NICOLAS SANCHEZ v.

SEVERINA RIGOS
G.R. No. L-25494. June 14, 1972
SYLLABUS:
1.CIVIL LAW; CONTRACTS; CONTRACT TO BUY AND SELL;
OPTION WITHOUT CONSIDERATION; CASE AT BAR. Where
both parties indicated in the instrument in the caption, as an
"Option to Purchase," and under the provisions thereof, the
defendant "agreed, promised and committed" herself to sell
the land therein described to the plaintiff for P1,510.00, but
there is nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is
supported by a consideration "distinct from the price"
stipulated for the sale of the land, it is not a "contract to buy
and sell." It merely granted plaintiff an "option" to buy.
2.ID.; ID.; ID.; ID.; ARTICLES 1354 AND 1479, NEW CIVIL
CODE; APPLICABILITY. It should be noted that: Article 1354
applies to contracts in general, whereas the second
paragraph of Article 1479 refers to "sales" in particular, and,
more specifically, to "an accepted unilateral promise to buy
or to sell."
3.ID.; ID.; REQUISITE OF A UNILATERAL PROMISE IN ORDER
TO BIND PROMISOR; BURDEN OF PROOF REST UPON
PROMISEE. In order that a 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.
4.ID.; ID.; WHERE A UNILATERAL PROMISE TO SELL
GENERATED TO A BILATERAL CONTRACT OF PURCHASE AND
SALE; ARTICLES 1324 AND 1479, NCC., NO DISTINCTION.
This Court itself, in the case of Atkins, Kroll & Co., Inc. vs. Cua
Hian Tek (102 Phil., 948), decided later than Southwestern
Sugar & Molasses Co. vs. Atlantic & Pacific Co., 97 Phil., 249,
saw no distinction between Articles 1324 and 1479 of the
Civil Code and applied the former where a unilateral promise
to sell similar to the one sued upon was involved, treating
such promise as an option which, although not binding as a
contract in itself for lack of a separate consideration,
nevertheless generated a bilateral contract of purchase and
sale upon acceptance. In other words, since there may be no
valid contract without a cause or consideration 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.
5.REMEDIAL LAW; PLEADINGS AND PRACTICE; JUDGMENT ON
THE PLEADINGS; IMPLIED ADMISSION. Defendant explicitly
averred in her answer, and pleaded as a special defense, the
absence of said consideration for her promise to sell and, by
joining in the petition for a judgment on the pleadings,
plaintiff has impliedly admitted the truth of said averment in
defendant's answer.
6.STATUTORY CONSTRUCTION; INTERPRETATION OF
PROVISIONS OF SAME LAW; CARDINAL RULE. The view that
an option to sell can still be withdrawn, even if accepted, if
the same is not supported by any consideration, has the
advantage of avoiding a conflict between Article 1324 on
the general principles on contracts and 1479 on sales
of the Civil Code, in line with the cardinal rule of statutory
construction that, in construing different provisions of one
and the same law or code, such interpretation should be
favored as will reconcile or harmonize said provisions and
avoid a conflict between the same. Indeed, the presumption
is that, in the process of drafting the Code, its author has

maintained a consistent philosophy or position. Moreover, the

decision in Southwestern Sugar & Molasses Co. vs. Atlantic
Gulf & Pacific Co., supra, holding that Article 1324 is modified
by Article 1479 of the Civil Code, in effect, considers the
latter as an exception to the former, and exceptions are not
favored, unless the intention to the contrary is clear, and it is
not so, insofar as said two (2) articles are concerned. What is
more, the reference, in both the second paragraph of Article
1479 and Article 1324, to an option or promise supported by
or founded upon a consideration, strongly suggests that the
two (2) provisions intended to enforce or implement the same
principle.

ANTONIO, J., concurring opinion:

1.CIVIL LAW; CONTRACTS; OPTION TO SELL; EFFECT OF
ACCEPTANCE. I fully agree with the abandonment of the
view previously adhered to in Southwestern Sugar & Molasses
Co. vs. Atlantic Gulf and Pacific Co. (97 Phil., 249), which
holds that an option to sell can still be withdrawn, even if
accepted if the same is not supported by any consideration,
and the reaffirmance of the doctrine in Atkins, Kroll & Co. Inc.
vs. Cua Hian Tech (102 Phil., 948), holding that "an option
implies . . . the legal obligation to keep the offer (to sell) open
for the time specified"; that it could be withdrawn before
acceptance, if there was no consideration for the option, but
once the "offer to sell" is accepted, a bilateral
promise to sell and to buy ensues, and the offeree ipso facto
assumes the obligations of a purchaser.
2.ID.; ID.; ID.; OPTION WITHOUT CONSIDERATION IS A MERE
OFFER TO SELL, NOT BINDING UNTIL ACCEPTED. If the
option to sell is given without a consideration, it is a mere
offer to sell, which is not binding until accepted. If, however,
acceptance is made before a withdrawal, it constitutes a
binding contract of sale. The concurrence of both acts the
offer and the acceptance could in such event generate a
contract.
3.ID.; ID.; ID.; WITHDRAWAL OF OFFER BEFORE ACCEPTANCE,
OFFER IMPLIES AN OBLIGATION ON THE PART OF OFFEROR.
While the law permits the offeror to withdraw the offer at any
time before acceptance even before the period has expired,
some writers hold the view, that the offeror can not exercise
this right in an arbitrary or capricious manner. This is upon
the principle that an offer implies an obligation on the part of
the offeror to maintain it for such length of time as to permit
the offeree to decide whether to accept or not, and therefore
cannot arbitrarily revoke the offer without being liable for
damages which the offeree may suffer. A contrary view would
remove the stability and security of business transactions.
4.ID.; ID.; ID.; A BILATERAL RECIPROCAL CONTRACT; CASE AT
BAR. Where, as in the present case, the trial court found
that the "Plaintiff (Nicolas Sanchez) had offered the sum of
P1,510.00 before any withdrawal from the contract has been
made by the Defendant (Severina Rigos)," and Rigos' offer to
sell was accepted by Sanchez, before she could withdraw her
offer, a bilateral reciprocal contract to sell and to buy
was generated.

FACTS:
1. On April 3, 1961 Nicolas Sanchez and Severina Rigos
executed an instrument, entitled "Option to Purchase where
Rigos "agreed, promised and committed . . . to sell" to
Sanchez a parcel of land situated in the barrios of Abar and
Sibot, municipality of San Jose, province of Nueva Ecija (as
described in TCT NT-12528) for the sum of P1,510.00 within
two (2) years from said date.

2. Such agreement was executed with the

understanding that the said option shall be deemed
"terminated and elapsed," if "Sanchez shall fail to
exercise his right to buy the property" within the
stipulated period.
3. Several tenders of payment of sum of P1,510.00
was made by Sanchez within the said period but
these were rejected by Mrs. Rigos.
4. Hence, On March 12, 1963 Sanchez deposited
said amount with the CFI of Nueva Ecija and
commenced against Rigos an action for specific
performance and damages.
5. As a special defense, Rigos alleged that the
contract between the parties "is a unilateral
promise to sell, and the same being unsupported by
any valuable consideration, by force of the New
Civil Code, is null and void"
6. On February 28, 1964 Lower court rendered
judgment in favour of Sanchez:
a. Ordering Mrs. Rigos to accept the sum judicially
consigned by him and to execute the requisite deed
of conveyance.

WON the promisor can withdraw an option to sell,

after acceptance, if the option is not supported by
any consideration
HELD: Acceptance resulted in a perfected contract
of sale.
1. The option did not impose upon Sanchez the
obligation to purchase defendant's property.
2. The instrument Option to Purchase is not a
"contract to buy and sell." It merely granted
plaintiff an "option" to buy (as understood by
parties and obvious from the title of the instrument
itself)
3. Under the provisions thereof, the defendant
"agreed, promised and committed" herself to sell
the land therein described to the plaintiff for
P1,510.00, but there is nothing in the contract to
indicate that her aforementioned agreement,
promise and undertaking is supported by a
consideration "distinct from the price" stipulated for
the sale of the land.
4. NOTE THAT:
a. Articles coverage:

b. Also, sentenced Rigos to pay P200.00, as

attorney's fees, and the costs.
NOTES:
A. Case revolves around the proper application of
Article 1479 of our Civil Code:
ART. 1479.A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
"An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding
upon the promisor if the promise is supported by a
consideration distinct from the price
B. Plaintiffs arguments (Sanchez):
a. by virtue of the option under consideration,
"defendant agreed and committed to sell" and "the
plaintiff agreed and committed to buy" the land
described in the option. HENCE, plaintiff maintains
that the promise contained in the contract is
"reciprocally demandable," pursuant to the first
paragraph of said Article 1479
C. Relying upon Article 1354 of our Civil Code, the
LOWER COURT presumed the existence of said
consideration, and this would seem to be the main
factor that influenced its decision in favour of
Sanchez.
ISSUE:

i. Art. 1354 - applies to contracts in general

ii. Art. 1479 - refers to "sales" in particular, and,
more specifically, to "an accepted unilateral
promise to buy or to sell."
b. In order that said unilateral promise may be
"binding" upon the promisor, Article 1479 requires
the concurrence of a condition that the promise
be "supported by a consideration distinct from the
price."
c. The promisee cannot compel the promisor to
comply with the promise, unless the former
establishes the existence of said distinct
consideration.
d. Hence, promisee has the burden of proving such
consideration (In here, Rigos has not even alleged
the existence thereof in his complaint)
5. Cited CONFLICTING Cases:
Southwestern Sugar & Molasses Co. v. Atlantic Gulf
& Pacific Co. "There is no question that under
article 1479 of the new Civil Code 'an option to sell,'
or 'a promise to buy or to sell,' as used in said
article, to be valid must be 'supported by a
consideration distinct from the price.' This is clearly
inferred from the context of said article that a
unilateral promise to buy or to sell, even if
accepted, is only binding if supported by a

consideration. In other words, 'an accepted

unilateral promise' can only have a binding effect if
supported by a consideration, which means that the
option can still be withdrawn, even if accepted, if
the same is not supported by any consideration.
Here it is not disputed that the option is without
consideration. It can therefore be withdrawn
notwithstanding the acceptance made of it by
appellee.
It is true that under article 1324 of the new Civil
Code, the general rule regarding offer and
acceptance is that, when the offerer 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, but
this general rule must be interpreted as modified by
the provision of article 1479 above referred to,
which applies to 'a promise to buy and sell'
specifically. As already stated, this rule requires that
a promise to sell to be valid must be supported by a
consideration distinct from the price.
We are net oblivious of the existence of American
authorities which hold that an offer, once accepted,
cannot be withdrawn, regardless of whether it is
supported or not by a consideration. These
authorities, we note, uphold the general rule
applicable to offer and acceptance as contained in
our new Civil Code. But we are prevented from
applying them in view of the specific provision
embodied in article 1479. While under the 'offer of
option' in question appellant has assumed a clear
obligation to sell its barge to appellee and the
option has been exercised in accordance with its
terms, and there appears to be no valid or
justifiable reason for appellant to withdraw its offer,
this Court cannot adopt a different attitude because
the law on the matter is clear. Our imperative duty
is to apply it unless modified by Congress."
Atkins, Kroll and Co., Inc. v. Cua Hian Tek saw no
distinction between Articles 1324 and 1479 of the
Civil Code and applied the former where a unilateral
promise to sell similar to the one sued upon here
was involved, treating such promise as an option
which, although not binding as a contract in itself
for lack of a separate consideration, nevertheless
generated a bilateral contract of purchase and sale
upon acceptance. Furthermore, an option is
unilateral: a promise to sell at the price fixed
whenever the offeree should decide to exercise his
option within the specified time. After accepting the
promise and before he exercises his option, the
holder of the option is not bound to buy. He is free
either to buy or not to buy later. In this case
however, upon accepting herein petitioner's offer a
bilateral promise to sell and to buy ensued, and the
respondent ipso facto assumed the obligation of a
purchaser. He did not just get the right
subsequently to buy or not to buy. It was not a
mere option then; it was bilateral contract of sale.

6. In other words, 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.
a. This view has the advantage of avoiding a
conflict between Articles 1324 on the general
principles on contracts and 1479 on sales of
the Civil Code, in line with the cardinal rule of
statutory construction that, in construing different
provisions of one and the same law or code, such
interpretation should be favored as will reconcile or
harmonize said provisions and avoid a conflict
between the same. Indeed, the presumption is that,
in the process of drafting the Code, its author has
maintained a consistent philosophy or position.
b. Moreover, the decision in Southwestern Sugar &
Molasses
Co. v. Atlantic Gulf & pacific Co., holding that Art.
1324 is modified by Art. 1479 of the Civil Code, in
effect, considers the latter as an exception to the
former, and exceptions are not favored, unless the
intention to the contrary is clear, and it is not so,
insofar as said two (2) articles are concerned. What
is more, the reference, in both the second
paragraph of Art. 1479 and Art. 1324, to an option
or promise supported by or founded upon a
consideration, strongly suggests that the two (2)
provisions intended to enforce or implement the
same principle.
7. Upon mature deliberation, the Court is of the
considered opinion that it should, as it hereby
reiterates the doctrine laid down in the Atkins, Kroll
& Co. case, and that, insofar all inconsistent
therewith, the view adhered to in the South western
Sugar & Molasses Co. case should be deemed
abandoned or modified.
8. In the present case, the trial court found that the
plaintiff (Sanchez) had offered the sum of P1,510.00
before Rigos could withdraw her offer. Since
Rigosoffer to sell was accepted by Sanchez, before
she could withdraw her offer, a bilateral reciprocal
contract to sell and to buy was generated.
SEPARATE OPINION:
ANTONIO, J., concurring:
I fully agree with the abandonment of the view
previously adhered to in Southwestern Sugar &
Molasses Co. vs. Atlantic Gulf and Pacific Co. which
holds that an option to sell can still be withdrawn,
even if accepted, if the same is not supported by
any consideration, and the reaffirmance of the

doctrine in Atkins, Kroll & Co., Inc. vs. Cua Hian Tek,
holding that "an option implies . . . the legal
obligation to keep the offer (to sell) open for the
time specified;" that it could be withdrawn before
acceptance, if there was no consideration for the
option, but once the "offer to sell" is accepted, a
bilateral promise to sell and to buy ensues, and the
offeree ipso facto assumes the obligations of a
purchaser In other words, if the option is given
without a consideration, it is a mere offer to sell,
which is not binding until accepted. If, however,
acceptance is made before a withdrawal, it
constitutes a binding contract of sale. The
concurrence of both acts the offer and the
acceptance could in such event generate a
contract.

question in good faith and for value. [She]has been

in continuous, public, peaceful, open possession
over the same and has been appropriating the
produce thereof without objection from anyone.

While the law permits the offeror to withdraw the

offer at any time before acceptance even before
the period has expired, some writers hold the view,
that the offeror can not exercise this right in an
arbitrary or capricious manner. This is upon the
principle that an offer implies an obligation on the
part of the offeror to maintain it for such length of
time as to permit the offeree to decide whether to
accept or not, and therefore cannot arbitrarily
revoke the offer without being liable for damages
which the offeree may suffer. A contrary view would
remove the stability and security of business
transactions

HELD:

DAUS vs. DE LEON

FACTS: Respondents alleged that they are the
owners of a parcel of land described as: No. 4786 of
the Cadastral Survey of San Manuel situated in the
Municipality of San Manuel, Bounded on the NW., by
Lot No. 4785; and on the SE., by Lot Nos. 11094 &
11096; containing an area of Four Thousand Two
Hundred Twelve (4,212) sq. m., more or less.
Covered by Original Certificate of Title No. 22134 of
the Land Records of Pangasinan which Hermoso de
Leon inherited from his father Marcelino de Leon by
virtue of a Deed of Extra-judicial Partition.
Sometime in the early 1960s, respondents engaged
the services of the late Atty. Florencio Juan to take
care of the documents of the properties of his
parents. Atty.Juan let them sign voluminous
documents. After the death of Atty. Juan, some
documents surfaced and most revealed that their
properties had been conveyed by sale or quitclaim
to Hermosos brothers and sisters, to Atty. Juan and
his sisters, when in truth and in fact, no such
conveyances were ever intended by them. His
signature in the Deed of Extra-judicial Partition with
Quitclaim made in favor of Rodolfo de Leon was
forged. They discovered that the land in question
was sold by Rodolfo de Leon to Aurora Alcantara.
They demanded annulment of the document and
reconveyance but defendants refused Aurora
Alcantara-Daus that she bought the land in

ISSUE:
1. Whether or not the Deed of Absolute Sale \
executed by Rodolfo de Leon over the land in
question in favor of petitioner was perfected and
binding upon the parties therein?
2. Whether or not the possession of petitioner
including her predecessor-in-interest Rodolfo de
Leon over the land in question was in good faith?

Petition has no merit.

1. A contract of sale is consensual. It is perfected by
mere consent, upon a meeting of the minds on the
offer and the acceptance thereof based on subject
matter, price of payment. At this stage, the sellers
ownership of the thing sold is not an element in the
perfection of the contract of sale .The contract,
however, creates an obligation on the part of the
seller to transfer ownership and to deliver the
subject matter of the contract. It is during the
delivery that the law requires the seller to have the
right to transfer ownership of the thing sold. In
general, a perfected contract of sale cannot be
challenged on the ground of the sellers nonownership of the thing sold at the time of the
perfection of the contract.
2. It is well-settled that no title to registered land in
derogation of that of the registered owner shall be
acquired by prescription or adverse possession.
Neither can prescription be allowed against the
hereditary successors of the registered owner,
because they merely step into the shoes of the
decedent and are merely the continuation of the
personality of their predecessor in interest.
Consequently, since a certificate of registration
covers it, the disputed land cannot be acquired by
prescription regardless of petitioners good faith
HEIRS OF ARTURO REYES, represented by
Evelyn R. San Buenaventura, petitioners, vs.
ELENA SOCCO-BELTRAN, respondent.
Nature:
This is a Petition for Review on Certiorari under Rule
45 of the Rules of Court, assailing the
Decision1dated 31 January 2006 rendered by the
Court of Appeals in CA-G.R. SP No. 87066, which
affirmed the Decision2 dated 30 June 2003 of the
Office of the President, in O.P. Case No. 02-A-007,

approving the application of respondent Elena

Socco-Beltran to purchase the subject property.
Ruling of the Supreme Court:
The instant Petition is DENIED.
Facts of the case:
The subject property in this case is a parcel of land
allocated to the Spouses Marcelo Laquian and
Constancia Socco (Spouses Laquian). When Marcelo
died, the property was left to his wife Constancia.
Upon Constancias subsequent death, she left the
original parcel of land, along with her other
property, with her heirs her siblings, namely:
Filomena Eliza Socco, Isabel Socco de Hipolito,
Miguel R. Socco, and Elena Socco-Beltran. The
parcel of land was partitioned into three lotsLot
No. 6-A, Lot No. 6-B, and Lot No. 6-C.The subject
property, Lot No. 6-B, was adjudicated to
respondent, but no title had been issued in her
name.
Elena Socco-Beltran filed an application for the
purchase of Lot No. 6-B before the Department of
Agrarian Reform (DAR), alleging that it was
adjudicated in her favor in the extra-judicial
settlement of Constancia Soccos estate. The heirs
of the late Arturo Reyes, filed their protest to
respondents petition before the DAR on the ground
that the subject property was sold by respondents
brother, Miguel R. Socco, in favor of their father,
Arturo Reyes, as evidenced by the Contract to Sell,
dated 5 September 1954 that for or in
consideration of the sum of FIVE PESOS (P5.00) per
square meter, he sell, convey and transfer by way
of this conditional sale the said 400 sq.m. more or
less unto Atty. Arturo C. Reyes, his heirs,
administrator and assigns.
Tolentino heirs averred that they took physical
possession of the subject property in 1954 and had
been uninterrupted in their possession of the said
property since then.
Petitioners sought remedy from the Office of the
President by appealing the 9 November 2001
Decision of the DAR Secretary favoring SoccoBeltran.The Office of the President rendered its
Decision denying petitioners appeal and affirming
the DAR Secretarys Decision. They appealed to Ca
and the CA subsequently affirmed the Decision of
the Office of the President. Hence, this present
Petition.

NOTE: Petitioners claim over the subject property

is anchored on the Contract to Sell executed
between Miguel Socco and Arturo Reyes on 5
September 1954. Petitioners additionally allege that
they and their predecessor-in-interest, Arturo
Reyes, have been in possession of the subject lot
since 1954 for an uninterrupted period of more than
40 years.
Held:
The Court is unconvinced.
Petitioners cannot derive title to the subject
property by virtue of the Contract to Sell. It was
unmistakably stated in the Contract and made clear
to both parties thereto that the vendor, Miguel R.
Socco, was not yet the owner of the subject
property and was merely expecting to inherit the
same as his share as a co-heir of Constancias
estate. It was also declared in the Contract itself
that Miguel R. Soccos conveyance of the subject to
the buyer, Arturo Reyes, was a conditional sale. It
is, therefore, apparent that the sale of the subject
property in favor of Arturo Reyes was conditioned
upon the event that Miguel Socco would actually
inherit and become the owner of the said property.
Absent such occurrence, Miguel R. Socco never
acquired ownership of the subject property which
he could validly transfer to Arturo Reyes.
Under Article 1459 of the Civil Code on contracts of
sale, "The thing must be licit and the vendor must
have a right to transfer ownership thereof at the
time it is delivered." The law specifically requires
that the vendor must have ownership of the
property at the time it is delivered. Petitioners claim
that the property was constructively delivered to
them in 1954 by virtue of the Contract to Sell.
However, as already pointed out by this Court, it
was explicit in the Contract itself that, at the time it
was executed, Miguel R. Socco was not yet the
owner of the property and was only expecting to
inherit it. Hence, there was no valid sale from which
ownership of the subject property could have
transferred from Miguel Socco to Arturo Reyes.
Without acquiring ownership of the subject
property, Arturo Reyes also could not have
conveyed the same to his heirs, herein petitioners.
Toyota Shaw Inc. vs. Court of Appeals, and
Sosa
244 SCRA 320 May 1995
FACTS:

Issue:
Whether or not there was valid delivery by Miguel
Socco to the heirs of Arturo Reyes that would
enable the latter to acquire title to the said land.

Luna L. Sosa and his son, Gilbert, went to purchase

a yellow Toyota Lite Ace from the Toyota office at
Shaw Boulevard, Pasig (petitioner Toyota) on June
14, 1989 where they met Popong Bernardo who
was a sales representative of said branch. Sosa

emphasized that he needed the car not later than

June 17, 1989 because he, his family, and a
balikbayan guest would be using it on June 18 to go
home to Marinduque where he will celebrate his
birthday on June 19. Bernardo assured Sosa that a
unit would be ready for pick up on June 17 at 10:00
in the morning, and signed the "Agreements
Between Mr. Sosa &Popong Bernardo of Toyota
Shaw, Inc., a document which did not mention
anything about the full purchase price and the
manner the installments were to be paid. Sosa and
Gilbert delivered the down payment of P100,000.00
on June 15, 1989 and Bernardo accomplished a
printed Vehicle Sales Proposal (VSP) No. 928 which
showed Sosas full name and home address, that
payment is by "installment," to be financed by
"B.A.," and that the "BALANCE TO BE FINANCED" is
"P274,137.00", but the spaces provided for
"Delivery Terms" were not filled-up.
When June 17 came, however, petitioner Toyota did
not deliver the Lite Ace. Hence, Sosa asked that his
down payment be refunded and petitioner Toyota
issued also on June 17 a Far East Bank check for the
full amount of P100,000.00, the receipt of which
was shown by a check voucher of Toyota, which
Sosa signed with the reservation, "without prejudice
to our future claims for damages." Petitioner Toyota
contended that the B.A. Finance disapproved Sosas
the credit financing application and further alleged
that a particular unit had already been reserved
and earmarked for Sosa but could not be released
due to the uncertainty of payment of the balance of
the purchase price. Toyota then gave Sosa the
option to purchase the unit by paying the full
purchase price in cash but Sosa refused.
The trial court found that there was a valid
perfected contract of sale between Sosa and Toyota
which bound the latter to deliver the vehicle and
that Toyota acted in bad faith in selling to another
the unit already reserved for Sosa, and the Court of
Appeals affirmed the said decision.
ISSUE:
Was there a perfected contract of sale between
respondent Sosa and petitioner Toyota?
COURT RULING:
The Supreme Court granted Toyotas petition and
dismissed Sosas complaint for damages because
the document entitled Agreements Between Mr.
Sosa &Popong Bernardo of Toyota Shaw, Inc., was
not a perfected contract of sale, but merely an
agreement between Mr. Sosa and Bernardo as
private individuals and not between Mr. Sosa and
Toyota as parties to a contract.
There was no indication in the said document of
any obligation on the part of Toyota to transfer

ownership of a determinate thing to Sosa and

neither was there a correlative obligation on the
part of the latter to pay therefor a price certain. The
provision on the downpayment of P100,000.00
made no specific reference to a sale of a vehicle. If
it was intended for a contract of sale, it could only
refer to a sale on installment basis, as VSP No.928
executed on June 15, 1989 confirmed. The VSP also
created no demandable right in favor of Sosa for
the delivery of the vehicle to him, and its nondelivery did not cause any legally indemnifiable
injury.
PERFECTO DY, JR. vs. COURT OF APPEALS,
GELAC TRADING INC., and ANTONIO V.
GONZALES
G.R. No. 92989 July 8, 1991
GUTIERREZ, JR., J
FACTS:
Wilfredo Dy purchased a truck and a farm tractor
through financing extended by Libra Finance and
Investment Corporation (Libra). Both truck and
tractor were mortgaged to Libra as security for the
loan.
Perfecto Dy wanted to buy the tractor from his
brother, Wilfredo Dy, so he wrote a letter to Libra
requesting that he be allowed to purchase from his
brother the said tractor and assume the mortgage
debt of the latter. Libra approved the request.
On September 4, 1979, Wilfredo Dy executed a
deed of absolute sale in favor of the petitioner over
the tractor in question. At this time, the subject
tractor was in the possession of Libra due to
Wilfredo Dy's failure to pay. Despite the offer of full
payment by the Perfecto Dy to Libra for the tractor,
the immediate release could not be effected
because Wilfredo Dy had obtained financing not
only for said tractor but also for a truck and Libra
insisted on full payment for both.
Perfecto Dy was able to convince his sister, Carol
Dy-Seno, to purchase the truck so that full payment
could be made for both. A check was issued in favor
of Libra, thus settling in full the indebtedness of
Wilfredo Dy with the financing firm. Payment having
been effected through an out-of-town check, Libra
insisted that it be cleared first before Libra could
release the chattels in question.
Meanwhile, a civil case entitled "Gelac Trading, Inc.
v. Wilfredo Dy", a collection case to recover the sum
of P12,269.80 was pending in another court.
On December 27, 1979, the provincial sheriff was
able to seize and levy on the tractor which was in

the premises of Libra through a writ of execution.

The tractor was subsequently sold at public auction
where Gelac Trading was the lone bidder. Later,
Gelac sold the tractor to one of its stockholders,
Antonio Gonzales.

the consummation of the sale. The contention,

therefore, that the consummation of the sale
depended upon the encashment of the check is
untenable.
SANCHEZ v RAMOS

It was only when the check was cleared on January

17, 1980 that the Perfecto Dy learned about GELAC
having already taken custody of the subject tractor.
So he filed an action to recover the subject tractor
against GELAC Trading.
RTC rendered judgment in favor of the petitioner.
Court of Appeals reversed it and held that the
tractor in question still belonged to Wilfredo Dy
when it was seized and levied by the sheriff by
virtue of the alias writ of execution issued in the
civil case.
ISSUE:
Whether or not Wilfredo Dy was still the owner of
the tractor in question when it was obtained
through the writ of execution.
HELD:
NO. The sale of the subject tractor was
consummated upon the execution of the public
instrument on September 4, 1979. At this time
constructive delivery was already effected. Hence,
the subject tractor was no longer owned by Wilfredo
Dy when it was levied upon by the sheriff in
December 27, 1979. It is well settled that only
properties unquestionably owned by the judgment
debtor and which are not exempt by law from
execution should be levied upon or sought to be
levied upon. For the power of the court in the
execution of its judgment extends only over
properties belonging to the judgment debtor.
Article 1496 of the Civil Code states that the
ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in
any of the ways specified in Articles 1497 to 1501
or in any other manner signing an agreement that
the possession is transferred from the vendor to the
vendee. Actual delivery of the subject tractor could
not be made. However, there was constructive
delivery already upon the execution of the public
instrument pursuant to Article 1498 and upon the
consent or agreement of the parties when the thing
sold cannot be immediately transferred to the
possession of the vendee. (Art. 1499)
The payment of the check was actually intended to
extinguish the mortgage obligation so that the
tractor could be released to the petitioner. The
clearing or encashment of the check which
produced the effect of payment determined the full
payment of the money obligation and the release of
the chattel mortgage. It was not determinative of

Facts:
This is an action for the recovery of a piece of land
described in the second paragraph of the
complaint. The land in question is in the
defendant's possession and formerly belonged to
Ciriaco Fernandez. Ciriaco Fernandez sold the land
to spouses Marcelino Gomez and Narcisa Sanchez
under pacto de retro for the period of one year.
Gomez and Sanchez never took material possession
of the land. The period for repurchase elapsed
without the vendor making use of it. Ciriaco
Fernandez again sold the same land, by means of a
private document, to Roque Ramos who
immediately took material possession thereof.
The trial court applied Art 1473 of the CC and
declared preferable the sale executed to the
defendant and absolved him from the complaint.
ISSUE: What kind of possession does Art 1473
refer?
Who has the material possession of a parcel of real
property?
HELD:
Possession is acquired by the material occupancy of
the thing or right possessed, or by the fact that the
latter is subjected to the action of our will, or by the
appropriate acts and legal formalities established
for acquiring possession (art. 438, Civil Code.). By a
simple reasoning, it appears that, because the law
does not mention to which of these kinds of
possession the article refers, it must be understood
that it refers to all of these kinds. The proposition
that this article, according to its letter, refers to the
material possession and excludes the symbolic
does not seem to be founded upon a solid ground.
Article 1473 is more in consonance with the
principles of justice. The execution of a public
instrument is equivalent to the delivery of the
realty sold (art. 1462, Civil Code) and its possession
by the vendee (art. 438). Under these conditions
the sale is considered consummated and
completely transfers to the vendee all of the
vendor's rights of ownership including his real right
over the thing. The vendee by virtue of this sale
has acquired everything and nothing, absolutely
nothing, is left to the vendor. From this moment the
vendor is a stranger to the thing sold like any other
who has never been its owner. As the thing is
considered delivered, the vendor has no longer the

obligation of even delivering it. If he continues

taking material possession of it, it is simply on
account of vendee's tolerance and, in this sense,
his possession is vendor's possession. And if the
latter should have to ask him for the delivery of this
material possession; it would not be by virtue of the
sale, because this has been already consummated
and has produced all its effects, but by virtue of the
vendee's ownership, in the same way as said
vendee could require of another person although
same were not the vendor. This means that after
the sale of a realty by means of a public
instrument, the vendor, who resells it to another,
does not transmit anything to the second vendee
and if the latter, by virtue of this second sale, takes
material possession of the thing, he does it as mere
detainer, and it would be unjust to protect this
detention against the rights to the thing lawfully
acquired by the first vendee.
The possession mentioned in article 1473 (for
determining who has better right when the same
piece of land has been sold several times by the
same vendor) includes not only the material but
also the symbolic possession, which is acquired by
the execution of a public instrument.
From the foregoing it follows that the plaintiff was
the first to take possession of the land, and
consequently the sale executed to him is
preferable.
The judgment appealed from is REVERSED. Plaintiff
is declared owner of the land in question; and the
defendant is ordered to deliver the possession of
the land to the plaintiff.
DOCTRINE: RULES ON DOUBLE SALE : (Separate
opinion, Street, J-dissenting) (ART. 1544)
Three distinct criteria for determining who has the
better right when the same piece of real property is
sold by the same vendor, to two different persons,
which are: First, priority of registration; secondly, in
default of registration, the taking of possession in
good faith by the purchaser, and thirdly, in default
of both the preceding factors, mere priority of title.
PURPOSE: prevent fraud upon the innocent second
purchaser. (to protect the second purchaser, the
authors of the Civil Code saw fit to state two
conditions either of which, when fulfilled, gives the
second purchaser the better right, namely, priority
of registration and priority in the acquisition of
possession. These tests must both be understood to
relate to acts extrinsic to the contracts, or
documents of sale, under which the rival
purchasers pretend to have acquired title.
Otherwise the whole purpose of the article is
defeated.)

When a question is made between two person

claiming the same land under documents executed
by the same vendor, and the right has to be
determined by the fact of registration, we here
have recourse to a test which is extrinsic to the
original act of executing the document and
incapable of occultation. Likewise, when the right is
to be determined by the other test, namely, the
taking of possession by one or the other of the
vendees, reference must be had to the taking of
material possession as an act extrinsic to the
execution of the contract, or document of sale,
under which possession was taken.
The question as to who has the material possession
of a parcel of real property can usually be
ascertained by inspection or inquiry among person
living in the neighborhood, and although the
information thus obtained is less certain and
absolute than that which would be revealed by the
registration of title; nevertheless there is a
presumption of ownership from the fact of
possession, and a purchaser who, relying on the
evidence supplied by his eyes, pays his money to
one who is believed to be the true owner and takes
the material possession from him, should be
protected as against any prior purchaser except the
one who may have registered his title. This was
without doubt the intention of the codifiers.
Otherwise the third paragraph of article 1473 would
have been so drawn as to read as follows:
Should it not be recorded, the property shall belong
to the person whose purchase is proved by a public
instrument, and if neither sale be thus proved , to
the person who first took possession of it in good
faith, or, in default of possession, to the person who
presents the oldest title, provided there is good
faith.
[In other words, if the codifiers had intended to
create a preferential right based upon the fact that
a contract of sale is executed in the form of a public
instrument, this would have been enumerated
among the criteria expressed in article 1473, as
giving the better right.
The omission of the authors of the Code of take this
course in framing that article is significant; and it
was doubtless due to a perception of the fact that
the form in which a contract happens to be
executed affords no proper test when the question
is between one who claims under that contract and
one who claims under another contract of later date
executed by the same vendor. The court, by the
decision made in this case has, we submit,
amended article 1473 by inserting therein a
provision antagonistic to the spirit of that article
and destructive of its purpose.]
JACOBUS BERNHARD HULST v. PR BUILDERS
INC. (G.R. No. 156364)

FACTS:
The Petitioner and his spouse, both Dutch
Nationals, entered into a Contract to Sell with PR
Builders, Inc. to purchase a 210-sq m residential
unit in the respondent's townhouse project in
Batanagas. When PR Builder's failed to comply with
their verbal promise to complete the project, the
spouses Hulst filed a complaint for recession of
contract with interest, damages and attorney's fees
before the Housing and Land Regulatory Board
(HLURB), which then was granted. A Writ of
Execution was then addressed to the Ex-Officio
Sheriff of the RTC of Tanauan, Batangas, but upon
the complaint of the respondent, the levy was set
aside, leaving only the respondent's personal
properties to be levied first. The Sheriff set a public
auction of the said levied properties, however, the
respondent filed a motion to quash Writ of levy on
the ground that the sheriff made an over levy since
the aggregate appraised value of the properties at
P6,500 per sq m is P83,616,000. Instead of
resolving the objection of the respondent's
regarding the auction, the Sheriff proceeded with
the auction since there was no restraining order
from the HLURB. The 15 parcels of land was then
awarded to Holly Properties Realty at a bid of
P5,450,653. On the same day, the Sheriff remitted
the legal fees and submitted to contracts of sale to
HLURB, however, he then received orders to
suspend proceedings on the auction for the reason
that the market value of the properties was not fair.
There was disparity between the appraised value
and the value made by the petitioner and the
Sheriff, which should've been looked into by the
Sheriff before making the sale. While an
inadequacy in price is not a ground to annul such
sale, the court is justified to such intervention
where the price shocks the conscience.
ISSUE:
1. Whether or not the Sheriff erred in the value that
was attached to the properties during the auction
and as well as disregarding the objection made by
the respondent's?
2. Whether or not the market value of the said
property was inadequate?
2. Whether or not the spouses Hulst's request for
damages is actionable?
HELD:
1. No. According to the Rules of Court, the value of
the property levied is not required to be exactly the
same as the judgment debt. In the levy of property,
the Sheriff does not determine the exact valuation
of the levied property. The Sheriff is left to his own
judgment. He should be allowed a reasonable
margin between the value of the property levied

upon and the amount of the execution; the fact that

the Sheriff levies upon a little more than is
necessary to satisfy the execution does not render
his actions improper.
In the absence of a restraining order, no error can
be imputed to the Sheriff in proceeding with the
auction sale despite the pending motion to quash
the levy filed by the respondents with the HLURB.
Sheriffs, as officers charged with the task of the
enforcement and/or implementation of judgments,
must act with considerable dispatch so as not to
unduly delay the administration of justice. It is not
within the jurisdiction of the Sheriff to consider and
resolve respondent's objection to the continuation
of the conduct of the auction sale. The Sheriff has
no authority, on his own, to suspend the auction
sale. His duty being ministerial, he has no
discretion to postpone the conduct of the auction
sale.
2. No. The HLURB Arbiter and Director had no
sufficient factual basis to determine the value of
the levied property. The Appraisal report, that was
submitted, was based on the projected value of the
townhouse project after it shall have been fully
developed, that is, on the assumption that the
residential units appraised had already been built.
Since it is undisputed that the townhouse project
did not push through, the projected value did not
become a reality. Thus, the appraisal value cannot
be equated with the fair market value.
3. No. Under Article 12, Sec.7 of the 1987
Constitution, foreign nationals, the spouses Hulst,
are disqualified form owning real property.
However, under article 1414 of the Civil Code, one
who repudiates the agreement and demands his
money before the illegal act has taken place is
entitled to
recover. Petitioner is therefore entitled to recover
what he has paid, although the basis of his claim for
rescission, which was granted by the HLURB, was
not the fact that he is not allowed to acquire private
land under the Philippine Constitution. But
petitioner is entitled to the recovery only of the
amount of P3,187,500.00, representing the
purchase price paid to respondent. No damages
may be recovered on the basis of a void contract;
being nonexistent, the agreement produces no
juridical tie between the parties involved. Further,
petitioner is not entitled to actual as well as
interests thereon, moral and exemplary damages
and attorney's fees.
INDUSTRIAL TEXTILE MANUFACTURING
COMPANY OF THE PHILIPPINES, INC.,
petitioner, vs. LPJ ENTERPRISES, INC.,
respondent.
Facts:

LPJ enterprises had a contract to supply 300,000

cement bags to Atlas Consolidated Mining and
Development Corporation (Atlas) delivered in the
common use, kraft paper bags. In 1970, the Vicepresident of Industrial Textile Manufacturing
Company of the Philippines (ITMCP) asked the
President of LPJ if he would like to be part of an
experiment to develop plastic cement bags in which
the latter agreed because ITMCP is a sister
corporation of Atlas. They tested fifty (50) cement
bags in the factory of LPJs cement supplier Luzon
Cement Corporation but were unsuccessful. They
tested another batch to the same result. On the
third try, the cement dust seepage was finally
substantially reduced. After another successful test
with Atlas, LPJ finally agreed to the use of the
plastic cement bags by ordering 115,800 in four
purchases in January, February, March and April of
1971, totaling P101,500. ITMCP made delivery in
the same months. LPJ made three payments but
still left a balance of P84,200. No other payments
were made. ITCMP sent demand letters to LPJ but
still no payment was made. A collection suit was
filed. On the trial on merits, LPJ admitted its liability
to the initial 53,800 bags but denied liability for the
subsequent purchases saying that the bags posed
serious health hazards by continuous seepage of
dust even with adopted safety measures. The trial
court favored ITMCP and ordered LPJ to pay the
balance plus interest and attorneys fees. LPJ
appealed where the Appellate court upheld them
removing any liability with costs against petitioner.

bags delivered to it by petitioner. Decision of the

the trial court reinstated.

Issue:

It appears that on November 23, 1982, respondent

Juan L. Reyes (Reyes, for brevity) executed a
Contract of Lease with Riviera. The ten-year (10)
renewable lease of Riviera involved a 1,018 square
meter parcel of land located along Edsa, Quezon
City, covered and described in Transfer Certificate
of Title No. 186326 of the Registry of Deeds of
Quezon City in the name of Juan L. Reyes.

Is LPJ liable in paying the unused plastic cement

bags to ITMCP?
Ruling:
Yes.
Both sides invoke article 1502 of the Civil code
(sale or return/sale on approval), this cannot apply
to the case. The provision in the Uniform Sales Act
and the Uniform Commercial Code from which
Article 1502 was taken, clearly requires an express
written agreement to make a sales contract either a
"sale or return" or a "sale on approval". Parol or
extrinsic testimony could not be admitted for the
purpose of showing that an invoice or bill of sale
that was complete in every aspect and purporting
to embody a sale without condition or restriction
constituted a contract of sale or return. If the
purchaser desired to incorporate a stipulation
securing to him the right of return, he should have
done so at the time the contract was made. On the
other hand, the buyer cannot accept part and reject
the rest of the goods since this falls outside the
normal intent of the parties in the "on approval"
situation. Therefore, the transaction between
respondent and petitioner constituted an absolute
sale. Accordingly, respondent is liable for the plastic

RIVIERA FILIPINA, INC., petitioner, vs. COURT

OF APPEALS, JUAN L. REYES, (now deceased),
substituted by his heirs, namely, Estefania B.
Reyes, Juanita R. de la Rosa, Juan B. Reyes, Jr.
and Fidel B. Reyes, PHILIPPINE CYPRESS
CONSTRUCTION & DEVELOPMENT
CORPORATION, CORNHILL TRADING
CORPORATION AND URBAN DEVELOPMENT
BANK,respondents.
FACTS:
Before us is a petition for review on certiorari of the
Decision of the Court of Appeals dated June 6, 1994
in CA-G.R. CV No. 26513 affirming the Decision
dated March 20, 1990 of the Regional Trial Court of
Quezon City, Branch 89 dismissing Civil Case No. Q89-3371.
On August 31, 1989, Riviera Filipina, Inc. (Riviera)
instituted a suit to compel the defendants therein
Juan L. Reyes, now deceased, Philippine Cypress
Construction & Development Corporation (Cypress),
Cornhill Trading Corporation (Cornhill) and Urban
Development Bank to transfer the title covering a
1,018 square meter parcel of land located along
EDSA, Quezon City for alleged violation of Rivieras
right of first refusal.

The said parcel of land was subject of a Real Estate

Mortgage executed by Reyes in favor of Prudential
Bank. Since the loan with Prudential Bank remained
unpaid upon maturity, the mortgagee bank
extrajudicially foreclosed the mortgage thereon. At
the public auction sale, the mortgagee bank
emerged as the highest bidder. The redemption
period was set to expire on March 7, 1989.
Realizing that he could not possibly raise in time
the money needed to redeem the subject property,
Reyes decided to sell the same.
Since paragraph 11 of the lease contract expressly
provided that the LESSEE shall have the right of
first refusal should the LESSOR decide to sell the
property during the term of the lease. Reyes offered
to sell the subject property to Riviera, through its
President Vicente C. Angeles, for Five Thousand
Pesos (P5,000.00) per square meter but Angeles
bargained to lower the price to Three thousand

Pesos per square meter. A consensus was not met

between the two with regard to the price.
Seven months later, Angeles offered to purchase
the property at Four Thousand Pesos per square
meter but Reyes refused the offer, insisting that the
price is now Six Thousand Pesos per square meter
since the value of the area had appreciated in view
of the plans of Araneta to develop the vicinity.
In a letter dated November 2, 1988, Atty. Irineo S.
Juan, acting as counsel for Reyes, informed Riviera
that Reyes was selling the subject property for Six
Thousand Pesos (P6,000.00) per square meter, net
of capital gains and transfer taxes, registration
fees, notarial fees and all other attendant charges.
He further stated therein that:
In this connection, conformably to the provisions
stipulated in Paragraph/Item No. 11 of your
CONTRACT OF LEASE (Doc. No. 365, Page No. 63,
Book No. X, Series of 1982, of the Notarial Registry
of Notary Public Leovillo S. Agustin), notice is
served upon your goodselves for you to exercise
the right of first refusal in the sale of said
property, for
which purpose you are hereby given a period of ten
(10) days from your receipt hereof within which to
thus purchase the same under the terms and
conditions aforestated, and failing which you shall
be deemed to have thereby waived such preemptive right and my client shall thereafter be
absolutely free to sell the subject property to
interested buyers.
To answer the foregoing letter and confirm their
telephone conversation on the matter, Riviera sent
a letter dated November 22, 1988 to Atty. Juan,
counsel for Reyes, expressing Rivieras interest to
purchase the subject property and that Riviera is
already negotiating with Reyes which will take a
couple of days to formalize. Riviera increased its
offer to Five Thousand Pesos per square meter but
Reyes did not accept. Angeles asked Reyes until the
end of November 1988 for Rivieras Final decision.
In a letter dated December 2, 1988, Angeles wrote
Reyes confirming Rivieras intent to purchase the
subject property for the fixed and final price of Five
Thousand Pesos (P5,000.00) per square meter,
complete payment within sixty (60) to ninety (90)
days which offer is what we feel should be the
market price of your property. Angeles asked that
the decision of Reyes and his written reply to the
offer be given within fifteen (15) days since there
are also other properties being offered to them at
the moment.
In response to the foregoing letter, Atty. Juan sent a
letter to Riviera dated December 5, 1988 informing
Riviera that Rivieras offer is not acceptable to his

client. He further expressed, let it be made clear

that, much as it is the earnest desire of my client to
really give you the preference to purchase the
subject property, you have unfortunately failed to
take advantage of such opportunity and thus lost
your right of first refusal in sale of said property.
On December 4, 1988, Reyes confided to Rolando P.
Traballo his predicament about the nearing expiry
date of the redemption period of the foreclosed
mortgaged property with Prudential Bank the
money for which he could not raise on time thereby
offering the subject property to him for Six
Thousand Pesos (P6,000.00) per square meter.
Traballo expressed interest in buying the said
property. They met the next day at which time
Traballo bargained for Five Thousand Three
Hundred Pesos (P5,300.00) per square meter. After
considering the reasons cited by Traballo for his
quoted price, Reyes accepted the same However,
since Traballo did not have the amount with which
to pay Reyes, he told the latter that he will look for
a partner for that purpose. Reyes told Traballo that
he had already afforded Riviera its right of first
refusal but they cannot agree because Rivieras
final offer was for Five Thousand Pesos (P5,000.00)
per square meter.
Apprehensive of the impending expiration in March
1989 of the redemption period of the foreclosed
mortgaged property with Prudential Bank and the
deal between Reyes and Traballo was not yet
formally concluded, Reyes decided to approach
anew Riviera. For this purpose, he requested Atty.
Estanislao Alinea to approach Angeles and find out
if the latter was still interested in buying the subject
property and ask him to raise his offer for the
purchase of the said property a little higher. As
instructed, Atty. Alinea met with Angeles and asked
the latter to increase his offer of Five Thousand
Pesos (P5,000.00) per square meter but Angeles
said that his offer is still the same.
Following the meeting, Angeles sent a letter dated
February 4, 1989 to Reyes, through Atty. Alinea,
that his offer is Five Thousand Pesos (P5,000.00)
per square meter payment of which would be fifty
percent (50%) down within thirty (30) days upon
submission of certain documents in three (3) days,
the balance payable in five (5) years in equal
monthly installments at twelve percent (12%)
interest in diminishing balance. With the terms of
this second offer, Angeles admittedly downgraded
the previous offer of Riviera on December 2, 1988.
Atty. Alinea conveyed to Reyes Rivieras offer of
Five Thousand Pesos (P5,000.00) per square meter
but Reyes did not agree. Consequently, Atty. Alinea
contacted again Angeles and asked him if he can
increase his price. Angeles, however, said he
cannot add anymore.

Sometime in February 1989, Cypress and its

partner in the venture, Cornhill Trading Corporation,
were able to come up with the amount sufficient to
cover the redemption money, with which Reyes
paid to the Prudential Bank to redeem the subject
property. A Deed of Absolute Sale covering the
subject property was executed by Reyes in favor of
Cypress and Cornhill for the consideration of Five
Million Three Hundred Ninety Five Thousand Four
Hundred Pesos (P5,395,400.00). On the same date,
Cypress and Cornhill mortgaged the subject
property to Urban Development Bank for Three
Million Pesos (P3,000,000.00). Thereafter, Riviera
sought from Reyes, Cypress and Cornhill a resale of
the subject property to it claiming that its right of
first refusal under the lease contract was violated.
After several unsuccessful attempts, Riviera filed
the suit to compel Reyes, Cypress, Cornhill and
Urban Development Bank to transfer the disputed
title to the land in favor of Riviera upon its payment
of the price paid by Cypress and Cornhill.
ISSUE: Whether or not Rivieras Right of First
Refusal was violated?
HELD:
It ruled that the defendants therein did not violate
Rivieras right of first refusal. this Court takes note
that since the beginning of the negotiation between
the plaintiff and defendant Reyes for the purchase
of the property, in question, the plaintiff was firm
and steadfast in its position, expressed in writing by
its President Vicente Angeles, that it was not willing
to buy the said property higher than P5,000.00, per
square meter, which was far lower than the asking
price of defendant Reyes for P6,000.00, per square
meter, undoubtedly, because, in its perception, it
would be difficult for other parties to buy the
property, at a higher price than what it was
offering, since it is in occupation of the property, as
lessee, the term of which was to expire after about
four (4) years more.
On the other hand, it was obvious, upon the basis
of the last ditch effort of defendant Reyes, thru his
nephew, Atty. Alinea, to have the plaintiff buy the
property, in question, that he was willing to sell the
said property at a price less than P6,000.00 and a
little higher than P5,000.00, per square meter,
precisely, because Atty. Alinea, in behalf of his
uncle, defendant Reyes, sought plaintiffs Angeles
and asked him to raise his price a little higher,
indicating thereby the willingness of defendant
Reyes to sell said property at less than his offer of
P6,000.00, per square meter. This being the case, it
can hardly be validly said by the plaintiff that he
was deprived of his right of first refusal to buy the
subject property at a price of P5,300.00, per square
meter which is the amount defendants
Cypress/Cornhill bought the said property from
defendant Reyes. For, it was again given such an
opportunity to exercise its right of first refusal by

defendant Reyes had it only signified its willingness

to increase a little higher its purchase price above
P5,000.00, per square meter, when its President,
Angeles, was asked by Atty. Alinea to do so, instead
of adamantly sticking to its offer of only P5,000.00
per square meter, by reason of which, therefore,
the plaintiff had lost, for the second time, its right
of first refusal, even if defendant Reyes did not
expressly offer to sell to it the subject land at
P5,300.00, per square meter, considering that by
the plea of Atty. Alinea, in behalf of defendant
Reyes, for it to increase its price a little, the plaintiff
is to be considered as having forfeited again its
right of first refusal, it having refused to budged
from its regid (sic) offer to buy the subject property
at no more than P5,000.00, per square meter.
As such, this Court holds that it was no longer
necessary for the defendant Reyes to expressly and
categorically offer to the plaintiff the subject
property at P5,300.00, per square meter, in order
that he can comply with his obligation to give first
refusal to the plaintiff as stipulated in the Contract
of Lease, the plaintiff having had already lost its
right of first refusal, at the first instance, by
refusing to buy the said property at P6,000.00, per
square meter, which was the asking price of
defendant Reyes, since to do so would
be a useless ceremony and would only be an
exercise in futility, considering the firm and
unbending position of the plaintiff, which defendant
Reyes already knew, that the plaintiff, at any event,
was not amenable to increasing its price at over
P5,000.00, per square meter.
Dissatisfied with the decision of the trial court, both
parties appealed to the Court of Appeals. However,
the appellate court, through its Special Seventh
Division, rendered a Decision dated June 6, 1994
which affirmed the decision of the trial court in its
entirety.
Riviera posits the view that its right of first refusal
was totally disregarded or violated by Reyes by the
latters sale of the subject property to Cypress and
Cornhill. It contends that the right of first refusal
principally amounts to a right to match in the sense
that it needs another offer for the right to be
exercised.
The concept and interpretation of the right of first
refusal and the consequences of a breach thereof
evolved in Philippine juristic sphere only within the
last decade. It all started in 1992 with Guzman,
Bocaling & Co. v. Bonnevie where the Court held
that a lease with a proviso granting the lessee the
right of first priority:
all things and conditions being equal meant that
there should be identity of the terms and conditions
to be offered to the lessee and all other prospective

buyers, with the lessee to enjoy the right of first

priority.

limited to the words used in the contract, as they

may not accurately reflect the parties true intent.

Subsequently in 1994, in the case of Ang Yu

Asuncion v. Court of Appeals the Court en banc
departed from the doctrine laid down in Guzman,
Bocaling & Co. v. Bonnevie and refused to rescind a
contract of sale which violated the right of first
refusal. The Court held that:

In the case at bar, the Court finds relevant and

significant the cardinal rule in the interpretation of
contracts that the intention of the parties shall be
accorded primordial consideration and in case of
doubt, their contemporaneous and subsequent acts
shall be principally considered. Where the parties to
a contract have given it a practical construction by
their conduct as by acts in partial performance,
such construction may be considered by the court
in construing the contract, determining its meaning
and ascertaining the mutual intention of the parties
at the time for contracting. The parties practical
construction of their contract has been
characterized as a clue or index to, or as evidence
of, their intention or meaning and as an important,
significant, convincing, persuasive, or influential
factor in determining the proper construction of the
contract. An examination of the attendant
particulars of the case do not persuade us to
uphold Rivieras view. It can clearly be discerned
from Rivieras letters dated December 2, 1988 and
February 4, 1989 that Riviera was so intractable in
its position and took obvious advantage of the
knowledge of the time element in its negotiations
with Reyes as the redemption period of the subject
foreclosed property drew near. Riviera strongly
exhibited a take-it or leave-it attitude in its
negotiations with Reyes. It quoted its fixed and
final price as Five Thousand Pesos (P5,000.00) and
not any peso more. It voiced out that it had other
properties to consider so Reyes should decide and
make known its decision within fifteen days.

the so-called right of first refusal cannot be

deemed a perfected contract of sale under Article
1458 of the New Civil Code and, as such, a breach
thereof decreed under a final judgment does not
entitle the aggrieved party to a writ of execution of
the judgment but to an action for damages in a
proper forum for the purpose.
In the 1996 case of Equatorial Realty Development,
Inc. v. Mayfair Theater, Inc., the Court en banc
reverted back to the doctrine in Guzman Bocaling &
Co. v. Bonnevie stating that 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.
Thereafter in 1997, in Paraaque Kings Enterprises,
Inc. v. Court of Appeals, the Court affirmed the
nature of and the concomitant rights and
obligations of parties under a right of first refusal.
The Court, summarizing the rulings in Guzman,
Bocaling & Co. v. Bonnevie and Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc., held
that:
in order to have full compliance with the
contractual right granting petitioner the first option
to purchase, the sale of the properties for the price
for which they were finally sold to a third person
should have likewise been first offered to the
former. Further, there should be identity of terms
and conditions to be offered to the buyer holding a
right of first refusal if such right is not to be
rendered illusory. Lastly, the basis of the right of
first refusal must be the current offer to sell of the
seller or offer to purchase of any prospective buyer.
Thus, the prevailing doctrine is that a right of first
refusal means identity of terms and conditions to
be offered to the lessee and all other prospective
buyers and a contract of sale entered into in
violation of a right of first refusal of another person,
while valid, is rescissible.
However, we must remember that general
propositions do not decide specific cases. Rather,
laws are interpreted in the context of the peculiar
factual situation of each proceeding. Each case has
its own flesh and blood and cannot be ruled upon
on the basis of isolated clinical classroom
principles. Analysis and construction should not be

The instant petition is hereby DENIED, and the

Decision of the Court of Appeals dated June 6, 1994
in CA-G.R. CV No. 26513 is AFFIRMED. No
pronouncement as to costs.
Martinez vs. CA G.R. No. 123547 May 21, 2001
FACTS:
Sometime in February 1981, private respondents
Godofredo De la Paz and his sister Manuela De la
Paz, married to Maximo Hipolito, entered into an
oral contract with petitioner Rev. Fr. Dante Martinez,
then Assistant parish priest of Cabanatuan City, for
the sale of Lot No. 1337-A-3 at the Villa Fe
Subdivision in Cabanatuan City for the sum of
P15,000.00. At the time of the sale, the lot was still
registered in the name of Claudia De la Paz, mother
of private respondents, although the latter had
already sold it to private respondent Manuela de la
Paz by virtue of a Deed of Absolute Sale dated May
26, 1976. It was agreed that petitioner would give a
downpayment of P3,000.00 to private respondents
De la Paz and that the balance would be payable by
installment. After giving the P3,000.00
downpayment, petitioner started the construction
of a house on the lot after securing a building

permit with the written consent of the then

registered owner, Claudia de la Paz. Petitioner
likewise began paying the real estate taxes on said
property. Since then, petitioner and his family have
maintained their residence there. On January 31,
1983, petitioner completed payment of the lot for
which private respondents De la Paz executed two
documents. However, private respondents De la Paz
never delivered the Deed of Sale they promised to
petitioner.
In the meantime, in a Deed of. Absolute Sale with
Right to Repurchase dated October 28, 1981 (Exh.
10),11private respondents De la Paz sold three lots
with right to repurchase the same within one year
to private respondents spouses Reynaldo and
Susan Veneracion for the sum of P150,000.00. One
of the lots sold was the lot previously sold to
petitioner.12
Before the expiration of the one year period, private
respondent Godofredo De la Paz informed private
respondent Reynaldo Veneracion that he was
selling the three lots to another person for
P200,000.00. Indeed, private respondent
Veneracion received a call from a Mr. Tecson
verifying if he had the titles to the properties, as
private respondents De la Paz were offering to sell
the two lots along Maharlika Highway to him (Mr.
Tecson) for P180,000.00 The offer included the lot
purchased by petitioner in February, 1981. Private
respondent Veneracion offered to purchase the
same two lots from the De la razes for the same
amount, The offer was accepted by private
respondents De la Paz. Accordingly, on June 2,
1983, a Deed of Absolute Sale was executed over
the two lots Sometime in January, 1984, private
respondent Reynaldo Veneracion asked a certain
Renato Reyes, petitioner's neighbor, who the owner
of the building erected on the subject lot was.
Reyes told him that it was Feliza Martinez,
petitioner's mother, who was in possession of the
property. Reynaldo Veneracion told private
respondent Godofredo about the matter and was
assured that Godofredo would talk to Feliza. Based
on that assurance, private respondents Veneracion
registered the lots with the Register of Deeds of
Cabanatuan on March 5, 1984. The lot in dispute
was registered under TCT No. T-44612.
Petitioner discovered that the lot he was occupying
with his family had been sold to the spouses
Veneracion after receiving a letter, (Exh. P/Exh. 6Veneracion) from private respondent Reynaldo
Veneracion on March 19, 1986, claiming ownership
of the land and demanding that they vacate.
Petitioner, in turn, demanded through counsel the
execution of the deed of sale from private
respondents De la Paz and informed Reynaldo
Veneracion that he was the owner of the property
as he had previously purchased the same from
private respondents De la Paz.

As a consequence, on May 12, 1986, private

respondent Reynaldo Veneracion brought an action
for ejectment
ISSUE:
Whether or not private respondents Veneracion are
buyers in good faith of the lot in dispute as to make
them the absolute owners thereof in accordance
with Art. 1544 of the Civil Code on double sale of
immovable property.
HELD:
The supreme court ruled in negative.
This case, however, involves double sale and, on
this matter, Art. 1544 of the Civil Code provides
that where immovable property is the subject of a
double sale, ownership shall be transferred (1) to
the person acquiring it who in good faith first
recorded it to the Registry of Property; (2) in default
thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person
who presents the oldest title.26 The requirement of
the law, where title to the property is recorded in
the Register of Deeds, is two-fold: acquisition in
good faith and recording in good faith. To be
entitled to priority, the second purchaser must not
only prove prior recording of his title but that he
acted in good faith, i.e., without knowledge or
notice of a prior sale to another. The presence of
good faith should be ascertained from the
circumstances surrounding the purchase of the
land.27
With regard to the first sale to private respondents
Veneracion, private respondent Reynaldo
Veneracion testified that on October 10, 1981, 18
days before the execution of the first Deed of Sale
with Right to Repurchase, he inspected the
premises and found it vacant.28 However, this is
belied by the testimony of Engr. Felix D. Minor, then
building inspector of the Department of Public
Works and Highways, that he conducted on October
6, 1981 an ocular inspection of the lot in dispute in
the performance of his duties as a building
inspector to monitor the progress of the
construction of the building subject of the building
permit issued in favor of petitioner on April 23,
1981, and that he found it 100 % completed (Exh.
V).29 In the absence of contrary evidence, he is to
be presumed to have regularly performed his
official duty.30 Thus, as early as October, 1981,
private respondents Veneracion already knew that
there was construction being made on the property
they purchased.
With regard to the second sale, which is the true
contract of sale between the parties, it should be
noted that this Court in several cases,35 has ruled
that a purchaser who is aware of facts which should

put a reasonable man upon his guard cannot turn a

blind eye and later claim that he acted in good
faith. Private respondent Reynaldo himself admitted
during the pre-trial conference in the MTC in Civil
Case No. 9523 (for ejectment) that petitioner was
already in possession of the property in dispute at
the time the second Deed of Sale was executed on
June 1, 1983 and registered on March 4, 1984. He,
therefore, knew that there were already occupants
on the property as early as 1981. The fact that
there are persons, other than the vendors, in actual
possession of the disputed lot should have put
private respondents on inquiry as to the nature of
petitioner's right over the property. But he never
talked to petitioner to verify the nature of his right.
He merely relied on the assurance of private
respondent Godofredo De la Paz, who was not even
the owner of the lot in question, that he would take
care of the matter. This does not meet the standard
of good faith.
Sigaya vs. Mayuga, G.R. No. 143254 August
18, 2005
FACTS:
Dionisia Alorsabes owned a three hectare land in
Dao, Capiz. In 1934, she sold a portion of the lot to
Juanito Fuentes while the remainder was inherited
by her children Paz Dela Cruz, Rosela Dela Cruz,
and Consorcia Arroja (an adopted child), and a
grandson, Francisco Abas, in representation of his
deceased mother Margarita Dela Cruz. These four
heirs executed an Extra-Judicial Settlement with
Sale dated February 4, 1964 wherein Consorcia sold
her share with an area of 6,694 square meters to
spouses Balleriano Mayuga. On April 1, 1977, Paz
also sold her share to Honorato de los Santos.
Later, another document entitled Extra-Judicial
Partition with Deed of Sale dated November 2, 1972
was uncovered wherein the heirs of Dionisia
purportedly adjudicated Lot 3603 among
themselves and sold their shares to Francisco. On
January 9, 1978, Francisco executed a Deed of Sale
over Lot 3603 in favor of Teodulfo Sigaya. Thus, the
title over Lot 3603 was cancelled and a new one
was issued in the name of Teodulfo, predecessor-ininterest of the petitioners herein.1

bought the land and had the title subsequently

issued in his name
Petitioners, in their Memorandum, further aver that:
Teodulfo is a purchaser in good faith having relied
on OCT No. RO-5841 (17205) in the name of
Dionisia and the Extra-Judicial Partition with Deed of
Sale which shows that Francisco is the absolute
owner of the lot; four years had elapsed from the
date that the OCT was reconstituted and the time
Teodulfo bought the property from Francisco and
yet none of the respondents had registered their
right in the property; the Extra-Judicial Settlement
of Lot 3603 of the Cadastral Survey of Dao, Capiz
with Sale, on which respondents base their claims,
was never registered with the Registry of Deeds;
not having been registered, this will not affect the
right of third persons who had no knowledge
thereof;
ISSUE:
Whether a person dealing with a registered land
can safely rely on the correctness of the Certificate
of Title issued therefor.16
HELD:
(1) This Court has held that the burden of proving
the status of a purchaser in good faith lies upon one
who asserts that status and this onus probandi
cannot be discharged my mere invocation of the
legal presumption of good faith. In this case, the
Court finds that petitioners have failed to discharge
such burden.
A purchaser in good faith is one who buys property
without notice that some other person has a right
to or interest in such property and pays its fair price
before he has notice of the adverse
claims and interest of another person in the same
property. The honesty of intention which constitutes
good faith implies a freedom from knowledge of
circumstances which ought to put a person on
inquiry.

On October 14, 1986, the petitioners, who are the

widow and children of Teodulfo, filed Civil Case for
recovery of possession and praying that
respondents be ordered to vacate Lot 3603, and
turn over the same to petitioners;

Where there is nothing in the certificate of title to

indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the
purchaser is not required to explore further than
what the Torrens Title upon its face indicates in
quest for any hidden defects or inchoate right that
may subsequently defeat his right thereto.34

Petitioners argue that: Teodulfo, their predecessorin-interest, purchased the subject property from
Francisco, who was in possession of the Original
Certificate of Title (OCT) No. RO-5841 (17205), in
the name of Dionisia and of the Extra-Judicial
Partition with Deed of Sale, relying on these
instruments and after inspecting the land and
seeing that nobody occupied the same, Teodulfo

However, this rule shall not apply when the party

has actual knowledge of facts and circumstances
that would impel a reasonably cautious man to
make such inquiry or when the purchaser has
knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably

prudent man to inquire into the status of the title of

the property in litigation.35

SPS. FERDINAND AND PERSEVERANDA

DOLLETON, RESPONDENTS

In this case, preponderance of evidence shows that

respondents had been in actual possession of their
respective portions even prior to 1960. Rolly Daniel,
which the trial court considered as a credible
witness, testified that not only were respondents in
actual possession of their respective portions prior
to 1960, he even accompanied Francisco and
Teodulfo to the different houses of respondents
sometime between 1976 to 1978 as Teodulfo was
going to buy the portion of Francisco. This Court
cannot give credence therefore to the claim of
petitioners that Teodulfo found no occupants in the
property.

[G.R. No. 171373, June 18, 2008]

A purchaser cannot simply close his eyes to facts

which should put a reasonable man on his guard
and then claim that he acted in good faith under
the belief that there was no defect in the title of his
vendor. His mere refusal to believe that such defect
exists or his willful closing of his eyes to the
possibility of the existence of a defect in his
vendors title will not make him an innocent
purchaser for value if it later develops that the title
was in fact defective, and it appears that he would
have notice of the defect had he acted with that
measure of precaution which may reasonably be
required of a prudent man in a similar situation.
(2)Petitioners also argue that the rule on double
sale of real property should apply in this case, and
since they are the first to register the sale in good
faith, they are entitled to be awarded ownership
thereof.
The Court disagrees. Apart from the fact that
Teodulfo is not a purchaser in good faith, the law on
double sales as provided in Art. 1544 of the Civil
Code38 contemplates a situation where a single
vendor sold one and the same immovable property
to two or more buyers. For the rule to apply, it is
necessary that the conveyance must have been
made by a party who has an existing right in the
thing and the power to dispose it. The rule cannot
be invoked where the two different contracts of sale
are made by two different persons, one of them not
being the owner of the property sold.39 In this
case, respondents derive their right over their
respective portions either through inheritance or
sale from Dionisia while petitioners invoke their
right from the sale of the land from Francisco.
Clearly, the law on double sales does not apply
here.
LLOYD'S ENTERPRISES AND CREDIT
CORPORATION, PETITIONERS
VS

FACTS:
Spouses Dolleton, were the registered owners of a
parcel of land covered by TCT No. 153554 with a
four-door apartment building being leased to
various tenants. Respondents mortgaged the
property to a certain Santos to secure a loan in the
amount of P100,000.00. Upon payment of the loan
on 15 August 1994, Santos executed a release and
cancellation of the mortgage. The same was
annotated on the TCT. On 15 September 1994, TCT
No. 153554 in the name of respondents was
cancelled and a new TCT No. 197220 was issued in
the name of Gagan on the basis of a Deed of
Absolute Sale dated 5 August 1994 whereby
respondents purportedly sold to Gagan the subject
property for the sum of P120,000.00. On 19
September 1994, Gagan and Gueverra mortgaged
said property with TCT No. 197220 to petitioner
LECC for second loan of P542,928.00 and was
annotated on said Title. However, Gagan and
Guevarra failed to pay the loan upon maturity.
Thus, petitioner foreclosed mortgaged property
being the highest bidder and was not redeemed
within the one-year period. Hence, ownership was
consolidated in favor of petitioner and was issue a
new TCT No. 210363 cancelling TCT No. 197220.
Petitioner then sent notices to the apartment
tenants on the transfer of ownership and rentals
were not remitted to respondents anymore,
prompting the latter to cause the annotation of an
adverse claim on TCT No. 210363. Respondents
prayed among others for the restoration of TCT No.
153554 and nullification of the Deed of Absolute
Sale, and the extrajudicial foreclosure proceedings.
They denied having executed the Deed of Absolute
Sale and alleged that they had merely offered to
sell to Gagan the subject property for P900,000.00
on installment basis so that they could pay their
loan obligation to Santos. After Gagan had initially
paid P200,000.00, they entrusted the owner's copy
of TCT No. 153554 to him. Gagan was unable to pay
the balance of the purchase price, rather she
caused the fraudulent cancellation of TCT No.
153554 and the issuance of TCT No. 197220 in her
name, and of eventually using TCT No. 197220 to
secure the loans obtained from petitioner.
Respondents also faulted petitioner for failing to
make adequate inquiries on the true ownership of
the property considering the suspicious
circumstances surrounding Gagan's and Guevarra's
request for loan immediately after the issuance of
the new certificate of title. The RTC declared the
Deed of Absolute Sale between Gagan and Dolleton
as spurious and directed the reconveyance of the
property to the true and genuine owners, the
spouses Dolleton. CA affirmed RTCs decision.

ISSUE:

Facts:

WON Petitioner is a Mortgagee and Buyer in Good

Faith

Respondent Spouses Lu purportedly sold two

parcels of land to respondent Babasanta, for the
price of P15.00 per square meter. Babasanta made
a down payment of P50, 000.00. Consequently,
Babasanta wrote a letter to Pacita Lu to demand
the execution of a final deed of sale in his favor so
that he could effect full payment of the purchase
price. In response, Pacita wrote a letter to
Babasanta wherein she reminded the latter that
when the balance of the purchase price became
due, he requested for a reduction of the price and
when she refused, Babasanta backed out of the
sale. Herein petitioner SLDC filed a motion for
intervention alleging that it had legal interest in the
subject matter under litigation because the two
parcels of land involved had been sold to it in a
deed of absolute sale with mortgage. It alleged that
it was a buyer in good faith and had therefore a
better right over the property in litigation.
Respondent Babasanta, however, argued that SLDC
could not have acquired ownership of the property
because it failed to comply with the requirement of
registration of the sale in good faith. He
emphasized that at the time the SLDC registered
the sale in its favor, there was already a notice of lis
pendens annotated on the titles of the property.
Hence, petitioners registration of the sale did not
confer upon it any right.

RULING:
The Court affirmed the reconveyance of the
property to respondents Dolleton as petitioner is
not a mortgagee in good faith, hence, foreclosure
was not valid. Petitioner failed to verify the actual
condition of the property, particularly as to who is
in actual possession and if the premises are leased
to third persons, who is receiving the rental
payments therefore.
Appellant LECC merely submitted in evidence forms
for credit investigation on the borrower's capacity
to
pay, there is no showing that they actually
inspected the property offered as collateral. Had
precautionary measure been taken, the lending
company's representatives would have easily
discovered that the four (4)-door apartment in the
premises being mortgaged is rented by tenants and
they could have been provided with information
that plaintiffs-appellees are still the present
lessors/owners thereof.
Moreover, the circumstance that the certificate of
title covering the property offered as security was
newly issued should have put petitioner on guard
and prompted it to conduct an investigation
surrounding the transfer of the property to
defendant Gagan. Had it inquired further, petitioner
would have discovered that the property was sold
for an unconscionably low consideration of only
P120,000.00 when it could have fetched as high as
P900,000.00. A purchaser cannot close his eyes to
facts which should put a reasonable man on his
guard and claim that he acted in good faith under
the belief that there was no defect in the title of the
vendor. Petitioner is engaged in the business of
extending credit to the public and is, thus, expected
to exercise due diligence in dealing with properties
offered as security. The failure of respondent to take
such precautionary steps is considered negligence
on its part and would thereby preclude the defense
of good faith.
SAN LORENZO DEVELOPMENT CORPORATION,
petitioner,vs.
COURT OF APPEALS, PABLO S. BABASANTA,
SPS. MIGUEL LU andPACITA ZAVALLA LU,
respondents
G.R. No. 124242 January 21, 2005

ISSUE: Won the registration of the sale after the

annotation of the notice of lis pendens obliterate
the effects of delivery and possession in good faith
which admittedly had occurred prior to SLDCs
knowledge of the transaction in favor of respondent
Babasanta.
Held:
No. The respondent Spouses executed the Option to
Buy in favor of petitioner. After petitioner had paid
more than of the agreed purchase price, the
Spouses subsequently executed a Deed of absolute
sale in favor of SLDC. At the time both deed were
executed, SLDC had no knowledge of the prior
transaction of the Spouses with Bababsanta. Simply
stated, from the time of the first deed up to the
moment of transfer and delivery of possession of
the lands to SLDC, it had acted in good faith and
the subsequent annotation of lis pendens has no
effect at all on the consummated sale between
SLDC and the Spouses LU. The court rules that
SLDC qualifies as a buyer in good faith since there
is no evidence in the records that it had knowledge
of the prior transaction in favor or Babasanta. At
the time of the sale of the property to SLDC, the
vendors were still the registered owner of the
property and were in fact in possession of the
lands.
De Leon vs. Ong

GR. 170405, February 2, 2010

FACTS: On March 10, 1993, (petitioner) Raymundo
De Leon sold 3 parcels of land to (respondent)
Benita Ong. The properties were mortgaged to Real
Savings and Loan Association Inc (RSLAI). The
parties executed a notarized deed of absolute sale
with assumption of mortgage. In the deed of
mortgage, the parties stipulated that Petitioner will
execute a deed of assumption of mortgage in favor
of Respondent after full payment of P415,000 and
they also agreed that respondent will assume
payment of mortgage of P684,500. Respondent
then subsequently gave Petitioner P415,000 as
partial payment. Petitioner, in turn, handed the
keys to Respondent and Petitioner wrote a letter to
inform RSLAI that the mortgage will be assumed by
Respondent. Thereafter, Respondent took repairs
and made improvements in the properties.
Subsequently, Respondent learned that the same
properties were sold to Viloria after March 10, 1993
and changed the locks, rendering the keys given to
her useless. Respondent proceeded to RSLAI but
she was informed that the mortgage has been fully
paid and that the titles have been given to Viloria.
Respondent then filed a complaint for specific
performance and declaration of nullity of the
second sale and damages. Petitioner contended
that respondent does not have a cause of action
against him because the sale was subject to a
suspensive condition which requires the approval of
RSLAI of the mortgage. Petitioner reiterated that
they only entered into a contract to sell.
RTC dismissed the case. CA, on appeal, upheld the
sale to Respondent and nullified the sale to Viloria.
Petitioner moved for an MR to the SC.
ISSUE: Whether the parties entered into a contract
of sale or contract to sell
HELD: Contract of Sale.
RATIO: In a contract of sale, the seller conveys
ownership of the property to the buyer upon the
perfection of the contract. The non-payment of the
price is a negative resolutory condition. Contract to
sell is subject to a positive suspensive condition.
The buyer does not acquire ownership of the
property until he fully pays the purchase price.
In this case, the deed executed by the parties did
not show that the owner (petitioner) intends to
reserve ownership of the properties. The terms and
conditions affected only the manner of payment
and not the immediate transfer of ownership.
Clearly, petitioner intended a sale because he
unqualifiedly delivered and transferred ownership
of properties to the respondent.

*NOTE: There was also a minor issue whether there

was a void second dale or a Double Sale. To which
the SC held that there was a Double Sale because
the properties were sold validly on two separate
occasions by the same seller to the two different
buyers in good faith (De Leon and Viloria).
Addison v. Felix
Facts: The defendants-appellees spouses Maciana
Felix and Balbino Tioco purchased from plaintiffappellant A.A. Addison four parcels of land to which
Felix paid, at the time of the execution of the deed,
the sum of P3,000 on account of the purchase
price. She likewise bound herself to the remainder
in installments, the first of P,2000 on July 15, 1914,
the second of P5,000 thirty days after the issuance
to her of a certificate of title under the Land
Registration Act, and further, within ten years from
the date of such title, P10 for each cocoanut tree in
bearing and P5 for each such tree not in bearing
that might be growing on said parcels of land on
the date of the issuance of title to her, with the
condition that the total price should not exceed
P85,000. It was further stipulated that Felix was to
deliver to the Addison 25% of the value of the
products that she might obtain from the four
parcels "from the moment she takes possession of
them until the Torrens certificate of title be issued
in her favor," and that within 1 year from the date
of the certificate of title in her favor, Marciana Felix
may rescind the contract of purchase and sale.
In January 1915, Addison , filed suit in the CFI of
Manila to compel Felix to pay the first installment of
P2,000, demandable, in accordance with the terms
of the contract of sale. The defendants Felix and
her husband Tioco contended that Addison had
absolutely failed to deliver the lands that were the
subject matter of the sale, notwithstanding the
demands they made upon him for this purpose. The
evidence adduced shows Addison was able to
designate only two of the four parcels, and more
than two-thirds of these two were found to be in the
possession of one Juan Villafuerte, who claimed to
be the owner of the parts he so occupied. The trial
court held the contract of sale to be rescinded and
ordered Addison to return to Felix the P3,000 paid
on account of the price, together with interest
thereon at the rate of 10% per annum.
Issue: Whether or not there was a delivery made
and, therefore, a transfer of ownership of the thing
sold.
Held: No. The record shows that the plaintiff did
not deliver the thing sold. With respect to two of the
parcels of land, he was not even able to show them
to the purchaser; and as regards the other two,
more than two-thirds of their area was in the hostile
and adverse possession of a third person.

The Code imposes upon the vendor the obligation

to deliver the thing sold. The thing is considered to
be delivered when it is placed "in the hands and
possession of the vendee." (Civ. Code, art. 1462.) It
is true that the same article declares that the
execution of a public instruments is equivalent to
the delivery of the thing which is the object of the
contract, but, 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 that, at the moment of the sale, its
material delivery could have been made. It is not
enough to confer upon the purchaser the ownership
and the right of possession. The thing sold must be
placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of
a public instrument is sufficient. But if,
notwithstanding the execution of the instrument,
the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it
himself or through another in his name, because
such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to
reality + the delivery has not been effected.
It is evident, then, in the case at bar, that the mere
execution of the instrument was not a fulfillment of
the vendors' obligation to deliver the thing sold,
and that from such non-fulfillment arises the
purchaser's right to demand, as she has demanded,
the rescission of the sale and the return of the
price. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the
express agreement of imposing upon the purchaser
the obligation to take the necessary steps to obtain
the material possession of the thing sold, and it
were proven that she knew that the thing was in
the possession of a third person claiming to have
property rights therein, such agreement would be
perfectly valid. But there is nothing in the
instrument which would indicate, even implicitly,
that such was the agreement.
CARAM v. LAURETA103 SCRA 7
FACTS:
On June 25, 1959, Claro L. Laureta filed in the Court
of First Instance of Davao an action for nullity,
recovery of ownership and/or reconveyance with
damages and attorney's fees against Marcos Mata,
Codidi Mata, Fermin Z. Caram, Jr.and the Register of
Deeds of Davao City.On June 10, 1945, Marcos Mata
conveyed a large tract of agricultural land covered
by Original Certificate of Title No. 3019 in favor of
Claro Laureta, plaintiff, the respondent herein. The
deed of absolute sale in favor of the plaintiff was
not registered because it was not acknowledged
before a notary public or any other authorized
officer. At the time the sale was executed, there

was no authorized officer before whom the sale

could be acknowledged inasmuch as the civil
government in Tagum, Davao was not as yet
organized. However, the defendant Marcos Mata
delivered to Laureta the peaceful and lawful
possession of the premises of the land together
with the pertinent papers thereof such as the
Owner's Duplicate Original Certificate of Title No.
3019,sketch plan, tax declaration, tax receipts and
other papers related thereto. Since June 10, 1945,
the plaintiff Laureta had been and is still in
continuous, adverse and notorious occupation of
said land, without being molested, disturbed or
stopped by any of the defendants or their
representatives. Infact, Laureta had been paying
realty taxes due thereon and had introduced
improvements worth not less thanP20,000.00 at the
time of the filing of the complaint. On May 5, 1947,
the same land covered by Original Certificate of
Title No. 3019 was sold by Marcos Mata to
defendant Fermin Z. Caram, Jr., petitioner herein.
The deed of sale in favor of Caram was
acknowledged before Atty.Abelardo Aportadera. On
May 22, 1947, Marcos Mata, through Attys.
Abelardo Aportadera and Gumercindo Arcilla,filed
with the Court of First Instance of Davao a petition
for the issuance of a new Owner's Duplicate of
Original Certificate of Title No. 3019, alleging as
ground therefore the loss of said title in the
evacuation place of defendant MarcosMata in
Magugpo, Tagum, Davao. On June 5, 1947, the
Court of First Instance of Davao issued an order
directing the Register of Deeds of Davao to issue a
new Owner's Duplicate Certificate of Title No. 3019
in favor of Marcos Mata and declaring the lost title
as null and void. On December 9, 1947, the second
sale between Marcos Mata and Fermin Caram, Jr.
was registered with the Register of Deeds. On the
same date, Transfer Certificate of Title No. 140was
issued in favor of Fermin Caram Jr.On August 29,
1959, the defendants Marcos Mataand Codidi Mata
filed their answer with counter claim admitting the
existence of a private absolute deed of sale of his
only property in favor of Claro L. Laureta but
alleging that it was subjected to duress, threat and
intimidation for the plaintiff was the commanding
officer of the 10th division USFIP operating in the
unoccupied areas of Northern Davao with its
headquarters at Project No. 7 (Km.60, Davao
Agusan Highways), in the Municipality of
Tagum,Province of Davao; that Laureta's words and
requests were laws; that although the defendant
Mata did not like to sell his property or
sign the document without even understanding the
same, he was ordered to accept P650.00 Mindanao
Emergency notes; and that due to his fear of harm
or danger that will happen to him or to his family, if
he refused he hadno other alternative but to sign
the document. The defendants Marcos Mata and
Codidi Mata also admitted the existence of a record
in the Registry of Deeds regarding a document
allegedly signed by him in favor of his co-defendant
Fermin Caram, Jr. but denies that he ever signed

the document for he knew before hand that he had

signed a deed of sale in favor of the plaintiff and
that the plaintiff was in possession of the certificate
of title; that if ever his thumb mark appeared in the
document purportedly alienating the property to
Fermin Caram, did his consent was obtained
through fraud and misrepresentation for
thedefendant Mata is illiterate and ignorant and did
not know what he was signing; and that he did not
receive a consideration for the said sale. The
defendant Fermin Caram Jr. filed his answer on
October23, 1959 alleging that he has no knowledge
or information about the previous encumbrances,
transactions, and alienations in favor of plaintiff
until the filing of the complaints. The trial court
rendered a decision declaring that the deed of sale,
Exhibit A, executed by Marcos Mata in favor of Claro
L. Laureta stands and prevails over the deed of
sale, in favor of Fermin Caram, Jr. The defendants
appealed from the judgment to the Court of
Appeals which promulgated its decision affirming
the judgment of the trial court.
ISSUE:
Whether there is a valid sale of the property
wasmade through his representatives, Pedro Irespe
and Atty.Abelardo Aportadera.
HELD:
The contention of the petitioner has no merit. The
facts of record show that Mata, the vendor, and
Caram, the second vendee had never met. During
the trial, Marcos Mata testified that he knows Atty.
Aportadera but did not knowCaram. Thus, the sale
of the property could have only been through
Caram's representatives, Irespe and Aportadera.
The petitioner, in his answer, admitted that Atty.
Aportadera acted as his notary public and attorneyin-fact at the sametime in the purchase of the
property.
The petitioner contends that he cannot be
considered to have acted in bad faith because there
is no direct proof showing that Irespe and
Aportadera, his allegedagents, had knowledge of
the first sale to Laureta. This contention is also
without merit.
Even if Irespe and Aportadera did not have actual
knowledgeof the first sale, still their actions have
not satisfied the requirement of good faith. Bad
faith is not based solely on the fact that a vendee
had knowledge of the defect or lack of title of his
vendor. In the instant case, Irespe and Aportadera
had knowledge of circumstances which ought to
have put theman inquiry. Both of them knew that
Mata's certificate of title together with other papers
pertaining to the land was taken by soldiers under
the command of Col. Claro L. Laureta.

Added to this is the fact that at the time of the

second sale Laureta was already in possession of
the land. Irespe and Aportadera should have
investigated the nature of Laureta's possession. If
they failed to exercise the ordinary care expected
of a buyer of real estate they must suffer the
consequences. The rule of caveat emptor requires
the purchaser to be aware of the supposed title of
the vendor and one who buys without checking the
vendor's title takes all the risks and losses
consequent to such failure. The principle that a
person dealing with the owner of the registered
land is not bound to go behind the certificate and
inquire into transactions the existence of which is
not there intimated should not apply in this case. It
was of common knowledge that at the time the
soldiers of Laureta took the documents from Mata,
the civil government of Tagum was not yet
established and that there were no officials to ratify
contracts of sale and make them registerable.
Obviously, Aportadera and Irespe knew thateven if
Mata previously had sold t he Disputed such sale
could not have been registered. There is no doubt
then that Irespe and Aportadera, acting asagents of
Caram, purchased the property of Mata in bad faith.
Applying the principle of agency, Caram as
principal, should also be deemed to have acted in
bad faith. Since Caram was a registrant in bad faith,
the situation is as if there was no registration at all.
A possessor in good faith is one who is not aware
that there exists in his title or mode of acquisition
any flaw which invalidates it. Laureta was first in
possession of the property. He is also a possessor in
good faith. It is true that Mata had alleged that the
deed of sale infavor of Laureta was procured by
force. Such defect, however, was cured when, after
the lapse of four years from the time the
intimidation ceased, Marcos Mata lost both his
rights to file an action for annulment or to set up
nullity of the contract as a defense in an action to
enforce the same.
PARAAQUE KINGS ENTERPRISES,
INCORPORATED vs. COURT OF APPEALS
FACTS:
Plaintiff is a private corporation with principal place
of business of Dr. A. Santos Avenue, Paraaque,
Metro Manila. Defendant Catalina L. Santos is the
owner of eight (8) parcels of land located at
Paraaque, Metro Manila. On November 28, 1977, a
certain Frederick Chua leased the above-described
property from defendant Catalina L. Santos. On
February 12, 1979, Frederick Chua assigned all his
rights and interest and participation in the leased
property to Lee Ching Bing. On August 6, 1979, Lee
Ching Bing also assigned all his rights and interest
in the leased property to Paraaque Kings
Enterprises. Paragraph 9 of the assigned leased
contract provides among others that: That in case
the properties subject of the lease agreement are
sold or encumbered, Lessors shall impose as a

condition that the buyer or mortgagee thereof shall

recognize and be bound by all the terms and
conditions of this lease agreement and shall respect
this Contract of Lease as if they are the LESSORS
thereof and in case of sale, LESSEE shall have the
first option or priority to buy the properties subject
of the lease. On September 21, 1988, defendant
Santos sold the eight parcels of land subject of the
lease to defendant David Raymundo for a
consideration of five million pesos which was in
contravention of the contract of lease. Upon
learning of this fact plaintiffs representative wrote
a letter to defendant Santos, requesting her to
rectify the error and consequently realizing the
error, she had it reconveyed to her for the same
consideration of five million pesos. The property
was offered for sale to plaintiff by the defendant for
the sum of fifteen million pesos Plaintiff was given
ten (10) days to make good of the offer but said
period already expired before there was an
acceptance or rejection of said offer. On May 8,
1989, before the period given in the letter offering
the properties for sale expired, plaintiffs counsel
wrote counsel of defendant Santos offering to buy
the properties for five million pesos. On May 15,
1989, before they replied to the offer to purchase,
another deed of sale was executed by defendant
Santos (in favor of) defendant Raymundo for a
consideration of nine million pesos. Defendant
Santos violated again paragraph 9 of the contract
of lease by executing a second deed of sale to
defendant Raymundo. Defendant Santos replied
stating that among others that the period has
lapsed and the plaintiff is not a privy to the
contract. On July 6, 1989, counsel for defendant
Santos informed the plaintiff that the new owner is
defendant Raymundo. Plaintiff has made
considerable investments in the said leased
property by erecting a two (2) storey, six (6) doors
commercial building amounting to three million
pesos because the consideration given was made
on the belief that eventually the said premises shall
be sold to the plaintiff. Plaintiff now seeks to
recover damages for the wanton, fraudulent,
reckless, oppressive or malevolent manner acted
by the defendant.
ISSUE:
Whether or not the complaint alleging breach of the
contractual right of first option or priority to buy
states a valid cause of action.
HELD:
The Court held that A cause of action exists if the
following elements are present: (1) a right in favor
of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an
obligation on the part of the named defendant to
respect or not to violate such right, and (3) an act
or omission on the part of such defendant violative
of the right of plaintiff or constituting a breach of

the obligation of defendant to the plaintiff for which

the latter may maintain an action for recovery of
damages.
Under paragraph 9 of the contract of lease between
respondent Santos and petitioner, the latter was
granted the first option or priority to purchase the
leased properties in case Santos decided to sell. If
Santos never decided to sell at all, there can never
be a breach, much less an enforcement of such
right. But on September 21, 1988, Santos sold
said properties to Respondent Raymundo without
first offering these to petitioner. Santos indeed
realized her error, since she repurchased the
properties after petitioner complained. Thereafter,
she offered to sell the properties to petitioner for
P15 million, which petitioner, however, rejected
because of the ridiculous price. But Santos again
appeared to have violated the same provision of
the lease contract when she finally resold the
properties to respondent Raymundo for only P9
million without first offering them to petitioner at
such price.
In order to have full compliance with the
contractual right granting petitioner the first option
to purchase, the sale of the properties for the
amount of P9 million, the price for which they were
finally sold to respondent Raymundo, should have
likewise been first offered to petitioner. The basis of
the right of the first refusal must be the current
offer to sell of the seller or offer to purchase of any
prospective buyer. Only after the grantee fails to
exercise its right of first priority under the same
terms and within the period contemplated, could
the owner validly offer to sell the property to a third
person, again, under the same terms as offered to
the grantee.
One of such rights included in the contract of lease
and, therefore, in the assignments of rights was the
lessees right of first option or priority to buy the
properties subject of the lease, as provided in
paragraph 9 of the assigned lease contract. The
deed of assignment need not be very specific as to
which rights and obligations were passed on to the
assignee. It is understood in the general provision
aforequoted that all specific rights and obligations
contained in the contract of lease are those referred
to as being assigned.
Needless to state, respondent Santos gave her
unqualified conformity to both assignments of
rights.
Court granted the petition and reversed and set
aside the decisions of the trial court and Court of
Appeals.

Teran v. Villanueva, Viuda de Rosa, et al

GR L-34697 | March 26, 1932

TOPIC: Article 1542: When the sale of real estate is
made for a lump sum (a cuerpo cierto/ por precio
alzado) and not per unit of measure or number.
FACTS: Plaintiff Jesus Teran executed a deed of sale
with the defendants where he purchased for the sum
of four thousand pesos (Php 4,000) a parcel of land
containing an area of 34 hectares, 52 ares and 43
centares. The plaintiff alleges that after the 1928
harvest he discovered that the boundaries were not
the real ones, and, to ascertain the exact area of the
land, he went to the cadastral office in Malinao and got
a sketch of the property which showed that the land in
question contains only 10 hectares, and not 34 as what
appears in the deed of sale. The trial court however,
found no evidence of bad faith on the part of the
defendants. The plaintiff now seeks to rescind the
contract on the ground that the property contains a
smaller area than that stated in the deed of sale.
ISSUE: Whether or not the plaintiff is entitled to
rescind the contract according to Article 1542
HELD: NO, the Supreme Court held that the deed of
sale between the parties is valid and binding upon
them. According to Manresa and Scaevola, whenever a
certain real estate is sold for a lump sum the rule in
law is that there shall be no increase or decrease in
price even if the area or extent is found to be more or
less than that stated in the contract (Article 1542, par.
1); but, if the vendor cannot deliver to the vendee all
that is included within the boundaries stated in the
contract, the latter has the option either to reduce the
price in proportion to the deficiency, or to set aside the
contract (Article 1542, par. 2). The Civil Code presumes
that the purchaser had in mind a determinate piece of
land, and that he ascertained its area and quality
before the contract was perfected. If he did not do so,
or if having done so, he made no objection and
consented to the transaction, he can blame no one but
himself. In the case at hand, there is nothing in the
record to show that the property described in the deed
of sale was not delivered to the plaintiff. Manresa
further explains saying that, if the sale was made for
a lump sum, the cause of the contract is the thing sold,
irrespective of area or quantity In the present case,
the parties did not consider the area as an essential
element of the contract. There is no evidence of record
that the parties fixed the price at so much per hectare.
If the plaintiff wanted to buy the land at so much per
unit of measure, he should have so stated in the
contract.
The Supreme Court ABSOLVED the defendants from
the complaint without special pronouncement as to the
costs.
Heirs of Jesus Mascunana v. CA
Masunana bought a parcel of land from the Wuthrich
siblings. Part of which Mascunana, he later sold to
Sumilhig. The contract price is 4,690 with 3,690 as
down payment. Their agreement says: That the

balance of ONE THOUSAND PESOS (P1,000.00) shall be

paid by the VENDEE unto the VENDOR as soon as the
above-portions of Lot 124 shall have been surveyed in
the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of
Title in the name of the VENDEE shall have been
prepared. Sumilhig later sold the same lot to Layumas.
Years after, Layumas wrote to the heirs of Mascunana
(since Mascunana died already) offering to pay the
1,000 balance of the purchase price of the property.
The addressee, however, refused to receive the mail
matter. Heirs Mascunana then filed a complaint for
recovery of possession against Barte ( an individual
whom Layumas allowed to stay on the subject
property).
Issue: WON the contract of alienation of the subject
lot in favor of Sumilhig was a contract to sell or a
contract of sale
Held:Sale
Article 1458 of the New Civil Code provides: By the
contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent. A
contract of sale may be absolute or conditional. Thus,
there are three essential elements of sale, to wit: a)
Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; b)
Determinate subject matter; and c) Price certain in
money or its equivalent. In this case, there was a
meeting of the minds between the vendor and the
vendee, when the vendor undertook to deliver and
transfer ownership over the property covered by the
deed of absolute sale to the vendee for the price of
P4,690.00 of which P3,690.00 was paid by the vendee
to the vendor as down payment. The vendor undertook
to have the property sold, surveyed and segregated
and a separate title therefor issued in the name of the
vendee, upon which the latter would be obliged to pay
the balance of P1,000.00. There was no stipulation in
the deed that the title to the property remained with
the vendor, or that the right to unilaterally resolve the
contract upon the buyers failure to pay within a fixed
period was given to such vendor. Patently, the contract
executed by the parties is a deed of sale and not a
contract to sell. As the Court ruled in a recent case: In
Dignos v. Court of Appeals (158 SCRA 375), we have
said that, although denominated a Deed of
Conditional Sale, a sale is still absolute where the
contract is devoid of any proviso that title is reserved
or the right to unilaterally rescind is stipulated, e.g.,
until or unless the price is paid. Ownership will then be
transferred to the buyer upon actual or constructive
delivery (e.g. by the execution of a public document)
of the property sold. Where the condition is imposed
upon the perfection of the contract itself, the failure of
the condition would prevent such perfection. If the
condition is imposed on the obligation of a party which
is not fulfilled, the other party may either waive the
condition or refuse to proceed with the sale. (Art. 1545,
Civil Code).Thus, in one case, when the sellers
declared in a Receipt of Down Payment that they
received an amount as purchase price for a house and

lot without any reservation of title until full payment of

the entire purchase price,

Fornilda vs. RTC (Resolution)

G.R. No. 72306. January 24, 1989

the implication was that they sold their property. In

Peoples Industrial and Commercial Corporation v.
Court of Appeals, it was stated: A deed of sale is
considered absolute in nature where there is neither a
stipulation in the deed that title to the property sold is
reserved in the seller until full payment of the price,
nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay
within a fixed period. Applying these principles to this
case, it cannot be gainsaid that the contract of sale
between the parties is absolute, not conditional. There
is no reservation of ownership nor a stipulation
providing for a unilateral rescission by either party. In
fact, the sale was consummated upon the delivery of
the lot to respondent. Thus, Art. 1477 provides that the
ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery
thereof. The condition in the deed that the balance of
P1,000.00 shall be paid to the vendor by the vendee as
soon as the property sold shall have been surveyed in
the name of the vendee and all papers pertinent and
necessary to the issuance of a separate certificate of
title in the name of the vendee shall have been
prepared is not a condition which prevented the
efficacy of the contract of sale. It merely provides the
manner by which the total purchase price of the
property is to be paid. The condition did not prevent
the contract from being in full force and effect: The
stipulation that the payment of the full consideration
based on a survey shall be due and payable in five (5)
years from the execution of a formal deed of sale is
not a condition which affects the efficacy of the
contract of sale. It merely provides the manner by
which the full consideration is to be computed and the
time within which the same is to be paid. But it does
not affect in any manner the effectivity of the contract.
In a contract to sell, ownership is retained by a seller
and is not to be transferred to the vendee until full
payment of the price. Such payment is a positive
suspensive condition, the failure of which is not a
breach of contract but simply an event that prevented
the obligation from acquiring binding force. It bears
stressing that in a contract of sale, the non-payment of
the price is a resolutory condition which extinguishes
the transaction that, for a time, existed and discharges
the obligation created under the transaction. A seller
cannot unilaterally and extra judicially rescind a
contract of sale unless there is an express stipulation
authorizing it. In such case, the vendor may file an
action for specific performance or judicial rescission.
Article 1169 of the New Civil Code provides that in
reciprocal obligations, neither party incurs in delay if
the other does not comply or is not ready to comply in
a proper manner with what is incumbent upon him;
from the moment one of the parties fulfil his obligation,
delay by the other begins. In this case, the vendor
(Jesus Mascuana) failed to comply with his obligation
of segregating Lot No. 124-B and the issuance of a
Torrens title over the property in favor of the vendee,
or the latters successors-in-interest, the respondents
herein. Worse, petitioner Jose Mascuana was able to
secure title over the property under the name of his
deceased father.

Ponente: Justice Melencio-Herrera

FACTS:
The Controverted Parcels were part of the estate of
the late Julio M. Catolos subject of intestate estate
proceedings, wherein Respondent Amonoy acted as
counsel for some of the heirs from1959 until 1968
by his own admission. These properties were
adjudicated to Alfonso Fornilda and Asuncion M.
Pasamba in the Project of Partition approved by the
Court on 12 January 1965.
On 20 January 1965, or only eight (8) days
thereafter, and while he was still intervening in the
case as counsel, these properties were mortgaged
by petitioners' predecessor-in-interest to
Respondent Amonoy to secure payment of the
latter's attorney's fees in the amount of
P27,600.00. Since the mortgage indebtedness was
not paid, Respondent Amonoy instituted an action
for judicial foreclosure of mortgage on 21 January
1970. The mortgage was subsequently ordered
foreclosed and auction sale followed where
Respondent Amonoy was the sole bidder
forP23,600.00. Being short of the mortgage
indebtedness, he applied for and further obtained a
deficiency judgment.
The Court rendered a Decision granting the Petition
for Certiorari and setting aside the decision of the
RTC which granted the Writ of Possession and
directed respondent Sheriff to demolish the houses
of petitioners Angela and Leocadia Fornilda.
Moreover, the six parcels of land controverted were
ordered to be returned to petitioner unless some of
them have been conveyed to innocent third
persons. Respondent Amonoy filed his Motion for
Reconsideration stating that the transaction
involved being a mortagage Article 1491[5] of the
Civil Code does not apply, therefore, the mortgage
contract executed in favor of respondent Amonoy is
valid. He also argued that Article 1491[5] does not
apply to foreclosure sales in favor of judgment
creditors.
Issue:
Does the prohibition against lawyers acquisition of
property apply to mortgages?
Held:
Yes. The pertinent portions of the said Article read:
Art. 1491. The following persons cannot acquire by
purchase even at a public or judicial or auction,

either in person or through the mediation of

another xxx xxx xxx:
(5) Justices, judges, prosecuting attorneys, ... the
property and rights in litigation or levied upon on
execution before the court within whose junction or
territory they exercise their respective functions;
this prohibition includes the act of acquitting by
assignment and shall apply to lawyers with respect
to the property and rights which may be the object
of any litigation in which they may take part by
virtue of their profession.
Under the aforequoted provision, a lawyer is
prohibited from acquiring either by purchase or
assignment the property or rights involved which
are the object of the litigation in which they
intervene by virtue of their profession. The
prohibition on purchase is all embracing to include
not only sales to private individuals but also public
or judicial sales
At the time of the execution of the mortgage
contract, the Controverted Parcels were still in
litigation and a fiduciary relationship of lawyer and
client, which Article 1491[5] precisely seeks to
protect, still existed between the parties. To state
that mortgages are not included within the
prohibition is to open the door to an indirect
circumvention of that statutory injunction,
acquisition of the property being merely postponed
till eventual foreclosure.
Respondent asserts further that Article 1491[5]
does not apply to judgment creditors of which, he
claims, he was one. Under ordinary circumstances,
the argument of respondent could be considered
plausible. Unfortunately, however, as heretofore
explained, the mortgage was executed in violation
of Article 1491[5] so that this Article has a direct
bearing on this case and respondent cannot escape
its provision. Having violated the same, he cannot
be considered in the general run of a judgment
creditor.
Considering that the mortgage contract, entered
into in contravention of Article 1491 of the Civil
Code is expressly prohibited by law, the same must
be held inexistent and void ab initio.
San Lorenzo Development Corporation vs. CA
FACTS:
The Spouses Lu allegedly sold the two parcels of
land to respondent Babasanta. Babasanta made a
down payment of P50,000 as evidenced by a
memorandum receipt issued by Pacita Lu of the
same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made
by Babasanta.

Sometime in May 1989, Babasanta wrote a letter to

Pacita Lu to demand the execution of a final deed of
sale in his favor so that he could effect full payment
of the purchase price. In the same letter, Babasanta
notified the spouses about having received
information that the spouses sold the same
property to another without his knowledge and
consent. He demanded that the second sale be
cancelled and that a final deed of sale be issued in
his favor. In response, Pacita Lu wrote a letter to
Babasanta wherein she acknowledged having
agreed to sell the property to him at P15.00 per
square meter. She, however, reminded Babasanta
that when the balance of the purchase price
became due, he requested for a reduction of the
price and when she refused, Babasanta backed out
of the sale. Pacita added that she returned the sum
of fifty thousand pesos (P50,000.00) to Babasanta
through Eugenio Oya.
Babasanta filed Complaint for Specific Performance
and Damages. Petitioner San SLDC filed a Motion
for Intervention. SLDC alleged that it had legal
interest in the subject matter under litigation
because the two parcels of land involved had been
sold to it in a Deed of Absolute Sale with Mortgage.
It alleged that it was a buyer in good faith and for
value and therefore it had a better right over the
property in litigation.
Issues:
(1) Whether or not there was a transfer of
ownership through the issuance of memorandum
receipt.
(2) Whether or not the petitioner has a better right
over the parcels of land in the case of double sale.
Held:
(1) No. Respondent Babasanta did not acquire
ownership by the mere execution of the receipt by
Pacita Lu acknowledging receipt of partial payment
for the property. For one, the agreement between
Babasanta and the Spouses Lu, though valid, was
not embodied in a public instrument. Hence, no
constructive delivery of the lands could have been
effected. For another, Babasanta had not taken
possession of the property at any time after the
perfection of the sale in his favor or exercised acts
of dominion over it despite his assertions that he
was the rightful owner of the lands. Simply stated,
there was no delivery to Babasanta, whether actual
or constructive, which is essential to transfer
ownership of the property. Thus, even on the
assumption that the perfected contract between
the parties was a sale, ownership could not have
passed to Babasanta in the absence of delivery,
since in a contract of sale ownership is transferred
to the vendee only upon the delivery of the thing
sold.

(2) Yes. As stated in Article 1544, if the same thing

should have been sold to different vendees, the
ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of
Property. The principle of primus tempore, potior
jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable
property. When the thing sold twice is an
immovable, the one who acquires it and first
records it in the Registry of Property, both made in
good faith, shall be deemed the owner. Verily, the
act of registration must be coupled with good faith
that is, the registrant must have no knowledge of
the defect or lack of title of his vendor or must not
have been aware of facts which should have put
him upon such inquiry and investigation as might
be necessary to acquaint him with the defects in
the title of his vendor.
It must be stressed that as early as 11 February
1989, the Spouses Lu executed the Option to Buy in
favor of SLDC upon receiving P316,160.00 as option
money from SLDC. After SLDC had paid more than
one half of the agreed purchase price of
P1,264,640.00, the Spouses Lu subsequently
executed on 3 May 1989 a Deed of Absolute Sale in
favor or SLDC. At the time both deeds were
executed, SLDC had no the time of execution of the
first deed up to the moment of transfer and
delivery of possession of the lands to SLDC, it had
acted in good faith and the subsequent annotation
of lis pendens has no effect at all on the
consummated sale between SLDC and the Spouses
Lu.
The law speaks not only of one criterion. The first
criterion is priority of entry in the registry of
property; there being no priority of such entry, the
second is priority of possession; and, in the absence
of the two priorities, the third priority is of the date
of title, with good faith as the common critical
element. Since SLDC acquired possession of the
property in good faith in contrast to Babasanta, who
neither registered nor possessed the property at
any time, SLDC's right is definitely superior to that
of Babasanta's.
At any rate, the above discussion on the rules on
double sale would be purely academic for as earlier
stated in this decision, the contract between
Babasanta and the Spouses Lu is not a contract of
sale but merely a contract to sell.
Other info:
Contract of sale vs. Contract to sell
The receipt signed by Pacita Lu merely states that
she accepted the sum of fifty thousand pesos
(P50,000.00) from Babasanta as partial payment of
3.6 hectares of farm lot situated in Sta. Rosa,
Laguna. While there is no stipulation that the seller

reserves the ownership of the property until full

payment of the price which is a distinguishing
feature of a contract to sell, the subsequent acts of
the parties convince us that the Spouses Lu never
intended to transfer ownership to Babasanta except
upon full payment of the purchase price.
Babasanta's letter dated 22 May 1989 was quite
telling. He stated therein that despite his repeated
requests for the execution of the final deed of sale
in his favor so that he could effect full payment of
the price, Pacita Lu allegedly refused to do so. In
effect, Babasanta himself recognized that
ownership of the property would not be transferred
to him until such time as he shall have effected full
payment of the price. Moreover, had the sellers
intended to transfer title, they could have easily
executed the document of sale in its required form
simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt
signed by Pacita Lu should legally be considered as
a perfected contract to sell.
The distinction between a contract to sell and a
contract of sale is quite germane. In a contract of
sale, title passes to the vendee upon the delivery of
the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor
and is not to pass until the full payment of the
price. In a contract of sale, the vendor has lost and
cannot recover ownership until and unless the
contract is resolved or rescinded; whereas in a
contract to sell, title is retained by the vendor until
the full payment of the price, such payment being a
positive suspensive condition and failure of which is
not a breach but an event that prevents the
obligation of the vendor to convey title from
becoming effective.
The perfected contract to sell imposed upon
Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay
the price, Babasanta should have made the proper
tender of payment and consignation of the price in
court as required by law. Mere sending of a letter by
the vendee expressing the intention to pay without
the accompanying payment is not considered a
valid tender of payment. Consignation of the
amounts due in court is essential in order to
extinguish Babasanta's obligation to pay the
balance of the purchase price. Glaringly absent
from the records is any indication that Babasanta
even attempted to make the proper consignation of
the amounts due, thus, the obligation on the part of
the sellers to convey title never acquired obligatory
force.
Ways of effecting delivery
In relation to the acquisition and transfer of
ownership, it should be noted that sale is not a
mode, but merely a title. A mode is the legal means
by which dominion or ownership is created,

transferred or destroyed, but title is only the legal

basis by which to affect dominion or ownership.
Under Article 712 of the Civil Code, "ownership and
other real rights over property are acquired and
transmitted by law, by donation, by testate and
intestate succession, and in consequence of certain
contracts, by tradition." Contracts only constitute
titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of
accomplishing the same. Therefore, sale by itself
does not transfer or affect ownership; the most that
sale does is to create the obligation to transfer
ownership. It is tradition or delivery, as a
consequence of sale, that actually transfers
ownership.
Explicitly, the law provides that the ownership of
the thing sold is acquired by the vendee from the
moment it is delivered to him in any of the ways
specified in Article 1497 to 1501. The word
"delivered" should not be taken restrictively to
mean transfer of actual physical possession of the
property. The law recognizes two principal modes of
delivery, to wit: (1) actual delivery; and (2) legal or
constructive delivery.
Actual delivery consists in placing the thing sold in
the control and possession of the vendee. Legal or
constructive delivery, on the other hand, may be
had through any of the following ways: the
execution of a public instrument evidencing the
sale; symbolical tradition such as the delivery of the
keys of the place where the movable sold is being
kept; traditio longa manu or by mere consent or
agreement if the movable sold cannot yet be
transferred to the possession of the buyer at the
time of the sale; traditio brevi manu if the buyer
already had possession of the object even before
the sale; and traditio constitutum possessorium,
where the seller remains in possession of the
property in a different capacity.

balance of the purchase price become due, he

requested for a eduction of the price. When
Babasanta backed out from the sale, Pacita
returned the 50,000. To Babasanta through Eugenio
ong.
On January 19, 1990, SLDC alleged that it had
better right over the property and they are a buyer
in good faith.
ISSUE:
Whether or not SLDC is a buyer in good faith
HELD: yes. It must be stressed that from the
execution of the first deed up to the moment of
transfer and delivery of possession of the land to
SLDC, it had acted in good faith. The subsequent
notice of lis pendes has no effect whatsoever on the
consummated sale between SLDC and the Lu's.
Babasanta argues that the registration of the notice
served as constructive notice of their interest in the
lands, but again, the registration was made long
after the sale to SLDC was consummated. Even
assuming that this is material, Babasanta still
cannot claim a superior right since he already had
notice of a previous sale. He cannot therefore be
considered a buyer in good faith either. The law,
after all, speaks not only of one criterion. The first
priority of entry in the registry of property; there
being none, the second is priority of possession;
and in the absence of both, the third is the date of
the title. In any event, since SLDC acquired
possession go the property in good faith in contrast
to Babasanta, who neither registered nor possessed
the property at any time, SLDC's right is definitely
the superior one.
PARAGAS vs. HEIRS OF DOMINADOR
BALACANO

San Lorenzo development corporation vs. ca

FACTS:

FACTS:

Gregorio and Lorenza Balacano are owners of two

parcel of land. They had three children namely,
Domingo, Catalino, and Alfredo. Lorenza died on
December 11, 1991, while Gregorio died on July 28,
1996. Prior to Gregorios death, he was admitted in
veterans general hospital in Nueva Vizcaya and
later transferred to Quezon City. It was alleged that
Gregorio, barely a week prior to his death, sold the
two lots to sps. Rudy and Corazon Paragas.
Domingos children filed a complaint for the
annulment of the sale against Catalno and the sps.
Paragas. They argued that, Gregorio was seriously
ill at the time of the execution of the deed of sale,
that his consent was vitiated and that the lots form
part of the conjugal partnership properties.

On August 20, 1986. Sps. Lu sold two parcel of land

to respondent Pablo Babasanta for the price of
15.00 per square meters. Babasanta made a
downpayment of 50,000.
Pabasanta wrote a letter to Pacita Lu to demand the
execution of a final deed of sale in his favor so that
he could effect full payment and notified the sps.
That he received an information that sps. Sold the
same property to another without his knowledge
and consent. He demanded that the second sale be
cancelled.
Pacita wrote a letter to Babasanta wherein she
acknowledged having agreed to sell the property.
She, however, reminded Babasanta that when the

ISSUE:
Whether or not the Deed of sale is null and void

HELD:
The court ruled that the deed of sale is null and
void. Gregorio died due to complications by
cirrhosis of the liver, had been fighting the disease
for a month. Due to his condition, there are serious
doubts as to whether he could read, or fully
understood the contents of the deed of sale. There
are no conclusive evidence that shows that the
evidence of the deed were sufficiently explained to
Gregorio before he affixed his signature.
Dignos vs CA
FACTS:
The spouses Silvestre and Isabel Dignos were
owners of a parcel of land in Opon, Lapu-Lapu City.
On June 7, 1965, appellants, herein petitioners
Dignos spouses sold the said parcel of land to
respondent Atilano J. Jabil for the sum of
P28,000.00, payable in two installments, with an
assumption of indebtedness with the First Insular
Bank of Cebu in the sum of P12,000.00, which was
paid and acknowledged by the vendors in the deed
of sale executed in favor of plaintiff-appellant, and
the next installment in the sum of P4,000.00 to be
paid on or before September 15, 1965.
On November 25, 1965 the Dignos spouses sold the
same land in favor of defendants spouses, Luciano
Cabigas and Jovita L. De Cabigas, who were then
U.S. citizens, for the price of P35,000.00. A deed of
absolute sale was executed by the Dignos spouses
in favor of the Cabigas spouses, and which was
registered in the Office of the Register of Deeds
pursuant to the provisions of Act No. 3344.
As the Dignos spouses refused to accept from
plaintiff-appellant the balance of the purchase price
of the land, and as plaintiff- appellant discovered
the second sale made by defendants-appellants to
the Cabigas spouses, plaintiff-appellant brought the
present suit.
ISSUE:
1 . Whether or not there was an absolute contract
of sale. 2. Whether or not the contract of sale was
already rescinded when the Dignos spouses sold
the land to Cabigas
HELD:

I. Yes. That a deed of sale is absolute in nature

although denominated as a Deed of Conditional
Sale where nowhere in the contract in question is
a proviso or stipulation to the effect that title to the
property sold is reserved in the vendor until full
payment of the purchase price, nor is there a
stipulation giving the vendor the right to
unilaterally rescind the contract the moment the
vendee fails to pay within a fixed period.
A careful examination of the contract shows that
there is no such stipulation reserving the title of the
property on the vendors nor does it give them the
right to unilaterally rescind the contract upon nonpayment of the balance thereof within a fixed
period.
On the contrary, all the elements of a valid contract
of sale under Article 1458 of the Civil Code, are
present. While it may be conceded that there was
no constructive delivery of the land sold in the case
at bar, as subject Deed of Sale is a private
instrument, it is beyond question that there was
actual delivery thereof. As found by the trial court,
the Dignos spouses delivered the possession of the
land in question to Jabil as early as March 27,1965
so that the latter constructed thereon Sallys Beach
Resort also known as Jabils Beach Resort in March,
1965; Mactan White Beach Resort on January 15, J
966 and Bevirlyns Beach Resort on September 1,
1965. Such facts were admitted by petitioner
spouses.
2. No.
The contract of sale being absolute in nature is
governed by Article 1592 of the Civil Code. It is
undisputed that petitioners never notified private
respondents Jabil by notarial act that they were
rescinding the contract, and neither did they file a
suit in court to rescind the sale. There is no showing
that Amistad was properly authorized by Jabil to
make such extra-judicial rescission for the latter
who, on the contrary, vigorously denied having sent
Amistad to tell petitioners that he was already
waiving his rights to the land in question. Under
Article 1358 of the Civil Code, it is required that
acts and contracts which have for their object
extinguishment of real rights over immovable
property must appear in a public document.
Petitioners laid considerable emphasis on the fact
that private respondent Jabil had no money on the
stipulated date of payment on September 15,1965
and was able to raise the necessary amount only by
mid-October 1965. It has been ruled, however, that
where time is not of the essence of the agreement,
a slight delay on the part of one party in the
performance of his obligation is not a sufficient
ground for the rescission of the agreement.
Considering that private respondent has only a
balance of P4,OOO.00 and was delayed in payment
only for one month, equity and justice mandate as

in the aforecited case that Jabil be given an

additional period within which to complete payment
of the purchase price.

No. Under Article 1542, there shall be no reduction

in the purchase price even if the area deliveredis
less than that stated in the contract.

LEITZ VS CA

DECISION:

FACTS:

Affirmed

1.Agapito Buriol owned a parcel of unregistered

land in Palawan.

RATIO DECIDENDI:

2. On 15 Aug 1986,
Buriol entered into a lease agreement with Flavia
Turatello, TizianaTuratello, and Paola Sani, all
Italians
involving 1 hectare of the property. Lease
agreement was for 25 years, renewable for another
25 years.
3. The Italians then took possession of the land
after paying a downpayment of 10,000. The lease
agreement was reduced into writing in Jan 1987.
4. On 17 Nov 1986, Buriol sold the land to Rudolf
Lietz, Inc. for 30,000. The Deed of Absolute Sale
states that the land measured 5 hectares, more or
less. It also described the boundaries of the land.
5.Lietz later discovered that Buriol owned only 4
hectares, with 1 more covered by the lease
agreement. Hence, only 3 hectares were actually
delivered.
6.Lietz then filed a complaint for Annulment of
Lease with Recovery of Possession against Buriol
andthe Italians. He alleged that Buriol sold to him
the lot in evident bad faith and malice knowing that
heowned only 4 hectares, not 5.
7. The trial court dismissed the complaint and the
counterclaim of the Italians for damages.
8. The CA affirmed the dismissal. It held that under
Article 1542, Lietz is no longer entitled to a
reduction in price.
9.Lietz appeals. He contends that he is entitled to
reduction under Article 1539.

1. Article 1539 governs a sale of immovable by the

unit, that is, at a stated price per unit area. In a unit
price contract, the statement of area of immovable
is not conclusive and the price maybe reduced or
increased depending on the area actually delivered.
2. In some instances, a sale of an immovable may
be made for a lump sum and not at a rate per unit.
In the case where the area of the immovable is
stated in the contract based on an estimate, the
actual area delivered may not measure up exactly
with the area stated in the contract.
3. A vendee of land, when sold in gross or with the
description more or less with reference to its
area, does not thereby ipso facto take all risk of
quantity in the land. The use of more or less or
similar words in designating quantity covers only a
reasonable excess or deficiency
4. What really defines a piece of ground is not the
area mentioned in its description, but the
boundaries therein laid down, as enclosing the land
and indicating its limits. In a contract of sale of land
in a mass, it is well established that the specific
boundaries stated in the contract must control over
any statement with respect to the area contained
within its boundaries.
5. In this case, the sale is one made for a lump
sum. The Deed of Absolute Sale shows that the
parties agreed on the purchase price on a
predetermined area of 5 hectares within the
specified boundaries and not based on a particular
rate per area.
6. In accordance with Article 1542, there shall be no
reduction in the purchase price even if the area
delivered to Lietz is less than that stated in the
contract. The area within the boundaries as stated
in the contract shall control over the area agreed
upon.

ISSUE:
Is Lietz entitled to a reduction in the purchase price
of the lot because of the reduced area of the
property delivered to him?
HELD:

7. Lietz had an ocular inspection prior to the

perfection of the contract. Thus, he gained a fair
estimate of the area of the property sold to him.
Also, his subscription to the Deed of Absolute Sale
indicates his assent to the correct description of the
boundaries of the property.
Law: Art. 1539.

The obligation to deliver the thing sold includes that

of placing in the control of the vendee all that is
mentioned in the contract, in conformity with the
following rules: If the sale of real estate should be
made with a statement of its area, at the rate of a
certain price for a unit of measure or number, the
vendor shall be obliged to deliver to the vendee, if
the latter should demand it, all that may have been
stated in the contract; but, should this be not
possible, the vendee may choose between a
proportional reduction of the price and the
rescission of the contract, provided that, in the
latter case, the lack in the area be not less than
one-tenth of that stated. x x x
LAO VS GENATO
Facts:
Petitioner spouses were promisees in a Mutual
Agreement of Promise to Sell executed between
them and private respondent Sotero B. Dionisio III,
son of respondent Sotero A. Dionisio, Jr. (heir and
administrator of the intestate estate of the
deceased <Rosenda Abuton>), whereby the
promisor bound himself to sell the subject property
to petitioners. Private respondents, except Sotero
Dionisio III and William Go, are the children and
only compulsory heirs of the deceased.
On June 25, 1980, respondent administrator Sotero
Dionisio, Jr., with due notice to all his co-heirs, filed
with the Probate Court a Motion for Authority to Sell
certain properties of the deceased to settle the
outstanding obligations of the estate. On July 8,
1980, after hearing, there being no opposition, the
lower court issued an Order authorizing the
administrator to sell the therein described
properties of the estate and such other properties
under his administration at the best price
obtainable, and directing him to submit to the court
for approval the transaction made by him.
On August 15, 1980, respondent-administrator
pursuant to said authorization, sold to his son,
Sotero Dionisio III, the subject property for
P75,000.00 per deed of sale acknowledged before a
Notary Public. On the same date, Sotero Dionisio III
executed a deed of sale of the same property in
favor of respondent William Go for a consideration
of P80.000.00. On August 18, 1980, title was
transferred to respondent Go.
On August 27, 1980, respondent-heir Florida Nuqui,
filed a Motion for Annulment/Revocation of the
Deeds of Absolute Sale for the reasons that the sale
and subsequent transfer of title of the property
were made in violation of the court's order of July 8,
1980 and that the consideration of the two sales
were grossly inadequate as in fact many are willing
to buy the property for P400,000.00 since it is
located along the corner of two main streets in the
commercial center of Oroquieta City. The

respondent-administrator filed an opposition to said

motion of co-heir Nuqui alleging that the actual
consideration of the sale made by him is
P200,000.00 and that it is the agreement of the
heirs that if any of the heirs or close relatives is
interested in buying the property, preference will be
given to him or her in order to keep the property
within the family of the deceased.
On September 9, 1980, respondent Nuqui filed a
Reply to said Opposition, stating that the two sales
were but a single transaction simultaneously
hatched and consummated in one occasion as
shown by the Notary Public's document Nos. 56 &
57 and with the same witnesses; that the sales
were in reality a single deal between the
administrator and William Go, because Sotero
Dionisio III is without means or income and so has
no capacity to buy the property; and that the
transaction is an evidence of the administrator's
intent to defraud the estate and his co-heirs, for
had it not been for the Motion for Annulment, he
would not have disclosed the true and actual
consideration of the sale. On September 10, 1980,
all the co-heirs of respondent-administrator filed a
Manifestation to Adopt the Motion for
Annulment/Revocation of Deeds of Absolute Sale.
Respondent Go filed a Motion for Leave to Intervene
to protect his rights, manifesting that he paid
Sotero Dionisio III the actual consideration of
P225,000.00 and being a purchaser in good faith
and for value, his title to the property is
indefeasible pursuant to law.
On February 6, 1981, petitioner spouses filed a
"Manifestation In Intervention of Interest to
Purchase Property Authorized by the Court to be
Sold", wherein they alleged that respondentadministrator, without revealing that the property
had already been sold to William Go, entered into a
Mutual Agreement of Promise to Sell to herein
petitioners, for the amount of P270,000 which was
reduced to P220,000.00; that immediately upon the
execution of the agreement, petitioners paid the
earnest money in the amount of P70,000.00, as
requested by respondent-administrator; that it was
agreed upon that the balance of P150,000.00 shall
immediately be paid upon the production of the
Transfer Certificate of Title and the execution of the
final Deed of Sale; that although the agreement
was executed in the name of Sotero Dionisio III the
'latter, was merely a nominal party, for technically
according to the administrator, he executed a Deed
of Absolute Sale in favor of his son, but the
negotiation and transactions were directly and
personally entered into between the administrator
and petitioners; that the contract of sale has been
perfected considering that the earnest money was
already paid; that despite repeated demands the
administrator refused to execute a final Deed of
Sale in favor of petitioners, who later found out that
the subject property was sold to William GO; that

both contracts of sale were made to defraud the

estate and the other heirs; that assuming the
consideration of P200,000.00 supplied by William
Go to Sotero Dionisio III who was not gainfully
employed, then the contract of sale to Go would be
without consideration, hence, it would become
fictitious and simulated and there is no other
recourse left to the court but to declare the sale
null and void. Petitioners also manifested that in the
event that the court should finally declare the sale
null and void, they are still interested to purchase
the property for the same amount of P200,000.00
as previously agreed.
Respondent heir Florida A. Nuqui filed an Opposition
to William Go's Motion to Intervene averring therein
that the deed of sale executed by Sotero Dionisio,
Jr. in favor of Sotero Dionisio III created no legal
force and effect, since the validity of the sale
absolutely depended on its approval by the court;
that it therefore follows that the succeeding sale to
Go and consequent issuance of the title to him are
also null and void from their inception and that the
admission by William Go of the actual and true
consideration of the sale at his stage, hardly
bespeaks of "innocence" or "good faith".
After several days of hearing, respondent Judge
allowed all the interested parties to bid for the
property at the highest obtainable price pursuant to
his Order of July 8, 1980. On February 16, 1981, in
open court, respondent Go offered to buy the
property in the amount of P280,000.00. Petitioners
counter-offered at P282,000.00, spot cash. On that
same day, all the heirs, except the administrator,
filed a Motion Ex Parte stating among other things,
that the offer of William Go appears the highest
obtainable price and that the offer of petitioners is
not well taken as the same has not been made
within a reasonable period of five (5) days from
February 11, 1981.
On February 17, 1981, all the parties, with the
exception of the Lao spouses and Sotero Dionisio III,
submitted for approval an Amicable Settlement
stating: That after the administrator, Sotero A.
Dionisio, Jr., had accounted for the actual price
received by him out of the transaction between him
and Sotero B. Dionisio III in the amount of
P200,000.00 Pesos and that in the interest of a
peaceful settlement William L. Go has offered and is
ready, able and to pay to the heirs an additional
amount of P80,000.00 pesos, an arrangement
which is most advantageous to the heirs and which
they willingly accept to their satisfaction. The heirs
of Rosenda Abuton hereby declare that they have
no objection to the confirmation and approval of the
sales/transactions executed by Sotero A. Dionisio,
Jr., in favor of Sotero B. Dionisio III and that
executed by Sotero B. Dionisio III in favor of the
intervenor, William L. Go.

On February 18, 1981, petitioners filed an

opposition to the approval of the Amicable
Settlement. Despite said opposition, respondent
Judge issued an Order approving the Amicable
Settlement, confirming and ratifying the two
questioned Deeds of Sale.
Issue: WON the sale in favor of Sotero Dionisio III
and by the latter to William Go should be declared
NULL and VOID
Held: YES!!!
In the discharge of his functions, the administrator
should act with utmost circumspection in order to
preserve the estate and guard against its
dissipation so as not to prejudice its editors and the
heirs of the decedents who are entitled to the net
residue thereof. In the case at bar, the sale was
made necessary "in order to settle other existing
obligations of the estate. The subsisting obligation
referred to, although not specified, must be those
due and owing to the creditors of the estate and
also the taxes due the government. In order to
guarantee faithful compliance with the authority
granted, respondent Judge made it an emphatic
duty on the part of the administrator Dionisio, " . . .
to submit to this Court for approval the transactions
made by him."
The sale was made. HOWEVER, it was made to his
very son Sotero Dionisio III and for the grossly low
price of only P75,000,00. That sale was indubitably
shown to be fictitious, it clearly appearing that
Dionisio III has no income whatsoever. In fact, he is
still a dependent of his father, administrator
Dionisio, Jr. On top of that, not a single centavo, of
the P75,000.00 stated consideration was ever
accounted for nor reported by Dionisio, Jr. to the
probate court. Neither did he submit said
transaction as mandated by the order authorizing
him to sell, to the probate court for its approval and
just so its validity and fairness may be passed upon
and resolved. It was only upon the filing by one of
the heirs, Florida A. Nuqui, of the "Motion for
Annulment/Revocation of Deeds of Absolute Sale"
questioning the genuineness and validity of the
transactions, that Dionisio, Jr. was compelled to
admit that the actual consideration for the sale
made by him was P200,000.00. The sale is an
illegal and irregular transactions that was confirmed
and legalized by respondent Judges approval of the
assailed Amicable Settlement. No doubt,
respondent Judge's questioned approval violates
Article 1409 of the New Civil Code and cannot work
to confirm nor serve to ratify a fictitious contract
which is non-existent and void from the very
beginning. The fact that practically all the heirs are
parties-signatories to the said Compromise
Agreement is of no moment. Their assent to such
an illegal scheme does not legalize the same nor
does it impose any obligation upon respondent
Judge to approve the same to the prejudice not only

of the creditors of the estate, and the government

by the non-payment of the correct amount of taxes
legally due from the estate.
GUZMAN, BOCALING VS BONNEVIE
Facts:Africa Valdez de Reynoso leased a parcel of land
with two buildings constructedthereon to Raoul S.
Bonnevie and Christopher Bonnevie, for a period of
one yearbeginning August 8, 1976, at a monthly rental
of P4,000.00, with an agreement thatshould Africa
decide to sell the property, the respondent lessee shall
be givent thefirst priority to purchase the same. Then
on November 1976, Africa sent a letter to the
respondents that she was sellingthe property for the
amount of P600,000 less a mortgage loan of P100,000,
givingthem 30 days to exercise their right of first
priority. Failure to exercise the saidright, respondents
should vacate the property not later than March 1977.
Then on January 1977, Africa informed that the
property have been sold to the petitioner,because
respondents failed to exercise their right to do
such.Respondent s on the other hand informed Africa
that they have not received theirletter and refused to
vacate the property. And on April of the same year,
Africademanded that they vacate the property
for failure to pay rent for four months,which they
refused. Hence a complaint for ejectment was
filed against them. Duringthe pendency of the
ejectment case, respondent filed an action for
annulment of thesale between Africa and the herein
petitioner and for the cancellation of the
transfercertificate of title in the name of the latter.
Asking also that Africa be required to sellthe property
to them under the same terms and conditions agreed
upon in theContract of Sale in favor of the
petitioner. Then on May 1980, the City Court ruled
that the respondent to vacate the premises,and deliver
possession of the property to the petitioner as well as
pay the rent dueto them. Upon appeal to the Court of
First Instance of Manila, affirmed the saidejection case
with modification and granted respondents petition to
cancel the Deedof Sale executed between Africa and
the petitioner and ordered her to sell theproperty to
respondent, and for petitioner and Africa to
pay respondent fordamages. CA affirmed the said
decision but with modification on the amount
of damages. Hence the petition.
Issue:
WON the respondent court erred in ruling that
the grant of first priority to purchase the subject
properties by the judicial administratrix needed no
authority from theprobate court;
WON the Contract of Sale executed between the
parties was not voidable butrescissible;
WON petitioner is a buyer in bad faith.
Ruling:On the first issue, Africa failed to show that the
letter sent by registered mail wasreceived by the
respondents, only a photocopy of the letter without
any receivingsignature coming from the latter.
Furthermore, even if the latter received the letterand
did not exercise their right of first priority, Africa would
still be guilty of violatingParagraph 20 of the Contract
of Lease which specifically stated that the
privaterespondents could exercise the right of first
priority, "all things and conditions beingequal." Since
Africa had offered a lesser amount to the petitioner
and moreadvantageous offer than that was offered to
the respondent. Also, respondent courtis correct that it
was not necessary to secure the approval by the
probate court of the Contract of Lease because it did
not involve an alienation of real property of theestate
nor did the term of the lease exceed one year so as top
make it fall underArticle 1878(8) of the Civil Code.In
the second issue, private respondents have the right
to rescind the contract of sale because Africa had
failed to comply with her duty to give them first

opportunityto purchase the subject property. The

petitioner argues that assuming the Contract of Sale
to be voidable, only theparties thereto could bring an
action to annul it pursuant to Article 1397 of the
CivilCode. It is stressed that private respondents are
strangers to the agreement andtherefore have no
personality to seek its annulment. The respondent
court correctly held that the Contract of Sale was not
voidable butrescissible. Under Article 1380 to 1381 (3)
of the Civil Code, a contract otherwisevalid may
nonetheless be subsequently rescinded by reason of
injury to thirdpersons, like creditors. The status of
creditors could be validly accorded theBonnevies for
they had substantial interests that were prejudiced by
the sale of thesubject property to the petitioner
without recognizing their right of first priorityunder the
Contract of Lease.Rescission is a remedy granted by
law to the contracting parties and evento third
persons, to secure reparation for damages caused to
them by a contract,even if this should be valid, by
means of the restoration of things to their conditionat
the moment prior to the celebration of said contract. It
is a relief allowed for theprotection of one of
the contracting parties and even third persons from all
injuryand damage the contract may cause, or to
protect some incompatible and preferentright created
by the contract. Recission implies a contract which,
even if initiallyvalid, produces a lesion or pecuniary
damage to someone that justifies itsinvalidation for
reasons of equity.It is true that the acquisition by a
third person of the property subject of the contract is
an obstacle to the action for its rescission where it is
shown that suchthird person is in lawful possession of
the subject of the contract and that he did notact in
bad faith. However, this rule is not applicable in
the case before us becausethe petitioner is not
considered a third party in relation to the Contract
of Sale normay its possession of the subject property
be regarded as acquired lawfully and ingood faith.
Petitioner was aware f the lease in favor of
the Bonnevies, who wereactually occupying the
subject property at the time it was sold to it. Although
theContract of Lease was not annotated on the
transfer certificate of title in the nameof the late
Jose Reynoso and Africa Reynoso, the petitioner cannot
deny actualknowledge of such lease which was
equivalent to and indeed more binding thanpresumed
notice by registration.A purchaser in good faith and
for value is one who buys the property of
anotherwithout notice that some other person has
a right to or interest in such property andpays a full
and fair price for the same at the time of such
purchase or before he hasnotice of the claim
or interest of some other person in the property. Good
faithconnotes an honest intention to abstain from
taking unconscientious advantage of another. Tested
by these principles, the petitioner cannot tenably claim
to be abuyer in good faith as it had notice of the lease
of the property by the Bonneviesand such knowledge
should have cautioned it to look deeper into the
agreement todetermine if it involved stipulations that
would prejudice its own interests.Petitioners insistence
that it was not aware of the right of first priority
granted bythe Contract of Lease, If Guzman-Bocaling
failed to inquire about the terms of theLease Contract,
which includes Par. 20 on priority right given to the
Bonnevies, ithad only itself to blame. Having known
that the property it was buying was underlease, it
behooved it as a prudent person to have required
Reynoso or the broker toshow to it the Contract of
Lease in which Par. 20 is contained.

SARSOSA VS CUENCO
FACTS:Sought to be reviewed herein is the
judgment dated August 18, 1970, of the Court of
Appeals, renderedin CA-G.R. No. 41318-R, entitled "

Victoriano T. Cuenco, Plaintiff-appellant, vs. Epifania

Sarsosa Vda.de Barsobia and Pacita W. Vallar,
Defendants- appellees
, " declaring Victoriano T. Cuenco (now
therespondent) as the absolute owner of the
coconut land in question.The lot in controversy is
a one-half portion (on the northern side) of two
adjoining parcels of coconut landlocated at Barrio
Mancapagao, Sagay, Camiguin, Misamis Oriental
(now Camiguin province), with anarea of 29,150
square meters, more or less. The entire land was
owned previously by a certain LeocadiaBalisado,
who had sold it to the spouses Patricio Barsobia
(now deceased) and Epifania Sarsosa, one of the
petitioners herein. They are Filipino citizens. On
September 5, 1936, Epifania Sarsosa then a
widow,sold the land in controversy to a Chinese,
Ong King Po, for the sum of P1,050.00 .Ong King Po
took actual possession and enjoyed the fruits
thereof. On August 5, 1961, Ong King Po sold the
litigatedproperty to Victoriano T. Cuenco
(respondent herein), a naturalized Filipino, for the
sum of P5,000.00.Respondent immediately took
actual possession and harvested the fruits
therefrom. On March 6, 1962,Epifania "usurped" the
controverted property, and on July 26, 1962,
Epifania (through her only daughterand child,
Emeteria Barsobia), sold a one-half (1/2) portion of
the land in question to Pacita W. Vallar, theother
petitioner herein .On September 19, 1962,
respondent filed a Forcible Entry case against
Epifaniabefore the Municipal Court of Sagay,
Camiguin. The case was dismissed for lack of
jurisdiction since, asthe laws then stood, the
question of possession could not be properly
determined without first settling thatof ownership.
On December 27, 1966, respondent instituted
before the Court of First Instance of MisamisOriental
a Complaint for recovery of possession and
ownership of the litigated land, against Epifania
andPacita Vallar (hereinafter referred to simply as
petitioners).
Issue: Whether or not Victoriano T. Cuenco ), a
naturalized Filipino is the rightful owner of the land
afterbuying it from Ong King Po, a Chinese.
HELD: The trial Court rendered judgment:1.
Dismissing the complaint with costs against plaintiff
(respondent herein).2. Declaring the two Deeds of
Sale, Exhibits A and B, respectively, inexistent and
void from thebeginning; and3. Declaring defendant
Pacita W. Vallar as the lawful owner and possessor
of the portion of land shebought from Emeteria
Barsobia (pp. 57, 67, Record.)The respondent
appealed and the Court of Appeals reversed the the
aforementioned Decision and decreedinstead that
respondent was the owner of the litigated
property.The judgment appealed from is hereby
reversed. In lieu thereof, The Court
renders judgment:
(a) Declaring the plaintiff-appellant Victoriano
T. Cuenco the absolute owner of the land in
question, withthe right of possession
thereof;(b) Ordering the defendantsappellees to restore the possession of said
land to the plaintiff;(c) Dismissing
the defendants' counterclaim;(d)
Condemning the defendants to pay to the
plaintiff the sum of P10,000.00
representing the latter's sharefrom the sale
of copra which he failed to receive since
March, 1962 when he was deprived of
hispossession over the land, and which

defendants illegally appropriated it to their

own use and benefit, pluslegal interest
from the filing of the complaint until fully
paid; plus P2,000.00 representing expenses
andattorney's fees;(e) Sentencing the
defendants to pay the costs
Sampaguita Pictures, Inc. vs. Jalwindor
Manufacturers, Inc.
FACTS:
Both the plaintiff-appellant Sampaguita Pictures Inc.
(Sampaguita) and defendant-appellee Jalwindor
Manufacturers Inc. (Jalwindor) were domestic
corporations duly organized under the Philippine
laws. Sampaguita leased to Capitol 300 Inc.
(Capitol) the roof deck of its building with the
agreement that all permanent improvements
Capitol will make on said property shall belong to
Sampaguita without any part on the latter to
reimburse Capitol for the expenses of said
improvements. Shortly, Capitol purchased on credit
from Jalwindor glass and wooden jalousies, which
the latter itself delivered and installed in the leased
premises, replacing the existing windows.
On June 1, 1964, Jalwindor filed with the CFI of
Rizal, Quezon City an action for collection of a sum
of money with a petition for preliminary attachment
against Capitol for its failure to pay its purchases.
Later, Jalwindor and Capitol submitted to the trial
court a Compromised Agreement wherein Capitol
acknowledged its indebtedness of P9,531.09,
payable in monthly installments of at least P300.00
a month beginning December 15,1964 and that all
the materials that Capitol purchased will be
considered as security for such undertaking.
Meanwhile, Sampaguita filed a complaint for
ejectment and for collection of a sum of money
against Capitol for the latters failure to pay rentals
from March 1964 to April 1965, and the City Court
of Quezon City ordered Capitol on June 8, 1965 to
vacate the premises and to pay Sampaguita.
On the other hand, Capitol likewise failed to comply
with the terms of the Compromise Agreement, and
on July 31, 1966, the Sheriff of Quezon City made
levy on the glass and wooden jalousies.
Sampaguita filed a third-party claim alleging that it
is the owner of said materials and not Capitol, but
Jalwindor filed an idemnity bond in favor of the
Sheriff and the items were sold at public auction on
August 30, 1966, with Jalwindor as the highest
bidder for P6,000.00. Sampaguita filed with the CFI
of Rizal, Quezon City an action to nullify the
Sheriff's sale and for an injunction to prevent
Jalwindor from detaching the glass and wooden
jalousies. Jalwindor was ordered to maintain the
status quo pending final determination of the case,
and on October 20, 1967, the lower court dismissed
the complaint and ordered Sampaguita to pay
Jalwindor the amount of P500.00 as attorney's
fees.
ISSUE:
Was there a delivery made and, therefore, a
transfer of ownership of the thing sold?
COURT RULING:
The Supreme Court reversed the decision of the
lower court declaring Sampaguita as declared the
lawful owner of the disputed glass and wooden
jalousies, permanently enjoining Jalwindor from
detaching said items from the roof deck of the
Sampaguita Pictures Building, and ordered
Jalwindor to pay Sampaguita the sum of P1,000.00
for and as attorney's fees.

When a property levied upon by the sheriff

pursuant to a writ of execution is claimed by a third
person in a sworn statement of ownership thereof,
as prescribed by the rules, an entirely different
matter calling for a new adjudication arises. The
items in question were illegally levied upon since
they do not belong to the judgment debtor. The
power of the Court in execution of judgment
extends only to properties unquestionably
belonging to the judgment debtor. The fact that
Capitol failed to pay Jalwindor the purchase price of
the items levied upon did not prevent the transfer
of ownership to Capitol and, later, to Sampaguita
by virtue of the agreement in their lease contract.
Therefore, the complaint of Sampaguita to nullify
the Sheriff's sale is well founded, and should
prosper.
GABRIEL VS MABANTA
Facts:
M ab anta spous es we re th e re gi stere d o wn e
r s o f t w o l o t s . T h e y mortgaged the said properties
to DBP as collateral. Later, the spouses sold theland
to Susana Soriano (Deed of sale of parcels of

land with assumption

of m o r t g a g e ) w i t h a r i g h t t o r e p u r c h a s e ; t h
ey failed to buy
it b ac k. Su s an aexe cu t ed a do cu men t en ti t l
ed "Ca nc el la tio n of Con tr ac t" whe re b y she t
ransferred to Alejandro all her rights over the two lots.
Alejandro and his sonAlfredo cultivated the lots.
However, when they were ready to pay the
entireloan, they found that Tans daughter already
bought the land.
Issue:
WON the Tan-Reyes is in good faith when she bought
and registered theland.
Ruling:
No. Good faith is something internal;
hence, we must rely on theconduct and out
w a r d a c t s o f Ta n - R e y e s . G o o d f a i t h m u s t
c o n c u r w i t h registration
Herrera v. Luy Kim Guan, 1 SCRA 406
-Date of death of the principal has not been
s a t i s f a c t o r i l y p r o v e n , therefore, documents are
presumed to have been executed during thelifetime of the
principal- A l s o , t h e r e w a s n o p r o o f t h a t a g e n t w a s
a w a r e o f d e a t h o f t h e principal; death of the principal
does not render th act of an agentunenforceable, where the
agent had no knowledge of suchextinguishment of the agency