loan only
to the extent of the value of the thing
delivered. Since Lot 4 would have no
value to the BANK if it will be
delivered to Enriquez, DELTA would
remain indebted to that extent.
DOCTRINE: A purchaser in good faith
and for value is one who buys the
property of another without notice
that some other person has a right to
or interest in such property and pays
a full and fair price for the same, at the
time of such purchase, or before he
has notice of the claims or interest of
some other person in the property.
Under PD 1529, the definition of an
innocent purchaser for value has been
expanded to include innocent lessee,
mortgagee, or other encumbrancer
for value.
The settled rule is that the burden of
proving the status of a purchaser in
good faith lies upon one who asserts
that status, and this onus probandi
cannot be discharged by mere
invocation of the legal presumption of
good faith. A purchaser in good faith
is one who buys property without
notice that some other person has a
right to or interest in such property
and pays its fair price before he or she
has notice of the adverse claims and
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
Mendoza vs. Spouses
Palugod
(G. R. No. 220517, June 20,
2018)
Module 7: I. Extinguishment of Sale (Articles 1600-1623, New Civil Code)
Cebu State College of
Science and Technology
(CSCST) vs. Misterio
(759 SCRA 1, G.R. No.
179025 June 17, 2015)
interest of another person in the same
property. The honesty of intention
which constitutes good faith implies a
freedom from knowledge of
circumstances which ought to put a
person on inquiry.
SHORT FACTS: Lolita and Jasminia, bestfriends, 1. The disputable presumption is that
bought the subject lot on installment for one consideration is inherent in every
year until they decide to pay the balance in full. contract
In 1995, Jasminia became afflicted with breast
cancer. Sometime in 1996, Lolita and Jasminia 2. As neither party was able to make
constructed a residential house on the subject out a case, neither side having
lot. Although Lolita has no receipts, she shared established his/ her cause of action,
in the cost of the construction of the house the Supreme Court (SC) can only leave
from her income in the catering business and them where they are and it has no
selling of various products. On May 11, 2004, choice but to dismiss the complaint,
Jasminia executed a Deed of Absolute Sale in as the lower courts should have done.
favor of Lolita, who eventually mortgaged the
subject property to [petitioner] Elizabeth
Gutierrez as a security for a loan in the amount
of Php800,000.00. On the other hand, alleged
that their daughter, the late Jasminia, acquired
the subject property. Prior to and after the said
acquisition of the subject property, Jasminia
was living with [petitioner] Lolita, a lesbian.
When she was nearing her death, she told her
mother that her house and lot shall go to her
brother Ramonito Palugod, but shall be
allowed to stay therein. Jasminia eventually
died. Meanwhile, Lolita, taking advantage of
her relationship with Jasminia, caused the
latter to sign a Deed of Absolute Sale in her
favor. Lolita, aided by her brother as witness,
entered the property for registration in the
Office of the Registry of Deeds where TCT in
the name of Jasminia has been cancelled and
was replaced by Lolita’s. Respondents
executed an Affidavit of Adverse Claim of their
right and interest over the property as the only
compulsory and legitimate heirs of Jasminia.
However, Lolita, knowing fully well of the
impending suit, made it appear that she
mortgaged the property to [petitioners]
Spouses Gutierrez as a security for a loan
amounting to Php800,000.00.
SHORT FACTS: Asuncion Sandaya, mother of DOCTRINE: Absent any period for the
respondents, executed a DoS covering a parcel exercise of the right to repurchase the
of land in favor of Sudlon Agricultural High property herein, respondents may use
School.The sale was subject to the right of said right within four (4) years from
vendor to repurchase the property after SAHS the happening of the allocated
shall have ceased to exist or shall have conditions contained in their Deed of
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transferred its school site elsewhere. A TCT
was issued annotated with the vendor’s right
to repurchase. Provincial Board of Cebu
donated 41 parcels of land to the SAHS subject
to the condition that (1) if SAHS ceases to
operate, the ownership of the lots will revert
to the province, and (2) SAHS could not
alienate the properties. In 1983, BP 412 was
executed incorporating and consolidating all
schools in the Cebu province as part of the
Cebu State College of Science and Technology.
Respondents and the province now wish to
repurchase and recover the subject property.
Catangcatang vs. Legayada SHORT FACTS: Legayda executed in favor of
Catangcatang a deed of sale with pacto de
(84 SCRA 51) retro with a 5-year redemption period over a
parcel of land (for P1400). Petitioner left a
balance of P200, covered by a promissory
note. Petitioner then found out that the land
delivered was less than what was stipulated in
the contract. Thus, petitioner filed a civil case
seeking recovery of the area allegedly
withheld. During pendency of said case,
respondent took back the possession of the
land from petitioner, where respondent’s
counsel wrote a letter informing her that the
redemption money was with the petitioner’s
counsel. However, the letter did not reach the
petitioner and the period of repurchase was
expired without respondent having availed
himself of his right to repurchase. Petitioner
now petitions the consolidation of title and
restoration of possession.
Alonzo vs. IAC SHORT FACTS: Five siblings inherited in equal
shares a parcel of land. 2/5 siblings sold their
(150 SCRA 259) portion of the land to the petitioners with a
denomination of a “Con Pacto de Retro Sale”.
Petitioners then occupied the lot and enclosed
the same with a fence. One of the respondents
sought to redeem the area but the same was
dismissed. Respondent Tecla Padua, now
invokes her right to redemption. RTC dismisses
the complaint on the ground that the right had
lapsed after failure to exercise redemption
after 30 days of notice. Respondent however
invokes that she was unaware of the sale.
Lee Chuy Realty Corporation SHORT FACTS: Petitioner claims that it was
vs. Court of Appeals never informed of the existence of the
aforementioned sale. On the contrary, it was
(December 4, 1995) upon the inquiry from the Register of Deeds
that the sale was brought to its attention. On
the other hand, respondent contends that
Sale: (a) the cessation of the existence
of the SAHS, or (b) the transfer of the
school to other site. failure to exercise
their right to redeem the property
within the required four (4) years
from the time when SAHS had ceased
to exist, or from 1983, the date of
effectivity of BP Blg. 412, this Court
held that respondents are barred by
prescription.
DOCTRINE: In the exercise of the right
to repurchase, it is not sufficient that
the vendor a retro manifests his
desire to repurchase. This statement
of intention must be accompanied
with an actual and simultaneous
tender of payment which constitutes
the legal exercise of the right to
repurchase.
DOCTRINE: Art. 1088 of the Civil Code
provides that the notice required is
written notice and that actual notice
would not suffice as a substitute. In
requiring written notice, the said
article seeks to ensure that the
redemptioner is properly notified of
the sale and to indicate the date of
such notice as the starting time of the
period of redemption.
DOCTRINE: What is essential is to
make an offer to redeem within the
prescribed period. There is actually no
prescribed form for an offer to
redeem to be properly effected.
Hence, it can either be through a
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Anecita Gregorio v. Crisologo
Vda. De Culig
(G.R. No. 180559; January
20, 2016)
Liam vs. United Coconut
Planters Bank
(793 SCRA 383, G.R. No.
194664 June 15, 2016)
petitioner was verbally notified of the sale. In formal tender with consignation, or by
1989, petitioner filed a complaint for legal filing a complaint in court coupled
redemption against MARC REALTY and with consignation of the redemption
consigned a manager’s check for value. In its price within the prescribed period.
Amended Answer, MARC REALTY insisted that What is condition precedent to a valid
the complaint be dismissed as there was no exercise of the right of legal
allegation of prior valid tender of payment or redemption is either the formal
notice of consignation. tender with consignation or the filing
of a complaint in court. What is
RTC: the filing of the action itself, within the paramount is the availment of the
period of redemption, is equivalent to a formal fixed and definite period within which
offer to redeem. to exercise the right of legal
redemption.
SHORT FACTS: Respondent filed a complaint DOCTRINE: The Public Land Act
demanding repurchase of a land (homestead provides that every conveyance of
patent) sold be her children to petitioners. land acquired under the homestead
Petitioners refused and countered that provisions shall be subject to
respondent had no right to repurchase the repurchase by the applicant, his
property. widow, or legal heirs, within a period
of 5 years from the date of
Petitioner: There was no valid redemption conveyance (Sec. 119).
since there was no valid tender of payment nor
consignation of the amount of repurchase Jurisprudence has held that tender of
the redemption price is not essential
Respondent: The case involves the exercise of or necessary where the filing of the
the right of redemption of homestead patent action itself is equivalent to a formal
lots. Thus, consignation should not be offer to redeem. The filing of the
considered a requisite element for repurchase. action itself, within the period of
redemption, is equivalent to a formal
offer to redeem.
SHORT FACTS: Petitioner Liam entered into a DOCTRINE: The transactions between
contract to sell with developer Primetown Liam and PPGI was an assignment of
(PPGI) for the purchase of a unit in Hongkong credit and not subrogation. An
Tower of a condominium project in San assignment of credit is the process of
Antonio, Makati. To finance said construction, transferring the right of the assignor
PPGI obtained a loan from UCPB. PPGI settled to the assignee who would then have
its loan to UCPB by transferring its right to the right to proceed against the
collect all receivables from buyers. PPGI then debtor. In assignment of credit, the
notified petitioner of the sale of its receivables consent of the debtor is not necessary
to UCPB and instructed her to remit the in order that the assignment may
balance to the latter. Liam then wrote to UCBP produce legal effects, as opposed to
for the deferment of her amortization of subrogation (where the third-party
payments until the delivery of the unit. As her steps into the shoes of the original
requests when unheeded, she demanded for a creditor). In assignment of credit,
refund. Liam then saw UCPB’s newspaper what is required is merely notice as
advertisement offering a sale of condominium the assignment takes effect only from
units in another project for a lower price. She the time he has knowledge thereof.
then requested UCPB for downgrading her
purchased condo to a unit that would be in The primary consideration in
equivalent to payments she had already made. determining the true nature of a
As her requests remain unheeded, Liam filed a contract is the intention. The
provisions of the foregoing
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complaint for specific performance before the agreements between Primetown and
HLURB, PPGI and UCPB. UCPB are clear, explicit and
unambiguous as to leave no doubt
about their objective of executing an
assignment of credit instead of
subrogation. The MOA and the Deed
of Sale/Assignment clearly state that
UCPB became an assignee of
Primetown’s outstanding receivables
of its condominium buyers. The
absence of Liam’s consent to the
transactions between PPGI and UCPB
affirms their nature as assignment of
credit.
Malasarte vs. CA SHORT FACTS: Respondent spouses Gopia, DOCTRINE: The taking in of boarders
leased to petitioner Mallarte, an apartment at by the petitioner in the leased
(178 SCRA 310) Sampaloc, Manila on a month-to-month basis premises, without the consent of the
for P300 /month. The lease agreement lessors, did not violate the lease
prohibited the subleasing or assignment of a agreement, for a prohibition against
portion fo the leased premises. Respondents, subleasing may not embrace the
through their annual inspection, found that taking in of boarders. Accepting
two rooms on the second floor and a portion boarders is not equivalent to
of the living/dining rooms had been converted subleasing the premises.
into bed spaces for boarders. Alleging that
petitioner had violated the contract, “The word ‘sublet’ has a clear and
respondents demanded that he vacate the distinct meaning, that is, it means to
premises and filed for ejected. Petitioner avers make a sublease, accompanied by a
that the boarders were his relatives and such surrender of the possession and
was not encompassed in “subletting.” control of the premises, or at least a
part thereof.”

The lessee, by accepting boarders and

Chua Tee Dee vs. CA
(GR 135721, 27 May 2004)
SHORT FACTS: A lease contract between
petitioner (lessor) and respondent (owner) of
a rubber plantation was made with the
stipulation that:
(1st party = Respondent // 2nd party =
Petitioner)
“ Farm Personnel: the 2nd party has the option
to select and screen those farm personnel that
they should retain. Those not selected shall be
terminated by the 1st party.”
assigning rooms or bed spaces for
them in the leased premises, does not
relinquish or surrender his lease to
them. He did not cease to become the
actual occupant and possessor of the
demised premises. He did not
surrender the possession and control
of the leased premises or a part
thereof.
DOCTRINE: As lessor, the Agricom had
the duty to maintain the petitioner in
the peaceful and adequate enjoyment
of the leased premises. Such duty was
made as part of the contract of lease
entered into by the parties. However,
the duty “to maintain the lessee in the
peaceful and adequate enjoyment of
the lease for the duration of the
contract” mentioned in No. 3 of the
article is merely a warranty that the
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
lessee shall not be disturbed in his
“1st party shall maintain the 2nd party in the legal, and not physical, possession.
quiet peaceful possession and enjoyment…”
Respondent then met with the employees and
updated them on the impending termination.
Later on, respondent sent letter to the said
employees confirming their termination which
prompted the latter to file a complaint.
Petitioner now complains that there is no
peaceful possession due to the pestering of
certain individuals who claim portions of the
plantation as their property. Thus, preventing
them to operate on the agreed area.
Respondent then sent a demand of overdue
rentals.
Tagbilaran Integrated Sellers Private respondent TWC entered into separate
Association vs. CA written lease contracts for a period of one year
with petitioner TISA. Each contract of lease
(444 SCRA 193) provides that “no subleasing is allowed
without the knowledge and consent of TWC.
However, some petitioners subleased the said
lot to the other petitioners.
TWC then demanded that they vacate the
premises on the following grounds: expiration
of lease contracts, non-payment of rentals,
and violations of the conditions of lease
including noncompliance with sanitary and
building ordinances.
TWC then entered into a contract with a third
person (Lim) who paid rentals for the first 12
months. Howerver, petitioners refused to
vacate the lot, contending that the lease
contract between Lim and TWC is null and
void.
Spouses Ricardo and Elena C.Respondent is the owner of a commercial lot
Golez v. Meliton Nemeño which a part of said lot was leased to
petitioners as lessees. The agreement as
(G.R. No. 178317, September follows:
23, 2015) - 2nd party (lessees) will construct a
commercial building, pay monthly rentals
- 1st party (lessors) shall not collect, instead,
said amount shall be used to the herein
lessee as payment of the cost of the
building.
- Term of the lease shall be four years only.
However, the amount shall not be paid
DOCRINE: The lease period executed
by petitioners and private
respondents ceased one year after
the agreement. Following Art. 1669 of
the NCC, the lease contracts, having
been executed for a determinate
time, they ceased on the day fixed.
While no subsequent lease contracts
extending the duration of the original
lease were forged, it appears that
TWC allowed petitioners to continue
occupying the lot as in fact it
continued to demand, collect and
accept monthly rentals. An implied
new lease (tacita reconduccion) was
thus created (Article 1670, NCC).
The implied lease of petitioners
expired upon the demand made by
TWC to vacate the occupied premises.
Hence, petitioners continued
occupation thereon had thus become
unlawful.
DOCTRINE: At the end of the lease
period or until such time the cost of
the building has been fully covered by
the rent accumulated, petitioners, will
transfer the ownership of said
building to respondent.
Unfortunately, the building was
gutted down by fire. However, the
destruction of the building should not
in any way be made a basis to exempt
petitioners from paying rent for the
period they made use of the leased
CEREZO, SBU-COL Mendiola A.Y. 2021-2022 *use at your own risk*
fully within the period, parties hereby
reserves the right to extend its contract
- As soon as the amount is fully paid,
building shall be deemed owned by the 1st
party
However, the building was burned down.
Because of this, respondent sent a letter to
petitioners demanding the accumulated
rentals for the leased properties. As the
demand remained unheeded, respondent filed
a complaint and alleged that petitioner
(Ricardo) is the proximate cause of the fire. The
trial court found that Ricardo was indeed the
author of the fire. Moreover, they noted that
since petitioners can no longer deliver the
building which the contract obliged them to
deliver, they are legally obliged to pay the
rentals for their use and enjoyment to prevent
unjust enrichment on their part. The CA
affirmed the same.
Golez vs. Nemeño, 771 SCRA SHORT FACTS: Respondent spouses Layug are
306 the registered owners of a parcel of land in
Makati City. They then leased the property for
(G.R. No. 178317 September a period of 7 years to petitioner Spouses
23, 2015) Modomo for P170,000.00 per month. It was
also agreed upon by the parties that real estate
taxes shall be paid by petitioners.
Subsequently, petitioners defaulted in
payment of the escalation of rental fees from
2006-2008 (their ejectment). Moreover,
respondents aver that as petitioners failed ot
pay their real estate tax, they had to pay the
same for the latter’s behalf.
A letter was then sent to petitioners
terminating the lease contract and demanding
them to vacate the premises. In their
counterclaim, petitioners aver that
respondents agreed, based on their
conversation, to reduce the monthly rentals to
P150,000.00 and the non-imposition of the
escalation clause and real estate tax. Hence,
petitioners prayed that the case be dismissed
because the lease contract had been amended
by the subsequent oral agreements by the
parties.
Spouses Modomo vs. SHORT FACTS: Spouses Modomo allege that
Spouses Layug they are the registered owners and legal
possessors of a parcel of land which they lease
(G.R. No. 197722, August 14, from Spouses Layug at the amount of Php170k
2019) per month subject to an escalation of: 10% for
property. Otherwise, this will be a
clear case of unjust enrichment.
The fact that the parties agreed to a
different mode of payment — in this
case, a building — does not in any way
exempt petitioners from paying
compensation due to respondent for
the use of the latter’s property
because the building was destroyed.
Hence, petitioners should be liable for
rent during the period within which
they were in possession of the leased
property
DOCTRINE: The Court finds that while
there has been a modificatory
novation through the parties
subsequent verbal agreement, such
novation relates solely to the lowering
of the fee from P170,000 to P150,000.
Novation is never presumed, and the
animus novandi, whether total or
partial, must appear by express
agreement of the parties, or by their
acts that are too clear to be mistaken.
While the records bear sufficient
evidence to show the modification of
such monthly rental, no similar
evidence exists on record to warrant
the non-imposition of the provisions
on annual escalation and proportional
payment of real estate tax. On the
contrary, their addendum (2005)
reinforces the parties’ intention to
impose annual escalation and impose
payment of real estate tax.
DOCTRINE: Novation has been
defined as the substitution or
alteration of an obligation by a
subsequent one that cancels or
modifies the preceding one. Unlike
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Booklight, Inc. vs. Tiu
(G.R. No. 213650, June 17,
2019)
the 2nd and 3rd year, 15% for 4th and 5th year,
20% on the 6th and 7th year. It was also alleged
in the agreement that Sps. Modomo would pay
the real estate taxes on the property. When
Spouses Modomo defaulted in the payment,
Sps. Layug demanded that they vacate the
premises. However, Sps. Modomo refused
claiming that there was a subsequent oral
agreement whereby the improvements made
by Sps. Modomo, the monthly rentals would
be reduced to Php150K and that the real estate
taxes would no longer be shouldered by Sps.
Modomo. However, Sps. Layug defaulted in
enforcing the subsequent agreement and
pushed that the original agreement be
followed. Sps. Modomo also alleged that the
Contract of Lease has been novated in view of
the subsequent oral agreements of the parties.
Hence, Sps. Modomo prayed for the dismissal
of the case and that they be declared entitled
to their counterclaim.
SHORT FACTS: Petitioner Booklight, Inc.
entered into a contract of lease with
respondent for a space in the latter’s building
to be used for petitioner’s bookstore business.
The lease was for 5 years, which expired on
2001. It was never renewed upon expiration,
although petitioner continued to occupy the
premises until its business operations ceased
on 2003. Alleging unpaid rentals from
December 2001, respondent filed the current
action.
Petitioner alleged that there was no prior
demand made by respondent and that it fully
paid its rentals up to July 2002. The RTC and
ruled in favor of Tiu. Petitioner now avers that
the CA neglected to rule on its claim for refund
of the advanced rental & deposit. In addition,
since the electric bills were allegedly for the
month of March 2003 and it had already
ceased its business on Feb 2003, it cannot be
made liable therefor. Moreover, petitioner
other modes of extinction of
obligations, novation is a juridical act
of dual function, in that at the time it
extinguishes an obligation, it creates a
new one in lieu of the old. x x x This is
not to say however, that in every case
of novation the old obligation is
necessarily extinguished. Our Civil
Code now admits of the so-called
imperfect or modificatory novation
where the original obligation is not
extinguished but modified or changed
in some of the principal conditions of
the obligation. Thus, article 1291
provides that obligations may be
modified.
While the Civil Code permits the
subsequent modification of existing
obligations, these obligations cannot
be deemed modified in the absence of
clear evidence to this effect. Novation
is never presumed, and the animus
novandi, whether total or partial,
must appear by express agreement of
the parties, or by their acts that are
too clear and unequivocal to be
mistaken.
DOCTRINE: Such declaration of non-
suit against petitioner was already
upheld by this Court with finality.
Hence, due to its failure to file a pre-
trial brief and to appear in the pre-
trial conference, petitioner lost its
right to present evidence to support
its allegations.
The fact that petitioner, for being
declared non-suited, was not able to
present evidence to support its claims
is surely fatal to its case. The records
are bereft of any evidence to support
petitioner's claim that it paid
advanced rental and deposit and that
the same have not yet been refunded
or utilized; nor was there any record
to definitely show that the subject
electric bills pertain only to a month
when petitioner was not occupying
the premises anymore.
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D.M. Ragasa Enterprises, Inc.
vs. Banco de Oro, Inc.
(G.R. No. 190512, June 20,
2018)
Muller vs. Philippine
National Bank
claims for the proceeds of the auction sale of
its attached/garnished good
SHORT FACTS: In January 1998, Ragasa and
then Equitable Bank executed a lease contract
over the ground and second floors of a
commercial building in Tomas Morato for 5
years from until 2003. Equitable paid the
amounts representing 3 months advance and
3 months security deposit. With the stipulation
that:
“The failure to pay two consecutive monthly
rentals shall automatically terminate this
contract”
“In the event that a court litigation has been
resort, the aggrieved party shall be paid by the
other no less than P15,000 for attorney’s fees
and other damages that the court may allow;
the cost of litigations shall be borne by the
party in fault or default”
“The TENANT voluntarily binds himself and a contract that is automatically
agrees to the following without any coercion terminated in case of its breach by
or force by the LESSOR;
m) The full deposit shall be forfeited in favor of sanctioned by the contract. Rather, it
the LESSOR upon noncompliance of the Term is a contravention thereof and it
of the Contract of lease by the TENANT and negates the autonomy characteristic
cannot be applied to rental (par. 8)”
Meanwhile, Equitable Bank entered into a
merger with PCI. This eventually merged with
Banco de Oro to form respondent bank. As a
result of the merger, the bank closed and
joined the branches of its constituent banks.
One of the branches which had to be closed is
in the subject property. The bank then sent a
notice informing petitioner that they are pre-
terminating their lease contract (effective June
2001). Ragasa then respondent with a demand
letter for payment of monthly rentals for the
remaining term of the lease contract from July
2001 to January 2003. Ragasa argued that
under the lease contract, the forfeiture of the
bank’s security deposit does not exempt it
from payment of the rentals of the remaining
term because the bank’s act of pre-terminating
the contract was a major breach of its terms.
SHORT FACTS: Petitioner Spouses Fritz and
Thelma Muller are the occupants of two
parcels of land with improvements in Iloilo City
DOCTRINE: In the present case, there
is an express stipulation of the lease
that breach shall mean termination of
the contract. Such automatic
termination clause is valid. Pursuant
to the automatic termination clause
of the Lease Contract, the Lease
Contract was terminated upon its
unauthorized pre-termination by the
bank. Ragasa is, thus, precluded from
availing of the second option which is
to claim damages by reason of the
breach and allow the lease to remain
in force. With the lease having been
automatically resolved or terminated
by agreement of the parties, Ragasa is
entitled only to indemnification for
damages.
To force either party to continue with
either party pursuant to its express
provision) is not in furtherance of or
of contracts.
NOTE: Entitlement to rentals after the
termination of the lease pursuant to
an automatic rescission or
termination clause is possible in the
case where the lessor invokes the
clause and the lessee refuses to
vacate the leased premises. However,
the bank did not continue to possess
the same as it is vacated.
DOCTRINE: Under Article 1670 of the
Civil Code, “[i]f at the end of the
contract the lessee should continue
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(G.R. No. 215922, October 1, owned by PNB. PNB informed the Mullers that
2018) their lease will expire on 1987 and that they
had unpaid rentals for 2 years. Seeking to
renew the lease for another year, Fritz wrote
to PNB, which were subsequently denied.
Moreover, Frtiz offered to purchase the same
but was not given due course by PNB. In 1988,
PNB demanded for petitioners to vacate within
15 days. However, the demand fell on deaf
ears. Due to continued occupation of the
petitioners, PNB sent its final demand letter on
2006 demanding them the payment of rentals
from 1984 to 2006. As this was unheeded, PNB
filed the current action.
enjoying the thing leased for fifteen
days with the acquiescence of the
lessor, and unless a notice to the
contrary by either party has
previously been given, it is
understood that there is an implied
new lease, not for the period of the
original contract, but for the time
established in Articles 1682 and 1687.
The other terms of the original
contract shall be revived.”
Thus, when petitioners’ written lease
agreement with respondent expired
on June 1, 1987 and they did not
vacate the subject properties, the
terms of the written lease, other than
that covering the period thereof,
were revived. The lease thus
continued. In this sense, the
prescriptive periods cited by
petitioners are inapplicable because
the lease subsisted and prescription
did not begin to set in
it can be said that so long as
petitioners continued to occupy the
subject properties — with or without
PNB’s consent — there was a lease
agreement between them. They
cannot escape the payment of rent,
by any manner whatsoever. First of
all, petitioners cannot be allowed to
enjoy PNB’s properties without paying
compensation therefor as this is
against equity and fair play. Second,
even when the parties’ lease
agreement ended and petitioners
failed or refused to vacate the
premises, it may be said that a forced
lease was thus created where
petitioners were still obligated to pay
rent to respondent as reasonable
compensation for the use and
occupation of the subject properties.