BRICKTOWN DEVELOPMENT CORP. and MARIANO Z. VERALDE VS.

AMOR TIERRA
DEVELOPMENT CORPORATION and the HON. COURT OF APPEALS
G.R. No. 112182
December 12, 1994
239 SCRA 127
FACTS: Bricktown Development Corporation, represented by its President and co-petitioner Mariano
Z. Velarde, executed two Contracts to Sell in favor of Amor Tierra Development Corporation,
represented in these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential
lots at the Multinational Village Subdivision, La Huerta, Paraaque, Metro Manila.
The total price of P21,639,875.00 was stipulated to be paid by private respondent in such amounts
and maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981;
P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by means of an
assumption by private respondent of petitioner corporation's mortgage liability to the Philippine
Savings Bank or, alternately, to be made payable in cash. On date, March 31, 1981, the parties
executed a Supplemental Agreement, providing that private respondent would additionally pay to
petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of down payment
for the period from 31 March to 30 June 1981, and of P390,369.37 representing interest paid by
petitioner corporation to the Philippine Savings Bank in updating the bank loan for the period from 01
February to 31 March 1981.
Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21. However,
the parties continued to negotiate for a possible modification of their agreement, but nothing
conclusive happened. And on October 12, 1981, petitioners counsel sent private respondent a
Notice of Cancellation of Contract because of the latters failure to pay the agreed amount.
Several months later, private respondents counsel, demanded the refund of private respondent's
various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest
within fifteen days from receipt of said letter, or, in lieu of a cash payment, to assign to private
respondent an equivalent number of unencumbered lots at the same price fixed in the contracts.
When the demand was not heeded, Amor Tierra filed an action with the court a quo which rendered
a decion in its favor. The decision of the lower court was affirmed in toto by the Court of Appeals.
Hence, this petition.
ISSUE:
1. Whether or not the contract was properly rescinded.
2. Whether or not Bricktown properly forfeited the payments of Amor Tierra.
RULING: The contract between Bricktown and Amor Tierra was validly rescinded because of the
failure of the latter to pay the agreed amounts stipulated in the contract on the proper date even after
the sixty-days grace period. Furthermore, the records showed that private respondent corporation
paid less than the amount agreed upon. The Supreme Court also added that such cancellation must
be respected. It may also be noteworthy to add that in a contract to sell, the non-payment of the
purchase price can prevent the obligation to convey title from acquiring any obligatory force.
On the second issue, the Supreme Court ruled that since the private respondent did not actually
possessed the property under the contract, the petitioner is then ordered to return to private
respondent the amount remitted. However, to adjudge any interest payment by petitioners on the
amount to be thus refunded, private respondent should not be allowed to totally free itself from its
own breach.

EDCA PUBLISHING v. SANTOS

Possession of movable property acquired in GF is equivalent to title. There is no need to produce a
receipt.

FACTS:
EDCA Publishing sold 406 books to a certain Professor Jose Cruz who ordered these by telephone,
which was agreed to be payable on delivery. The books were subsequently delivered to him with the
corresponding invoice, and he paid with a personal check.
Cruz then sold the 120 of the books to Leonor Santos who asked for verification, and was then
showed the invoice for the books.
EDCA became suspicious when Cruz ordered another set of books even before his check cleared.
Upon investigation, EDCA found that he wasnt the person he claimed to be (Dean in DLSU). EDCA
had the police capture Cruz, as well as seize the books from Santos. Santos demanded the return of
the books.
RTC granted the writ of preliminary attachment.
Subsequent dishonor of a check, which did not render the contract of sale void does not amount to
unlawful deprivation of property. (There was a perfected contract of sale so the proper remedy is
specific performance)

ISSUE:
Whether or not the owner was unlawfully deprived of the property?

HELD: No.
Santos was a good faith buyer after taking steps to verify the identity of the seller. When she was
showed the invoice, she reasonably believed that he was a legitimate seller.
With regard to unlawful deprivation, EDCA was not unlawfully deprived of the property by mere
failure of consideration. There was already a perfected contract of sale. Proof was even
substantiated when EDCA gave the invoice as proof of payment upon delivery of the books. This did
not amount to unlawful taking, because by the delivery of EDCA to Cruz, ownership of the books
already transferred to him.

G.R. No. 97442 June 30, 1994

PILAR T. OCAMPO, Petitioner, v. COURT OF APPEALS and MAGDALENA S. VILLARUZ,

Respondents.
FACTS: Two (2) documents, an "Agreement to Sell Real Property" and a "Contract to Sell,"
covering the same parcel of land were executed by a seller in favor of two (2) different buyers.
Both buyers now assert against each other a better title to the property.

Tolosa and Ocampo (represented by Borres) entered into an "Agreement to Sell Real
Property" 3 whereby Tolosa "sells, cedes and transfers" the land to Ocampo in consideration of
P25,000.00, P12,500.00 of which was paid upon signing of the deed and the balance to be due
within six (6) months thereafter. Paragraph 4 of the contract provides that "immediately upon
complete payment of the purchase price . . . by the VENDEE, the VENDOR . . . agrees to
execute and deliver unto the VENDEE whatever pertinent document or documents necessary to
implement this sale and to transfer title to the VENDEE."chan

Subject property is mortgaged the land to the Philippine Veterans Bank and had the
encumbrance annotated on his certificate of title

Before the six-month period to complete the payment of the purchase price expired,
Ocampo paid but only the total of P16,700.00. Nevertheless Tolosa accepted her subsequent
late payments amounting to P3,900.00.

Upon learning of the mortgage lien, Ocampo caused her adverse claim to be annotated
on Tolosas certificate of title

Later on, Tolosa sought the cancellation of Ocampos adverse claim and presented her
with two options, namely, a refund of payments made, or a share from the net proceeds if sold
to a third party.

Subsequently, Tolosa and Magdalena S. Villaruz executed a "Contract to Sell" whereby

Tolosa "sells, cedes, transfers, and conveys" to Villaruz the same land in consideration of
P94,300.00. The amount of P15,000.00 was to be paid upon execution and the balance upon
cancellation of all liens and encumbrances from the certificate of title. The contract stipulated
the immediate conveyance of the physical possession of the land to Villaruz, although no deed
of definite sale would be delivered to her unless the price was fully paid.

Tolosa wrote Ocampo offering to reimburse her what she paid provided she would sign a
document canceling her adverse claim. Failing to convince Ocampo, Tolosa filed a petition in
the Court of First Instance of Iloilo to cancel the adverse claim of Ocampo. The petition was
however denied but Tolosa was able to get a favourable decision in another branch of the court.

The contract of sale between Tolosa and Villaruz was registered and a new title in the
name of Villaruz was eventually issued.

Aggrived Ocampo filed a third party complaint against Villaruz

RTC decided in favour of Ocampo declaring the agreement between Talosa and Villaruz
as null and void and ordered Tolosa to execute the corresponding Deed of Sale in favour of
Ocampo.
CA reversed RTC s decision upholding the agreement between Tolosa and
Villaruz, hence, this appeal. The appellate court upheld the sale in favor of Villaruz on the theory
that the 21 April 1975 agreement of Tolosa and Ocampo was merely a contract to sell. It claimed
that in the absence of a deed of absolute sanle in favor of Ocampo, in relation to par. 4 of the
contract,
Tolosa retained ownership over the land and validly conveyed the same to
Villaruz.chanroblesvirtualawlibrarychanrobles
4

ISSUE: WON Tolosa has the right to rescind the contract entered between him and Ocampo.
RULING: NO. CA decision reversed and set aside and RTC ruling reinstated

The agreement between Tolosa and Ocampo dated 21 April 1975 although titled "Agreement to
Sell Real Property" was a perfected contract of absolute sale. Paragraph 4 pertains to the
undertaking of the seller to execute and deliver to the buyer any document deemed necessary
by law to implement the sale and transfer title since the parties were unsure of what documents
were pertinent. If the intent was for the seller to retain ownership and possession of the land
through non-delivery of certain documents unless the price be fully paid, par. 4 alone should be
inutile; it should have been complemented with a proviso that the sale would not be
implemented nor the title considered transferred unless another document specifically for said
purpose be first executed and delivered to the buyer. In this regard, no right to retain ownership
and possession of the land pending full payment of the price can be inferred from the fact that
no delivery was made to Ocampo. The failure of the buyer to pay the price in full within a fixed
period does not, by itself, bar the transfer of the ownership or possession, much less dissolve
the contract of sale.
19

Under Art. 1592 of the Civil Code, the failure of Ocampo to complete her payment of the
purchase price within the stipulated period merely accorded Tolosa the option to rescind the
contract of sale upon judicial or notarial demand.obles virtual law library
However, the letter of 2 August 1977 claimed to have been sent by Tolosa to Ocampo
rescinding the contract of sale was defective because it was not notarized and, more
importantly, it was not proven to have been received by Ocampo. hanrobles Likewise, Civil
Case No. 12163 could not be considered a judicial demand under Art. 1592 of the Civil Code
because it did not pray for the rescission of the contract. Although the complaint sought the
cancellation of Ocampos adverse claim on Tolosas OCT and for the refund of the payments
made, these could not be equivalent to a rescission. Even assuming arguendo that Civil Case
No. 12163 was a valid judicial demand, rescission is not granted as a matter of course. Before
Civil Case No. 12163 was filed on 7 October 1977, Ocampo not only paid Tolosa a total of
P20,600.00 but also discharged Tolosas mortgage debt in the amount of P4,453.41. Had not
Tolosa ordered the Philippine Veterans Bank to return the mortgage debt payment by Ocampo,
the purchase price would have been deemed fully paid.
Tolosa, on the other hand, is now precluded from raising the issue of late payments. His
unqualified acceptance of payments after the six-month period expired constitutes waiver of the
period and, hence, of the ground to rescind under Art. 1592.
In any case, however, the breach on the part of Ocampo was only slight if not outweighed by the
bad faith of Tolosa in reneging in his own prestations, hence, judicial rescission of the contract
cannot be justified. Angeles v. Calasanz. already had her adverse claim annotated on Tolosas
title before the sale between Tolosa and Villaruz.
4 southern motors
Southern Motors Inc vs. Moscoso
2 SCRA 168
May 1961
FACTS:
In June 1957, plaintiff-appellee, Southern Motors, Inc. (Southern Motors) sold to defendantappellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making
a down payment, the defendant executed a promisory note for the sum of P4,915,00,
representing the unpaid balance of the purchase price to secure the payment of which, a chattel

mortgage was constituted on the truck in favor of Southern Motors. Of the P4,915,00, defendant
was only able to pay a total of P550.00, which P110.00 was applied to the interest up to August
15, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The defendant
failed to pay 3 more installments on the balance of the purchase price.
In November 1957, the Southern Motors filed a complaint against the Moscoso to recover the
unpaid balance of the promissory note, and the lower court issued a writ of attachment on
Moscosos properties. The Sheriff of San Jose, Antique, attach the Chevrolet truck, as well as a
house and lot belonging to Moscoso, and said truck was brought to the Southern Motors
compound in Iloilo City for safe keeping. The Provincial Sheriff of Iloilo sold the said truck on
January 2, 1958 at a public auction in which Southern Motors itself was the only bidder for
P1,000.00. In March 1958, the trial court condemned the defendant Moscoso to pay the plaintiff
Southern Motors the unpaid balance of P4,475.00 with interest at the rate of 12% per annum
from August 16, 1957, until fully paid. While Southern Motors claims that in filing the complaint,
demanding payment of the unpaid balance of the purchase price, it has availed of the first
remedy provided in Article 1484 of the new Civil Code i.e. to exact fulfillment of the obligation
(specific performance), Mosocoso, on the other hand, contends that Southern Motors had
availed itself of the third remedy viz, the foreclosure of the chattel mortgage on the truck.
ISSUE:
Which remedy under the Civil Code did the vendor Southern Motors avail?
COURT RULING:
The Supreme Court, in affirming the decision of the lower court, found that there is nothing
unlawful or irregular in appellee Southern Motors's act of attaching the mortgaged truck itself.
Since it has chosen to exact the fulfillment of the appellant Moscoso's obligation, Southern
Motors may enforce execution of the judgment that may be favorable to it, on all personal and
real properties of the latter not exempt from execution sufficient to satisfy such judgment. No
one can successfully contest that the attachment of a house and lot at San Jose, Antique was
merelly an incident to all ordinary civil action. (Sections 1 & 11, Rule 59; sec. 16 Rule 39.) The
mortgage creditor may recover judgment on the mortgage debt and cause an execution on the
mortgaged property and may cause an attachment to be issued and levied on such property,
upon beginning his civil action.

5 nonato
SPOUSES NONATO V. IAC & INVESTOR'S FINANCE CORP 140 SCRA 255 (1985)
FACTS: In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from
the Peoples Car Inc on installment basis.
1.
To secure their complete payment, Nonato executed a promissory note and a chattel
mortgage in favor of Peoples Car Inc.
2.
Subsequently, Peoples Car Inc assigned its rights and interest over the note and
mortagge in favor of Investors Finance Corp (IFC).
3.
For failure of the spouses to pay two or more installments, despite demands, the car was
repossessed by IFC.

4.
Despite repossession, IFC still demanded from Nonato that they pay the balance of the
price of the car. IFC, then, filed a complaint for the payment of the price of the car with damages
5.
Nonato, in their defense, argued that when the company repossessed the car, IFC had, by
that act, effectively cancelled the sale of the vehicle. As such, it was barred from exacting the
recovery of the unpaid balance of the purchase price as mandated by Art 1484.
6.
The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance
of the purchase price of the car with interest. CA affirmed the same.
ISSUE: WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure
of the buyer to pay two or more of the stipulated installments, may also demand payment of the
balance of the purchase price
HELD: No. The applicable law in the case at bar is Art 1484 which provides that:
In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.
This provision means that should the vendee or the purchaser of a personal property default in
the payment of two or more of the agreed installments, the vendor or the seller has the option to
avail any of these 3 remedieseither to exact fulfillment by the purchaser of the obligation, or to
cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was
constituted. These remedies have been recognized as an alternative, not cumulative, that the
exercise of one should bar the exercise of the others.
In the present case, it is not disputed that IFC had taken possession of the car purchased by the
Nonatos after the spouses defaulted in their payments. The defense of IFC that it the
repossession of the vehicle was only for the purpose of appraising its value and for storage and
safekeeping pending full payment of the spouses is untenable. The receipt issued by IFC to the
spouses when it took possession of the vehicle that the vehicle could be redeemed within 15
days. This could only mean that should the spouses fail to redeem the car within the period
provided, IFC would retain permanent possession of the vehicle. IFC even notified the spouses
Nonato that the value of the car was not sufficient to cover the balance of the purchase price
and there was no attempt at all on the part of the company to return the car.
The acts performed by IFC are consistent with the conclusion that it had opted to cancel the
sale of the vehicle. Therefore, it is barred from exacting payment from the petitioners of the
balance of the price of the vehicle which it had already repossessed (it cannot have its cake and
eat it too)

6 ridad

Luis Ridad and Lourdes Ridad, plaintiffs-appellees, v

Filipinas Investment and Finance Corporation, Jose D. Sebastian and Jose San Agustin,
in his capacity as Sheriff, defendants-appellants
January 27, 1983
De Castro, J.
Plaintiffs purchased from Supreme Sales and Development Corporation (Supreme) 2 brand new
Ford Consul Sedans, for P26,887 payable in 24 monthly installments.
To secure payment thereof, plaintiffs executed a promissory note covering the purchase price
and a deed of chattel mortgage on the two vehicles purchased and also on another car
(Chevrolet) and plaintiffs franchise or certificate of public convenience granted by the defunct
Public Service Commission for the operation of a taxi fleet.
With the conformity of plaintiffs, the vendor Supreme assigned its rights, title and interest to the
promissory note and chattel mortgage to the defendant Filipinas Investment and Finance
Corporation.
Plaintiffs failed to pay their monthly installments. Filipinas foreclosed the chattel mortgage extrajudicially.
During the public auction, of which the plaintiffs were not notified, the 2 Ford Consul cars were
bought by defendant Filipinas, who was as the highest bidder. During another public auction, the
rest of the properties (including the taxi franchise) subject of the chattel mortgage were sold,
and bought by defendant Filipinas also.
Filipinas subsequently sold the taxi franchise to defendant Jose D. Sebastian, who filed with the
Public Service Commission an application for approval of said sale.
Plaintiffs then filed an action for annulment of contract before the CFI, against Filipinas,
Sebastian, and Sheriff San Agustin.
CFI ruling: The chattel mortgage was null and void in so far as the taxi franchise and the used
Chevrolet car were concerned, and the sale at public auction of the taxicab franchise was to be
of no legal effect. The Certificate of Sale issued by the Sheriff of Manila in favor of Filipinas
concerning the taxi franchise was cancelled and set aside. The assignment made by Filipinas in
favor of Jose Sebastian was also declared void and of no legal effect.
The CA certified the defendants appeal to the SC.
Issue: Is the chattel mortgage and its subsequent sale valid? NO

Held:
Article 1484 of the Civil Code is applicable. Under this article, the vendor of personal property
the purchase price of which is payable in installments, has the right, should the vendee default
in the payment of two or more of the agreed installments, to exact fulfillment by the purchaser of
the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal
property, if one was constituted. The vendor can only choose one option.
If the vendor avails himself of the right to foreclose the mortgage, the law prohibits him from
further bringing an action against the vendee for the purpose of recovering whatever balance of
the debt secured is not satisfied by the foreclosure sale.
Purpose of the law is to prevent mortgagees from seizing the mortgaged property, buying it at
foreclosure sale for a low price and the bringing suit against the mortgagor for a deficiency
judgment.

Without the law, the mortgagor-buyer would find himself without the property and still owing
practically the full amount of his original debt.
In this case, defendant Filipinas chose to foreclose the mortgage upon default of plaintiffs, and
bought the vehicles at the public auction as the highest bidder.
Filipinas is deemed to have renounced any and all rights which it might otherwise have under
the promissory note and the chattel mortgage as well as the payment of the unpaid balance.
The lower court rightly declared the nullity of the chattel mortgage in so far as the taxi franchise
and the Chevrolet were concerned, under the authority of the ruling in the case of Levy
Hermanos, Inc. v Pacific Commercial Co., et al.
The vendors right to foreclose is limited only on the thing sold.
The vendor of personal property sold on installment is precluded, after foreclosing the chattel
mortgage on the thing sold, from having a recourse against the additional security put up by a
third party to guarantee the purchasers performance of his obligation. (Cruz v Filipinos
Investment & Finance Corporation)
Otherwise, if the vendee could still be compelled to pay the balance of the purchase price, the
vendee will be made to bear the payment of the balance despite the earlier foreclosure.
Judgment appealed from is affirmed.
7 borbon
BORBON II v SERVICEWIDE SPECIALISTS INC. - DINGLASAN
FACTS:
Daniel and Francisco Borbon issued a PN in favor of Pangasinan Auto Mart for the purchase of certain
chattels. It was secured by a chattel mortgage. The rights under the note were assigned to Filinvest, which
later assigned said rights to Servicewide. The Borbons failed to pay, thus the mortgages were foreclosed.
The Borbons aver that the seller delivered chattels not strictly in accord with their instructions,
nonetheless they cannot evade liability because the notes have passed to holders for value and in good
faith. The trial court sustained the foreclosure but awarded liquidated damages and attorneys fees in
addition to the proceeds of the auction sale.
ISSUE:
W/N it was proper for the trial court to award liquidated damages and attorneys fees in addition to the
proceeds of the auction sale?
HELD:
No. First when a person assigns credits to another the latter is bound under the same law, thus Art. 1484 is
equally applicable. In case of foreclosure the legislative intent is not merely to limit the proscription to
collecting the unpaid balance of the debt but also to other claims including costs of litigation and
attorneys fees. That being the case, the SC struck down the award of liquidated damages but considering
the facts of the case the award of attorney's fees is reasonable and sustained.
Note. In a contract of sale of personal property payable in installments the mere fact that the vendor
secures possession of the unpaid articles through an attachment does not necessarily mean that it would
resort to a foreclosure of the mortgage.
8 pascual
Pascual vs. Universal Motors Corp.
61 SCRA 121
November 1974
FACTS:
Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual) executed the
real estate mortgage subject matter of this complaint on December 14, 1960 to secure the
payment of the indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase of 5 units of
Mercedes Benz trucks, with a total purchase price or principal obligation of P152,506.50 which

was to bear interest at 1% per month starting that day, but the plaintiffs' guarantee is not to
exceed P50,000.00 which is the value of the mortgage. The PDP Trans., as the spouses
Pasqual's principal, paid to defendant-appellant Universal Motors Corporation (Universal
Motors) the sum of P92,964.91 on April 5, 1961 for two of the five Mercedes Benz trucks and on
May 22, 1961 for the remaining three, thus leaving a balance of P68,641.69 including interest
due on February 8, 1965.
On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against the
PDP Trans. to collect the balance due under the Chattel Mortgages and to repossess all the
units sold to PDP Trans. as the spouse Pascuals principal, including the 5 units guaranteed
under the subject Real (Estate) Mortgage. During the hearinbg, Universal Motors admitted that it
was able to repossess all the units sold to the latter, including the 5 units guaranteed by the
subject real estate mortgage, and to foreclose all the chattel mortgages constituted thereon,
resulting in the sale of the trucks at public auction. As the real estate mortgagors, the spouses
Pascual filed an action with the CFI of Quezon City for the cancellation of the mortgage they
constituted on 2 parcels of land in favor of the Universal Motors to guarantee the obligation of
PDP Trans. to the amount of P50,000. The said CFI rendered judgment in favor of the spouses
Pascual and ordered the cancellation of the mortgage.
ISSUE:
Was Article 1484 of the New Civil Code applicable in the case at bar?
COURT RULING:
The Supreme Court affirmed the lower courts decision. Appellant Universal Motors argues that
Article 1484 is not applicable to the case at bar because there is no evidence on record that the
purchase by PDP Trans. of the 5 trucks was payable in installments and that the PDP Trans.
had failed to pay two or more installments. Universal Motors also contends that what Article
1484 prohibits is for the vendor to recover from the purchaser the unpaid balance of the price
after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the
security put up by a third party.
The Supreme Court concluded to the contrary, saying that the first issue was whether or not the
sale was one on installments. The lower court found that it was, and that there was failure to
pay two or more installments, a finding which is not subject to review by the Supreme Court.
The next contention is that what article 1484 withholds from the vendor is the right to recover
any deficiency from the purchaser after the foreclosure of the chattel mortgage, and not a
recourse to the additional security put up by a third party to guarantee the purchaser's
performance of his obligation. But the Supreme Court to sustain this argument of the appellant
would be to indirectly subvert and public policy overturn the protection given by Article 1484.
9 magna
Magna Financial vs. Colarina, G.R. No. 158635
December 9, 2005
Facts:
Respondent bought a Multicab from petitioner. To secure the obligation, respondent executed a
promissory note and a chattel mortgage of the vehicle in favor of the petitioner. Respondent
then defaulted in payment. Petitioner filed a complaint for foreclosure of chattel mortgage with
replevin. A writ of replevin was issued and the vehicle was turned over to Magna financial. The

trial court and RTC decided in favor ofpetitioner and ordered respondent to pay the unpaid
balance and foreclose the chattel mortgage. The Court of Appeals reversed the decision.
Issue:
Whether MFS can avail of the two remedies, payment of unpaid balance and foreclosure of
chattel mortgage?
Held:
No. Petitioner, having elected the foreclosure of chattel mortgage, is not entitled to be paid the
balance even though it did not actually foreclose the chattel mortgage. Article 1484, paragraph
3, provides that if the vendor has availed himself of the right to foreclose the chattel mortgage,
he shall have no further action against the purchaser to recover any unpaid balance of the
purchase price. Any agreement to the contrary shallbe void. In other words, in all proceedings
for the foreclosure of chattel mortgages executed on chattels which have been sold on the
installment plan, the mortgagee is limited to the property included in the mortgage. The
petitioners prayer contains two remedies, payment of unpaid balance and foreclosure of chattel
mortgage. Such a scheme is not only irregular but is a flagrant circumvention of the prohibition
of the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc.
renounced whatever claim it may have under the promissory note.
10 filipinas
Filipinas Investment vs Vitug Jr., and Supreme Sales and Development
Doctrine
Under Art 1484 of the Civil Code, the vendor may only exercise in the alternative the
following remedies: a.) exact fulfillment of the obligation; b.) cancel the sale in case the failure to
pay covers two or more installments and c.) foreclose the chattel mortgage in case one has
been executed over the personalty involved in the case.
However, the provision can admit of some exceptions as in the present case, where it has
been expressly stipulated in the assignment that recourse may be had against the seller should
the buyer fail to pay for the balance of the obligation.
Facts
Respondent Vitug bought a four-door Consul sedan for Php 14,605. He executed a promissory
note providing for monthly installment payment and at the same time constituted a chattel
mortgage over the vehicle. On the same day he assigned his negotiated the promissory note in
favor of herein petitioner Filipinas Investment, assigning thereto all his rights, including a right
of recourse against co-defendant Supreme Sales.
Vitug predictably failed to pay for the car, and petitioner applied for a writ of replevin, but this
was negated when Vitug voluntarily surrendered the vehicle. The car was sold in public auction
but the proceeds left a balance of Php 8, 349.35, which petitioner now wishes to collect from codefendant Supreme Sales.
Issue
1.) WON petitioner can collect on the balance from Supreme Sales despite the provision of the
Recto Law (Art 1484)?
Held
1.) YES. The transaction between appellant and appellee was purely an ordinary discounting
transaction whereby the promissory note executed by defendant Vitug was negotiated by
appellee in favor of appellant for a valuable consideration at a certain discount, accompanied by
an assignment also of the chattel mortgage executed by said defendant to secure the payment
of his promissory note and with the express stipulation that should there be any deficiency,
recourse could be had against appellee. Stated otherwise, the remedy presently being
sought is not against the buyer of the car or the defendant Vitug but against the seller,

independent of whether or not such seller may have a right of recovery against the buyer,
which, in this case, he does not have under the Recto Law.
11 olympia
Olympia Housing, Inc. vs Panasiatic Travel Corp.
395 scra 298
Facts: Olympia Housing, Inc. agreed to sell a condominium unit to Ma. Nelida Galvez-Ycasiano
for P2,340,000 payable in installments of P33,657.40 per month and schedule of payments
were also agreed on. Pursuant to the contract, defendant made a deposit of P100,000 and 50%
down payment on the dates agreed. She made several payments in cash and thru cash credit
memos issued by plaintiff representing plane tickets bought from Panasiatic Travel Corp, owned
by Ma. Nelida. When defendant failed to pay installments which amounted to P1,924,345.52
even after demand, plaintiff allegedly rescinded the contract by a Notarial Act of Rescission.
Issue: whether or not the contract to sell executed in favor of respondent buyer had been validly
cancelled or rescinded
Held: no cancellation took place. The notarial rescission was not sent to respondents prior to the
institution of the case for reconveyance but merely served on respondents by way of an
attachment to the complaint. In any case, a notarial rescission, standing alone, could not have
invalidly effected the cancellation of the contract. RA 6552 (Realty Installment Buyer Protection
Act) states that any cancellation must be done in conformity with the requirements therein
prescribed. In addition to the notarial act of rescission, the seller is required to refund to the
buyer the cash surrender value of the payments on the property. The actual cancellation of the
contract can only be deemed to take place upon the expiry of a 30day period following the
receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and
the full payment of the cash surrender value.
12 felicen
PEDRO A. FELICEN SR. (Deceased), substituted by his widow, BEATRIZ LANUEVO and his
children, ELEUTERIO, PEDRO, JR., CLARITA, FERNANDO and JOSE MARIA, all surnamed
FELICEN petitioners,
vs.
SEVERINO ORIAS, MILAGROS ORIAS DE LIM, and the COURT OF APPEALS

FACTS: This appeal on certiorari involves Article 1606 of the Civil Code. the third and last
paragraph and it is this which is directly relevant to the case at bar reads as follows:
However, the vendor may still exercise the right to repurchase within thirty days from the time
final judgment was rendered in a civil action on the basis that the contract was a true sale with
right to repurchase.
Under a "Deed of Sale With Right to Repurchase," the spouses Severino Orias and Milagros O.
Lim (private respondents herein) sold to Pedro A. Felicen, Sr. (petitioner) a parcel of land in the
Municipality of Salcedo, Province of Samar at the price of P 3,000.00. The deed expressly
reserved to the vendors the right to redeem within two (2) years. That period expired without
any offer having been made by the vendors a retro to repurchase the land.
Eight (8) years afterwards" the vendors a retro filed suit against the vendees to compel the
latter to resell and reconvey the property to them. After due proceedings, the Trial Court
rendered judgment, finding that the contract between the parties was in truth one of sale with
pacto de retro, and that the period stipulated for the repurchase had already expired; but this
notwithstanding, the vendors a retro still had the right to repurchase the property within thirty
(30) days from the time the judgment becomes final, in accordance with the third paragraph of
Article 1606 of the Civil Code, by complying with the requirements of Article 1616.

ISSUE: W/N the interpretation Art 1606 par 3 is correct

HELD: NO. The application of the third paragraph of Article 1606 is predicated upon the bona
fides of the vendor a retro. It must appear that there was a belief on his part, founded on facts
attendant upon the execution of the sale withpacto de retro, honestly and sincerely entertained,
that the agreement was in reality a mortgage, one not intended to affect the title to the property
ostensibly sold, but merely to give it as security for a loan or other obligation. In that event, if the
matter of the real nature of the contract is submitted for judicial resolution, the application of the
rule is meet and proper: that the vendor a retro be allowed to repurchase the property sold
within 30 days from rendition of final judgment
Conversely, if it should appear that the parties' agreement was really one of sale transferring
ownership to the vendee, but accompanied by a reservation to the vendor of the right to
repurchase the property and there are no circumstances that may reasonably be accepted as
generating some honest doubt as to the parties' intention, the proviso is inapplicable. The
reason is quite obvious. If the rule were otherwise, it would be within the power of every vendor
a retro to set at naught a pacto de retro, or resurrect an expired right of repurchase, by simply
instituting an action to reform the contract known to him to be in truth a sale with pacto de
retro into an equitable mortgage.

13 de macoy
De macoy vs ca
Facts:
Dominga Tabora Vda. de Macoy was the owner of a rice land in Camarines Norte. Her
ownership thereof was evidenced by TCT No. T-7520. On December 28, 1970, she executed or
sale with a right to repurchase in favor of private respondents spouses Jesus F. Redillas and
Anatalia Elon; the period of repurchase is between December 29, 1973 and December 29,
1975.
Dominga Tabora Vda. de Macoy died in February, 1972, leaving as heirs petitioners. Alleging
failure of petitioners to repurchase the land, private respondent Jesus F. Redillas executed an
Affidavit of Consolidation of Ownership. On July 21, 1977, he and his wife filed a petition for
Recording of Consolidation of Ownership.
private respondents obtained a favorable decision. petitioners filed a motion alleging that the
document executed by the late Dominga Tabora Vda. de Macoy was not a sale with a right to
repurchase but an equitable mortgage or a contract of antichresis. They alleged further that
even assuming it to be a sale with a right to repurchase they nevertheless had thirty (30) days
from final judgment under Article 1606 of the Civil Code within which to redeem the land. During
the trial, the trial court, upon motion of petitioners, ordered the Register of Deeds to immediately
restore TCT No. T-7520 in the Registry office.
Issue: can petitioners avail of article 1606?
Held:
Article 1606, paragraph 3, of the Civil Code provides that:
However, the vendor may still exercise the right to repurchase within thirty days from the time

final judgment was rendered in a civil action on the basis that the contract was a true sale with
the right to repurchase.
Petitioners invoke this provision as an alternative legal remedy in the event that the document
be finally declared a pacto de retro sale.
J
But The application of the third paragraph of Article 1606 is predicated upon the bona fides of
the vendor a retro. It must appear that there was a belief on his part, founded on facts attendant
upon the execution of the sale with pacto de retro, honestly and sincerely entertained, that the
agreement was in reality a mortgage, one not intended to affect the title to the property
ostensibly sold, but merely to give it as security for a loan or other obligation. If it should appear
that the parties' agreement was really one of sale transferring ownership to the vendee, but
accompanied by a reservation to the vendor of the right to repurchase the property and there
are no circumstances that may reasonably be accepted as generating some honest doubt as to
the parties' intention, the proviso is inapplicable.
The reason is quite obvious. If the rule were otherwise, it would be within the power of every
vendor a retro to set at naught a pacto de retro, or resurrect an expired right of repurchase, by
simply instituting an action to reform the contract known to him to be in truth a sale with pacto
de retro into an equitable mortgage.

14 paez
Paez vs Magno
Facts:
On October 1943, plaintiffs and appellants borrowed from defendant and appellee P4,000 in
Japanese Military notes, with the promise to pay within a period of five years. As a security, a
parcel of land was mortgaged in favor of the creditor. On September 1944, payment of this debt
was offered and tendered, but was rejected by the creditor. For that reason, an action was filed
on November 18, 1945 asking that the obligation be declared as already paid and the deed of
mortgage be cancelled. Defendant filed a motion to dismiss upon the ground that plaintiffs have
no cause of action, there being no allegation that the thing due was consigned in court, as
provided by law. The motion was granted, hence, this appeal by the plaintiffs.
Issue:won vendor is relieved from obligation?
Held:
Tender does not in itself relieve the vendor from his obligation to pay the price when redemption
is allowed by the court. In other words, tender of payment is sufficient to compel redemption but
is not in itself a payment that relieves the vendor from his liability to pay the redemption price.
15 cachola
Cachola vs ca
Facts: the respondent spouses Federico Briones and Trinidad Encinas, as the registered
owners of the above-named property mortgaged to Benjamin Ocampo as a security for a loan of
P15,000.00. For failure of the spouses to pay the loan, Ocampo caused the foreclosure of the
real estate mortgage and the subsequent sale of the property at public auction. Ocampo being

the highest bidder, purchased the property at the auction. A certificate of sale was executed in
his favor.
The respondents were able to exercise their right of redemption within the one-year period from
the auction sale by paying through a loan of P40,000.00 obtained from petitioner, the late
Mauricio Cachola.
The Kasunduan recognized the full ownership by the respondents. There was also a stipulation
that after the properties shall have been redeemed from Ocampo, the title should be placed in
the hands of Cachola for the purpose of securing the loan. The respondent spouses failed to
pay any amount within the stipulated six month period and even afterwards so a deed of
absolute sale was executed by the parties.
Sometime in 1977, the petitioner filed an unlawful detainer suit against the respondentsspouses. In June 1979, the respondents filed a suit for annulment of the deed of absolute sale
and annulment of the unlawful detainer judgment.

Issue: whether there is contract of sale or equitable mortgage?

Held: sale
An equitable mortgage is "one which although it lacks some formality, form
of words or other requisites prescribed by a statute, show(s) the intention of
the parties to charge a real property as security for a debt and contains
nothing impossible or contrary to law."
The plain terms of the Deed of Absolute Sale and the circumstances of the
case do not suggest an unequivocal intention to make the property
answerable for the P40,000.00 debt after the lapse of the six-month period
from March 13, 1975 to September 13, 1975 within which the respondent
spouses were expected to pay their obligation. There was nothing to show an
agreement that the parties recognized the continued ownership of the
spouses Briones.
The words of the contract are clear and leave no doubt as to the desire of the
spouses to transfer the property by way of sale to the petitioner. No other
meaning could be given to the terms and stipulations of the contract but
their literal meaning. (Article 1370, New Civil Code).
The Court holds that none of the circumstances in Article 1602 of the Civil
Code which would raise the presumption of equitable mortgage, in relation to
Article 1604 of the same Code pertaining to a contract purporting to be an
absolute sale, exists in the case at bar.
16. PRIMARY STRUCTURES CORP. vs. SPS. VALENCIA
August 19, 2003
Facts: Petitioner is a private corporation based in Cebu City and the registered owner of Lot 4523 situated
in Liloan, Cebu, with an area of 22,214 square meters. Adjacent to the lot of petitioner are parcels of land,

identified to be Lot 4527, Lot 4528, and Lot 4529 with a total combined area of 3,751 square meters. The
three lots, aforenumbered, have been sold by Hermogenes Mendoza to respondent spouses sometime in
December 1994. Petitioner learned of the sale of the lots only in January, 1996, when Hermogenes
Mendoza sold to petitioner Lot No. 4820, a parcel also adjacent to Lot 4523 belonging to the latter.
Forthwith, it sent a letter to respondents, on 30 January 1996, signifying its intention to redeem the
three lots. On 30 May 1996, petitioner sent another letter to respondents tendering payment of
the price paid to Mendoza by respondents for the lots. Respondents, in response, informed
petitioner that they had no intention of selling the parcels. Thereupon, invoking the provisions of
Articles 1621 and 1623, petitioner filed an action against respondents to compel the latter to
allow the legal redemption. Petitioner claimed that neither Mendoza, the previous owner, nor
respondents gave formal or even just a verbal notice of the sale of the lots as so required by
Article 1623 of the Civil Code.
Issue: W/N petitioner can compel respondents to allow legal redemption
Held: ART. 1621. The owners of adjoining lands shall also have the right of redemption when a piece of
rural land, the area of which does not exceed one hectare, is alienated unless the grantee does not own
any rural land.
This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and
other apparent servitudes for the benefit of other estates.
If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of
the adjoining land of smaller area shall be preferred; and should both lands have the same area, the one
who first requested the redemption.
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days
from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor
that he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
Whenever a piece of rural land not exceeding one hectare is alienated, the law grants to the adjoining
owners a right of redemption except when the grantee or buyer does not own any other rural land. In
order that the right may arise, the land sought to be redeemed and the adjacent property belonging to the
person exercising the right of redemption must both be rural lands. If one or both are urban lands, the
right cannot be invoked
[1]

The trial court found the lots involved to be rural lands. Unlike the case of Fabia vs. Intermediate
Appellate Court (which ruled, on the issue of whether a piece of land was rural or not, that the use of the
property for agricultural purpose would be essential in order that the land might be characterized as rural
land for purposes of legal redemption), respondents in the instant case, however, did not dispute before
the Court of Appeals the holding of the trial court that the lots in question are rural lands. In failing to
assail this factual finding on appeal, respondents would be hardput to now belatedly question such finding
and to ask the Court to still entertain that issue.
Article 1621 of the Civil Code expresses that the right of redemption it grants to an adjoining owner
of the property conveyed may be defeated if it can be shown that the buyer or grantee does not own
any other rural land. The appellate court, sustaining the trial court, has said that there has been no
evidence proffered to show that respondents are not themselves owners of rural lands for the
exclusionary clause of the law to apply.

With respect to the second issue, Article 1623 of the Civil Code provides that the right of legal preemption or redemption shall not be exercised except within thirty days from notice in writing by the
prospective vendor, or by the vendor, as the case may be. In stressing the mandatory character of the
requirement, the law states that the deed of sale shall not be recorded in the Registry of Property unless
the same is accompanied by an affidavit of the vendor that he has given notice thereof to all possible
redemptioners.
The Court of Appeals has equated the statement in the deed of sale to the effect that the vendors have
complied with the provisions of Article 1623 of the Civil Code, as being the written affirmation under
oath, as well as the evidence, that the required written notice to petitioner under Article 1623 has been
met. Respondents, like the appellate court, overlook the fact that petitioner is not a party to the deed of
sale between respondents and Mendoza and has had no hand in the preparation and execution of the deed
of sale. It could not thus be considered a binding equivalent of the obligatory written notice prescribed by
the Code.
17. Etcuban vs. Court of Appeals, and Songalia
March 1987
FACTS:
Petitioner Dominico Etcuban (petitioner) inherited a piece of land together with his co-heirs (the spouse
of the deceased, Demetria Initan, and Pedro, Vicente, Felicitas, Anastacio, Froilan, Alfonso. Advincula,
Anunciacion, Jesus, Aguinaldo, all surnamed Etcuban) from their deceased father. Said piece of land was
declared in their names as the heirs of Eleuterio Etcuban under Tax Declaration No. 06837. Thereafter the
eleven co-heirs executed in favor of Jesus C. Songalia and Guadalupe S. Songalia (private respondents
Songalia) eleven deeds of sale of their respective shares in the co-ownership for the total sum of
P26,340.00. The earliest of the eleven deeds of sale was made on December 9, 1963 and the last one in
December 1967.
In his complaint before the trial court, petitioner alleged that his coowners leased and / or sold their
respective shares without giving due notice to him as a co-owner notwithstanding his intimations to them
that he was willing to buy all their respective shares. Private respondents Songalia, in denying the
material allegations of the complaint, argued that petitioner came to know of the sale of the subject
property to them in August 1968 or sometime earlier; that acting on this knowledge, petitioner thru his
lawyers wrote private respondents Songalia on August 15, 1968 about the matter; that Jesus Songalia
personally went to the office of Atty. Vicente Faelner or counsel for petitioner to inform him of the sale of
the subject property; that petitioner took no action despite the information he received from private
respondents Songalia thru his counsel; and that, consequently, petitioner lost his right to redeem under
Art. 1623 of the new Civil Code because the right of redemption may be exercised only within 30 days
from notice of sale and petitioner was definitely notified of the sale years ago as shown by the records.
The trial court allowed petitioner his right of redemption over the subject property and ordered the private
respondents Songalia to accept the redemption price of P26,340.00. The Court of Appeals, on the other
hand, ruled that petitioner is barred from redeeming the subject property for his failure to make a valid
tender of the sale price of the land paid by the defendants within the period fixed by Art. 1623 of the Civil
Code.
Issue: Who has the right of redemption over the subject property?
Held: The Supreme Court dismissed herein petition and affirmed the decision of the appellate court.
Petitioner contends that vendors (his co-heirs) should be the ones to give him written notice and not the

vendees (defendants or private respondent herein). However, while it is true that written notice is required
by the law (Art. 1623), it is equally true that the same Art. 1623 does not prescribe any particular form of
notice, nor any distinctive method for notifying the redemptioner. So long therefore, as the latter is
informed in writing of the sale and the particulars thereof, the 30 days for redemption start running, and
the redemptioner has no real cause to complain.
In the case at bar, where the vendors or co-owners of petitioner stated under oath in the deeds of sale that
notice of sale had been given to prospective redemptioners in accordance with Article 1623 of the Civil
Code. "A sworn statement or clause in a deed of sale to the effect that a written notice of sale was given to
possible redemptioners or co-owners might be used to determine whether an offer to redeem was made on
or out of time, or whether there was substantial compliance with the requirement of said Art. 1623."