DIZON v.

CA
FACTS:
 Private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease
with Option to Buy with petitioners / lessors involving a parcel of land.
 The term of the lease was for one year (May 16, 1974 - May 15, 1975). During this period,
private respondent was granted an option to purchase. Thereafter, the lease shall be on
a per month basis.
 For failure of private respondent to pay the increased rent per month effective June 1976,
petitioners filed an action for ejectment.
 The QC MeTC ordered the private respondent to vacate the leased premises and to pay
an amount representing rentals in arrears and/or as damages in the form of reasonable
compensation for the use and occupation of the premises during the period of illegal
detainer from June 1976 to the time of judgement.
 Private respondent filed a certiorari petition with the IAC praying for the issuance of a
restraining order enjoining the enforcement of said judgment and dismissal of the case for
lack of jurisdiction of the City Court. The motion for reconsideration was denied.
 On appeal, respondent Court of Appeals rendered a decision upholding the jurisdiction of
the City Court of Quezon City in the ejectment case, concluding that there was a perfected
contract of sale between the parties on the leased premises and that pursuant to the option
to buy agreement, private respondent had acquired the rights of a vendee in a contract of
sale. It opined that the payment by private respondent of P300,000.00 on June 20, 1975
as partial payment for the leased property, which petitioners accepted (through Alice A.
Dizon) and for which an official receipt was issued, was the operative act that gave rise to
a perfected contract of sale, and that for failure of petitioners to deny receipt thereof,
private respondent can therefore assume that Alice A. Dizon, acting as agent of
petitioners, was authorized by them to receive the money in their behalf. The Court of
Appeals went further by stating that in fact, what was entered into was a "conditional
contract of sale" wherein ownership over the leased property shall not pass to the private
respondent until it has fully paid the purchase price.
ISSUE:
1. WON the petitioners have established a right to evict the private respondent for non
payment of rentals after the one year contract of lease.
2. WON the respondents can enforce its option to purchase after the expiration of the one
year contract of lease.
3. WON there is a perfected contract between the petitioners and the respondents.
HELD:
1. YES. Petitioners have established a right to evict private respondent from the subject
premises for non-payment of rentals. The term of the Contract of Lease with Option to Buy
was for a period of one year (May 1974 to May 1975) during which the private respondent
was given an option to purchase said property. After the expiration thereof, the lease was
on a monthly basis. No definite period beyond the one-year term of lease was agreed
upon by petitioners and private respondent. However, since the rent was paid on a
monthly basis, the period of lease is considered to be from month to month. In such case,
a demand to vacate is not even necessary for judicial action after the expiration of every
month.
2. NO. Having failed to exercise the option within the stipulated one-year period, private
respondent cannot enforce its option to purchase anymore. There was an implicit renewal
of the contract of lease on a monthly basis. The other terms of the original contract of
lease which are revived in the implied new lease under Article 1670 of the Civil Code are
only those terms which are germane to the lessee's right of continued enjoyment of the
property leased. Therefore, an implied new lease does not ipso facto carry with it any
 implied revival of private respondent's option to purchase (as lessee thereof) the leased
premises. Moreover, even assuming arguendo that the right to exercise the option still
subsists at the time private respondent tendered the amount on June 1975, the suit for
specific performance to enforce the option to purchase was filed only on October 1985 or
more than ten years after accrual of the cause of action as provided under Article 1144 of
the New Civil Code.
3. NO. There was no perfected contract of sale between petitioners and private respondent.
In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to
petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amount
tendered would constitute a perfected contract of sale pursuant to the contract of lease
with option to buy. There was no valid consent by the petitioners (as co-owners of the
leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners'
alleged agent, and private respondent. As provided in Article 1868 of the New Civil Code,
27 there was no showing that petitioners consented to the act of Alice A. Dizon nor
authorized her to act on their behalf with regard to her transaction with private respondent.
PRINCIPLES:
1. Where the rentals are paid monthly, the lease, even if verbal may be deemed to be on a
monthly basis, expiring at the end of every month pursuant to Article 1687, in relation to
Article 1673 of the Civil Code.
2. Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object of the contract and upon the
price. From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts." Thus, the elements of a contract
of sale are consent, object, and price in money or its equivalent. The absence of any of
these essential elements negates the existence of a perfected contract of sale. Sale is a
consensual contract and he who alleges it must show its existence by competent proof.

FORMARAN v. ONG
FACTS:
 Petitioner claims that the land in question is part of the land donated to her by her uncle
and aunt. As owner thereof, she declared the land for taxation purposes.
 Respondent and her father, Melquiades Barraca came to her residence asking for help.
They were borrowing one-half of land donated to her so that defendant Glenda could
obtain a loan from the bank to buy a dental chair. They proposed that she signs an alleged
sale over the said portion of land.
 Acceding to their request, she signed a prepared Deed of Absolute Sale which they
brought along with them , covering the land in question without any money involved.
 A month thereafter, petitioner inquired from her uncle, Melquiades Barracca, if they have
obtained the loan. The latter informed her that they did not push through with the loan
because the bank’s interest was high. With her uncle’s answer, plaintiff inquired about the
Deed of Absolute Sale. Her uncle replied that they crampled the deed and threw it away.
 Following the donation, plaintiff immediately took possession of the land.
  Respondent filed a complaint for unlawful detainer against the Petitioner before the MCTC,
which was decided on in favor of the Respondent; ordering the Petitioner to vacate the
land in question.
 Petitioner filed on action for annulment of the Deed of Sale against respondents before
the RTC of Kalibo, which was ruled in favor of petitioner and against the respondent by
declaring the Deed of Absolute Sale null and void for being an absolutely simulated
contract and for want of consideration; declaring the petitioner as the lawful owner entitled
to the possession of the land.
 Respondents coursed an appeal to the CA. The CA, on August 30, 2007, reversed and
set aside the Decision of the trial court and ordered petitioner to vacate the land in question
and restore the same to respondents.
ISSUE: WON the subject Deed of Sale is simulated.
HELD: YES. The Court held that the subject Deed of Sale is indeed simulated, as it is:
(1) totally devoid of consideration;
(2) it was executed on August 12, 1967, less than two months from the time the subject land was
donated to petitioner on June 25, 1967 by no less than the parents of respondent Glenda Ong;
(3) on May 18, 1978, petitioner mortgaged the land to the Aklan Development Bank for a
₱23,000.00 loan;
(4) from the time of the alleged sale, petitioner has been in actual possession of the subject land;
(5) the alleged sale was registered on May 25, 1991 or about twenty four (24) years after
execution;
(6) respondent Glenda Ong never introduced any improvement on the subject land; and
(7) petitioner’s house stood on a part of the subject land. These are facts and circumstances
which may be considered badges of bad faith that tip the balance in favor of petitioner.

LUZON BROKERAGE v. MARITIME BUILDING

FACTS:
 Defendant Myers Building Co., Inc., owner of three parcels of land in the City of Manila,
together with the improvements thereon, entered into a contract entitled "Deed of
Conditional Sale" in favor of Bary Building Co., Inc., later known as Maritime Building Co.,
Inc.
 In Par. (O) of the said deed, they agreed that in case of failure on the part of the vendee
to pay any of the installments due and payable, the contract shall be annulled at the option
of the vendor and all payments already made by vendee shall be forfeited and the vendor
shall have right to re-enter the property and take possession thereof.
 The Vice-President, George Schedler, of the Maritime Building Co., Inc., wrote a letter to
the President of Myers, Mr. C. Parsons, requesting for a moratorium on the monthly
payment of the installments until the end of the year 1961, for the reason that the said
company was encountering difficulties in connection with the operation of the warehouse
business.
 Mr. C. Parsons, in behalf of the Myers Estate, answered that the monthly payments due
were not payable to the Myers Estate but to the Myers Building Co., Inc., and that the
Board of Directors of the Myers Co., Inc. refused to grant the request for moratorium for
suspension of payments under any condition.
 Maritime Building Co., Inc. failed to pay the monthly installments corresponding to the
months of March, April and May, 1961. Myers Building Co., Inc. made a demand upon the
Maritime Building Co., Inc., for the payment of the installments that had become due and
payable, which letter, however, was returned unclaimed.
 A letter was sent by Maritime to Myers stating that the company “intend to withhold any
further payments to Myers Building Company or Estate, in order that we can preserve
 those funds and assets to set off against the potential liability to which I am now exposed
by the failure of the Myers heirs to honor the indemnity agreement pertaining to the Labor
claims.”
 Myers Building Co., Inc. wrote the Maritime Building Co., Inc. another letter advising it of
the cancellation of the Deed of Conditional Sale entered into between them and
demanding the return of the possession of the properties and holding the Maritime Building
Co., Inc. liable for use and occupation of the said properties at P10,000.00 monthly.
 Myers Building Co., Inc. demanded upon the Luzon Brokerage Co., Inc. to whom the
Maritime Building Co., Inc. leased the properties, the payment of monthly rentals of
P10,000.00 and the surrender of the same to it. As a consequence, the Luzon Brokerage
Co., Inc. found itself in a payment to the wrong party, filed this action for interpleader
against the Maritime Building Co., Inc.
 Myers Building Co., Inc. in its answer filed a cross-claim against the Maritime Building Co.,
Inc. praying for the confirmation of its right to cancel the said contract. In the meantime,
the contract between the Maritime Building Co., Inc. and the Luzon Brokerage Co., Inc.
was extended by mutual agreement for a period of four (4) more years
 Maritime Building Co., Inc. now contends (1) that the Myers Building Co., Inc. cannot
cancel the contract entered into by them for the conditional sale of the properties in
question extrajudicially and (2) that it had not failed to pay the monthly installments due
under the contract and, therefore, is not guilty of having violated the same.
 The trial court found the position of Schedler indefensible, and that Maritime, by its failure
to pay, committed a breach of the sale contract; that Myers Company, from and after the
breach, became entitled to terminate the contract, to forfeit the installments paid, as well
as to repossess, and collect the rentals of the building from its lessee, Luzon Brokerage
Co., in view of the terms of the conditional contract of sale
ISSUE:
1. WON there was breach of contract by Maritime by not paying its monthly installments as
stipulated in the Deed of Conditional Sale with Myers.
2. WON Myers was entitled to rescind or resolve the contract without recoursing to judicial
process.
HELD:
1. YES. The Court held that appellant Maritime’s failure or refusal to pay the P5,000 monthly
installments corresponding to the months of March, April and May, 1961 did constitute a
breach of contract with Myers, since the said agreement expressly stipulated that the
balance of the purchase price (P950,000) “shall be paid at the rate of Ten Thousand Pesos
(P10,000) monthly on or before the 10th day of each month with interest at 5% per annum,
this amount to be first applied on the interest, and the balance paid to the principal thereof;
and the failure to pay any installment or interest when due shall ipso facto cause the whole
unpaid balance of the principal and interest to be and become immediately due and
payable.” Under the circumstances, the action of Maritime in suspending payments to
Myers Corporation was a breach of contract tainted with fraud or malice (dolo), as
distinguished from mere negligence (culpa), "dolo" being succinctly defined as a
"conscious and intentional design to evade the normal fulfillment of existing obligations".
The text of the letter to Myers to Maritime, leaves no doubt that the non-payment of the
installments was the result of a deliberate course of action on the part of appellant,
designed to coerce the appellee Myers Corporation into answering for an alleged promise
of the late F. H. MYERS to indemnify E. W. Schedler, the controlling stock-holder of
appellant, for any payments to be made to the members of the Luzon Labor Union.
Appellant Maritime could not ignore the fact that whatever obligation F. H. Myers or his
estate had assumed in favor of Schedler with respect to the Luzon Brokerage labor case
was not, and could not have been, an obligation of appellee corporation Myers Building
 Company. Maritime having acted in bad faith, it was not entitled to ask the court to give it
further time to make payment and thereby erase the default or breach that it had
deliberately incurred. Thus the lower court committed no error in refusing to extend the
periods for payment.
2. Maritime’s averment that Myers could not extrajudicially rescind or resolve the contract,
but must first recourse to the courts, as founded on paragraph D and E of the Deed of
Conditional Sale does not hold true. Correlation of this paragraph (e) with the preceding
paragraph (d) of the Deed of Conditional Sale reveals no incompatibility between the two;
and the suit to "be brought in Court by the Vendor to seek judicial declaration of rescission"
is provided for by paragraph(e) only in the eventuality that, notwithstanding the automatic
annulment of the deed under paragraph (d), the Vendee "refuses to peacefully deliver the
possession of the properties subject of this contract". Maritime can not as well invoke
Article 1592 of the Civil Code of the Philippines as entitling it to pay despite its default.
Appellant overlooks that its contract with appellee Myers is not the ordinary sale envisaged
by Article 1592, transferring ownership simultaneously with the delivery of the real property
sold, but one in which the vendor retained ownership of the immovable object of the sale,
merely undertaking to convey it provided the buyer strictly complied with the terms of the
contract. Appellee Myers is not after the resolution or setting aside of the contract and the
restoration of the parties to the status quo ante, as contemplated by Article 1592, but
precisely enforcing the provisions of the agreement that it is no longer obligated to part
with the ownership or possession of the property because Maritime failed to comply with
the specified condition precedent, which is to pay the installments as they fell due. The
distinction between contracts of sale and contract to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under
contracts to sell in case of failure of the other party to complete payment, to extrajudicially
terminate the operation of the contract, refuse conveyance and retain the sums or
installments already received, where such rights are expressly provided for.
PRINCIPLES:
Contract of Sale vs. Contract to Sell:
Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply to
contracts to sell. Failure to fully pay the purchase price in contracts to sell is not the breach of
contracts referred to in Art. 1191. IT is merely an event which prevents the seller’s obligation to
convey title from acquiring binding force. This is because there can be no rescission of an
obligation that is still non-existent, the suspensive condition not having happened.

DIGNOS v. CA
FACTS:
 The Dignos spouses were owners of a parcel of land in Opon, Lapu-Lapu City.
 Appellant-petitioners Dignos spouses sold the said parcel of land to plaintiff-appellant,
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.
 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.
  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.
 After due trial, the CFI of Cebu rendered its decision, which ruled among others that the
Court “declares the deed of sale executed on November 25, 1965 by defendant Isabela
L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States of
America, null and void ab initio, and the deed of sale executed by defendants Silvestre T.
Dignos and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff
Atilano G. Jabil is hereby ordered to pay the sum of Sixteen Thousand Pesos (P16,000.00)
to the defendants-spouses upon the execution of the Deed of absolute Sale of Lot No.
3453, Opon Cadastre and when the decision of this case becomes final and executory.”
 Tthe plaintiff (respondent herein) and defendants-spouses (petitioners herein) appealed
to the Court of Appeals, which affirmed the decision of the lower court except as to the
portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the
building of a fence upon the land in question.
 A motion for reconsideration of said decision was filed by the defendants- appellants-
petitioners Dignos spouses but a resolution was issued by the Court of Appeals denying
the motion for lack of merit.

ISSUE:
1. WON subject contract is a deed of absolute sale, despite it being entitled as a “Deed of
Conditional Sale”.
2. WON petitioner spouses Dignos can rescind the sale due to the delay in payment by
respondent Jabil.
HELD:
1. It has been held 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 non-payment 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,
such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent. In addition, Article 1477 of the same Code provides that
"The ownership of the thing sold shall be transferred to the vendee upon actual or
constructive delivery thereof." 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 Sally's Beach Resort also known as Jabil's
Beach Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and
Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by petitioner
spouses.
2. 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. The most that they were able to show is a letter of Cipriano Amistad who, claiming
to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil
because the latter had no money and further advised petitioners to sell the land in litigation
 to another party. There is no showing that Amistad was properly authorized by Jabil to
make such extrajudicial 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 the 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 P4,000.00 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.
PRINCIPLES:
 The rule is that it is not the title of the contract, but its express terms or stipulations that
determine the kind of contract entered into by the parties.