IMPORTANT CASES IN SALES

Sanchez vs. Mapalad Realty Corporation, 541 SCRA 397(2007)

Contracts of sale are perfected by mere consent, which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. Consent may be given only
by a person with the legal capacity to give consent. In the case of juridical persons such as corporations
like Mapalad, consent may only be granted through its officers who have been duly authorized by its
board of directors.

In the present case, consent was purportedly given by Miguel Magsaysay, the person who signed for and
in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However, as he categorically
stated on the witness stand during trial, he was no longer connected with Mapalad on the said date
because he already divested all his interests in said corporation as early as 1982. Even assuming, for the
sake of argument, that the signatures purporting to be his were genuine, it would still be voidable for lack
of authority resulting in his incapacity to give consent for and in behalf of the corporation. On this score,
the contract of sale may be annulled for lack of consent on the part of Mapalad.

The third element for a valid contract of sale is likewise lacking. Lack of consideration makes a contract of
sale fictitious. A fictitious sale is void ab initio. The alleged deed of absolute sale dated November 2, 1989
notwithstanding, the contract of sale between Mapalad and Nordelak is not only voidable on account of
lack of valid consent on the part of the purported seller, but also void ab initio for being fictitious on
account of lack of consideration. Despite a void sale between Mapalad and Nordelak, may petitioner still
claim valid title to the subject properties?.

Hernandez-Nievera vs. Hernandez, 642 SCRA 646(2011)

The powers conferred on Demetrio were exclusive only to selling and mortgaging the properties. Between
these two specific powers, the power to sell is quite controversial because it is the sale transaction which
bears close resemblance to the deal contemplated in the DAC. In fact, part of the testimony of Atty.
Danilo Javier, counsel for respondent HIGC and head of its legal department at the time, is that in the
execution of the DAC, respondents had relied on Demetrio’s special power of attorney and also on his
supposed agreement to be paid in kind, i.e., in shares of stock, as consideration for the assignment and
conveyance of the subject properties to the Asset Pool. What petitioners miss, however, is that the power
conferred on Demetrio to sell “for such price or amount” is broad enough to cover the exchange
contemplated in the DAC between the properties and the corresponding corporate shares in PMRDC,
with the latter replacing the cash equivalent of the option money initially agreed to be paid by PMRDC
under the MOA. Suffice it to say that “price” is understood to mean “the cost at which something is
obtained, or something which one ordinarily accepts voluntarily in exchange for something else, or the
consideration given for the purchase of a thing.”

Thus, it becomes clear that Demetrio’s special power of attorney to sell is sufficient to enable him to
make a binding commitment under the DAC in behalf of Carolina and Margarita.In particular, it does
include the authority to extinguish PMRDC’s obligation under the MOA to deliver option money and agree
to a more flexible term by agreeing instead to receive shares of stock in lieu thereof and in consideration
of the assignment and conveyance of the properties to the Asset Pool. Indeed, the terms of his special
power of attorney allow much leeway to accommodate not only the terms of the MOA but also those of
the subsequent agreement in the DAC which, in this case, necessarily and consequently has resulted in a
novation of PMRDC’s integral obligations.

Heirs of Lopez v. DBP, Nov. 19, 2014

A seller can only sell what he or she owns, or that which he or she does not own but has authority to
transfer, and a buyer can only acquire what the seller can legally transfer. This principle is incorporated in
our Civil Code. Article 1458 provides that in a contract of sale, the seller binds himself to transfer the
ownership of the thing sold.
Title or rights to a deceased person’s property are immediately passed to his or her heirs upon death. The
heirs’ rights become vested without need for them to be declared "heirs." Before the property is
partitioned, the heirs are co-owners of the property.

In this case, the rights to Gregoria Lopez’s property were automatically passed to her sons — Teodoro,
Francisco, and Carlos — when she died in 1922. Since only Teodoro was survived by children, the rights
to the property ultimately passed to them when Gregoria Lopez’s sons died. The children entitled to the
property were Gregorio, Simplicio, Severino, and Enrique.

Gregorio, Simplicio, Severino, and Enrique became co-owners of the property, with each of them entitled
toan undivided portion of only a quarter of the property. Upon their deaths, their children became the co-
owners of the property, who were entitled to their respective shares, such that the heirs of Gregorio
became entitled to Gregorio’s one-fourth share, and Simplicio’s and Severino’s respective heirs became
entitled to their corresponding onefourth shares in the property. The heirs cannot alienate the shares that
do not belong to them.

Since Enrique’s right to the property was limited to his one-fourth share, he had no right to sell the
undivided portions that belonged to his siblings or their respective heirs. Any sale by one heir of the rest
of the property will not affect the rights of the other heirs who did not consent to the sale. Such sale is void
with respect to the shares of the other heirs.

As regards the validity of the mortgage contract, the Court ruled that Marietta (vendee) acquired no valid
title or ownership from Enrique over the undivided portions of the property, this court finds that no valid
mortgage was executed over the same property in favor of DBP. This is due to the fact that Article 2085
of the NCC requires that the pledgor or mortgagor be the absolute owner of the thing pleadged or
mortgaged. Without a valid mortgage, there was no valid foreclosure sale and no transfer of ownership of
petitioners’ undivided portions since its predecessor-in-interest was not the owner and held no authority to
convey the property.

Cabrera v. Ysaac, Nov. 19, 2014.

There was no contract of sale. It was null ab initio. The

object of a valid sales contract must be owned by
the seller. If the seller is not the owner, the seller must be authorized by the owner to sell the object.
Specific rules attach when the seller co-ownsthe object of the contract. Sale of a portion of the property is
considered an alteration of the thing owned in common. Under the Civil Code, such disposition requires
the unanimous consent of the other co-owners. However, the rules also allow a co-owner to alienate his
or her part in the co-ownership. If the alienation precedes the partition, the co-owner cannot sell a definite
portion of the land without consent from his or her co-owners. He or she could only sell the undivided
interest of the co-owned property.

As summarized in Lopez v. Ilustre,

"if he is the owner of an undivided half of a tract of land, he has a right
to sell and convey an undivided half, but he has no right to divide the lot into two parts, and convey the
whole of one part by metes and bounds.

Hence, prior to partition, a sale of a definite portion of common property requires the consent of all co-
owners because it operates to partition the land with respect to the co-owner selling his or her share. The
co-owner or seller is already marking which portion should redound to his or her autonomous ownership
upon future partition.

The object of the sales contract between petitioner and respondent was a definite portion of a co-owned
parcel of land. At the time of the alleged sale between petitioner and respondent, the entire property was
still held in common. There was no showing that respondent was authorized by his coowners to sell the
portion of land occupied by Juan Cabrera, the Espiritu family, or the Borbe family. Without the consent of
his co-owners, respondent could not sell a definite portion of the co-owned property.
Voidable Title

Double Sales

De Leon vs. Ong, 611 SCRA 381(2010)

This case involves a double sale as the

disputed properties were sold validly on two separate occasions
by the same seller to the two different buyers in good faith. Art. 1544 clearly states that the rules on
double or multiple sales apply only to purchasers in good faith. Needless to say, it disqualifies any
purchaser in bad faith.

A purchaser in good faith is one who buys the property of another without notice that some other person
has a right to, or an 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 some other person’s claim or interest in the property.21 The
law requires, on the part of the buyer, lack of notice of a defect in the title of the seller and payment in full
of the fair price at the time of the sale or prior to having notice of any defect in the seller’s title.

Respondent was not aware of any interest in or a claim on the properties other than the mortgage to
RSLAI which she undertook to assume. Moreover, Viloria bought the properties from petitioner after the
latter sold them to respondent. Respondent was therefore a purchaser in good faith. Hence, the rules on
double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with
the registrar of deeds, the one who took prior possession of the properties shall be the lawful owner
thereof.

In this instance, petitioner delivered the properties to respondent when he executed the notarized deed
and handed over to respondent the keys to the properties. For this reason, respondent took actual
possession and exercised control thereof by making repairs and improvements thereon. Clearly, the sale
was perfected and consummated on March 10, 1993. Thus, respondent became the lawful owner of the
properties.

The Roman Catholic Chruch vs. Pante, 669 SCRA 234(2012)

The sale of the lot to Pante and later to the spouses Rubi resulted in a double sale that called for the
application of the rules in Article 1544 of the Civil Code: “Article 1544. If the same thing should have been
sold to different vendees, the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property. Should it be immovable property, the
ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of
Property. Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.”

As neither Pante nor the spouses Rubi registered the sale in their favor, the question now is who,
between the two, was first in possession of the property in good faith. Jurisprudence has interpreted
possession in Article 1544 of the Civil Code to mean both actual physical delivery and constructive
delivery. Under either mode of delivery, the facts show that Pante was the first to acquire possession of
the lot. The sale in favor of Pante would have to be upheld since the contract executed between the
Church and Pante was duly notarized, converting the deed into a public instrument.

Sabitsana, Jr. vs. Muertegui, 703 SCRA 145(2013)

Both the trial court and the CA are, however, wrong in applying Article 1544 of the Civil Code. Both courts
seem to have forgotten that the provision does not apply to sales involving unregistered land. Suffice it to
state that the issue of the buyer’s good or bad faith is relevant only where the subject of the sale is
registered land, and the purchaser is buying the same from the registered owner whose title to the land is
clean.

In such case, the purchaser who relies on the clean title of the registered owner is protected if he is a
purchaser in good faith for value. Act No. 3344 applies to sale of unregistered lands. What applies in this
case is Act No. 3344, as amended, which provides for the system of recording of transactions over
unregistered real estate. Act No. 3344 expressly declares that any registration made shall be without
prejudice to a third party with a better right.

Alfaro and Dumalagan, 714 SCRA 476(2014)

Article 1544 clearly states that the rule on double or multiple sales applies only when all the purchasers
are in good faith. In detail, Art. 1544 requires that 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.

A purchaser in good faith is one who buys the property of another without notice that some other person
has a right to, or an 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 some other person’s claim or interest in the property. The
petitioners are not such purchaser. Petitioners had prior knowledge of the previous sales by
installment of portions of the property to several purchasers.Moreover, petitioners had prior
knowledge of respondents’ possession over the subject property. Hence, the rule on double sale is
inapplicable in the case at bar.As correctly held by the appellate court, petitioners’ prior registration of
the subject property, with prior knowledge of respondents’ claim of ownership and possession, cannot
confer ownership or better right over the subject property.

Sps. Suntay v. Keyser Mercantile, Inc. Dec. 10, 2014.

The doctrine is well-settled that a levy on execution duly registered takes preference over a prior
unregistered sale. Even if the prior sale was subsequently registered before the sale in execution but after
the levy was duly made, the validity of the execution sale should be maintained because it retroacts to the
date of the levy. Otherwise, the preference created by the levy would be meaningless and illusory.

In this case, the contract to sell between Keyser and Bayfront was executed on October 20, 1989, but the
deed of absolute sale was only made on November 9, 1995 and registered on March 12, 1996. The
Notice of Levy in favor of Spouses Suntay was registered on January 18, 1995, while the Certificate of
Sale on April 7, 1995, both dates clearly ahead of Keyser’s registration of its Deed of Absolute Sale.
Evidently, applying the doctrine of primus tempore, potior jure (first in time, stronger in right), Spouses
Suntay have a better right than Keyser.

The settled rule is that levy on attachment, duly registered, takes preference over a prior
unregistered sale. This result is a necessary consequence of the fact that the property involved was duly
covered by the Torrens system which works under the fundamental principle that registration is the
operative act which gives validity to the transfer or creates a lien upon the land.

The preference created by the levy on attachment is not diminished even by the subsequent
registration of the prior sale. This is so because an attachment is a proceeding in rem. It is against the
particular property, enforceable against the whole world.
 Option to Buy/Sell

Sanchez v. Rigos

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 buy later. In this case however,
upon accepting herein petitioner’s offer a bilateral promise to sell and to buy ensued, and the respondent
ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not
to buy. It was not a mere option then; it was bilateral contract of sale.

In other words, 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.

Sid’s note: Accdg to Atty. Legarda, this case is wrong. Wala daw siyang binigay na maski isang kusing.
You can’t sell until you communicate such withdrawal. [eh walang option contract ano ba]

Eulogio v. Apeles 576 SCRA 561

Obligations; Contracts; Option; Words and Phrases; An option is a contract by which the owner of the
property agrees with another person that the latter shall have the right to buy the former’s property at a
fixed price within a certain time; An option is not of itself a purchase, but merely secures the privilege to
buy—it is not a sale of property but a sale of the right to purchase; Option is also sometimes called an
“unaccepted offer” and is sanctioned by Article 1479 of the Civil Code. For an option contract to be valid
and enforceable against the promissor, there must be a separate and distinct consideration that supports
it.

In other words, “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 the same is not
supported by any consideration. Here it is not disputed that the option is without consideration. It can
therefore be withdrawn notwithstanding the acceptance made of it by appellee.

The doctrine requiring the payment of consideration in an option contract enunciated in Southwestern
Sugar is resonated in subsequent cases and remains controlling to this day. Without consideration that is
separate and distinct from the purchase price, an option contract cannot be enforced; that holds true even
if the unilateral promise is already accepted by the optionee.
 Right of First Refusal

Ang Yu v. CA, Dec. 2, 1994.

Where a period is given to the offeree within which to accept the offer, the following rules
generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free
and has the right to withdraw the offer before its acceptance, or, if an acceptance has been
made, before the offeror's coming to know of such fact, by communicating that withdrawal to the
offeree (see Art. 1324, Civil Code)

The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it
could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every
person must, in the exercise of his rights and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good faith."

(2) If the period has a separate consideration, a contract of "option" isdeemed perfected, and it
would be a breach of that contract to withdraw the offer during the agreed period. The option,
however, is an independent contract by itself, and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-
offeree, the latter may not sue for specific performance on the proposed contract ("object" of the
option) since it has failed to reach its own stage of perfection.

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless
to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.
Neither can the right of first refusal, understood in its normal concept, per se be brought within the
purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an
offer under Article 1319 of the same Code. An option or an offer would require, among other
things, a clear certainty on both the object and the cause or consideration of the envisioned
contract. In a right of first refusal, while the object might be made determinate, the exercise of the
right, however, would be dependent not only on the grantor's eventual intention to enter into a
binding juridical relation with another but also on terms, including the price, that obviously are yet
to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class
of preparatory juridical relations governed not by contracts (since the essential elements to
establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of
general application, the pertinent scattered provisions of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like
here, its breach cannot justify correspondingly an issuance of a writ of execution under a
judgment that merely recognizes its existence, nor would it sanction an action for specific
performance without thereby negating the indispensable element of consensuality in the
perfection of contracts. It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for
instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a recovery for
damages.

In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of private
respondents to honor the right of first refusal, the remedy is not a writ of execution on the
judgment, since there is none to execute, but an action for damages in a proper forum for the
purpose

Sid’s note: in an en banc decision, an action for specific performance will not lie against the
respondents to honor the right of first refusal

Litonjua v. CA
May a mortgage contract provide: (a) that the mortgagor cannot sell the mortgaged property
without first obtaining the consent of the mortgagee and that, otherwise, the sale made without
the mortgagee's consent shall be invalid; and (b) for a right of first refusal in favor of the
mortgagee?

Insofar as the validity of the questioned stipulation prohibiting the mortgagor from selling his
mortgaged property without the consent of the mortgagee is concerned, therefore, the ruling in
the Tambunting case is still the controlling law. Indeed, we are fully in accord with the
pronouncement therein that such a stipulation violates Article 2130 of the New Civil Code. Both
the lower court and the Court of Appeals in its Amended Decision rationalize that since paragraph
8 of the subject Deed of Real Estate Mortgage contains no absolute prohibition against the sale
of the property mortgaged but only requires the mortgagor to obtain the prior written consent of
the mortgagee before any such sale, Article 2130 is not violated thereby. This observation takes a
narrow and technical view of the stipulation in question without taking into consideration the end
result of requiring such prior written consent. True, the provision does not absolutely prohibit the
mortgagor from selling his mortgaged property; but what it does not outrightly prohibit, it
nevertheless achieves. For all intents and purposes, the stipulation practically gives the
mortgagee the sole prerogative to prevent any sale of the mortgaged property to a third party.
The mortgagee can simply withhold its consent and thereby, prevent the mortgagor from selling
the property. This creates an unconscionable advantage for the mortgagee and amounts to a
virtual prohibition on the owner to sell his mortgaged property. In other words, stipulations like
those covered by paragraph 8 of the subject Deed of Real Estate Mortgage circumvent the law,
specifically, Article 2130 of the New Civil Code.

Re: Validity and enforceability of stipulation granting the mortgagee the right of first refusal. Said
paragraph 9 grants upon L & R Corporation the right of first refusal over the mortgaged property
in the event the mortgagor decides to sell the same. We see nothing wrong in this provision. The
right of first refusal has long been recognized as valid in our jurisdiction. The consideration for the
loan-mortgage includes the consideration for the right of first refusal. L & R Corporation is in
effect stating that it consents to lend out money to the spouses Litonjua provided that in case they
decide to sell the property mortgaged to it, then L & R Corporation shall be given the right to
match the offered purchase price and to buy the property at that price. Thus, while the spouses
Litonjua had every right to sell their mortgaged property to PWHAS without securing the prior
written consent of L & R Corporation, they had the obligation under paragraph 9, which is a
perfectly valid provision, to notify the latter of their intention to sell the property and give it priority
over other buyers. It is only upon failure of L & R Corporation to exercise its right of first refusal
could the spouses Litonjua validly sell the subject properties to others, under the same terms and
conditions offered to L & R Corporation.

Equatorial v. Mayfair 264 SCRA 483

Court upheld the right of first refusal of the lessee Mayfair, and rescinded the sale of the property
by the lessor Carmelo to Equatorial Realty “considering that Mayfair, which had substantial
interest over the subject property, was prejudiced by its sale to Equatorial without Carmelo
conferring to Mayfair every opportunity to negotiate within the 30-day stipulated period”

Sid’s note: Right of first refusal was violated when the Creditor sold the property to another party
[Accdg to Atty. Legarda... NEVER USE EQUATORIAL]

Paranaque King v. CA 268 SCRA 727

We hold, that in order to have full compliance with the contractual right granting petitioner the first
option to purchase, the sale of the properties for the amount of P9 million, the price for which they
were finally sold to respondent Raymundo, should have likewise been first offered to petitioner.
In the case of Guzman, Bocaling & Co. vs. Bonnevie,the Court held that even if the Bonnevies
could not buy it at the price quoted (P600,000.00), nonetheless, Reynoso could not sell it to
another for a lower price and under more favorable terms and conditions without first offering said
favorable terms and price to the Bonnevies as well. Only if the Bonnevies failed to exercise their
right of first priority could Reynoso thereafter lawfully sell the subject property to others, and only
under the same terms and conditions previously offered to the Bonnevies.

From the foregoing, the basis of the right of first refusal must be the current offer to sell of
the seller or offer to purchase of any prospective buyer. Only after the optionee fails to
exercise its right of first priority under the same terms and within the period contemplated,
could the owner validly offer to sell the property to a third person, again, under the same
terms as offered to the optionee.

Sid’s note:Ang sinasabi lang ng court dito is hindi pwede yung contention ni Santos na “inoffer
ko naman sa lessee kaso ni-reject niya dahil masyadong mahal, hindi niya daw kaya bayaran.”
Sabi ng Court, pag pumayag ka na ibenta sa halagang 9 Million sa 3rd party yung property na
nilelease ni lessee, kailangan mo munang i-offer for 9 Million sa lessee kapag may right of first
refusal siya”.

Earnest Money

First Optima Realty Construction v. Securitron, Jan, 2015.

The stages of a contract of sale are: (1) negotiation, starting from the time the prospective
contracting parties indicate interest in the contract to the time the contract is perfected; (2)
perfection, which takes place upon the concurrence of the essential elements of the sale; and (3)
consummation, which commences when the parties perform their respective undertakings under
the contract of sale, culminating in the extinguishment of the contract.

In the present case, the parties never got past the negotiation stage. Nothing shows that the
parties had agreed on any final arrangement containing the essential elements of a contract of
sale, namely, (1) consent or the meeting of the minds of the parties; (2) object or subject matter of
the contract; and (3) price or consideration of the sale.

Respondent’s subsequent sending of the February 4, 2005 letter and check to petitioner – without
awaiting the approval of petitioner’s board of directors and Young’s decision, or without making a
new offer – constitutes a mere reiteration of its original offer which was already rejected
previously; thus, petitioner was under no obligation to reply to the February 4, 2005 letter. It would
be absurd to require a party to reject the very same offer each and every time it is made;
otherwise, a perfected contract of sale could simply arise from the failure to reject the same offer
made for the hundredth time.

Since there is no perfected sale between the parties, respondent had no obligation to make
payment through the check; nor did it possess the right to deliver earnest money to petitioner in
order to bind the latter to a sale. As contemplated under Art. 1482 of the Civil Code, "there must
first be a perfected contract of sale before we can speak of earnest money." "Where the parties
merely exchanged offers and counter-offers, no contract is perfected since they did not yet give
their consent to such offers. Earnest money applies to a perfected sale."
 Equitable Mortgage

Torda v. Jacque

A purported contract of sale where the vendor remains in physical possession of the land, as
lessee or otherwise, is an indicium of an equitable mortgage. During the period material to the
present controversy, the petitioners, spouses Solitarios, retained actual possession of the
property. This was never disputed. If the transaction had really been one of sale, as the Jaques
claim, they should have asserted their rights for the immediate delivery and possession of the lot
instead of allowing the spouses Solitarios to freely stay in the premises for almost seventeen (17)
years from the time of the purported sale until their filing of the complaint. Human conduct and
experience reveal that an actual owner of a productive land will not allow the passage of a long
period of time, as in this case, without asserting his rights of ownership.

Furthermore, the court held that the intentions of the parties was for the transaction to secure the
payment of a debt. Indubitably, the subject property was transferred to the Jaques in a prohibited
pactum commisorium manner and, therefore, void. Thus, the foregoing transaction and the
registration of the deeds of sale, by virtue of which the Jaques were able to obtain the impugned
TCT No. 745 must be declared void.

Furthermore, given that the transaction between the parties is an equitable mortgage, this means
that the title to the subject property actually remained with Felipe Solitarios, as owner-
mortgagor, conformably with the well-established doctrine that the mortgagee does not
become the owner of the mortgaged property because the ownership remains with the
mortgagor.Thus, Felipe Solitarios' ownership over the subject property is not affected by the fact
that the same was already registered in the name of the Jaques.

Heirs of Soliva v. Soliva, April 22, 2015.

The 1970 Conditional Sale with Pacto tie Retro is a true sale, not an equitable mortgage
under Article 1602 of the Civil Code. An equitable mortgage is one which, although lacking the
proper formalities, form or words, or other requisites prescribed by law for a mortgage,
nonetheless shows the real intention of the parties to make the property subject of the contract as
security for debt and contains nothing impossible or anything contrary to law in this intent. A
contract of sale, whether an absolute sale or with a right of repurchase, is presumed by law to be
an equitable mortgage under any of the following circumstances:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
1. When the price of a sale with right to repurchase is unusually inadequate;
2. When the vendor remains in possession as lessee or otherwise;
3. When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
4. When the purchaser retains for himself a part of the purchase price;
5. When the vendor binds himself to pay the taxes on the thing sold;
6. In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.

For the presumption of an equitable mortgage to arise under any of the circumstances
enumerated in Article 1602, however, two requisites must concur: (a) that the parties entered into
a contract denominated as a contract of sale; and (b) that their intention was to secure an
existing debt by way of mortgage.

The Court is not unaware of the equitable-mortgage presumption that the law accords in
situations when doubt exists as to the true intent of the parties to the contract. This legal
presumption, however, applies only when doubt, in fact, exists as to the nature of the agreement
of the parties.

When no doubt exists from the facts and the evidence, and the parties to the transaction
(specifically Juana as the vendor a retro in this case), never questioned the nature of their
agreement as one of mortgage, then this legal presumption shall not and cannot apply. After all,
the contract is the law between them and where its terms are clear and leaves no doubt on their
intention, the courts would have no choice but to uphold them.

Capacity to Contract

Sarili v. Lagrosa, January, 2014.

A higher degree of prudence is required from one who buys from a person who is
not the registered owner, although the land object of the transaction is registered. In such
a case, the buyer is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the transferor.
The buyer also has the duty to ascertain the identity of the person with whom he is dealing with
and the latter’s legal authority to convey the property. The strength of the buyer’s inquiry on the
seller’s capacity or legal authority to sell depends on the proof of capacity of the seller.If the
proof of capacity consists of a special power of attorney duly notarized, mere inspection of the
face of such public document already constitutes sufficient inquiry. Ifno such special power of
attorney is provided or there is one but there appears to be flaws in its notarial
acknowledgment, mere inspection of the document will not do; the buyer must show that
his investigation went beyond the document and into the circumstances of its execution.

Redemption

Alonzo v. IAC, G.R. No. L-72873. May 28, 1987

Although the co-heirs were not notified of the sales made by their other co-heirs through a notice
in writing, the court ruled that they need not be notified through a written notice since to rule
otherwise would close their eyes to the obvious truth in favor of their palpably false claim of
ignorance, thus exalting the letter of the law over its purpose. The purpose is clear enough: to
make sure that the redemptioners are duly notified. We are satisfied that in this case the other
brothers and sisters were actually informed, although not in writing, of the sales made in 1963
and 1964.

Sid’s note: Hindi na daw kailangan ng written notice from a co-heir to his other co-heirs pag
binenta ni co-heir yung share niya sa 3rd party stranger. Enough na daw ang ACTUAL notice.

Goldenway Merchandising Corporation vs. Equitable PCI Bank, 693 SCRA 439(2013)

The one-year period of redemption is counted from the date of the registration of the certificate of
sale. In this case, the parties provided in their real estate mortgage contract that upon petitioner’s
default and the latter’s entire loan obligation becoming due, respondent may immediately
foreclose the mortgage judicially in accordance with the Rules of Court, or extrajudicially in
accordance with Act No. 3135, as amended.

Under the General Banking Law, an exception is thus made in the case of juridical persons which
are allowed to exercise the right of redemption only “until, but not after, the registration of the
certificate of foreclosure sale” and in no case more than three (3) months after foreclosure,
whichever comes first.

Tolosa vs. United Coconut Planters Bank, 695 SCRA 138(2013)

A writ of possession is simply an order by which the sheriff is commanded by the court to place a
person in possession of a real or personal property. Under Section 7 of Act No. 3135, as
amended, a writ of possession may be issued in favor of a purchaser in a foreclosure sale either
(1) within the one-year redemption period, upon the filing of a bond; or (2) after the lapse of the
redemption period, without need of a bond.

Within the one-year redemption period, the purchaser may apply for a writ of possession by filing
a petition in the form of an ex parte motion under oath, in the registration or cadastral
proceedings of the registered property. The law requires only that the proper motion be filed, the
bond approved and no third person is involved. After the consolidation of title in the buyer’s name
for failure of the mortgagor to redeem the property, entitlement to the writ of possession becomes
a matter of right. In the latter case, the right of possession becomes absolute because the basis
thereof is the purchaser’s ownership of the property.

Having consolidated its ownership over the subject properties after the Spouses Tolosa failed to
exercise their right of redemption, UCPB was correctly found by the CA entitled to a writ of
possession.

David vs. David, 713 SCRA 326(2014)

The redemption within the period allowed by law is not a matter of intent but of payment or valid
tender of the full redemption price within the period. Verily, the tender of payment is the seller’s
manifestation of his desire to repurchase the property with the offer of immediate performance.
Here, Eduardo paid the repurchase price to Roberto by depositing the proceeds of the sale of the
Baguio City lot in the latter’s account. Such payment was an effective exercise of the right to
repurchase.

CSCT v. Misterio, June 17, 2015.

In the present case, the Deed of Sale executed by the parties provide for a right to repurchase
the subject property upon the occurrence of either of two suspensive conditions, particularly: (1)
the cessation of existence of SAHS; or (2) the transfer of SAHS to another school site.

In cases of conventional redemption when the vendor a retro reserves the right to repurchase the
property sold, the parties to the sale must observe the parameters set forth by Article 1606 of the
New Civil Code. Thus, depending on whether the parties have agreed upon a specific period
within which the vendor a retro may exercise his right to repurchase, the property subject of the
sale may be redeemed only within the limits prescribed by the aforequoted provision.

This Court deemed it necessary to keep within the ten (10)-year period those instances where
parties agree to suspend the right until the occurrence of a certain time, event, or condition,
insofar as the application of the four (4)-year period in the first paragraph of Article 1606 Civil
Code would prolong the exercise of the right beyond ten (10) years. In cases where the four (4)-
year period would extend the life of the contract beyond ten (10) years, the vendor a retro will
only have the remainder of the said ten (10)-year period to redeem the property, in line with the
manifest spirit of the law.

To repeat, Article 1606 expressly provides that in the absence of an agreement as to the period
within which the vendor a retro may exercise his right to repurchase, the same must be done
within four (4) years from the execution of the contract. In the event the contract specifies a
period, the same cannot exceed ten (10) years. Thus, whether it be for a period of four (4) or ten
(10) years, this Court consistently implements the law and limits the period within which the right
to repurchase may be exercised, adamantly striking down as illicit stipulations providing for an
unlimited right to repurchase. Indubitably, it would be rather absurd to permit respondents to
repurchase the subject property upon the occurrence of the second suspensive condition,
particularly, the relocation of SAHS on October 3, 1997, the time when petitioner ceded the
property to the Province of Cebu, which is nearly forty-one (41) years after the execution of the
Deed of Sale on December 31, 1956. This Court must, therefore, place it upon itself to suppress
these kinds of attempts in keeping with the fundamentally accepted principles of law.

RA 6652

Sebastian v. BPI Family Bank, October 22, 2014.

The protection of Republic Act No. 6552 (Realty Installment Buyer Protection Act) does not cover
a loan extended by the employer to enable its employee to finance the purchase of a house and
lot. The law protects only a buyer acquiring the property by installment, not a borrower whose
rights are governed by the terms of the loan from the employer.

Tagaytay Realty v. Gacutan, July 1, 2015.

Petitioner was not relieved from its statutory and contractual obligations to complete the
amenities. Under Section 20 of Presidential Decree No. 957, all developers, including the
petitioner, are mandated to complete their subdivision projects, including the amenities, within
one year from the issuance of their licenses. Pursuant to Section 30 of Presidential Decree No.
957, the amenities, once constructed, are to be maintained by the developer like the petitioner
until a homeowners’ association has been organized to manage the amenities.

Considering that the petitioner’s unilateral suspension of the construction of the amenities was
intended to save itself from costs, its plea for relief from its contractual obligations was properly
rejected because it would thereby gain a position of advantage at the expense of the lot owners
like the respondent. Its invocation of Article 1267 of the Civil Code, which provides that “(w)hen
the service has become so difficult as to be manifestly beyond the contemplation of the parties,
the obligor may also be released therefrom in whole or in part,” was factually unfounded.

And, secondly, the unilateral suspension of the construction had preceded the worsening of
economic conditions in 1983; hence, the latter could not reasonably justify the petitioner’s plea for
release from its statutory and contractual obligations to its lot buyers, particularly the respondent.
Besides, the petitioner had the legal obligation to complete the amenities within one year from the
issuance of the license (under Section 20 of Presidential Decree No. 957), or within two years
from July 15, 1976 (under the express undertaking of the petitioner). Hence, it should have
complied with its obligation by July 15, 1978 at the latest, long before the worsening of the
economy in 1983.

Waivers/Warranties

Bignay v. Union Bank GR 171590 Feb 12, 2014

The gross negligence of the seller in defending its title to the property subject matter of the sale –
thereby contravening the express undertaking under the deed of sale to protect its title against
the claims of third persons resulting in the buyer’s eviction from the property – amounts to bad
faith, and the buyer is entitled to the remedies afforded under Article 1555 of the Civil Code.

Such negligence in the handling of the case is far from coincidental; it is decidedly glaring, and
amounts to bad faith. “[N]egligence may be occasionally so gross as to amount to malice [or bad
faith].

Contract of Sale/Contract to Sell

Ace Foods, Inc. vs. Micro Pacific Technologies Co., Ltd., 712 SCRA 679(2013)

A contract of sale is classified as a consensual contract, which means that the sale is perfected
by mere consent. No particular form is required for its validity. Upon perfection of the contract, the
parties may reciprocally demand performance, i.e., the vendee may compel transfer of ownership
of the object of the sale, and the vendor may require the vendee to pay the thing sold.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the property despite delivery thereof to the prospective
buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, i.e., the full payment of the purchase price. A contract to sell may not
even be considered as a conditional contract of sale where the seller may likewise reserve title to
the property subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon
the happening of a contingent event which may or may not occur.

Optimum Development Bank vs. Jovellanos, 711 SCRA 548(2013)

In the case at bar, the unlawful detainer suit filed by Optimum against Sps. Jovellanos for illegally
withholding possession of the subject property is similarly premised upon the cancellation or
termination of the Contract to Sell between them. Indeed, it was well within the jurisdiction of the
MeTC to consider the terms of the parties’ agreement in order to ultimately determine the factual
bases of Optimum’s possessory claims over the subject property. Proceeding accordingly, the
MeTC held that Sps. Jovellanos’s nonpayment of the installments due had rendered the Contract
to Sell without force and effect, thus depriving the latter of their right to possess the property
subject of said contract. The foregoing disposition aptly squares with existing jurisprudence. As
the Court similarly held in the Union Bank case, the seller’s cancellation of the contract to sell
necessarily extinguished the buyer’s right of possession over the property that was the subject of
the terminated agreement.

Verily, in a contract to sell, the prospective seller binds himself to sell the property subject
of the agreement exclusively to the prospective buyer upon fulfillment of the condition
agreed upon which is the full payment of the purchase price but reserving to himself the
ownership of the subject property despite delivery thereof to the prospective buyer. The
full payment of the purchase price in a contract to sell is a suspensive condition, the nonfulfillment
of which prevents the prospective seller’s obligation to convey title from becoming effective, as in
this case.

Roque v. Aguado, 2014.

It has been consistently ruled that where the seller promises to execute a deed of absolute sale
upon the completion by the buyer of the payment of the purchase price, the contract is only a
contract to sell even if their agreement is denominated as a Deed of Conditional Sale, as in this
case. This treatment stems from the legal characterization of a contract to sell, that is, a bilateral
contract whereby the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell the subject
property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such
as, the full payment of the purchase price. Elsewise stated, in a contract to sell, ownership is
retained by the vendor and is not to pass to the vendee until full payment of the purchase
price.

Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price.
As such, the condition which would have triggered the parties’ obligation to enter into and thereby
perfect a contract of sale in order to effectively transfer the ownership of the subject portion from
the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to have been
fulfilled. Consequently, the latter cannot validly claim ownership over the subject portion even if
they had made an initial payment and even took possession of the same.

Sale v. Agency

Sps. Viloria v. Continental Jan 2012

A principal-agent relationship exists between CAI and Holiday Travel.

This Court extrapolated that the primordial differentiating consideration between the two (2)
contracts is the transfer of ownership or title over the property subject of the contract. In an
AGENCY,the principal retains ownership and control over the property and the agent merely acts
on the principal’s behalf and under his instructions in furtherance of the objectives for which the
agency was established. On the other hand, the contract is clearly a SALE if the parties intended
that the delivery of the property will effect a relinquishment of title, control and ownership in such
a way that the recipient may do with the property as he pleases.

As to how the CA have arrived at the conclusion that the contract between CAI and Holiday
Travel is a sale is certainly confounding, considering that CAI is the one bound by the contracts of
carriage embodied by the tickets being sold by Holiday Travel on its behalf. It is undisputed that
CAI and not Holiday Travel who is the party to the contracts of carriage executed by Holiday
Travel with third persons who desire to travel via Continental Airlines, and this conclusively
indicates the existence of a principal-agent relationship. That the principal is bound by all the
obligations contracted by the agent within the scope of the authority granted to him is clearly
provided under Article 1910 of the Civil Code and this constitutes the very notion of agency.

Recoupment

First United Construction Corporation vs. Bayanihan Automotive Corporation, 713

SCRA 354(2014)

Recoupment (reconvencion) is the act of rebating or recouping a part of a claim upon which
one is sued by means of a legal or equitable right resulting from a counterclaim arising out of
the same transaction. It is the setting up of a demand arising from the same transaction as
the plaintiff’s claim, to abate or reduce that claim. The legal basis for recoupment by the buyer
is the first paragraph of Article 1599 of the Civil Code.

It was improper for petitioners to set up their claim for repair expenses and other spare parts
of the dump truck against their remaining balance on the price of the prime mover and the
transit mixer they owed to respondent. Recoupment must arise out of the contract or
transaction upon which the plaintiff’s claim is founded. To be entitled to recoupment,
therefore, the claim must arise from the same transaction, i.e., the purchase of the prime
mover and the transit mixer and not to a previous contract involving the purchase of the dump
truck. That there was a series of purchases made by petitioners could not be considered as a
single transaction, for the records show that the earlier purchase of the six dump trucks was a
separate and distinct transaction from the subsequent purchase of the Hino Prime Mover and
the Isuzu Transit Mixer. Consequently, the breakdown of one of the dump trucks did not grant
to petitioners the right to stop and withhold payment of their remaining balance on the last two
purchases.

Assignment of Credits

Serfino vs. Far East Bank and Trust Company, Inc., 683 SCRA 380(2012)

“An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without
the consent of the debtor, transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could enforce
it against the debtor. It may be in the form of sale, but at times it may constitute a dation in
payment, such as when a debtor, in order to obtain a release from his debt, assigns to his creditor
a credit he has against a third person.”

As a dation in payment, the assignment of credit operates as a mode of extinguishing the

obligation; the delivery and transmission of ownership of a thing (in this case, the credit due from
a third person) by the debtor to the creditor is accepted as the equivalent of the performance of
the obligation.