51.) CHRYSLER PHILIPPINES CORPORATION, petitioner vs.

THE HONORABLE COURT

OF APPEALS, and SAMBOK, MOTORS. CO. (BACOLOD), respondents
G.R. No. L-55684 133 SCRA 567
December 19, 1984

Facts:
Petitioner Chrysler Philippines Corporation is a domestic corporation engaged in the
assembling and sale of motor vehicles and other automotive products. Respondent Sambok
Motors Co., a general partnership, during the period relevant to these proceedings, was its dealer
for automotive products with offices at Bacolod (Sambok, Bacolod) and Iloilo (Sambok, Iloilo).
On October 2, 1970, Sambok, Bacolod, ordered from petitioner various automotive
products worth P30,909.61, payable in 45 days; that on November 25, 1970, petitioner delivered
said products to its forwarding agent, Allied Brokerage Corporation, for shipment; that Allied
Brokerage loaded the goods on board the M/S Doña Florentina, a vessel owned and operated by
Negros Navigation Company, for delivery to Sambok, Bacolod; that when petitioner tried to
collect from the latter the amount of P31,037.56, representing the price of the spare parts plus
handling charges, Sambok, Bacolod, refused to pay claiming that it had not received the
merchandise; that petitioner also demanded the return of the merchandise or their value from
Allied Brokerage and Negros Navigation, but both denied any liability. In its Answer, Sambok,
Bacolod, denied having received from petitioner or from any of its co-defendants, the automotive
products referred to in the Complaint, and professed no knowledge of having ordered from
petitioner said articles.

Issue:
Whether or not Sambok, Bacolod bears the loss of the cargo for which it is liable for damages to
Chrysler.
Held:
No. Under the circumstances, Sambok, Bacolod cannot be faulted for not accepting or
refusing to accept the shipment from Negros Navigation four years after shipment. The evidence
is clear that Negros Navigation could not produce the merchandise nor ascertain its where abouts
at the time Sambok, Bacolod, was ready to take delivery. Where the seller delivers to the buyer
a quantity of goods less than he contacted to sell, the buyer may reject them. From the
evidentiary record, Negros Navigation was the party negligent in failing to deliver the complete
shipment either to Sambok, Bacolod or to Sambok, Iloilo, but as the Trial court found, petitioner
failed to comply with the conditions precedent to the filing of judicial action. Thus, in the last
analysis, it is petitioner that must shoulder the resulting loss. The general rule is that, before
delivery, the risk of loss is borne by the seller who is still the owner, under the principle of res
perit domino, is applicable in petitioner’s case.
In sum, the judgment of respondent Appellate Court will have to be sustained not on the basis of
misdelivery but on non-delivery since the merchandise was never placed in the control and
possession of Sambok, Bacolod, and the vendee.
 52.) ARTEMIO KATIGBAK, petitioner, vs. COURT OF APPEALS, DANIEL EVANGELISTA
and V. K. LUNDBERG, respondents.
4 SCRA 243
January 31, 1962

Facts:
This case arose from an agreed purchase and sale of a Double Drum Carco Tractor Winch.
Artemio Katigbak upon reading an advertisement for the sale of the winch placed by V. K.
Lundberg, owner and operator of the International Tractor and Equipment Co., Ltd., went to see
Lundberg and inspected the equipment. The price quoted was P12, 000.00. Desiring a reduction
of the price, Katigbak was referred to Daniel Evangelista, the owner. After the meeting, it was
agreed that Katigbak was to purchase the winch for P12, 000.00, payable at P5, 000.00 upon
delivery and the balance of P7, 000.00 within 60 days. The condition of the sale was that the
winch would be delivered in good condition. Katigbak was apprised that the winch needed some
repairs, which could be done in the shop of Lundberg. It was then stipulated that the amount
necessary for the repairs will be advanced by Katigbak but deductible from the initial payment of
P5, 000.00. The repairs were undertaken and the total of P2, 029.85 for spare parts was advanced
by Katigbak for the purpose. For one reason or another, the sale was not consummated and
Katigbak sued Evangelista, Lundberg and the latter's company, for the refund of such amount.
Lundberg and Evangelista filed separate Answers to the complaint, the former alleging non-
liability for the amount since the same (obligation for refund) was purely a personal account
between defendant Evangelista and plaintiff Katigbak.
Evangelista, on his part, claimed that while there was an agreement between him and Katigbak
for the purchase and sale of the winch and that Katigbak advanced the payment for the spare
parts, he (Katigbak) refused to comply with his contract to purchase the same; that as a result of
such refusal he (Evangelista) was forced to sell the same to a third person for only P10,000.00,
thus incurring a loss of P2,000.00, which amount Katigbak should be ordered to pay, plus moral
damages of P5,000.00 and P700.00 for attorney's fees.
Issue:

Whether or not private respondent Evangelista committed a breach of contract.

Held:
No. The facts of the case under consideration are identical to those of the Hanlon case.
The herein petitioner failed to take delivery of the winch, subject matter of the contract and such
failure or breach was, according to the Court of Appeals, attributable to him, a fact which We are
bound to accept under existing jurisprudence. The right to resell the equipment, therefore,
cannot be disputed. It was also found by the Court of Appeals that in the subsequent sale of the
winch to a third party, the vendor thereof lost P2, 000.00, the sale having been only for P10,
000.00, instead of P12, 000.00 as agreed upon, said difference to be borne by the supposed
vendee who failed to take delivery and/or to pay the price.
Of course, petitioner tried to draw a distinction between the Hanlon case and his case. The slight
differences in the facts noted by petitioner are not, however, to our mode of thinking, sufficient
to take away the case at bar from the application of the doctrine enunciated in the Hanlon case.
WHEREFORE, the petition is dismissed, and the decision appealed from is affirmed in all respects,
with cost against petitioner.
 53.) JULIAN BORROMEO, Plaintiff-appellant, vs. JOSE FRANCO ET.AL., Defendants-
appellants
5 Phil 49
September 26, 1905

Facts:
On April 19, 1902, and before a notary public, Jose Maria Sado Calvo, a resident attorney
of the City of Manila, Jose Franco , et. Al., as parties of the first part, declare themselves to be
the joint owners of the frame houses, with nipa roofs belonging to the said parties of the first
part. That they have agreed to sell the said property to Julian Borromeo as party of the second
part executed a contract, wherein the latter is to pay the sum of 2,500 Mexican Currency,
payment shall be made upon the execution of the final deed of sale, he will also shoulder the
expenses incurred in the execution of the deed and for any judicial and extra-judicial proceeding,
he was given six months from the execution of the instrument to arrange and complete the
documents and papers relating to the said property,whatever rent may be due from said
property will be paid to Borromeo from the aforesaid date, the parties of the first party do not
gurantee the title which they undertake to transfer to Borromeo, and all expenses incurred by
Catalina Franco in obtaining the necessary authority for the sale of the property will be borne
solely by Borromeo. All the foregoing conditions were accepted by Borromeo. On January 7,
1903, Borromeo filed a complaint praying that defendants be compelled to sell to him the
property in question under the terms of the contract. He had already taken steps to complete
the documents and papers relating to the property but he was unable to complete it. The Francos
answered and asked that the complaint be dismissed for Borromeo failed to comply with the
condition of completing the documents and papers related to the property.

Issue: Whether or not the petitioner could demand fulfilment from the respondent.
Held:
The Court held that the contract in question is a bilateral one containing mutual
obligations and the fulfillment of which may be demanded after the expiration of the aforesaid
six months. The obligation to buy the property in question is correlative with the obligation to
sell it, so that upon the execution of the deed of transfer the purchaser shall pay the sum of 2,500
pesos, Mexican currency, as stipulated in the written contract referred to. The failure of the
petitioner to complete the documents and papers related to the property is not an essential part
of the contract and cannot be an obstacle for the fulfillment thereof.
The obligation to buy the property is correlative with the obligation to sell it. The
obligation of Borromeo to perfect the papers of the property is not correlative with the obligation
to sell the property. These obligations do not arise from the same cause. They create no
reciprocal rights between the contracting parties; so that the failure to comply with this
stipulation does not give the defendants the right to cancel the obligation which they imposed
upon themselves in accordance with Article 1191 of the Civil Code, since no real juridical
bilaterality or reciprocity existed between the two obligations. One obligation is entirely
independent of the other.
 54.) TAN LEONCO, plaintiff-appellee, vs. GO INQUI, defendant-appellant
8 PHIL 531
September 13, 1907

Facts:
On July 23, 1904, the plaintiff and appellee, Tan Leonco, commenced an action in the
Court of First Instance of the Province of Sorsogon against the defendant, Go Inqui, as
representative of the mercantile company "J.C.," for the purpose of recovering the sum of 800
pesos, with interest. This indebtedness is evidenced by a bill of exchange, executed and delivered
by said company of the plaintiff on March 3, 1901. The bill of exchange was drawn upon one Lim
Uyco, of Manila.
The bill of exchange was duly presented to Lim Uyco, refused payment because he had
received instructions to that effect from the said company.
Upon the 15th day of August, 1906, the defendant filed an answer to the said complaint,
admitting all of the facts of said complaint, and setting up a counterclaim, claiming that the
plaintiff owed the defendant the sum P2,369, with interested at 6 per cent. To this answer the
plaintiff filed of the defendant, and setting up a counterclaim to that of the defendant, amounting
to P5, 500.
Upon the 26th day of October, 1904, the Ho. Grant Trent, judge of the Court of First
Instance of said province, appointed arbitrators in accordance with the provisions of the Civil
Code, for the purpose of setting, if possible, the differences between the plaintiff and defendant.
On the 31st day of March, 1905, the said arbitrators mare a report of the facts in said cause.
On the 5th day of June, 1905, upon petition to the said judge signed by the attorneys for
the respective parties, the cause was set down for hearing without the intervention of the
arbitrators, and was duly tried before the judge of the Court of First Instance of said province.
On the 6th day of November, 1905, the judge indicated a sentence in the cause against
the defendant and in favor of the plaintiff for the sum of 800 pesos, Mexican currency, or its value
in the Conant, at the rate of P1.30, with interest 6 per cent from 3d day of march, 1901, and
costs, including the fees of the arbitrators appointed at its request of the respective the
counterclaim presented by the defendant.
Issue:

Whether or not the draft or check delivered by the plaintiff company to the defendant is
considered as a bill of exchange.

Held:
Yes.It is not disputed that the warehouse in which the hemp was deposited was the
warehouse of the defendant. The hemp became the property of the defendant upon the delivery
thereof in the warehouse of the defendant (arts. 1462 and 1463, Civil Code), and was property
of the defendant at the time of the complete delivery of the said abaca to the defendant, and the
loss occurring thereafter, without fault of the plaintiff was loss of the defendant the court ruled
the delivery of the hemp as above stated was duly made to the defendant and constituted a
valuable consideration for the said bill of exchange or check.
It was alleged that the said bill of exchange, after being presented to the drawee in
Manila, was not protested and that there is some question of the right of the p[plaintiff to recover
upon said bill of exchange without the same having been duly protested. The action was not
brought upon the bill of exchange; the bill of exchange was used only as evidence of the
indebtedness. We believe, however, that inasmuch as the defendant had himself ordered the
drawee not to pay the said bill of exchange, that protest and notice of non-payment under these
conditions was unnecessary in order to render the drawer, or defendant in this case, liable.
As to the assignment of error relating to the counterclaim presented by the defendant,
we are of the opinion that the evidence did not support said contention on the part of the
defendant.
The judgment of the lower court is therefore affirmed, with costs. So ordered.
 55.) ASIATIC PETROLEUM COMPANY (LTD.), plaintiff-appellant, vs. COLLECTOR OF
INTERNAL REVENUE, defendant-appellant
G.R. No. L-12687 38 PHIL. 510
August 27, 1918

Facts:
The defendant, under threat of penalty, compelled the plaintiff to pay the internal
revenue tax provided for under above said section of Act No. 2432 upon all such oils which the
plaintiff had on hand on the first day of January, 1915, whether or not the same had been sold
theretofore or not. The tax was paid under protest.
The plaintiff contends that the tax collected was illegal, for the reason that the law had
expressly relieved him from the necessity of paying the same on all such oils which he had
"disposed of to consumers or persons other than manufacturers or wholesale dealers, prior to
January 1, 1915"; that inasmuch as he had made a valid and legal sale of such oils before January
1, 1915 even though the same had not been actually delivered they had been "disposed of" and
he was therefore relieved from the necessity of paying the tax imposed by said Act. No contention
was made that the oils "disposed of" had been disposed of to "manufacturers or wholesale
dealers." To this note, Section 17 (paragraph 72a) of Act No. 2432, among other things, provides
that "no tax (imposed by law) shall be collected on such articles have been disposed of to
consumers or persons other than manufacturers or wholesale dealers. Said Act took effect upon
the first day of January, 1915.

Issue:
Whether or not a dealer is required to pay the internal revenue tax, provided for under section
17, (paragraph 72a) of Act No. 2342, upon mineral oils, but not delivered, prior to the first day of
January, 1915.
Held:

No. Considering the provisions of said quoted section, it is clear that the plaintiff could
not be compelled to pay the tax imposed by said Act upon mineral oils which had been disposed
of to consumers or persons, etc., prior to the first day of January, 1915. The court ruled that the
plaintiff had "disposed of" the mineral oils in question before the first day of January, 1915, and
was therefore relieved from the necessity of paying the internal revenue tax imposed by the
defendant. Moreover, the Legislature, by Act No. 2445, fully recognized that the phrase
"disposed of" meant nothing more or less than a contract whereby the vendor was bound to
furnish an article, because in said Act (No. 2445) it provided that "whenever any person has prior
to the enactment of this law (2432) entered into a contract whereby he has bound himself to
furnish to another an article subject to the tax or increased rate of tax . . .," the purchaser, and
not the vendor, was subject to pay such tax in the absence of stipulations to the contrary.
 56.) AUYONG HIAN ( HONG WHUA HANG), petitioner, vs. COURT OF TAX APPEALS,
ET. AL., respondents
104 SCRA 470
September 12, 1974

Facts:
On December 30, 1961, 600 hogsheads of Virginia leaf tobacco arrived in the Port of
Manila. As the Import Control Law was already expired, the Collector of Customs in Manila
refused to release the shipment of the subject goods. The shipment was then, declared illegal
upon the ground that the importation was made long after the expiration of the effectivity of the
Import Control Law and that the importation contravened the government policy as declared in
Republic Acts 698 and 1194. The goods were declared forfeited to the government and its sale
was ordered for public auction which the CTIP took advantage of. The petitioner prayed for
several errors by the CTA. One of them is the petitioner’s contention that the sale to the CTIP
was invalid on ground that the amount paid by the CTIP was insufficient in respect with the
petitioner’s claim that the goods’ value was Php 7,000,000 and what CTIP paid was only Php
1,500,000.
Issue:
Whether the sale of the tobacco from the public auction to CTIP was invalid?
Held:
No. The sale of the tobacco from the public auction to CTIP was valid. Even if the consideration
paid for the forfeited tobacco was inadequate, such inadequate consideration is not a ground for
the invalidity of a contract. Article 1355 of the Civil Code provides the law for this matter. It was
not shown that the instant sale is a case exempted by law from the operation of the
aforementioned Article; neither has the petitioner shown that there was fraud, mistake or undue
influence in the sale. Therefore, the SC can only conclude with the CTA that “In these
circumstances, we find no reason to invalidate the sale of said tobacco to CTIP.”
 57.) TIBURCIO LEOQUINCO, plaintiff-appellant, VS. POSTAL SAVINGS BANK, ET
AL.,defendants-appellees
G.R. No. L-23630 47 PHIL. 772
August 25, 1925

Facts:

This is a case involving of a piece or parcel of land belonging to the Bank, situated at Navotas,
Province of Rizal, having offered P27,000 for said property. The Plaintiff herein alleged that he
was the highest bidder at a public auction held by the defendants on March 31, 1924. Then he
wrote a letter to the defendants on May 9, 1924, advising that he was ready to tender payment
for the land as soon as the deed of sale of the same in his favor is executed and delivered by the
defendants. That the defendants refused to execute the deed in spite of requests made therefor
by him and that said refusal caused him damages in the sum of P25,000 more or less. Plaintiff
prayed that said defendants be ordered to execute and deliver the deed of sale of said land in his
favor, and to pay him damages amounting to P25,000, and the costs.

Issue:
Whether or not Leoquinco may compel PSB accept his offer and to execute a deed of sale of the
land in his favor.
Held:
No. In a resolution adopted by the board of directors authorizing the sale at public
auction of the property in question, as well as in the notice announcing said sale, the defendants
expressly reserved to themselves "the right to reject any and all bids‖. By taking part in the
auction and offering Leoquinco voluntarily submitted to the terms and conditions of the auction
sale as announced in the notice and has clearly acknowledged the right to reserve to the PSB.
Clearly, Leoquinco has no ground of action to compel the PSB to execute a deed of sale of the
land in his favor nor to comply his bid and offer. The owner of the property offered to sale in
auction has the right to prescribe the manner. Therefore, the sentence appealed from should be
and is hereby affirmed, with costs against the appellant
58.) FIDELITY & DEPOSIT COMPANY OF MARYLAND,plaintiff-appellant, VS. WILLIAM
A. WILSON, ET AL., defendant-appellees
G.R. No. 2684 8 PHIL. 51
March 15, 1907
Facts:
On October 17, 1904, the plaintiff filed a complaint against Wilson and The American
Surety Company asking, first, that judgment be rendered against Wilson for the sum of $4,464.90,
that amount having been paid by plaintiff to the Government under plaintiff's surety bond;
second, that there be applied to the payment of said judgment the said sum of $785 found in
possession of Wilson and that said plaintiff be preferred in its right to the said money and to
receive the same; and third, that a depositary be named by the court for the purpose of caring
for and administering said amount during the pendency of the case. Wilson had ceded and
transferred to the said Terrell all of his, the said Wilson's rights in and to the said $785 in payment
on account of a larger sumhen owed by said Wilson to the said H.D. In this case of intervention
The Fidelity and Deposit Company of Maryland, the plaintiff in the principal cause, and The
American Surety Company of New York together in cooperation and against the claim of the
intervenor Terrell, both of them, alleging on their part, better right that the intervenor to receive
the sum in question, asked that the said sum be delivered to them in equal shares and portions
as part payment and on account of the amounts which they had paid respectively to the
Issue: Whether or not Terrell and The Fidelity and Deposit Company of Maryland can
Government as sureties on the bond of Wilson. claim ownership of the funds in accordance to
Art 609 of the Civil Code
Held: In conformity with said doctrine as established in paragraph 2 of article 609 of said code,
"the ownership and other property rights are acquired and transmitted by law, by gift, by testate
or intestate succession, and, in consequence of certain contracts, by tradition." And as the logical
application of this disposition article 1095 prescribes the following: "A creditor has the right to
the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire
areal right." (And the ownership is surely such) "Until the property has been delivered to him."
In accordance with such disposition and provisions, the delivery of a thing constitutes a necessary
and indispensable requisite for the purpose of acquiring the ownership of the same by virtue for
a contract. With this, it can therefore be concluded that: "The transfer of the ownership in the
contract of such transfer, does not produce the effect by the fact of the mere consent, but is
acquired by tradition and in the due observance of general precepts." Therefore, by reason of
the non-delivery Terrell did not acquire the ownership of the property transferred to him by
Wilson. The court therefore finds that neither of the two creditors should enjoy preference with
regard to the other.
59.) RUFINA YATCO, plaintiff- appellant vs. JESUALDO GANA, defendant-appellee
G.R. No. L-3876
March 27, 1909

Facts:

The plaintiff, as heir to her father, Isidro Yatco, among other properties, received the
lands in controversy. In consequence of proceedings in execution brought in by the late Yatco
against the spouses Eugenio Andal and Gregoria Faciolco, the said lands were attached and as no
bidders appeared at the public auction, they were adjudicated in payment to the execution
creditor by an order of the lower court. The corresponding instrument of sale was not executed
nor was the execution creditor put in possession of the property until 1902, in compliance with
an order issued upon request of the said creditor. The credit of the execution creditor, Yatco, is
not recorded in the registry of property, nor were the attached properties charged in the
payment of any debts, or entered in the register. The defendant debtor, Andal, had informed the
officer who was sent to enforce the order of attachment that the property now in question had
already been sold by him to the defendant, Jesualdo Gana, prior to the date of the attachment.
Gana, acquired the said lands from Eugenio Andal by means of a public instrument of purchase
and sale. The said instrument was lost during the late insurrection, but appears on the index of
the notarial acts executed in La Laguna, on file at the office of the clerk of the Supreme Court.
Since 1894, the defendant has been in possession of the said properties and has held them as
owner until the present day and defendant was not required by the sheriff to deliver the
possession of the lands to the representative of the late Yatco.
ISSUE:
Whether or not the purchasers had acquired the ownership and dominion over the
purchased thing in accordance with article 1473 of the Civil Code.

HELD:
Yes. The main point is the legitimacy of the sale made by Eugenio Andal to Jesualdo Gana,
and the fact that this contract was executed even before the lands that were sold had been
judicially attached. The trial court has not committed any error by declaring that Eugenio Andal
could validly sell them to Jesualdo Gana and the circumstance that they were subject to the credit
of Isidro Yatco against the spouses Andal and Faciolco was not an obstacle to the validity of the
sale because they were not subject to the security of the credit as by a real right formally attached
to the said lands, but by the mere delivery of the title deeds that the debtors made to the
creditors.
There was no bad faith on the part of the purchaser even though it be supposed such
existed on the part of the vendor, because it has not been shown in any manner that the
purchaser was aware of any impediment to the vendor's lawfully effecting the sale of a thing that
belonged to him.
 60.) KUENZLE & STREIFF, plaintiff-appellant vs. MACKE & CHANDLER,
ETAL.,defendants-appellants
G.R. No. L-5295
December 16, 1909

Facts:

The plaintiff alleges that it was the owner of the Oregon Saloon consisting of bar,
furniture, furnishings, and fixtures in which the Jose Desiderio, as sheriff, levied upon by virtue
of an execution issued upon a judgment secured by the defendant Macke & Chandler, against
Stanley & Krippendorf. Said plaintiff notified the sheriff that it was the owner of said goods and
forbade the sale thereof under said execution. The sheriff sold said goods under said execution
and the firm of Macke & Chandler was the purchaser of said goods. Bachrach, Elser, and Gale,
were the sureties upon the bond given to the sheriff by Macke & Chandler before said goods
were sold. The defendants in this case allege that the property described by the plaintiff and sold
at the execution sale referred to was not the property of the plaintiff at the time of said levy and
sale, but was the property of Stanley & Krippendorf, who were in possession of the same at the
time of such levy. They further allege that Stanley & Krippendorf, being indebted in a
considerable sum to the plaintiff in this case, attempted to sell to the said plaintiff by an
instrument in writing the property in question which was never recorded and was a private
document. The said property was not delivered to the plaintiff but that property remained from
the time of sale forward in the exclusive possession and control of said Stanley & Krippendorf,
and that they conducted the business.

ISSUE:
Whether or not there is an effect in the said instrument of sale in transferring the property
in question from Stanley & Krippendorf to the plaintiff.
HELD:
No. The ownership of personal property can not be transferred to the prejudice of third
persons except by delivery of the property itself; and that a sale without delivery gives the would-
be purchaser no rights in said property except those of a creditor. The bill of sale in the case at
bar could have no effect against a person dealing with the property upon the faith of
appearances. It is evident that the bill of sale was in no sense a conditional sale of property.
Possession of the property in suit was not taken at any time by the plaintiff. The defendant Macke
& Chandlre, having purchased the property at an execution sale, property conducted, obtained
a good title to the property in question as against the plaintiff in this case.
 61.) MARIANO GONZALES ET AL., petitioners-appellants vs. ALEJANDRO
ROJAS,respondent-appellee
G.R. No. 5449
March 22, 1910

Facts:

The subject land of fishery belonged to the sisters Juliana Samonte and Atanasia Samonte,
during their lifetime, who are said to have inherited it from their grandfather, Jose Samonte.
These sisters leased the property to Mamerto Siaoson under a contract for 12 years. The first sale
was made by the Juliana Samonte to Alejandro Rojas, on February 2, 1900. Juliana Samonte died
on March 10 of the same year. From March 21, 1895, to the same date of 1907, Mamerto Siaoson
was entitled to the possession and lease of the fishery. For this reason, Juliana Samonte, on
February 24, 1900, said that the lease still had six years to run. Juliana Samonte and Alejandro
Rojas expressly stipulated, in the document of contract, Exhibit No. 1, that as soon as the said six
years of the lease should have expired "and this land is returned to us — Juliana’s words-
immediately and without delay we will deliver the same to this married couple. On November
14, 1907, the delivery of this land had not yet been made to Alejandro Rojas; hence, by means of
a notarial proceeding, the latter demanded of two sons of Juliana Samonte, Brigido and Matias
Villanueva, the said delivery.

ISSUE:
Whether or not the sale made by Juliana Samonte to Alejandro Rojas in 1900 remained
in a state of dependency on the completion of the contract and was not consummated.
HELD:
Yes. Article 1462 of the Civil Code provides that, a thing sold shall be considered as
delivered when it is placed in the hands of the vendee. When the sale is made by means of a
public instrument, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if in said instrument the contrary does not appear or may be clearly
inferred. No actual delivery was made of the possession of the reality in question. There was no
public instrument, the execution of which could have constituted a form of delivery of the thing
sold. On the contrary, from the instrument executed, which is only a private one, it clearly
appears that the delivery of the fishery was postponed to a fixed date.
Juliana Samonte’s heirs, having no knowledge of this obligation and making the fishery
materially a part of the inheritance left by their mother, conveyed the property that had been
held by her and which had been transferred to her successors in interests, without any complaint
from a third party. It must be concluded that the sales effected by the heirs of Juliana Samonte
to the petitioners were true, valid, and efficacious.
62.)WALTER EASTON, plaintiff-appellee, VS E. DIAZ & Co., defendants-appellants
32 Phil 631
November 9,1915

Facts:
This is an appeal by bill of exceptions, filed by counsel for the defendant E. Diaz and Company,
from a judgment of March 10, 1914, in which the Honorable P. M. Moir, judge, held that the
alambique, or ilang-ilang still, in litigation belongs to the plaintiff, made final the writ of
preliminary injunction issued on October 24, 1913, by which the defendants were restrained
from selling the said still at public auction and the sheriff was ordered to return it to the plaintiff,
dismissed the plaintiff's action for recovery of damages, as well as the counterclaims of the
defendant E. Diaz and Company for damages, and sentenced the latter to pay the costs of the
proceedings. The claim against the sheriff was dismissed.

Issue: The question now submitted to us on appeal involves the specific point as to who was the
owner of the ilang-ilang still which, on October 22, 1913, at the instance of E. Diaz & Co., was
attached as belonging to Jose Parlade.

Held: In conclusion, it appears then from the record in this case that the still attached against
Jose Parlade at the instance of E. Diaz & Co. is the exclusive property of the debtor and that the
sale said to have been made by Parlade to the plaintiff, Walter Easton, was simulated and made
long after the attachment of the said still and for the purpose of preventing its sale and the
payment of the sum which Parlade owed to E. Diaz & Co.
For the foregoing reasons the judgment appealed from is reversed in so far as it holds that the
said still is the property of the plaintiff Easton, as it makes final the injunction issued on October
24, 1913, and as it orders the costs to be taxed against the defendant E. Diaz & Co. The latter
company is absolved from the complaint, and the still in question is hereby held to be the
property of Jose Parlade; we lift and dissolve the said injunction, and affirm the dismissals
contained in the judgment appealed from on the grounds therein set forth, without special
finding as to the costs of both instances. So ordered.
63.) OCEJO, PEREZ & CO., plaintiff-appellants VS INTERNATIONAL BANK
37 PHIL 631
February 14,1918

Facts:
On March, 1914, Chua Teng Chong gave a promissory note to the International Banking
corporation in exchange for Php 20k. 5000 piculs of sugar, located in a warehouse in Calle
Toneleros, was out up as security for the note. It seema that at the end of March, Ocejo, Perez
and Co. entered into contract with Chua Teng Chong for the sale of some sugar. The sugar was
brought to Manila in the month of April, and 5000 piculs were delivered by to Chua Teng Chong
where upon it was stored in the warehouse at No.119, Muelle de la Industria. The next day,
petitioners attempted to collect the purchse price of the sugar, but the buyer refused to make
payment. In the written contract between them, nothing was said concerning the time and place
for payment.

Issues:
a) Did title to the sugar pass to the buyer upon its delivery to him?
b) Assuming to pay that the title passed to the buyer, did his failure to pay the purchase price
authorize the seller to rescind the sale?
c) Was the commencement of a replevin suit by the seller equivalent to the rescission of the
sale?

Held: The obligation of the seller to make delivery of the thing sold was not subject to the
condition that the buyer was to pay the price before delivery. The sugar was delivered to the
buyer on April 16, 1914. The seller delivered it into the buyer’s warehouse, leaving it entirely
subject to his control. Article 1462 of the Civil Code provides that the thing sold is deemed to be
delivered “ when it passes into the possession and control of the buyer.
 64.) PEDRO ROMAN, plaintiff-appellant, vs. ANDRES GRIMALT, defendant-
appellant
6 Phil 96
April 11,1906

Facts:

Pedro Roman, the owner of the schooner Sta. Maria and Andres Grimalt had been negotiating
for several days for the purchase of the schooner. They agreed upon the sale of the vessel for the
sum of P1500 payable on three installments, provided the title papers to the vessel were in
proper form. The sale was not perfected and the purchaser did not consent to the execution of
the deed of transfer for the reason that the title of the vessel was in the name of one Paulina
Giron and not in the name of Pedro Roman. Roman promised however, to perfect his title to the
vessel but he failed to do so. The vessel was sunk in the bay in the afternoon of June 25, 1904
during a severe storm and before the owner had complied with the condition exacted by the
proposed purchaser. On the 30th of June 1904, plaintiff demanded for the payment of the
purchase price of the vessel in the manner stipulated and defendant failed to pay.

Issue:
Whether there was a perfected contract of sale and who will bear the loss.

Held:
There was no perfected contract of sale because the purchase of which had not been concluded.
The conversations had between the parties and the letter written by defendant to plaintiff did
not establish a contract sufficient in itself to create reciprocal rights between the parties.
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 the 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 contract of sale.
65.) PRISCA NAVAL, ET. AL.,plaintiffs-appellees, vs. FRANCISCO ENRIQUEZ, ET. AL.,
defendants-appellants
3 Phil 669
April 12, 1904

Facts:

Don Jorge Enriquez as heirs of his deceased parents (Don Antonio Enriquez and Dona Ciriaca
Villanueva , whose estates were at that time still undistributed, by public document sold to Don
Victoriano Reyes his interest in both estates. The deed was executed before Don Enrique Barrera,
a notary public. Another instrument was executed before the same notary public where Don
Victoriano Reyes sold to Dona Carmen the interest in the estates which he had acquired from
Don Jorge Enriquez. The purchaser, Dona Carmen was the wife of Don Francisco Enriquez
(defendant) who was the executor and administrator of the testamentary estate of Don Antonio
Enriquez at the time the two deeds were executed. The plaintiffs demand that these deeds be
declared null and void, as well as the contracts evidenced thereby. Apparently solely so far as
they refer to the estate of Don Antonio Enriquez, no mention being made of the estate of Dona
Ciriaca Villanueva in the complaint.
The plaintiffs contended that the deeds in question were consummated and were executed for
the purpose of deceiving and defrauding Don Jorge Enriquez and his family. The conclusion of the
plaintiffs was that as such executor Don Francisco was unable to acquire by his own act or that
of any intermediary the said hereditary portion of Don Jorge under the provisions of Article 1459,
paragraph 3 of the Civil Code.

Issue:
Whether or not Don Francisco Enriquez as executor and administrator of estate of Don Antonio
is incapacitated to acquire by purchase the hereditary right of Jorge Enriquez.
Held:

No. The thing sold in the two contracts of sale mentioned in the complaint was the hereditary
right of Don Jorge Enriquez, which evidently was not in charge of the executor Don Francisco
Enriquez. Executors, even in those cases in which they administer the property pertaining to
estate, do not administer the hereditary rights of any heirs. This right is vested entirely in the
heirs who retain it or transmit it in whole or in part, as they may deem convenient, to some other
person absolutely, whatever powers the testator may have desired to confer upon him, do not
and cannot under any circumstances in the slightest degree limit the power of the heirs to
dispose of the said right at will. That right does not form part of the property delivered to the
executor for administration. Further, Article 1459 of the Civil Code has no application to the
present case. The prohibition which Article 145, paragraph 3 imposes upon executors refers to
the property confided to their care and does not extend, therefore, to property not falling within
this class. Consequently, even upon the supposition that the executor (Don Francisco) was the
person who really acquired the hereditary rights of Don Jorge, the sale in question would not for
that reason be invalid, the executor not being legally incapacitated of acquiring the hereditary
right in question as the plaintiffs erroneously suppose.
The action brought by the plaintiffs is devoid of foundation.
 66.) SERAFIN UY PIAOCO,plaintiff-appellant, vs. JOSE MCMICKING,ET.AL.,
defendants-appellees
10 phil 286
March 5, 1908

Facts:
Each of the defendants Antonio R. Bayan Ju, Yap Qui Chin and Khy Pack, in the course of certain
proceedings instituted by them against one Uy Chiam Ling, procured the issuance of orders for
the attachments of his property. In pursuance of these orders, attachments were levied by the
defendant Jose McMicking, sheriff of the city of Manila, on or about the 26th, 28th and 29th of
January, 1907, on certain certificates of stock of the "Yuen Sheng Exchange, Trading and Loan
Company, of Manila," alleged to be the property of Uy Chiam Ling, and which were found in the
possession of the manager of that company, held by him as security for a certain debt due the
company by Uy Chiam Liong. The plaintiff alleges that he is the owner of the stock thus attached,
having purchased it of Uy Chiam Liong on the 17th of March, 1906, and prays that the
attachments be dissolved and that the stock be restored to its legitimate owner. It was found
that the sale has not yet been recorded in the books.

Issue: Whether or not the sale is valid.

Held: As between the seller and the buyer, the sale is perfectly valid since the seller was the
owner of the corporate shares. However, as between the corporation and the buyer, the latter
has acquired only an equitable title which may eventually ripen into a legal title after he presents
himself to the corporation and performs the acts required by its charter or by-laws, and which
are needed to effectuate the transfer.
67.) JUAN BUENCAMINO, ET AL.petitioners-appellees,vs. NICASIA VICEO, ET
AL.,respondents-appellants
G.R. No. 4929
March 5, 1909

Facts:
First. That on or about the 17th day of April, 1903, in the city of Chicago, in the State of Illinois,
in the United States, the Defendant, through a representative of the Insular Government of the
Philippine Islands, entered into a contract for a period of two years with the Plaintiff, by which
the Defendant was to receive a salary of 1,200 dollars per year as a stenographer in the service
of the said Plaintiff, and in addition thereto was to be paid in advance the expenses incurred in
traveling from the said city of Chicago to Manila, and one-half salary during said period of travel.
Second. Said contract contained a provision that in case of a violation of its terms on the part of
the Defendant, he should become liable to the Plaintiff for the amount expended by the
Government by way of expenses incurred in traveling from Chicago to Manila and the one-half
salary paid during such period. Third. The Defendant entered upon the performance of his
contract upon the 30th day of April, 1903, and was paid half-salary from the date until June 4,
1903, the date of his arrival in the Philippine Islands. Fourth. That on the 11th day of February,
1904, the Defendant left the service of the Plaintiff and refused to make a further compliance
with the terms of the contract. Fifth. On the 3d day of December, 1904, the Plaintiff commenced
an action in the Court of First Instance of the city of Manila to recover from the Defendant the
sum of 269. 23 dollars, which amount the Plaintiff claimed had been paid to the Defendant as
expenses incurred in traveling from Chicago to Manila, and as half-salary for the period consumed
in travel. Sixth. It was expressly agreed between the parties to said contract that Laws No. 80
and No. 224 should constitute a part of said contract. To the complaint of the Plaintiff the
Defendant filed a general denial and a special defense, alleging in his special defense that the
Government of the Philippine Islands had amended Laws No. 80 and No. 224 and had thereby
materially altered the said contract, and also that he was a minor at the time the contract was
entered into and was therefore not responsible under the law. To the special defense of the
Defendant the Plaintiff filed a demurrer, which demurrer the court sustained.
Issues:
1. Whether or not the court erred in sustaining Plaintiff’s demurrer to Defendant’s special
defenses.
2. The court erred in rendering judgment against the Defendant on the facts.

Held:
With reference to the above assignments of error, it may be said that the mere fact that the
legislative department of the Government of the Philippine Islands had amended said Acts No.
80 and No. 224 by Acts No. 643 and No. 1040 did not have the effect of changing the terms of
the contract made between the Plaintiff and the Defendant. The legislative department of the
Government is expressly prohibited by section 5 of the Act of Congress of 1902 from altering or
changing the terms of a contract. The right which the Defendant had acquired by virtue of Acts
No. 80 and No. 224 had not been changed in any respect by the fact that said laws had been
amended. These acts, constituting the terms of the contract, still constituted a part of said
contract and were enforceable in favor of the Defendant. The Defendant alleged in his special
defense that he was a minor and therefore the contract could not be enforced against him. The
record discloses that, at the time the contract was entered into in the State of Illinois, he was an
adult under the laws of that State and had full authority to contract. The Plaintiff [the Defendant]
claims that, by reason of the fact that, under that laws of the Philippine Islands at the time the
contract was made, made persons in said Islands did not reach their majority until they had
attained the age of 23 years, he was not liable under said contract, contending that the laws of
the Philippine Islands governed. It is not disputed — upon the contrary the fact is admitted —
that at the time and place of the making of the contract in question the Defendant had full
capacity to make the same. No rule is better settled in law than that matters bearing upon the
execution, interpretation and validity of a contract are determined b the law of the place where
the contract is made. (Scudder vs. Union National Bank, 91 U. S., 406.) Matters connected with
its performance are regulated by the law prevailing at the place of performance. Matters
respecting a remedy, such as the bringing of suit, admissibility of evidence, and statutes of
limitations, depend upon the law of the place where the suit is brought. (Idem.) The Defendant’s
claim that he was an adult when he left Chicago but was a minor when he arrived at Manila; that
he was an adult a the time he made the contract but was a minor at the time the Plaintiff
attempted to enforce the contract, more than a year later, is not tenable. Our conclusions with
reference to the first above assignment of error are, therefore. First. That the amendments to
Acts No. 80 and No. 224 in no way affected the terms of the contract in question; and Second.
The Plaintiff [Defendant] being fully qualified to enter into the contract at the place and time the
contract was made, he cannot plead infancy as a defense at the place where the contract is being
enforced. We believe that the above conclusions also dispose of the second assignment of error.
For the reasons above stated, the judgment of the lower court is affirmed, with costs.
68.) YAP UNKI, plaintiff-appellee, vs. CHUA JAMCO,defendant-appellant
G.R. No. L-5202
December 16, 1909

Facts:

On November 10, 1906, plaintiff and defendant executed a written agreement whereby the
business partnership then existing between them was dissolved, and plaintiff sold and defendant
bought plaintiff’s interest in the partnership for the sum of P1,728.94, payable in three
installments, as set out in the agreement. The amended complaint alleged that the total
indebtedness thus contracted by the defendant had become due and payable and had not been
paid in whole or in part at the time when that complaint was filed. Judgment was rendered in the
court below in favor of the plaintiff and against the defendant for P1,728.94 together with
interest upon the various installments from the date when they fell due. From this judgment
defendant appealed, and the case is now before us on his bill of exceptions.

Issue: Whether or not all of the deferred payments had become due and payable when the
original complaint was filed in this action?

Held: Appellant having made no assignment of error on this ground we are not called upon to
review the action of the court in this regard. The judgment already rendered will be modified or
not in accordance with defendant’s success or failure in establishing the damages alleged in this
counterclaim.
 69.) JOSE FLORENDO,plaintiff-appelee, vs. EUSTAQUIO P. FOZ, ET.
AL.,defendantsappellants
20 Phil 388
March 19, 1914

Facts: Eustaquio P. Foz executed in Manila a contract, ratified before a notary, obligating
himself to deliver his house and lot for a consideration of P6,000 to Jose Florendo. The latter
already paid P2, 000 of the purchase prize. In the contract, plaintiff fixed the period of the
payment of the prize wherein plaintiff has to pay the remainder of the prize when he goes to
Vigan or if not to pay to the Church wherein he has a debt and to obtain the title of the subject
matter of the sale. Defendant went to Vigan, plaintiff tendered payment of the remainder of the
prize, however, the former refused, saying that the true prize of the sale recorded in the other
instrument was P10,000. As defendant refused payment, plaintiff filed a suit to comply with the
contract of absolute purchase and sale, by delivering to the plaintiff the property sold.

Issue: WON the plaintiff can compel the defendant to deliver his propertypursuant to the
notarized contract.

Held: Yes. The contract is valid and effective. From the validity and force of the contract is
derived the obligation on the part of the vendor to deliver the thing sold. Pursuant to the
contract, it can’t be found that the payment of the prize is a precondition for the delivery of the
thing. There was no need, therefore, of assenton the part of the plaintiff to pay the P4, 000, the
remainder of the price, in order to oblige the defendant unconditionally to deliver the property
sold. With still more reason should the defendant be compelled to effect the material delivery of
the property, since, after the lapse of the period for the delivery of the price, the plaintiff
hastened to pay it and, on account of the defendant's refusal to receive it, duly deposited it, in
order to avoid the consequences that might issue from delinquency in the payment of a sum
entrusted to him for a fixed period. It is the material delivery of the property sold which the
defendant must make in compliance with the contract, inasmuch as the formal delivery de jure
was made, according to the provisions of article 1462, 2nd paragraph, of the same code.
70.) DOMICIANO GONZAGA, plaintiff-appellee vs ANGEL JAVELLANA,
defendant-appellant
G.R. No. 6843 September 3, 1912

Facts:
Angel Javellana won a suit against Jose Lim and attached the lot of the latter for the satisfaction
of the judgement. A portion of which containing an area of 449.30 sq.m. is now the subject of
the litigation. This was already sold to one Domiciano Gonzaga in 1905 while the sale to Javellana
was on 1910. The sale to Gonzaga was recorded in 1909 in the Property Registry in Iloilo City. In
1910. Gonzaga brought a suit against Javellana for the ownership of the said parcel of land. The
latter contended that the sale made to Gonzaga was fictitious for lack of consideration as attested
by witnesses. The trial court ruled in favor of the plaintiff. The defendant appealed from that
judgment and forwarded his appeal to this court through the means of a bill of exceptions.
Issue:
Whether or not the contract of sale between Lim and Gonzaga a valid one.
Held:
There was a valid contract of sale between Lim and Gonzaga since all the elements for its
perfection has been complied with. the deed made in 1905 by Jose Lim to this plaintiff was made
for a valuable consideration. This is shown by the deed of itself, and the testimony of the more
reliable witness. The other facts alleged as proof of the simulation do not, either singly or jointly,
destroy the truth of the first contract of sale. The agreement of the payment of taxes of the
vendor even after the sale does not destroy the validity of the perfected contract of sale. As there
was not sufficient evidence of the simulation of the contract of sale on which the complaint is
based, the court right concluded that the sale was true, valid and effective one.
 74.) FELIX DANGUILAN, petitioner, VS INTERMEDIATE APPELLATE
COURT, ET. AL., respondents
168 SCRA 22
November 28, 1988
Facts:
On January 29, 1962, the Apolonia Melad, assisted by her husband, filed a complaint against the
petitioner in the then Court of First Instance of Cagayan for recovery of a farm lot and a
residential lot which she claimed she had purchased from Domingo Melad in 1943 which is now
possessed by Felix Danguilan. At the trial, the plaintiff presented a deed of sale dated December
4, 1943, purportedly signed by Domingo Melad and duly notarized, which conveyed the said
properties to her for the sum of P80.00. She claimed to have stayed with Domingo, being an
illegitimate child of the latter until his death in 1945. She moved out of the farm only when in
1946 Felix Danguilan approached her and asked permission to cultivate the land and to stay
therein. She had agreed on condition that he would deliver part of the harvest from the farm to
her, which he did from that year to 1958. For his part, the defendant testified that he was the
husband of Isidra Melad, Domingo’s niece. The latter took them to their home and in 1941 and
1943, two separate documents were executed to effect the conveyance of the farm lot and the
residential lot respectively on condition that they will take care of Domingo until his death. The
Trial Court ruled in favor of Danguilan deciding mainly based on possession. The decision
concluded that where there was doubt as to the ownership of the property, the presumption was
in favor of the one actually occupying the same, which in this case was the defendant. The issue
was raised for review to the IAC who ruled in favor of Apolonia Melad and held that the
documents for the conveyance of the two parcels of land to the petitioner are null and void
because it is in substance a donation so they should have been executed in a public instrument.
Issue:
Whether or not the transfer of land from Domingo to Danguilan is considered sale.
Held:
Yes, the conveyance of the two parcels of land is considered sale. It was alleged and not denied
that he died when he was almost one hundred years old, which would mean that the petitioner
farmed the land practically by himself and so provided for the donee (and his wife) during the
latter part of Domingo Melad's life. We may assume that there was a fair exchange between the
donor and the donee that made the transaction an onerous donation. Therefore the transfer was
not a donation and Daguilan being the possessor of the land is considered the owner of the same.
75.) ALLIANCE TOBACCO CORPORATION, INC. vs PHILIPPINE VIRGINIA
TOBACCO ADMINISTRATION, FARMER'S 'VIRGlNlA TOBACCO REDRYING
COMPANY, INC. and INTERMEDIATE APPELLATE COURT
G.R. No. L-66944 November 13, 1989

Facts:
The PVTA a government corporation created under Republic Act No. 2265 to promote the
tobacco industry, entered into a contract of procuring, redrying and servicing with the FVTR for
the1963 tobacco trading operation.1 In June of that year, the PVTA also entered into a
merchandising loan agreement with the petitioner, a duly incorporated and authorized tobacco
trading entity, whereby the PVTA agreed to lend P25,500 to the petitioner for the purchase of
flue-cured Virginia tobacco from bona fide Virginia tobacco former-producers. 2The following
month, petitioner shipped to the FVTR 96 bales of tobacco weighing 4,800 kilos and 167 bales
weighing 8,350 kilos. Unfortunately, the remaining un-graded and un-weighed 174 bales with a
total value of P28,382 were lost while they were in the possession of the FVTR Having learned of
such loss in 1965, petitioner demanded for its value and the application of the same to its
merchandising loan with PVTA but both the latter and the FVTR refused to heed said demands.
4Consequently, petitioner filed in the then Court of First Instance of La Union a complaint against
PVTA and FVTR praying that the two defendants be ordered to pay it P4,443 representing the
value of the 89 bales which were weighed, graded and accepted by the defendants, P28,382.00
representing the value of the lost bales of tobacco and/or that the said amount be applied to its
loan with PVTA and P4,000 as attorney's fees and litigation expensesThe trial court’s decision
were order for payment of the defendant to the plaintiff of P9,323.11 plus interest and 1000
attorney’s fees. Petitioner appealed to the then Intermediate Appellate Court which, in its
decision of March 20, 1984, 11 affirmedin toto the lower court's decisionThe plaintiff then
brought the case to the Supreme Court for for review on certiorari.
Issue:
Whether or not there was a perfected contract of sale between the parties so as to hold the
defendants liable for the loss.
Held:
The Civil Code provides that ownerhip of the thing sold shall be transferred to the vendee upon
the actual or constructive delivery thereof. 19 There is delivery when the thing sold is placed in
the control and possession of the vendee. Equity and fair dealing, the anchor of said case, must
once more prevail. Since PVTA had virtual control over the lost tobacco bales, delivery thereof to
the FVTR should also be considered effective delivery to the PVTA.
 76.) PHILIPPINE SUBURBAN DEVELOPMENTCORPORATION,petitioner, vs.
AUDITOR GENERAL, respondent
63 SCRA 397
April 18,1975

Facts:
On June 8, 1960, the President of the Philippines, approved in principle the acquisition by the
People's Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate
in Sta. Maria, Bulacan for relocating the squatters who desire to settle north of Manila, and of
another area for those who desire to settle south of Manila. The project was to be financed
through the flotation of bonds under the charter of the PHHC in the amount of P4.5 million, the
same to be absorbed by the Government Service Insurance System.
On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 authorizing the
purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter.
On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000
and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the
acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq.
meter.
On December 29,1960, after an exchange of communications, Petitioner Philippine Suburban
Development Corporation, as owner of the unoccupied portion of the Sapang Palay Estate, and
the PHHC, entered into a contract embodied in a public instrument entitled "Deed of Absolute
Sale". This was not registered in the Office of the Register of Deeds until March 14, 1961, due to
the fact, petitioner claims, that the PHHC could not at once advance the money needed for
registration expenses.
In the meantime, the Auditor General, to whom a copy of the contract had been submitted for
approval in conformity with Executive Order No. 290, expressed objections thereto and
requested a re-examination of the contract, in view of the fact that from 1948 to December 20,
1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning December 21,
1960 in the greatly increased amount of P4,898,110.00.
It appears that as early as the first week of June, 1960, prior to the signing of the deed by the
parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable
the said PHHC to proceed immediately with the construction of roads in the new settlement and
to resettle the squatters and flood victims in Manila.
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the
amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban
Development Corporation. Said amount represented the realty tax due on the property involved
for the calendar year 1961.
Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial
Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of
Finance Dominador Aytona to order a refund of the amount so paid.
Petitioner claimed that it ceased to be the owner of the land in question upon the execution of
the Deed of Absolute Sale on December 29, 1960. It is now claimed in this appeal that the Auditor
General erred in disallowing the refund of the real estate tax in the amount of P30,460.90
because aside from the presumptive delivery of the property by the execution of the deed of sale
on December 29, 1960, the possession of the property was actually delivered to the vendee prior
to the sale, and, therefore, by the transmission of ownership to the vendee, petitioner has ceased
to be the owner of the property involved, and, consequently, under no obligation to pay the real
property tax for the year 1961.
Respondent, however, argues that the presumptive delivery of the property under Article 1498
of the Civil Code does not apply because of the requirement in the contract that the sale shall
first be approved by the Auditor General, pursuant to the Executive Order.

Issue:

Whether or not there was already a valid transfer of ownership between the parties.
Held:
Considering the aforementioned approval and authorization by the President of the Philippines
of the specific transaction in question, and the fact that the contract here involved — which is
for a special purpose to meet a special situation — was entered into precisely to implement the
Presidential directive, the prior approval by the Auditor General envisioned by Administrative
Order No. 290, dated February 3, 1959, would therefore, not be necessary.
Under the civil law delivery (tradition) as a mode of transmission of ownership, may be actual
(real tradition) or constructive (constructive tradition). When the sale of real property is made
in a public instrument, the execution thereof is equivalent to the delivery of the thing object of
the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In other
words, there is symbolic delivery of the property subject of the sale by the execution of the public
instrument, unless from the express terms of the instrument, or by clear inference therefrom,
this was not the intention of the parties.
In the case at bar, there is no question that the vendor had actually placed the vendee in
possession and control over the thing sold, even before the date of the sale. The condition that
petitioner should first register the deed of sale and secure a new title in the name of the vendee
before the latter shall pay the balance of the purchase price, did not preclude the transmission
of ownership. In the absence of an express stipulation to the contrary, the payment of the
purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but
title passes by the delivery of the goods.
We fail to see the merit in respondent's insistence that, although possession was transferred to
the vendee and the deed of sale was executed in a public instrument on December 29, l960, the
vendor still remains as owner of the property until the deed of sale is actually registered with the
Office of the Register of Deeds, because the land sold is registered under the Torrens System. In
a long line of cases already decided by this Court, the constant doctrine has been that, as between
the parties to a contract of sale, registration is not necessary to make it valid and effective, for
actual notice is equivalent to registration.
77.) JOSEPH AND SONS, petitioner, vs. COURT OF APPEALS, ET. AL., respondents
143 SCRA 663
August 29,1986

Facts:
Respondent Rodolfo T. Lat purchased the lot in question from the Makati Development
Corporation. One condition embodied in the Deed of Absolute Sale was that the lot could not be
sold, transferred, or conveyed, and it could not be registeres and the title would not be released
until after the construction of a house thereon was completed, in spite of his having fully paid for
the lot.
On July 24, 1965, respondent Lat sold the lot to respondent Paz Banaad Laurel for P38,830.00.
Respondent spouses Laurel constructed a residential house on the lot.
The Laurels advertised the house and lot for sale. Petitioner's President and Secretary, Alfredo
Joseph and his daughter Alegria Neri, went to see the Laurels at the latter's residence and
negotiated for the purchase of the property.
Having agreed on the terms and conditions of the sale, the parties executed a Deed of Conditional
Sale on April 23, 1966. Because the house and lot, while already owned by the Laurels, were still
registered in the name of respondent Lat, the deed was signed with the latter as vendor and the
Laurels as witnesses.
The consideration for the conditional sale was P125,000.00, of which P20,000.00 was payable
upon the execution of the deed and the balance payable in six equal installments. Petitioner
failed to pay the second and subsequent installments on time.
Because of its difficulties in paying its obligations and to enable it to pay the Laurels in full,
petitioner through Mrs. Alegria Neri proposed to the Laurels that a loan be secured from a bank
using the property as collateral. The proceeds of the loan would be applied to the unpaid
installments already due while petitioner would assume the payment of the bank loan.
Since the title to the property was still in respondent Lat's name, the bank advised the parties to
have the title transferred to respondent Laurel. A deed of absolute sale was executed and
confirmation of the sale was executed by Rodolfo T. Lat and TCT No. 176760 was issued in Paz
Banaad's name.
The Laurels mortgaged the disputed property to the bank to secure a P56,000.00 loan. Out of the
P54,217.47 net proceeds of the bank loan, P48,145.12 was applied to petitioner's unpaid
installments already past due, while the balance of P6,063.35 was turned over to it.
Petitioner failed to pay the P17,500.00 final installment under the deed of conditional sale. It also
failed to pay any of the loan amortizations due to the bank. To stave off foreclosure, the Laurels
paid for bank loan, interests and expenses, including the P6,083.35 earlier given to petitioner, in
the total sum of P63,452.22.
On July 25, 1967 in view of petitioner's refusal to surrender the house and lot to them, the Laurels
filed a complaint for ejectment against the petitioner. The court decided the case in favor of the
Laurels. The record is not clear as to the present status of this case. On December 18, 1967,
petitioner filed a complaint for annulment of title and of contract, with damages and preliminary
injunction. The Laurels filed a counterclaim for the cancellation and termination of the Deed of
Conditional Sale; for the recovery of possession and payment of rentals; and for damages

Issues:
(1) The Court of Appeals had decided questions of substance in a way probably not in accord
with law or with applicable decisions of the Supreme Court.
(2) The Court of Appeals in its questioned decision sanctioned departures by the lower court from
the accepted and usual course of procedure as to cause for an exercise of the power of
supervision.
Held:
The alleged errors raised in the petition were correctly adjudged unmeritorious by the Court of
Appeals.
Petitioner argues that TCT No. 17670 in the name of Paz Banaad Laurel was only a token title to
enable the Laurels to obtain a loan from the bank based upon a simulated contract of sale and
that the "Agreement to Purchase and to Sell" was not really a deed of sale in favor of Paz Banaad
laurel. This argument is without merit. In the "Agreement to Purchase and to Sell", respondent
Paz Banaad Laurel assumed the obligation of constructing a house on the lot purchased by her
and respondent Lat bound himself to execute a Deed of Absolute Sale in favor of the vendee as

soon as the house was constructed and the Transfer Certificate of Title of the lot was delivered
to him.
Petitioner further argues that inasmuch as respondent Lat was the registered owner of the
property when the Deed of Conditional Sale was executed in its favor, respondent Lat's
ownership was conclusive and indefeasible, and the Laurels could not claim that they were the
owners thereof. This argument is untenable because petitioner was fully aware of the fact that
the property belonged to the Laurels. However, since the property was still registered in the
name of respondent Lat, the parties agreed that the Deed of Conditional Sale would be signed by
Lat as vendor and the Laurels as witnesses.
In view of the petitioner's failure to pay the amortizations on the loan as well as the final
installment under the Deed of Conditional Sale, the Laurels had the right to cancel and terminate
the same. Petitioner, however, contends that the Laurels did not comply with Article 1592 of the
Civil Code of the Philippines. This contention is without merit. Article 1592 (formerly Article 1504)
of the Civil Code of the Philippines is not applicable to a contract to sell or a deed of conditional
sale as in the case at bar.
Finally, petitioner claims that because the property was delivered to it after the execution of the
Deed of Conditional Sale, the ownership thereof was transferred to it in accordance with Articles
1477 and 1496 of the Civil Code of the Philippines. This claim is without basis. Petitioner fails to
distinguish between a contract of sale and a contract to sell, between a deed of absolute sale and
a deed of conditional sale. In a contract of sale or in a deed of absolute sale, ownership is
transferred simultaneously with the delivery of the real property sold; whereas in a contract to
sell or in a deed of conditional sale, ownership is transferred after the full payment of the
installments of the purchase price or the fulfillment of the condition and the execution of a
definite or absolute deed of sale. In the case at bar, ownership could have been transferred to
petitioner only after it had fully paid the installments of the purchase price and a deed of absolute
sale had been executed in its favor.
WHEREFORE, the petition is hereby dismissed for lack of merit and the decision appealed from is
affirmed, with costs against petitioner
 78.) GERONIMO PANIZALES, ET. AL., plaintiffs-appellees, vs.VALERIO PALMARES,
defendant-appellant
47 SCRA 376
October 31, 1972

Facts:
The controversy in this appeal from a lower court decision is between plaintiff, now appellee,
Geronimo Panizales, who would base his claim to the disputed lot as purchaser in a private sale
on March 19, 1958 and defendant Valerio Palmares, the sole appellant, who bought the same at
the public auction sale on March 16, 1961 by virtue of a writ of execution issued at the instance
of defendant Valentin Espino, the judgment creditor who was the prevailing party in a suit against
the original owner thereof, a certain Amado Panizales. The lower court decision, now on appeal,
was in favor of the plaintiff Geronimo Panizales, by virtue of the private sale antedating the
amicable settlement on December 3, 1958 on which the decision, thereafter resulting in an order
of execution, was based.

Issue:
Whether or not such levy is valid.

Held:
From the stipulation of facts, it is undisputed that as far back as March 19, 1958, the lot in
question had been disposed of. It ceased therefore as of that date to form part of the property
of the judgment debtor. There is a strong intimation in the brief of appellant that such a sale
could be objected to as having been made in fraud of creditors. If such indeed were the case,
defendants ought to have introduced evidence to that effect. Good faith is presumed. After the
express admission that such a transaction did take place, although there was no categorical proof
that the judgment creditor was aware of such a sale, it was not unreasonable for the lower court
to consider that the property, now the object of the suit, could not be levied upon.
The ruling in Potenciano v. Dinero, the opinion being penned by Justice Alex Reyes is illuminating.
"Under the jurisprudence established by this Court a bona fide sale and transfer of real property,
although not recorded, is good and valid against a subsequent attempt to levy execution on the
same property by a creditor of the vendor." To repeat then, the right of plaintiff Geronimo
Panizales to the disputed lot in question must be recognized. In thus ruling, the lower court
committed no error.

It is of no moment, therefore, that the other principal error assigned to the effect that the lower
court was mistaken in its holding that the writ of execution was invalid as it did not conform to
the judgment to be executed in Civil Case No. 4044, has the impress of plausibility. The lower
court certainly failed to appreciate that the money judgment for P800.00 in such a case having
remained unsatisfied, whatever property still belonged to the judgment debtor, Amado
Panizales, could have been levied on. In thus seeking a writ of execution the judgment creditor,
appellant Valentin Espino, was well within his right. What led to the frustration of his efforts, as
shown on the foregoing, was that the disputed lot had been previously sold. It follows then that
an affirmative response to this assignment of error would not help appellants at all. Under the
circumstances, the last error assigned that the judgment should have not been in favor of plaintiff
Geronimo Panizales is manifestly devoid of merit.

WHEREFORE, the lower court decision of November 23, 1964 is hereby affirmed. With costs
against appellant.
 79.) JOSE B. AZNAR, plaintiff-appellant, vs.RAFAEL YAPDIANGCO, defendant-
appellee; TEODORO SANTOS ,intervenor-appellee
G.R. No. L-18536 March 31, 1965

Facts:
Theodoro Santos advertised in the newspapers the sale of his Ford Fairlane 500. After the
advertisement, a certain de Dios, claiming to be the nephew of Vicente Marella, went to the
residence of Santos and expressed his uncle’s intent to purchase the car. Since Santos wasn't
around, it was Irineo (son of Theodoro) who talked with de Dios. On being informed, Santos
advised his son to see Marella, which the son did. Marella expressed his intention to purchase
the car. A deed of sale was prepared and Irineo was instructed by his father not to part with the
deed and the car without receiving the purchase price from Marella. Upon arriving at the house
of Vicente Marella, he said that his money was short and that he had to borrow from his sister.
Marella then instructed de Dios and Irineo to go the supposed house of the sister to obtain the
money with an unidentified person. He also asked Irineo to leave the deed to have his lawyer
see it. Relying on the good faith of Marella, Irineo did as requested. Upon arriving at the house
of Marella’s supposed to be sister, de Dios and the unidentified person then disappeared
together with the car. Santos reported the incident to the authorities. Thereafter, Marella was
able to sell the land to Aznar. While in possession of the car, police authorities confiscated the
same from him. Aznar filed an action for replevin (to recover the car). Claiming ownership of
the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro
Santos moved and was allowed to intervene by the lower court. Lower court ruled in favor of
Teodoro Santos saying that he has been unlawfully deprived of his car and he retains ownership
of the same.
Issue:

Whether or not the plaintiff-appellant, Jose B. Aznar has a better right to the possession of the
disputed automobile

Held:
Article 559 is applicable in this case and not Article 1506 which was cited by petitioner Aznar
ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been
voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys
them in good faith, for value, and without notice of the seller's defect of title.The contention is
clearly unmeritorious. Under the aforequoted provision, it is essential that the seller should have a
voidable title at least. It is very clearly inapplicable where, as in this case, the seller (Marella) had no title
at all.

Marella did not have a title over the car because it was never delivered to him Vicente Marella sought
ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired ownership or
title to the subject matter thereof only by the delivery or tradition of the car to him.

Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and
transmitted by law, by donation, by testate and intestate succession, and in consequence of certain
contracts, by tradition." As interpreted by this Court in a host of cases, by this provision, ownership is not
transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same.

Delivery vs. Tradition So long as property is not delivered, the ownership over it is not transferred by
contract merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the method of accomplishing the same, the title and the method
of acquiring it being different in our law.

The car in question was never delivered to the vendee by the vendor as to complete or consummate the
transfer of ownership by virtue of the contract It should be recalled that while there was indeed a contract
of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took possession of the
subject matter thereof by stealing the same while it was in the custody of the latter's son.
There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to the
car to the unidentified person who went with him and L. De Dios to the place on Azcarraga where a sister
of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery contemplated by Article
712 of the Civil Code. For then, it would be indisputable that he turned it over to the unidentified
companion only so that he may drive Irineo Santos and De Dios to the said place on Azcarraga and not to
vest the title to the said vehicle to him as agent of Vicente Marella. Article 712 above contemplates that
the act be coupled with the intent of delivering the thing.

Article 559 was applicable in this case (Doctrine of irrevindicability) The lower court was correct in applying
Article 559 of the Civil Code to the case at bar, for under it, the rule is to the effect that if the owner has
lost a thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the
finder, thief or robber, but also from third persons who may have acquired it in good faith from such
finder, thief or robber.

The said article establishes two exceptions to the general rule of irrevindicability, to wit, when the owner
(1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot
retain the thing as against the owner, who may recover it without paying any indemnity, except when the
possessor acquired it in a public sale.

Aznar shall suffer the consequences The common law principle that where one of two innocent persons
must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his
misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is
covered by an express provision of the new Civil Code, specifically Article 559. Between a common law
principle and a statutory provision, the latter must prevail in this jurisdiction.
 80.) LUZON BROKERAGE CO. INC., plaintiff-appellee, vs. MARITIME BUILDING CO.
INC.,defendant-appellant
43 SCRA 93
January 31,1972

Facts:
Myers corp sold land to Maritime. In the agreement, they agreed on an installment plan and that
if Maritime missed a payment, the contract will be annulled and the payments already made will
be forfeited. Maritime failed to pay so Myers annulled the contract and did not return payments.
SC says Myers can do this because under contracts to sell, promisors, in case of failure of the
other party to complete payment, can extrajudicially terminate the contract, refuse conveyance,
and retain installments already received, where such rights are provided.

In Manila, Myers owned 3 parcels of land w/ improvements. Myers then entered into a contract
called a “Deed of Conditional Sale” with Maritime Building. o Myers sold the land for P1million.
o They agreed on the manner of payment (installment, initial payment upon execution of
contract, interest rate) o In the contract it was stipulated that in case of failure of buyer to pay
any of the installments, the contract will be annulled at the option of the seller and all payments
made by the buyer is forfeited.
Later on, the stipulated installment of P10k with 5%interest was amended to the P5k with 5.5%
per annum. o Maritime paid the monthly installments but failed to pay the monthly installment
of March.
VP of Maritime wrote to Pres of Myers requesting for a moratorium on the monthly payment of
the installments because the company was undergoing financial problems. o Myers refused. o
For the months of March, April, and May, Maritime failed to pay and did not heed the demand
of Myers.
Myers wrote Maritime cancelling the “Deed of Conditional Sale” .
Myers demanded return of possession of properties o Held Maritime liable for use and
occupation amounting to P10k per month
In the meantime, Luzon Brokerage was leasing the property from Maritime. Myers demanded
from Luzon the payment of monthly rentals of P10k o Myers also demanded surrender of
property.
While actions and cross claims between Myers and Maritime were happening, the contract
between Maritime and Luzon was extended for 4more years. Turns out, Maritime’s suspension
of its payments to Myers corp arose from a previous event: An award of back wages made by the
Court of Industrial Relations in favor of Luzon Labor Union (employees employed by Luzon).
FH Myers was a major stockholder of Luzon Brokerage. FH Myers promised to indemnify
Schedler (who controlled Maritime) when Shedler purchased FH Myers’s stock in Luzon
Brokerage company. (This indemnification is for the award of back wages by the CIR) o Schedler
claims that after FH Myers estates closed, he was notified that the indemnity on the Labor Union
case will not be honored anymore. o And so, Schedler advised Myers corp that Maritime is
withholding payments to Myers corp in order to offset the liability when Myersheirs failed to
honor the indemnity agreement. Trial Court ruled Maritime is in breach of contract.

Issues:
1.) Whether or not there has been a breach of contract.
2.) Whether or not Myers can terminate the contract extrajudicially.

Held:
Yes. Failure to pay monthly installments constitutes a breach of contract. Default was not made
in good faith. The letter to Myers corp means that the non-payment of installments was
deliberately made to coerce Myers crp into answering for an alleged promise of the dead FH
Myers. Whatever obligation FH Myers had assumed is not an obligation of Myers corp. No
proof that board of Nyers corp agreed to assume responsibility to debts of FH Myers and heirs.
Schaedler allowed the estate proceedings of FH Myers to close without providing liability. By
the balance (of payment) in the Deed of Conditional Sale, Maritime was attempting to burden
the Myers corp with an uncollectible debt, since enforcement against FH Myers estate was
already barred. Maritime acted in bad faith. Maritime’s contract with Myers is not the ordinary
sale contemplated in NCC 1592 (transferring ownership simultaneously with delivery).
 81.) ANTONIO ENRIQUEZ DELA CAVADA, plaintiff-appellee vs. ANTONIO DIAZ,
defendant-appellant
37 PHIL 982
April 01, 1918

Facts:
Plaintiff Antonio dela Cavada and defendant Antonio Diaz made a Contract of Option where the
latter promised to sell to the former his Hacienda de Pitogo located in Tayabas together with its
coconut and nipa palm trees for 30 and 70 thousand pesos respectively.
The contract provides that Dela Cavada has the right to purchase the land until after Diaz
acquires its Torrens title.
Diaz applied two land titles for the hacienda dividing it in two parts. After the titles have been
issued, Diaz offers to sell to Dela Cavada only a portion of the entire hacienda.

Issue:
Whether or not Diaz is obliged to sell to Dela Cavada the entire hacienda and not only a part of
it.
Held:
A promise made by one party, if made in accordance with the forms required by the law, may
be a good consideration (causa) for a promise made by another party. The contract is complete,
provided they have complied with the forms required by the law and the consideration need not
be paid at the time of the promise.
The plaintiff stood ready to comply with his part of the contract. The defendant, even though he
had obtained a registered title to said parcel of land, refused to comply with his promise.
The contract was not, in fact, what is generally known as a "contract of option." It differs very
essentially from a contract of option. An optional contract is a privilege existing in one person,
for which he had paid a consideration, which gives him the right to buy, for example, certain
merchandise of certain specified property, from another person, if he chooses, at any time within
the agreed period, at a fixed price.
The contract is already in the perfected stage.
 82.) NICOLAS SANCHEZ , plaintiff-appellee, vs. SEVERINA RIGOS, defendant-
appellant
45 SCRA 368
June 14, 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?
Held:

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
tocontractsingeneral. 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.
 83.) EUSEBIO S. MILLAR, plaintiff-appellee vs. DOROTEO NADRES, defendant-
appellant
74 Phil 307
GR No. 48679
August 11, 1943

Facts:
A judgment having been secured by plaintiff Millar in the justice of the peace court of Tayabas
against defendant Nadres for the sum of P558.14, the provincial sheriff, pursuant to a writ of
execution, sold at public auction the two parcels of land belonging to said defendant and plaintiff
was the highest bidder for the amount of the judgment. Defendant failed to redeem the property
within the time prescribed by the rules, and on March 8, 1934, a final deed of sale was executed
in plaintiff’s favor and thereafter transfer certificates of title were issued to him. Subsequently,
upon defendant’s request, plaintiff accorded him an option to repurchase the two parcels of land
until December 31, 1934. In November of same year, defendant paid P200 on account but failed
to pay the balance until the period of option expired. On defendant’s second request, plaintiff
renewed the option to repurchase the property, the option to expire on April 30, 1938, but
subject to the condition that the balance would carry an interest of 12 per cent per annum and
that upon defendant’s default, the option would be automatically cancelled and that whatever
defendant might have paid would be treated as rentals of the property to be computed at the
rate of P20 per month from September, 1936. In accordance with this new agreement, defendant
made a second payment of P200 in November, 1935, but having failed to pay the balance within
the time stipulated, plaintiff instituted ejectment proceedings against him in the justice of the
peace court of Tayabas. The then defendant was ordered to vacate the property and to deliver
their possession to plaintiff.

Issue:
Whether or not there was an implied extension of the period for the right of redemption because
of the acceptance of the second payment.
Held:
This contention is not borne out by the facts found by the trial court. In the trial court’s decision
there is nothing in thereat showing that an indefinite extension of time has ever been given
impliedly the defendant. Furthermore, such an implied extension was without consideration in
so far as plaintiff was concerned, and may be treated merely as a period of grace which may be
made ineffectual upon failure of the debtor to comply with the terms thereof within a reasonable
time. The first option given the defendant was for one year, and when for more than three years
he failed to take advantage of the period of grace given him, plaintiff was more than justified in
terminating such period of grace.
 84.) J.F. WRIGHT, plaintiff-appellee, vs. LA COMPANIA DE TRANSVIAS, ET AL.,
defendants-appellants.
5 Phil 242 GR No. 2296
November 10, 1905

Facts:
On April 11, 1901, Walter A. Fitton, as one of the parties thereto, and Rafael Reyes,
Enrique Brias, Cosme Churruca, and Jose Rosales, who then composed the administrative council
of the partnership called the Street Car Company of the Philippines entered into a contract. A
written guaranty for the security of the stockholders was deposited in the Chartered Bank, in
accordance with the provisions of article 3 of the said agreement. The capital stock of the
company was represented by 3,500 shares of 500 pesetas each. There were also 1,050 cedulas.
On the 4th day of June Rafael Reyes, as the representative of the company, notified Fitton in
writing that there were on that day deposited, for the purpose of being turned over to him under
the conditions of the said contract. When Fitton executed a general power of attorney to T.E.
Sansom, the latter wrote a letter to Reyes, demanding him to return the money deposited by
Fitton due to the impossibility of the fulfillment of the contract according to the date stipulated.
On the 28th of October Sansom, as the attorney in fact of Fitton, assigned to the plaintiff all his
rights in the 30,000 pesos deposited with the company. No consideration is stated in this
document to have been paid by the plaintiff for the transfer.
On the 31st of October, 1901, defendant, by a notary, caused a demand to be made on plaintiff
as attorney in fact for Fitton for the fulfillment of the contract. In answer to this notarial demand
plaintiff stated that he was not the attorney in fact of Fitton. This action was commenced by the
plaintiff as the assignee of Fitton on the 8th of November, 1901.

Issue:
Whether or not the contract is void for having no consideration between the Company and
Fitton, and other parties thereof bound to do nothing.
HELD:
No. The court below based its decision on the ground that there was no consideration for
the contract between Fitton and the company; that all of the obligations were upon Fitton’s part;
that the other parties to the contract bound themselves to do nothing and the contract was
therefore void. We do not think that this view of the contract can be sustained. Without
considering the fact that the persons signing the contract agreed to do with what they could to
get the other stockholders of the company to transfer their stock to Fitton, it is sufficient to say
that by the second paragraph of the contract the four directors bound themselves to at once
deliver to Fitton the stock which they possessed, at the price named in the contract. It is very
clear that upon the day following the contract, or at any time within two months from the 11th
of April, Fitton had the right to demand of these four directors the delivery to him of all the stock
in the company owned by them, and that upon such a demand having been made it would have
been the duty of the directors, under the contract, to have delivered to him such stock. During
the two months named the directors had no power to sell the stock to anyone else. If the price
of the stock during that time had advanced and they had sold it to third persons, Fitton could
unquestionably have maintained an action against them to recover damages for such sale. In
other words, there was a binding contract on the part of the directors to deliver to Fitton at any
time within two months, at the price named, the stock which they held. This was a sufficient
consideration.
 85.) BEHN, MEYER & CO. (LTD.), plaintiff-appellant vs. TEODORO R. YANGCO,
defendant-appellee.
38 PHIL 602
September 18, 1918

Facts:

On March 7, 1916, the parties signed a memorandum or a contract of sale which provides
for“80drums of caustic soda, with 76% of Carabao brand, at the price of $9.75 per one hundred
pounds, cost, insurance, and freight included, to be shipped during March, 1916, to be delivered
to Manila and paid for on delivery of the documents.”Behn, Meyer, and Co. was the vendor while
Yanco was the vendee with the selling price was P10, 063.86. Said goods were shipped on board
the steamship, Chinese Prince, from New York, but before it reached Manila, the vessel was
detained at Penang and 71 drums were confiscated. Only 9 drums reached its destination and
Yanco refused to accept it and rejected plaintiff’s offer of waiting for the remainder of the
shipment until its arrival, or of accepting the substitution of seventy-one drums of caustic soda
of similar grade from plaintiff's stock. The plaintiff then sold, for the account of the defendant,
eighty drums of caustic soda from which there was realized the sum of P6, 352.89. Deducting this
sum from the selling price of P10, 063.86, we have the amount claimed as damages for the
alleged breach of the contract.

Issue:

(1) Whether or not Behn, Meyer, and Co. committed a breach of the contract of sale.
Held:

Yes. The court divided the issues into three component parts.

a.) SUBJECT MATTER AND CONSIDERATION b.) PLACE OF DELIVERY c.) TIME OF DELIVERY d.)
PERFORMANCE

SUBJECT MATTER AND CONSIDERATION – As to the offer made by the plaintiff, the specific
merchandise was never tendered, the soda it offered was not of the Carabao brand, and that said
offer was not made within the time that a March shipment, according to another provision the
contract, would normally have been available.

PLACE OF DELIVERY – The contract provided for "c.i.f. Manila, pagadero against delivery of
documents."
Its determination always resolves itself into a question of fact. If the contract be silent as to the
person or mode by which the goods are to be sent, delivery by the vendor to a common carrier,
in the usual and ordinary course of business, transfers the property to the vendee.
However, a specification relative to the payment of freight may be used to indicate the parties’
intention as to the place of delivery so that it leads to two scenarios: If the buyer is to pay the
freight, it is reasonable to suppose that he does so because the goods become his at the point of
shipment. On the other hand, if the seller is to pay the freight, the inference is equally so strong
that the duty of the seller is to have the goods transported to their ultimate destination and that
title to property does not pass until the goods have reached their destination.
The letters "c.i.f." found in British contracts, such as that found in the case, stand for cost,
insurance, and freight and signify that the price fixed covers not only the cost of the goods, but
the expense of freight and insurance to be paid by the seller.
(See doctrine). The terms, c.i.f. and f.o.b., merely make rules of presumption which yield to
proof of contrary intention.
Plaintiffs argue that the place of delivery was not Manila, but New York, however the Court ruled
that it would not have gone to the trouble of making fruitless attempts to substitute goods for
the merchandise named in the contract, but would have permitted the entire loss of the
shipment to fall upon the defendant if it was so.
To be noted is the fact that the bill of lading was for goods received from Neuss Hesslein & Co.
to be sent to the Bank of the Philippine Islands with a draft upon Behn,Meyer & Co. and with
instructions to deliver the same, and thus transfer the property toBehn, Meyer & Co. when and
if Behn, Meyer & Co. should pay the draft.c)

TIME OF DELIVERY - The contract provided for: "Embarque: March 1916," the merchandise was
in fact shipped from New York on the Steamship Chinese Prince on April 12, 1916.d)

PERFORMANCE – Plaintiff has not complied with his obligation under the contract and, as
contemplated by article 1451 of the Civil Code, the vendee can demand fulfillment of the
contract, and this being shown to be impossible, is relieved of his obligation. There thus being
sufficient ground for rescission, the defendant is not liable.

Judgement affirmed.
 86.) LOTHAR F. ENGEL, ET. AL., plaintiffs-appelees, vs. MARIANO VELASCO & CO.,
defendant-appellant.
47 PHIL 115
December 29, 1924

Facts:
The three consolidated actions now before us were instituted in the Court of First Instance
of Manila, by Lothar F. Engel, Et.Al., co-partners under the firm name of Engel, Upmann & Co. , a
general partnership engaged in mercantile business in the City of Manila, for the purpose of
recovering various sums of money, with interest, for the alleged failure of the defendant to
accept and pay for various consignments of merchandise ordered from the plaintiffs by the
defendant. The defendant interposed answers in the three cases denying generally the
allegations against him.
At the time of the transactions with which we are here concerned the plaintiffs were
export brokers, or jobbers, of textile merchandise in the City of New York, while the defendant
was the owner, as it still is, of a large store in Manila where general merchandise is sold both at
wholesale and retail. In connection with this business the defendant from time to time has
occasion to import textile fabrics on a large scale. In the beginning of the year 1920 commercial
relations were established between the plaintiffs and the defendant, and in the succeeding three
months the defendant sent to the plaintiffs numerous orders for merchandise.
It is said that as many as thirty-seven orders were given by the defendant to the plaintiffs
beginning in the month of January, 1920. A number of these orders were duly honoured by the
defendant upon the receipt of the goods and the price paid in due course. However, in sixteen
or seventeen orders nearly all of which were sent to the plaintiffs between February 5 and April
2, 1920, inclusive, these orders appear to have been promptly placed with the manufacturers by
the plaintiffs, but delay occurred in the matter of shipment. And when delivery was finally
tendered in Manila, acceptance was refused. The plaintiff proceeds upon the idea of breach of
contract on the part of the defendant, while the latter’s defense was that the plaintiff have not
complied with the terms of the various orders and the refusal of the defendant to accept and pay
for the goods in question was justified.
Issue:
Whether or not the delay in shipment on the part of the seller would justify purchaser’s refusal
to accept and pay for the goods ordered and thus absolves him from any liability.

Held:
No. None of the contentions above referred to nor others of less moment, constitutes
any sufficient ground of absolving the defendant from liability. None of these contentions came
to light in defendant’s correspondence; and even while negotiations were being conducted in the
early months of 1921 between Kummer, the plaintiff’s representative, and the defendant, no
word of complaint from the defendant was heard upon any of these points. Even the question
about the undue delay in the shipment of the goods was never raise by the defendant until the
drafts covering the goods shipped in the autumn began to arrive in Manila and were presented
by the bank to the defendant. Then finding itself without funds and unable to confront a
situation, the defendant put forth the claim that the shipment of the goods had been out of time.
Furthermore, delay on the part of the seller in dispatching goods is sufficiently excused where it
appears not only that the delay was requested by the purchaser but also was further rendered
necessary by the inability of the purchaser to comply with an agreement to supply the credit
necessary to transport the goods.
 87.) PACIFIC COMMERCIAL CO., plaintiff-appellee, vs. ERMITA MARKET &
COLD STORE, INC., defendant-appellant.
G.R. No. L-34727 /56 Phil 617
March 9, 1932

Facts:

On September 14, 1927, the plaintiff, Pacific Commercial Co., sold to the Ermita Market & Cold
Stores, Inc., the defendant herein, an automatic refrigerating machine. The parties signed the usual
printed sales-contract form of the plaintiff company, the purchase price being, payable by installments on
dates and in amounts stated in the sales contract. By mutual agreement between the vendor and the
vendee, the said machine was installed by the plaintiff, to be paid by the defendant, in favor of the
plaintiff. Complying with the terms of the sales contract, the defendant paid the plaintiff an initial amount
of the purchase price of the machine, leaving a balance. A few days after installation, defendant advised
the plaintiff that the machine was not serving the purpose for which it was sold to defendant and that it
was lacking ammonia receiver and oil separator, and further alleges that the temperature in the
refrigerating rooms did not reached, owing to the negligence of the plaintiff in not repairing or putting in
good working condition the said refrigerating machine, the defendant had been forced to closed its
establishment and for which reason the defendant claimed damages against the plaintiff. The plaintiff
denied generally and specifically each and every and every allegation in the said cross-complaint and by
way of special defense, alleged that whatever defects or deficiency there might have been in the
temperature in the refrigerating rooms of defendant's establishment, or in the functioning of the
machine, these were due to the defects and imperfections of the coils which were supplied and installed
by the defendant itself, as well as to the incompetency and inefficiency of the defendant's personnel to
operate the machine. By which the Court of First Instance of Manila rendered its judgement, ordering the
defendant to pay the remaining amount plus interest and other damages, so, the defendant appealed.

Issue:

Whether or not the installed refrigeration machine was the same machine agreed upon by the plaintiff
and the defendant.
Held:

The judgement of the Court of First Instance of Manila is affirmed in its entirety. After a careful
examination of the record, we have not the least doubt that the plaintiff delivered the machine as
described in the sales contract, and the fact that the defendant could not use it satisfactorily in the three
cold stores division cannot be attributed to plaintiff's fault; as far as we can see, the machine was strictly
in accordance with the written contract between the parties, and the defendant can hardly honestly say
that there was any deception by the plaintiff. But it is clear that the defendant company did not fully
understand the use of the motor. It complains that the machine would not properly refrigerate the
refrigerating rooms, but it is evident that the machine could not operate automatically when the
defendant had three refrigerating rooms which it expected to maintain at three different temperatures.
The defendant also complained that the machine was not equipped with a thermostat and that the lack
of it, obstructed the work of the refrigerating. In the first place, the thermostat was not include in the
sales contract and in the second place it would not have been of any service to defendant because it could
not possibly operate automatically at three different temperatures with the defendant's insufficient
equipment.

The defendant's complaint that the machine did not contain an oil separator is not true; the oil
separator is combined with the receiver and condenser in a single combined piece in the machine. The
evidence in this case is clear to us, and we cannot find any errors committed by the court below. It may
be that the machine could have given satisfaction to the defendant if the coils had been installed properly
and the machine had been operated by competent persons. Any deficiency in this regard could not be the
plaintiff's fault; the coils were supplied and installed by someone other than the plaintiff, and the machine
was being operated by the defendant itself.
 88.) VILLONCO REALTY COMPANY, plaintiff-appelee, vs. BORMAHECO
INCORPORATED, ET. AL., defendants-appellants.
65 SCRA 575
July 25, 1975

Facts:
Francisco Cervantes, the president of Bormaheco, Inc., and his wife, Rosario P. Navarro
Cervantes, are the owners of parcels of land consisting of lots 3, 15 and 16 located at 245 Buendia,
avenue, Makati Rizal. In the early part of 1964 there were negotiations for the sale of the said
lots including its improvements between Romeo VIllonco of the Villonco Realty and Bormaheco
Inc., represented by Francisco Cervantes. The sale is for P400 per square meter but it is only to
be consummated after respondent shall have also consummated purchase of a property in Sta.
Ana, Manila. Bormaheco won the bidding for the Sta.Ana land and subsequently bought the
property. The parcels of land were mortgaged to the Development Bank of the Philippines (DPB),
which was fully paid on July 10,1969. In 1964, the lots were then negotiated for its sale to the
Villonco brothers, through the intervention of Edith Perez de Tagle, a real estate broker. In the
course of the negotiation, Cervantes did not inform De Tagle and Villonco that the lots were
mortgaged to DBP. After negotiations, the sale was perfected and Villonco sent a check as earnest
money. The check was deliverd by Tagle and was received by Cervantes with a corresponding
voucher-receipt in handwriting by Tagle evidencing that the earnest money was subject to the
terms and conditions of Bormaheco. Then, unexpectedly, twenty six days after the signing of the
contract of sale, Cervantes returned the earnest money saying that they are no longer interested
to sell the property and that the forty-five day period had already expired. Petitioners filed an
action for specific performance for the sale of the lots. Respondent argued that there was no
perfected sale because they returned the earnest money, thus there was no meeting of the
minds.

Issue:
Whether or not Bormaheco is bound to perform the contract with Villonco and that there was
contact of Sale.
Held:
Yes. The conclusion of the Supreme Court is that, the said acts of Cervantes of signing his
conformity to Villonco’s counter offer and accepting the P100, 000.00 earnest money therein
offered, resulted in a completely perfected contract of sale between the parties per Article 1482
of the Civil Code, needing only the execution of the corresponding deed of sale for its
consummation and subject solely to the negative resolutory condition that the sale shall be
cancelled only if Cervantes’ deal with another property in Sta. Ana shall not be consummated.
Thus, as of March 3, one day before Cervantes accepted Villonco’s counter-offer, nothing more
was left to formalize the transaction with Nassco except the approval of the Economic
Coordinator. As such, it would be legally feasible for the sale to the Villonco Realty Property to
be made directly by the spouses.
89.) PEPITO VELASCO ET.AL., petitioners, vs. COURT OF APPEALS AND
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), respondents
51 SCRA 439
January 28, 1980

Facts:
Sometime on November 10, 1965, Alta Farms secured from the GSIS a Three Million Two
Hundred Fifty Five Thousand Pesos (P3,255,000.00) loan and an additional loan of Five Million
SixtyTwo Thousand Pesos (P5,062,000.00) on October 5, 1967, to finance a piggery project. Alta
Farms defaulted in the payment of its amortizations, it is presumably because of this that Alta
Farms executed a Deed of Sale With Assumption of Mortgage with Asian Engineering Corporation
on July 10, 1969 but without the previous consent or approval of the GSIS and in direct violation
of the provisions of the mortgage contracts. Even without the approval of the Deed of Sale with
Assumption of Mortgage by the GSIS, Asian Engineering Corporation executed an Exclusive Sales
Agency, Management and Administration Contract in favor of Laigo Realty Corporation, with the
intention of converting the piggery farm into a subdivision. After developing the area, on
December 4, 1969, Laigo entered into a contract with Amable Lumanlan, one of the petitioners,
to construct for the home buyers, 20 houses on the subdivision. Petitioner Lumanlan allegedly
constructed 20 houses for the home buyers and for which he claims a balance of P309, 187.76
from the home buyers and Laigo. Out of his claim, petitioner Lumanlan admits that Mrs. Rhody
Laigo paid him in several checks totalling P124, 855.00 but which checks were all dishonoured.
On December 29, 1969, Laigo entered into a contract with petitioner Pepito Velasco to construct
houses for the home buyers who agreed with Velasco on the prices and the downpayment.
Petitioner Velasco constructed houses for various home buyers, who individually agreed with
Velasco, as to the prices and the downpayment to be paid by the individual home buyers. When
neither Laigo nor the individual home buyers paid for the home constructed, Velasco wrote the
GSIS to intercede for the unpaid accounts of the home buyers.
Issue:
Whether or not GSIS is liable to the petitioners for the cost of the materials and labor furnished
by them in construction of the 63 houses now owned by the GSIS?

Held:
Yes. The Supreme Court held that Article 1311 of the Civil Code which GSIS invokes is not
applicable where the situation in Article 1729 obtains. The intention of the latter provision is to
protect the laborers and the material men from being taken advantage of by unscrupulous
contractors and from possible connivance between owners and contractors. As the court stated,
GSIS had no legal basis for insisting that Article 1729 of the Civil Code does not apply to this case
it being indisputably the owner of said houses already. Besides, it must be borne in mind that the
claim of petitioners are in the nature of claims of laborers and material men themselves.
Accordingly, Article 2208, paragraphs 2, 7, and 11 are applicable hereto. Indeed, the house
owners or occupants who have not paid either petitioners or Laigo, or even the GSIS should not
be allowed to enrich themselves at the expense of the petitioners, and the most feasible way of
avoiding such a result is for the GSIS to pay petitioners and then pass on to said house owners
what it would have to pay under this judgement.
 90.) Spouses RAMON DOROMAL Sr., ET.AL, petitioners, vs. HON. COURT OF
APPEALS, ET. AL., respondents
66 SCRA 575
September 5, 1975

Facts:
Lot 3504 of the cadastral survey of Iloilo were co-owned by siblings Luis, Soledad, Fe,
Rosita, Carlos and Esperanza (already deceased) all surnamed Horilleno. Five of the siblings gave
a Special Power of Attorney (SPA) to their niece, Mary Jimenez, who succeeded her father as a
co-owner, for the sale of the land to father and son Doromal. One of the co-owners, herein
petitioner, Filomena Javellana, however did not gave her consent to the sale even though her
siblings executed a SPA for her signature. The co-owners went on with the sale of 6/7 part of the
land and a new title for the Doromals was issued. Respondent offered to repurchase the land for
30,000.00 as stated in the deed of sale, but petitioners declined invoking lapse of time for the
right of repurchase. Petitioner also contends that the 30,000.00 price was only placed in the deed
of sale to minimize payment of fees and taxes and as such, respondent should pay the real price
paid which was P115, 250.

Issue:
Whether or not respondent could still exercise her right of redemption and the amount to be
paid is P30, 000.00 as stipulated in the Deed of Sale.

Held:
Yes. The period of redemption had not yet elapsed because the respondent was not
notified of the sale. The 30-day period for the right of redemption starts only after actual notice
not only of a perfected sale but of actual execution and delivery of the deed of sale. The letter
sent to the respondent by the other co-owners cannot be considered as actual notice because
the letter was only to inform her of the intention to sell the property but not its actual sale. As
such, the 30-day period has not yet commenced and the respondent can still exercise her right
of redemption. The respondent should also pay only the P30,000.00 as stipulated in the deed of
sale because the law is definite that a person who has the right of redemption can subrogate
herself in place of the buyer upon the same terms and conditions stipulated in the contract.
(Art.1619, Civil Code)
 91.) ELIAS GALLAR, plaintiff-appellee, vs. HERMENEGILDA HUSAIN, ET AL.,
defendants-appellants.
G.R. No. L-20954 / 20 SCRA 186
May 24, 1967

Facts:
Teodoro Husain sold the land under dispute for 30 pesos to Serapio Chichirita with the
right to repurchase within six years. Teodoro transferred his right to his sister, Graciana Husain.
Graciana paid the redemption price and later sold the land to Elias Gallar in exchange for one
cow. Possession of the land, together with the owner's duplicate of the certificate of title of
Teodoro Husain, was delivered on the same occasion to Gallar, who since then has been in
possession of the land. In 1960, Gallar asked the cadastral court for the issuance to him of a
transfer certificate of title but the court dismissed the petition for lack of jurisdiction. He
therefore, filed this suit in the Court of Instance of Iloilo on October 10, 1960 to compel
Hermenegilda and Bonifacio Husain, as heirs of Teodoro Husain, to execute a deed of conveyance
in his favor so that he could get a transfer certificate of title. He also asked for damages. The
Husains countered by saying that the agreement between their father and Chichirita was that of
a mortgage to secure a loan of P30.00 and that, Graciana already paid Teodoro Husain’s debt to
Chichirita, thus their father had already reacquired ownership over the same. They also claim
that the action of Elias has already PRESCRIBED.

Issue:
1. Whether or not the ownership was transferred to Gallar .
2. Whether or not the action has already prescribed.
Held:

1. Yes. While it is indeed true that the first note written on the reverse side of the deed of sale
speaks of the “redemption” of the land , there is no evidence to show that the vendee
Graciana, was acting in behalf of her brother Teodoro, in the exercise of the latter’s right of
redemption. Now, unlike a debt which a third party may satisfy even against the debtor’s
will, the right of repurchase may be exercised only by the vendor in whom the right is
recognized by contract or by any person to whom the right may have been transferred.
Graciana Husain must, therefore, be deemed to have acquired the land in her own right,
subject only to Teodoro Husain's right of redemption. As the new owner she had a perfect
right to dispose of the land as she in fact did when she exchanged it for cattle with Gallar.
When teodoro failed to redeem the land within the stipulated period, its ownership became
consolidated in the appellee. By the delivery of possession of the land on April 2, 1919 the
sale was consummated and title was transferred to appellee.

2. NO, the action is imprescriptible. This action is not for specific performance; all it seeks is to
quiet title, to remove the cloud cast on appellee's ownership as a result of appellant's refusal
to recognize the sale made by their predecessor. And, as plaintiff-appellee is in possession
of the land, the action is imprescriptible. Appellant's argument that the action has prescribed
would be correct if they were in possession as the action to quiet title would then be an
action for recovery of real property which must be brought within the statutory period of
limitation governing such actions.
 92.) LEON DE GUZMAN, ET. AL.,plaintiffs-appellants, vs. FRANCISCA T. GUIEB,
defendants-appellants.
G.R. No. L-28862/ 48 SCRA 68
November 24, 1972

Facts:
On June 17, 1948, the defendants, as bonafide tenants of the then Ana Sarmiento Estate,
acquired the right to purchase parcel of land subject matter of this case. On November 20,1954,
defendants for and consideration of the sum of Four Thousad Pesos (P4,000.00) executed a deed
of sale, selling,transferring, and conveying all the defendants’ rights over the property subject of
this case to Teodoro de Guzman. The Director of Lands approved the aforesaid transfer of the
property by executing a Deed of Absolute Sale and it was also registered with the Registry of
Deeds, subject to corresponding lien and encumbrances that the property cannot be sold,
mortgaged or encumbered within the period of five years without the written consent of the
Land Tenure Administration, which is annotated on the back of the said title. During the period
of five years within which Francisca Guieb could exercise the option to purchase, said defendants
paid all the rentals. When Teodoro died, his parents, plaintiffs herein, thereafter executed an
extra judicial partition over the estate left by him. That on July 31, 1964, defendant went to the
residence of plaintiffs and advised Genoveva Rodriguez, her husband Leon DE Guzman , that she
was exercising and did exercise the right an option to purchase by tendering payment in cash to
Genoveva the sum of P4,040.00, but Genoveva refused to accept.That on September 15, 1964
defendant filed Civil Case No. 126601 in the City Court of Manila against the plaintiffs for specific
performance with consignation, which case is now pending trial before Branch VIII of the City
Court of Manila with the agreement that the said case be held in abeyance pending a final
decision in the instant case. As show in Official Receipt No. 048717-I, dated September 15,1965
issued by the Treasurer of Manila, photosatic copy of which is hereto attached and made part
hereof as Exhibit “23” for the defendants, defendants duly consigned with the City Court of
Manila, sum of P4,040.00 the sum which plaintiff Genoveva Rodriguez refused to accept when it
was tendered to her on July 31,1964 by defendants; That on October 22,1964, the plaintiff Leon
de Guzman filed an ejectment case against the defendants herein in the City Court of Manila,
Branch II, for non-payment of rentals from August 1964, Civil Case No. 128123 which case is also
pending, awaiting a final decision in the instant case; That plaintiffs or their predecessor in
interest were never in actual physical possession of the property involved in this litigation.
Issues:
1.) Whether the option to purchase real property, contained in Exhibit 1, was renewed in the
option to purchase real property, Exhibit 16.
2.) Whether upon failure of defendants to pay rentals for forty five (45) months, their right to
exercise the option to purchase real property was extinguished.

Held:
1.) No. The “Option to Purchase Real Property” dated October 5,1959 cannot be considered as a
renewal of the first “Option dated November 20,1954” as the same is not duly acknowledge
before a notary public and not signed in the presence of witnesses” and because if it were such
as renewal,” it should have been executed on November 29,1959, the date of the expiration of
the first option, and, furthermore, because there is no statement therein saying that it is a
renewal, it is obvious that this posture is without merit. To be effective is an option, there was
no need at all that the document of October 5, 1959 be a renewal of the first option for there is
no reason why it cannot be considered as another option by itself, in fact, nowhere in the
appealed decision does it appear that the trial court took it as a renewal. And since there is no
dispute that it is genuine, as very well pointed out by His Honor, it constitutes an enforceable
agreement under Article 1403 (2) of the Civil Code, or the Statute of Frauds, the same being at
least a note or memorandum, in writing, of the agreement of the parties and signed by the party
charged, in this case, Teodoro de Guzman, the Predecessor in interest of appellants.
2.) Yes. The failure of appellees to pay the stipulated rentals for long periods, particularly, those
for the forty-five months they paid only on July 21, 1964, rendered their option null and void
under the following provision of the option agreement, Exhibit 16.
 93.) FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners, vs. ZOSIMO
GABAR, ET. AL., respondents
G.R. No. L-36359 55 SCRA 499
January 31, 1974

Facts:
Plaintiff Nicanora Gabar Bucton (wife of her co-plaintiff Felix Bucton) is the sister of
defendant Zosimo Gabar, husband of his co-defendant Josefina Llamoso Gabar. Josefina bought
a parcel of land from the spouses Villarin on installment basis, P500 down, the balance payable
in instalments. Josefina entered into a verbal agreement with her sister-in-law, Nicanora, that
the latter would pay one-half of the price (P3, 000) and would then own one-half of the land.
Pursuant to this agreement, Nicanora gave her sister-in-law Josefina the initial amount of P1,000,
then P400--all evidence by receipts---then she loaned Josefina P1, 000 and thereafter along with
her spouse Zosimo, took possession of the lot and built their house as well as apartments
thereon. Villarin executed a Deed of Sale in favor of Josefina. Plaintiffs then sought to obtain a
separate title for their portion of the land in question. Defendants repeatedly declined to
accommodate paintiffs. Their excuse: the entire land was still mortgaged with the Philippine
National Bank (PNB). Plaintiffs continued enjoying their portion of the land and continued to
insist on obtaining their separate title but the latter refused to execute the corresponding Deed
of Sale in favor of Nicanora. Josefina claimed that the amounts paid by Nicanora were in the
concept of loans. Thus, Nicanora filed a case for specific performance.

Issue:
Whether or not there was a sale between Josefina and Nicanora.
Held:
Yes. Although at the time said petitioner paid P1, 000. 00 as part of the purchase price,
private respondents were not yet the owners of the lot, they became such owners when a deed
of sale was executed in their favour by the Villarin spouses. In the premises, Article 1434 of the
Civil Code which provides that “when a person who is not the owner of a thing sells or alienates
and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation
of law to the buyer or grantee,” is applicable. Petitioners therefore became owners of the one-
half portion of the lot in question after it had fully paid the amount to Josefina even though not
evidenced by a formal deed, was nevertheless proved by both documentary and parole evidence.
Furthermore, the doctrine was reiterated in the case of Gallar v. Husain, et. al., where the
Supreme Court ruled that by the delivery of the possession of the land, the sale was
consummated and title was transferred to the appellee, that the action is actually not for specific
performance, since all it seeks is to quiet title, to remove the the cloud cast upon appellee’s
ownership as a result of appellant’s refusal to recognize the sale made by his predecessor, and
that as plaintiff-appellee is in possession of land, the action is imprescriptible.
94. )ROSARIO CARBONELL, petitioner, vs. HONORABLE COURT OF APPEALS, JOSE
PONCIO, EMMA INFANTE and RAMON INFANTE, respondents.
G.R. No. L-29972 January 26, 1976

Facts:

On January 27,1995, respondent executed a private memorandum of sale of his parcel of land
with improvements situated in san juan, rizal in favor of petitioner who knew that the said
property was at that time subject to a mortgage in favor of republic savings bank. Four days later
, poncio, in another private memorandum, bound himself to sell the same property for an
improved price to one emma infante, with the latter still assuming the existing mortgage debr in
favor of rsb. Thus in February 2, poncio executed a formal registerable deed of sale in her 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 the formalizing the contract with carbonell
because he had already formalized a sales contract in favor of infant. To protect her legal rights
as the first buyer, carbonell registered on February 8,1995 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, 1995, so that 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 the 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 property?

Held:
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 the article 1544 of the civil code.
Unlike the first and third paragraph of said article, 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 she was the only buyer thereof and th
title of poncio was still in his name solely encumbered by bank mortgage duly annotated thereon.
Carbonell was not aware of any sale to infant. Hence, carbonell’s prior purchase of the land was
in good faith and did not cease. carbonell wanted to meet infant but she refused. Carbonell
registered her adverse claim in good faith while and while infante’s was done in bad faith when
she registered the deed of sale.
 95.) THE BOARD OF LIQUIDATORS and PANAY DEVELOPMENT CO., INC., petitioners,
vs.
JOSE ROXAS, respondent.
G.R. No. 84419
December 4, 1989

Facts:

On April 12, 1940, PDCI entered into a management contract with the National Food Products
Corporation (NFPC) whereby the latter agreed to finance the construction, maintenance,
management and operation of the fishponds of PDCI and NFPC gave loans and advances
necessary therefor. As security for the payment of said loan, PDCI executed a real estate
mortgage on all its properties in favor of NFPC. Among the properties given as collateral was lot
No. 3247, formerly belonging to Maria Roxas Lisao and covered by TCT No. RO-4331 (17921) of
the Register of Deeds of Capiz, which contains an annotation stating that the same was
transferred and assigned in favor of PDCI and mortgaged to NFPC. Said original certificate of title
was later cancelled by TCT No. 12651 in the name of PDCI. The NFPC was later abolished under
Executive Order No. 372 petitioner Board of Liquidators was created to liquidate and settle its
affairs and dispose of its properties. On December 13, 1972 petitioner Board executed with the
PDCI a contract of amicable settlement whereby petitioner PDCI agreed to pay in full settlement
of its mortgage obligation. Petitioner Board agreed to assist PDCI in ejecting the squatters in the
premises and to deliver the certificates of title covering the property as well as the records
pertinent thereto. Respondent Jose Roxas was found illegally occupying said lot so petitioner
PDCI demanded that he vacate the premises. PDCI also informed the Board of its predicament
upon refusal of respondent to vacate the premises. Petitioners filed an action for recovery of
possession with preliminary mandatory injunction and damages against respondent in the Court
of First Instance of Capiz. respondent Jose Roxas claims that petitioners have no cause of action
as he acquired the property by legal means and having been in public, peaceful and uninterrupted
possession in good faith in the concept of owner for more than ten (10) years and that the title
thereto of petitioner PDCI has already been lost by reason of laches and prescription.The trial
court rendered a decision declaring PDCI the legal owner of the land in question. Respondent
Roxas appealed to the Court of Appeals reversing the appealed decision.

Issue: Whether or not PDCI is the true owner of Lot no. 3247.
Held:

Yes.Since it is not disputed that petitioner PDCI is the titled owner of Lot No. 3247 having acquired
the same by assignment from its owner Maria Roxas Lisao for and in consideration of her
subscription to shares of capital stocks in the PDCI, petitioner PDCI is therefore the absolute
owner of the property. And even if, as claimed by respondent Jose Roxas, Maria Roxas Lisao had
subsequently executed a quitclaim, deed and donation of said property in favor of her brothers
and sisters who in turn allegedly verbally sold the same to respondent, such subsequent
disposition is of no legal effect whatsoever inasmuch as Maria has no more right or title whatever
over the property in question to convey to her brothers and sisters including respondent. And
even if it may be true that respondent Jose Roxas had been in actual possession of the property
in question for more than ten (10) years, the registered title of the petitioner PDCI over the
property cannot be lost by prescription or laches as respondent claims.The alleged verbal sale
executed by the donees brothers and sisters of Maria Roxas Lisao in favor of respondent Jose
Roxas is also null and void not only because they had no title to convey but also because the sale
of the land, which is verbal, and the presentation of which was timely objected to, are not
enforceable under the statute of frauds. 9 It is not a valid sale, and is inadmissible in evidence.
 96.) SOSTENES CAMPILLO, Plaintiff-Appellee, v. PHILIPPINE NATIONAL BANK and THE
REGISTER OF DEEDS OF PASAY CITY, defendants; PHILIPPINE NATIONAL
BANK, Defendant-Appellant.

Rosendo J. Tansinsin for Plaintiff-Appellee.

Ramon B. de los Reyes, for Defendant-Appellant.

G.R. No. L-19890. May 21, 1969

Facts:
The mortgaged property in the name of Justiniano D. Quirino was attached and levied upon and
subsequently sold at public auction by virtue of the alias writ of execution issued in Civil Case No.
35447 in favor of appellee Sostenes Campillo on April 8, 1960. This levy in execution was duly
registered on March 16, 1960, while the certificate of sheriff’s sale executed on April 8, 1960 was
registered on April 12, 1960. Upon the other hand, it is an admitted fact that the extra-judicial
foreclosure sale made in favor of the PNB on Dec. 17, 1958 was registered in the Office of the
Register of Deeds of Pasay City only on April 21, 1960.
Issue: whether or not the mortgaged property belonged to PNB.
Held:

No.The foreclosure sale in favor of the Bank was effected only on April 21, 1960, the date said
sale was registered. Consequently, when the same property subject matter thereof was actually
attached and levied upon on March 16, 1960 and the levy thus made was registered on the same
date, the property stood in the official records of the government still as property of Justiniano
D. Quirino and was therefore properly attached, levied upon and subsequently sold as his
property. The net result of this is that the execution sale made in favor of herein appellee
transferred to him all the rights, interest and participation of Quirino in the aforesaid property at
that time, subject only to the lone encumbrance duly registered and annotated on the back of
the Certificate of Title No. 236-A issued in the name of Quirino.
 97.) URSULA FRANCISCO, plaintiff-appellant,
vs.
JULIAN RODRIGUEZ, defendant-appellee, MONINA RODRIGUEZ, defendant-intervenor-
appellee.
G.R. No. L-31083 September 30, 1975

Facts:

The plaintiff-appellant applied for the purchase of Lot No. 595, Cadastral No. 102 of L-102 of
Davao, consisting of 33.1185 hectares, situated in, Davao City, through Sales Application, the
Director of Lands rejected the sales application, for the reason that the plaintiff-appellant had
permitted herself to be a dummy in the acquisition of the land. The plaintiff-appellant continued
in possession and later she conveyed 29.3298 hectares of the land to her former lawyer,
defendant upon discovering that the document she signed was a deed of absolute sale and not
the antichresis, she filed civil case in the Court of First Instance for the annulment of the deed.
The deed was declared null and void, but the land was considered Government property Bureau
of Lands reinstated plaintiff-appellant's sales application, but stayed the execution thereof.
Plaintiff-appellant sued defendant. The lower court adjudged plaintiff and defendants not
entitled to the possession of the disputed land and left the disposition thereof to the Department
of Agriculture and Natural Resources. Both parties appealed to this Court. The judgment of the
lower court was affirmed, the Court holding that the land dispute may well be left to the action
of the Department of Agriculture and Natural Resources. The parties separately moved for
reconsideration. The motions were denied. After the Bureau of Lands had completed its
investigation ordered by the Secretary of Agriculture, the Secretary denied the claims of Julian
Rodriguez and his daughter to the 29.3298 hectares and it improvements. It declared the land in
question vacant. The Office of the President affirmed in toto. The Director of Lands moved to
intervene in Civil Case and prayed that the receivership be dissolved after the receiver shall have
rendered an accounting. Motion was granted. Defendants filed a motion for the possession of
the property and discharge of the receiver and later, together with the plaintiff-appellant, moved
that the proceeds of the property be delivered and divided between them. Motions were denied.
Defendants appealed to this Court, Court affirmed the judgment appealed from, the Director of
Lands sought the execution of the decision of the Court before the lower court. Plaintiff opposed
the petition. Lower court denied the oppositions; plaintiff-appellant filed her Notice of Appeal.

Issue: whether or not the reversion ordered in G.R. No. L-15605, October 31, 1962, refers to the
whole Lot No. 595, Cadastral No. 102 of Davao, consisting of 33.1185 hectares.
Held:

Yes. The subsequent reinstatement of plaintiff-appellant's sales application by the Director of

Lands did not redeem her claim to Lot 595, Cadastral No. 102 from its incipient nullity because
the application was finally denied by the Secretary of Agriculture after formal investigation by
the Bureau of Lands.. As a result, whatever rights or interests plaintiff-appellant may have in Lot
No. 595 had thus frittered away and the entire lot reverted to the mass of public lands, such
reversion being even imprescriptible. By transgressing the law, allowing herself to be a dummy
in the acquisition of the land and selling the same without the previous approval of the Secretary
of Agriculture and Natural Resources, plaintiff-appellant herself has eliminated the very source
of her claim to Lot No. 595, as a consequence of which, she cannot later on assert any right or
interest thereon. As a matter of fact, Section 29 of the Public Land Law expressly ordains that any
sale and encumbrance made without the previous approval of the Secretary Agriculture and
Natural Resources "shall be null and void and shall produce the effect of annulling the
acquisition and reverting the property and all rights thereto to the State, and all payments on the
purchase price theretofore made to the Government shall be forfeited."
 98.) MANOTOK REALTY, INC., petitioner,
vs.
THE HON. COURT OF APPEALS and FELIPE MADLANGAWA, respondents.
G.R. No. L-45038 April 30, 1987

Facts:

Felipe Madlangawa, respondent claims that he has been occupying a parcel of land in the Clara
de Tambunting de Legarda Subdivision since 1949 upon permission being obtained from Andres
Ladores, then anoverseer of the subdivision, with the understanding that the respondent would
eventually buy the lot. On April 2, 1950 The owner of the lot, Clara Tambunting, died and her
entire estate, including her paraphernal properties covering the lot occupied by the respondent
were placed under custodia legis. On April 22, 1950 Vicente Legarda, husband of Tambunting
received the deposit of respondent amounting to P1,500 for the lot. Respondent had a remaining
balance of P5,700 which he did not pay or was unable to pay because the heirs of Tambunting
could not settle their differences. On April 28, 1950Don Vicente Legarda was appointed as
a special administrator of the estate and the respondent remained in possession of the lot in
question. While on March 13 and 20, 1959 Petitioner Manotok Realty, Inc. became the successful
and vendee of the Tambunting de Legarda Subdivision pursuant to the deeds of sale executed in
its favor by the Philippine Trust Company, as administrator of the Testate Estate of
Clara Tambunting de Legarda. The lot in dispute was one of those covered by the sale. The Deed
of Sale provided for terms and conditions. Petitioner caused the publication of several notices in
the Manila Times and the Taliba advising the occupants to vacate their respective premises,
otherwise, court action with damages would follow. This includes respondent among others who
refused to vacate the lots. Trial Court dismissed the petitioner's action. CA ruled that the only
right remaining to the petitioner is to enforce the collection of the balance because accordingly,
it stepped into the shoes of its predecessor.

Issue: Whether Don Vicente Legarda could validly dispose of the paraphernal property?
Held:
No. Decision of CA is reversed and set aside. The record does not show that don vicente legarda
was the administrator of the paraphernal properties of clara tambunting during the lifetime of
the latter. Thus it cannot be said that the sale which was entered by the private respondent and
Don vicente legarda had its inception before the death of clara tambunting and was entered into
by Don vicente on behalf of clara tambunting but was only consummated after her death. Don
vicente therefore could not have validly disposed of the lot in dispute as continuing administrator
of the paraphernal properties of clara tambunting The Court concluded that the sale between
Don vicente and private respondent is void ab initio, the former being neither an owner nor
administrator.
 99.) BRAULIO CASTILLO, ET AL., plaintiffs,
vs.
SIMPLICIA NAGTALON, defendants,
SIMPLICIA NAGTALON, movant-appellee,
vs.
DESIDERIO SEGUNDO, ET AL., respondents-appellants
G.R. No. L-17079 January 29, 1962

Facts:

On July 8, 1958, the last day of the one-year period for redemption, appellee Simplicia Nagtalon
who, as already stated, was one of the judgment debtors and the exclusive owner of three of the
ten parcels of land sold in public auction, deposited with the Deputy Provincial Sheriff the sum of
P317.44 representing 1/12 of the consideration of the sale plus 1% interest thereon, and prayed
for the issuance of the corresponding deed of redemption as to the three parcels of land
belonging to her. The purchaser, however, opposed the same on the ground that the amount
thus tendered did not cover the full redemption price of the said three parcels of land which were
auctioned separately at P1,240.00, P21.00, and P30.00, respectively or a total of P1,291.00 (see
parcels 1, 2 and 4 of the certificate of sale executed by the Sheriff, pp. 27-28, Record on Appeal).
In view of said opposition Nagtalon filed a motion with the court to compel the Sheriff to issue
the deed of redemption prayed for. On August 26, 1958, the court, acting on said motion, issued
an order holding that the liability of the defendants, as appearing in the dispositive part of the
executed decision, was only joint and that the tender by movant Nagtalon of the sum
corresponding to 1/12 of the purchase price was sufficient to redeem her properties sold at
public auction. Thus, the Deputy Provincial Sheriff was directed to execute and deliver to movant
Nagtalon the certificate of redemption covering the three parcels of land owned by her. The
purchaser's and the Sheriff's motion for reconsideration having been denied, they instituted the
instant appeal.1

Issue: whether or not the lower court committed an error in holding movant's tender as valid
redemption of the three parcels of land owned by her, and in ordering the issuance of the
corresponding certificate of redemption therefor.

Held:

Yes. The procedure for the redemption of the properties sold at execution sale is prescribed in
Section 26, Rule 39, of the Rules of Court. Thereunder, the judgment debtor or redemptioner
may redeem the property from the purchaser, within 12 months after the sale, by paying the
purchaser the amount of his purchase, with 1% per month interest thereon up to the time of
redemption, together with the taxes paid by the purchaser after the purchase, if any. In other
words, in the redemption of properties sold at an execution sale, the amount payable is no longer
the judgment debt but the purchase price. Considering that appellee tendered payment only of
the sum of P317.44, whereas the three parcels of land she was seeking to redeem were sold for
the sums of P1,240.00, P21.00, and P30.00, The aforementioned amount of P317.44 is
insufficient to effectively release the properties. As the tender of payment was timely made and
in good faith we incline to give the appellee opportunity to complete the redemption purchase
of the three parcels, as provided in Section 26, Rule 39 of the Rules of Court, with and executory.
In this, justice is done to the appellee who had been made to pay more than her share in the
judgment, without doing an injustice to the purchaser who shall get the corresponding interest
of 1% per month on the amount of his purchase up to the time of redemption. Should appellee
fail to complete the redemption price as herein indicated, the sheriff may either release to
appellee, the two smaller lots and return to her the balance of her deposit, or return the entire
deposit without releasing any of the three lots, as the appellee may elect.
100.) MARIA MAHILUM, SALVADOR MAHILUM, ANGEL MAHILUM, EMILIO OGDIMAN,
VICTORIO SALAZAR and TOMAS SALAZAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and GORGONIA FLORA DE SOTES, respondents.
G.R. No. L-17970 June 30, 1966

Facts:

It appears that one Pedro Mahilum was the registered owner of a parcel of land, known as Lot
No. 2195 of the Cadastral Survey of San Carlos, Negros Occidental, with an area of 150,333 square
meters, as evidenced by Original Certificate of Title. Upon the death of Pedro Mahilum, he was
succeeded by his six children,who on May 13, 1935, executed a "deed of definite sale" in favor of
Gorgonia Flora, married to Basilio Sotes, whereby in consideration of P2,000.00, receipt of which
was acknowledged by them, they had ceded and conveyed unto her "A parcel of land Part of the
Cadastral Survey of San Carlos. The vendors had acknowledged the deed of sale before Notary
Public. It further appears that Gorgonia Flora, the herein plaintiff, had declared the contested
portion for taxation purposes and began paying the taxes therefor in 1936.The Mahilums,
however, claimed that they never sold any portion of the aforesaid Lot As a matter of fact,
according to them, Original Certificate of Title is free from any encumbrance whatsoever. They
further claimed that if plaintiff had been in possession of a portion of said lot, it was a mere
toleration on their part, but not an acknowledgment of her right if ownership over the property.
It may be mentioned in this connection that most of the six children of the late Tomas Mahilum,
only two were living at the trial of this case, According to Tomasa, neither she nor her brothers
and sisters appeared before notary public, much less thumb marked and/or signed the deed of
sale The rule is well settled that clear and positive evidence is necessary to destroy the credence
of a public instrument, especially so where, like in the instant case, the notary public who ratified
the deed of sale (Exh. "D") took the witness stand and categorically declared that "Those are the
genuine thumbmarks of Tomas, Antonia, Juan, Juliana and Tomasa and this signature is the
signature of Clemente Mahilum. according to the plaintiff, only Clemente Mahilum affixed his
signature on the document, and they simply thumb marked the same For these reasons, the lone
testimony of Tomasa Mahilum is insufficient to destroy the probative value of the public
document (Exh. "D") which, according to the trial court, came into existence only in 1941, a
conclusion that is not correct. For Juan Mahilum alleged in their complaint for "Annulment of
Contract of Definite Sale," dated March 11, 1955 filed in the Court of First Instance of Occidental
herein plaintiff. As the document (Exh. "D") which according to the court below came into
existence only 1941, is dated May 13, 1935, and entitled 'Deed of Definite Sale,' we can safely
say that it is the very document referred to in the aforequoted portion (Par. 5) of the complaint.
Issue: whether or not The Court of Appeals erred in not holding that the deed of sale (Exh. "D")
could not validly convey registered land because it is not signed by two disinterested witnesses.

Held:

No. the issue is without merit. The requirement of two witnesses to the execution of an
instrument, as provided for in Section 127 of Act 496, was complied with in Exhibit D. The notary
public himself, Nicolas D. Destua, signed the instrument as such witness, together with his wife,
and there is nothing in the law which prohibits a notary public from acting in that capacity. The
decision of the Court of Appeals is affirmed
 101.) MACONDRAY & CO., INC., plaintiff-appellant,
vs.
PRAXEDES R. DE SANTOS, defendant-appellee
G.R. No. L-42416 April 9, 1935

Facts:

on January 11, 1934, the defendant executed and delivered to the plaintiff a promissory note for
the sum of P1,000, with interest thereon at the rate of 12 per cent per annum, payable in
installments as set forth in said promissory note and in case of default in the payment of the
principal or interest an additional sum equal to 20 per cent of the total amount due was to be
paid as attorney's fees; that to guarantee the payment of this note the defendant executed a
duly registered chattel mortgage on a Willis 77, Sedan, automobile; that one of the conditions of
said mortgage is that if the mortgaged property be lost, destroyed or damages, for any cause
whatsoever, the mortgage would immediately have the right to foreclose and declare the whole
amount of the principal and interest, secured by said mortgage, due and payable. the mortgaged
automobile, while in possession and control of the defendant, met with an accident resulting in
its total wreck and loss; that by reason of the failure of the defendant to replace or to restore the
automobile to its former condition or to pay the value thereof plaintiff foreclosed its mortgage
and what remained of the wrecked automobile was sold at public auction for the sum of
P50,defendant there was an unpaid balance of P980.39 plus interest defendant refused to pay in
spite of demand. plaintiff reproduces the allegations contained in the first cause of action and
alleges that another condition of the
above-mentioned chattel mortgage is that the defendant agreed to use extraordinary care and
diligence in the preservation and maintenance of the mortgaged property and further engaged
to pay any and all damages for deterioration, reasonable wear and tear excepted, resulting
directly or indirectly from carelessness or neglect of any kind on the part of the mortgagor and
alleges further that through the carelessness, neglect or reckless imprudence of the defendant
and or her agents while the automobile was in her possession or under her control the same was
totally wrecked by reason of which the plaintiff was damaged in the sums mentioned in the first
cause of action and therefore the plaintiff prays that defendant be sentenced to pay the plaintiff.
Issue: Whether or not the trial court erred in sustaining the demurrer.

Held:

Yes. Trial court erred in sustaining the demurrer. The defendant, as the only ground of her
demurrer, alleges that under the provisions of Act No. 4122, article 1454-A of the Civil Code,
there is no cause of action against her. Granting that there was a contract between the parties
for the sale of personal property payable in installments, which does not clearly appear in the
record before this court, the complaint does not allege nor does it appear in the record that there
was a failure to pay two or more installments. In order to apply the provisions of article 1454-A
of the Civil Code it must appear that there was a contract for the sale of personal property
payable in installments and that there has been a failure to pay two or more installments.
 102.) LEVY HERMANOS, INC., plaintiff-appellant,
vs.
LAZARO BLAS GERVACIO, defendant-appellee
G.R. No. L-46306 October 27, 1939

Facts:

On March 10, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a
Packard car. Defendant, after making the initial payment, executed a promissory note for the
balance of P2,400, payable on or before June 15, 1937, with interest at 12 per cent per annum,
to secure the payment of the note, he mortgaged the car to the plaintiff. Defendant failed to pay
the note it its maturity. Wherefore, plaintiff foreclosed the mortgage and the car was sold at
public auction, at which plaintiff was the highest bidder for P1,800. The present action is for the
collection of the balance of P1,600 and interest. Defendant admitted the allegations of the
complaint, and with this admission, the parties submitted the case for decision. The lower court
applied, the provisions of Act No. 4122, inserted as articles 1454-A of the Civil Code, and rendered
judgment in favor of the defendant. Plaintiff appealed.

Issue: Whether or not the lower court erred in applying the provisions of Act No. 4122, inserted
as articles 1454-A of the Civil Code, and rendered judgment in favor of the defendant.

Held:

Yes. "in order to apply the provisions of article 1454-A of the Civil Code it must appear that there
was a contract for the sale of personal property payable in installments and that there has been
a failure to pay two or more installments." The contract, in the instant case, while a sale of
personal property, is not, however, one on installments, but on straight term, in which the
balance, after payment of the initial sum, should be paid in its totality at the time specified in the
promissory note. The transaction is not, therefore, the one contemplated in Act No. 4122 and
accordingly the mortgagee is not bound by the prohibition therein contained as to the right to
the recovery of the unpaid balance. Undoubtedly, the law is aimed at those sales where the price
is payable in several installments, for, generally, it is in these cases that partial payments consist
in relatively small amounts, constituting thus a great temptation for improvident purchasers to
buy beyond their means. There is no such temptation where the price is to be paid in cash, or, as
in the instant case, partly in cash and partly in one term, for, in the latter case, the partial
payments are not so small as to place purchasers off their guard and delude them to a
miscalculation of their ability to pay.
Theoretically, perhaps, there is no difference between paying the price in to installments, in so
far as the size of each partial payment is concerned; but in actual practice the difference exists,
for, according to the regular course of business, in contracts providing for payment of the price
in two installments, there is generally a provision for initial payment. But all these considerations
are immaterial, the language of the law being so clear as to require no construction at
all.lâwphi1.nêtThe suggestion that the cash payment made in this case should be considered as
an installment in order to bring the contract sued upon under the operation of the law, is
completely untenable. A cash payment cannot be considered as a payment by installment, and
even if it can be so considered, still the law does not apply, for it requires non-payment of two or
more installments in order that its provisions may be invoked. Here, only one installment was
unpaid. Judgment is reversed, and the defendant-appellee is hereby sentenced to pay plaintiff-
appellant.
 103.) INDUSTRIAL FINANCE CORPORATION, petitioner,
vs.
CASTOR TOBIAS, respondent.
G.R. No. L-41555 July 27, 1977

Facts:

On June 16, 1968, respondent Castor Tobias bought on installment one (1) Dodge truck from
Leelin Motors, Inc. To answer for his obligation he executed a promissory note in favor of the
latter, payable in thirty-six (36) equal installments with interest. To secure payment of the
promissory note, respondent Tobias executed in favor of Leelin Motors, Inc. a chattel mortgage
on the Dodge truck. On June 19, 1969, Leelin Motors, Inc. indorsed the promissory note and
assigned the chattel mortgage to petitioner Industrial Finance Corporation. As a consequence
respondent Tobias paid six (6) installments on the promissory note directly to the petitioner
Industrial Finance Corporation the last of which was made on February 19, 1970. Upon learning
that the truck met an accident, petitioner decided not to get the truck anymore from Leelin
Motors, Inc. On February 16, 1971, petitioner filed in the Court of First Instance of Manila an
action against respondent Tobias to recover the unpaid balance of the promissory note.- The
lower court dismissed the complaint on the ground that "(I) as much as the defendant voluntarily
and willingly surrendered the truck and gave the Industrial Finance Corporation full authority to
get said truck from Leelin Motors, Inc. (Exhibit 2) pursuant to the demand to surrender (Exhibit
B) the defendant complied with the demands of the plaintiff. Court of Appeals affirmed the
decision of the lower court dismissing the complaint of petitioner Industrial Finance Corporation
but modifying the same by ordering respondent Tobias to pay the cost of repairs of the damaged
truck.

Issue: Whether or not respondent Court of Appeals erred in affirming the dismissal of the
complaint of the petitioner in the lower court by not considering his right as an unpaid vendor of
the truck in question under Art. 1484 of the New Civil Code.
Held:

Yes. The claim of respondent cannot be sustained. Art. 1484 is clear that "should the vendee or
purchaser of a personal property be in default in the payment of two or more of the agreed
installments, the vendor or seller has the option to either exact fulfillment by the purchaser of -
the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal
property, if one was constituted.8 Since the case involves the sale of personal property on
installments Art. 1484 of the Civil Code should apply. The remedies provided for in Art. 1484 are
considered alternative, not cumulative 9 such that the exercise of one would bar the exercise by
the others. 10 Here, petitioner has not cancelled the sale, nor has it exercised the remedy of
foreclosure. Judgment of the respondent Court of Appeals and of the lower court are hereby set
aside and a new one rendered ordering respondent Tobias to pay petitioner the balance of the
purchase price of the truck in question.
104.) LUIS RIDAD and LOURDES RIDAD vs. FILIPINAS INVESTMENT ET AL.
G.R. No. L-39806
January 27, 1983

Facts:

On April 14, 1964, plaintiffs purchased from the Supreme Sales and Development Corporation
two brand new Ford Consul Sedans complete with accessories, for P26,887 payable in 24 monthly
installments. To secure payment thereof, plaintiffs executed on the same date a promissory note
covering the purchase price and a deed of chattel mortgage not only on the two vehicles
purchased but also on another car (Chevrolet) and plaintiffs' franchise or certificate of public
convenience granted by the defunct Public Service Commission for the operation of a taxi fleet.
Then, with the conformity of the plaintiffs, the vendor assigned its rights, title and interest to the
above-mentioned promissory note and chattel mortgage to defendant Filipinas Investment and
Finance Corporation.

Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, the
defendant corporation foreclosed the chattel mortgage extra-judicially, and at the public auction
sale of the two Ford Consul cars, of which the plaintiffs were not notified, the defendant
corporation was the highest bidder and purchaser. Another auction sale was held on November
16, 1965, involving the remaining properties subject of the deed of chattel mortgage since
plaintiffs' obligation was not fully satisfied by the sale of the aforesaid vehicles, and at the public
auction sale, the franchise of plaintiffs to operate five units of taxicab service was sold for P8,000
to the highest bidder, herein defendant corporation, which subsequently sold and conveyed the
same to herein defendant Jose D. Sebastian, who then filed with the Public Service Commission
an application for approval of said sale in his favor.

Plaintiffs filed an action for annulment of contract before the Court of First Instance of Rizal with
Filipinas Investment and Finance Corporation, Jose D. Sebastian and Sheriff Jose San Agustin, as
party-defendants. Thereafter, the lower court rendered judgment declaring the chattel mortgage
to be null and void in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are
concerned, and the sale at public auction conducted by the City Sheriff of Manila concerning said
taxicab franchise, to be of no legal effect. The certificate of sale issued by the City Sheriff of
Manila in favor of Filipinas Investment and Finance Corporation concerning plaintiffs' taxicab
franchise for P8,000 is accordingly cancelled and set aside, and the assignment thereof made by
Filipinas Investment in favor of defendant Jose Sebastian is declared void and of no legal effect.
Issue:Whether or not the chattel mortgage is valid in so far as the franchise and the subsequent
sale thereof are concerned.

Ruling: No. Judgment of the Court of Appeals affirmed. The resolution of said issue is
unquestionably governed by the provisions of Article 1484 of the Civil Code which states:

Art. 1484. In a contract of sale of personal property the price of which is payable
in installments, the vendor may exercise y of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case,
he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void.

Under the above-quoted article of the Civil Code, the vendor of personal property the purchase
price of which is payable in installments, has the right, should the vendee default in the payment
of two or more of the agreed installments, to exact fulfillment by the purchaser of the obligation,
or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one
was constituted. Whichever right the vendor elects, he cannot avail of the other, these remedies
being alternative, not cumulative. Furthermore, if the vendor avails himself of the right to
foreclose his mortgage, the law prohibits him from further bringing an action against the vendee
for the purpose of recovering whatever balance of the debt secured not satisfied by the
foreclosure sale. The precise purpose of the law is to prevent mortgagees from seizing the
mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against
the mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find himself
without the property and still owing practically the full amount of his original indebtedness.

In the instant case, defendant corporation elected to foreclose its mortgage upon default by the
plaintiffs in the payment of the agreed installments. Having chosen to foreclose the chattel
mortgage, and bought the purchased vehicles at the public auction as the highest bidder, it
submitted itself to the consequences of the law as specifically mentioned, by which it is deemed
to have renounced any and all rights which it might otherwise have under the promissory note
and the chattel mortgage as well as the payment of the unpaid balance.
Consequently, the lower court rightly declared the nullity of the chattel mortgage in question in
so far as the taxicab franchise and the used Chevrolet car of plaintiffs are concerned, under the
authority of the ruling in the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., holding
that under the law, should the vendor choose to foreclose the mortgage, he has to content
himself with the proceeds of the sale at the public auction of the chattels which were sold on
installment and mortgaged to him and having chosen the remedy of foreclosure, he cannot nor
should he be allowed to insist on the sale of the house and lot of the vendees, for to do so would
be equivalent to obtaining a writ of execution against them concerning other properties which
are separate and distinct from those which were sold on installment. This would indeed be
contrary to public policy and the very spirit and purpose of the law, limiting the vendor's right to
foreclose the chattel mortgage only on the thing sold.
 105.) JULIETA V. ESGUERRA vs. COURT OF APPEALS and SURESTE PROPERTIES, INC.,
G.R. No. 119310
February 3, 1997

Facts:

On 29 June 1984, Julieta Esguerra filed a complaint for separation of property against her
husband Vicente Esguerra, Jr. before court which was later amended impleading V. Esguerra
Construction Co., Inc. (VECCI for brevity) and other family corporations as defendants.

The parties entered into a compromise agreement which was submitted to the court. On the
basis of the said agreement, the court rendered two partial judgments: one between Vicente and
Julieta and the other as between the latter and VECCI.

By virtue of said agreement, Esguerra Bldg. I located at 140 Amorsolo St., Legaspi Village was sold
and the net proceeds distributed according to the agreement. The controversy arose with respect
to Esguerra Building II. Petitioner started claiming one-half of the rentals of the said building
which VECCI refused. Thus, Petitioner filed a motion with respondent court praying that VECCI
be ordered to remit one-half of the rentals to her effective January 1990 until the same be sold.
VECCI opposed said motion. Respondent trial court ruled in favour of petitioner which was
affirmed by this court in a decision dated 17 May 1991.VECCI resorted to the Supreme Court
which affirmed the decision of the lower courts.

Meanwhile, Esguerra Bldg. II was sold to herein private respondent Sureste Properties, Inc. for
P150,000,000.00. Julieta V. Esguerra filed a motion seeking the nullification of the sale before
respondent trial court on the ground that VECCI is not the lawful and absolute owner thereof and
that she has not been notified nor consulted as to the terms and conditions of the sale. Not being
a party to the civil case, private respondent Sureste filed a Manifestation that petitioner gave
her express consent to the sale of the said building.

Respondent judge (who took over the case from Judge Buenaventura Guerrero, now Associate
Justice of this court) issued an Omnibus Order denying among others, Sureste’s motion, to which
a motion for reconsideration was filed. The RTC rendered a decision ordering the sale of Esguerra
Bldg. II to Sureste Properties, Inc. is declared valid with respect to one-half of the value thereof
but ineffectual and unenforceable with respect to the other half as the acknowledged owner of
said portion was not consulted as to the terms and conditions of the sale. Julieta Esguerra’s
Motion for Reconsideration was denied by the respondent Court in the second assailed
Resolution, hence this petition.
Issue:

Whether or not VECCI’s sale of Esguerra Building II to private respondent is unenforceable to

the extent of her one-half share

Ruling:

Petition denied.

The Civil Code provides that a contract is unenforceable when it is entered into in the name of
another person by one who has been given no authority or legal representation, or who has acted
beyond his powers. And that (a) contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his powers, shall be unenforceable.
After a thorough review of the case at bench, the Court finds the sale of Esguerra Building II by
VECCI to private respondent Sureste Properties, Inc. valid. The sale was expressly and clearly
authorized under the judicially-approved compromise agreement freely consented to and
voluntarily signed by petitioner Julieta Esguerra. Thus, petitioner’s contention that the sale is
unenforceable as to her share for being unauthorized is plainly incongruous with the express
authority granted by the compromise agreement to VECCI, which specified no condition that the
latter shall first consult with the former prior to selling any of the properties listed there. As
astutely and correctly found by the appellate Court:

The compromise agreement entered between private respondent (Julieta Esguerra) and VECCI ,
which was approved by the court, expressly provides, among others, that the latter shall sell or
otherwise dispose of certain properties, among them, Esguerra Bldgs. I and II, and fifty (50%)
percent of the net proceeds thereof to be given to the former. Pursuant to said agreement, VECCI
sold the buildings.

Moreover, petitioner’s contention runs counter to Article 1900 of the Civil Code which provides
that:

So far as third persons are concerned, an act is deemed to have been performed within the scope
of the agent’s authority, if such act is within the terms of the power of attorney, as written, even
if the agent has in fact exceeded the limits of his authority according to an understanding
between the principal and the agent.
Thus, as far as private respondent Sureste Properties, Inc. is concerned, the sale to it by VECCI
was completely valid and legal because it was executed in accordance with the compromise
agreement, authorized not only by the parties thereto, who became co-principals in a contract
of agency created thereby, but by the approving court as well. Consequently, the sale to Sureste
Properties, Inc. of Esguerra Building II cannot in any manner or guise be deemed unenforceable,
as contended by petitioner.

Once a notice of lis pendens has been duly registered, any cancellation or issuance of the title of
the land involved as well as any subsequent transaction affecting the same, would have to be
subject to the outcome of the suit. In other words, a purchaser who buys registered land with
full notice of the fact that it is in litigation between the vendor and a third party stands in the
shoes of his vendor and his title is subject to the incidents and result of the pending litigation. In
the present case, the purchase made by private respondent Sureste Properties, Inc. of the
property in controversy is subject to the notice of lis pendens annotated on its title. Thus, the
private respondent’s purchase remains subject to our decision in the instant case. The former is
likewise deemed notified of all the incidents of this case including the terms and conditions for
the sale contained in the compromise agreement. However, petitioners inference that the
private respondent is also deemed to have been notified that the manner of the sale of the
properties contained in the compromise agreement should be made only upon prior
consent/conformity of the herein petitioner is non sequitur. Nowhere in the compromise
agreement was this inference expressly or impliedly stated. In the final analysis, the
determination of this issue ultimately depends on this Courts disposition of this case.
 106.) FILINVEST CREDIT CORPORATION vs. COURT OF APPEALS
G.R. No. 82508
September 29, 1989

Facts:

Spouses Sy Bang were engaged in the sale of gravel produced from crushed rocks and used for
construction purposes. In order to increase their production, they looked for a rock crusher which
Rizal Consolidated Corporation then had for sale. A brother of Sy Bang, went to inspect the
machine at the Rizal Consolidated’s plant site. Apparently satisfied with the machine, the private
respondents signified their intent to purchase the same.

Since he does not have the financing capability, Sy Bang applied for financial assistance from
Filinvest Credit Corporation. Filinvest agreed to extend financial aid on the following conditions:
(1) that the machinery be purchased in the petitioner’s name; (2) that it be leased with option to
purchase upon the termination of the lease period; and (3) that Sy Bang execute a real estate
mortgage as security for the amount advanced by Filinvest. A contract of lease of machinery (with
option to purchase) was entered into by the parties whereby they to lease from the petitioner
the rock crusher for two years. The contract likewise stipulated that at the end of the two-year
period, the machine would be owned by Sy Bang.

3 months from the date of delivery, Sy Bang claiming that they had only tested the machine that
month, sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per
hour capacity of the machine as stated in the lease contract, the machine could only process 5
tons of rocks and stones per hour. They then demanded that the petitioner make good the
stipulation in the lease contract. Sy Bang stopped payment on the remaining checks they had
issued to the petitioner.

As a consequence of the non-payment, Filinvest extrajudicially foreclosed the real estate

mortgage.
Issue:

Whether or not the real transaction was lease or sale?.

Held:
The real intention of the parties should prevail. The nomenclature of the agreement cannot
change its true essence, i.e., a sale on installments. It is basic that a contract is what the law
defines it and the parties intend it to be, not what it is called by the parties. It is apparent here
that the intent of the parties to the subject contract is for the so-called rentals to be the
installment payments. Upon the completion of the payments, then the rock crusher, subject
matter of the contract, would become the property of the private respondents. This form of
agreement has been criticized as a lease only in name.
Sellers desirous of making conditional sales of their goods, but who do not wish openly to make
a bargain in that form, for one reason or another, have frequently resorted to the device of
making contracts in the form of leases either with options to the buyer to purchase for a small
consideration at the end of term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee.
It is obvious that such transactions are leases only in name. The so-called rent must necessarily
be regarded as payment of the price in installments since the due payment of the agreed amount
results, by the terms of bargain, in the transfer of title to the lessee.
Indubitably, the device contract of lease with option to buy is at times resorted to as a means to
circumvent Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by
retaining ownership over the property in the guise of being the lessor, retains, likewise, the right
to repossess the same, without going through the process of foreclosure, in the event the
vendee-lessee defaults in the payment of the installments. There arises therefore no need to
constitute a chattel mortgage over the movable sold. More important, the vendor, after
repossessing the property and, in effect, canceling the contract of sale, gets to keep all the
installments-cum-rentals already paid.
Even if there was a contract of sale, Filinvest is still not liable because Sy Bang is presumed to be
more knowledgeable, if not experts, on the machinery subject of the contract, they should not
therefore be heard now to complain of any alleged deficiency of the said machinery. It was Sy
Bang who was negligent, not Filinvest. Further, Sy Bang is precluded to complain because he
signed a Waiver of Warranty.
 107.) INDUSTRIAL FINANCE CORPORATION vs. HON. PEDRO A. RAMIREZ, Judge
of the Court of First instance of Manila, and CONSUELO ALCOBA,
G.R. No. L-43821
May 26, 1977

Facts:

On Dec. 4, 1970, Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet car for
P13,157.89, payable in eighteen monthly installments, which was secured by a chattel mortgage
on the car. On that same date, Dizon assigned for ten thousand pesos to Industrial Finance
Corporation all his rights and interest in the chattel mortgage. Consuelo Alcoba defaulted in the
payment of the first four installments. Because of that default and by virtue of the acceleration
clause in the promissory note forming part of the mortgage, the whole obligation became due
and demandable. As of February 27, 1972 Consuelo Alcoba owed Industrial Finance Corporation
the sum of P7,678.05.

On November 20, 1971, or less than a year after Industrial Finance Corporation had discounted
Consuelo Alcoba's promissory note to Dizon, the corporation sued her in the Court of First
Instance of Manila. In its complaint Industrial Finance Corporation prayed for alternative reliefs.
The main objective of its complaint was recovery of the mortgaged car by means of a writ of
replevin. It submitted a redelivery bond. Undoubtedly, the mortgagee-assignee wanted to
foreclose extrajudicially the chattel mortgage but, before it could do so, the sheriff had to seize
the car by means of the provisional remedy of an order for the delivery of personal property.
Industrial Finance Corporation prayed that, if the car could not be recovered by means of
replevin, then Consuelo Alcoba should be ordered to pay the corporation the sum of P11,083.38,
plus twelve percent interest per annum, damages, and attorney's fees in the sum of P2,770.85.
There was no prayer for the foreclosure of the mortgage, a relief that should be invoked if the
complaint had been filed under section 8, Rule 68 of the Rules of Court.

The lower court issued the writ of replevin. But the sheriff was not able to seize the mortgaged
car. Consequently, there was no extrajudicial foreclosure of the mortgage since, for that purpose,
possession of the car by the sheriff is necessary.
The trial court rendered judgment against Alcoba. On September 27, 1973, or long after the
judgment had become final, she paid Industrial Finance Corporation the sum of P2,000. The lower
court issued writs of execution. The writs were returned unsatisfied. A second alias writ of
execution was issued. The sheriff was able to levy upon the mortgaged car which was then in the
possession of the Aco Motor Service of Dagupan City. At the execution sale Industrial Finance
Corporation bought the mortgaged car for P4,000.However, in order to take possession of the
car, the corporation had to pay P4,250 to the Aco Motor Service to satisfy its lien for the repair
and storage of the car.

The corporation contended that, because of that payment, it sustained a loss of P250 in the
execution sale. It asked for a third alias writ of execution in order to satisfy the balance of
Consuelo Alcoba's obligation which, together with the 12% interest, it computed at P11,300.92
as of September 26, 1975.

Consuelo Alcoba opposed the motion for a third alias writ of execution. The lower court in its
order of March 2, 1976 denied the motion for a third alias writ of execution. It treated the
execution sale as a "virtual foreclosure of the chattel mortgage" which, although not beneficial
to the mortgagee, Industrial Finance Corporation, barred it from recovering the deficiency under
article 1484.

Issue: Whether or not the seller is entitled to deficiency damages

Ruling: Yes. Petition granted.

Here, there was no extrajudicial foreclosure of the mortgage. Consuelo Alcoba, the mortgagee,
acted perversely in not surrendering the mortgaged car to the corporation and in preventing
extrajudicial foreclosure. Had she complied with the writ of replevin, then the corporation could
have foreclosed the mortgage and, in that event, she would not be liable for any deficiency.

But she violated the mortgage by removing the car from her residence at 3 Gladiola Street, Roxas
District, Quezon City. She did not comply with the stipulation that, upon her default, the car
should be delivered, on demand, to the mortgagee in Manila.

The corporation's action was for specific performance or fulfillment of the obligation and not for
judicial foreclosure Consuelo Alcoba's payment of P2,000 on account of the money judgment
against her signified that she acquiesced in the action for specific performance. She cannot now
be heard to say that the judgment resulting from that action could not be enforced because the
mortgagees had opted for foreclosure of the mortgage. The Civil Code provides.
 ART. 1484. In a contract of sale of personal property the price of which is payable
in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case, he
shall have no further action against the purchaser to recover any unpaid balance
of the price. Any agreement to the contrary shall be void. (1454-A-a).

According to article 1484, it is only when there has been a foreclosure that the mortgagor is not
liable for any deficiency.

In this case, there was no foreclosure. The mortgagee evidently chose the remedy of specific
performance. It levied upon the car by virtue of an execution and not as an incident of a
foreclosure proceeding. It is entitled to an alias writ of execution for the portion of the judgment
that has not been satisfied. The rule is that in installment sales, if the action instituted is for
specific performance and the mortgaged property is subsequently attached and sold, the sale
thereof does not amount to a foreclosure of the mortgage. Hence, the seller-creditor is entitled
to a deficiency judgment.
108.) SOUTHERN MOTORS, INC. vs. ANGELO MOSCOSO
G.R. No. L-14475,
May 30, 1961

FACTS:
Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on
installment basis for P6,445.00. Upon making a down payment, the defendant executed a
promissory 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 the
plaintiff. Of said account, the defendant had paid a total of P550.00, of which P110.00 was
applied to the interest and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00.
The defendant failed to pay 3 installments on the balance of the purchase price. Plaintiff filed a
complaint against the defendant, to recover the unpaid balance of the promissory note. Upon
plaintiff's petition, a writ of attachment was issued by the lower court on the properties of the
defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to
defendant, were attached by the Sheriff and said truck was brought to the plaintiff's compound
for safe keeping. After attachment and before the trial of the case on the merits, acting upon the
plaintiff's motion for the immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo
sold the truck at public auction in which plaintiff itself was the only bidder for P1,OOO.OO. The
trial court condemned the defendant to pay the plaintiff the amount of P4,475.00 with interest
at the rate of 12% per annum from August 16, 1957,until fully paid, plus 10% thereof as attorney’s
fees and costs. Hence, this appeal by the defendant.

ISSUE:
Whether or not the attachment caused to be levied on the truck and its immediate sale at public
auction was tantamount to the foreclosure of the chattel mortgage on said truck.

HELD:
No. Article 1484 of the Civil Code provides that in a contract of sale of personal property the price
of which is payable in installments, the vendor may exercise any of the following remedies: (I)
Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the
vendee's failure to pay cover two or more installments; and (3) Foreclose the chattel mortgage
on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or
more installments. In this case, he shall have no further action against the purchaser to recover
any unpaid balance of the price. Any agreement to the contrary shall be void. The plaintiff had
chosen the first remedy. The complaint is an ordinary civil action for recovery of the remaining
unpaid balance due on the promissory note.
 The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel
Mortgage Law but those prescribed for ordinary civil actions under the Rules of Court. Had the
plaintiff elected the foreclosure, it would not have instituted this case in court; it would not have
caused the chattel to be attached under Rule 59, and had it sold at public auction, in the manner
prescribed by Rule 39. That the plaintiff did not intend to foreclose the mortgage truck, is further
evinced by the fact that it had also attached the house and lot of the appellant at San Jose,
Antique.We perceive nothing unlawful or irregular in plaintiff's act of attaching the mortgaged
truck itself. Since the plaintiff has chosen to exact the fulfillment of the appellant's obligation, it
may enforce execution of the judgment that may be favorably rendered hereon, on all personal
and real properties of the latter not exempt from execution sufficient to satisfy such judgment.
It should be noted that a house and lot at San Jose, Antique were also attached. No one can
successfully contest that the attachment was merely an incident to an ordinary civil action. 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.
109.)SERVICEWIDE SPECIALISTS, INCORPORATED vs. THE HONORABLE INTERMEDIATE
APPELLATE COURT, GALICANO SITON AND JUDGE JUSTINIANO DE DUMO
G.R. No. 74553
June 8, 1989

Facts:

Galicano Siton purchased from Car Traders Philippines, Inc. a vehicle and paid a downpayment
of the price. The remaining balance includes not only the remaining principal obligation but also
advance interests and premiums for motor vehicle insurance policies. Siton executed a
promissory note in favor of Car Traders Philippines, Inc. expressly stipulating that the face value
of the note shall “be payable, without need of notice of demand, in instalments. There are
additional stipulations in the Promissory Note consisting of, among others, that if default is made
in the payment of any of the installments or interest thereon, the total principal sum then
remaining unpaid, together with accrued interest thereon shall at once become due and
demandable. As further security, Siton executed a Chattel Mortgage over the subject motor
vehicle in favor of Car Traders Philippines, Inc. The credit covered by the promissory note and
chattel mortgage executed by respondent Galicano Siton was first assigned by Car Traders
Philippines, Inc. in favor of Filinvest Credit Corporation.

Subsequently, Filinvest Credit Corporation likewise reassigned said credit in favor of petitioner
Servicewide Specialists, Inc. Siton was advised of this second assignment. When Siton failed to
pay, Servicewide Specialists filed this action against Galicano Siton and “John Doe.” After the
service of summons, Justiniano de Dumo, identifying himself as the “John Doe” in the Complaint,
inasmuch as he is in possession of the subject vehicle, filed his Answer with Counterclaim and
with Opposition to the prayer for a Writ of Replevin.

Siton alleged the fact that he has bought the motor vehicle from Galicano Siton; that de Dumo
and Siton testified that, before the projected sale, they went to a certain. Atty. Villa of Filinvest
Credit Corporation advising the latter of the intended sale and transfer. Siton and de Dumo were
accordingly advised that the verbal information given to the corporation would suffice, and that
it would be tedious and impractical to effect a change of transfer of ownership as that would
require a new credit investigation as to the capacity and worthiness of Atty. De Dumo, being the
new debtor. The further suggestion given by Atty. Villa is that the account should be maintained
in the name of Galicano Siton.; that as such successor, he stepped into the rights and obligations
of the seller; that he has religiously paid the installments as stipulated upon in the promissory
note. He also manifested that the Answer he has filed in his behalf should likewise serve as a
responsive pleading for his co-defendant Galicano Siton.
Issue:

Whether or not the mortgagee is bound by the deed of sale by the mortgagor in favour of a third
person, as neither the mortgagee nor its predecessors has given written or verbal consent
thereto pursuant to the deed of Chattel Mortgage.

Held:

The absence of the written consent of the mortgagee to the sale of the mortgaged property in
favor of a third person, therefore, affects not the validity of the sale but only the penal liability of
the mortgagor under the Revised Penal Code and the binding effect of such sale on the
mortgagee under the Deed of Chattel Mortgage. The rule is settled that the chattel mortgagor
continues to be the owner of the property, and therefore, has the power to alienate the same;
however, he is obliged under pain of penal liability, to secure the written consent of the
mortgagee. Thus, the instruments of mortgage are binding, while they subsist, not only upon the
parties executing them but also upon those who later, by purchase or otherwise, acquire the
properties referred to therein

There is no dispute that the Deed of Chattel Mortgage executed between Siton and the petitioner
requires the written consent of the latter as mortgagee in the sale or transfer of the mortgaged
vehicle. We cannot ignore the findings, however, that before the sale, prompt inquiries were
made by private respondents with Filinvest Credit Corporation regarding any possible future sale
of the mortgaged property; and that it was upon the advice of the company’s credit lawyer that
such a verbal notice is sufficient and that it would be convenient if the account would remain in
the name of the mortgagor Siton.

Even the personal checks of de Dumo were accepted by petitioner as payment of some of the
installments under the promissory note. If it is true that petitioner has not acquiesced in the sale,
then, it should have inquired as to why de Dumo’s checks were being used to pay Siton’s
obligations.
110.) THE BACHRACH MOTOR CO., INC., vs. PA BLO A. MILLAN

G.R. No. L-42256

April 25, 1935

Facts:

On December 12, 1933, the defendant for value received, executed and delivered to the plaintiff
his promissory note for the sum of P939 in monthly instalments. The said amount of P939 was
the balance of the purchase price of one second hand Renault touring car purchased by the said
defendant from the plaintiff, as may be seen from the chattel mortgage executed by the
defendant in favor of the plaintiff, which chattel mortgage was executed by the defendant on the
said date, December 12, 1933, and registered in the office of the Register of Deeds of the City of
Manila. The defendant has violated the terms of the said promissory note and chattel mortgage
by failing to pay the installments which fell due on December 22, 1933, and January 22 and
February 22, 1934.After crediting the defendant with all the payments made by him on account
of said promissory note, there is still due and owing from said defendant in favor of the plaintiff
the sum of P928.50, together with interest thereon at the rate of 12 per cent per annum from
March 17, 1934, until paid. The complaint in the present case was made by the plaintiff without
foreclosing the said chattel mortgage. The defendant had offered to return the said second hand
Renault touring car to the plaintiff in payment of the full amount under the promissory note,but
the said plaintiff refused to receive the same, and has filed this complaint for the full amount of
the purchase price.

The trial court, after embodying in its decision the above stipulation of facts, passed on to
consider the provisions of article 1454-A of the Civil Code (Act No. 4122 of the Philippine
Legislature) and held that inasmuch as that article gives the vendor the alternative of either
cancelling the sale or foreclosing the mortgage and the vendor, having elected not to foreclose
the mortgage, it can only make use of the other alternative, that is, cancel the sale and retain the
total amount of the installments already paid on account of the purchase price of the automobile
bought by the defendant from the plaintiff. Upon this theory the trial court dismissed this case.

Issues:

I. Whether or not a vendor of personal property on the installment plan, upon the
failure of the purchaser to comply with his obligation under such a contract, exact the
fulfillment of that obligation, or does article 1454-A deprive him of that right and limit
him to the right to cancel such a sale or foreclose a mortgage if one has been given on
the property?
 II. Has the adoption of article 1454-A, amending article 1454 of the Civil Code also
repealed that part of article 1124 of the Civil Code, which gives the prejudiced person
the right to exact the fulfillment of an obligation?

Ruling:

No. The judgment of the trial court is reversed.

The right to cancel a contract for the sale of personal property, payable in installments, in case
the vendee fails to comply with the terms of the contract and the right to foreclose a mortgage,
if one has been given on such property, in case the mortgagor fails to live up to the terms thereof
are legal remedies which were available to a vendor long before Act No. 4122 was passed. This
being so it follows that said Act, in so far as it refers to these remedies, is merely a redeclaration
of rights which existed at the time that law was adopted. This Act however places a certain
limitation on the privilege to exercise these rights in the case of installment sales of personal
property in that they are now available to the vendor after the vendee has failed to pay two or
more installments. It furthermore prescribes and limits the rights of the vendor after he has
availed himself of either remedy.

Before Act No. 4122 was adopted the legal right to exact the fulfillment of an obligation was also
available to the person prejudiced by the failure of one of the obligors to comply with the terms
of an obligation. Act No. 4122 does not expressly or impliedly prohibit the party injured by the
failure of one of the obligors, in a sale of personal property on installments, from exacting the
fulfillment of that obligation. Neither do the terms of that Act expressly provide nor do they imply
that, upon failure to pay two or more installments on the purchase price of personal property
sold on the installment plan, the vendor must "cancel the sale or foreclose the mortgage if one
has been given on the property."

In view of the foregoing, it is evident that the Legislature in adopting Act No. 4122 did not intend
to limit the remedies available to a vendor of personal property on the installment plan to the
right to cancel the sale or foreclose the mortgage if one had been given on the property. The real
object of that law is to prevent the exercise of either of these rights by such a vendor until after
the vendee has failed to pay two or more installments and furthermore to prescribe and limit the
rights of the vendor after he has availed himself of either of the remedies mentioned therein.

It is apparent that that part of article 1124 of the Civil Code, mentioned above, has not been
repealed.

Wherefore, we hold that in a sale of personal property on the installment plan the vendor may
elect to exact the fulfillment of the obligation, as the plaintiff has done in this case, cancel the
sale or foreclose his mortgage if one has been given on the property so sold. If he elects to cancel
or foreclose he is bound by the provisions of article 1454-A of the Civil Code.
111.) MACONDRAY & CO., INC., vs. FELICIANO BENITO and SEBASTIAN OCAMPO

G.R. No. 43014

September 24, 1935

Facts:

The plaintiff seeks to recover over P2,500 with interest at 12 per cent per annum from the
defendants, less the sum of P550 realized from the sale at public auction of certain chattels
mortgaged to it as security for the payment of the above mentioned sum. The defendant
executed promissory notes to cover the unpaid balance of the price of certain personal properties
purchased by them from the plaintiff payable in installments, the said properties were covered
by the two chatel mortgages specified therein. Upon the failure of the defendants to pay the two
and more installments on the purchase price of said personal properties, plaintiff foreclosed the
mortgages executed on said properties. The properties mortgaged were sold at public auction to
the plaintiff which was the only bidder therefor. The lower court rendered a judgment denying
the plaintiff to recover from the defendants the unpaid balance of the properties.

Issue:

Whether or not by virtue of sec. 1454-A of the Civil Code (Act No. 4122 of the Philippine
Legislature) plaintiff is entitled to recover from the defendants the unpaid balance of the
purchase price of said personal properties.

Ruling:

No. The judgment of the trial court is affirmed.

"ART. 1454-A. In a contract for the sale of personal property payable in installments failure to
pay two or more installments shall confer upon the vendor the right to cancel the sale or
foreclose the mortgage if one has been given on the property, without reimbursement to the
purchaser of the installments already paid, if there be an agreement to this effect.

"However, if the vendor has chosen to foreclose the mortgage he shall have no further action
against the purchaser for the recovery of any unpaid balance owing by the same, and any
agreement to the contrary shall be null and void."cralaw vir
Under the above article of the Civil Code the vendor of personal property, the purchase price of
which is payable in installments, has the right to cancel the sale or foreclose the mortgage if one
has been given on the property thus sold on the installment plan. Whichever right the vendor
elects he need not return to the purchaser the amount of the installments already paid, if there
is an agreement to that effect. Furthermore, if the vendor avails himself of the right to foreclose
his mortgage this article prohibits him from bringing an action against the purchaser for the
unpaid balance. Under this article, in proceedings for the foreclosure of chattel mortgages,
executed on chattels sold on the installment plan, the mortgagee is limited to the property
included in the mortgage.

In this case the plaintiff, the vendor of personal property on the installment plan, elected, as
stated above, to foreclose its mortgage on that property and consequently under the second
paragraph of this article he has "no further action against the purchaser for the recovery of any
unpaid balance owing by the same.
112.) LORENZO PASCUAL and LEONILA TORRES vs.UNIVERSAL MOTORS CORPORATION

G.R. No. L-27862

November 20, 1974

Facts:

The plaintiffs executed the real estate mortgage of this complaint on December 14, 1960 to
secure the payment of the indebtedness of PDP Transit, Inc. for the purchase of five (5) units of
Mercedez Benz trucks under invoices Nos. 2836, 2837, 2838, 2839 and 2840 with a total purchase
price or principal obligation of P152,506.50 but plaintiffs' guarantee is not to exceed P50,000.00
which is the value of the mortgage. The principal obligation of P152,506.50 was to bear interest
at 1% a month from December 14, 1960. As of April 5, 196, plaintiffs had paid to the defendant
Universal Motors Corporation the sum of P92,964.91, thus leaving a balance of P68,641.69
including interest due as of February 8, 1965. The aforementioned obligation is further secured
by separate deeds of chattel mortgages on the Mercedez Benz units covered by the
aforementioned invoices in favor of the defendant Universal Motors Corporation.

On March 19, 1965, the defendant Universal Motors Corporation filed a complaint against PDP
Transit, Inc. before, the Court of First Instance of Manila with a petition for a writ of Replevin, to
collect the balance due under the Chattel Mortgages and to repossess all the units to sold to
plaintiffs' principal PDP Transit, Inc. including the five (5) units guaranteed under the subject Real
(Estate) Mortgage. In addition to the foregoing the Universal Motors Corporation admitted
during the hearing that in its against the PDP Transit, Inc. it was able to repossess all the units
sold to the latter, including the five (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.
With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the real estate
mortgagors, filed an action in the Court of First Instance of Quezon City (Civil Case No. 8189) for
the cancellation of the mortgage they constituted on two (2) parcels of land in favor of the
Universal Motors Corporation to guarantee the obligation of PDP Transit, Inc. to the extent of
P50,000. The court rendered judgment for the plaintiffs, ordered the cancellation of the
mortgage, and directed the defendant Universal Motors Corporation to pay attorney's fees to
the plaintiffs in the sum of P500.00. Unsatisfied with the decision, defendant interposed the
present appeal. The lower court rendered a judgment precluding the mortgagee to maintain any
further action against the debtor for the purpose of recovering whatever balance of the debt
secured, and even adding that any agreement to the contrary shall be null and void.

Issue: Whether or not what Art. 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 set up by a third party

Ruling: No. To sustain appellant's argument is to overlook the fact that if the guarantor should
be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to
recover what she has paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it
will be the vendee who will be made to bear the payment of the balance of the price, despite the
earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article
1484 would be indirectly subverted, and public policy overturned.
113.)EUTROPIO ZAYAS, JR. vs. LUNETA MOTOR COMPANY and HONORABLE JUAN O.
REYES, Presiding Judge of the Court of First Instance of Manila, Branch XXI

G.R. No. L-30583 October 23, 1982

Facts:
Eutropio Zayas, Jr, purchased on installment basis a motor vehicle from Mr. Roque Escaño of the
Escaño Enterprises in Cagayan de Oro City, dealer of respondent Luneta Motor Company, under
the following terms and conditions: Selling price P7,500.00, Financing charge P1,426.82, Total
Selling Price P8,926.82, Payable on Delivery P1,006.82, Payable in 24 months at 12% interest per
annum P7,920.00. The motor vehicle was delivered to the petitioner who paid the initial payment
in the amount of P1,006.82, and executed a promissory note in the amount of P7,920.00, the
balance of the total selling price, in favor of respondent Luneta Motor Company. The promissory
note stated the amounts and dates of payment of 26 installments covering the P7,920.00 debt.
Simultaneously with the execution of the promissory note and to secure its payment, the
petitioner executed a chattel mortgage on the subject motor vehicle in favour of the respondent.
After paying a total amount of P3,148.00, the petitioner was unable to pay further monthly
installments prompting the respondent Luneta Motor Company to extra- judicially foreclose the
chattel mortgage. The motor vehicle was sold at public auction with the respondent Luneta
Motor Company as the highest bidder in the amount of P5,000.00. Since the payments made by
petitioner Zayas, Jr. plus the P5,000.00 realized from the foreclosure of the chattel mortgage
could not cover the total amount (P7,920.00) of the promissory note executed by the petitioner
in favor of the respondent Luneta Motor Company, the latter filed an action for the recovery of
the balance of P1,551.74 plus interests.
Issue:
Whether or not a deficiency amount after the motor vehicle, subject of the chattel mortgage, has
been sold at public auction could still be recovered by respondent company
Held:
No. The main defense of respondent Luneta Motor Company is that Escaño Enterprises, Cagayan
de Oro City from which petitioner Zayas, Jr. purchased the subject motor vehicle was a distinct
and different entity; that the role of Luneta Motor Company in the said transaction was only to
finance the purchase price of the motor vehicle; and that in order to protect its interest as regards
the promissory note executed in its favor, a chattel mortgage covering the same motor vehicle
was also executed by petitioner Zayas, Jr. In short, respondent Luneta Motor Company maintains
that the contract between the company and the petitioner was only an ordinary loan removed
from the coverage of Article 1484 of the New Civil Code. This is untenable. The Escaño Enterprises
of Cagayan de Oro City was an agent of Luneta Motor Company. Avery significant evidence which
proves the nature of the relationship between Luneta Motor Company and Escaño Enterprises is
Annex “A” of the petitioner’s opposition to Urgent Motion for Reconsideration. Annex “A” is a
Certification from the cashier of Escaño Enterprises on the monthly installments paid by Zayas,
Jr. In the certification, the promissory note in favor of Luneta Motor Company was specifically
mentioned. There was Escaño Enterprises, a dealer of respondent Luneta Motor Company, was
merely a collecting-agent as far as the purchase of the subject motor vehicle was concerned. The
principal and agent relationship is clear. But even assuming that the “distinct and independent
entity” theory of the private respondent is valid, the nature of the transaction as a sale of
personal property on installment basis remains. When, therefore, Escaño Enterprises, assigned
its rights vis-à-visthe sale to respondent Luneta Motor Company, the nature of the transaction
involving Escaño Enterprises and Zayas, Jr. did not change at all. As assignee, respondent Luneta
Motor Company had no better rights than assignor Escaño Enterprises under the same
transaction. The transaction would still be a sale of personal property in instalments covered by
Article 1484 of the New Civil Code.
114.) MANILA TRADING AND SUPPLY CO vs. E. M. REYES
62 Phil 461 (GR No. L-43263)
October 31, 1935

Facts:
On December 13, 1933, following the enactment of Act No. 4122 or the Installment Sales Law,
E.M. Reyes executed in favor of the Manila Trading & Supply Co., a chattel mortgage on an
automobile as security for the payment of the sum of P400, which Reyes agreed to pay in ten
equal monthly installments. As found by the trial judge, Reyes failed to pay some of the
installments due on his obligation. Thereupon the Manila Trading & Supply Co., proceeded to
foreclose its chattel mortgage. The mortgaged property was sold at public auction by the sheriff
of the City of Manila for the sum of P200, After applying this sum, with interest, costs, and
liquidated damages to Reyes' indebtedness, the latter owed the company a balance of P275.47,
with interest thereon at the rate of 12 percent per annum from February 19, 1934. When Reyes
failed to pay the deficiency on the debt, the company instituted an action in the Court of First
Instance of Manila for the recovery thereof. To plaintiff's complaint defendant filed an answer in
which he pleaded as a defense that plaintiff, having chosen to foreclose its chattel mortgage, had
no further action against defendant for the recovery of the unpaid balance owed by him to
plaintiff, as provided by Act No. 4122. After trial the lower court sustained defendant's defense
and rendered a judgment absolving him from the complaint, with costs. From this judgment, the
plaintiff has taken an appeal and here contends that the lower court erred in not declaring Act
No. 4122 of the Philippine Legislature unconstitutional for the following reasons: (1) in that it
embraces more than one subject, (2) in that it unduly restrains the liberty of a person to contract
with respect to his property rights, (3) in that it is class legislation, and (4) in that it denies vendors
and lessors of personal property the equal protection of the laws.
Issues:
1.) Whether or not Act No. 4122 violates the constitutional provision "that no bill which may be
enacted into law shall embraced more than one subject and that subject shall be expressed in
the title of the bill.
2.) Whether or not the said law violates the non-impairment clause.
Held:
Act No. 4122 known as the enforcement sales law is valid and enforceable.
The Philippine Legislature having had the purpose in mind in enacting Act No. 4122 to provide
legislation concerning sales on the installment plan, this subject was sufficiently expressed by
indicating in the title that the law had to do with an amendment of the Civil Code in the portion
thereof given to purchase and sale. Legislation should not be embarrassed by overly strict
construction. The constitutional provision " that no bill which may be enacted into law shall be
expressed in the title of the bill" while designed to remedy an evil was not designed to require
great particularity in stating the object of the law in its title.
Parties have no vested rights in particular remedies or modes of procedure, and the Legislature
may change existing remedies and modes of procedure without impairing the obligations of
contracts, provided an efficacious remedy remains for the enforcement of a mortgage may not,
even when public policy is invoked as an excuse, be pressed so far as to cut down the security of
a mortgage without moderation or reason or in a spirit of oppression.
In the Philippines three remedies are available to the vendor who has sold personal property on
the installment plan. (1) He may elect to exact fulfillment of the obligation (Bachrach Motor Co.
vs. Millan [1935], 61 Phil 409). (2) If the vendee shall have failed to pay two or more installments,
the vendor may cancel the sale. (3) If the vendee shall have failed to pay two or more
installments, the vendor may foreclose the mortgage if one has been given on the property. Act
4122 does no more than qualify the remedy.
The question of the validity of an act is solely one of constitutional power. Questions of
expediency of motive or of results are irrelevant. Nevertheless it is not improper to inquire as to
the occasion for the enactment of a law.
Most constitutional issues are determined by the Court's approach to them. The proper
approach should be to resolve all presumptions in favor of the validity of an act in the absence of
a clear conflict between it and the constitution. All doubts should be resolved in its favor.
Public policy, obvious from a statute, when defined and established by legislative authority and
when violative of no constitutional principle, should be perpetuated by the Courts.
115.) INDUSTRIAL FINANCE CORPORATION VS. CASTOR TOBIAS
G.R. No. L-41555
78 SCRA 28
July 27 1977

Facts:

Tobias bought on installment one a dodge truck from Leelin Motors, Inc. To answer for his
obligation he executed a promissory note in favor of the latter, for the sum of P29 070.28 payable
in thirty – six (36) equal installments with interest at the rate of 12% per annum payable in the
amounts and dates indicated in said promissory note. To secure payment of the promissory note,
respondent Tobias executed in favor of Leelin Motors, Inc. a chattel mortgage on the dodge truck.
Leelin Motors, Inc. indorsed the promissory note and assigned the chattel mortgage to petitioner
Finance Corporation. Tobias paid six (6) installments on the promissory note directly to the
petitioner Industrial Finance Corporation but defaulted on more than two installments, IFC
through a letter gave Tobias a choice of either paying the balance of the purchase price or
surrender the truck. Tobias responded to the letter voluntarily and willingly surrendering the
truck which was still in the custody of Leelin Motors ever since the truck met an accident. Upon
learning that the truck met an accident, IFC decided not to get the truck anymore from Leelin
Motors. Instead, IFC filed an action against Tobias to recover the unpaid balance of the
promissory note.

Issue:

Whether possession by the mortgagee of the disputed vehicle bars its foreclosure.
Held:

Possession by the mortgagee of the disputed vehicle bars the chattel mortgage foreclosure. The
contract being a sale of machinery payable in installments, the applicable provision of law is
Article 1484 of the Civil Code, which gives the vendor the option to exercise any one of the
alternative remedies therein mentioned: exact fulfillment of the obligation, cancel the sale, or
foreclose the chattel mortgage. But he vendor – mortgagor in the present case desisted, on its
own initiative, from consummating the auction sale, without gaining any advantage or benefit,
and without causing any disadvantage,, or harm to the vendees – mortgagees. The least that
could be said is that such desistance of the plaintiff from proceeding with auction sale was a
timely disavowal that cancelled or rendered useless its previous choice to foreclose; its acts,
being extra-judicial, brought no trouble upon any court, and were harmless to the defendants.
For this reason, the plaintiff cannot be considered as having ―exercised‖ (the Code uses the word
―exercise‖) the remedy of foreclosure because of its incomplete implementation, and,
therefore, the plaintiff is not barred from suing on the unpaid account. The remedies provided
for in Art. 1484 are considered alternative, not cumulative such that the exercise by the others.
Here, petitioner has not cancelled the sale, nor has it exercised the remedy of foreclosure.
Foreclosure, judicial or extrajudicial, presupposes something more than a mere demand to
surrender possession of the object of the mortgage. Since the petitioner has not availed itself of
the remedy of cancelling the sale of truck in question or of foreclosing the chattel mortgage on
said truck, petitioner is still free to avail of the remedy of exacting fulfillment of the obligation of
respondent Tobias, the vendee of the truck in question. In Radio wealth Inc. vs. Lavin, the facts
of which are similar to the present case, the issue was ―whether the plaintiff is precluded to
press for collection of an account secured by a chattel mortgage after it shall have informed the
defendants of its intention to foreclose said mortgage, and the voluntary acceptance of such step
(foreclosure) by defendant mortgagor,‖ the Supreme Court ruled in favor of the plaintiff
mortgagee.
 116.) SPOUSES NONATO VS. IAC AND INVESTOR‘S FINANCE CORP.
G.R. No. L-67181 140 SCRA 255
November 22 1985

Facts:

In 1976, Spouses Restituto Nonato and Ester Nonato purchased a Volkswagen from the People‘s
Car Inc. on installment basis. To secure their complete payment, Nonato executed a promissory
note and a chattel mortgage in favor of People‘s Car Inc. Subsequently, People‘s Car Inc. assigned
its rights and interest over the note and mortgage in favor of Investor‘s Finance Corp (IFC). For
failure of the spouses to pay two or more installments, despite demands, the car was repossessed
by IFC. Despite repossession, IFC still demanded from Nonato that they pay the balance of the
price of the car. IFC, then, filed a complaint for the payment of the price of the car with damages.
Nonato, in their defense, argued that when the company repossessed the car, IFC had, by that
act, effectively cancelled the sale of the vehicle. As such, it was barred from exacting the recovery
of the unpaid balance of the purchase price as mandated by Article 1484. The trial court rendered
in favor of IFC and ordered the spouses Nonato pay the balance of the purchase price of the car
with interest. CA affirmed the same.

Issue:

Whether or not a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure
of the buyer to pay two or more of the stipulated installments, may also demand payment of the
balance of the purchase price.
Held:

No. The applicable law in this case at bar is Article 1484 which provides that in a contract of sale
of personal property the price of which is payable in installments, the vendor may exercise any
of the following remedies: 1. Exact fulfilment of the obligation, should the vendee fail to pay;
2. Cancel the sale, should the vendee‘s failure to pay cover two or more installments; 3.
Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee‘s failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to
contrary shall be void. This provision means that should the vendee or the purchaser of a
personal property default in the payment of two or more of the agreed installments, the vendor
or the seller has the option to avail any of these 3 remedies – either to exact fulfillment by the
purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased
personal property, if one was constituted. These remedies have been recognized as an
alternative, not cumulative, that the exercise of one should bar the exercise of the others. In the
present case, it is not disputed that IFC had taken possession of the car purchased by the Nonatos
after the spouses defaulted in their payments. The defense of IFC that it the repossession of the
vehicle was only for the purpose of appraising its value and for storage and safekeeping pending
full payment of the spouses is untenable. The receipt issued by IFC to the spouses when it took
possession of the vehicle that the vehicle could be redeemed within 15 days. This could only
mean that should the spouses fail to redeem the car within the period provided, IFC would retain
permanent possession of the vehicle. IFC even notified the spouses Nonato that the value of the
car was not sufficient to cover the balance of the purchase price and there was no attempt at all
on the part of the company to return the car. The acts performed by IFC are consistent with the
conclusion that it had opted to cancel the sale of the vehicle. Therefore, it is barred from exacting
payment from the petitioners of the balance of the price of the vehicle which it had already
repossessed (it cannot have its cake and eat it too).
117.) VDA. DE QUIAMBAO VS. MANILA MOTORS CO.
G.R. No. L-17384
October 31 1961 3 SCRA 444

Facts:
On 7 March 1940, Gaudencio R. Quiambao, deceased husband of Nestora Rigor Vda. De
Quiambao and father of the other petitioners bought from Manila Motor Company, Inc. one (1)
Studebaker car on installment plan. Upon default in the payment of a number of installments,
the company sued Gaudencion Quiambao in Civil Case 53043 of the CFI Manila. On 4 December
1940, judgment was entered in said case, awarding in favor of the company the sum of P3,
054.32, with interest thereon at 12% per annum, and P300.00 attorney‘s fees. On 14 July 1941,
the court issued a writ of execution directed to the Provincial sheriff of Tarlac, who thereupon
levied on and attached two parcels of land covered by TCT 18390 of the Office of the Register of
Deeds for Tarlac. On 27 August 1941, Atty. Felix P. David, then counsel for the Manila Motor
Company, accompanied by the sheriff, personally apprised Gaudencio Quiambao of the levy. The
latter pleaded to have the execution sale suspended and begged for time within which to satisfy
the judgment debt, proposing that in the meanwhile, he would surrender to the company the
Studebaker car. This proposition was accepted; accordingly, Gaudencio Quiambao delivered the
car to the company, and Atty. David issued a receipt therefore. On 16 October 1941, Gaudencio
Quiambao remitted to the company, on account of the judgment, the sum of P500.00; he ,
however, failed to make further payments, thus leaving a balance still unsettled of P1,952.47,
with interest thereon at 12% per annum from 6 March 1940. In the meantime, the Pacific war
broke out, and when the Japanese forces occupied the country shortly thereafter, the invader
seized all the assets of the Manila Motor Company, Inc. as enemy property. After the war, the
company filed with the Philippine War Damage Commission, among other things, a claim for its
mortgage lien on the car of Gaudencio Quiambao and was awarded the sum of P780.47, P409.75
of which amount had already been paid. On 12 October 1949, the company addressed a letter to
Gaudencio Quiambao asking him to fill a blank form relative to the lost car. Quiambao having
since died, his widow, Nestora Rigor Vda. De Quiambao, returned the form with the statement
that the questioned car was surrendered to the company for storage. On 18 May 1953, a demand
was made on the widow to settle the deceased‘s unpaid accounts, but in view of her refusal, the
company urged the Sheriff of Tarlac to carry out the pre-war writ of execution issued in Civil Case
58043. Although the records of the case had been lost during the war, and have not been
reconstructed, a copy of said writ of execution kept on file by the provincial sheriff was saved.
Accordingly, the latter advertised for sale at public auction the properties levied upon.
Issue:

Whether or not the heirs of the deceased Quiambao may file the suit to annul and set aside the
writ of execution and to recover damages.

Held:
Judgment was rendered by the CFI in favor of the Quiambaos, but on appeal to the Court of
Appeals (CA –GR 17031 – R), the decision was reversed and another entered dismissing the
complaint. Hence, the appeal by writ of certiorari.. Heacock case does not apply; delivery of car
to company did not produce the effect of rescinding or annulling the contract of sale; buyer
surrendered car to postpone satisfaction of the judgment amount. Receipt of car not for
appropriation but as security to satisfaction of judgment credit; does not amount to foreclosure
of chattel mortgage. Since the company did not receive the car for the purpose of appropriating
the same, but merely as security for the ultimate satisfaction of its judgment credit, the situation
under consideration could not have amounted to a foreclosure of the chattel mortgage.
Payment of war damage compensation does not produce same and equal legal effect as formal
foreclosure. Having been the party who was last in possession of the lost car, the company was
well within its rights, or better still, under obligation, to protect the interest of the car owner, as
well as its own, by claiming, as it did, the corresponding war damage compensation for the car.
Such action of the company cannot reasonably be construed as a constriction of its rights under
the pre-war judgment. Suit filed was for specific performance and not for rescission or
cancellation of contract of sale. The best reason why respondent company may not be construed
as having rescinded or cancelled the contract of sale or foreclosed the mortgage on the
automobile is precisely because it brought suit for specific performance, and won, in the pre-war
Civil Case 58043. Pre-war judgment has not prescribed; period covered by moratorium law and
closure of regular courts at the outbreak of war deducted. The pre-war judgment was entered
on 4 December 1940, and on 14 July 1941, a writ of execution was issued. The company took no
further step to enforce the judgment until 19 may 1954, on which date, Manila Motors scheduled
2 parcels of land owned by the Quiambaos for sale at public auction pursuant to the writ of 14
July 1941. Pre-war writ of execution and levy may still be enforced by sale of the levied property
after the lapse of the 5-year period within which a judgment may be executed by motion.
A valid execution issued and levy made within the period provided by law may be enforced by a
sale thereafter. The sale of the property by the sheriff and the application of the proceeds are
simply the carrying out of the writ of execution and levy which when issued were valid. This rests
upon the principle that the levy is the essential act by which the property is set apart for the
satisfaction of the judgment and taken into custody of the law, and that after it has been taken
from the defendant, his interest is limited to its application to the judgment, irrespective of the
time when it may be sold. Amount received from the Philippine War Damage Commission must
be credited to the Quiambao‘s account. The Quiambaos should be credited the amount of
P409.75 which the Manila Motors Actually received from the Philippine War Damage Commission
on account of the car of Gaudencio Quiambao that had been seized from it by the enemy
occupant during the war. This should reduce the principal amount still due Manila Motors from
the Quiambao to the sum of P1,542.72.
118.)CIRILO ABELLA, plaintiff-appellant, vs. MARIANO GONZAGA, defendant-appellee
G.R. No. 345743
September 19, 1931 56 Phil. 132

Facts:

Cirilo Abella demanded specific performance of the contract entered into with Mariano Gonzaga
on April 15, 1921, which parts of it read as follows: SPECIAL CONTRACT OF LEASE Mariano
Gonzaga, landowner, and Cirilo Abella, tenant, do hereby enter into a contract of lease under the
following conditions:
First. Mariano Gonzaga, as land owner, does hereby lease the following described parcel of land
situate within the jurisdiction of San Felipe Neri to Cirilo Abella to use with all the active and
passive easements thereof, to wit: etc. The surveyed parcel contains an area of one hectare,
seventy-eight ares, and fifty-eight centares.
Second. The lease shall run for five years: from March 5, 1921 to March 5, 1926.
Third. The rent shall be one thousand one hundred fourteen pesos and 34/100 (P1,114.34) per
annum payable in advance at the house of the undersigned on the 5th of March every year.
Fourth. In consideration of the sum of one thousand three hundred ninety –two pesos and
(P1,392.92) which the tenant has now paid, and his promise to pay rent of the remaining nineteen
quarters at the periods fixed in the preceding clause, the owner undertakes at the termination
of this contract to transfer free of charge to the tenant the full ownership of the leased property,
provided the tenant has made the aforesaid payments. Gonzaga contended in his answer that
Abella’s right to compel him to make the transfer of the land in question is not absolute, but
conditional; that the conditions have not been complied with, but violated by the latter, who
made the last payment over a year after the obligation had become due.

Issue:
Whether or not the special contract of lease entered into by the parties is a contract of sale
payable on instalment basis?
Held:

Yes. The contract is clearly a sale on installments. The document entitled “Special Contract of
Lease” and the special quality consists in the stipulation found in clause IV, to wit: that in
consideration of the sum of one thousand three hundred ninety –two pesos and 92/100
(P1,392.92) which the tenant has now paid, and his promise to pay rent of the remaining nineteen
quarters at the periods fixed in the preceding clause, the owner undertakes at the termination
of this contract to transfer free of charge to the tenant the full ownership of the leased property,
provided the tenant has made the aforesaid payments. When Abella paid the last installments,
the SC arrived at the inevitable conclusion that although in the contract the usual words “lease,”
“lessee,” and “lessor” were employed, that is no obstacle to the holding that said contract was a
sale on installments, for such was the evident intention of the parties in entering into said
contract. (Art 1281, par. 2, of the Civil Code, as interpreted in the cases of Reyes vs. Limjap, 15
Phil 420; and De la Vega vs. Ballilos, 34 Phil 683)
119. HEACOCK CO. vs. BUNTAL MANUFACTURINMG CO.
G.R. No. 44471 66 PHIL. 246
September 26 1938

Fact:

1. Buntal, et al rented a machine from Heacock Company for a term of 20 calendar months. 2. Buntal,
et al unable to return the machine and failed to pay the lease. 3. The lower court held that the contract
is a contract of lease. It also decided that Heacock should pay P555, the total amount they bound
themselves to pay (rate of rent is P35 a month starting august 1931).

Issue:

Whether or not is the contract a contract of purchase and sale on installments?

Held:

Yes. 1. It was stipulated in the contract that: “In consideration of the sum of P160 to it in hand paid by
the hirer, the owner hereby grants to hirer the option to purchase while the present lease is in force and
effect, the property made the subject of this agreement, at the purchase price of P860….” 2. The court
finds that the amount P160 paid by Buntal Manufacturing Company was an initial payment for the P860
purchase price. 3. The court also stated that the intention of the parties should be taken into
consideration when the contract in question is not clear. The intention was seen in the contract they
stipulated.

204
120. MACONDRAY & CO., INC. vs. BENITO and OCAMPO
G.R. No. 43014 62 Phil. 246
September 24, 1935

Facts:
The defendants admit each and every allegation in each and every paragraph of the plaintiff’s
amended complaint subject to the stipulations herein contained. The promissory notes
mentioned were executed by the defendants to cover the unpaid balance of the price of certain
personal properties purchased by them from the plaintiff payable in installments, the said
properties being covered by the two chattel mortgages specified therein. Upon the failure of the
defendants to pay the two (2) and more installments on the purchase price of said personal
properties, plaintiff foreclosed the mortgages executed on said properties. The properties
mortgaged were sold at public auction to the plaintiff which was the only bidder therefor. The
parties, in view of this stipulation, submit for determination by the court the sole question of law
whether by virtue of sec. 1454-A of the Civil Code (Act No. 4122 of the Philippine Legislature)
plaintiff is entitled to recover from the defendants the unpaid balance of the purchase price of
said personal properties.

Issue:
Whether or not the provisions of Law No.4122 of the Philippine Legislature benefits in this case
the defendants.

Held:
Yes. Not challenged the effectiveness and the validity of the Act. The notes in question are hand
granted after the rule of law. It is obvious, therefore, that the transaction at issue here falls within
its laws, among which are available expressly that the seller will have no action against the
purchaser, to recover the unpaid balance after the property executed, and that any agreement
contrary to this legal provision is null and void
 121. FELIX GOCHAN AND SONS REALTY CORPORATIONS, ET AL. vs. HEIRS OF
RAYMUNDO BABA
GR. 138945
August 19, 2003

Facts:

The lot in dispute is part of the conjugal property of spouses Raymundo Baba and Dorotea Inot
and was originally titled in the name of Inot. After Raymundo’s demise in 1947, an extrajudicial
settlement of his estate, including the lot was executed. One-half undivided portion of the lot
was adjudicated in favor of Dorotea, and the other half divided between his 2 children -
Victoriano and Gregorio. Dorotea, Victoriano and Gregorio sold the lot to petitioner Felix Gochan
and Sons Realty Corporation. -Consequently, title was issued in favor of Gochan Realty. Sometime
in 199(, the latter entered into a joint venture agreement with Sta. Lucia Realty and Development
Corporation Inc. for the development of the lot into a subdivision. Meanwhile respondents,
Baba, filed a complaint for quieting of title and re-conveyance with damages against petitioners.
They alleged that they are among the 7 children of Dorotea Inot and Raymundo Baba. That
petitioners connived with Dorotea Inot, Victoriano and Gregorio Baba in executing the
extrajudicial settlement and deed of sale which fraudulently deprived them of their hereditary
share and that said transactions are void insofar as their respective shares are concerned because
they never consented to the said sale and extrajudicial settlement, which came to their
knowledge barely a year prior to the filing of the complaint. Their action in reality seeks to declare
said deeds as inexistent for lack of consent, an essential element for the existence of a contract.

Issue: Whether or not there exists a cause of action to declare the inexistence of the contract of
sale with respect to the shares of respondents in the lot on the ground of absence of any of the
essential requisites of a valid contract. If the answer is in the negative, then the dismissal of the
complaint must be upheld, otherwise the dismissal on the ground of prescription is erroneous
because actions for the declaration of inexistence of contracts on the ground of absence of any
of the essential requisites thereof do not prescribe.
Held: Under Article 1819 of the Civil Code, there is no contract unless the following requisites
concur:(1) consent of the contracting parties; (2) object certain which is the subject matter of the
contract; and (3)cause of the obligation. The absence of any of these essential requisites renders
the contract inexistent and an action or defense to declare said contract void ab initio and the
action does not prescribe, pursuant to Article 1410 of the same Code. In Delos Reyes v. Court of
Appeals , it was held that one of the requisites of a valid contract under Article 1819 of the Civil
Code, namely, the consent and the capacity to give consent of the parties to the contract, is an
indispensable condition for the existence of consent. There is no effective consent in law without
the capacity to give such consent. In other words, legal consent presupposes capacity. Thus, there
is said to be no consent, and consequently, no contract when the agreement is entered into by
one in behalf of another who has never given him authorization unless he has by law a right to
represent the latter.
The Court, applying Article 1410 of the Civil Code declared that a claim of prescription is
unavailing where the assailed conveyance is void ab initio with respect to those who had no
knowledge of the transaction. In the case at bar, it involved a fraudulent sale and extrajudicial
settlement of a lot executed without the knowledge and consent of some of the co-owners. It
was held that the sale of the realty is void in so far as it prejudiced the shares of said co-owners
and that the issuance of a certificate of title over the whole property in favor of the vendee does
not divest the other coowners of the shares that rightfully belonged to them. The nullity of the
said sale proceeds from the absence of legal capacity and consent to dispose of the property.
Likewise, in the cases decided by the Court, it ruled that conveyances by virtue of a forged
signature or a fictitious deed of sale are void ab initio. The absence of the essential requites of
consent and cause or consideration in these cases rendered the contract inexistent and the action
to declare their nullity is imprescriptible. On the other hand, laches is defined as failure or neglect
for an unreasonable and unexplained length of time, to do that which, by exercising due
diligence, could or should have been done earlier. It is negligence or omission to assert a right
within a reasonable time, warranting presumption that the party entitled to assert it has
abandoned it or has declined to assert it. Its elements are: (1) conduct on the part of the
defendant, or of one under whom he claims, giving rise to the situation which the complaint
seeks a remedy; (2) delay in asserting the complainant’s rights, the complainant having had
knowledge or notice of the defendant’s conduct as having been afforded an opportunity to
institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant
would assert the right in which the bases his suit; and (4) injury or prejudice to the defendant in
the event relief is accorded to the complainant, or the suit is not held barred. Though laches
applies even to imprescriptible actions, its elements must be proved positively. Laches is
evidentiary in nature which could not be established by mere allegations in the pleadings and
cannot be resolved in a motion to dismiss. At this stage therefore, the dismissal of the complaint
on the ground of laches is premature.
122. PHILIPPINE LAWIN BUS CO. (LAWIN) vs. COURT OF APPEALS
GR 130972
January 23, 2002

Facts:
Lawin initially loaned from Advance Capital Corp. (ACC) Php 8M payable within 1 yr and
guaranteed by a chattel mortgage of Lawin’s 9 buses. Lawin was in default in its payments and
was able to pay only Php 1.8M. Lawin obtained its second loan of 2M payable in one month under
a promissory note. Lawin was in default again hence it asked ACC for a restructuring of the loan
despite this Lawin was still not able to pay. The buses for foreclosed and it was sold for 2M. ACC
sent Lawin demand letters to settle its indebtedness amounting to hp16, 484,992.42 then
subsequently filed a suit for sum of money against Lawin. Lawin in its defense said that there was
already an arrangement to settle the obligation A. Sale of 9 buses and its proceeds will cover for
the full payment; OR B. ACC will shoulder the rehabilitation of the buses and the earnings of the
operation will be then applied to the loan RTC dismissed the suit to claim for a sum of money
against Lawin. CA reversed RTC’s decision and ruled that Lawin has to pay.

Issue:

WON there was dacion en pago between the parties upon the surrender or transfer of the
mortgaged buses to the respondent.

Held:
No. In dacion en pago, property is alienated to the creditor in satisfaction of a debt in money. It
is “the delivery and transmission of ownership of a thing by the debtor to the creditor as an
accepted equivalent of the performance of the obligation.” It “extinguishes the obligation to the
extent of the value of the thing delivered, either as agreed upon by the parties or as may be
proved, unless the parties by agreement, express or implied, or by their silence, consider the
thing as equivalent to the obligation, in which case the obligation is totally extinguished."
Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of dacion
en pago. A contract of sale is perfected at the moment there is a meeting of the minds of the
parties thereto upon the thing which is the object of the contract and upon the price. In Filinvest
Credit Corporation v. Philippine Acetylene Co., Inc., we said:
“x x x. In dacion en pago, as a special mode of payment, the debtor offers another thing to the
creditor who accepts it as equivalent of payment of an outstanding obligation. The undertaking
really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or
property of the debtor, payment for which is to be charged against the debtor’s debt. As such,
the essential elements of a contract of sale, namely, consent, object certain, and cause or
consideration must be present. In its modern concept, what actually takes place in dacion en
pago is an objective novation of the obligation where the thing offered as an accepted equivalent
of the performance of an obligation is considered as the object of the contract of sale, while the
debt is considered as the purchase price. In any case, common consent is an essential
prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or
obligation.” In this case, there was no meeting of the minds between the parties on whether the
loan of the petitioners would be extinguished by dacion en pago. The petitioners anchor their
claim solely on the testimony of Marciano Tan that he proposed to extinguish petitioners’
obligation by the surrender of the nine buses to the respondent acceded to as shown by receipts
its representative made. However, the receipts executed by respondent’s representative as proof
of an agreement of the parties that delivery of the buses to private respondent would result in
extinguishing petitioner’s obligation do not in any way reflect the intention of the parties that
ownership thereof by respondent would be complete and absolute. The receipts show that the
two buses were delivered to respondent in order that it would take custody for the purpose of
selling the same. The receipts themselves in fact show that petitioners deemed respondent as
their agent in the sale of the two vehicles whereby the proceeds thereof would be applied in
payment of petitioners’ indebtedness to respondent. Such an agreement negates transfer of
absolute ownership over the property to respondent, as in a sale. Thus, in Philippine National
Bank v. Pineda we held that where machinery and equipment were repossessed to secure the
payment of a loan obligation and not for the purpose of transferring ownership thereof to the
creditor in satisfaction of said loan, no dacion en pago was ever accomplished.
 123.) INSULAR LIFE ASSURANCE COMPANY, LTD, ET AL. vs. ROBERT YOUNG, ET AL
GR. 140964
January 16, 2002

Facts:

In December, 1987, respondent Robert Young, together with hisassociates and co-respondents,
acquired by purchase Home Bankers Savings and Trust Co., now petitioner Insular Savings Bank
("the Bank," for brevity), from the Licaros family for P65,000,000.00. Young and his group
obtained 55% equity in the Bank, while Jorge Go and his group owned the remaining 45%.
However, Araneta backed out from the intended sale and demanded the return of his
downpayment. On October 1, 1991, Insular Life and Insular Life Pension Fund formally informed
Young of their intention to acquire 30% and 12%, respectively, of theBank's outstanding shares,
subject to due diligence audit and pr operdocumentation. On October 9, 1991, Insular Life and
Young, authorized to represent the other stockholders, entered into a Memorandum of
Agreement(MOA), wherein Insular Life and its Pension Fund agreed to purchase 30,860common
shares and 311,572 common shares, respectively, for a total consideration of P198,000,000.00.
Under its terms, the MOA is subject to Young's representations and warranties that, as of
September 30, 1991, the Bank has (a) a total outstanding paid-in capital of P157,714,900.00, (b)
a total net worth of P114,801,539.00, and (c) total loans with doubtful recovery of
P60,000,000.00. The MOA is also subject to these "condition precedents": (1) Young shall infuse
additional capital of P50,000,000.00 into the Bank, and (2) Insular Life and its Pension Fund shall
undertake a due diligence audit on the Bank to determine whether the provision for
P60,000,000.00 doubtful account made by Young is sufficient. On October 21, 1991, Young signed
a letter prepared by Atty. Jacinto Jimenez, counsel of Insular Life, addressed to Mr. Vicente R.
Ayllon, Chairman of the Bank's Board of Directors, stating that due to business reverses, he shall
not be able to pay his obligations under the Credit Agreement between him and Insular Life.
Consequently, Young "unconditionally and irrevocably waive(s) the benefit of the period" of the
loan (up to December 26, 1991) and Insular "may consider (his) obligations there under as
defaulted." He likewise interposes no objection to Insular Life's exercise of its rights under the
said agreement.Forthwith, Insular Life instructed its counsel to foreclose the ple dgeconstituted
upon the shares. The latter then sent Young a notice informing him of the sale of the shares in a
public auction scheduled on October 28, 1991, and in the event that the shares are not sold, a
second auction sale shall be held the next day, October 29.
 From October 31, 1991 to December 27, 1991, Insular Life invested a total of P325,000,000.00
in the Bank. Meanwhile, on November 27, 1991, its Board of Directors, during its meeting,
accepted the resignation of Young as President. On January 7, 1992, Young and his associates
filed with the Regional Trial Court(RTC), Branch 142, Makati City, a complaint against the Bank,
Insular Life and its counsel, Atty. Jacinto Jimenez, petitioners, for annulment of notarial sale,
specific performance and damages, docketed as Civil Case No. 92-049. The complaint alleges,
inter alia, that the notarial sale conducted by petitioner Atty. Jacinto Jimenez is void as it does
not comply with the requirement of notice of the second auction sale; that Young was forced by
the officers of Insular Life to sign letters to enable them to have control of the Bank; that under
the MOA, InsularLife should apply the purchase price of P198,000,000.00 (corresponding to
the55% of the outstanding capital stock of the Bank) to Young's lo an of P200,000,000.00 and pay
the latter P162,000,000.00, representing t heremaining 45% of its outstanding capital stock,
which must be set-off against the loans of the other respondents.

Issue: Whether or not the respondent court erred in declaring the MOA dated October 9, 1991
valid and enforceable between the parties despite respondent Young's failure to comply with the
terms and conditions thereof.

Ruling:
Contrary to the findings of the Court of Appeals, the foregoing provisions of the MOA negate the
existence of a perfected contract of sale. The MOA is merely a contract to sell since the parties
therein specifically undertook to enter into a contract of sale if the stipulated conditions are met
and the representation and warranties given by Young prove to be true. The obligation of
Petitioner Insular Life to purchase, as well as the concomitant obligation of Young toconvey to it
the shares, are subject to the fulfillment of the conditions contained in the MOA. Once the
conditions, representation and warranties are satisfied, then it is incumbent upon the parties to
perform their respective obligations under the contract. Conversely, in the event that these
conditions are not met or complied with, no obligation on the part of either party arises. This is
in accord with Article 1181 of the Civil Code which provides that "(i)n conditional obligations, the
acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend
upon the happening of the event which constitutes the condition." And when the obligation
assumed by a party to a contract is expressly subjected to a condition, the obligation cannot be
enforced against him unless the condition is complied with. Here, the MOA provides that Young
shall infuse additional capital of P50,000,000.00 into the Bank. It likewise specifies the warranty
given by Young that the doubtful accounts of petitioner Bank amounted to P60,000,000.00 only.
However, records show that Young failed to infuse the required additional capital. Moreover, the
due diligence audit shows that Young was involved infraudulent schemes like checkkiting which
amounted to a staggeringP344,000,000.00. This belies his representation that the doubtful
accounts of petitioner Bank amounted only to P60,000,000.00. As a result of these anomalous
transactions, the reserves of the Bank were depleted and it had to undergo a ten-year
rehabilitation plan under the supervision of the Central Bank. Significantly, respondents do not
dispute petitioners’ assertion that Young committed fraud, misrepresented the warranties and
failed to comply with his obligations under the MOA. Accordingly, no right in favor of Young's
arose and no obligation on the part of Insular Life was created. Since no sale transpired between
the parties, the Court of Appeals erred in concluding that Insular Life purchased 55% of the total
shares of the Bank under the MOA. Consequently, its findings that the debt of Young has been
fully paid and that Insular Life is liable to pay for the remaining 45% equity have no basis. It must
be emphasized that the MOA did not convey title of the shares to InsularLife. If ever there was
delivery of the said shares to Insular Life, it was because they were pledged by Young to Insular
Life under the Credit Agreement. It would be unfair on the part of Young to demand compliance
by InsularLife of its obligations when he himself was remiss in his own. Neither can hefeign
ignorance of the stipulation in the MOA since it is presumed that he read the same and was
satisfied with its provisions before he affixed his signature therein. The fact that no deed of sale
was subsequently executed by the parties confirms the conclusion that no sale transpired
between them.