ALI AKANG, Petitioner,

vs.
MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE
G.R. No. 186014
June 26, 2013
FACTS:
Akang Ali Akang is a member of the Maguindanaon tribe of Isulan, Province of Sultan Kudarat
and the registered land owner.
In 1962, a two-hectare portion of the property was sold by the Akang to the Municipality of
Isulan through Mayor Datu Ampatuan for PhP 3000.oo, to be used as a government center.
The Municipality of Isulan immediately took possession of the property and began construction
of the municipal building. However, 39 years later in 2001, Akang filed a civil action for
Recovery of Possession of Subject Property and/or Quieting of Title thereon and Damages
against the Municipality of Isulan.
Akang alleged, among others, that the agreement was one to sell, which was not consummated as
the purchase price was not paid.
In its answer, the Municipality of Isulan denied the Akangs allegations, claiming that the Deed
of Sale was valid; and that it has been in open, continuous and exclusive possession of the
property for 40 years.
The RTC rendered judgment in favor of the Akang. The RTC construed the Deed of Sale as a
contract to sell, based on the wording of the contract, which allegedly showed that the
consideration was still to be paid and delivered on some future date a characteristic of a
contract to sell. In addition, the RTC observed that the Deed of Sale was not determinate as to its
object since it merely indicated 2 hectares of the 97,163 sq m lot, which is an undivided portion
of the entire property owned by the Akang. The RTC found that segregation must first be made
to identify the parcel of land indicated in the Deed of Sale and it is only then that the Akang
could execute a final deed of absolute sale in favor of the Municipality of Isulan.
As regards the payment of the purchase price, the RTC found the same to have not been made by
the Municipality of Isulan.
The RTC also ruled that the Deed of Sale was not approved pursuant to Section 145 of the
Administrative Code for Mindanao and Sulu or Section 120 of the Public Land Act, and that the
board resolution appropriating the amount of PhP3,000.oo as payment for the property cannot be
considered proof of the sale as said Deed of Sale was not presented for examination and approval
of the Provincial Board.
The CA, however, on appeal, sustained the Municipality of Isulans arguments and ruled that the
Akang is not entitled to recover ownership and possession of the property as the Deed of Sale
already transferred ownership thereof to the Municipality of Isulan. The CA held that the
doctrines of estoppel and laches must apply against the Akang, that actual payment was paid.
The CA also rules that even if Akang was not paid the consideration, it does not affect the
validity of the contract of sale for it is not the fact of payment of the price that determines its
validity.

ISSUE:
Is Akang correct in contending that the contract is merely a contract to sell and not a contract of
sale?
HELD:
No. The deed of sale is a valid contract of sale, not a mere contract to sell.
A contract of sale is defined under Article 1458 of the Civil Code:
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefore a price certain in money or
its equivalent.
The elements of a contract of sale are: (a) consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price certain
in money or its equivalent.
A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:
A bilateral contract whereby the prospective seller, while expressly reserving the ownership of
the subject property despite delivery thereof to the prospective buyer, binds himself to sell the
said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing
sold, whereas in a contract to sell, the ownership is, by agreement, retained by the seller and is
not to pass to the vendee until full payment of the purchase price.
The Deed of Sale executed by the petitioner and the respondent is a perfected contract of sale, all
its elements being present.
xxx
Even assuming, arguendo, that the petitioner was not paid, such non-payment is immaterial and
has no effect on the validity of the contract of sale. A contract of sale is a consensual contract and
what is required is the meeting of the minds on the object and the price for its perfection and
validity. In this case, the contract was perfected the moment the petitioner and the respondent
agreed on the object of the sale the two-hectare parcel of land, and the price Three Thousand
Pesos (P3,000.00). Non-payment of the purchase price merely gave rise to a right in favor of the
petitioner to either demand specific performance or rescission of the contract of sale.

ROGELIO DANTIS, Petitioner,

vs.
JULIO MAGHINANG, JR., Respondent.
G.R. No. 191696
April 10, 2013
FACTS:
Rogelio alleged that he was the registered owner of a parcel of land covered by TCT No. T125918, with an area of 5,657 square meters, located in Bulacan. Rogelio claims that he
acquired ownership of the property through a deed of extrajudicial partition of the estate of his
deceased father, Emilio Dantis, and that he had been paying the realty taxes on the said property.
Rogelio alleges in a complaint for quieting of title that Julio, Jr. occupied and built a house on a
portion of his property without any right and that demands were made upon Julio, Jr. that he
vacate the premises but the same fell on deaf ears. He finally alleges and that the acts of Julio,
Jr. had created a cloud of doubt over his title and right of possession of his property.
Julio, Jr. denied the material allegations of the complaint. By way of an affirmative defense, he
claimed that he was the actual owner of the subject lot where he was living and that he had been
in open and continuous possession of the property for almost 30 years. Julio, Jr. says that the
subject lot was once tenanted by his ancestral relatives until it was sold by Rogelios father,
Emilio, to his father, Julio Maghinang, Sr. and that he succeeded to the ownership of the subject
lot after his father died.
RTC rendered its decision declaring Rogelio as the true owner. The CA reversed.
ISSUES:
1. Was Julio able to prove that his father bought the land from Rogelios father?
2. Are the terms of payment necessary for the perfection of a contract of sale?
HELD:
1. No, Julio was not able to prove by preponderance of evidence that there was perfected
contract of sale.
"It is an age-old rule in civil cases that he who alleges a fact has the burden of proving it and a
mere allegation is not evidence. After carefully sifting through the evidence on record, the Court
finds that Rogelio was able to establish a prima facie case in his favor tending to show his
exclusive ownership of the parcel of land... In light of Rogelios outright denial of the oral sale
together with his insistence of ownership over the subject lot, it behooved upon Julio, Jr. to
contravene the formers claim and convince the court that he had a valid defense. The burden of
evidence shifted to Julio, Jr. to prove that his father bought the subject lot from Emilio Dantis.
xxx
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership
of, and to deliver, a determinate thing, and the other to pay therefor a price certain in money or
its equivalent. A contract of sale is a consensual contract and, thus, is perfected by mere consent
which is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. Until the contract of sale is perfected, it cannot, as an
independent source of obligation, serve as a binding juridical relation between the parties. The

essential elements of a contract of sale are: a) consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; b) determinate subject matter;
and c) price certain in money or its equivalent. The absence of any of the essential elements shall
negate the existence of a perfected contract of sale.
Seemingly, Julio, Jr. wanted to prove the sale by a receipt when it should be the receipt that
should further corroborate the existence of the sale. At best, his testimony only alleges but does
not prove the existence of the verbal agreement. Julio, Jr. miserably failed to establish by
preponderance of evidence that there was a meeting of the minds of the parties as to the subject
matter and the purchase price.
2. Yes, an agreement on the terms and conditions of payment is necessary to perfect a contract of
sale.
"In Swedish Match, AB v. Court of Appeals, the Court ruled that the manner of payment of the
purchase price was an essential element before a valid and binding contract of sale could exist.
Albeit the Civil Code does not
explicitly provide that the minds of the contracting parties must also meet on the terms or manner
of payment of the price, the same is needed, otherwise, there is no sale.38 An agreement anent
the manner of payment goes into the price so much so that a disagreement on the manner of
payment is tantamount to a failure to agree on the price.
xxx
Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement
between the parties had been perfected over the lot in question. Indeed, this Court has already
ruled before that a definite agreement on the manner of payment of the purchase price is an
essential element in the formation of a binding and enforceable contract of sale."

NICOLAS P. DIEGO, Petitioner,

vs.
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.
G.R. No. 179965
February 20, 2013
FACTS:
In 1993, petitioner Nicolas and his brother Rodolfo, respondent, entered into an oral contract to
sell covering Nicolas's share of the family's Diego Building situated in Dagupan City. Rodolfo
made a downpayment of P250,000.00. It was agreed that the deed of sale shall be executed upon
payment of the remaining balance of P250,000.00. However, Rodolfo failed to pay the remaining
balance.
Meanwhile, the building was leased out to third parties, but Nicolas's share in the rents were not
remitted to him by herein respondent Eduardo, another brother of Nicolas and administrator of
the Diego Building. Instead, Eduardo gave Nicolas's monthly share in the rents to Rodolfo.
Despite demands and protestations by Nicolas, Rodolfo and Eduardo failed to render an
accounting and remit his share in the rents and fruits of the building, and Eduardo continued to
hand them over to Rodolfo.
Thus, on May 17, 1999, Nicolas filed a Complaint against Rodolfo and Eduardo before the RTC
of Dagupan City praying for an accounting of all the transactions over the Diego Building and
the delivery of his share in the rents.
Rodolfo and Eduardo filed their Answer, arguing that Nicolas had no more claim in the rents in
the Diego Building since he had already sold his share to Rodolfo. Rodolfo admitted having
remitted only P250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase
price to Nicolas only after the latter shall have executed a deed of absolute sale.
The trial court rendered its Decision dismissing the case for lack of merit and ordering Nicolas to
execute a deed of absolute sale in favor of Rodolfo upon payment by the latter of the
P250,000.00 balance of the agreed purchase price. The trial court ruled that the sale by Nicolas
of his share was already perfected as early as the year 1993 when he received the partial
payment. Nicolas has ceased to be a co-owner of the building and is no longer entitled to the
fruits of the Diego Building.
Nicolas appealed to the CA which sustained the trial court's Decision in toto.
ISSUES:
1, Was there a perfected contract of sale of Nicolas share in the the Diego Builfing?
2. Is rescission available as a remedy to the parties?
HELD:
1. No. The contract entered into by Nicolas and Rodolfo was a contract to sell.
The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and
distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title to
the property until full payment.
There is no dispute that in 1993, Rodolfo agreed to buy Nicolas' share in the Diego Building for
the price of P500,000.00. There is also no dispute that of the total purchase price, Rodolfo paid,
and Nicolas received, P250,000.00. Significantly, it is also not disputed that the parties agreed

that the remaining amount of P250,000.00 would be paid after Nicolas shall have executed a
deed of sale.
This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price,
is a unique and distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this
Court ruled that a stipulation in the contract, "[w]here the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price," indicates that the
parties entered into a contract to sell. According to this Court, this particular provision is
tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court
ruled that the agreement to execute a deed of sale upon full payment of the purchase price
"shows that the vendors reserved title to the subject property until full payment of the purchase
price."
In Tan v. Benolirao, this Court, speaking through Justice Brion, ruled that the parties entered into
a contract to sell as revealed by the following stipulation:
d) That in case, BUYER has complied with the terms and conditions of this contract, then the
SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale;
The Court further held that "[j]urisprudence has established that where the seller promises to
execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the
contract is only a contract to sell."
The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the
parties show that they agreed on a contract to sell, not of sale. The absence of a formal deed of
conveyance is indicative of a contract to sell.
xxx
In the instant case, the parties were similarly embroiled in an impasse. The parties' agreement
was likewise embodied only in a receipt. Also, Nicolas did not want to sign the deed of sale
unless he is fully paid. On the other hand, Rodolfo did not want to pay unless a deed of sale is
duly executed in his favor. We thus say, pursuant to our ruling in Chua v. Court of Appeals that
the agreement between Nicolas and Rodolfo is a contract to sell.
This Court cannot subscribe to the appellate court's view that Nicolas should first execute a deed
of absolute sale in favor of Rodolfo, before the latter can be compelled to pay the balance of the
price. This is patently ridiculous, and goes against every rule in the book. This pronouncement
virtually places the prospective seller in a contract to sell at the mercy of the prospective buyer,
and sustaining this point of view would place all contracts to sell in jeopardy of being rendered
ineffective by the act of the prospective buyers, who naturally would demand that the deeds of
absolute sale be first executed before they pay the balance of the price. Surely, no prospective
seller would accommodate.
xxx
Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this case
only entered into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full
payment of the agreed purchase price Moreover, there could not even be a surrender or
delivery of title or possession to the prospective buyer Rodolfo. This was made clear by the
nature of the agreement, by Nicolas's repeated demands for the return of all rents unlawfully and
unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo's repeated demands for
Nicolas to execute a deed of sale which, as we said before, is a recognition on their part that
ownership over the subject property still remains with Nicolas.
xxx

It must be stressed that it is anathema in a contract to sell that the prospective seller should
deliver title to the property to the prospective buyer pending the latter's payment of the price in
full. It certainly is absurd to assume that in the absence of stipulation, a buyer under a contract to
sell is granted ownership of the property even when he has not paid the seller in full. If this were
the case, then prospective sellers in a contract to sell would in all likelihood not be paid the
balance of the price.
2. No. The remedy of rescission is not available in contracts to sell. As explained in Spouses
Santos v. Court of Appeals:
In view of our finding in the present case that the agreement between the parties is a contract to
sell, it follows that the appellate court erred when it decreed that a judicial rescission of said
agreement was necessary. This is because there was no rescission to speak of in the first place.
As we earlier pointed out, in a contract to sell, title remains with the vendor and does not pass on
to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of
the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a
mere breach, casual or serious, but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force. This is entirely different from the situation in a
contract of sale, where non-payment of the price is a negative resolutory condition. The effects in
law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and
cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell,
however, the vendor remains the owner for as long as the vendee has not complied fully with the
condition of paying the purchase price. If the vendor should eject the vendee for failure to meet
the condition precedent, he is enforcing the contract and not rescinding it.
xxx
Similarly, we held in Chua v. Court of Appeals that "Article 1592 of the Civil Code permits the
buyer to pay, even after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by notarial act. However, Article 1592 does
not apply to a contract to sell where the seller reserves the ownership until full payment of the
price," as in this case.
Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase
price, the contract to sell was deemed terminated or cancelled. As we have held in Chua v. Court
of Appeals, "[s]ince the agreement x x x is a mere contract to sell, the full payment of the
purchase price partakes of a suspensive condition. The non-fulfillment of the condition prevents
the obligation to sell from arising and ownership is retained by the seller without further
remedies by the buyer." Similarly, we held in Reyes v. Tuparan that "petitioner's obligation to sell
the subject properties becomes demandable only upon the happening of the positive suspensive
condition, which is the respondent's full payment of the purchase price. Without respondent's full
payment, there can be no breach of contract to speak of because petitioner has no obligation yet
to turn over the title. Respondent's failure to pay in full the purchase price in full is not the
breach of contract contemplated under Article 1191 of the New Civil Code but rather just an
event that prevents the petitioner from being bound to convey title to respondent." Otherwise
stated, Rodolfo has no right to compel Nicolas to transfer ownership to him because he failed to
pay in full the purchase price. Correlatively, Nicolas has no obligation to transfer his ownership
over his share in the Diego Building to Rodolfo.
xxx
We find it irrelevant and immaterial that Nicolas described the termination or cancellation of his
agreement with Rodolfo as one of rescission. Being a layman, he is understandably not adept in
legal terms and their implications. Besides, this Court should not be held captive or bound by the
conclusion reached by the parties. The proper characterization of an action should be based on
what the law says it to be, not by what a party believed it to be.

EAGLERIDGE DEVELOPMENT CORPORATION, MARCELO N. NAVAL and CRISPIN I.

OBEN, Petitioners,
vs.
CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC. Respondent.
G.R. No. 204700
April 10, 2013
FACTS:
Petitioners Eagleridge Development Corporation (EDC), and sureties Marcelo N. Naval and
Crispin I. Oben are the defendants in a collection suit initiated by Export and Industry Bank
(EIB) through a Complaint.
By virtue of a Deed of Assignment, EIB transferred EDC's outstanding loan obligations of
P10,232,998.00 to respondent Cameron Granville 3 Asset Management, a special purpose
vehicle.
On February 22, 2012, EDC filed a Motion for Production/Inspection10 of the Loan Sale and
Purchase Agreement (LSPA) dated April 7, 2006 referred to in the Deed of Assignment.
Respondent Cameron filed its Comment dated March 14, 2012 alleging that EDC have not
shown good cause for the production of the LSPA and that the same is allegedly irrelevant to
the case a quo. In response, EDC filed on March 26, 2012 their Reply, explaining that the
production of the LSPA was for good cause. They pointed out that the claim of Cameron is
based on an obligation purchased after litigation had already been instituted in relation to it. They
claimed that pursuant to Article 1634 of the New Civil Code on assignment of credit, the
obligation subject of the case a quo is a credit in litigation, which may be extinguished by
reimbursing the assignee of the price paid, the judicial costs incurred and interest. Article 1634
provides:
When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to
extinguish it by reimbursing the assignee for the price the latter paid therefor, the judicial costs
incurred by him, and the interest on the price from the day on which the same was paid.
The trial court denied EDCs motion for production, ruling that there was failure to show good
cause for the production of the LSPA and failure to show that the LSPA is material or contains
evidence relevant to an issue involved in the action. EDC filed a Motion for Reconsideration,
arguing that the application of Article 1634 of the Civil Code is sanctioned by the Special
Purpose Vehicle Law (SPV Law).
According to the trial court, there is no need for the production of the LSPA in order to apprise
the EDC of the amount of consideration paid by Cameron in favor of EIB and that it is enough
that the Deed of Assignment has been produced by Cameron showing that it has acquired the
account of the EDC pursuant to the SPV Law.
ISSUE:
Does EDC have a right to be apprised of the cost of the assignment of their credit to Cameron so
that they may properly extinguish their obligation?
HELD:
Yes. The question was whether respondent had acquired a valid title to the credit, i.e., EDCs
outstanding loan obligation, and whether it had a right to claim from petitioners. In fact,

petitioners had maintained in their motions before the trial court the nullity or non-existence of
the assignment of credit purportedly made between respondent and EIB (the original creditor).
As respondent Camerons claim against the petitioners relies entirely on the validity of the Deed
of Assignment, it is incumbent upon respondent Cameron to allow petitioners to inspect all
documents relevant to the Deed, especially those documents which, by express terms, were
referred to and identified in the Deed itself. The LSPA, which pertains to the same subject matter
the transfer of the credit to respondent is manifestly useful to petitioners defense.
xxx
Also, Section 19 of the SPV Law expressly states that redemption periods allowed to borrowers
under the banking law, the rules of court and/or other laws are applicable. Hence, the equitable
right of redemption allowed to a debtor under Article 1634 of the Civil Code is applicable.
Therefore, as petitioners correctly pointed out, they have the right of legal redemption by paying
Cameron the transfer price plus the cost of money up to the time of redemption and the judicial
costs.
Certainly, it is necessary for the petitioners to be informed of the actual consideration paid by the
SPV in its acquisition of the loan, because it would be the starting point for them to negotiate for
the extinguishment of their obligation. As pointed out by the petitioners, since the Deed of
Assignment merely states For value received, the appropriate information may be supplied by
the LSPA. It is self-evident that in order to be able to intelligently match the price paid by
respondent for the acquisition of the loan, petitioner must be provided with the necessary
information to enable it to make a reasonably informed proposal. Because of the virtual refusal
and denial of the production of the LSPA, petitioners were never accorded the chance to
reimburse respondent of the consideration the latter has paid.
Consequently, this Court finds and so holds that the denial of the Motion for Production despite
the existence of good cause, relevancy and materiality for the production of the LSPA was
unreasonable and arbitrary constituting grave abuse of discretion on the part of the trial court.
Hence, certiorari properly lies as a remedy in the present case.

FIL-ESTATE GOLF AND DEVELOPMENT, INC. and FILESTATE LAND, INC., Petitioners,
vs.
VERTEX SALES AND TRADING, INC., Respondent.
G.R. No. 202079
June 10, 2013
FACTS:
FEGDI is a stock corporation whose primary business is the development of golf courses. FELI
is also a stock corporation, but is engaged in real estate development. FEGDI was the developer
of the Forest Hills Golf and Country Club and, in consideration for its financing support and
construction efforts, was issued several shares of stock of Forest Hills.
Sometime in August 1997, FEGDI sold, on installment, to RS Asuncion Construction
Corporation (RSACC) one Class "C" Common Share of Forest Hills for P1,100,000.00. Prior to
the full payment of the purchase price, RSACC sold, on February 11, 1999,5 the Class "C"
Common Share to respondent Vertex Sales and Trading, Inc. (Vertex). RSACC advised FEGDI
of the sale to Vertex and FEGDI, in turn, instructed Forest Hills to recognize Vertex as a
shareholder. For this reason, Vertex enjoyed membership privileges in Forest Hills.
Despite Vertexs full payment, the share remained in the name of FEGDI. 17 months after the
sale, Vertex wrote FEDGI a letter demanding the issuance of a stock certificate in its name.
FELI replied, initially requested Vertex to first pay the necessary fees for the transfer. Although
Vertex complied with the request, no certificate was issued. This prompted Vertex to make a
final demand. As the demand went unheeded, Vertex filed a Complaint for Rescission with
Damages and Attachment against FEGDI, FELI and Forest Hills. It averred that the petitioners
defaulted in their obligation as sellers when they failed and refused to issue the stock certificate
covering the subject share despite repeated demands. On the basis of its rights under Article 1191
of the Civil Code, Vertex prayed for the rescission of the sale and demanded the reimbursement
of the amount it paid, plus interest. During the pendency of the rescission action (a certificate of
stock was issued in Vertexs name, but Vertex refused to accept it.
ISSUE:
1. May the delay in the issuance of a stock certificate be considered a substantial breach as to
warrant rescission of the contract of sale?
2. Is FELI a party to the contract of sale given that it is its share of stock that is being sold?
HELD:
1. Yes. Physical delivery is necessary to transfer ownership of stocks.
The factual backdrop of this case is similar to that of Raquel-Santos v. Court of Appeals,
where the Court held that in "a sale of shares of stock, physical delivery of a stock
certificate is one of the essential requisites for the transfer of ownership of the stocks
purchased."
In that case, Trans-Phil Marine Ent., Inc. (Trans-Phil) and Roland Garcia bought Piltel
shares from Finvest Securities Co., Inc. (Finvest Securities) in February 1997. Since
Finvest Securities failed to deliver the stock certificates, Trans-Phil and Garcia filed an
action first for specific performance, which was later on amended to an action for
rescission. The Court ruled that Finvest Securities failure to deliver the shares of stock

constituted substantial breach of their contract which gave rise to a right on the part of
Trans-Phil and Garcia to rescind the sale.
Section 63 of the Corporation Code provides:
SEC. 63. Certificate of stock and transfer of shares. The capital stock of stock
corporations shall be divided into shares for which certificates signed by the president or
vice-president, countersigned by the secretary or assistant secretary, and sealed with the
seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so
issued are personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person legally
authorized to make the transfer. No transfer, however, shall be valid, except as between
the parties, until the transfer is recorded in the books of the corporation showing the
names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.
In this case, Vertex fully paid the purchase price by February 11, 1999 but the stock certificate
was only delivered on January 23, 2002 after Vertex filed an action for rescission against FEGDI.
Under these facts, considered in relation to the governing law, FEGDI clearly failed to deliver
the stock certificates, representing the shares of stock purchased by Vertex, within a reasonable
time from the point the shares should have been delivered. This was a substantial breach of their
contract that entitles Vertex the right to rescind the sale under Article 1191 of the Civil Code. It is
not entirely correct to say that a sale had already been consummated as Vertex already enjoyed
the rights a shareholder can exercise. The enjoyment of these rights cannot suffice where the law,
by its express terms, requires a specific form to transfer ownership.
2. No. Regarding the involvement of FELI in this case, no privity of contract exists between
Vertex and FELI. "As a general rule, a contract is a meeting of minds between two persons. The
Civil Code upholds the spirit over the form; thus, it deems an agreement to exist, provided the
essential requisites are present. A contract is upheld as long as there is proof of consent, subject
matter and cause. Moreover, it is generally obligatory in whatever form it may have been entered
into. From the moment there is a meeting of minds between the parties, [the contract] is
perfected."
In the sale of the Class "C" Common Share, the parties are only FEGDI, as seller, and Vertex, as
buyer. As can be seen from the records, FELI was only dragged into the action when its staff
used the wrong letterhead in replying to Vertex and issued the wrong receipt for the payment of
transfer taxes. Thus FELI should be absolved from any liability.

FOREST HILLS GOLF & COUNTRY CLUB, Petitioner,

vs.
VERTEX SALES & TRADING, INC., Respondent.
G.R. No. 202205
March 6, 2013
FACTS:
Petitioner Forest Hills is a domestic non-profit stock corporation that operates and maintains a
golf and country club facility in Antipolo City. Forest Hills was created as a result of a joint
venture agreement between Kings Properties and Fil-Estate Golf (FEGDI). Accordingly, Kings
and FEGDI owned the shares of stock of Forest Hills, holding 40% and 60% of the shares,
respectively.
In August 1997, FEGDI sold to RS Asuncion Construction Corporation (RSACC) 1) Class C
common share of Forest Hills for P1.1 million. Prior to the full payment of the purchase price,
RSACC transferred its interests over FEGDI's Class C common share to respondent Vertex.
RSACC advised FEGDI of the transfer and FEGDI, in turn, requested Forest Hills to recognize
Vertex as a shareholder. Forest Hills acceded to the request, and Vertex was able to enjoy
membership privileges in the golf and country club.
Despite the sale of FEGDI's Class C common share to Vertex, the share remained in the name
of FEGDI, prompting Vertex to demand for the issuance of a stock certificate in its name. As its
demand went unheeded, Vertex filed a complaint for rescission with damages against defendants
Forest Hills, FEGDI, and Fil-Estate Land, Inc. (FELI) the developer of the Forest Hills golf
course. Vertex averred that the defendants defaulted in their obligation as sellers when they failed
and refused to issue the stock certificate covering the Class C common share. It prayed for the
rescission of the sale and the return of the sums it paid; it also claimed payment of actual
damages for the defendants unjustified refusal to issue the stock certificate.
Forest Hills denied transacting business with Vertex and claimed that it was not a party to the
sale of the share; FELI claimed the same defense. While admitting that no stock certificate was
issued, FEGDI alleged that Vertex nonetheless was recognized as a stockholder of Forest Hills
and, as such, it exercised rights and privileges of one. FEGDI added that during the pendency of
Vertex's action for rescission, a stock certificate was issued in Vertex's name, but Vertex refused
to accept it.
The RTC dismissed Vertex's complaint after finding that the failure to issue a stock certificate did
not constitute a violation of the essential terms of the contract of sale that would warrant its
rescission. The RTC noted that the sale was already consummated notwithstanding the nonissuance of the stock certificate. The issuance of a stock certificate is a collateral matter in the
consummated sale of the share; the stock certificate is not essential to the creation of the relation
of a shareholder.
The CA reversed the RTC. It declared that in the sale of shares of stock, physical delivery of a
stock certificate is one of the essential requisites for the transfer of ownership of the stocks
purchased. It based its ruling on Section 63 of the Corporation Code, which requires for a valid
transfer of stock
1. the delivery of the stock certificate;
2. the endorsement of the stock certificate by the owner or his attorney-in-fact or other
persons legally authorized to make the transfer; and
3. to be valid against third parties, the transfer must be recorded in the books of the
corporation.
ISSUES:

1. Is Forest Hills a party to the contract of sale, given that what is being traded is its share of
stock?
2. Is restitution a proper effect of Vertexs rescission of the contract of sale?
HELD:
1. No. While Forest Hills questioned and presented its arguments against the CA ruling
rescinding the sale of the share in its petition, it is not the proper party to appeal this ruling.
As correctly pointed out by Forest Hills, it was not a party to the sale even though the subject of
the sale was its share of stock. The corporation whose shares of stock are the subject of a transfer
transaction (through sale, assignment, donation, or any other mode of conveyance) need not be a
party to the transaction, as may be inferred from the terms of Section 63 of the Corporation
Code. However, to bind the corporation as well as third parties, it is necessary that the transfer is
recorded in the books of the corporation. In the present case, the parties to the sale of the share
were FEGDI as the seller and Vertex as the buyer (after it succeeded RSACC). As party to the
sale, FEGDI is the one who may appeal the ruling rescinding the sale. The remedy of appeal is
available to a party who has a present interest in the subject matter of the litigation and [is]
aggrieved or prejudiced by the judgment. A party, in turn, is deemed aggrieved or prejudiced
when his interest, recognized by law in the subject matter of the lawsuit, is injuriously affected
by the judgment, order or decree. The rescission of the sale does not in any way prejudice
Forest Hills in such a manner that its interest in the subject matter the share of stock is
injuriously affected. Thus, Forest Hills is in no position to appeal the ruling rescinding the sale of
the share. Since FEGDI, as party to the sale, filed no appeal against its rescission, we consider as
final the CAs ruling on this matter.
2. Yes, but not between Vertex and Forest Hills. A necessary consequence of rescission is
restitution: the parties to a rescinded contract must be brought back to their original situation
prior to the inception of the contract; hence, they must return what they received pursuant to the
contract. Not being a party to the rescinded contract, however, Forest Hills is under no obligation
to return the amount paid by Vertex by reason of the sale. Indeed, Vertex failed to present
sufficient evidence showing that Forest Hills received the purchase price for the share or any
other fee paid on account of the sale (other than the membership fee which we will deal with
after) to make Forest Hills jointly or solidarily liable with FEGDI for restitution.
Although Forest Hills received P150,000.00 from Vertex as membership fee, it should be
allowed to retain this amount. For three years prior to the rescission of the sale, the nominees of
Vertex enjoyed membership privileges and used the golf course and the amenities of Forest Hills.
We consider the amount paid as sufficient consideration for the privileges enjoyed by Vertex's
nominees as members of Forest Hills.

GATCHALIAN REALTY, INC., Petitioner,

vs.
EVELYN M. ANGELES, Respondent.
G.R. No. 202358
November 27, 2013
FACTS:
On 28 December 1994, respondent Angeles purchased a house and lot, both under contracts to
sell, from plaintiff GRI valued at PhP 750,000.00 and PhP 450,000.00), respectively, with 24%
interest per annum to be paid by installment within a period of ten years.
The house and lot were delivered to Angeles in 1995. Nonetheless, under the contracts to sell,
GRI retained ownership of the property until full payment of the purchase price.
Angeles failed to satisfy her monthly installments, as she was only able to pay 35 installments
for the lot and 48 installments for the house. According to GRI, Angeles was given at least 12
notices for payment in a span of 3 years but she still failed to settle her account. She was given
3 more notices reminding her to pay her outstanding balance with warning of impending legal
action and/or rescission of the contracts, but to no avail. After being given a total of 51 months
grace period for both contracts, Angeles was served with a notice of notarial rescission dated 11
September 2003 by registered mail which she allegedly received on 19 September 2003 as
evidenced by a registry return receipt.
Angeles was also furnished by GRI with a demand letter dated 26 September 2003 demanding
her to pay PhP 112,304.42 as outstanding reasonable rentals for her use and occupation of the
house and lot as of August 2003 and to vacate the same. She was informed in said letter that the
50% refundable amount that she is entitled to has already been deducted from the rentals she
incurred during such period that she was not able to pay the installments.
Angeles subsequently sent postal money orders through registered mail to GRI. In a letter dated
27 January 2004, Angeles was notified by GRI of its receipt of a postal money order and was
requested to notify GRI of the purpose of the payment. She was informed that if the postal
money order was for her amortizations, the money order will not be accepted and she was
requested to pick it up from GRIs office. On 29 January 2004, another postal money order was
sent by Angeles to GRI. Angeles also informed GRI that the postal money orders were supposed
to be payments for her monthly amortization. GRI reiterated that the postal money orders will
only be accepted if the same will serve as payment of her outstanding rentals and not as monthly
amortization. Still, 4 more postal money orders were sent by Angeles to GRI.
For her continued failure to satisfy her obligations with GRI and her refusal to vacate the house
and lot, GRI filed a complaint for unlawful detainer against Angeles.
The MTC ruled in favor of GRI, determining that the case was for an unlawful detainer and
assumed jurisdiction. The MTC further held that GRI was able to establish the validity of the
rescission. On appeal, the RTC found that the case was one for ejectment. As an ejectment court,
the MeTCs jurisdiction is limited only to the issue of possession and does not include the title or
ownership of the properties in question.
The RTC pointed out that R.A. 6552 provides that the non-payment by the buyer of an
installment prevents the obligation of the seller to convey title arising. Moreover, cancellation of
the contract to sell may be done outside the court when the buyer agrees to the cancellation.
However, in the present case, Angeles denied knowledge of GRIs notice of cancellation.
Cancellation of the contract must be done in accordance with Section 3 of R.A. 6552, which
requires a notarial act of rescission and refund to the buyer of the cash surrender value of the
payments on the properties. Thus, the RTC held that there is no valid cancellation of the Contract

to Sell. On reconsideration, however, the RTC ruled in favor of GRI. The RTC relied on this
Courts ruling in Pilar Development Corporation v. Spouses Villar, stating that, the cash
surrender value of the payments made by Angeles shall be applied to the rentals that accrued on
the property, which rental wasfixed by the court at PhP7,000.oo/month. Thus the RTC ordered
Angeles, to pay plaintiff GRI the outstanding rental amount of P48,851.60 with legal interest.
Finally, the CA dismissed GRIs complaint for unlawful detainer, and reversed and set aside the
RTCs decision. Although the CA ruled that Angeles received the notice of notarial rescission, it
ruled that the actual cancellation of the contract between the parties did not take place because
GRI failed to refund to Angeles the cash surrender value.
ISSUE:
1. Was there a valid rescission of the contracts to sell effected by GRI?
2. Did GRI comply with the twin requirements under the Maceda law for valid cancellations of
contracts to sell of real property, namely a notarized notice of cancellation and a refund of the
cash surrender value?
HELD:
1. No, because the law requires the refunding of a cash surrender value for rescissions of
contracts to sell of real property.
Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment Buyer
Protection Act, has the declared public policy of protect[ing] buyers of real estate on installment
payments against onerous and oppressive conditions.
xxx
It should be noted that Section 3 of R.A. 6552 and paragraph six of Contract Nos. 2271 and
2272, speak of two years of installments. The basis for computation of the term refers to the
installments that correspond to the number of months of payments, and not to the number of
months that the contract is in effect as well as any grace period that has been given. Both the law
and the contracts thus prevent any buyer who has not been diligent in paying his monthly
installments from unduly claiming the rights provided in Section 3 of R.A. 6552.
The MeTC, the RTC, and the CA all found that Angeles was able to pay 35 installments for the
lot (Contract No. 2271) and 48 installments for the house (Contract No. 2272).21 Angeles thus
made installment payments for less than three years on the lot, and exactly four years on the
house.
Section 3(a) of R.A. 6552 provides that the total grace period corresponds to one month for every
one year of installment payments made, provided that the buyer may exercise this right only once
in every five years of the life of the contract and its extensions. The buyers failure to pay the
installments due at the expiration of the grace period allows the seller to cancel the contract after
30 days from the buyers receipt of the notice of cancellation or demand for rescission of the
contract by a notarial act. Paragraph 6(a) of the contract gave Angeles the same rights.
xxx
GRI claims that it gave Angeles a refund of the cash surrender value of both the house and the lot
in the total amount of P574,148.40 when it deducted the amount of the cash surrender value from
the amount of rentals due.

For paying more than two years of installments on the lot, Angeles was entitled to receive cash
surrender value of her payments on the lot equivalent to fifty per cent of the total payments
made. This right is provided by Section 3(b) of R.A. 6552, as well as paragraph 6(b) of the
contract. Out of the contract price of P450,000, Angeles paid GRI a total of P364,188.96
consisting of P135,000 as downpayment and P229,188.96 as installments and penalties. The
cash surrender value of Angeles payments on the lot amounted to P182,094.48.28
For the same reasons, Angeles was also entitled to receive cash surrender value of the payments
on the house equivalent to fifty per cent of the total payments made. Out of the contract price of
P750,000, Angeles paid GRI a total of P784,107.84 consisting of P165,000 as downpayment and
P619,107.84 as installments and penalties. The cash surrender value of Angeles payments on
the house amounted to P392,053.92.30
There was no actual cancellation of the contracts because of GRIs failure to actually refund the
cash surrender value to Angeles.
2. No. This Court has been consistent in ruling that a valid and effective cancellation under
R.A. 6552 must comply with the mandatory twin requirements of a notarized notice of
cancellation and a refund of the cash surrender value.
In Olympia Housing, Inc. v. Panasiatic Travel Corp., we ruled that the notarial act of rescission
must be accompanied by the refund of the cash surrender value In Pagtalunan v. Dela Cruz
Vda. De Manzano, we ruled that there is no valid cancellation of the Contract to Sell in the
absence of a refund of the cash surrender value.
xxx
In view of the absence of a valid cancellation, the Contract to Sell between GRI and Angeles
remains valid and subsisting.
xxx
We observe that this case has, from the institution of the complaint, been pending with the courts
for 10 years. As both parties prayed for the issuance of reliefs that are just and equitable under
the premises, and in the exercise of our discretion, we resolve to dispose of this case in an
equitable manner. Considering that GRI did not validly rescind Contracts to Sell Nos. 2271 and
2272, Angeles has two options:
1. The option to pay, within 60 days from the MeTCs determination of the proper
amounts, the unpaid balance of the full value of the purchase price of the subject
properties plus interest at 6% per annum from 11 November 2003, the date of filing of the
complaint, up to the finality of this Decision, and thereafter, at the rate of 6% per
annum.43 Upon payment of the full amount, GRI shall immediately execute Deeds of
Absolute Sale over the subject properties and deliver the corresponding transfer
certificate of title to Angeles.
In the event that the subject properties are no longer available, GRI should offer
substitute properties of equal value. Acceptance of the suitability of the substitute
properties is Angeles sole prerogative. Should Angeles refuse the substitute properties,
GRI shall refund to Angeles the actual value of the subject properties with 6% interest per
annum44 computed from 11 November 2003, the date of the filing of the complaint, until
fully paid; and
2. The option to accept from GRI P574,148.40, the cash surrender value of the subject
properties, with interest at 6% per annum,45 computed from 11 November 2003, the date
of the filing of the complaint, until fully paid. Contracts to Sell Nos. 2271 and 2272 shall
be deemed cancelled 30 days after Angeles receipt of GRIs full payment of the cash

surrender value. No rent is further charged upon Angeles as GRI already had possession
of the subject properties on 10 October 2006.
xxx
Should Evelyn M. Angeles choose to pay the unpaid balance, she shall pay, within 60 days from
the MeTCs determination of the proper amounts, the unpaid balance of the full value of the
purchase price of the subject properties plus interest at 6% per annum from 11 November 2003,
the date of filing of the complaint, up to the finality of this Decision, and thereafter, at the rate of
6% per annum. Upon payment of the full amount, GRI shall immediately execute Deeds of
Absolute Sale over the subject properties and deliver the corresponding transfer certificate of
title to Angeles.
In the event that the subject properties are no longer available, GRI should offer substiute
properties of equal value. Should Angeles refuse the substitute properties - GRI shall refund to
Angeles the actual value of the subject properties with 6% interest per annum computed from 11
November 2003, the date of the filing of the complaint, until fully paid.
Should Evelyn M. Angeles choose to accept payment of the cash surrender value, she shall
receive from GRI P574,148.40 with interest at 6% per annum, computed from 11 November
2003, the date of the filing of the complaint, until fully paid. Contracts to Sell Nos. 2271 and
2272 shall be deemed cancelled 30 days after Angeles' receipt of GRI's full payment of the cash
surrender value. No rent is further charged upon Evelyn M. Angeles.

SPOUSES LEHNER and LUDY MARTIRES, Petitioners

vs.
MENELIA CHUA, Respondent.
G.R. No. 174240
March 20, 2013
FACTS:
Subject of the instant controversy are twenty-four memorial lots located at the Holy Cross
Memorial Park in Novaliches, Quezon City. Respondent Chua, together with her mother,
Florencia R. Calagos, own the disputed property. Their co-ownership is evidenced by a Deed of
Sale and Certificate of Perpetual Care.
In 1995, Chua borrowed from petitioner spouses Martires the amount of PhP150,000.oo. The
loan was secured by a real estate mortgage over the abovementioned property. Respondent failed
to fully settle her obligation. Subsequently, without foreclosure of the mortgage, ownership of
the subject lots were transferred in the name of Martires via a Deed of Transfer.
Chua thus filed a Complaint against Martires, Manila Memorial Park Inc., the company which
owns the Holy Cross Memorial Park, and the Register of Deeds of Quezon City, praying for the
annulment of the contract of mortgage between her and petitioners on the ground that the interest
rates imposed are unjust and exorbitant. Chua also sought accounting to determine her liability
under the law. She likewise prayed that the Register of Deeds of Quezon City and Manila
Memorial Park, Inc. be directed to reconvey the disputed property to her.
The RTC decided in favor of petitioners Martires by dismissing the complaint. On appeal, the
CA affirmed, with modification, the judgment of the RTC. The CA ruled that Chua voluntarily
entered into a contract of loan and that the execution of the Deed of Transfer is sufficient
evidence of petitioners' acquisition of ownership of the subject property.
Respondent filed a Motion for Reconsideration, which the CA granted. The CA reconsidered its
findings and concluded that the Deed of Transfer which, on its face, transfers ownership of the
subject property to petitioners, is, in fact, an equitable mortgage. The CA held that the true
intention of respondent was merely to provide security for her loan and not to transfer ownership
of the property to petitioners. The CA so ruled on the basis of its findings that: (1) the
consideration, amounting to P150,000.00, for the alleged Deed of Transfer is unusually
inadequate, considering that the subject property consists of 24 memorial lots; (2) the Deed of
Transfer was executed by reason of the same loan extended by petitioners to respondent; (3) the
Deed of Transfer is incomplete and defective; and (4) the lots subject of the Deed of Transfer are
one and the same property used to secure respondent's P150,000.00 loan from petitioners.
Hence, this appeal by the Sps. Martires.
ISSUE:
Is the contention of the CA, that the parties never contemplated a transfer of ownership but only
an equitable mortgage, correct?
HELD:
Yes. Based on the foregoing, the Court finds no cogent reason to depart from the findings of
the CA that the agreement between petitioners and respondent is, in fact, an equitable mortgage.

An equitable mortgage has been defined as one which, although lacking in some formality, or
form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the
parties to charge real property as security for a debt, there being no impossibility nor anything
contrary to law in this intent.
One of the circumstances provided for under Article 1602 of the Civil Code, where a contract
shall be presumed to be an equitable mortgage, is where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation. In the instant case, it has been established that the intent of
both petitioners and respondent is that the subject property shall serve as security for the latter's
obligation to the former. As correctly pointed out by the CA, the circumstances surrounding the
execution of the disputed Deed of Transfer would show that the said document was executed to
circumvent the terms of the original agreement and deprive respondent of her mortgaged
property without the requisite foreclosure. With respect to the foregoing discussions, it bears to
point out that in Misena v. Rongavilla, a case which involves a factual background similar to the
present case, this Court arrived at the same ruling. In the said case, the respondent mortgaged a
parcel of land to the petitioner as security for the loan which the former obtained from the latter.
Subsequently, ownership of the property was conveyed to the petitioner via a Deed of Absolute
Sale. Applying Article 1602 of the Civil Code, this Court ruled in favor of the respondent holding
that the supposed sale of the property was, in fact, an equitable mortgage as the real intention of
the respondent was to provide security for the loan and not to transfer ownership over the
property.

DAVID A. RAYMUNDO, Petitioner,

vs.
GALEN REALTY AND MINING CORPORATION, Respondent.
G.R. No. 191594
October 16, 2013
FACTS:
Respondent Galen Realty filed against against Raymundo and Tensorex an action for
Reconveyance with Damages. Subject of the case was a transaction between Galen and
Raymundo over a house and lot located in Urdaneta Village, Makati City originally covered by
TCT in the name of Galen. By virtue of a Deed of Sale dated September 9, 1987 executed
between Galen and Raymundo, title to the property was transferred to Raymundo, who later on
sold the property to Tensorex, which caused the issuance of a new TCT in Tensorexs name.
The RTC of Makati City ruled that the transaction between Raymundo and Galen was actually an
equitable mortgage. On appeal, the CA upheld the RTC decision but modified the loan
obligation of Galen and reduced the same to PhP3,865,000.oo. The CA ruled that the Deed of
Absolute Sale between plaintiff-appellant and defendant-appellant David Raymundo is declared
null and void, being a Deed of Equitable Mortgage. The CA also held that the Deed of Sale
between defendant-appellant Raymundo and defendant-appellant Tensorex is declared null and
void, and ordered defendant-appellant Raymundo to reconvey the subject property to Galen upon
Galens payment to defendant-appellant David Raymundo; or if reconveyance is no longer
feasible, for defendants-appellants Raymundo and Tensorex to solidarily pay plaintiff-appellant
the fair market value of the subject property by expert appraisal, plus damages, attornes fees,
and costs of suit.
Galen moved for the execution of the CA decision. Raymundo and Tensorex opposed the
motion, arguing that the CA decision provides for two alternatives one, for Raymundo to
reconvey the property to Galen after payment of P3,865,000.00 with legal interest or, two, if
reconveyance is no longer feasible, for Raymundo and Tensorex to solidarily pay Galen the fair
market value of the property.
RTC granted Galens motion and ordered the issuance of a writ of execution. Galen filed a
Counter Manifestation and Opposition claiming that reconveyance is no longer feasible as the
property is heavily encumbered and title to the property is still in the name of Tensorex which
had already gone out of operations and whose responsible officers are no longer accessible.
ISSUE:
In an equitable mortgage, if the reconveyance of the property is decreed but no longer possible
because ownership has passed to an innocent buyer, is the payment of the fair market value
sufficient as an alternative remedy?
HELD:
Yes. Nevertheless, the import of the dispositive portion of the CA Decision dated May 7, 2004
is clear. The principal obligation of Raymundo under the judgment is to reconvey the property to
Galen; on the other hand, Galens principal obligation is to pay its mortgage obligation to
Raymundo. Performance of Raymundos obligation to reconvey is upon Galens payment of its
mortgage obligation in the amount of P3,865,000.00 plus legal interest thereon from the date of
the filing of the complaint, until fully paid. This is in accord with the nature of the agreement as
an equitable mortgage where the real intention of the parties is to charge the real property as

security for a debt. It was wrong for the RTC to require Raymundo to show proof of his
willingness to reconvey the property because as stressed earlier, their agreement was an
equitable mortgage and as such, Galen retained ownership of the property. In Montevirgen, et al.
v. CA, et al., the Court was emphatic in stating that the circumstance that the original
transaction was subsequently declared to be an equitable mortgage must mean that the title to the
subject land which had been transferred to private respondents actually remained or is transferred
back to the petitioners herein as owners-mortgagors, conformably to the well-established
doctrine that the mortgagee does not become the owner of the mortgaged property because the
ownership remains with the mortgagor. Thus, it does not devolve upon Raymundo to determine
whether he is willing to reconvey the property or not because it was not his to begin with. If
Raymundo refuses to reconvey the property, then the court may direct that the act be done by
some other person appointed by it as authorized by Section 10 of Rule 39 of the Rules of Court
xxx
It is only when reconveyance is no longer feasible that Raymundo and Tensorex should pay
Galen the fair market value of the property. In other words, it is when the property has passed on
to an innocent purchaser for value and in good faith, has been dissipated, or has been subjected
to an analogous circumstance which renders the return of the property impossible that Raymundo
and/or Tensorex, is obliged to pay Galen the fair market value of the property.

TEODORO A. REYES, Petitioner,

vs.
ETTORE ROSSI, Respondent.
G.R. No. 159823
February 18, 2013
FACTS:
In 1997, Reyes and Advanced Foundation, represented Rossi, executed a deed of conditional sale
involving the purchase by Reyes of equipment consisting of a Warman Dredging Pump worth
PhP10,000,000.oo. The parties agreed therein that Reyes would pay the sum of PhP3,000,000.oo
as downpayment, and the balance of PhP7,000,000.oo will be settled through four post-dated
checks. Reyes complied, but in January 1998, he requested the restructuring of his obligation
under the deed of conditional sale by replacing the four post-dated checks with nine post-dated
checks.
Advanced Foundation assented to Reyes request, and returned the four checks. In turn, Reyes
issued and delivered the following nine postdated checks in the aggregate sum of
PhP7,125,000.oo drawn against the United Coconut Planters Bank.
Rossi deposited three of the post-dated checks on their maturity dates in Advanced Foundations
bank account at the PCI Bank in Makati. Two of the checks were denied payment ostensibly
upon Reyes instructions to stop their payment, while the third was dishonored for insufficiency
of funds.
Rossi likewise deposited two more checks in Advanced Foundations account at the PCI Bank in
Makati, but the checks were returned with the notation Account Closed stamped on them. He did
not anymore deposit the three remaining checks on the assumption that they would be similarly
dishonored.
In 1998, Reyes commenced an action for rescission of contract and damages in the RTC.
Subseuently, Rossi charged Reyes with five counts of estafa and five counts of violation of BP22
for the dishonor of the checks. Another criminal charge for violation of BP22 was lodged against
Reyes in another jurisdiction for the dishonor of another check.
Reyes argued that the City Prosecutor should suspend the criminal proceedeings for estafa and
BP22 proceedings because of the pendency in the RTC of the civil action for rescission of
contract that posed a prejudicial question as to the criminal proceedings.
The CA ruled that the action for rescission of contract did not pose a prejudicial question that
would suspend the criminal proceedings.
ISSUE:
Does the rescission of a contract of sale pose a prejudicial question sufficient to suspend a
criminal prosecution for BP22?
HELD:
No. The rescission of a contract of sale is not a prejudicial question that will warrant the
suspension of the criminal proceedings commenced to prosecute the buyer for violations of the
Bouncing Checks Law (Batas Pambansa Blg. 22) arising from the dishonor of the checks the
buyer issued in connection with the sale.

xxx
A prejudicial question generally comes into play in a situation where a civil action and a criminal
action are both pending, and there exists in the former an issue that must first be determined
before the latter may proceed, because howsoever the issue raised in the civil action is resolved
would be determinative juris et de jure of the guilt or innocence of the accused in the criminal
case. The rationale for the suspension on the ground of a prejudicial question is to avoid
conflicting decisions.
xxx
Article 1191 of the Civil Code recognizes an implied or tacit resolutory condition in reciprocal
obligations. The condition is imposed by law, and applies even if there is no corresponding
agreement thereon between the parties. The explanation for this is that in reciprocal obligations a
party incurs in delay once the other party has performed his part of the contract; hence, the party
who has performed or is ready and willing to perform may rescind the obligation if the other
does not perform, or is not ready and willing to perform.
xxx
A careful perusal of the complaint for rescission of contract and damages reveals that the causes
of action advanced by respondent Reyes are the alleged misrepresentation committed by the
petitioner and AFCSC and their alleged failure to comply with his demand for proofs of
ownership. On one hand, he posits that his consent to the contract was vitiated by the fraudulent
act of the company in misrepresenting the condition and quality of the dredging pump.
xxx
Accordingly, we agree with the holding of the CA that the civil action for the rescission of
contract was not determinative of the guilt or innocence of Reyes.
xxx
Indeed, under the law on contracts, vitiated consent does not make a contract unenforceable but
merely voidable, the remedy of which would be to annul the contract since voidable contracts
produce legal effects until they are annulled. On the other hand, rescission of contracts in case of
breach pursuant to Article 1191 of the Civil Code of the Philippines also presupposes a valid
contract unless rescinded or annulled.
As defined, a prejudicial question is one that arises in a case, the resolution of which is a logical
antecedent of the issue involved therein, and the cognizance of which pertains to another
tribunal. The prejudicial question must be determinative of the case before the court but the
jurisdiction to try and resolve the question must be lodged in another court or tribunal.

ROBERN DEVELOPMENT CORPORATION and RODOLFO M. BERNARDO, JR.,

Petitioners,
vs.
PEOPLE'S LANDLESS ASSOCIATION, Respondent.
G.R. No. 173622
March 11, 2013
FACTS:
Al-Amanah owned a lot located in Davao City and covered by TCT 138914. In 1992, AlAmanah asked some of the members of PELA to desist from building their houses on the lot and
to vacate the land, unless they are interested to buy it. The informal settlers thus expressed their
interest to buy the lot at PhP100.oo per square meter, which Al-Amanah turned down for being
far below its asking price.
In a letter dated March 18, 1993, the informal settlers together with other members comprising
PELA offered to purchase the lot for PhP300,000.oo, half of which shall be paid as down
payment and the remaining half to be paid within one year.
By May 3, 1993, PELA had deposited PhP150,000.oo as evidenced by four bank receipts. For
the first three receipts, the bank labelled the payments as "Partial deposit on sale of TCT No.
138914", while it noted the 4th receipt as "Partial/Full payment on deposit on sale of A/asset
TCT No. 138914." In the meantime, the PELA members remained in the property and
introduced further improvements.
On November 29, 1993, Al-Amanah wrote then PELA informing them of the Al-Amanahs
disapproval of PELAs offer to buy the lot.
PELA replied that it had already reached an agreement with Al-Amanah regarding the sale of the
subject lot based on their offered price, asserting that PELA had a definite agreement with the
Islamic Bank.
Meanwhile, the Al-Amanah accepted another groups- Roberns- offer to buy. However, when
Al-Amanah informed Robern of the acceptance, Robern expressed to Al-Amanah its uncertainty
on the status of the subject lot, because PELA insists that they had already bought the lot.
To convince Robern that it has no existing contract with PELA, Al-Amanah furnished it with
copies of the Head Offices rejection letter of PELAs bid, the demand letters to vacate, and the
proof of consignment of PELAs PhP150,000.oo deposit that PELA refused to withdraw.
Thus, Robern paid the balance of the purchase price. The Deed of Sale over the land was
executed on April 6, 1994 and TCT was issued in Roberns name the following day.
A week later, PELA consigned PhP150,000.oo in the RTC of Davao City. Then it wrote AlAmanah asking the latter to withdraw the amount consigned.
The RTC dismissed PELAs case It opined that the March 18, 1993 letter PELA has been relying
upon as proof of a perfected contract of sale was a mere offer which was already rejected. The
RTC held that the annotation appearing in the bottom part of the said letter could not be
construed as an acceptance because the same is a mere acknowledgment of receipt of the letter,
and not the offer.
The CA reversed the RTC, ruling that there was already a perfected contract of sale between
PELA and Al-Amanah. The CA also concluded that Al-Amanah is guilty of bad faith in dealing
with PELA because it took Al-Amanah almost seven months to reject PELAs offer while
holding on to the PhP150,000.oo deposit. The CA thus adjudged PELA entitled to moral and
exemplary damages as well as attorneys fees.

ISSUE:
Is there a perfected contract of sale between PELA and Al-Amanah, such that the sale of the land
by Al-Amanah to Robern constitutes a double sale?
HELD:
No, thus the sale between Al-Amanah and Robern is a valid first sale.
A contract of sale is perfected at the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price. Thus, for a contract of sale to be valid, all of the
following essential elements must concur: "a) consent or meeting of the minds; b) determinate
subject matter; and c) price certain in money or its equivalent.
xxx
There is no perfected contract of sale between PELA and Al-Amanah for want of consent and
agreement on the price.
After scrutinizing the testimonial and documentary evidence in the records of the case, we find
no proof of a perfected contract of sale between Al-Amanah and PELA. The parties did not agree
on the price and no consent was given, whether express or implied.
When PELA Secretary Florida Ramos (Ramos) testified, she referred to the March 18, 1993
letter which PELA sent to Al-Amanah as the document supposedly embodying the perfected
contract of sale. However, we find that the March 18, 1993 letter referred to was merely an offer
to buy.
xxx
We cannot agree with the CAs ratiocination that receipt of the amount, coupled with the phrase
written on the four receipts as "deposit on sale of TCT No. 138914," signified a tacit acceptance
by Al-Amanah of PELAs offer. For sure, the money PELA gave was not in the concept of an
earnest money. Besides, as testified to by then OIC Dalig, it is the usual practice of Al-Amanah
to require submission of a bid deposit which is acknowledged by way of bank receipts before it
entertains offers.
xxx
Contracts undergo three stages: "a) negotiation which begins from the time the prospective
contracting parties indicate interest in the contract and ends at the moment of their agreement[;
b) perfection or birth, x x x which takes place when the parties agree upon all the essential
elements of the contract x x x; and c) consummation, which occurs when the parties fulfill or
perform the terms agreed upon, culminating in the extinguishment thereof."
In the case at bench, the transaction between Al-Amanah and PELA remained in the negotiation
stage. The offer never materialized into a perfected sale, for no oral or documentary evidence
categorically proves that Al-Amanah expressed amenability to the offered P300,000.00 purchase
price. Before the lapse of the 1-year period PELA had set to pay the remaining balance, AlAmanah expressly rejected its offered purchase price, although it took the latter around seven
months to inform the former and this entitled PELA to award of damages.67 Al-Amanahs act of
selling the lot to another buyer is the final nail in the coffin of the negotiation with PELA.
Clearly, there is no double sale, thus, we find no reason to disturb the consummated sale between
Al-Amanah and Robern.

HOSPICIO D. ROSAROSO, et. al. Petitioners,

vs.
LUCILA LABORTE SORIA, et. al. Respondents.
G.R. No. 194846
June 19, 2013
FACTS:
Spouses Luis Rosaroso and Honorata Duazo acquired several real properties in Daan Bantayan,
Cebu City, including the subject properties. The couple had nine (9) children namely: Hospicio,
Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and Angelica. On April 25, 1952,
Honorata died. Later on, Luis married Lourdes Pastor Rosaroso.
In 1991 a complaint for Declaration of Nullity of Documents with Damages was filed by Luis, as
one of the plaintiffs, against his daughter Lucila, Lucilas daughter Laila, and Meridian Realty
Corporation. Due to Luis subsequent death, an amended complaint was filed with the spouse of
Laila, Ham, and Luis second wife, Lourdes, included as defendants.
The petitioners led by Hospicio allege that Luis, with the full knowledge and consent of his
second wife, Lourdes, executed the Deed of Absolute Sale covering the properties in their favor.
They also alleged that, despite the fact that the said properties had already been sold to them,
respondent Laila, in conspiracy with her mother, Lucila, obtained an SPA from Luis fraudulently
whith his thumb mark when Luis was then sick, infirm, blind, and of unsound mind. The
petitioners further averred that, through this SPA, a sale took place on August 23, 1994, when the
respondents made Luis sign the Deed of Absolute Sale conveying to Meridian the subject
property, and that Meridian was in bad faith when it did not make any inquiry as to who were the
occupants and owners of said lots. The petitioners claim that if Meridian had only investigated,
it would have been informed as to the true status of the subject properties and would have
desisted in pursuing their acquisition.
The RTC ruled in favor of petitioners. It held that when Luis executed the deed of sale in favor of
Meridian, he was no longer the owner of Lot Nos. 19, 22 and 23 as he had already sold them to
his children by his first marriage. In fact, the subject properties had already been delivered to the
vendees who had been living there since birth and so had been in actual possession of the said
properties. The trial court stated that although the deed of sale was not registered, this fact was
not prejudicial to their interest.
However, the CA reversed and set aside the RTC decision. The CA ruled that the first deed of
sale in favor of petitioners was void, relying on the testimony of Lourdes that petitioners did not
pay her husband. The price or consideration for the sale was simulated to make it appear that
payment had been tendered when in fact no payment was made at all.
ISSUE:
1. Is the first sale by Luis of the subject property to his children from his first marriage valid,
even though there are allegations that there was no consideration provided?
2. Is Meridian a buyer in good faith, such that it should be awarded the land which was
subjected to a double sale?
HELD:
1. Yes, the first sale was valid.

The fact that the first deed of sale was executed, conveying the subject properties in favor of
petitioners, was never contested by the respondents. What they vehemently insist, though, is that
the said sale was simulated because the purported sale was made without a valid consideration.
Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1)
private transactions have been fair and regular; (2) the ordinary course of business has been
followed; and (3) there was sufficient consideration for a contract. These presumptions operate
against an adversary who has not introduced proof to rebut them. They create the necessity of
presenting evidence to rebut the prima facie case they created, and which, if no proof to the
contrary is presented and offered, will prevail. The burden of proof remains where it is but, by
the presumption, the one who has that burden is relieved for the time being from introducing
evidence in support of the averment, because the presumption stands in the place of evidence
unless rebutted In this case, the respondents failed to trounce the said presumption. Aside from
their bare allegation that the sale was made without a consideration, they failed to supply clear
and convincing evidence to back up this claim. It is elementary in procedural law that bare
allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules of Court.
2. No. The fact that Meridian had them first registered will not help its cause. In case of double
sale, Article 1544 of the Civil Code provides: Should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith first recorded it in the Registry of
Property Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in possession; and, in the absence thereof; to the person who presents the oldest
title, provided there is good faith.
Otherwise stated, ownership of an immovable property which is the subject of a double sale shall
be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in
default thereof, to the person who presents the oldest title, provided there is good faith. The
requirement of the law then is two-fold: acquisition in good faith and registration in good faith.
Good faith must concur with the registration. If it would be shown that a buyer was in bad faith,
the alleged registration they have made amounted to no registration at all.
xxx
When a piece of land is in the actual possession of persons other than the seller, the buyer must
be wary and should investigate the rights of those in possession. Without making such inquiry,
one cannot claim that he is a buyer in good faith. When a man proposes to buy or deal with
realty, his duty is to read the public manuscript, that is, to look and see who is there upon it and
what his rights are. A want of caution and diligence, which an honest man of ordinary prudence
is accustomed to exercise in making purchases, is in contemplation of law, a want of good faith.
The buyer who has failed to know or discover that the land sold to him is in adverse possession
of another is a buyer in bad faith.
xxx
One who purchases real property which is in the actual possession of another should, at least
make some inquiry concerning the right of those in possession. In the case at bench, the fact that
the subject properties were already in the possession of persons other than Luis was never
disputed.
xxx
Instead of investigating the rights and interests of the persons occupying the said lots, however, it
chose to just believe that Luis still owned them. Simply, Meridian Realty failed to exercise the
due diligence required by law of purchasers in acquiring a piece of land in the possession of
person or persons other than the seller.

RODOLFO C. SABIDONG, Complainant,

vs.
NICOLASITO S. SOLAS (Clerk of Court IV), Respondent.
A.M. No. P-01-1448
June 25, 2013
FACTS:
Trinidad Sabidong, complainants mother, is one of the longtime occupants of a parcel of land,
originally registered in the name of C. N. Hodges.
The Sabidongs are in possession of one-half portion of a Lot 11 of the Hodges Estate, as the
other half-portion was occupied by Priscila Saplagio. Lot 11 was the subject of an ejectment suit
filed by the Hodges Estate. On May 31, 1983, a decision was rendered in said case ordering the
Sabidong to immediately vacate the portion of Lot 11 leased to her and to pay the plaintiff Estate
rentals due, attorneys fees, expenses and costs. At the time, respondent Solas was the Clerk of
Court III of MTCC, Branch 3, Iloilo City. Sometime in October 1984, Solas submitted an Offer
to Purchase on installment Lots 11 and 12. The Administratrix of the Hodges Estate rejected
Solass offer in view of an application to purchase already filed by the actual occupant of Lot 12.
While the check for initial down payment tendered by Solas was returned to him, he was
nevertheless informed that he may file an offer to purchase Lot 11 and that if he could put up a
sufficient down payment, the Estate could immediately endorse it for approval of the Probate
Court so that the property can be awarded to him should the occupant fail to avail of the priority
given to them.
Solas again submitted an Offer to Purchase Lot 11 for the amount of PhP35,100.oo. Solass Offer
to Purchase Lot 11 was approved upon the courts observation that the occupants of the subject
lots have not manifested their desire to purchase the lots they are occupying. Eventually, a writ
of possession was issued in Solas favor.
On motion of Ernesto Pe Benito, Administrator of the Hodges Estate, a writ of demolition was
issued by the probate court in favor of Solas and against all adverse occupants of Lot 11.
The SC then received a sworn letter-complaint asserting that as court employee Solas cannot buy
property in litigation, and asserting that Solas is not a buyer in good faith. Sabidong averred that
Solas met with the Sabidongs and then negotiated for the sale of the property and transfer of the
title in their names. Solas made the Sabidongs believe that he is the representative of the estate
and that he needed a down payment right away.
The Court Administrator found Solas liable for serious and grave misconduct and dishonesty
and recommended the forfeiture of Solass salary for six months, which shall be deducted from
his retirement benefits. The SC asked the parties if they are willing to submit the issue for
resolution to them, and the parties agreed.
ISSUE:
Being a clerk of court, is Solas relatively incapacitated from acquiring the property under
litigation?
HELD:
No, Solas was not incapacitated to acquire the subject property because while the property is in
litigation, the litigation is not pending in the court where Solas works.

Article 1491, paragraph 5 of the Civil Code prohibits court officers such as clerks of court from
acquiring property involved in litigation within the jurisdiction or territory of their courts. Said
provision reads:
Article 1491. The following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the property
and rights in litigation or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions; this prohibition includes
the act of acquiring by assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they may take part by virtue
of their profession.
The rationale advanced for the prohibition is that public policy disallows the transactions in view
of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar
control exercised by these persons. In so providing, the Code tends to prevent fraud, or more
precisely, tends not to give occasion for fraud, which is what can and must be done.
For the prohibition to apply, the sale or assignment of the property must take place during the
pendency of the litigation involving the property. Where the property is acquired after the
termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches.
In the case at bar, when respondent purchased Lot 11-A on November 21, 1994, the Decision in
Civil Case No. 14706 which was promulgated on May 31, 1983 had long become final. Be that
as it may, it cannot be said that the property is no longer in litigation at that time considering
that it was part of the Hodges Estate then under settlement proceedings.
A thing is said to be in litigation not only if there is some contest or litigation over it in court, but
also from the moment that it becomes subject to the judicial action of the judge.36 A property
forming part of the estate under judicial settlement continues to be subject of litigation until the
probate court issues an order declaring the estate proceedings closed and terminated. The rule is
that as long as the order for the distribution of the estate has not been complied with, the probate
proceedings cannot be deemed closed and terminated.37 The probate court loses jurisdiction of
an estate under administration only after the payment of all the debts and the remaining estate
delivered to the heirs entitled to receive the same.38 Since there is no evidence to show that Sp.
Proc. No. 1672 in the RTC of Iloilo, Branch 27, had already been closed and terminated at the
time of the execution of the Deed of Sale With Mortgage dated November 21, 1994, Lot 11 is
still deemed to be in litigation subject to the operation of Article 1491 (5) of the Civil Code.
This notwithstanding, we hold that the sale of Lot 11 in favor of respondent did not violate the
rule on disqualification to purchase property because Sp. Proc. No. 1672 was then pending
before another court (RTC) and not MTCC where he was Clerk of Court.

SPOUSES DEO AGNER and MARICON AGNER, Petitioners,

vs.
BPI FAMILY SAVINGS BANK, INC. Respondent.
G.R. No. 182963
June 3, 2013
FACTS:
On February 15, 2001, petitioners the Sps. Agner executed a Promissory Note with Chattel
Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for receiving the
amount of Php834, 768.oo, petitioners shall pay Php 17,391.00 every succeeding month until
fully paid; that the loan is secured by a 2001 Mitsubishi Adventure Super Sport; and an interest
of 6% per month shall be imposed for failure to pay each installment on or before the stated due
date.
On the same day, Citimotors, Inc. assigned all its rights, title and interests in the Promissory Note
with Chattel Mortgage to ABN AMRO Savings Bank, Inc. which, in turn, assigned the same to
respondent BPI Family Savings Bank, Inc.
For failure to pay four successive installments from May 15, 2002 to August 15, 2002, BPI sent a
demand letter to Sps. Agner declaring the entire obligation as due and demandable and requiring
to pay Php576,664.04, or surrender the mortgaged vehicle immediately upon receiving the letter.
As the demand was left unheeded, respondent filed on October 4, 2002 an action for Replevin
and Damages.
A writ of replevin was issued. Despite this, the subject vehicle was not seized. Trial on the
merits ensued. The RTC orders Sps. Agner to jointly and severally pay the amount of
Php576,664.04 plus interest at the rate of 72% per annum from August 20, 2002 until fully paid,
and the costs of suit. Petitioners appealed the decision to the CA), which affirmed the same.
Before the SC, the Sps. Agner argued that respondents remedy of resorting to both actions of
replevin and collection of sum of money is contrary to the provision of Article 1484 of the Civil
Code.
ISSUE:
Is BPI prevented from pursuing its alternative prayer for a sum of money because it was already
granted a writ of replevin for the recovery of the subject property?
HELD:
Lastly, there is no violation of Article 1484 of the Civil Code...
xxx
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars
the exercise of the others. This limitation applies to contracts purporting to be leases of personal
property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the
lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled
in this case by the filing by petitioner of the complaint for replevin to recover possession of
movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff
seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car

was not returned to private respondent until April 16, 1989, after two (2) years and eight (8)
months, upon issuance by the Court of Appeals of a writ of execution.
xxx
the vehicle subject matter of this case was never recovered and delivered to respondent despite
the issuance of a writ of replevin. As there was no seizure that transpired, it cannot be said that
petitioners were deprived of the use and enjoyment of the mortgaged vehicle
or that respondent pursued, commenced or concluded its actual foreclosure. The trial court,
therefore, rightfully granted the alternative prayer for sum of money, which is equivalent to the
remedy of exacting fulfillment of the obligation. Certainly, there is no double recovery or
unjust enrichment to speak of.

SPOUSES RUBIN AND PORTIA HOJAS, Petitioners

vs.
PHILIPPINE AMANAH BANK AND RAMON KUE, Respondents
G.R. No. 193453
June 5, 2013
FACTS:
The petitioners, Sps. Hojas alleged that on April 11, 1980, they secured a loan from respondent
Philippine Amanah Bank (PAB) in the amount of PhP450,000.oo; that this loan was secured by a
mortgage, covering both personal and real properties; that from May 14, 1981 to June 27, 1986,
they made various payments amounting to PhP486,162.13; that PAB, however, did not properly
credit their payments; that based on the summary of payments furnished by PAB to them on
February 24, 1989, only 13 payments were credited, erroneously amounting to PhP317,048.83;
that PAB did not credit the payment they made totaling PhP165,623.24; and that, in the statement
of their account as of October 17, 1984, PAB listed their total payment as PhP412,211.54 on the
principal, and PhP138,472.09 as 30% interest, all amounting to PhP 550,683.63, despite the fact
that at that time, petitioners had already paid the total sum of PhP 486,162.13.
Sps. Hojas further averred that for failure to pay the loan, PAB applied for the extrajudicial
foreclosure of their mortgaged real properties.
It was further alleged that on March 9, 1988, through the intervention of then Senator Aquilino
Pimentel, PAB wrote Roberto Hojas informing him that although the one-year redemption period
would expire on April 21, 1988, by virtue of the banks incentive scheme, the redemption period
was extended until December 31, 1988; that the real properties acquired by PAB would be sold
in a public bidding before the end of August, 1988; that on November 4, 1988, a public bidding
was conducted; that in the said bidding, the mortgaged properties were awarded to respondent
Ramon Kue; that subsequently, they received a letter from the OIC of the Project Development
Department, dated January 3, 1989, informing them that they had 15 days from receipt within
which to vacate the premises; that Kue then sent another letter, dated January 31, 1989,
informing them that he had already acquired the said property and that they were requested to
vacate the premises within 15 days from receipt thereof; and that because of this development,
on May 7, 1991, Sps. Hojas filed an action for Determination of True Balance of Mortgage
Debt, Annulment/Setting Aside of Extrajudicial Foreclosure of Mortgage and Damages, with
Prayer for Preliminary Injunction against PAB.
On May 27, 1996, the RTC dismissed Sps. Hojas complaint. The CA was not sympathetic with
Sps. Hojas position. It held that the period of redemption was never extended. The date
December 31, 1988 was not an extension of the redemption period. It was merely the last day
for the availment of the liberalized payment for the repossession of foreclosed assets under
PABs incentive scheme.
PAB cites the RTCs finding that although the petitioners manifested their intention to avail of
the incentive scheme desire alone was not sufficient. Redemption is not a matter of intent but
involved making the proper payment or tender of the price of the land within the specified
period.
ISSUE:
Does the availment of the right to repurchase require the return to the vendee of the price which
the vendee paid for the property?

HELD:
Yes. In order to effect a redemption, the judgment debtor must pay the purchaser the
redemption price composed of the following: (1) the price which the purchaser paid for the
property; (2) interest of 1% per month on the purchase price; (3) the amount of any assessments
or taxes which the purchaser may have paid on the property after the purchase; and (4) interest of
1% per month on such assessments and taxes.
Furthermore, Article 1616 of the Civil Code of the Philippines provides:
The vendor cannot avail himself of the right to repurchase without returning to the vendee the
price of the sale.
It is not difficult to understand why the redemption price should either be fully offered in legal
tender or else validly consigned in court. Only by such means can the auction winner be assured
that the offer to redeem is being made in good faith.
Respondents' repeated requests for information as regards the amount of loan availed from the
credit line and the amount of redemption, nd petitioner's failure to accede to said requests do not
invalidate the foreclosure. Respondents can find other ways to know the redemption rice. For
one, they can examine the Certificate of Sale registered with the Register of Deeds to verify the
purchase price, or upon the filing of their complaint, they could have moved for a computation of
the redemption price and consigned the same to the court. At anv rate, whether or not
respondents '"ere diligent in asserting their willingness to pay is irrelevant. Redemption within
the period allowed bv law is not a matter of intent but a question of payment or valid tender of
the full redemption price within said period.
Even the complaint instituted by respondents cannot aid their plight because the institution of an
action to annul a foreclosure sale does not suspend the running of the redemption period.
In the case at bench, the record is bereft of concrete evidence that would show that, aside from
the fact that petitioners manifested their intention to avail of the scheme, they were also ready to
pay the redemption price. Hence, as they failed to exercise their right of redemption and failed to
take advantage of the liberalized incentive scheme, PAB was well within its right to sell its
property in a public sale.

SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M. SABITSANA,

Petitioners,
vs.
JUANITO F. MUERTEGUI, represented by DOMINGO A. MUERTEGUI, JR., Respondent.
G.R. No. 181359
August 5, 2013
FACTS:
In 1981, Alberto Garcia executed an unnotarized Deed of Sale in favor of respondent Juanito
Muertegui over a parcel of unregistered land.
Juanitos father Domingo Muertegui, Sr. and brother Domingo Jr. took actual possession of the
lot and planted thereon coconut and ipilipil trees. They also paid the real property taxes on the
lot for the years 1980 up to 1998.
In 1991, Garcia sold the lot to the Muertegui family lawyer, petitioner Atty. Clemencio C.
Sabitsana, Jr., through a notarized deed of absolute sale. The sale was registered with the
Register of Deeds on February 6, 1992. A new tax declaration was issued in Atty. Sabitsanas
name. Although Domingo Jr. and Sr. paid the real estate taxes, Atty. Sabitsana also paid real
property taxes in 1992, 1993, and 1999. In 1996, he introduced concrete improvements on the
property, which shortly thereafter were destroyed by a typhoon.
When Domingo Sr. passed away, his heirs applied for registration and coverage of the lot under
the Public Land Act or Commonwealth Act No. 141. Atty. Sabitsana opposed the application,
claiming that he was the true owner of the lot. He asked that the application for registration be
held in abeyance until the issue of conflicting ownership has been resolved.
On April 11, 2000, Juanito, through his attorney-in-fact Domingo Jr., filed a civil case quieting of
title and preliminary injunction against petitioners Atty. Sabitsana and his wife, Rosario,
claiming that they bought the lot in bad faith and are exercising acts of possession and ownership
over the same, which acts thus constitute a cloud over his title.
The trial court held that petitioners are not buyers in good faith. Petitioner Atty. Sabitsana was
the Muertegui familys lawyer, and was informed beforehand by Carmen that her family had
purchased the lot; thus, he knew of the sale to Juanito. After conducting an investigation, he
found out that the sale was not registered. With this information in mind, Atty. Sabitsana went
on to purchase the same lot and raced to register the sale ahead of the Muerteguis, expecting that
his purchase and prior registration would prevail over that of his clients, the Muerteguis.
Applying Article 1544 of the Civil Code , the trial court declared that even though petitioners
were first to register their sale, the same was not done in good faith. And because petitioners
registration was not in good faith, preference should be given to the sale in favor of Juanito, as he
was the first to take possession of the lot in good faith, and the sale to petitioners must be
declared null and void for it casts a cloud upon the Muertegui title.
The CA denied the appeal and affirmed the trial courts Decision in toto.
ISSUE:
Does Art. 1544 of the Civil Code on double sales apply to unregistered land?

HELD:
No. Article 1544 of the Civil Code does not apply to sales involving unregistered land.
Both the trial court and the CA are, however, wrong in applying Article 1544 of the Civil Code.
Both courts seem to have forgotten that the provision does not apply to sales involving
unregistered land. Suffice it to state that the issue of the buyers good or bad faith is relevant only
where the subject of the sale is registered land, and the purchaser is buying the same from the
registered owner whose title to the land is clean. In such case, the purchaser who relies on the
clean title 0; the registered owner is protected if he is a purchaser in good faith for value.
What applies in this case is Act No. 3344, 32 as amended, which provides for the system of
recording of transactions over unregistered real estate. Act No. 3344 expressly declares that any
registration made shall be without prejudice to a third party with a better right. The question to
be resolved therefore is: who between petitioners and respondent has a better right to the
disputed lot?
Respondent has a better right to the lot.
The sale to respondent Juanito was executed on September 2, 1981 via an unnotarized deed of
sale, while the sale to petitioners was made via a notarized document only on October 17, 1991,
or ten years thereafter. Thus, Juanito who was the first buyer has a better right to the lot, while
the subsequent sale to petitioners is null and void, because when it was made, the seller Garcia
was no longer the owner of the lot. Nemo dat quod non habet.
The fact that the sale to Juanito was not notarized does not alter anything, since the sale between
him and Garcia remains valid nonetheless. Notarization, or the requirement of a public document
under the Civil Code, is only for convenience, and not for validity or enforceability. And because
it remained valid as between Juanito and Garcia, the latter no longer had the right to sell the lot
to petitioners, for his ownership thereof had ceased.
Nor can petitioners registration of their purchase have any effect on Juanitos rights. The mere
registration of a sale in ones favor does not give him any right over the land if the vendor was no
longer the owner of the land, having previously sold the same to another even if the earlier sale
was unrecorded. Neither could it validate the purchase thereof by petitioners, which is null and
void. Registration does not vest title; it is merely the evidence of such title. Our land registration
laws do not give the holder any better title than what he actually has.
Specifically, we held in Radiowealth Finance Co. v. Palileo that:
Under Act No. 3344, registration of instruments affecting unregistered lands is without
prejudice to a third party with a better right. The aforequoted phrase has been held by this Court
to mean that the mere registration of a sale in ones favor does not give him any right over the
land if the vendor was not anymore the owner of the land having previously sold the same to
somebody else even if the earlier sale was unrecorded.
Petitioners defense of prescription, laches and estoppel are unavailing since their claim is based
on a null and void deed of sale. The fact that the Muerteguis failed to interpose any objection to
the sale in petitioners favor does not change anything, nor could it give rise to a right in their
favor; their purchase remains void and ineffective as far as the Muerteguis are concerned.

SPOUSES DELFIN 0. TUMIBAY and AURORA T. TUMIBAY-deceased; GRACE JULIE ANN

TUMIBA Y MANUEL, legal representative, Petitioners,
vs.
SPOUSES MELVIN A. LOPEZ and ROWENA GAY T. VISITACION LOPEZ, Respondents.
G.R. No. 171692
June 3, 2013
FACTS:
On March 23, 1998, Sps. Tumibay filed a Complaint for declaration of nullity ab initio of sale,
and recovery of ownership and possession of land.
In their Complaint, Sps. Tumibay alleged that they are the owners of a parcel of in the name of
petitioner Aurora; that they are natural born Filipino citizens but petitioner Delfin acquired
American citizenship while his wife, petitioner Aurora, remained a Filipino citizen; that
petitioner Aurora is the sister of Reynalda; that Reynalda sold the subject land to her daughter,
Rowena, through a deed of sale for an unconscionable amount of PhP95,000.oo although said
property had a market value of more than PhP2,000,000.oo; that the subject sale was done
without the knowledge and consent of Sps. Tumibay; and that, for these fraudulent acts,
respondents should be held liable for damages. Sps. Tumibay prayed that (1) the deed of sale
dated July 23, 1997 be declared void ab initio, (2) the subject land be reconveyed to Sps.
Tumibay, and (3) respondents be ordered to pay damages.
The RTC rendered a Decision in favor of Sps. Tumibay. In ruling in favor of Sps. Tumibay, the
trial court held: (1) the SPA merely authorized Reynalda to offer for sale the subject land for a
price subject to the approval of the Sps. Tumibay; (2) Reynalda violated the terms of the SPA
when she sold the subject land to her daughter, respondent Rowena, without first seeking the
approval of Sps. Tumibay as to the selling price thereof; (3) the SPA does not sufficiently confer
on Reynalda the authority to sell the subject land; (4) Reynalda, through fraud and with bad faith,
connived with her daughter, respondent Rowena, to sell the subject land to the latter; and, (5) the
sale contravenes Article 1491, paragraph 2, of the Civil Code which prohibits the agent from
acquiring the property subject of the agency unless the consent of the principal has been given.
The trial court held that Reynalda, as agent, acted outside the scope of her authority under the
SPA. Thus, the sale is null and void and the subject land should be reconveyed to Sps. Tumibay.
The trial court further ruled that Sps. Tumibay are not entirely free from liability because they
received from respondent Rowena deposits totaling $12,000.00. Under the principle of unjust
enrichment, Sps. Tumibay should, thus, be ordered to reimburse the same without interest.
The CA reversed the judgment of the trial court.
ISSUES:
1. Did the petitioners and the respondent enter into a contract to sell, contrary to the claims of
the petitioners?
2. If there was an extant contract to sell, did the respondent Rowena perform her contractual
obligation?
3. Is the contract to sell rescissible?
HELD:
1. Yes. Petitioners and respondent Rowena entered into a contract to sell over the subject
land.

In a contract to sell, the seller retains ownership of the property until the buyer has paid the
price in full. A buyer who covertly usurps the seller's ownership of the property prior to the
full payment of the price is in breach of the contract and the seller is entitled to rescission
because the breach is substantial and fundamental as it defeats the very object of the parties in
entering into the contract to sell.
xxx
Petitioners deny that they agreed to sell the subject land to respondent Rowena for the price of
P800,000.00 payable in 10 years through monthly installments. They claim that the payments
received from respondent Rowena were for safekeeping purposes only pending the final
agreement as to the purchase price of the subject land.
xxx
We are, thus, inclined to rule that there was, indeed, a contractual agreement between the parties
for the purchase of the subject land and that this agreement partook of an oral contract to sell for
the sum of P800,000.00. A contract to sell has been defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property despite
delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the
purchase price.25 In a contract to sell, ownership is retained by the seller and is not to pass
until the full payment of the price x x x.26 It is commonly entered into so as to protect the
seller against a buyer who intends to buy the property in installment[s] by withholding ownership
over the property until the buyer effects full payment therefor.27
In the case at bar, while there was no written agreement evincing the intention of the parties to
enter into a contract to sell, its existence and partial execution were sufficiently established by,
and may be reasonably inferred from the actuations of the parties, to wit: (1) the title to the
subject land was not immediately transferred, through a formal deed of conveyance, in the name
of respondent Rowena prior to or at the time of the first payment of $1,000.00 by respondent
Rowena to petitioner Aurora on January 25, 1995;28 (2) after this initial payment, petitioners
received 22 intermittent monthly installments from respondent Rowena in the sum of $500.00;
and, (3) in her testimony, respondent Rowena admitted that she had the title to the subject land
transferred in her name only later on or on July 23, 1997, through a deed of sale, because she
believed that she had substantially paid the purchase price thereof,29 and that she was entitled
thereto as a form of security for the installments she had already paid.30
2. No. Respondent Rowena was in breach of the contract to sell.
Although we rule that there was a contract to sell over the subject land between petitioners and
respondent Rowena, we find that respondent Rowena was in breach thereof because, at the time
the aforesaid deed of sale was executed on July 23, 1997, the full price of the subject land was
yet to be paid.
xxx
Respondent Rowena tried to justify the premature transfer of title by stating that she had
substantially paid the full amount of the purchase price and that this was necessary as a security
for the installments she had already paid. However, her own evidence clearly showed that she
had, by that time, paid only 32.58% thereof. Neither can we accept her justification that the
premature transfer of title was necessary as a security for the installments she had already paid
absent proof that petitioners agreed to this new arrangement. Verily, she failed to prove that
petitioners agreed to amend or novate the contract to sell in order to allow her to acquire title
over the subject land even if she had not paid the price in full.

Significantly, the evidence on record indicates that the premature transfer of title in the name of
respondent Rowena was done without the knowledge and consent of petitioners.
xxx
Respondent Rowenas reliance on the SPA as the authority or consent to effect the premature
transfer of title in her name is plainly misplaced. The terms of the SPA are clear. It merely
authorized Reynalda to sell the subject land at a price approved by petitioners. The SPA could
not have amended or novated the contract to sell to allow respondent Rowena to acquire the title
over the subject land despite non-payment of the price in full for the reason that the SPA was
executed four years prior to the contract to sell. In fine, the tenor of her testimony indicates that
respondent Rowena made a unilateral determination that she had substantially paid the purchase
price and that she is entitled to the transfer of title as a form of security for the installments she
had already paid, reasons, we previously noted, as unjustified.
3. Yes. The contract to sell is rescissible.
Article 1191 of the Civil Code provides:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of
a period.
As a general rule, rescission will not be permitted for a slight or casual breach of the contract,
but only for such breaches as are substantial and fundamental as to defeat the object of the
parties in making the agreement.
In the case at bar, we find that respondent Rowenas act of transferring the title to the subject
land in her name, without the knowledge and consent of petitioners and despite non-payment of
the full price thereof, constitutes a substantial and fundamental breach of the contract to sell. As
previously noted, the main object or purpose of a seller in entering into a contract to sell is to
protect himself against a buyer who intends to buy the property in installments by withholding
ownership over the property until the buyer effects full payment therefor.42 As a result, the
sellers obligation to convey and the buyers right to conveyance of the property arise only upon
full payment of the price. Thus, a buyer who willfully contravenes this fundamental object or
purpose of the contract, by covertly transferring the ownership of the property in his name at a
time when the full purchase price has yet to be paid, commits a substantial and fundamental
breach which entitles the seller to rescission of the contract.
Indeed, it would be highly iniquitous for us to rule that petitioners, as sellers, should continue
with the contract to sell even after the discovery of the aforesaid breach committed by
respondent Rowena, as buyer, considering that these acts betrayed in no small measure the trust
reposed by petitioners in her and her mother, Reynalda. Put simply, respondent Rowena took
advantage of the SPA, in the name of her mother and executed four years prior to the contract to
sell, to effect the transfer of title to the subject land in her (Rowenas) name without the
knowledge and consent of petitioners and despite non-payment of the full price.
We, thus, rule that petitioners are entitled to the rescission of the subject contract to sell.

SPS. ESMERALDO D. VALLIDO and ARSENIA M. V ALLIDO, rep. by ATTY. SERGIO C.

SUMAYOD, Petitioners,
vs.
SPS. ELMER PONO and JULIET PONO, and PURIFICACION CERNAPONG and SPS.
MARIANITO PONO and ESPERANZA MEROPONO, Respondents.
G.R. No. 200173
April 15, 2013
FACTS:
Martino Dandan was the registered owner of a parcel of land in Kananga, Leyte. In 1960,
Martino, sold a portion of the subject property to respondent Purificacion Cerna. Upon execution
of the Deed of Absolute Sale, Martino gave Purificacion the owners copy of OCT No. P-429.
The transfer, however, was not recorded in the Registry of Deeds.
On May 4, 1973, Purificacion sold her portion of the subject property to respondent Marianito
Pono and also delivered OCT No. P-429 to him. Marianito registered the portion he bought for
taxation purposes, paid its taxes, took possession, and allowed his son respondent Elmer Pono
and daughter-in-law, Juliet Pono, to construct a house thereon. Marianito kept OCT No. P-429.
The transfer, however, was also not recorded in the Registry of Deeds.
Meanwhile, Martino left Kananga, Leyte, and went to San Rafael III, Noveleta, Cavite, and resettled there. On June 14, 1990, he sold the whole subject property to his grandson, petitioner
Esmeraldo Vallido, also a resident of Noveleta, Cavite. Considering that Martino had delivered
OCT No. P-429 to Purificacion in 1960, he no longer had any certificate of title to hand over to
Esmeraldo.
On May 7, 1997, Martino filed a petition seeking for the issuance of a new owners duplicate
copy of OCT No. P-429, which he claimed was lost. He stated that he could not recall having
delivered the said owners duplicate copy to anybody to secure payment or performance of any
legal obligation. On June 8, 1998, the petition was granted by the RTC, Branch 12 of Ormoc
City. On September 17, 1999, Esmeraldo registered the deed of sale in the Registry of Deeds and
Transfer Certificate of Title (TCT) No. TP-13294 was thereafter issued in the name of the
petitioners Sps. Vallido.
Subsequently, the Sps. Vallidos filed before the RTC a complaint for quieting of title, recovery of
possession of real property and damages against the respondents. In their Answer, respondents
Elmer and Juliet averred that their occupation of the property was upon permission of Marianito.
They included a historical chronology of the transactions from that between Martino and
Purificacion to that between Purificacion and Marianito.
On July 20, 2004, the RTC promulgated a decision favoring Sps. Vallido. The RTC held that
there was a double sale under Article 1544 of the Civil Code. The respondents were the first
buyers while the Sps. Vallido were the second buyers. Even as second buyers, the RTC deemed
the Sps. Vallido as buyers in good faith because during the sale on June 4, 1990, OCT No. P-429
was clean and free from all liens. The Sps. Vallido were also deemed registrants in good faith
because at the time of the registration of the deed of sale, both OCT No. P-429 and TCT No. TP13294 did not bear any annotation or mark of any lien or encumbrance. The RTC concluded that
because the Sps. Vallido registered the sale in the Register of Deeds, they had a better right over
the respondents.
Aggrieved, the respondents filed their Notice of Appeal. In the assailed Decision, the CA ruled
in favor of the respondents. The CA agreed that there was a double sale. It, however, held that the
Sps. Vallido were neither buyers nor registrants in good faith. The respondents indisputably were
occupying the subject land. It wrote that where the land sold was in the possession of a person

other than the vendor, the purchaser must go beyond the certificate of title and make inquiries
concerning the rights of the actual possessors.
ISSUE:
Are the Sps. Vallido buyers and registrants in good faith?
HELD:
No. It is undisputed that there is a double sale and that the respondents are the first buyers
while the petitioners are the second buyers. The burden of proving good faith lies with the
second buyer (petitioners herein) which is not discharged by simply invoking the ordinary
presumption of good faith.
After an assiduous assessment of the evidentiary records, this Court holds that the petitioners are
NOT buyers in good faith as they failed to discharge their burden of proof.
Notably, it is admitted that Martino is the grandfather of Esmeraldo. As an heir, petitioner
Esmeraldo cannot be considered as a third party to the prior transaction between Martino and
Purificacion. In Pilapil v. Court of Appeals, it was written:
The purpose of the registration is to give notice to third persons. And, privies are not third
persons. The vendor's heirs are his privies. Against them, failure to register will not
vitiate or annul the vendee's right of ownership conferred by such unregistered deed of
sale.
The non-registration of the deed of sale between Martino and Purificacion is immaterial as it is
binding on the petitioners who are privies. Based on the privity between petitioner Esmeraldo
and Martino, the petitioner as a second buyer is charged with constructive knowledge of prior
dispositions or encumbrances affecting the subject property. The second buyer who has actual or
constructive knowledge of the prior sale cannot be a registrant in good faith.
Moreover, although it is a recognized principle that a person dealing on a registered land need
not go beyond its certificate of title, it is also a firmly settled rule that where there are
circumstances which would put a party on guard and prompt him to investigate or inspect the
property being sold to him, such as the presence of occupants/tenants thereon, it is expected from
the purchaser of a valued piece of land to inquire first into the status or nature of possession of
the occupants.
xxx
Where the vendor is not in possession of the property, the prospective vendees are obligated to
investigate the rights of one in possession.
xxx
As the petitioners cannot be considered buyers in good faith, they cannot lean on the
indefeasibility of their TCT in view of the doctrine that the defense of indefeasibility of a torrens
title does not extend to transferees who take the certificate of title in bad faith. The Court cannot
ascribe good faith to those who have not shown any diligence in protecting their rights.
Lastly, it is uncontroverted that the respondents were occupying the land since January 4, 1960
based on the deed of sale between Martino and Puriticacion. They have also made improvements
on the land by erecting a house of mixed permanent materials thereon, which was also admitted
by the petitioners. The respondents, without a doubt, are possessors in good faith. Ownership
should therefore vest in the respondents because they were first in possession of the property in
good faith.