1. Artates vs.
Urbi In both instances, the spirit of the law would have
Public land law; Homestead patent; Prohibition
against alienation or encumbrance of public
lands within 5 years from grant;
Purpose.—As prescribed by law, for a period of
five years from the date of the government
grant, lands acquired by free or homestead
patent shall not be only incapable of being
encumbered or alienated except in favor of the
government itself or any of its institutions or of
duly constituted banking corporations, but also,
they shall not be liable to the satisfaction of any
debt contracted within the said period, whether
or not the indebtedness shall mature during or
after the prohibited time.
This provision against the alienation or
encumbrance of public lands granted within five
years from the issuance of the patent, it has been
held, is mandatory; a sale made in violation
thereof is null and void and produces no effect
whatsoever. Though it may be a limitation on the
right of ownership of the grantee, the salutary
purpose of the provision cannot be denied; it is
to preserve and keep for the homesteader or his
family the land given to him gratuitously by the
State, so that being a property owner, he may
become and remain a contented and useful
member of our society.
Prohibition applies even in case of involuntary
sale.—
The homestead patent covering the land in
question was issued to appellants on 23
September 1952, and it was sold at public
auction to satisfy the civil liability of appellant
Lino Artates to Daniel Urbi, adjudged on the 14
March 1956 decision of the Justice of the Peace
Court of Camalaniugan, Caga-yan.
There can be no doubt that the award of
damages to Urbi created for Artates a civil
obligation, an indebtedness, that commenced
from the date such obligation was decreed on
14 March 1956. Consequently, it is evident that, it
cannot be enforced against, or satisfied out of,
the sale of the homestead lot acquired by
appellants less than 5 years before the obligation
accrued. And this is true even if the sale involved
here is not voluntary. For purposes of complying
with the law, it is immaterial that the satisfaction
of the debt by the encumberancing or alienation
of land grant was made voluntarily, as in the
case of an ordinary sale, or involuntarily, such as
that effected through levy on the property and
consequent sale at public auction.
been violated.
Non-liability of homestead grant extends to
extra-contractual obligation.—
Doubts have been expressed as to whether the
words “debt contracted prior to the expiration of
said period” (of 5 years from and after the grant)
would include the civil liability arising from a
crime committed by the homesteader. While
there is no direct Philippine precedent on this
point, there are various reasons why the non-
liability of the homestead grant should be
extended to extra-contractual obligations. First
and foremost, whether it be viewed as an
exemption or as a condition attached to the
grant to encourage people to settle and
cultivate public land, the immunity in question is
in consonance with the definite public policy
underlying these grants, which is to “to preserve
and keep in the family of the homesteader that
portion of public land which the State has given
to him” so he may have a place to live with his
family and become a happy citizen and a useful
member of society and the exemption should
not be given restrictive application.
A levy and sale of the homestead on account of
extra-contractual liability incurred would uproot
the homesteader and his family and turn them
into homeless waifs as effectively as a levy for
nonpayment of a contractual debt. Secondly,
the word “debt” in exemption statutes, in its
wider sense, includes all that is due to a man
under any form or obligation or promise, and
covers not only obligations arising under
contract, but also those imposed by law without
contract.
Considering the protective policy of the law, it
becomes apparent that “debt contracted” was
used in it in the sense of “obligation incurred,”
since Webster gives the verb to “contract” the
meaning of “to bring on; incur; acquire.” Finally,
our public land laws being copied from
American legislation, resort to American
precedents reveals that, under the weight of
authority, exemption from “debts contracted” by
a homesteader has been held to include
freedom from money liabilities, from torts or
crimes committed by him, such as from bigamy
or slander, breach of contract or other torts.
Execution being null and void; Possession of land
to be returned.
 2. Concrete Aggregates, Inc. vs. Court of It is clear, however, that petitioner does
Tax Appeals nothing more than sell the articles that it
habitually manufactures. It stocks raw
Petitioner, which operates a batching
materials, ready at any time, for the
plant and an asphalt mixing plant is a
manufacture of asphalt and/or concrete
manufacturer subject to 7% sales tax and
mix.
not a mere contractor.
Its marketing system would readily disclose
It is quite evident that the percentage tax
that its products are available for sale to
imposed in Section 191 is generally a tax
anyone needing them.
on the sale of services or labor. In its
factual findings, respondent court found Whosoever would need its products,
that petitioner was formed and organized whether builder, contractor, homeowner or
primarily as a manufacturer; that it has an paver with sufficient money, may order
aggregate plant at Montalban, Rizal, aggregates, concrete mix or bituminous
which processes rock aggregates mined asphalt mix of the kind manufactured by
by it from private lands; it operates a petitioner.
concrete batching plant at Longos,
The habituality of the production of goods
Quezon City where the specified
for the general public characterizes the
aggregates from its plant at Montalban
business of petitioner.
are mixed with sand and cement, after
which water is added and the concrete
mixture is sold and delivered to customers;
and at its plant site at Longos, Quezon City,
petitioner has also an asphalt mixing
machinery where bituminous asphalt mix is
manufactured.

As aptly pointed out by the Solicitor

General, petitioner’s raw materials are
processed under a prescribed formula and
thereby changed by means of machinery
into a finished product, altering their
quality, transforming them into marketable
state or preparing them for any of the
specific uses of industry.

Thus, the raw materials become a distinct

class of merchandise or “finished products
for the purpose of their sales or distribution
to others and not for his own use or
consumption.” Evidently, without the
above process, the raw materials or
aggregates could not, in their original form,
perform the uses of the finished product.

Had it not been for this fact, petitioner

could easily mass produce the ready-
mixed concrete or asphalt desired and
needed by its various customers and for
which it is mechanically equipped to do.
 3. Dignos vs. Court of Appeals
A deed of sale is absolute in nature
although denominated as Deed of
Conditional Sale, absent a proviso that the
title to the property sold is reserved in the
vendor until full payment of the purchase
price nor a stipulation giving the vendor
the right to unilaterally rescind the contract
the moment the vendee fails to pay within
a fixed period.—
All elements of a valid contract of sale are
present in the case at bar.—
On the contrary, all the elements of a valid
contract of sale under Article 1458 of the
Civil Code, are present, such as:
(1) consent or meeting of the minds;
(2) determinate subject matter; and
(3) price certain in money or its equivalent.
In addition, Article 1477 of the same Code
provides that "The ownership of the thing
sold shall be transferred to the vendee
upon actual or constructive delivery
thereof."
Sale of the property by the vendors to a
second vendee is null and void as at the
time of sale they were no longer owners of
the property.—
Rescission; Absence of notice to the first
vendees of alleged extrajudicial rescission
of the contract by petitioners and of a
court suit to rescind the sale;
Public document; Acts and contracts
which have for their object the
extinguishments of real rights over
immovable property must appear in a
public document.
Slight delay on the part of one party in the
performance of his obligation is not a
sufficient ground for rescission of the
agreement; Equity and justice mandate
that the vendee be given an additional
period to complete payment of the
purchase price.

As applied in the case of Froilan v. Pan

Oriental Shipping Co., et al. (12 SCRA 276),
this Court held that in the absence of
stipulation to the contrary, the ownership of
the thing sold passes to the vendee upon
actual or constructive delivery thereof.

Although there was no constructive

delivery of the land sold, as the deed of
sale is a private instrument there was
actual delivery thereof by the delivery of
possession of the land to the vendees.—

Contemporaneous acts; The act of the

petitioners of delivering the possession of
the land to the vendees,
contemporaneous with the contract,
clearly show that an absolute deed of sale
was intended by the parties and not a
contract to sell.—
 4. Heirs of Enrique Zambales vs. CA
Public Land Act; Contracts; Compromise
Agreement; A compromise agreement
approved by the court wherein a grantee
of public land promised to sell the same
where executed within the 5- year
prohibitory period is null and void ab initio.
The fact that the land was actually sold
after the five-year period and the same
was approved by the Secretary of
Agriculture does not cure the defect.
As the contract is void from the beginning,
for being expressly prohibited by law the
action for the declaration of its inexistence
does not prescribe.
Being absolutely void, it is entitled to no
authority or respect, the sale may be
impeached in a collateral proceeding by
any one with whose rights and interest it
conflicts.
There is no presumption of its validity. The
approval of the sale by the Secretary of
Agriculture and Natural Resources after the
lapse of five years from the date of the
patent would neither legalize the sale.
Action for reversion may be filed by the
State where public land was promised to
be sold in a compromise agreement
entered into within the 5-year prohibited
period.
5. People’s Homesite & Housing Corp. vs.
Court of Appeals
Sale; P.H.H.C.; There is no perfected sale of
a subdivision lot where award thereof was
expressly made subject to approval by
higher authorities and there was no
acceptance manifested by the supposed
awardee.
6. Sanchez vs. Rigos
Sales; Consideration not presumed in an
accepted unilateral promise to buy or to
sell.—
Article 1354 of the Civil Code which
presumes the existence of a consideration
in every contract applies to contracts in
general, whereas the second paragraph
of Article 1479 thereof refers to “sales” in
particular, and, more specifically, to “an
accepted unilateral promise to buy or to
sell.” It is Article 1479 that controls
defendant’s unilateral promise to sell her
property to the plaintiff.
Promisee in an accepted unilateral
promise to sell must prove existence of
consideration.—
In order that said unilateral promise may
be “binding” upon the promisor, Article
1479 requires the concurrence of a
condition, namely, that the promise be
“supported by a consideration distinct
from the price.”
Accordingly, the promisee cannot compel
the promisor to comply with the promise,
unless the former establishes the existence
of said distinct consideration. In other
words, the promisee has the burden of
proving such consideration,
Accepted promise to sell is an offer to sell
and when accepted becomes a contract
of sale.—
In accepted unilateral promise to sell, since
there may be no valid contract without a
cause or consideration, the promisor is not
bound by his promise and may,
accordingly, withdraw it. Pending notice of
its withdrawal, his accepted promise
partakes, however, of the nature of an
offer to sell which, if accepted, results in a
perfected contract of sale.
7. SOUTHWESTERN SUGAR AND MOLASSES
COMPANY, vs, ATLANTIC GULF & PACIFIC
COMPANY
CONTRACTS; OFFER AND ACCEPTANCE;
RULE ON WITHDRAWAL OF OFFER.—
While it is true that under article 1324 of the
new Civil Code, the general rule regarding
offer and acceptance is that, when the
offeror gives to the offeree a certain
period to accept, "the offer may be
withdrawn at any time before
acceptance" except when the option is
founded upon consideration, this general
rule must be interpreted as modified by the
provision of article 1479 which applies to "a
promise to buy and sell" specifically.
This rule requires that a promise to sell to be
valid must be supported by a
consideration distinct from the price, which
means that the option can still be
withdrawn, even if accepted, if the same is
not supported by any consideration.
8. QUIROGA vs. PARSONS
SALES; INTERPRETATION OF CONTRACT.—
For the classification of contracts, due
regard must be paid to their essential
clauses. In the contract in the instant case,
what was essential, constituting its cause
and subject matter, was that the plaintiff
was to furnish the defendant with the beds
which the latter might order, at the
stipulated price, and that the defendant
was to pay this price in the manner agreed
upon.
These are precisely the essential features of
a contract of purchase and sale. There
was the obligation on the part of the
plaintiff to supply the beds, and, on that of
the defendant, to pay their price.
These features exclude the legal
conception of an agency or order to sell
whereby the mandatary or agent receives
the thing to sell it, and does not pay its
price, but delivers to the principal the price
he obtains from the sale of the thing to a
third person, and if he does not succeed in
selling it, he returns it.
Held: That this contract is one of purchase
and sale, and not of commercial agency.
The testimony of the person who drafted
this contract, to the effect that his purpose
was to be an agent for the beds and to
collect a commission on the sales, is of no
importance to prove that the contract was
one of agency, inasmuch as the
agreements contained in the contract
constitute, according to law, covenants of
purchase and sale, and not of commercial
agency. It must be understood that a
contract is what the law defines it to be,
and not what it is called by the contracting
parties.
The fact that the contracting parties did
not; perform the contract in accordance
with its terms, only shows mutual tolerance
and gives no right to have the contract
considered, not as the parties stipulated it,
but as they performed it.
Only the acts of the contracting parties,
subsequent to, and in connection with, the
performance of the contract must be
considered in the interpretation of the
contract, when such interpretation is
necessary, but not when, as in the instant
case, its essential agreements are clearly
set forth and plainly show that the-
contract belongs to a certain kind and not
to another.
The defendant obligated itself to order the
beds from the plaintiff by the dozen.
Held: That the effect of a breach of this
clause by the defendant would only entitle
the plaintiff to disregard the orders which
the defendant might place under other
conditions; but if the plaintiff consents to fill
them, he waives his right and cannot
complain for having acted thus at his own
free will.
 9. Toyota Shaw, Inc. vs. Court of Appeals 10. ATKINS, KROLL & Co.vs. B. CUA HIAN TEK

Exhibit “A” is not a contract of sale.— SALES; OFFER TO SELL A DETERMINATE THING
FOR A PRICE CERTAIN; ACCEPTANCE OF
What is clear from Exhibit “A” is not what
OFFER; EFFECT OF; LIABILITY OF THE OFFEROR
the trial court and the Court of Appeals
AND OFFEREE.—
appear to see. It is not a contract of sale.
The acceptance of an offer to sell a
No obligation on the part of Toyota to
determinate thing for a price certain
transfer ownership of a determinate thing
creates a bilateral contract to sell and to
to Sosa and no correlative obligation on
buy.
the part of the latter to pay therefor a
price certain appears therein. The provision The offeree, upon acceptance, ipso facto
on the downpayment of P100,000.00 made assumes the obligations of a purchaser. On
no specific reference to a sale of a the other hand, the offeror would be liable
vehicle. for damages if he fails to deliver the thing
he had offered for sale.
If it was intended for a contract of sale, it
could only refer to a sale on installment OPTION WITHOUT CONSIDERATION. —
basis, as the VSP executed the following
If an option is given without consideration,
day confirmed. But nothing was
it is a mere offer of contract of sale, which
mentioned about the full purchase price
is not binding until accepted.
and the manner the installments were to
be paid. If, however, acceptance is made before a
withdrawal, it constitute a binding contract
Definiteness as to the price is an essential
of sale, even though the option was not
element of a binding agreement to sell
supported by a sufficient consideration.
personal property.—

This Court had already ruled that a definite

agreement on the manner of payment of
the price is an essential element in the
formation of a binding and enforceable
contract of sale.

This is so because the agreement as to the

manner of payment goes into the price
such that a disagreement on the manner
of payment is tantamount to a failure to
agree on the price. Definiteness as to the
price is an essential element of a binding
agreement to sell personal property.
11. Natino vs. Intermediate Appellate Court premises to the lessee, should he choose to
exercise his option to purchase the same, is
Sales; Mortgage; Redemption; A
the obligation of the lessee to sell to the
commitment by the bank to resell a
lessor the building and/or improvements
property within a specified period,
constructed and/or made by the former, if
although accepted by the party in whose
he fails to exercise his option to buy said
favor it was made, is considered an option
premises.”
not supported by consideration distinct
from the price, and therefore, not binding In the present case, the consideration is
upon the promissor. even more onerous on the part of the
lessee since it entails, transferring of the
building and/or improvements on the
12. Serra vs. Court of Appeals property to petitioner, should respondent
bank fail to exercise its option within the
Sales; Arts. 1324 and 1479 of the Civil Code period stipulated.
explained. —
13. Roman vs. Grimalt
Article 1324 of the Civil Code provides that
when an offeror has allowed the offeree a PARTIES; PROPOSAL; CONSENT;
certain period to accept, the offer may be CONSIDERATION.—
withdrawn at anytime before acceptance
When there is no proof that the parties
by communicating such withdrawal,
have agreed as to the thing which should
except when the option is founded upon
be the subject of the contract and that
consideration, as something paid or
one has accepted the terms proposed by
promised.
the other, it cannot be said that the
On the other hand, Article 1479 of the contracting parties have given their mutual
Code provides that an accepted consent as to the subject and
unilateral promise to buy and sell a consideration of the contract.
determinate thing for a price certain is
SALE.—
binding upon the promisor if the promise is
supported by a consideration distinct from Where no valid contract of sale exists it
the price. creates no mutual rights or obligations
between the alleged purchaser and seller,
In a unilateral promise to sell, where the
nor any legal relation binding upon them.
debtor fails to withdraw the promise before
the acceptance by the creditor, the LOST PROPERTY.—
transaction becomes a bilateral contract
The disappearance or loss of property
to sell and to buy and the parties may
which the owner intended or -attempted
reciprocally demand performance.
to sell can only interest the owner, who
Consideration separate from the price, should suffer the loss, and not a third party
explained.— who has acquired no rights nor incurred
any liability with respect thereto.
On the other hand, what may be
regarded as a consideration separate from
the price is discussed in the case of Vda.
de Quirino v. Palarca wherein the facts are
almost on all fours with the case at bar. The
said case also involved a lease contract
with option to buy where we had occasion
to say that “the consideration for the
lessor’s obligation to sell the leased
14. Equatorial Realty Development, Inc. vs.
Mayfair Theater, Inc
Sales; The contractual stipulation provides
for a right of first refusal in favor of
Mayfair.—
We agree with the respondent Court of
Appeals that the aforecited contractual
stipulation provides for a right of first refusal
in favor of Mayfair. It is not an option
clause or an option contract. It is a
contract of a right of first refusal.
The deed of option or the option clause in
a contract in order to be valid and
enforceable must among other things
indicate the definite price at which the
person granting the option is willing to sell.
An accepted unilateral promise which
specifies the thing to be sold and the price
to be paid when coupled with a valuable
consideration distinct and separate from
the price is what may properly be termed
a perfected contract of option.
The option is not the contract of sale
itself.—
Observe, however, that the option is not
the contract of sale itself. The optionee has
the right, but not the obligation, to buy.
Once the option is exercised timely, i.e.,
the offer is accepted before a breach of
the option, a bilateral promise to sell and
to buy ensues and both parties are then
reciprocally bound to comply with their
respective undertakings.
An option is a contract granting a privilege
to buy or sell within an agreed time and at
a determined price.—
An option is a contract granting a privilege
to buy or sell within an agreed time and at
a determined price. It is a separate and
distinct contract from that which the
parties may enter into upon the
consummation of the option. It must be
supported by consideration. In the instant
case, the right of first refusal is an integral
part of the contracts of lease. The
consideration is built into the reciprocal
obligations of the parties.
Rescission is a relief allowed for the
protection of one of the contracting parties
and even third persons from all injury and
damage the contract may cause or to
protect some incompatible and preferred
right by the contract.
15. Norkis Distributors, Inc. vs. Court of
Appeals
Ownership; The issuance of a sales invoice
does not prove transfer of ownership of the
thing sold to the buyer; An invoice is
nothing more than a detailed statement of
the nature, quantity and cost of the thing
sold and has been considered not a bill of
sale.
In all forms of delivery, it is necessary that
the act of delivery whether constructive or
actual be coupled with the intention of
delivering the thing.
The critical factor in the different modes of
effecting delivery which gives legal effect
to the act is the actual intention of the
vendor to deliver and its acceptance by
the vendee.
Provision that in the absence of an express
assumption of risk by the buyer, the things
sold remain at seller’s risk until the
ownership thereof is transferred to the
buyer is applicable to this case.—
Article 1496 of the Civil Code which
provides that in the absence of an express
assumption’ of risk by the buyer, the things
sold remain at seller’s risk until the
ownership thereof is transferred to the
buyer,” is applicable to this case, for there
was neither an actual nor constructive
delivery of the thing sold, hence, the risk of
loss should be borne by the seller, Norkis,
which was still the owner and possessor of
the motorcycle when it was wrecked. This
is in accordance with the well-known
doctrine of res perit domino.
 16. SOUTHERN MOTORS, INC., vs. ANGELO
MOSCOSO
Sale on Installments; Action filed is for specific
performance; Mortgaged Property Attached;
Sale of mortgaged property not tantamount to
foreclosure of mortgage; Deficiency
judgment.—
In sales on installments, where the action
instituted is for specific performance and the
mortgaged property is subsequently attached
and sold, the sale thereof does not amount to
a foreclosure of the mortgage, hence, the
seller-creditor is entitled to deficiency
judgment.
17. Pascual vs. Universal Motors Corporation
Sales; Chattel mortgage; Foreclosure of chattel
mortgage precludes any further action against
the debtor and his guarantor. —
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.
A similar argument has been answered by this
Court in this wise:
“(T)o sustain appellant’s argument is to
overlook the fact that if the guarantor should
be compelled to pay the balance of the
purchase price, the guarantor will in turn be
entitled to recover what she has paid from the
debtor vendee (Art. 2066, Civil Code); so that
ultimately, it will be the vendee who will be
made to bear the payment of the balance of
the price, despite the earlier foreclosure of the
chattel mortgage given by him.
Thus, the protection given by Article 1484
would be indirectly subverted, and public
policy overturned.”
18. Filinvest Credit Corporation vs. Court of
Appeals
Sales; Contracts in the form of lease either with
an option to the buyer to purchase for a small
consideration at the end of the term provided
all installments are paid or with stipulation that
if the rent throughout the term is paid, title shall
vest in the lessee, are leases in name only;
Contracts of this nature are actually contracts
of sale.
Sale of Movables in Installments; Remedies of
Seller; The remedies of a seller provided for in
Art. 1484 are alternative and not cumulative,
hence, the exercise of one precludes the
exercise of the others; and this limitation
applies likewise to contracts purporting to be
leases of personal property with option to
buy.—
The seller of movables in installments, in case
the buyer fails to pay two or more installments,
may elect to pursue either of the following
remedies:
(1) exact fulfillment by the purchaser of the
obligation;
(2) cancel the sale; or
(3) foreclose the mortgage on the purchased
property if one was constituted thereon.
It is now settled that the said remedies are
alternative and not cumulative and therefore,
the exercise of one bars the exercise of the
others. Indubitably, the device—contract of
lease with option to buy—is at times resorted to
as a means to circumvent Article 1484,
particularly paragraph (3) thereof.
Through the set-up, the vendor, by retaining
ownership over the property in the guise of
being the lessor, retains, likewise, the right to
repossess the same, without going through the
process of foreclosure, in the event the
vendee-lessee defaults in the payment of the
installments.
There arises therefore no need to constitute a
chattel mortgage over the movable sold. More
important, the vendor, after repossessing the
property and, in effect, canceling the contract
of sale, gets to keep all the installments-cum-
rentals already paid.
 19. Ridad vs. Filipinas Investment and 20. De la Cruz vs. Asian Consumer and
Finance Corp. Industrial Finance Corp.

Sales; Remedy of vendor under Art. 1484 of Sale on installment; Foreclosure of chattel
the new Civil Code in case buyer of mortgage; Application of “Recto Law”;
personal property on installment fails to Remedies of seller mortgagee alternative,
pay is mutually exclusive. not cumulative.—

Under Art 1484 of the new Civil Code the It is not disputed that the instant case is
vendor of personal property sold on covered by the so-called “Recto Law”,
installment who chooses the remedy of now Art. 1484 of the New Civil Code, which
foreclosure of the chattel mortgage is provides: “In a contract of sale of personal
limited to the foreclosure of the items sold property the price of which is payable in
only and not to other items not subject of installments, the vendor may exercise any
the sale although also given as additional of the follow-ing remedies:
security. The foreclosure of the latter items
(1) Exact fulfillment of the obligation,
is null and void.
should the vendee fail to pay;
In the case of Cruz v. Filipinas Investment &
(2) Cancel the sale, should the vendee’s
Finance Corporation, 23 SCRA 791, this
failure to pay cover two or more
Court ruled that the vendor of personal
installments;
property sold on the installment basis is
precluded, after foreclosing the chattel (3) Foreclose the chattel mortgage on the
mortgage on the thing sold, from having a thing sold, if one has been constituted,
recourse against the additional security put should the vendee’s failure to pay cover
up by a third party to guarantee the two or more installments.
purchaser’s performance of his obligation
on the theory that to sustain the same In this case, he shall have no further action
would overlook the fact that if the against the purchaser to recover any
guarantor should be compelled to pay the unpaid balance of the price. Any
balance of the purchase price, said agreement to the contrary shall be void.”
guarantor will in turn be entitled to recover
what he has paid from the debtor-vendee,
and ultimately it will be the latter who will
be made to bear the payment of the
balance of the price, despite the earlier
foreclosure of the chattel mortgage given
by him, thereby indirectly subverting the
protection given the latter.

Consequently, the additional mortgage

was ordered cancelled. Said ruling was
reiterated in the case of Pascual v.
Universal Motors Corporation, 61 SCRA 121.
 21. Agustin vs. Court of Appeals
Chattel Mortgage; Where the mortgagor
plainly refuses to deliver the chattel subject of
the mortgage upon his failure to pay two or
more installments, or if he conceals the chattel
to place it beyond the reach of the
mortgagee, the necessary expenses incurred
in the prosecution by the mortgagee of the
action for replevin so that he can regain
possession of the chattel should be borne by
the mortgagor.
At any rate, even if we were to brush aside the
“law of the case” doctrine we find the award
for repossession expenses still proper.
In Filipinas Investment & Finance Corporation v.
Ridad, the Court recognized an exception to
the rule stated under Article 1484(3) upon
which petitioner relies.
Thus: “x x x Where the mortgagor plainly refuses
to deliver the chattel subject of the mortgage
upon his failure to pay two or more
installments, or if he conceals the chattel to
place it beyond the reach of the mortgagee,
what then is the mortgagee expected to do? x
x x It logically follows as a matter of common
sense, that the necessary expenses incurred in
the prosecution by the mortgagee of the
action for replevin so that he can regain
possession of the chattel, should be borne by
the mortgagor.
Recoverable expenses would, in our view,
include expenses properly incurred in effecting
seizure of the chattel and reasonable
attorney’s fees in prosecuting the action for
replevin.”
22. Fiestan vs. Court of Appeals
Foreclosure; Levy defined.—
Levy, as understood under Section 15, Rule 39
of the Rules of Court in relation to execution of
money judgments, has been defined by this
Court as the act whereby a sheriff sets apart or
appropriates for the purpose of satisfying the
command of the writ, a part or the whole of
the judgment-debtor’s property.
Formalities of a levy as an essential requisite of
a valid execution sale under Section 15 of Rule
39 and a valid attachment lien under Rule 57 of
the Rules of Court are not basic requirements
before an extrajudicially foreclosed property
can be sold at public auction; Three different
kinds of sales under the law, distinguished—
—The formalities of a levy, as an essential
requisite of a valid execution sale under
Section 15 of Rule 39 and a valid attachment
lien under Rule 57 of the Rules of Court, are not
basic requirements before an extrajudicially
foreclosed property can be sold at public
auction. At the outset, distinction should be
made of the three different kinds of sales under
the law, namely:
An ordinary execution sale, a judicial
foreclosure sale, and an extrajudicial
foreclosure sale, because a different set of law
applies to each class of sale mentioned.
An ordinary execution sale is governed by the
pertinent provisions of Rule 39 of the Rules of
Court.
Rule 68 of the Rules of Court applies in cases of
judicial foreclosure sale.
On the other hand, Act No. 3135, as amended
by Act No. 4118 otherwise known as “An Act to
Regulate the Sale of Property under Special
Powers Inserted in or Annexed to Real Estate
Mortgages” applies in cases of extrajudicial
foreclosure sale.
Property sought to be foreclosed need not be
identified or set apart by the sheriff from the
whole mass of property of the mortgagor for
the purpose of satisfying the mortgage
indebtedness.—
In extrajudicial foreclosure of mortgage, the
property sought to be foreclosed need not be
identified or set apart by the sheriff from the
whole mass of property of the mortgagor for
the purpose of satisfying the mortgage
indebtedness.
For, the essence of a contract of mortgage
indebtedness is that a property has been
identified or set apart from the mass of the
property of the debtor-mortgagor as security
for the payment of money or the fulfillment of
an obligation to answer the amount of
indebtedness.
 23. Borbon II vs. Servicewide Specialists, Difference between alternative obligations
Inc. and alternative remedies.—

Sales; Mortgages; Remedies under Article In ordinary alternative obligations, a mere

1484 of the Civil Code are not cumulative choice categorically and unequivocally
but alternative and exclusive.— made and then communicated by the
person entitled to exercise the option
The remedies under Article 1484 of the Civil
concludes the parties. The creditor may
Code are not cumulative but alternative
not thereafter exercise any other option,
and exclusive, which means, as so held in
unless the chosen alternative proves to be
Nonato vs. Intermediate Appellate Court
ineffectual or unavailing due to no fault on
and Investor’s Finance Corporation, that—
his part.
“x x x Should the vendee or purchaser of a
This rule, in essence, is the difference
personal property default in the payment
between alternative obligations, on the
of two or more of the agreed installments,
one hand, and alternative remedies, upon
the vendor or seller has the option to avail
the other hand, where, in the latter case,
of any of these three remedies—either to
the choice generally becomes conclusive
exact fulfillment by the purchaser of the
only upon the exercise of the remedy.
obligation, or to cancel the sale, or to
foreclose the mortgage on the purchased For instance, in one of the remedies
personal property, if one was constituted. expressed in Article 1484 of the Civil Code,
it is only when there has been a foreclosure
These remedies have been recognized as
of the chattel mortgage that the vendee
alternative, not cumulative, that the
mortgagor would be permitted to escape
exercise of one would bar the exercise of
from a deficiency liability.
the others.”
Thus, if the case is one for specific
When the assignee forecloses on the
performance, even when this action is
mortgage, there can be no further
selected after the vendee has refused to
recovery of the deficiency, and the seller-
surrender the mortgaged property to
mortgagee is deemed to have renounced
permit an extrajudicial foreclosure, that
any right thereto.—
property may still be levied on execution
When the seller assigns his credit to another and an alias writ may be issued if the
person, the latter is likewise bound by the proceeds thereof are insufficient to satisfy
same law. Accordingly, when the assignee the judgment credit.
forecloses on the mortgage, there can be
So, also, a mere demand to surrender the
no further recovery of the deficiency, and
object which is not heeded by the
the seller-mortgagee is deemed to have
mortgagor will not amount to a
renounced any right thereto.
foreclosure, but the repossession thereof by
A contrario, in the event the seller- the vendor mortgagee would have the
mortgagee first seeks, instead, the effect of foreclosure.
enforcement of the additional mortgages,
guarantees or other security arrangements,
he must then be held to have lost by
waiver or non-choice his lien on the chattel
mortgage of the personal property sold by
and mortgaged back to him, although,
similar to an action for specific
performance, he may still levy on it.
 24. Dizon vs. Suntay
Property; Owner unlawfully deprived of
movable property may recover
possession of same from third party.—
The owner of a diamond ring may
recover the possession of the same
from a pawnshop where another
person had pledged it without authority
to do so. Article 559 of the Civil Code of
the Philippines applies and the defense
that the pawnshop acquired possession
of the ring without notice of any defect
in the title of the pledgor is unavailing.
25. EDCA Publishing & Distributing Corp.
vs. Santos
Property; Sales; Possession of movable
property acquired in good faith is
equivalent to a title.
Contract of sale is consensual;
Ownership shall pass from the vendor to
the vendee upon the actual or
constructive delivery of the thing sold.
Non-payment creates a right to
demand payment or to rescind the
contract, or to criminal prosecution.

Estoppel; Owner of movable unlawfully

pledged by another not estopped from
recovering possession.—

Where the owner delivered the

diamond ring to another solely for sale
on commission but the latter instead
pawned the same without authority to
do so, the owner is not estopped from
pursuing an action against the
pawnshop for the recovery of the
possession of the said ring.
 26. Layug vs. Intermediate Appellate Court
Contracts; The stipulations of a contract shall
be interpreted together attributing to the
doubtful ones that sense which may result from
all of them taken jointly.
Sale; Rulings in Legarda Hermanos v. Saldaña
and Calasanz v. Angeles invoked by Layug are
inapplicable.—
Layug posits that at the very least, he is entitled
to a conveyance of at least 8 of the 12 lots
subject of the conditional sale, on the theory
that since the total price of the 12 lots was P1
20,000.00, each lot then had a alue of
P10,000.00 and, therefore, with his P80,000.00,
he had paid in full the price for 8 lots. In
support, he invokes our earlier rulings in
Legarda Hermanos v. Saldaña and Calasanz v.
Angeles.
The cited precedents are however
inapplicable. In Legarda Hermanos, the
contract of sale provided for payment of the
price of two (2) subdivision lots at P1,500.00
each, exclusive of interest, in 120 monthly
installments, and at time of default, the buyer
had already paid P3,582.00, inclusive of
interest; and in Calasanz, the agreement fixed
a price of P3,720.00 with interest at 7% per
annum, and at time of default, the buyer had
paid installments totaling P4,533.38, inclusive of
interest.
Upon considerations of justice and equity and
in light of the general provisions of the civil law,
we resolved in Legarda Hermanos to direct the
conveyance of one of the lots to the buyer
since he had already paid more than the
value thereof, and in Calasanz, to disallow
cancellation by the seller and direct transfer of
title to the buyer upon his payment of the few
installments yet unpaid.
Court cannot resort to principles of equity and
the general provisions of the Civil Code in
resolution of the controversy because of
Republic Act. No. 6552.—
It is not however possible, in any event, to
apply the rulings in Legarda Hermanos and
Calasanz to the case at bar; i.e., to resort to
principles of equity and the general provisions
of the Civil Code in resolution of the
controversy. That was done in the cited cases
because there was at then no statute
specifically governing the situation. It was not
so as regards the instant case.
At the time of the execution of the contract in
question, and the breach thereof, there was a
statute already in force and applicable
thereto, Republic Act No. 6552. This statute
makes unnecessary if not indeed improper, a
resort to analogous provisions of the Civil
Code.
It also precludes a resort to principles of equity
it being axiomatic that where there is an
adequate remedy at law available to the
parties, equity should not come into play. And
it allows a mitigation of the impact of the
stringent contractual provisions on Layug and
makes possible the grant of some measure of
relief to him under the circumstances of the
case.
Even in residential properties, RA 6552
recognizes and reaffirms the vendor's right to
cancel the contract to sell upon breach and
non-payment of the stipulated installments.

In both said cases, we strove to equitably

allocate the benefits and losses between the
parties to preclude undue enrichment by one
at the expense of the other; and by this norm,
Layug cannot be permitted to claim that all his
payments should be credited to him in their
entirety, without regard whatever to the
damages his default might have caused to
Gabuya.
27. Power Commercial and Industrial Corp.
vs. Court of Appeals
Obligations and Contracts; Sales; Any
obscurity in a contract must be construed
against the party who caused it.
If the parties intended to impose on
respondent spouses the obligation to eject
the tenants from the lot sold, it should have
included such provision in the contract.
Rescission was not allowed as the breach
was not substantial and fundamental to the
fulfillment by the petitioners of the
obligation to sell.
Symbolic delivery, as a species of
constructive delivery, effects the transfer of
ownership through the execution of a
public document. Its efficacy can be
prevented if the vendor does not possess
control over the thing sold.
In order that this symbolic delivery may
produce the effect of tradition, it is
necessary that the vendor shall have had
such control over the thing sold.
Prior physical delivery or possession is not
legally required and the execution of the
deed of sale is deemed equivalent to
delivery. This deed operates as a formal or
symbolic delivery of the property sold and
authorizes the buyer to use the document
as proof of ownership.
Breach of Warranty; Requirements.—
Obvious to us in the ambivalent stance of
petitioner is its failure to establish any
breach of the warranty against eviction.
Despite its protestation that its acquisition
of the lot was to enable it to set up a
warehouse for its asbestos products and
that failure to deliver actual possession
thereof defeated this purpose, still no
breach of warranty against eviction can
be appreciated because the facts of the
case do not show that the requisites for
such breach have been satisfied. A
breach of this warranty requires the
concurrence of the following
circumstances:
(1) The purchaser has been deprived of the
whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right
prior to the sale made by the vendor; and
(4) The vendor has been summoned and
made co-defendant in the suit for eviction
at the instance of the vendee.
In the absence of these requisites, a
breach of the warranty against eviction
under Article 1547 cannot be declared.
As petitioner failed to impugn the integrity
of the contract, it is presumed, under the
law to be valid and subsisting.
Solutio Indebiti; Solutio indebiti applies
where:
[1] a payment is made when there exists
no binding relation between the payor,
who has no duty to pay, and the person
who received the payment, and
[2] the payment is made through mistake,
and not through liberality or some other
cause.
Quasi-contract of solutio indebiti is one of
the concrete manifestations of the ancient
principle that no one shall enrich himself
unjustly at the expense of another.
28. ADDISON vs. FELIX
VENDOR AND PURCHASER; DELIVERY;
EXECUTION OF PUBLIC INSTRUMENT.—
It is the duty of the vendor to deliver the
thing sold. Symbolic delivery by the
execution of a public instrument is
equivalent to actual delivery only when the
thing sold is subject to the control of the
vendor.
RESCISSION.—
If the vendor fails to deliver the thing sold the
vendee may elect to rescind the contract.