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Civil Law Q&As (2007-2013) hectorchristopher@yahoo.com dbaratbateladot@gmail.

com

Sales advanced for her employees (biyaheros).


She required them to surrender TCT of
Condominium Act; Partition of a their properties and to execute the
Condominium (2009) corresponding Deeds of Sale in her favor.
Domeng Bandong was not required to post
No.XVIII. The Ifugao Arms is a
any security but when Eulalia discovered
condominium project in Baguio City. A
that he incurred shortage in cattle
strong earthquake occurred which left huge
procurement operation, he was required to
cracks in the outer walls of the building. As
execute a Deed of Sale over a parcel of land
a result, a number of condominium units
in favor of Eulalia. She sold the property to
were rendered unfit for use. May Edwin,
her grandneice Jocelyn who thereafter
owner of one of the condominium units
instituted an action for ejectment against
affected, legally sue for partition by sale of
the Spouses Bandong.
the whole project? Explain. (4%)

To assert their right, Spouses Bandong filed


SUGGESTED ANSWER:
an action for annulment of sale against
Yes, Edwin may legally sue for partition
Eulalia and Jocelyn alleging that there was
by sale of the whole condominium
no sale intended but only equitable
project under the following conditions:
mortgage for the purpose of securing the
(a) the damage or destruction caused by
shortage incurred by Domeng in the
the earthquake has rendered one-half
amount of P 70, 000.00 while employed as
(1/2) or more of the units therein
"biyahero" by Eulalia. Was the Deed of Sale
untenantable, and (b) that the
between Domeng and Eulalia a contract of
condominium owners holding an
sale or an equitable mortgage? Explain.
aggregate of more than thirty percent
(5%)
(30%) interests of the common areas are
opposed to the restoration of the SUGGESTED ANSWER:
condominium project (Sec 8 [b], Republic
Act No. 472 “Condominium Act”). The contract between Domeng Bandong
and Eulalia was an equitable mortgage
rather than a contract of sale. The
Mortgage; Equitable Mortgage (2012) purported deed of sale was actually
intended to merely secure the payment
No.VI. (b) Eulalia was engaged in the of the shortage incurred by Domeng in
business of buying and selling large cattle. the conduct of the cattle-buying
In order to secure the financial capital, she operations. Under Art 1602, Civil Code,

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the contract shall be presumed to be an offering P800,000 in ready cash for the
equitable mortgage when it may be fairly land. When Roberto confirmed that he
inferred that the real intention of the could pay in cash as soon as Sergio could
parties is simply to secure the payment get the documentation ready, Sergio
of a debt or the performance of any decided to withdraw his offer to Marcelo,
other obligation. The present transaction hoping to just explain matters to his friend.
was clearly intended to just secure the Marcelo, however, objected when the
shortage incurred by Eulalia because withdrawal was communicated to him,
Bandung remained in possession of the taking the position that they have a firm
property inspite of the execution of the and binding agreement that Sergio cannot
sale. simply walk away from because he has an
option to buy that is duly supported by a
duly accepted valuable consideration.

Option Contract; Liquor & “Pulutan” as


(A) Does Marcelo have a cause of action
Consideration (2013)
against Sergio? (5%)

No.III.Sergio is the registered owner of a


SUGGESTED ANSWER:
500-square meter land. His friend, Marcelo,
who has long been interested in the Yes. Marcelo has a cause of action
property, succeeded in persuading Sergio to against Sergio.
sell it to him. On June 2, 2012, they agreed
on the purchase price of P600,000 and that Under Art. 1324, when the offerer has
Sergio would give Marcelo up to June30, allowed the offeree a certain period to
2012 within which to raise the amount. accept, the offer may be withdrawn at
Marcelo, in a light tone usual between any time before acceptance by
them, said that they should seal their communicating such withdrawal, except
agreement through a case of Jack Daniels when the option is founded upon
Black and P5,000 "pulutan" money which consideration, as something paid or
he immediately handed to Sergio and which promised.
the latter accepted. The friends then sat
down and drank the first bottle from the An accepted unilateral promise to buy or

case of bourbon. sell a determinate thing for a price


certain is binding upon him if the
On June 15, 2013, Sergio learned of promise is supported by a consideration
another buyer, Roberto, who was distinct from the price (Art. 1479).

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Consideration in an option contract may The Statute of Frauds covers an


be anything of value,, unlike in sale agreement for the sale of real property
where it must be the price certain in or of an interest therein. Such
money or its equivalent (San Miguel agreement is unenforceable by action,
Properties Inc. v. Spouses Huang, G.R. unless the same, or some note or
No. 137290, July 31, 2000). memorandum, thereof, be in writing,
(Art. 1403 (e), Civil Code). Here, Marcelo
Here, the case of Jack Daniels Black and and Sergio merely entered into an
the P5,000.00 “pulutan” money was a Option Contract, which refers to a
consideration to “seal their agreement,” unilateral promise to buy or sell, which
an agreement that Marcelo is given until need not be in writing to be enforceable
June 30, 2012 to buy the parcel of land. (Sanchez v. Rigos, G.R. No. L-25494,
There is also no showing that such June 14, 1972, citing Atkins, Kroll and
consideration will be considered part of Co. Inc. v. Cua Hian Tek and
the purchase price. Thus, Sergio’s Southwestern Sugar & Molasses Co. v.
unilateral withdrawal of the offer Atlantic Gulf & Pacific Co.).
violated the Option Contract between
him and Marcelo. ALTERNATIVE ANSWER:

(B) Can Sergio claim that whatever they No. Sergio’s claim has no legal basis.
might have agreed upon cannot be enforced
because any agreement relating to the sale The contract of sale has already been

of real property must be supported by partially executed which takes it outside

evidence in writing and they never reduced the ambit of the Statute of Frauds is

their agreement to writing? (3%) applicable only to executory contracts,


not to contracts that are totally or
SUGGESTED ANSWER: partially performed (Carbonnel v. Poncio,
G.R. No. L-11231, May 12, 1958).
No. Sergio’s claim has no legal basis.

The contract at issue in the present case


is the option contract, not the contract Right of First Refusal; Lessee; Effect
of sale for the real property. Therefore, (2008)
Art. 1403 does not apply.
No.XVI. Dux leased his house to Iris for a
period of 2 years, at the rate of P25,000.00

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monthly, payable annually in advance. The refusal. This makes the mother a buyer
contract stipulated that it may be renewed in bad faith, hence giving more ground
for another 2-year period upon mutual for rescission of the sale to her
agreement of the parties. The contract also (Equatorial Realty, et al. v. Mayfair
granted Iris the right of first refusal to Theater, G.R. No. 106063, 21 Nov. 1996).
purchase the property at any time during
the lease, if Dux decides to sell the property ALTERNATIVE ANSWER:

at the same price that the property is


No, Iris cannot seek rescission of the
offered for sale to a third party. Twenty-
sale of the property to Dux’s mother
three months after execution of the lease
because the sale is not one of those
contract, Dux sold breach of her right of
rescissible contracts under Art. 1381 of
first refusal. Dux said there was no breach
the Civil Code.
because the property was sold to his
mother who is not a third party. Iris filed an
(B). Will the alternative prayer for extension
action to rescind the sale and to compel
of the lease prosper? (2%)
Dux to sell the property to her at the same
price. Alternatively, she asked the court to SUGGESTED ANSWER:
extend the lease for another 2 years on the
same terms. No. The contract stipulated that it may
be renewed for another 2-year period
(A). Can Iris seek rescission of the sale of upon mutual agreement of the parties.
the property to Dux's mother? (3%) Contracts are binding between the
parties; validity or compliance cannot be
SUGGESTED ANSWER:
left to the will of one of the parties (Art.
1308, Civil Code).
Yes, because the right of first refusal is
included in the contract signed by the
ALTERNATIVE ANSWER:
parties. Only if the lessee failed to
exercise the right of first refusal could It depends. The alternative prayer for
the lessor lawfully sell the subject the extension of the lease may prosper if
property to others, under no less than (a) there is a stipulation in the contract
the same terms and conditions of sale; (b) Dux's mother is aware of the
previously offered to the lessee. Granting existing contract of lease; or (c) the lease
that the mother is not a third party, this is recorded in the Registry of Property
would make her privy to the agreement (Art. 1676, Civil Code).
of Dux and Iris, aware of the right of first

“Never Let The Odds Keep You From Pursuing What You Know In Your Heart You Were Meant To Do.”-Leroy Satchel Paige
Page 102 of 180
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
Trust; Implied Resulting Trust (1995) (Art. 1624; 1475. CC; Rodriguez v. CA, et al, G. R No. 84220,
In 1960, Maureen purchased two lots in a plush subdivision March 25. 1992 207 SCRA 553).
ALTERNATIVE ANSWER:
registering Lot 1 in her name and Lot 2 in the name of her
brother Walter with the latter's consent. The idea was to No, the defense of Peter Co will not prosper. Hadji
circumvent a subdivision policy against the acquisition of Butu validly acquired his right by an assignment of credit
more than one lot by one buyer. Maureen constructed a under Article 1624 of the Civil Code. However, the
house on Lot 1 with an extension on Lot 2 to serve as a provisions on the contract of sale (Article 1475 Civil Code)
guest house. In 1987, Walter who had suffered serious will apply, and the transaction is covered by the Statute
business losses demanded that Maureen remove the of Frauds. (Art. 1403 par. (2) Civil Code)
extension house since the lot on which the extension was
built was his property. In 1992, Maureen sued for the Conditional Sale vs. Absolute Sale (1997)
reconveyance to her of Lot 2 asserting that a resulting trust was Distinguish between a conditional sale, on the one
created when she had the lot registered in Walter's name hand, and an absolute sale, on the other hand.
even if she paid the purchase price. Walter opposed the suit SUGGESTED ANSWER:
arguing that assuming the existence of a resulting trust the A CONDITIONAL SALE is one where the vendor is
action of Maureen has already prescribed since ten years have granted the right to unilaterally rescind the contract
already elapsed from the registration of the title in his name. predicated on the fulfillment or non-fulfillment, as the case
Decide. Discuss fully. may be, of the prescribed condition. An ABSOLUTE
SUGGESTED ANSWER: SALE is one where the title to the property is not reserved to
This is a case of an implied resulting trust. If Walter claims to the vendor or if the vendor is not granted the right to
have acquired ownership of the land by prescription or if he rescind the contract based on the fulfillment or non-
anchors his defense on extinctive prescription, the ten year fulfillment, as the case may be, of the prescribed condition.
period must be reckoned from 1987 when he
demanded that Maureen remove the extension house on Contract of Sale vs. Agency to Sell (1999)
Lot No. 2 because such demand amounts to an express A granted B the exclusive right to sell his brand of Maong
repudiation of the trust and it was made known to Maureen. pants in Isabela, the price for his merchandise payable
The action for reconveyance filed in 1992 is not yet barred by within 60 days from delivery, and promising B a
prescription. (Spouses Huang v. Court of Appeals, Sept. commission of 20% on all sales. After the delivery of
13, 1994). the merchandise to B but before he could sell any of them,
B’s store in Isabela was completely burned without his
fault, together with all of A's pants. Must B pay A for
SALES his lost pants? Why? (5%)
SUGGESTED ANSWER:
Assignment of Credit vs. Subrogation (1993) The contract between A and B is a sale not an agency to sell
Peter Co, a trader from Manila, has dealt business with
because the price is payable by B upon 60 days from
Allied Commodities in Hongkong for five years. All delivery even if B is unable to resell it. If B were an agent,
through the years, Peter Co accumulated an indebtedness of he is not bound to pay the price if he is unable to resell it.
P500,000.00 with Allied Commodities. Upon demand by its
As a buyer, ownership passed to B upon delivery and, under
agent in Manila, Peter Co paid Allied Commodities by check
the amount owed. Upon deposit in the payee's account in Art. 1504 of the Civil Code, the thing perishes for the
Manila, the check was dishonored for insufficiency of funds. owner. Hence, B must still pay the price.
For and in consideration of P1.00, Allied Commodities
assigned the credit to Hadji Butu who brought suit against Peter Contract of Sale; Marital Community Property;
Co in the RTC of Manila for recovery of the amount owed. Formalities (2006)
Peter Co moved to dismiss the complaint against him on the Spouses Biong and Linda wanted to sell their house. They
ground that Hadji Butu was not a real party in interest found a prospective buyer, Ray. Linda negotiated with Ray for
and, therefore, without legal capacity to sue and that he had not the sale of the property. They agreed on a fair price of P2
agreed to a subrogation of creditor. Million. Ray sent Linda a letter confirming his intention to
Will Peter Co's defense of absence of agreement to a buy the property. Later, another couple, Bernie and Elena,
subrogation of creditor prosper? offered a similar house at a lower price of P 1.5 Million.
SUGGESTED ANSWER: But Ray insisted on buying the house of Biong and Linda for
No, Co's defense will not prosper. This is not a case of sentimental reasons. Ray prepared a deed of sale to be signed
subrogation, but an assignment of credit. ASSIGNMENT by the couple and a manager's check for P2 Million.
OF CREDIT is the process of transferring the right of the After receiving the P2 Million, Biong signed the deed of
assignor to the assignee. The assignment may be done either sale. However, Linda was not able to sign it because she was
gratuitously or onerously, in which case, the assignment has an abroad. On her return, she refused to sign the document
effect similar to that of a sale (Nyco Sales Corp.v.BA saying she changed her mind. Linda filed suit for nullification
Finance Corp. G.R No.71694. Aug.16, 1991 200 SCRA 637). As a of the deed of sale and for moral and exemplary
result of the assignment, the plaintiff acquired all the rights damages against Ray.
of the assignor including the right to sue in his own name as Will the suit prosper? Explain. (2.5%)
the legal assignee. In assignment, the debtor's consent is ALTERNATIVE ANSWER:
not essential for the validity of the assignment
Page 91 of 119
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
No, the suit will not prosper. The contract of sale was In a CONTRACT OF SALE, ownership is transferred to
perfected when Linda and Ray agreed on the object of the the buyer upon delivery of the object to him while in a
sale and the price [Art. 1475, New Civil Code]. The consent CONTRACT TO SELL, ownership is retained by the seller
of Linda has already been given, as shown by her agreement until the purchase price is fully paid. In a contract to sell,
to the price of the sale. There is therefore consent on her delivery of the object does not confer ownership upon the
part as the consent need not be given in any specific form. buyer. In a contract of sale, there is only one contract
Hence, her consent may be given by implication, especially executed between the seller and the buyer, while in a
since she was aware of, and participated in the sale of the contract to sell, there are two contracts, first the contract to
property (Pelayo v. CA, G.R. No. 141323, June 8, 2005). Her sell (which is a conditional or preparatory sale) and a
action for moral and exemplary damages will also not second, the final deed of sale or the principal contract which
prosper because the case does not fall under any of those is executed after full payment of the purchase price.
mentioned in Art. 2219 and 2232 of the Civil Code.
ALTERNATIVE ANSWER: Contract to Sell; Acceptance; Right of First Refusal (1991)
The suit will prosper. Sale of community property requires A is the lessee of an apartment owned by Y. A allowed his
written consent of both spouses. The failure or refusal of married but employed daughter B, whose husband works in
Linda to affix her signature on the deed of sale, coupled Kuwait, to occupy it. The relationship between Y and A
with her express declaration of opposing the sale negates soured. Since he has no reason at all to eject A, Y, in
any valid consent on her part. The consent of Biong by connivance with the City Engineer, secured from the latter
himself is insufficient to effect a valid sale of community an order for the demolition of the building. A immediately
property (Art. 96, Family Code; Abalos v. Macatangay, G.R. filed an action in the Regional Trial Court to annul the order
No. 155043, September 30, 2004). and to enjoin its enforcement. Y and A were able to forge a
compromise agreement under which A agreed to a twenty
Does Ray have any cause of action against Biong and percent (20%) increase in the monthly rentals. They further
Linda? Can he also recover damages from the spouses? agreed that the lease will expire two (2) years later and that
Explain. (2.5%) in the event that Y would sell the property, either A or his
Considering that the contract has already been perfected daughter B shall have the right of first refusal. The
and taken out of the operation of the statute of frauds, Ray Compromise Agreement was approved by the court. Six (6)
can compel Linda and Biong to observe the form required months before the expiration of the lease, A died. Y sold
by law in order for the property to be registered in the name the property to the Visorro Realty Corp. without notifying
of Ray which can be filed together with the action for the B. B then filed an action to rescind the sale in favor of the
recovery of house [Art. 1357 New Civil Code]. In the corporation and to compel Y to sell the property to her
alternative, he can recover the amount of Two million pesos since under the Compromise Agreement, she was given the
(P2,000,000.00) that he paid. Otherwise, it would result in right of first refusal which, she maintains is a stipulation
solutio indebiti or unjust enrichment. pour atrui under Article 1311 of the Civil Code. Is she
correct?
Ray can recover moral damages on the ground that the SUGGESTED ANSWER:
action filed by Linda is clearly an unfounded civil suit which B is not correct. Her action cannot prosper. Article 1311
falls under malicious prosecution {Ponce v. Legaspi, G.R. requires that the third person intended to be benefited must
No. 79184, May 6,1992). communicate his acceptance to the obligor before the
revocation. There is no showing that B manifested her
Contract to Sell (2001) acceptance to Y at any time before the death of A and
Arturo gave Richard a receipt which states: before the sale. Hence, B cannot enforce any right under
Receipt
the alleged stipulation pour atrui.
Received from Richard as down payment for my 1995
Toyota Corolla with plate No. XYZ-1 23.............. Double Sales (2001)
P50.000.00 On June 15, 1995, Jesus sold a parcel of registered land to
Jaime. On June 30, 1995, he sold the same land to Jose.
Balance payable: 12/30/01........ P50 000.00 Who has a better right if:
a) the first sale is registered ahead of the second sale,
September 15, 2001. with knowledge of the latter. Why? (3%)
b) the second sale is registered ahead of the first sale,
(Sgd.) Arturo with knowledge of the latter? Why? (5%)
Does this receipt evidence a contract to sell? Why? (5%) SUGGESTED ANSWER:
SUGGESTED ANSWER: (a) The first buyer has the better right if his sale was first
It is a contract of sale because the seller did not reserve to be registered, even though the first buyer knew of the
ownership until he was fully paid. second sale. The fact that he knew of the second sale at the
time of his registration does not make him as acting in bad
Contract to Sell vs. Contract of Sale (1997) faith because the sale to him was ahead in time, hence, has a
State the basic difference (only in their legal effects) - priority in right. What creates bad faith in the case of double
Between a contract to sell, on the one hand, and a contract
sale of land is knowledge of a previous sale.
of sale, on the other.
SUGGESTED ANSWER:
Page 92 of 119
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
b) The first buyer is still to be preferred, where the second (2) years, or until 3 June 1973. It is further stated therein
sale is registered ahead of the first sale but with knowledge that should the Vendor (Juliet) fail to exercise her right to
of the latter. This is because the second buyer, who at the redeem within the said period, the conveyance shall be
time he registered his sale knew that the property had deemed absolute and irrevocable. Romeo did not take
already been sold to someone else, acted in bad faith. possession of the property. He did not pay the taxes
(Article 1544, C.C.) thereon.

Double Sales (2004) Juliet died in January I973 without having repurchased the
JV, owner of a parcel of land, sold it to PP. But the deed of property. Her only surviving heir, her son X, failed to
sale was not registered. One year later, JV sold the parcel repurchase the property on or before 3 June 1973. In 1975,
again to RR, who succeeded to register the deed and to Romeo sold the property to Y for P50,000.00. Upon
obtain a transfer certificate of title over the property in his learning of the sale, X filed an action for the nullification of
own name. the sale and for the recovery of the property on the ground
Who has a better right over the parcel of land, RR or PP? that the so-called deed of absolute sale executed by his
Why? Explain the legal basis for your answer. (5%) mother was merely an equitable mortgage, taking into
SUGGESTED ANSWER: account the inadequacy of the price and the failure of
It depends on whether or not RR is an innocent purchaser Romeo to take possession of the property and to pay the
for value. taxes thereon. Romeo and Y maintain that there was a valid
Under the Torrens System, a deed or instrument operated absolute sale and that the document signed by the former
only as a contract between the parties and as evidence of on 3 June 1973 was merely a promise to sell.
authority to the Register of Deeds to make the registration. a) If you were the Judge, would you uphold the theory of
It is the registration of the deed or the instrument that is the X?
operative act that conveys or affects the land. (Sec. 51, P.D. b) If you decide in favor of Romeo and Y, would you
No. 1529). uphold the validity of the promise to sell?
SUGGESTED ANSWER:
In cases of double sale of titled land, it is a well-settled rule A. I will not uphold the theory of X for the nullification of
that the buyer who first registers the sale in good faith the sale and for the recovery of the property on the ground
acquires a better right to the land. (Art. 1544, Civil Code). that the so-called sale was only an equitable mortgage. An
equitable mortgage may arise only if, in truth, the sale was
Persons dealing with property covered by Torrens title are one with the right of repurchase. The facts of the case state
not required to go beyond what appears on its face. that the right to repurchase was granted after the absolute
(Orquiola v. CA 386, SCRA 301, [2002]; Domingo v. Races 401 deed of sale was executed. Following the rule in Cruzo vs.
SCRA 197, [2003]). Thus, absent any showing that RR knew Carriaga (174 SCRA 330), a deed of repurchase executed
about, or ought to have known the prior sale of the land to independently of the deed of sale where the two stipulations
PP or that he acted in bad faith, and being first to register are found in two instruments instead of one document, the
the sale, RR acquired a good and a clean title to the property right of repurchase would amount only to one option
as against PP. granted by the buyer to the seller. Since the contract
cannot be upheld as a contract of sale with the right to
Equitable Mortgage (1991) repurchase, Art. 1602 of the Civil Code on equitable
On 20 December 1970, Juliet, a widow, borrowed from mortgage will not apply. The rule could have been different
Romeo P4,000.00 and, as security therefore, she executed a if both deeds were executed on the same occasion or date,
deed of mortgage over one of her two (2) registered lots in which case, under the ruling in spouses Claravall v. CA
which has a market value of P15,000.00. The document and (190 SCRA 439), the contract may still be sustained as an
the certificate of title of the property were delivered to equitable mortgage, given the circumstances expressed in
Romeo. Art. 1602. The reserved right to repurchase is then deemed
an original intention.
On 2 June 1971, Juliet obtained an additional sum of P3,000
from Romeo. On this date, however, Romeo caused the B. If I were to decide in favor of Romeo and Y, I would
preparation of a deed of absolute sale of the above not uphold the validity of the promise to sell, so as to
property, to which Juliet affixed her signature without first enforce it by an action for specific performance. The
reading the document. The consideration indicated is promise to sell would only amount to a mere offer and,
P7,000.00. She thought that this document was similar to therefore, it is not enforceable unless it was sought to be
the first she signed. When she reached home, her son X, exercised before a withdrawal or denial thereof.
after reading the duplicate copy of the deed, informed her
that what she signed was not a mortgage but a deed of Even assuming the facts given at the end of the case, there
absolute sale. On the following day, 3 June 1971, Juliet, would have been no separate consideration for such
accompanied by X, went back to Romeo and demanded the promise to sell. The contract would at most amount to an
reformation it, Romeo prepared and signed a document option which again may not be the basis for an action for
wherein, as vendee in the deed of sale above mentioned, he specific performance.
obligated and bound himself to resell the land to Juliet or Equitable Mortgage vs. Sale (2005)
her heirs and successors for the same consideration as On July 14, 2004, Pedro executed in favor of Juan a Deed
reflected in the deed of sale (P7,000) within a period of two of Absolute Sale over a parcel of land covered by TCT No.

Page 93 of 119
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
6245. It appears in the Deed of Sale that Pedro received X sold a parcel of land to Y on 01 January 2002, payment
from Juan P120,000.00 as purchase price. However, Pedro and delivery to be made on 01 February 2002. It was
retained the owner's duplicate of said title. Thereafter, Juan, stipulated that if payment were not to be made by Y on 01
as lessor, and Pedro, as lessee, executed a contract of lease February 2002, the sale between the parties would
over the property for a period of one (1) year with a automatically be rescinded. Y failed to pay on 01 February
monthly rental of Pl,000.00. Pedro, as lessee, was also 2002, but offered to pay three days later, which payment X
obligated to pay the realty taxes on the property during the refused to accept, claiming that their contract of sale had
period of lease. already been rescinded. Is X’s contention correct? Why? 5%
SUGGESTED ANSWER:
Subsequently, Pedro filed a complaint against Juan for the No, X is not correct. In the sale of immovable property,
reformation of the Deed of Absolute Sale, alleging that the even though it may have been stipulated, as in this case, that
transaction covered by the deed was an equitable mortgage. upon failure to pay the price at the time agreed upon the
In his verified answer to the complaint, Juan alleged that the rescission of the contract shall of right take place, the
property was sold to him under the Deed of Absolute Sale, vendee may pay, even after the expiration of the period, as
and interposed counterclaims to recover possession of the long as no demand for rescission of the contract has been
property and to compel Pedro to turn over to him the made upon him either judicially or by a notarial act (Article
owner's duplicate of title. 1592, New Civil code). Since no demand for rescission was
Resolve the case with reasons. (6%) made on Y, either judicially or by a notarial act, X cannot
SUGGESTED ANSWER: refuse to accept the payment offered by Y three (3) days
The complaint of Pedro against Juan should be dismissed. after the expiration of the period.
The instances when a contract — regardless of its ANOTHER SUGGESTED ANSWER:
nomenclature — may be presumed to be an equitable This is a contract to sell and not a contract of absolute sale,
mortgage are enumerated in Article 1602 of the Civil Code: since as there has been no delivery of the land. Article 1592
"Art. 1602. The contract shall be presumed to be an of the New Civil code is not applicable. Instead, Article
equitable mortgage, in any of the following cases: 1595 of the New Civil Code applies. The seller has two
1. When the price of a sale with right to repurchase is alternative remedies: (1) specific performance, or (2)
unusually inadequate: rescission or resolution under Article 1191 of the New Civil
2. When the vendor remains in possession as lessee or code. In both remedies, damages are due because of default.
otherwise; ALTERNATIVE ANSWER:
3. When upon or after the expiration of the right to Yes, the contract was automatically rescinded upon Y’s
repurchase another instrument extending the period of failure to pay on 01 February 2002. By the express terms of
redemption or granting a new period is executed; the contract, there is no need for X to make a demand in
4. When the purchaser retains for himself a part of the order for rescission to take place. (Article 1191, New Civil
Code, Suria v. IAC 151 SCRA 661 [1987]; U.P. v. de los
purchase price;
Angeles 35 SCRA 102 [1970]).
5. When the vendor binds himself to pay the taxes on the
thing sold;
Maceda Law (2000)
6. In any other case where it may be fairly inferred that
Priscilla purchased a condominium unit in Makati City from
the real intention of the parties is that the transaction
the Citiland Corporation for a price of P10 Million, payable
shall secure the payment of a debt or the performance
P3 Million down and the balance with interest thereon at
of any other obligation. 14% per annum payable in sixty (60) equal monthly
installments of P198,333.33. They executed a Deed of
"In any of the foregoing cases, any money, fruits, or other
Conditional Sale in which it is stipulated that should the
benefit to be received by the vendee as rent or otherwise
vendee fail to pay three (3) successive installments, the sale
shall be considered as interest which shall be subject to the
shall be deemed automatically rescinded without the
usury laws." necessity of judicial action and all payments made by the
vendee shall be forfeited in favor of the vendor by way of
Article 1604 states that "the provisions of article 1602 shall
rental for the use and occupancy of the unit and as
also apply to a contract purporting to be an absolute sale." liquidated damages. For 46 months, Priscilla paid the
monthly installments religiously, but on the 47th and 48th
For Articles 1602 and 1604 to apply, two requisites must
months, she failed to pay. On the 49th month, she tried to
concur: 1) the parties entered into a contract denominated
pay the installments due but the vendor refused to receive
as a contract of sale; and 2) their intention was to secure an
the payments tendered by her. The following month, the
existing debt by way of mortgage. (Heirs of Balite v. Lim,
vendor sent her a notice that it was rescinding the Deed of
G.R. No. 152168, December 10, 2004)
Conditional Sale pursuant to the stipulation for automatic
In the given case, although Pedro retained possession of the rescission, and demanded that she vacate the premises. She
replied that the contract cannot be rescinded without
property as lessee after the execution of the Deed of Sale,
judicial demand or notarial act pursuant to Article 1592 of
there is no showing that the intention of the parties was to
the Civil Code.
secure an existing debt by way of mortgage. Hence, the
a) Is Article 1592 applicable? (3%)
complaint of Pedro should be dismissed.
b) Can the vendor rescind the contract? (2%)
Immovable Property; Rescission of Contract (2003) SUGGESTED ANSWER:

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CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
a) Article 1592 of the Civil Code does not apply to a
conditional sale. In Valarao v. CA, 304 SCRA 155, the Option Contract (2002)
Supreme Court held that Article 1592 applies only to a Explain the nature of an option contract. (2%)
contract of sale and not to a Deed of Conditional Sale SUGGESTED ANSWER:
where the seller has reserved title to the property until full An OPTION CONTRACT is one granting a privilege to
payment of the purchase price. The law applicable is the buy or sell within an agreed time and at a determined price.
Maceda Law. It must be supported by a consideration distinct from the
SUGGESTED ANSWER: price. (Art. 1479 and 1482, NCC)
b) No, the vendor cannot rescind the contract under the
circumstances. Under the Maceda Law, which is the law Option Contract; Earnest Money (1993)
applicable, the seller on installment may not rescind the LT applied with BPI to purchase a house and lot in Quezon
contract till after the lapse of the mandatory grace period of City, one of its acquired assets. The amount offered was
30 days for every one year of installment payments, and Pl,000,000.00 payable, as follows: P200,000.00 down
only after 30 days from notice of cancellation or demand for payment, the balance of P800,000.00 payable within 90 days
rescission by a notarial act. In this case, the refusal of the from June 1, 1985. BPI accepted the offer, whereupon LT
seller to accept payment from the buyer on the 49th month drew a check for P200,000.00 in favor of BPI which the
was not justified because the buyer was entitled to 60 days latter thereafter deposited in its account. On September 5,
grace period and the payment was tendered within that 1985, LT wrote BPI requesting extension until October 10,
period. Moreover, the notice of rescission served by the 1985 within which to pay the balance, to which BPI agreed.
seller on the buyer was not effective because the notice was On October 5, 1985, due to the expected delay in the
not by a notarial act. Besides, the seller may still pay within remittance of the needed amount by his financier from the
30 days from such notarial notice before rescission may be United States, LT wrote BPI requesting a last extension
effected. All these requirements for a valid rescission were until October 30, 1985, within which to pay the balance.
not complied with by the seller. Hence, the rescission is BPI denied LTs request because another had offered to buy
invalid. the same property for P1,500,000.00. BPI cancelled its
agreement with LT and offered to return to him the amount
Maceda Law; Recto Law (1999) of P200,000.00 that LT had paid to it. On October 20,
What are the so-called "Maceda" and "Recto" laws in 1985, upon receipt of the amount of P800,000.00 from his
connection with sales on installments? Give the most US financier, LT offered to pay the amount by tendering a
important features of each law. (5%) cashier's check therefor but which BPI refused to accept.
SUGGESTED ANSWER: LT then filed a complaint against BPI in the RTC for
The MACEDA LAW (R.A. 655) is applicable to sales of specific performance and deposited in court the amount of
immovable property on installments. The most important P800,000.00. Is BPI legally correct in canceling its contract
features are (Rillo v. CA, 247 SCRA 461): with LT?
(1) After having paid installments for at least two years, the SUGGESTED ANSWER:
buyer is entitled to a mandatory grace period of one month BPI is not correct in canceling the contract with LT. In Lina
for every year of installment payments made, to pay the Topacio v Court of Appeals and BPI Investment (G. R No.
unpaid installments without interest. 102606, July 3. 1993, 211 SCRA 291) the Supreme Court held
that the earnest money is part of the purchase price and is
If the contract is cancelled, the seller shall refund to the proof of the perfection of the contract. Secondly, notarial or
buyer the cash surrender value equivalent to fifty percent judicial rescission under Art. 1592 and 1991 of the Civil
(50%) of the total payments made, and after five years of Code is necessary (Taguba v. de Leon, 132 SCRA 722.)
installments, an additional five percent (5%) every year but ALTERNATIVE ANSWER:
not to exceed ninety percent (90%) of the total payments BPI is correct in canceling its contract with LT but BPI
must do so by way of judicial rescission under Article 1191
made.
Civil Code. The law requires a judicial action, and mere
(2) In case the installments paid were less than 2 years, the notice of rescission is insufficient if it is resisted. The law
seller shall give the buyer a grace period of not less than 60 also provides that slight breach is not a ground for
days. If the buyer fails to pay the installments due at the rescission (Song Fo & Co, vs, Hawaiian Phil Co., 47 Phils.
expiration of the grace period, the seller may cancel the 821), Delay in the fulfillment of the obligation (Art. 1169,
contract after 30 days from receipt by the buyer of the Civil Code) is a ground to rescind, only if time is of the
notice of cancellation or demand for rescission by notarial essence. Otherwise, the court may refuse the rescission if
act. there is a just cause for the fixing of a period.
The RECTO LAW (Art. 1484} refers to sale of movables
payable in installments and limiting the right of seller, in Perfected Sale; Acceptance of Earnest Money (2002)
case of default by the buyer, to one of three remedies: Bert offers to buy Simeon’s property under the following
a) exact fulfillment; terms and conditions: P1 million purchase price, 10%
b) cancel the sale if two or more installments have not option money, the balance payable in cash upon the
been paid; clearance of the property of all illegal occupants. The option
c) foreclose the chattel mortgage on the things sold, also money is promptly paid and Simeon clears the property of
in case of default of two or more installments, with no illegal occupants in no time at all. However, when Bert
further action against the purchaser. tenders payment of the balance and ask Simeon for the deed

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CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
for absolute sale, Simeon suddenly has a change of heart, May Adela still exercise her right of redemption? Explain.
claiming that the deal is disadvantageous to him as he has (5%)
found out that the property can fetch three time the agreed SUGGESTED ANSWER:
purchase price. Bert seeks specific performance but Simeon Yes, Adela may still exercise her right of redemption
contends that he has merely given Bert an option to buy notwithstanding the lapse of more than 30 days from notice
and nothing more, and offers to return the option money of the sale given to her because Article 1623 of the New
which Bert refuses to accept. Civil Code requires that the notice in writing of the sale
B. Will Bert’s action for specific performance must come from the prospective vendor or vendor as the
prosper? Explain. (4%) case may be. In this case, the notice of the sale was given by
C. May Simeon justify his refusal to proceed with the the vendee and the Register of Deeds. The period of 30
sale by the fact that the deal is financially disadvantageous to days never tolled. She can still avail of that right.
him? Explain. (4%) ALTERNATIVE ANSWER:
SUGGESTED ANSWER: Adela can no longer exercise her right of redemption. As
B. Bert’s action for specific performance will prosper co-owner, she had only 30 days from the time she received
because there was a binding agreement of sale, not just an written notice of the sale which in this case took the form
option contract. The sale was perfected upon acceptance by of a copy of the deed of sale being given to her (Conejero v.
Simeon of 10% of the agreed price. This amount is in really CA, 16 SCRA 775 [1966]). The law does not prescribe any
earnest money which, under Art. 1482, “shall be considered particular form of written notice, nor any distinctive method
as part of the price and as proof of the perfection of the for notifying the redemptioner (Etcuban v. CA, 148 SCRA
contract.” (Topacio v. CA, 211 SCRA 291 [1992]; Villongco 507 [1987]). So long as the redemptioner was informed in
Realty v. Bormaheco, 65 SCRA 352 [1975]). writing, he has no cause to complain (Distrito v. CA, 197
SCRA 606, 609 [1991]). In fact, in Distrito, a written notice
C. Simeon cannot justify his refusal to proceed with was held unnecessary where the co-owner had actual
the sale by the fact that the deal is financially knowledge of the sale, having acted as middleman and being
disadvantageous to him. Having made a bad bargain is not a present when the vendor signed the deed of sale.
legal ground for pulling out a biding contract of sale, in the
absence of some actionable wrong by the other party (Vales Right of First Refusal; Lessee; Effect (1996)
v. Villa, 35 Phil 769 [1916]), and no such wrong has been Ubaldo is the owner of a building which has been leased by
committed by Bert. Remigio for the past 20 years. Ubaldo has repeatedly
assured Remigio that if he should decide to sell the building,
Redemption; Legal; Formalities (2001) he will give Remigio the right of first refusal. On June 30,
Betty and Lydia were co-owners of a parcel of land. Last 1994, Ubaldo informed Remigio that he was willing to sell
January 31, 2001, when she paid her real estate tax, Betty the building for P5 Million. The following day, Remigio sent
discovered that Lydia had sold her share to Emma on a letter to Ubaldo offering to buy the building at P4.5
November 10, 2000. The following day, Betty offered to Million. Ubaldo did not reply. One week later, Remigio
redeem her share from Emma, but the latter replied that received a letter from Santos informing him that the
Betty's right to redeem has already prescribed. Is Emma building has been sold to him by Ubaldo for P5 Million, and
correct or not? Why? (5%) that he will not renew Remigio's lease when it expires.
SUGGESTED ANSWER: Remigio filed an action against Ubaldo and Santos for
Emma, the buyer, is not correct. Betty can still enforce her cancellation of the sale, and to compel Ubaldo to execute a
right of legal redemption as a co-owner. Article 1623 of the deed of absolute sale in his favor, based on his right of first
Civil Code gives a co-owner 30 days from written notice of refusal.
the sale by the vendor to exercise his right of legal a) Will the action prosper? Explain.
redemption. In the present problem, the 30-day period for b) If Ubaldo had given Remigio an option to purchase the
the exercise by Betty of her right of redemption had not building instead of a right of first refusal, will your
even begun to run because no notice in writing of the sale answer be the same? Explain.
appears to have been given to her by Lydia.
SUGGESTED ANSWER:
Redemption; Legal; Formalities (2002) No, the action to compel Ubaldo to execute the deed of
Adela and Beth are co-owners of a parcel of land. Beth sold absolute sale will not prosper. According to Ang Yu v. Court
her undivided share of the property to Xandro, who of Appeals (238 SCRA 602), the right of first refusal is not
promptly notified Adela of the sale and furnished the latter based on contract but is predicated on the provisions of
a copy of the deed of absolute sale. When Xandro presented human relations and, therefore, its violation is predicated on
the deed for registration, the register of deeds also notified quasi-delict. Secondly, the right of first refusal implies that
Adela of the sale, enclosing a copy of the deed with the the offer of the person in whose favor that right was given
notice. However, Adela ignored the notices. A year later, must conform with the same terms and conditions as those
Xandro filed a petition for the partition of the property. given to the offeree. In this case, however, Remigio was
Upon receipt of summons, Adela immediately tendered the offering only P4.5 Million instead of P5 Million.
requisite amount for the redemption. Xandro contends that ALTERNATIVE ANSWER:
Adela lost her right of redemption after the expiration of 30 No, the action will not prosper. The lessee's right of first
refusal does not go so far as to give him the power to
days from her receipt of the notice of the sale given by him.
dictate on the lessor the price at which the latter should sell

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CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
his property. Upon the facts given, the lessor had SUGGESTED ANSWER:
sufficiently complied with his commitment to give the lessee 1) A can exercise his right of repurchase within four (4)
a right of first refusal when he offered to sell the property to years from the date of the contract (Art. 1606, Civil Code).
the lessee for P5 Million, which was the same price he got in
selling it to Santos. He certainly had the right to treat the SUGGESTED ANSWER:
lessee's counter-offer of a lesser amount as a rejection of his 2} I would advise B to file an action for consolidation of
offer to sell at P5 Million. Thus, he was free to find another title and obtain a judicial order of consolidation which must
buyer upon receipt of such unacceptable counter-offer (Art. be recorded in the Registry of Property (Art. 1607. Civil
Code).
1319. NCC).
SUGGESTED ANSWER: Transfer of Ownership; Non-Payment of the Price (1991)
Yes, the answer will be the same. The action will not Pablo sold his car to Alfonso who issued a postdated check
prosper because an option must be supported by a in full payment therefor. Before the maturity of the check,
consideration separate and distinct from the purchase price. Alfonso sold the car to Gregorio who later sold it to
In this case there is no separate consideration. Therefore, Gabriel. When presented for payment, the check issued by
the option may be withdrawn by Ubaldo at any time. (Art. Alfonso was dishonored by the drawee bank for the reason
that he, Alfonso, had already closed his account even before
1324, NCC)
he issued his check.
Right of First Refusal; Lessee; Effect (1998) Pablo sued to recover the car from Gabriel alleging that he
In a 20-year lease contract over a building, the lessee is (Pablo) had been unlawfully deprived of it by reason of
expressly granted a right of first refusal should the lessor Alfonso's deception. Will the suit prosper?
decide to sell both the land and building. However, the SUGGESTED ANSWER:
lessor sold the property to a third person who knew about No. The suit will not prosper because Pablo was not
the lease and in fact agreed to respect it. Consequently, the unlawfully deprived of the car although he was unlawfully
lessee brings an action against both the lessor-seller and the deprived of the price. The perfection of the sale and the
buyer (a) to rescind the sale and (b) to compel specific delivery of the car was enough to allow Alfonso to have a
performance of his right of first refusal in the sense that the right of ownership over the car, which can be lawfully
lessor should be ordered to execute a deed of absolute sale transferred to Gregorio. Art. 559 applies only to a person
in favor of the lessee at the same price. The defendants who is in possession in good faith of the property, and not
contend that the plaintiff can neither seek rescission of the to the owner thereof. Alfonso, in the problem, was the
sale nor compel specific performance of a "mere" right of owner, and, hence, Gabriel acquired the title to the car.
first refusal. Decide the case. [5%]
SUGGESTED ANSWER: Non-payment of the price in a contract of sale does not
The action filed by the lessee, for both rescission of the render ineffective the obligation to deliver. The obligation
offending sale and specific performance of the right of first to deliver a thing is different from the obligation to pay its
refusal which was violated, should prosper. The ruling in price. EDCA Publishing Co. v. Santos (1990)
Equatorial Realty Development, Inc. vs. Mayfair Theater,
Inc. (264 SCRA 483), a case with similar facts, sustains both Transfer of Ownership; Risk of Loss (1990)
rights of action because the buyer in the subsequent sale D sold a second-hand car to E for P150,000.00 The
knew the existence of right of first refusal, hence in bad agreement between D and E was that half of the purchase
faith. price, or P75,000.00, shall be paid upon delivery of the car
ANOTHER ANSWER: to E and the balance of P75,000.00 shall be paid in five
The action to rescind the sale and to compel the right to equal monthly installments of P15,000.00 each. The car was
first refusal will not prosper. (Ang Yu Asuncion vs. CA, 238 delivered to E, and E paid the amount of P75.000.00 to D.
SCRA 602). The Court ruled in a unanimous en banc Less than one month thereafter, the car was stolen from E's
decision that the right of first refusal is not founded upon garage with no fault on E's part and was never recovered. Is
contract but on a quasi-delictual relationship covered by the E legally bound to pay the said unpaid balance of
principles of human relations and unjust enrichment (Art. P75.000.00? Explain your answer.
19, et seq. Civil Code). Hence the only action that will SUGGESTED ANSWER:
prosper according to the Supreme Court is an "action for Yes, E is legally bound to pay the balance of P75,000.00.
damages in a proper forum for the purpose." The ownership of the car sold was acquired by E from the
moment it was delivered to him. Having acquired
Right of Repurchase (1993) ownership, E bears the risk of the loss of the thing under
On January 2, 1980, A and B entered into a contract the doctrine of res perit domino. [Articles 1496. 1497, Civil
whereby A sold to B a parcel of land for and in Code).
consideration of P10.000.00. A reserving to himself the
right to repurchase the same. Because they were friends, no LEASE
period was agreed upon for the repurchase of the property.
1) Until when must A exercise his right of repurchase?
2) If A fails to redeem the property within the allowable Extinguishment; Total Distruction; Leased Property (1993)
period, what would you advise B to do for his better A is the owner of a lot on which he constructed a building
protection? in the total cost of P10,000,000.00. Of that amount B

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