Friday, January 9, 2009

Etcuban vs. Court of Appeals, and Songalia


Etcuban vs. Court of Appeals, and Songalia
148 SCRA 507
March 1987

FACTS:

Petitioner Dominico Etcuban (petitioner) inherited a piece of land together with his co-heirs (the spouse of the deceased, Demetria Initan, and Pedro, Vicente, Felicitas, Anastacio, Froilan, Alfonso. Advincula, Anunciacion, Jesus, Aguinaldo, all surnamed Etcuban) from their deceased father. Said piece of land was declared in their names as the heirs of Eleuterio Etcuban under Tax Declaration No. 06837. Thereafter the eleven co-heirs executed in favor of Jesus C. Songalia and Guadalupe S. Songalia (private respondents Songalia) eleven deeds of sale of their respective shares in the co-ownership for the total sum of P26,340.00. The earliest of the eleven deeds of sale was made on December 9, 1963 and the last one in December 1967.

In his complaint before the trial court, petitioner alleged that his coowners leased and / or sold their respective shares without giving due notice to him as a co-owner notwithstanding his intimations to them that he was willing to buy all their respective shares. Private respondents Songalia, in denying the material allegations of the complaint, argued that petitioner came to know of the sale of the subject property to them in August 1968 or sometime earlier; that acting on this knowledge, petitioner thru his lawyers wrote private respondents Songalia on August 15, 1968 about the matter; that Jesus Songalia personally went to the office of Atty. Vicente Faelner or counsel for petitioner to inform him of the sale of the subject property; that petitioner took no action despite the information he received from private respondents Songalia thru his counsel; and that, consequently, petitioner lost his right to redeem under Art. 1623 of the new Civil Code because the right of redemption may be exercised only within 30 days from notice of sale and petitioner was definitely notified of the sale years ago as shown by the records.

The trial court allowed petitioner his right of redemption over the subject property and ordered the private respondents Songalia to accept the redemption price of P26,340.00. The Court of Appeals, on the other hand, ruled that petitioner is barred from redeeming the subject property for his failure to make a valid tender of the sale price of the land paid by the defendants within the period fixed by Art. 1623 of the Civil Code.

ISSUE:

Who has the right of redemption over the subject property?

COURT RULING:

The Supreme Court dismissed herein petition and affirmed the decision of the appellate court. Petitioner contends that vendors (his co-heirs) should be the ones to give him written notice and not the vendees (defendants or private respondent herein). However, while it is true that written notice is required by the law (Art. 1623), it is equally true that the same Art. 1623 does not prescribe any particular form of notice, nor any distinctive method for notifying the redemptioner. So long therefore, as the latter is informed in writing of the sale and the particulars thereof, the 30 days for redemption start running, and the redemptioner has no real cause to complain.

In the case at bar, where the vendors or co-owners of petitioner stated under oath in the deeds of sale that notice of sale had been given to prospective redemptioners in accordance with Article 1623 of the Civil Code. "A sworn statement or clause in a deed of sale to the effect that a written notice of sale was given to possible redemptioners or co-owners might be used to determine whether an offer to redeem was made on or out of time, or whether there was substantial compliance with the requirement of said Art. 1623."

Flores vs. So


Flores vs. So
162 SCRA 117
June 1988

FACTS:

On August 2, 1958, plaintiff-appellee Johnson So filed an action for specific performance before the CFI of Sorsogon, against defendant-appellant Alfonso Flores to effect the redemption of a parcel of coconut and rice land in Matnog, Sorsogon. It was alleged that one Valentin Gallano sold to Flores the said parcel of land on February 27, 1950, with right of repurchase within 4 years from the date of the sale, for a price of P2,550.00. Valentin Gallano sold in an absolute manner the same land to Johnson So on February 26, 1958 for the price of P5,000.00. On the allegation that the Pacto de Retro Sale did not embody the real intent and nature of the agreement between the parties, the transaction being a mere mortgage to secure a loan, Johnson So prayed that the court declare the said Pacto de Retro Sale as a mere equitable mortgage and order Alfonso Flores to receive the sum of P2,550.00 deposited with the court and to consider the land in question as redeemed from the latter for all legal purposes.

The lower court ruled that there was a indeed a contract of sale of a parcel of land with the reservation in favor of Gallano a retro of the right to repurchase it within a period of four (4) years from execution thereof; that Flores’ execution of the affidavit of consolidation of ownership on March 6, 1958 and its subsequent registration in the Office of the Register of Deeds of Sorsogon did not make his ownership over the subject land absolute for non-compliance with Articles 1606 and 1607 of the New Civil Code; and that Johnson So has already acquired the right of redemption belonging to Valentin Gallano when he bought the subject property. Thus, the Court ordered Alfonso Flores to deliver the possession of the land in question to Johnson So and to execute the necessary deed of resale in favor of the latter and authorized Flores to withdraw for his own use and benefit the redemption money in the sum of P2,550.00. Valentin Gallano was absolved from liability. The Court of Appeals certified the instant case to the Supreme Court for it involves purely a question of law.

ISSUE:

Who should be the absolute owner of the subject property?

COURT RULING:

The Supreme Court reversed the decision appealed from and declared Alfonso Flores the absolute owner of the subject property. In a sale with the right of redemption, the ownership over the thing sold is transferred to the vendee upon execution of the contract, "subject only to the resolutory condition that the vendor may exercise his right of repurchase within the period agreed upon." Consequently, since the pacto de retro sale in question, which was executed in February of 1950 before the effectivity of the New Civil Code in August of 1950, was a contract with a resolutory condition, and the condition was still pending at the time the new law went into effect, the provisions of the old Civil Code should still apply.

The trial court erred in allowing Johnson So to redeem the subject property. Valentin Gallano was no longer the owner of the same at the time of sale to Johnson So, thus, no right whatsoever was transmitted to the latter, except the right to redeem the property. Ownership over the subject property had long vested upon the defendant-appellant Alfonso Flores.

Villostas vs. Court of Appeals, and Tensuan


Villostas vs. Court of Appeals, and Tensuan
210 SCRA 490
June 1992

FACTS:

Petitioner Natividad Villostas and her husband decided to buy a water purifier. Private respondent Electrolux Marketing, Inc.'s (Electrolux) sales agents assured Villostas of the very special features of their brand of water purifier so she ordered one unit. On September 13, 1986, an Electrolux Aqua Guard water purifier was delivered and installed at Villostas's residence. Consequently, petitioner Villostas signed the Sales Order and the Contract of Sale with Reservation of Title in October 1986. Electrolux issued a warranty certificate which provided that it warrants the quality product to perform efficiently for 1 full year from the date of its original purchase. The purchase of said unit was on installment basis under which Villostas would pay the amount of P16,190.00 in 20 monthly installments of P635.00 per month.

After two weeks, the unit began to perform badly and dirty water started coming out of it. Upon Villostas complaint, Electrolux’s technician changed the unit’s filter, without any charge. Villostas, then, paid the amount of P1,650.00 on November 18, 1986 which included the first amortization of P700.00. However, dirty water still came out of the unit after the replacement of the filter. Villostas complained for the 2nd and the 3rd time, and, after being advised that the filter should be changed every 6 months which costs P300, she finally decided to return the unit as early as December 9, 1986 and demand a refund for the amount paid. Electrolux offered to change the water purifier with another brand of any of its appliance of the unit in her favor, but Villostas did not accept it as she was disappointed with the original unit which did not perform as warranted. Consequently, Villostas refused pay any more the subsequent installments in the amount of P14,540.00 exclusive of interests when Electrolux demanded her payment.

Electrolux filed a complaint against Villostas with the MTC of Makati for the recovery of the sum of P14,540.00 as the unpaid balance of the purchase price of the water purifeir plus interest at the rate of 42% per annum. The MTC rendered its judgment in favor of Electrolux, and upon appeal, the RTC of Makati affirmed said decision, and the Court of Appeals denied her petition for review.

ISSUE:

Is the petitioner entitled to rescind the contract on the basis of a violation of the warranty of the article delivered by the respondent?

COURT RULING:

The Supreme Court dismissed the complaint of private respondent and declared the contract of sale of the water purifier as rescinded.

Electrolux’s contention that the action for rescission is barred by prescription under Article 1571 of the Civil Code providing for a prescriptive period of six months is bereft of merit. A cursory reading of the ten preceding articles to which Article 1571 refers will reveal that said rule may be applied only in cases of implied warranties. The Warranty Certificate that Electrolux issued to Villostas when the unit was delivered is an example of an express warranty, and consequently, the general rule on rescission of contracts, which is four years (Article 1389, Civil Code) should apply in the case at bar.

Radiowealth Finance Co. vs. Palileo


Radiowealth Finance Co. vs. Palileo
197 SCRA 245
May 1991

FACTS:

In April 1970, defendant spouses Enrique Castro and Herminio R. Castro (spouse Castro) sold to herein respondent Manuelito Palileo a parcel of unregistered coconut land in Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale, but the deed was not registered in the Registry of Property for unregistered lands in the province of Surigao del Norte. Since the execution of the deed of sale, Palileo who was then employed in Lianga, Surigao del Sur, exercised acts of ownership over the land through his mother Rafaela Palileo, as administratrix or overseer. Manuelito Palileo has continuously paid the real estate taxes on said land from 1971 until the present.

In November 1976, the CFI of Manila rendered a judgment was rendered against defendant Enrique T. Castro to pay herein petitioner Radiowealth Finance Company (Radiowealth), the sum of P22,350.35 with interest rate of 16% per annum from November 2, 1975 until fully paid, and upon the finality of the judgment, a writ of execution was issued. The Provincial Sheriff Marietta E. Eviota, through defendant Deputy Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public auction the subject land that defendant Enrique Castro had sold to Palileo in 1970. The said Provincial Sheriff executed a certificate of sale was by the in favor of Radiowealth as the only bidder, and upon expiration of the redemption period, she also executed a deed of final sale. Both documents were registered with the Registry of Deeds.

Learning of what happened to the land, Palileo filed an action for recovery of the subject property. The court a quo rendered a decision in favor of Palileo, which the Court of Appeals affirmed.

ISSUE:

Who is the rightful owner of the subject property?

COURT RULING:

The Supreme Court likewise affirmed the appellate court’s decision on this case. There is no doubt that had the subject property been a registered land, this case would have been decided in favor of Radiowealth since it was the company that had its claim first recorded in the Registry of Deeds for it is the act of registration that operates to convey and affect registered land. Therefore, a bonafide purchaser of a registered land at an execution sale acquires a good title as against a prior transferee, if such transfer was unrecorded.

However, a different set of rules applies in the case at bar which deals with a parcel of unregistered land. Under Act No. 3344, registration of instruments affecting unregistered lands is "without prejudice to a third party with a better right." The aforequoted phrase has been held by the Supreme Court to mean that the mere registration of a sale in one's favor does not give him any right over the land if the vendor was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded. Applying this principle, the Court of Appeals correctly held that the execution sale of the unregistered land in favor of petitioner is of no effect because the land no longer belonged to the judgment debtor as of the time of the said execution sale.

Nuguid vs. Court of Appeals, and Guevarra


Nuguid vs. Court of Appeals, and Guevarra
171 SCRA 213
March 1989

FACTS:

The deceased spouses Victorino and Crisanta dela Rosa (spouses dela Rosa) were registered owners of a parcel of land in Orani, Bataan, and covered by OCT No. 3778. On or about May 4, 1931, Victorino dela Rosa (widowed by then) sold one-half of the said property to Juliana Salazar for P95.00. This sale between him and Salazar, though evidenced by a document, was not registered. Nevertheless, Juliana Salazar constructed a house on the lot she purchased immediately after the sale. On March 10, 1964, petitioner spouses Diosdado Nuguid and Marqiueta Venegas (spouses Nuguid) caused the registration of a document entitled "Kasulatan ng Partihan at Bilihan" (Kasulatan) dated June 6, 1961. In this document, Marciana dela Rosa, together with the heirs of Victorino and Crisanta dela Rosa, sold to spouses Nuguid the entire area of the property for the sum of P300.00. Subsequently, OCT No. 3778 was cancelled by the Register of Deeds of Bataan, and TCT No. T-12782 was issued in the spouses Nuguid’s names.

Private respondents claimed that the presented by spouses Nuguid was forged. They also allegedly discovered the forged deed as well as the certificate of title in the name of the petitioners much later, that is, on February 28, 1978, when respondents Amorita Guevarra and Teresita Guevarra thought of having the title of their grandmother Juliana Salazar, registered. On the other hand, spouse Nuguid assert that in the latter part of 1960, Nicolas dela Rosa, uncle of respondent Marciana dela Rosa and grandfather of the other heirs-signatories, offered to sell the subject land to them. Apparently, Nicolas dela Rosa claimed that he had already purchased the shares of the heirs over the subject property as evidenced by a private document entitled "Kasunduan" (Kasunduan) dated August 31, 1955, and as a matter of fact, he had in his possession the original certificate of title covering the property in the name of the deceased Victorino and Crisanta dela Rosa.

The CFI of Bataan dismissed the complaint filed by private respondents, but the Court of Appeals reversed said decision and ordered the spouses Nuguid to execute a deed of reconveyance in favor of herein respondents.

ISSUE:

Who is the rightful owner of the subject property?

COURT RULING:

The Supreme Court reinstated the decision of the CFI of Bataan. The basis for the Court of Appeals' conclusion that petitioners were buyers in bad faith is ambiguous because said court relied on the singular circumstance that the petitioners are from Orani, Bataan, and should have personally known that the private respondents were the persons in actual possession. However, at the time of the purchase, the spouses Nuguid dealt with Pedro Guevarra and Pascuala Tolentino, the latter being the actual occupants. The respondents Guevarras, children of the said Pedro and Pascuala Guevarra, came into the picture only after their parents died. As for the respondent heirs of Victorino dela Rosa, their being in actual possession of any portion of the property was, likewise, simply presumed or taken for granted by the Court of Appeals.

The private respondents cannot also honestly claim that they became aware of the spouses Nuguid’s title only in 1978, because ever since the latter bought the property in 1961, the spouse Nuguid have occupied the same openly, publicly, and continuously in the concept of owners, even building their house thereon. For seventeen years they were in peaceful possession, with the respondents Guevarras occupying less than one-half of the same property.

Cruz vs. Cabaña / Cruz vs. Cabana


Cruz vs. Cabaña
129 SCRA 656
June 1984

FACTS:

In June 1965, respondent Leodegaria Cabaña sold the subject property to respondent spouses Teofilo Legaspi and Iluminada Cabaña (spouses Legaspi) under their contract entitled “Bilihang Muling Mabibili” which stipulated that Cabaña can repurchase the land within one year from December 31, 1966. The said land was not repurchased, however, so the spouses Legaspi took possession of the said property. Later, Cabaña requested that the land title be lent to her in order to mortgage the property to the Philippine National Bank (PNB), to which the spouses Legaspi yielded. On October 21, 1968, Cabaña formally sold the land to spouses Legaspi by way of an absolute sale. The spouses Legaspi then attempted to register the deed of sale, but failed because they could not present the owner's duplicate of title which was still in the possession of the PNB as mortgage. Subsequently, they were able to register the document of sale on May 13, 1969 under Primary Entry No. 210113 of the Register of Deeds of Quezon Province.

On November 29, 1968, Cabaña sold the same property to herein petitioner Abelardo Cruz (now deceased), who, in turn, tried to register the deed of sale on September 3, 1970. However, he was informed that Cabaña had already sold the property to the spouses Legaspi, so he was only able to register the land in his name on February 9, 1971. The CFI of Quezon Province declared the spouses Legaspi as the true and rightful owners of the subject property and the land title that Cruz had acquired as null and void. The Court of Appeals affirmed said decision, but ordered Cabaña reimburse to Cruz's heirs the amounts of P2,352.50, which the late petitioner Abelardo Cruz paid to PNB to discharge the mortgage obligation of Cabaña in favor of said bank, and the amount of P3,397.50, representing the amount paid by said Abelardo Cruz to her as consideration of the sale with pacto de retro of the subject property.

ISSUE:

Who is the rightful owner of the subject property?

COURT RULING:

The Supreme Court affirmed the decision of the appellate court with modification ordering and sentencing respondent Leodegaria Cabaña to reimburse and pay to petitioner's heirs the total sum of P5,750.00.

There is no question that spouses Legaspi were the first buyers, first on June 1, 1965 under a sale with right of repurchase and later on October 21, 1968 under a deed of absolute sale and that they had taken possession of the land sold to them; that Abelardo Cruz was the second buyer under a deed of sale dated November 29, 1968, which to ail indications, contrary to the text, was a sale with right of repurchase for ninety (90) days. There is no question, either, that spouses Legaspi were the first and the only ones to be in possession of the subject property.

The knowledge of the first sale Abelardo Cruz had gained defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code. Before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) - from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law."

Dagupan Trading vs. Macam


Dagupan Trading vs. Macam
14 SCRA 99
May 1965

FACTS:

Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel of unregistered land located in barrio Parayao, Binmaley, Pangasinan. In 1955, while their application for registration of said land under Act No. 496 was pending, they executed, on June 19 and on September 21, two deeds of sale conveying the property to herein respondent Rustico Macam who thereafter took possession of the property and made substantial improvements upon it. On October 14, 1955, OCT No. 6942 covering the land was issued in the name of the Marons, free from all liens and encumbrances.

On August 4, 1956, however, by virtue of a final judgment of the Municipal Court of Manila in a civil case in favor of Manila Trading and Supply Co. (Manila Trading) against Sammy Maron, levy was made upon whatever interest he had in the subject property. Thereafter, said interest was sold at public auction to the judgment creditor Manila Trading. The corresponding notice of levy, certificate of sale and the sheriff's certificate of final sale in favor of Manila Trading - because nobody exercised the right of redemption - were duly registered, and on March 1, 1958, the latter sold all its rights and title in the property to herein petitioner Dagupan Trading Company (Dagupan Trading).

On September 4, 1958, Dagupan Trading filed an action against Macam, praying that it be declared owner of one-eighth portion of the subject property. The CFI of Pangasinan dismissed the said complaint, and the Court of Appeals affirmed its decision.

ISSUE:

Who has the superior right over the one-eight portion of the subject property?

COURT RULING:

The Supreme Court likewise affirmed both decisions of the lower courts. At the time of the levy, Sammy Maron already had no interest on the one-eight portion of the property he and his siblings have inherited because for a considerable time prior to the levy, said interest had already been conveyed upon Macam "fully and irretrievably" - as the Court of Appeals held. Consequently, the subsequent levy made on the property for the purpose of satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading Company was void and of no effect.

The unregistered sale and the consequent conveyance of title and ownership in favor Macam could not have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the entire parcel of land. Moreover, upon the execution of the deed of sale in his favor by Sammy Maron, Macam had immediately taken possession of the land conveyed as its new owner and introduced considerable improvements upon it himself. To deprive him, therefore, of the same by sheer force of technicality would be against both justice and equity.

Carbonell vs. Court of Appeals, and Poncio


Carbonell vs. Court of Appeals, and Poncio
69 SCRA 99
January 1976

FACTS:

On January 27, 1955, respondent Jose Poncio executed a private memorandum of sale of his parcel of land with improvements situated in San Juan, Rizal in favor of petitioner Rosario Carbonell who knew that the said property was at that time subject to a mortgage in favor of the Republic Savings Bank (RSB) for the sum of P1,500.00. Four days later, Poncio, in another private memorandum, bound himself to sell the same property for an improved price to one Emma Infante for the sum of P2,357.52, with the latter still assuming the existing mortgage debt in favor of the RSB in the amount of P1,177.48. Thus, in February 2, Poncio executed a formal registerable deed of sale in her (Infante's) favor. So, when the first buyer Carbonell saw the seller Poncio a few days afterwards, bringing the formal deed of sale for the latter's signature and the balance of the agreed cash payment, she was told that he could no longer proceed with formalizing the contract with her (Carbonell) because he had already formalized a sales contract in favor of Infante.

To protect her legal rights as the first buyer, Carbonell registered on February 8, 1955 with the Register of Deeds her adverse claim as first buyer entitled to the property. Meanwhile, Infante, the second buyer, was able to register the sale in her favor only on February 12, 1955, so that the transfer certificate of title issued in her name carried the duly annotated adverse claim of Carbonell as the first buyer. The trial court declared the claim of the second buyer Infante to be superior to that of the first buyer Carbonell, a decision which the Court of Appeals reversed. Upon motion for reconsideration, however, Court of Appeals annulled and set aside its first decision and affirmed the trial court’s decision.

ISSUE:

Who has the superior right over the subject property?

COURT RULING:

The Supreme Court reversed the appellate court’s decision and declared the first buyer Carbonell to have the superior right over the subject property, relying on Article 1544 of the Civil Code. Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in good faith of personal or real property, the second paragraph directs that ownership of immovable property should be recognized in favor of one "who in good faith first recorded" his right. Under the first and third paragraphs, good faith must characterize the prior possession, while under the second paragraph, good faith must characterize the act of anterior registration.

When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware - and she could not have been aware - of any sale to Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith which did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante. Carbonell wanted to meet Infante but the latter refused so to protect her legal rights, Carbonell registered her adverse claim on February 8, 1955. Under the circumstances, this recording of Carbonell’s adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad faith when the latter registered her deed of sale 4 days later.

Dizon vs. Suntay


Dizon vs. Suntay
47 SCRA 160
September 1972

FACTS:

Respondent Lourdes G. Suntay and one Clarita R. Sison entered into a transaction wherein the Suntay’s three-carat diamond ring, valued at P5,500.00, was delivered to Sison for sale on commission. Upon receiving the ring, Sison executed and delivered to the receipt to Suntay. After the lapse of a considerable time without Clarita R. Sison having returned to the ring to her, Suntay made demands on Clarita R. Sison for the return of said jewelry. Clarita R. Sison, however, could not comply with Suntay’s demands because on June 15, 1962, Melia Sison, niece of the husband of Clarita R. Sison, evidently in connivance with the latter, pledged the ring with the petitioner Dominador Dizon's pawnshop for P2,600.00 without Suntay’s knowledge. When Suntay found out that Clarita R. Sison pledged the ring, she filed a case of estafa against the latter with the fiscal's office. Subsequently, Suntay wrote a letter to Dizon on September 22, 1962 asking for the return of her ring which was pledged with the latter’s pawnshop under its Pawnshop Receipt serial B No. 65606, dated June 15, 1962.

Dizon refused to return the ring, so Suntay filed an action for its recovery with the CFI of Manila, which declared that she had the right to its possession. The Court of Appeals likewise affirmed said decision.

ISSUE:

Who has the right title over the subject property?

COURT RULING:

The Supreme Court affirmed the decision of the lower courts. The controlling provision is Article 559 of the Civil Code which provides that “[T]he possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.” The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the owner cannot obtain its return without, reimbursing the price. Hanging on to said exception as his basis, Dizon insisted that the principle of estoppel should apply in this case but the Supreme Court ruled otherwise.

In the present case not only has the ownership and the origin of the jewels misappropriated been unquestionably proven but also that Clarita R. Sison, acting fraudulently and in bad faith, disposed of them and pledged them contrary to agreement with no right of ownership, and to the prejudice of Suntay, who was illegally deprived of said jewels and who, as the owner, has an absolute right to recover the jewels from the possession of whosoever holds them, which in this case is Dizon’s pawnshop. Dizon ought to have been on his guard before accepting the pledge in question, but evidently there was no such precaution availed of and he has no one to blame but himself. While the activity he is engaged in is no doubt legal, it is not to be lost sight of that it thrives on taking advantage of the necessities precisely of that element of our population whose lives are blighted by extreme poverty. From whatever angle the question is viewed then, estoppel certainly cannot be justly invoked.

Fiestan vs. Court of Appeals, and Developmentt Bank of the Philippines


Fiestan vs. Court of Appeals, and Developmentt Bank of the Philippines
185 SCRA 751
May 1990

FACTS:

For failure of petitioner spouses Dionisio Fiestan and Juanita Arconada (spouses Fiestan) to pay their mortgage indebtedness to respondent Development Bank of the Philippines (DBP), the latter was able to acquire at a public auction sale on August 6, 1979 the parcel of land (Lot No. 2-B covered by TCT No. T-13218) that the spouses Fiestan owned in Ilocos Sur after extrajudicial foreclosure of said property. The Provincial Sheriff issued a certificate of sale that same day which was registered on September 28 in the Office of the Register of Deeds of Ilocos Sur. Earlier, or on September 26, spouses Fiestan also executed a Deed of Sale in favor of DBP which was likewise registered on September 28, 1979. When spouses Fiestan failed to redeem their parcel of land within the 1 year period which expired on September 28, 1980, the Register of Deeds cancelled their title over the subject property and issued TCT No. T-19077 to DBP upon the latter’s duly executed affidavit of consolidation of ownership.

On April 13, 1982, the DBP sold the lot to Francisco Peria, so the Register of Deeds of Ilocos Sur cancelled DBP’s title over said property and issued TCT No. T-19229 to Peria’s name, who later secured a tax declaration for said lot and accordingly paid the taxes due thereon. He thereafter mortgaged said lot to the PNB-Vigan Branch as security for his loan of P115,000.00. Since the spouses Fiestan were still in possession of the property, the Provincial Sheriff ordered them to vacate the premises, but instead of leaving, they filed a complaint in the RTC of Vigan, Ilocos Sur for annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP-Laoag City, PNB-Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds of Ilocos Sur.

The lower court dismissed said complaint, declaring valid the extrajudicial foreclosure sale of the mortgaged property in favor of the DBP and its subsequent sale to Francisco Peria as well as the real estate mortgage constituted in favor of PNB-Vigan. The Court of Appeals likewise affirmed said decision. The spouses Fiestan herein seek to annul the extrajudicial foreclosure sale of the mortgaged property on the ground that the Provincial Sheriff conducted the foreclosure without first effecting a levy on said property before selling the same at the public auction sale.

ISSUE:

Who has the right to acquire by purchase the subject property?

COURT RULING:

In denying the petition, the Supreme Court reiterated that the formalities of a levy, which the Provincial Sheriff of Ilocos Sur allegedly failed to comply with, are not basic requirements before an extrajudicially foreclosed property can be sold at public auction. The spouses Fiestan insisted that what prevails over the case are par. (2) of Article 1491 and par. (7) of Article 1409 of the Civil Code which prohibits agents from acquiring by purchase, even at a public or judicial auction either in person or through the mediation of another, the property whose administration or sale may have been entrusted to them unless the consent of the principal has been given. However, the Supreme Court ruled that the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection, as provided under Section 5 of Act No 3135, as amended, which is a special law that must prevail over the Civil Code which is a general law. Even in the absence of statutory provision, there is authority to hold that a mortgagee, and in this case the DBP, may purchase at a sale under his mortgage to protect his own interest or to avoid a loss to himself by a sale to a third person at a price below the mortgage debt.

Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers, Inc.


Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers, Inc.
93 SCRA 420
October 1979

FACTS:

Both the plaintiff-appellant Sampaguita Pictures Inc. (Sampaguita) and defendant-appellee Jalwindor Manufacturers Inc. (Jalwindor) were domestic corporations duly organized under the Philippine laws. Sampaguita leased to Capitol “300” Inc. (Capitol) the roof deck of its building with the agreement that all permanent improvements Capitol will make on said property shall belong to Sampaguita without any part on the latter to reimburse Capitol for the expenses of said improvements. Shortly, Capitol purchased on credit from Jalwindor glass and wooden jalousies, which the latter itself delivered and installed in the leased premises, replacing the existing windows.

On June 1, 1964, Jalwindor filed with the CFI of Rizal, Quezon City an action for collection of a sum of money with a petition for preliminary attachment against Capitol for its failure to pay its purchases. Later, Jalwindor and Capitol submitted to the trial court a Compromised Agreement wherein Capitol acknowledged its indebtedness of P9,531.09, payable in monthly installments of at least P300.00 a month beginning December 15,1964 and that all the materials that Capitol purchased will be considered as security for such undertaking. Meanwhile, Sampaguita filed a complaint for ejectment and for collection of a sum of money against Capitol for the latter’s failure to pay rentals from March 1964 to April 1965, and the City Court of Quezon City ordered Capitol on June 8, 1965 to vacate the premises and to pay Sampaguita.

On the other hand, Capitol likewise failed to comply with the terms of the Compromise Agreement, and on July 31, 1966, the Sheriff of Quezon City made levy on the glass and wooden jalousies. Sampaguita filed a third-party claim alleging that it is the owner of said materials and not Capitol, but Jalwindor filed an idemnity bond in favor of the Sheriff and the items were sold at public auction on August 30, 1966, with Jalwindor as the highest bidder for P6,000.00. Sampaguita filed with the CFI of Rizal, Quezon City an action to nullify the Sheriff's sale and for an injunction to prevent Jalwindor from detaching the glass and wooden jalousies. Jalwindor was ordered to maintain the status quo pending final determination of the case, and on October 20, 1967, the lower court dismissed the complaint and ordered Sampaguita to pay Jalwindor the amount of P500.00 as attorney's fees.

ISSUE:

Was there a delivery made and, therefore, a transfer of ownership of the thing sold?

COURT RULING:

The Supreme Court reversed the decision of the lower court declaring Sampaguita as declared the lawful owner of the disputed glass and wooden jalousies, permanently enjoining Jalwindor from detaching said items from the roof deck of the Sampaguita Pictures Building, and ordered Jalwindor to pay Sampaguita the sum of P1,000.00 for and as attorney's fees.

When a property levied upon by the sheriff pursuant to a writ of execution is claimed by a third person in a sworn statement of ownership thereof, as prescribed by the rules, an entirely different matter calling for a new adjudication arises. The items in question were illegally levied upon since they do not belong to the judgment debtor. The power of the Court in execution of judgment extends only to properties unquestionably belonging to the judgment debtor. The fact that Capitol failed to pay Jalwindor the purchase price of the items levied upon did not prevent the transfer of ownership to Capitol and, later, to Sampaguita by virtue of the agreement in their lease contract. Therefore, the complaint of Sampaguita to nullify the Sheriff's sale is well founded, and should prosper.

Addison vs. Felix


Addison vs. Felix
38 Phil 404
August 1918

FACTS:

The defendants-appellees spouses Maciana Felix and Balbino Tioco purchased from plaintiff-appellant A.A. Addison four parcels of land to which Felix paid, at the time of the execution of the deed, the sum of P3,000 on account of the purchase price. She likewise bound herself to the remainder in installments, the first of P,2000 on July 15, 1914, the second of P5,000 thirty days after the issuance to her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title, P10 for each cocoanut tree in bearing and P5 for each such tree not in bearing that might be growing on said parcels of land on the date of the issuance of title to her, with the condition that the total price should not exceed P85,000. It was further stipulated that Felix was to deliver to the Addison 25% of the value of the products that she might obtain from the four parcels "from the moment she takes possession of them until the Torrens certificate of title be issued in her favor," and that within 1 year from the date of the certificate of title in her favor, Marciana Felix may rescind the contract of purchase and sale.

In January 1915, Addison , filed suit in the CFI of Manila to compel Felix to pay the first installment of P2,000, demandable, in accordance with the terms of the contract of sale. The defendants Felix and her husband Tioco contended that Addison had absolutely failed to deliver the lands that were the subject matter of the sale, notwithstanding the demands they made upon him for this purpose. The evidence adduced shows Addison was able to designate only two of the four parcels, and more than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts he so occupied. The trial court held the contract of sale to be rescinded and ordered Addison to return to Felix the P3,000 paid on account of the price, together with interest thereon at the rate of 10% per annum.

ISSUE:

Was there a delivery made and, therefore, a transfer of ownership of the thing sold?

COURT RULING:

The Supreme Court affirmed the decision of the lower court, with modification that the interest thereon will be at the rate of 6% (instead of 10%) per annum from the date of the filing of the complaint until payment.

The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. Symbolic delivery through the execution of a public instrument is sufficient when there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such are opposed by a third person’s will, then the delivery has not been effected. In the case at bar, therefore, it is evident, that the mere execution of the instrument was not a fulfillment of the vendor's obligation to deliver the thing sold, and that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price.

Pascual vs. Universal Motors Corp.


Pascual vs. Universal Motors Corp.
61 SCRA 121
November 1974

FACTS:

Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual) executed the real estate mortgage subject matter of this complaint on December 14, 1960 to secure the payment of the indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase of 5 units of Mercedes Benz trucks, with a total purchase price or principal obligation of P152,506.50 which was to bear interest at 1% per month starting that day, but the plaintiffs' guarantee is not to exceed P50,000.00 which is the value of the mortgage. The PDP Trans., as the spouses Pasqual's principal, paid to defendant-appellant Universal Motors Corporation (Universal Motors) the sum of P92,964.91 on April 5, 1961 for two of the five Mercedes Benz trucks and on May 22, 1961 for the remaining three, thus leaving a balance of P68,641.69 including interest due on February 8, 1965.

On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against the PDP Trans. to collect the balance due under the Chattel Mortgages and to repossess all the units sold to PDP Trans. as the spouse Pascual’s principal, including the 5 units guaranteed under the subject Real (Estate) Mortgage. During the hearinbg, Universal Motors admitted that it was able to repossess all the units sold to the latter, including the 5 units guaranteed by the subject real estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the trucks at public auction. As the real estate mortgagors, the spouses Pascual filed an action with the CFI of Quezon City for the cancellation of the mortgage they constituted on 2 parcels of land in favor of the Universal Motors to guarantee the obligation of PDP Trans. to the amount of P50,000. The said CFI rendered judgment in favor of the spouses Pascual and ordered the cancellation of the mortgage.

ISSUE:

Was Article 1484 of the New Civil Code applicable in the case at bar?

COURT RULING:

The Supreme Court affirmed the lower court’s decision. Appellant Universal Motors argues that Article 1484 is not applicable to the case at bar because there is no evidence on record that the purchase by PDP Trans. of the 5 trucks was payable in installments and that the PDP Trans. had failed to pay two or more installments. Universal Motors also contends that what Article 1484 prohibits is for the vendor to recover from the purchaser the unpaid balance of the price after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the security put up by a third party.

The Supreme Court concluded to the contrary, saying that the first issue was whether or not the sale was one on installments. The lower court found that it was, and that there was failure to pay two or more installments, a finding which is not subject to review by the Supreme Court.

The next contention is that what article 1484 withholds from the vendor is “the right to recover any deficiency from the purchaser after the foreclosure of the chattel mortgage,” and not a “recourse to the additional security put up by a third party to guarantee the purchaser's performance of his obligation.” But the Supreme Court to sustain this argument of the appellant would be to indirectly subvert and public policy overturn the protection given by Article 1484.

Southern Motors Inc vs. Moscoso


Southern Motors Inc vs. Moscoso
2 SCRA 168
May 1961

FACTS:

In June 1957, plaintiff-appellee, Southern Motors, Inc. (Southern Motors) sold to defendant-appellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making a down payment, the defendant executed a promisory note for the sum of P4,915,00, representing the unpaid balance of the purchase price to secure the payment of which, a chattel mortgage was constituted on the truck in favor of Southern Motors. Of the P4,915,00, defendant was only able to pay a total of P550.00, which P110.00 was applied to the interest up to August 15, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 more installments on the balance of the purchase price.

In November 1957, the Southern Motors filed a complaint against the Moscoso to recover the unpaid balance of the promissory note, and the lower court issued a writ of attachment on Moscoso’s properties. The Sheriff of San Jose, Antique, attach the Chevrolet truck, as well as a house and lot belonging to Moscoso, and said truck was brought to the Southern Motors’ compound in Iloilo City for safe keeping. The Provincial Sheriff of Iloilo sold the said truck on January 2, 1958 at a public auction in which Southern Motors itself was the only bidder for P1,000.00. In March 1958, the trial court condemned the defendant Moscoso to pay the plaintiff Southern Motors the unpaid balance of P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid. While Southern Motors claims that in filing the complaint, demanding payment of the unpaid balance of the purchase price, it has availed of the first remedy provided in Article 1484 of the new Civil Code i.e. to exact fulfillment of the obligation (specific performance), Mosocoso, on the other hand, contends that Southern Motors had availed itself of the third remedy viz, the foreclosure of the chattel mortgage on the truck.

ISSUE:

Which remedy under the Civil Code did the vendor Southern Motors avail?

COURT RULING:

The Supreme Court, in affirming the decision of the lower court, found that there is nothing unlawful or irregular in appellee Southern Motors's act of attaching the mortgaged truck itself.

Since it has chosen to exact the fulfillment of the appellant Moscoso's obligation, Southern Motors may enforce execution of the judgment that may be favorable to it, on all personal and real properties of the latter not exempt from execution sufficient to satisfy such judgment. No one can successfully contest that the attachment of a house and lot at San Jose, Antique was merelly an incident to all ordinary civil action. (Sections 1 & 11, Rule 59; sec. 16 Rule 39.) The mortgage creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged property and may cause an attachment to be issued and levied on such property, upon beginning his civil action.

Norkis Distributors Inc. vs. Court of Appeals, and Nepales


Norkis Distributors Inc. vs. Court of Appeals, and Nepales
193 SCRA 694
February 1991

FACTS:

On September 20, 1979, private respondent Alberto Nepales bought from the Norkis Distributors, Inc. (Norkis) in its Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine No.L2-329401K Frame No.NL2-0329401, color maroon, which was then on display in the Norkis showroom. The Branch Manager Avelino Labajo agreed to accept the P7,500.00 price payable by means of a Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan. Hence, credit was extended to Nepales, and as security for the loan, he executed a chattel mortgage on the motorcycle in favor of DBP. Labajo issued the Norkis Sales Invoice No. 0120 perfecting the contract of sale, and Nepales signed the same to conform to the terms of the sale, while the unit remained in Norkis' possession. On November 6, 1979, it was registered under Alberto Nepales’ name in the Land Transportation Commission.

On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly the agent of Alberto Nepales but the latter denies it. The record shows, however, that Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch. On February 3, 1980, the motorcycle met an accident at Binalbagan, Negros Occidental while being driven by a certain Zacarias Payba. The unit was a total wreck, was returned, and stored inside Norkis' warehouse.

On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis in the total sum of P7,500. As the price of the motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference of P328 and demanded the delivery of the motorcycle. Norkis failed to deliver the unit, and Nepales filed an action for specific performance with damages in the RTC of Himamaylan, Negros Occidental. Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, he should bear the risk of loss or damage as owner of the unit. The lower court ruled in favor of Nepales, and the Court of Appeals affirmed the decision but deleted the award of damages "in the amount of P50.00 a day from February 3, 1980 until payment of the present value of the damaged vehicle." Norkis concedes that there was no "actual" delivery of the vehicle, but insists that there was constructive delivery of the unit upon the issuance of the sales invoice, upon the registration of the unit in Nepales’ name, and upon the issuance of the official receipt.

ISSUE:

Who should bear the risk of loss?

COURT RULING:

Affirming the decision of the Court of Appeals, the Supreme Court reiterated that Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable in the case at bar for there was neither an actual nor constructive delivery of the thing sold.

The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated September 20, 1979 and the registration of the vehicle in the name of Alberto Nepales with the Land Registration Commission was not to transfer the ownership and dominion over the motorcycle to him, but only to comply with the requirements of the DBP for processing private respondent's motorcycle loan. The circumstances in the case itself more than amply rebut the disputable presumption of delivery upon which Norkis anchors its defense to Nepales' action.

Roman vs. Grimalt


Roman vs. Grimalt
6 Phil 96
April 1906

FACTS:

In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the owner, and respondent Andres Grimalt, the purchaser, verbally agreed upon the sale of the schooner Santa Marina. In his letter on June 23, Grimalt agreed to buy the vessel and offered to pay in three installments of P500 each on July 15, September 15, and November 15, provided the title papers to the vessel were in proper form. The title of the vessel, however, was in the name of one Paulina Giron and not in the name of Roman as the alleged owner. Roman promised to perfect his title to the vessel, but failed so the papers he presented did not show that he was the owner of the vessel. On June 25, 1904, the vessel sank in the Manila harbor during a severe storm, even before Roman was able to produce for Grimalt the proper papers showing that the former was in fact the owner of the vessel in question and not Paulina Giron. As a result, Grimalt refused to pay the purchase price when Roman made a demand on June 30, 1904.

On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found that the parties had not arrived at a definite understanding, and later dismissed said complaint.

ISSUE:

Who should bear the risk of loss?

COURT RULING:

The Supreme Court affirmed the decision of the lower court and declared Roman as the one who should bear the risk of lost because there was no actual contract of sale. If no contract of sale was actually executed by the parties, the loss of the vessel must be borne by its owner and not by a party who only intended to purchase it and who was unable to do so on account of failure on the part of the owner to show proper title to the vessel and thus enable them to draw up the contract of sale. Grimalt was under no obligation to pay the price of the vessel, the purchase of which had not been concluded. The conversations between the parties and the letter Grimalt had written to Roman did not establish a contract sufficient in itself to create reciprocal rights between the parties.

Serra vs. Court of Appeals, and RCBC


Serra vs. Court of Appeals, and RCBC
229 SCRA 60
January 1994

FACTS:

Petitioner Federico Serra, who is the owner of a 374 square meter parcel of land located at Masbate, Masbate, and private respondent Rizal Commercial Banking Corporation (RCBC) entered into a "Contract of Lease with Option to Buy" in May 25, 1975 which provided that Serra will lease the subject land to RCBC for a period of 25 years from June 1, 1975 to June 1, 2000, that the RCBC has the option to purchase the same at P210.00 per square meter within a period of 10 years from May 25, 1975, the date of the signing of the Contract, and that Serra will have to register said land under the Torrens System to the Register of Deeds of Province of Masbate within the same 10-year option period. Pursuant to said contract, RCBC constructed improvements on the subject land to house its branch office, while the petitioner had the property, within 3 years from 1975, duly registered with OCT No. 0-232 under the Torrens System. Later, petitioner alleged that as soon as he had the property registered, he kept on pursuing the branch manager for the sale of the lot as per their agreement, but it was not until September 4, 1984, that RCBC decided to exercise the option.

RCBC informed petitioner, through a letter, of its intention to buy the property at the agreed price of not greater than P210.00 per square meter or a total of P78,430.00, but petitioner replied that he is no longer selling the property. RCBC then filed an action for specific performance and damages against Serra in March 1985 alleging that during the negotiations it made clear to petitioner that it intends to stay permanently on property once its branch office is opened unless the exigencies of the business requires otherwise.

Although finding that the contract was valid, the lower court ruled that the option to buy is unenforceable because it lacked a consideration distinct from the price and RCBC did not exercise its option within the reasonable time. Upon motion for reconsideration, however, the lower court reversed itself on the 2nd issue, declared the contract as valid, and ordered Serra to deliver the proper deed of sale to RCBC. The Court of Appeals likewise affirmed said decision.

ISSUE:

Was there a valid contract of lease with option to buy between the parties? Was there a consideration distinct from the price to support the option given to RCBC?

COURT RULING:

The Supreme Court affirmed the appellate court’s decision. A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his "adhesion" thereto. These types of contracts are as binding as ordinary contracts because in reality, the party who adheres to the contract is free to reject it entirely.

In the case at bar, the Supreme Court did not find the situation to be inequitable because petitioner is a highly educated man, who, at the time of the trial was already a CPA-Lawyer, and when he entered into the contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties. Also, in the present case, the consideration is even more onerous on the part of the lessee since it entails transferring of the building and/or improvements on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated.

Sanchez vs. Rigos


Sanchez vs. Rigos
45 SCRA 368
June 1972

FACTS:

In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date, a parcel of land situated in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be deemed "terminated and elapsed," if “Sanchez shall fail to exercise his right to buy the property" within the stipulated period. On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an action for specific performance and damages against Rigos for the latter’s refusal to accept several tenders of payment that Sanchez made to purchase the subject land.

Defendant Rigos contended that the contract between them was only “a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option. The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of conveyance. The Court of Appeals certified the case at bar to the Supreme Court for it involves a question purely of law.

ISSUE:

Was there a contract to buy and sell between the parties or only a unilateral promise to sell?

COURT RULING:

The Supreme Court affirmed the lower court’s decision. The instrument executed in 1961 is not a "contract to buy and sell," but merely granted plaintiff an "option" to buy, as indicated by its own title "Option to Purchase." The option did not impose upon plaintiff Sanchez the obligation to purchase defendant Rigos' property. Rigos "agreed, promised and committed" herself to sell the land to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land. The lower court relied upon Article 1354 of the Civil Code when it presumed the existence of said consideration, but the said Article only applies to contracts in general.

However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the case at bar because the latter’s 2nd paragraph refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Upon mature deliberation, the Court reiterates the doctrine laid down in the Atkins case and deemed abandoned or modified the view adhered to in the Southwestern Company case.

Atkins Kroll & Co. vs. Cu Hian Tek


Atkins Kroll & Co. vs. Cu Hian Tek
102 Phil 984
January 1958

FACTS:

On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c) 300 cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the offers subject to reply by September 23, 1951. Hian Tek unconditionally accepted the said offer through a letter delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the shortage of catch of sardines by the packers in California.

Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor. Upon Atkins’ appeal, the Court of Appeals affirmed said decision but reduced the damages to P3,240.15 representing unrealized profits. Atkins herein contends that there was no such contract of sale but only an option to buy, which was not enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.” Atkins also insisted that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until September 23.

Was there a contract of sale between the parties or only a unilateral promise to buy?

COURT RULING:

The Supreme Court held that there was a contract of sale between the parties. Petitioner’s argument assumed that only a unilateral promise arose when the respondent accepted the offer, which is incorrect because a bilateral contract to sell and to buy was created upon respondent’s acceptance.

Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or to pay for their price, he could also be sued. But his letter-reply to Atkins indicated that he accepted "the firm offer for the sale" and that "the undersigned buyer has immediately filed an application for import license.” After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. In this case at bar, however, upon respondent’s acceptance of herein petitioner's offer, a bilateral promise to sell and to buy ensued, and the respondent had immediately assumed the obligations of a purchaser.

Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific Company


Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific Company
97 Phil 247
June 1955

FACTS:

On March 24, 1953, defendant-appellant Atlantic granted plaintiff-appellee Southwestern an option period of ninety days to buy the formers barge No. 10 for the sum of P30,000. On May 11 of the same year, Southwestern Company communicated its acceptance of the option to Atlantic through a letter, to which the latter replied that their understanding was that the "offer of option" is to be a cash transaction and to be effected "at the time the lighter is available." On June 25, Atlantic advised the Southwestern Company that since there is still further work for it, the barge could not be turned over to the latter company.

On June 27, 1953, the Southwestern Company filed this action to compel Atlantic to sell the barge in line with the option, depositing with the court a check covering the sum of P30,000, but said check was later withdrawn with the approval of the court. On June 29, the Atlantic withdrew its "offer of option" with due notices to Southwestern Company stating that the option was granted merely as a favor. The Atlantic contended that the option to sell it made to Southwestern Company is null and void because said option to sell is not supported by any consideration.

The trial court granted herein plaintiff-appellee Southwestern Company’s action for specific performance and ordered herein defendant-appellant Atlantic to pay damages equivalent to 6 per centum per annum on the sum of P30,000 from the date of the filing of the complaint.

ISSUE:

Is Atlantic liable for specific performance and to pay damages in favor of Southwestern Company?

COURT RULING:

The Supreme Court reversed the trial court’s decision applying Article 1479 of the new Civil Code. The Court reiterated that "an accepted unilateral promise" can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if said option is not supported by any consideration. The option that Atlantic had provided was without consideration, hence, can be withdrawn notwithstanding Southwestern Company’s acceptance of said option.

American jurisprudence hold that an offer, once accepted, cannot be withdrawn, regardless of whether it is supported or not by a consideration, but the specific provisions of Article 1479 commands otherwise. While under the "offer of option" in question appellant Atlantic has assumed a clear obligation to sell its barge to appellee Southwestern Company and the option has been exercised in accordance with its terms, and there appears to be no valid or justifiable reason for the former to withdraw its offer, the Court cannot adopt a different attitude because the law on the matter is clear.

Toyota Shaw Inc. vs. Court of Appeals, and Sosa


Toyota Shaw Inc. vs. Court of Appeals, and Sosa
244 SCRA 320
May 1995

FACTS:

Luna L. Sosa and his son, Gilbert, went to purchase a yellow Toyota Lite Ace from the Toyota office at Shaw Boulevard, Pasig (petitioner Toyota) on June 14, 1989 where they met Popong Bernardo who was a sales representative of said branch. Sosa emphasized that he needed the car not later than June 17, 1989 because he, his family, and a balikbayan guest would be using it on June 18 to go home to Marinduque where he will celebrate his birthday on June 19. Bernardo assured Sosa that a unit would be ready for pick up on June 17 at 10:00 in the morning, and signed the "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.,” a document which did not mention anything about the full purchase price and the manner the installments were to be paid. Sosa and Gilbert delivered the down payment of P100,000.00 on June 15, 1989 and Bernardo accomplished a printed Vehicle Sales Proposal (VSP) No. 928 which showed Sosa’s full name and home address, that payment is by "installment," to be financed by "B.A.," and that the "BALANCE TO BE FINANCED" is "P274,137.00", but the spaces provided for "Delivery Terms" were not filled-up.

When June 17 came, however, petitioner Toyota did not deliver the Lite Ace. Hence, Sosa asked that his down payment be refunded and petitioner Toyota issued also on June 17 a Far East Bank check for the full amount of P100,000.00, the receipt of which was shown by a check voucher of Toyota, which Sosa signed with the reservation, "without prejudice to our future claims for damages." Petitioner Toyota contended that the B.A. Finance disapproved Sosa’s the credit financing application and further alleged that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused.

The trial court found that there was a valid perfected contract of sale between Sosa and Toyota which bound the latter to deliver the vehicle and that Toyota acted in bad faith in selling to another the unit already reserved for Sosa, and the Court of Appeals affirmed the said decision.

ISSUE:

Was there a perfected contract of sale between respondent Sosa and petitioner Toyota?

COURT RULING:

The Supreme Court granted Toyota’s petition and dismissed Sosa’s complaint for damages because the document entitled “Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.,” was not a perfected contract of sale, but merely an agreement between Mr. Sosa and Bernardo as private individuals and not between Mr. Sosa and Toyota as parties to a contract.

There was no indication in the said document of any obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and neither was there a correlative obligation on the part of the latter to pay therefor a price certain. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as VSP No.928 executed on June 15, 1989 confirmed. The VSP also created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury.

People’s Homesite vs. Court of Appeals, and Mendoza


People’s Homesite vs. Court of Appeals, and Mendoza
133 SCRA 777
December 1984

FACTS:

In February 1960, herein petitioner People’s Homesite & Housing Corporation (PHHC) passed a resolution, subject to the approval of the Court Court Council of the PHHC’s consolidation subdivision plan, awarding Lot 4 with an area of 4,182.2 square meters located at Diliman, Court City to respondents Rizalino and Adelaida Mendoza (spouses Mendoza) at a price of twenty-one pesos (P21.00) per square meter. The Court Court Council disapproved the consolidation subdivision plan in August 1960 but approved in February 1964 its revised version where Lot 4 was reduced to an area of 2,608.7 square meters. Then in October 1965, the PHHC withdrew the tentative award of Lot 4 to the spouses Mendoza for the latter’s failure neither to pay its price nor to make a 20% initial deposit, and re-awarded said lot jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, all of whom made the initial deposit. The subdivision of Lot 4 into five lots was later approved by the Court council and the Bureau of Lands.

The spouses Mendoza asked for reconsideration and for the withdrawal of the said 2nd award to Sto. Domingo and four others, and at the same time filed an action for specific performance plus damages. The trial court sustained the award but the Court of Appeals reversed the said decision, declared void the re-award to Sto. Domingo and four others, and ordered the PHHC to sell Lot 4 with an area of 2,608.7 square meters at P21.00 per square meter to spouses Mendoza.

ISSUE:

Was there a perfected sale of Lot 4, with its reduced area, between the parties?

COURT RULING:

The Supreme Court found that there was no perfected sale of Lot 4 because the said lot was conditionally or contingently awarded to the Mendozas subject to the approval by the Court council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities.

When the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved in 1964, the spouses Court should have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its purchase although the area was reduced. Article 1475 of the Civil Court says “[t]he contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the law governing the form of contracts.” Indeed, there was a no meeting of the minds between the parties on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter and the PHHC board of directors acted within its rights in withdrawing the tentative award.

Concrete Aggregates vs. CTA and CIR


Concrete Aggregates vs. CTA and CIR
185 SCRA 416
May 1990

FACTS:

Petitioner, a domestic corporation duly existing under the laws of the Philippines, has an aggregate plant at Montalban, Rizal which processes rock aggregates mined by it from private lands, and maintains and operates a plant at Longos, Quezon City for the production of ready-mixed concrete and plant-mixed hot asphalt. Sometime in 1968, the agents of respondent Commission on Internal Revenue (CIR) conducted an investigation of petitioner's tax liabilities, and assessed and demanded payment from petitioner the amount of P244,002.76 as sales and ad valorem taxes for the first semester of 1968, inclusive of surcharges.

Instead of paying, the petitioner appealed to respondent CTA. The said Court concluded that petitioner is a manufacturer subject to the 7% sales tax under the Section Section 186 of the 1968 National Internal Revenue Code, and ordered it to pay what the respondent CIR demands, plus interest at the rate of 14% per centum from January 1, 1973 up to the date of full payment thereof pursuant to Section 183 (now 193) of the same Code. Petitioner contends, however, that it is a contractor within the meaning of Section 191 under the same Code, that its business falls under "other construction work contractors" or "other independent contractors", and that it produced asphalt and concrete mix only upon previous orders.

ISSUE:

Is the petitioner a contractor subject to the 3% contractor's tax under Section 191 or a manufacturer subject to the 7% sales tax under Section 186?

COURT RULING:

The Supreme Court affirmed respondent CTA’s decision and declared that petitioner is a manufacturer as defined by Section 194(x), now Section 187(x), of the Tax Code. It reiterated the respondent CTA’s finding that petitioner was formed and organized primarily as a manufacturer; that it has an aggregate plant at Montalban, Rizal, which processes rock aggregates mined by it from private lands; it operates a concrete batching plant at Longos, Quezon City where the specified aggregates from its plant at Montalban are mixed with sand and cement, after which water is added and the concrete mixture is sold and delivered to customers; and at its plant site at Longos, Quezon City, petitioner has also an asphalt mixing machinery where bituminous asphalt mix is manufactured.

Quiroga vs. Parsons Hardware


Quiroga vs. Parsons Hardware
38 Phil 501
August 1918

FACTS:

On January 24, 1911, plaintiff Andres Quiroga and J. Parsons (to whose rights and obligations the present defendant Parsons Hardware Co. later subrogated itself) entered into a contract, where it was stated among others that Quiroga grants in favor of Parsons the exclusive rights to sell his beds in the Visayan Islands under some conditions. One of the said conditions provided that “Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval” while another one passed on to Parsons the obligation to order by the dozen and in no other manner the beds from Quiroga.

Alleging that the Parsons was his agent for the sale of his beds in Iloilo, Quiroga filed a complaint against the former for violating the following obligations implied in what he contended to be a contract of commercial agency: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner.

ISSUE:

Is the defendant, by reason of the contract, a purchaser or an agent of the plaintiff for the sale of the latter’s beds in Iloilo?

COURT RULING:

The Supreme Court declared that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.

In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.

Heirs of Enrique Zambales vs. Court of Appeals, and Nin Bay Mining Corp.


Heirs of Enrique Zambales vs. Court of Appeals & Nin Bay Mining Corp.
120 SCRA 897
February 1983

FACTS:

The spouses Enrique Zambales and Joaquina Zambales (the Zambaleses), who are illiterate, were the homestead patentees of a parcel of land in the Municipality of Del Pilar, Roxas, Palawan, pursuant to Homestead Patent No. V-59502 dated September 6, 1955. They claimed in November 1956 that respondent Nin Bay Mining Corporation (Corporation) had removed silica sand from their land and destroyed the plants and other improvements thereon, to which said Corporation denied to have done so. On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. Perfecto de los Reyes, and the Corporation, entered into a Compromise Agreement which state, among others, that the Zambaleses are giving the Corporation full power and authority to sell, transfer and convey on September 10, 1960 or at any time thereafter the whole or any part of herein subject property.

On September 10, 1960, the Corporation sold the disputed property to Joaquin B. Preysler for the sum of P8,923.70 fixed in the Compromise Agreement. On December 6, 1969, or ten (10) years after the Trial Court's Decision based on the Compromise Agreement, and nine (9) years after the sale to Preysler, the Zambaleses filed a civil action in the CFI of Palawan for "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.

The trial court declared null and void the deed of sale executed between Preysler and the Corporation, but the Court of Appeals reversed the said decision after finding that the alleged fraud or misrepresentation in the execution of the Compromise Agreement had not been substantiated by evidence.

ISSUE:

Are the compromise agreement and the subsequent deed of sale valid and legal?

COURT RULING:

The Supreme Court sustained the finding of the appellate court that fraud and misrepresentation did not vitiate petitioners' consent to the Agreement because the latter were not as ignorant as they themselves tried to show. The Zambaleses were political leaders who speak in the platform during political rallies, and the lawyers they have hired belong to well-established law firms in Manila, which show that although they were illiterate, they are still well-informed.

However, while the Compromise Agreement was held to be in violation of the Public Land Act, which prohibits alienation and encumbrance of a homestead lot within five years from the issuance of the patent. Although the issue was not raised in the Courts below, the Supreme Court has the authority to review matters even if they are not assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at a just decision of the case. The bilateral promise to sell between the Zambaleses and the Corporation, and the subsequent deed of sale between Preysler and the latter were declared null and void.

Artates vs. Urbi


Artates vs. Urbi
37 SCRA 395
January 1971

FACTS:

In September 1952, the proper land authorities issued in favor of herein appellant Lino Artates and Manuela Pojas (spouses Artates) a homestead which is covered by Patent No. V-12775 and duly registered in their names (OCT No. P-572). In October 1955, Lino Artates inflicted injuries upon herein defendant Daniel Urbi who then filed Civil Case No. 40 against the former. The Justice of the Peace of Court of the CFI of Camilaniugan, Cagayan, awarded damages in favor of Urbi in the amount of P1,476.35, so in June 1962, the Provincial Sheriff of Cagayan made a public sale of the homestead to satisfy the said judgment.

The spouses Artates alleged that the sale of the homestead to satisfy Lino Artates’ indebtedness accrued in October 1955 violated the provision of the Public Land Law exempting said property from execution for any debt contracted within five years from the date of the issuance of the patent, and that Urbi executed a deed of sale of the same parcel of land in June 1961 for the sum of P2,676.35 to herein defendant Crisanto Soliven, who was a minor, to defraud them.

In March 1953, the CFI of Camilaniugan, Cagayan, upheld the execution made by the Provincial Sheriff upon the homestead, and at declared null and void the sale of the land between Urbi and Soliven.

ISSUE:

Do the appellants spouses Artates possess absolute ownership over the homestead which is covered by a patent?

COURT RULING:

The Supreme Court reversed the decision appealed from and declared the spouses Artates to be entitled to the return and possession of the subject land without prejudice to their continuing obligation to pay the judgment debt, and expenses connected therewith.

Considering the protective policy of the law, the Supreme Court reiterated that the Philippines’ public land laws, being copied from American legislation, resort to American precedents which held that the exemption from "debts contracted" by a homesteader include freedom from money liabilities, from torts or crimes committed by him, such as from bigamy or slander, breach of contract or other torts.

Dignos vs. Court of Appeals, and Jabil


Dignos vs. Court of Appeals, and Jabil
158 SCRA 378
February 1988

FACTS:

In July 1965, herein petitioners Silvestre T. Dignos and Isabela Lumungsod de Dignos (spouses Dignos) sold their parcel of land in Opon, Lapu–Lapu to herein private respondent Antonio Jabil for the sum of P28,000 payable for two installments, with an assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000 and the next installment of P4,000 to be paid in September 1965. In November 1965, the spouses Dignos sold the same parcel of land for P35,000 to defendants Luciano Cabigas and Jovita L. de Cabigas (spouses Cabigas) who were then US citizens, and executed in their favor an Absolute Deed of Sale duly registered in the Office of the Register of Deeds.

Upon discovery of the 2nd sale of the subject land, Jabil filed the case at bar in the CFI of Cebu which rendered its Decision in August 1975 declaring the 2nd sale to the spouses Cabigas null and void ab initio and the 1st sale to Jabil not rescinded. The CFI of Cebu also ordered Jabil to pay the remaining P16,000 to the spouses Dignos and to reimburse the spouses Cabigas a reasonable amount corresponding the expenses in the construction of hollow block fences in the said parcel of land. The spouses Dignos were also ordered to return the P35,000 to the spouses Cabigas.

Both Jabil and the spouses Dignos appealed to the Court of Appeals, which affirmed in July 1981 the CFI of Cebu’s Decision except for the part of Jabil paying the expenses of the spouses Cabigas for building a fence. The spouses Dignos contested that the contract between them and Jabil was merely a contract to sell and not a deed of sale.

ISSUE:

Is the contract between the parties a contract of sale or a contract to sell?

COURT RULING:

The Supreme Court affirmed the Decision of the Court of Appeals saying stated that all the elements of a valid contract of sale are present in the document and that the spouses Dignos had no right to sell the land in question because an actual delivery of its possession has already been made in favor of Jabil as early as March 1965. It was also found that the spouses Dignos never notified Jabil by notarial act that they were rescinding the contract, and neither did they file a suit in court to rescind the sale. There is no showing that Jabil properly authorized a certain Cipriano Amistad to tell petitioners that he was already waiving his rights to the land in question.