TITLE Adelfa Properties, Inc. vs.

CA, Rosario JimenezCastaneda & Salud Jimenez January 25, 1995 #1

FACTS Private respondents, along w/ their brothers Jose & Dominador, were the registered owners of a parcel of land. Jose & Dominador sold their share consisting of of the land, specifically the eastern portion thereof, to petitioner. Subsequently, an extrajudicial partition was executed among the siblings and the eastern portion was adjudicated to Jose & Dominador, while the western portion went to the private respondents. Thereafter, petitioner expressed interest in buying the western portion of the land from private respondents and an exclusive option to purchase was executed between them. The agreement provided that a downpayment given by petitioner would be credited as partial payment upon the consummation of the sale. But in one part of the agreement, the payment was denominated as option money. Before petitioner could make final payment, it received summons filed by the nephews & nieces of private respondents against Jose & Dominador, & petitioner, for annulment of the deed of sale of the eastern portion in favor of a 3rd party. As a consequence of this, petitioner informed private respondents that it would hold payment of the full of the purchase price and suggested that the latter settle the case 1st w/ their nephews & nieces. Respondents refused to heed this suggestion by petitioner and attributed the suspension of payment of the purchase price to lack of word of honor. Petitioner then caused to be annotated on the title of the lot its option contract w/ respondents, and its contract of sale w/ Jose & Dominador. The respondents cancelled the transaction w/ petitioners & then subsequently, they executed a conditional sale of the western portion in favor of Emylene Chua. Respondents also tried to return a part of the option money as agreed upon. Private respondents filed a case for annulment of contract against petitioner. TC held that the agreement entered into by the parties was merely an option contract, & that the suspension of payment by petitioner constituted a counter-offer, w/c therefore was tantamount to a rejection of the option. It likewise ruled that petitioner could not validly suspend payment in favor of private respondents on the ground that the action filed by the latters kin did not involve the western portion of the land but the eastern portion thereof, w/c was not the one subject of the transaction between petitioner & respondents. The TC

ISSUE What was the contract entered into between the parties, a K to sell, an option K, or a K of sale? WON there was a valid suspension of payment of the purchase price by petitioner & the legal consequences thereof.

HELD It was a K to sell. Not a K of sale because: 1. There was no intention to transfer ownership to petitioner except upon full payment of the purchase price. There was an absence of a stipulation that petitioner was obliged to return possession or ownership of the property as a consequence of non-payment, w/c just means that there was no transfer to begin with. In effect, there was an implied agreement that ownership shall not pass to the purchaser until he has fully paid the price. Hence, it was not a K of sale. 2. The deed of absolute sale would have been issued only upon the payment of the balance of the purchase price. 3. It has not been shown that there was delivery of the property, actual or constructive, made to petitioner. Although after the reconstitution of the respondents title, it remained in the possession of petitioners counsel, still, this is not equivalent to a constructive delivery since there was really no intention on respondents part to deliver. Not a K to sell because: 1. The fact that the document was entitled exclusive option to purchase is not controlling where the text thereof shows that it is a K to sell. The title of a K does not necessarily determine its true nature. 2. It is not an option K because such kind is not really a K but a mere unaccepted offer. In this case, there was already a concurrence of petitioners offer to buy and private respondents acceptance thereof. 3. The alleged option money was actually earnest money w/c was intended to form part of the purchase price. It was not distinct from the cause or consideration for the sale of the property, but was itself a part thereof. Art. 1478 of the CC does not require that a stipulation that ownership will not pass to the buyer until full payment of the price be expressly made. An implied stipulation to that effect is valid and binding between the parties. A contract w/c contains this kind of stipulation is a K to sell. YES, the petitioner was justified in suspending payment of the balance of the purchase price by reason of the vindicatory action filed against it. Although in the vindicatory action only the eastern portion of the land was included, the plaintiffs therein (nephews & nieces) were claiming to be co-owners of the entire parcel of land and not only of a portion thereof, nor did their claim pertain exclusively to the eastern half adjudicated to Jose & Dominador. So in effect, the western part, subject of the transaction between the parties in this case, was also included in the vindicatory action. Under Art. 1590, the vendee is not justified in suspending payment if the vendor gives security for the return of the price in a proper case.

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then directed the cancellation of the exclusive option to purchase & declared the sale to Chua valid. CA affirmed in toto.

Luzon Brokerage Co, Inc. vs. Maritime Building Co, Inc. & Myers Bldg Co, Inc. August 18, 1972 #9

F.H. Myers sold the Luzon Brokerage to Maritime, a/ an agreement that F.H. would indemnify Maritime for whatever labor claims it would pay to Luzon Brokerage. Thereafter, Maritime bought a building from Myers Company. However, due to its lack of money in the meantime, Maritime requested a suspension of payments from Myers Company. It was turned down. But, in spite of the refusal to the request, Maritime still went on and suspended payments to Myers Co, basing its act on the agreement that FH Myers is indebted to it. The K provided that title to the properties remains w/ the vendor and shall be passed to the vendee only upon full payment of the purchase price. It also provided that upon default of the vendee, the deed of conditional sale would automatically and w/o any further formality, become null & void.

WON Maritime was justified in suspending its payments to Myers Co. Could their compliance (in the form of offering to deposit in trust the missing amounts) be considered as substantial performance that is equivalent to payment? Was Art.1504 of the CC applicable in this case? WON Maritimes failure to pay constitutes a mere casual breach.

However, in this case, the mere assurance made by respondents that petitioner did not have to worry about the case because it was pure & simple harassment is not the kind of guaranty contemplated under the exceptive clause in the article above, wherein the vendee is still bound to make payment even w/ the existence of a vindicatory action. However, petitioner cannot anymore compel respondents to sell the property to it for 2 reasons: 1. Petitioners failure to duly effect the consignation of the purchase price after the disturbance had ceased; The mere sending of a letter by the vendee expressing the intention to pay, w/o the accompanying payment, is not considered a valid tender of payment. There must also have been a consignation of the money tendered because there was an obligation to pay. The rule is different, however, in contracts wherein there is no obligation to pay yet (e.g. option K, legal redemption, sale w/ right to repurchase). In such cases, mere tender of payment, w/o consignation, is sufficient to preserve the exercise of the right or privilege. 2. The fact that the contract to sell had been validly rescinded by private respondents. Art. 1592 of the CC w/c requires rescission either by judicial action or by notarial act is not applicable to a K to sell (because theres no K of sale yet w/c could be rescinded). Furthermore, judicial action for rescission of a K is not necessary where the K provides for automatic rescission in case of breach. NO, it was not justified for the ff reasons: 1. The claim was against the person of FH Myers, not against Myers Co, the vendor. 2. The claim was not proven to be real, and even assuming that it was, it was already barred because no contingent claim was filed before the closure of the estate proceedings of FH Myers estate after he died. Since the non-payment was intentional and deliberate (even if it was based on something w/c was later on proven to be not a true claim) designed to force Myers Co to grant the moratorium originally solicited and rejected, then, it was tainted w/ dolo, fraud or malice, and not merely negligence. NO. A tender, to be valid, must be unconditional; and even then, a tender alone is not a mode of extinguishing obligations, unless followed by consignation. Moreover, Art. 1234 of the CC w/c states that an obligation substantially performed in good faith is equivalent to payment, is not applicable in Maritimes case since it was not in good faith.

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NO. Article 1504 requiring demand by suit or notarial act in case the vendor wants to rescind does not apply to a K to sell or a promise to sell, where title remains w/ the vendor until fulfillment of a positive suspensive condition, such as full payment of the price. NO. In K to sell, where ownership is retained by the seller and is not to pass until the full payment of the price, such payment is a positive suspensive condition, the failure of w/c is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force, in accordance w/ art.1177. To argue that it was a breach is to proceed from the assumption that the K is one of absolute sale, where non-payment is a resolutory condition, w/c is not the case. YES, it was valid because UP & ALUMCO had expressly stipulated that upon default by the latter, UP has the right and the power to consider the Logging Agreement as rescinded w/o the necessity of any judicial suit. There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the K would cause cancellation thereof, even w/o court intervention. It is not always necessary for the injured party to resort to court for rescission of the K. However, the act of a party in treating a K as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. The practical effect of such kind of a stipulation is that it transfers to the defaulter the initiative of instituting suit, instead of the rescinder. In fact, even w/o express provision conferring the power of cancellation upon one contracting party, a resolution of reciprocal or synallagmatic K may be made extrajudicially unless successfully impugned in court. When can rescission be made extrajudicially? 1. When theres an express stipulation; OR 2. In reciprocal K under art. 1191. NO, it did not revive the K. The deposit was made only after a judgment was rendered against the petitioner to pay PHHC certain sums of money, and more than 90 days after the cancellation of the K. It was not made in compliance w/ the requirements for the revival of the K. Further, having been made after the rendition of the judgment, the deposit was apparently made in partial satisfaction of the judgment.

A land grant was segregated from the public domain and given as endowment to UP. UP & ALUMCO entered into a logging agreement under w/c the latter was granted exclusive authority to cut, collect and remove timber from the land grant in consideration of payment to UP of royalties. ALUMCO defaulted in payment of royalties & other fees to UP twice, so UP informed ALUMCO that it had rescinded the logging agreement between them. UP then filed a complaint against ALUMCO for the collection of the unpaid balance the latter owes it. UP also obtained an order for preliminary injunction restraining ALUMCO from continuing its logging operations in the land grant. In the meantime, before the issuance of the preliminary injunction, UP awarded the concession to Sta. Clara Lumber Co, Inc. TC then issued orders, 1st enjoining UP from awarding the concession to any other party, 2nd declared UP in contempt of court & directing Sta. Clara to refrain from exercising logging rights. PHHC entered into a conditional K to sell a parcel of land w/ petitioner Torralba. It was stipulated in the K that should petitioner violate, refuse or fail to comply w/ the terms & conditions of the K, or default in the payment of 3 monthly installments, the K shall be deemed annulled and cancelled & the PHHC shall be at liberty to dispose the property to any person, in the same manner as if the K has never been made. The petitioner defaulted in his payments, as a result, PHHC notified it in writing of the cancellation of the conditional K to sell but gave petitioner 30 days w/in w/c to revive the K by paying in cash all installments due. WON UPs unilateral rescission of the logging K was valid.

UP vs. De los Angeles September 29, 1970 #10

WON the payment to and the acceptance of the PHHC of the P1,000 revived the K. WON PHHC should have resorted to a judicial decree rescinding the K to sell before awarding the lot to Florencia San Juan.

Torralba vs. De los Angeles February 14, 1980 #12

NO, the contract expressly provided that the K shall be deemed annulled and cancelled & the PHHC shall be at liberty to dispose the same to any other person upon default of the petitioner. Hence, there was no K to rescind in court because from the

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Reyes vs. Hamada May 31, 1965 #4

Petitioner failed to make payment. Then, PHHC again notified petitioner in writing of the definite annulment & cancellation of the K. TC upheld the cancellation and ordered petitioner to pay PHHC the amounts it still owes. However, after this, petitioner deposited an amount of P1,000 w/ the PHHC. Subsequently, the BOD of PHHC adopted a resolution awarding the disputed parcel of land to respondent Florencia San Juan, & thereafter the PHHC executed a deed of sale in her favor. The TC then granted PHHCs motion for the issuance of an order of demolition against the petitioner. As a result of an extrajudicial foreclosure proceeding, certain real properties of the spouses Hamada were sold at public auction on February 11, 1960, and awarded to Arsenio Reyes as the highest bidder. At 10pm of February 10, 1961 (the last day of redemption), the mortgagors delivered to the sheriff checks covering the redemption amount, w/c payment was accepted by said official. Reyes, however, refused to recognize the validity of such redemption. Reyes then filed a case for declaration of ownership & right to possession of the said properties by reason of his purchase thereof at the auction sale. During the pendency of the case, Reyes filed a complaint for the recovery of the rentals paid by the tenants to the defendants Hamada, on the ground that Reyes was the one entitled to such rentals paid during & after the period of redemption.

moment petitioner defaulted in the timely payment of the installments, the K between the parties were deemed ipso facto rescinded.

Whether the pendency of the 1st case (for declaration of ownership) precluded the institution of another action for the recovery of rentals receivable from the same properties.

Almeda vs. Daluro October 5, 1977 #5

Daluro sold to Almeda, under a pacto de retro sale, a parcel of land. Afterwards, Daluro redeemed the property from Almeda wherein the parties also agreed upon the manner in w/c they will share in the harvest of the standing palay crop. It was stipulated that the parties would share 5050 in the harvest of the palay planted in June 1957, harvest of w/c will take place sometime in September, 1957. There was an initial harvest of the palay in September 30, 1957, w/c was divided equally between the parties. Thereafter, a second harvest of the same planted palay was realized, w/c Daluro appropriated only to themselves, not giving Almeda a share in it.

Whether the palay that Almeda was entitled to was all that would be harvested from the palay planted in June 1957, or, only that w/c will be harvested on September 1957.

YES, the first case is a bar to the second case. Because the right to the rentals during the period of redemption and thereafter is necessarily included in the issue of the timeliness and adequacy of the redemption made or exercised by the mortgagors. If the redemption was valid, then the rentals would pertain to the mortgagors (Hamada), otherwise, it would go to the purchaser (Reyes). Sec. 30 of Rule 39: If during the period of redemption the judgment-debtor is in possession of the property sold, he is entitled to retain it and to receive its fruits, the purchaser not being entitle to its possession; BUT if the property is in the possession of a tenant, it is only then that the purchaser is entitled to receive its rents or the reasonable value of its use & occupation. In such a case, the purchaser is accountable for the amount thus received to the judgment-debtor when he effects the redemption. Before the expiration of the 1-year period w/in w/c the judgment debtor or mortgagor may redeem the property, the purchaser thereof is not entitled, as a matter of right, to possession of the same. The rentals receivable from tenants, although they may be collected by the purchaser during the redemption period, do not belong to the latter but still pertain to the debtor or mortgagor. The rational is to secure for the benefit of the debtor or mortgagor, the payment of the redemption amount and the consequent return to him of his properties sold at public auction. He is entitled to all that would be harvested from the palay that was planted on June 1957. The phrase sometime in September 1957 was not meant to limit the right of the plaintiffs to participate in the harvest of the crop planted in June. Article 1617 of the CC is not applicable. It applies only when the parties have not provided for their sharing arrangement w/ respect to the fruits existing at the time of redemption.

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Vda. De Zulueta vs. Octaviano March 28, 1983 #6

Petitioner Olimpia was the registered owner of a Riceland w/c was sold to Respondent Aurelio. It was agreed that Aurelio would pay to a certain Maximino Gumayan an amount representing the redemption price of the Riceland that was first sold to Maximino under a pacto de retro sale. It was also agreed that upon the redemption of the land, the agreement would be considered for all legal purposes a deed of absolute and definite sale. This agreement was registered in the office of the RD. On a separate document, Aurelio gave the vendor, Olimpia, the option to repurchase the property at anytime after May 1958 but not later that May 1960. This document, however, was not registered. Aurelio paid the amounts agreed upon to Maximino. However, the latter refused to deliver the CT to Aurelio for the reason that it was deposited w/ the PNB. Aurelio then caused the annotation of a notice of lis pendens in the title. 4 mos later, Aurelio again approached Maximino for the same purpose of obtaining the CT, w/c the latter again refused unless Aurelio would pay him the pagare receipts representing additional sums that Olimpia borrowed from Maximino, w/c amounts were not included in the obligation of Olimpia assumed by Aurelio. To avoid further trouble, Aurelio offered Olimpia the option to repurchase the property. Olimpia did not accept the offer alleging that she had no money at that time to buy back the land. In fact, Olimpia even suggested to Aurelio that he better sell the land to anybody and simply disregard the option to purchase. Relying on this, Aurelio sold the property to his brother, Isauro. On February 1962 (about 2 yrs after the deadline of May 1960) Olimpia desired to purchase the land. However, Isauro refused to allow repurchase of it. Olimpia then commenced suit for recovery of ownership & possession of the subject land against Aurelio & Isauro. TC ruled in favor of Olimpia, and ordered the brothers to execute the sale of the property in Olimpias favor. It also declared Isauros CT null & void. CA reversed and ruled that the transaction between Olimpia & Aurelio was an absolute sale, and declared Isauro the lawful & absolute owner of the lot in question.

What was the nature of the transaction between Olimpia & Aurelio, an absolute sale or a sale w/ right to repurchase? Could Olimpia validly repurchase the property?

It was an absolute sale. Conventional redemption takes place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply w/ the provisions of Aft. 1616 and other stipulations w/c may have been agreed upon. In this case, there was no reservation made by the vendor, Olimpia, in the document embodying their transaction. The option was given by Aurelio and not reserved by Olimpia. Further, it was not made in the instrument itself but was made in a separate document. The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like an option to buy. Neither is the K one of equitable mortgage for there was nothing in the document from w/c it could be inferred that the property was being utilized as security for a debt. Neither can the K be a pactum commissorium for such a K, w/c is void, applies only in a K w/ a debtor-creditor relationship. As has been stated, Olimpia was not a debtor but a vendor. NO, for the ff. reasons: Olimpia exercised the right of redemption, assuming there was such a right, only around 2 years after the stipulated period of redemption. 2. Neither did Olimpia make a judicial consignation of the repurchase price w/in the agreed period. In a K of sale w/ right to repurchase, the redemptioner who may offer to make the repurchase on the option date of redemption should deposit the full amount in court To effectively exercise the right to repurchase, the vendor a retro must make an actual and simultaneous tender of payment or consignation. (However, dont construe this to mean that consignation is required in order to preserve the exercise of the right to redeem. As stated in Adelfa Properties vs. CA, only tender of payment is required in order to preserve this right.) 1.

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