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Palanca v. Dir.

Of lands

FACTS :

Carlos Palanca is the applicant for the registration of the parcel of land marked lot No. 2 described in the plan accompanying his application.
Roman Santos opposes the registration of the eastern portion of this lot which is more fully described in his written opposition.

the sisters Irene Mojica and Consuelo Mojica sold the hacienda composed of these two lots to Felipe BuencaminoSuntay . Suntay sold the
same lands to Carlos Palanca.

In the description of this hacienda in the document of sale to Suntay the portion claimed by Roman Santos appears to have been excluded.
Mojic sisters sold to the opponent Roman Santos the said portion that had been excluded. The deeds of sale of SUNTAY. PALANCA AND
SANTOS WERE ALL RECORDED.

The hacienda, composed of lots Nos. 1 and 2, Benito Mojica( original owner- deceased ) considered it as a single property calling it "Hacienda
of SapangCawayan," which includes the part sold to Santos.

-Prior to sale .Benito Mojica leased a small part within this hacienda to Song Fo& Company in order to erect thereon a structure for the
manufacture of alcohol but After the death of Benito Mojica Irene Mojica, cancelled the former contract with Song Fo& Company and on
December 21, 1911, entered into a new agreement with him for the lease of the entire property. In the second contract of lease the property was
described and the part now objected to was excluded from the description. Notwithstanding this fact we are persuaded that, in selling the land,
it was not the intention of the parties to exclude any portion.
ISSUE:

WON the contract of sale of land sold to Suntay includes the portion sold to Santos .
HELD:

( true intentions of parties vsdescription in contract of sale ) -if the true intention of the parties was to sell the portion now in question, the
mere fact of having been excluded from the description contained in the document of sale of the said property is a mistake which cannot annul
the intention of the contracting parties. The document is nothing more than a mere formality of the contract, and cannot prevail as against the
contract itself which may be proved by extraneous facts.

( Preference in registration ) - It results, therefore, that the land under discussion was twice sold to two different purchasers. In accordance
with article 1473 of the Civil Code the sale that was first recorded must be given preference. Although the sale to Suntay and the sale by the
latter to Palanca were recorded, it must be deemed that no record was made as to the portion of land in question.

For the purposes of article 1473, the record in the registry is tantamount to a notice of the fact of the existence of the contract. But, as in the
deeds containing these contracts the portion of land under discussion does not appear, the registration of the documents cannot be
considered as a notice of the sale of the said portion.

( Purchaser in bad faith ) On the other hand, although the sale to Roman Santos was also recorded, it was only effected after the herein
applicant had already filed his application for this land claiming to have bought it from the sisters Mojica and after the said Palanca had filed
an opposition to the application of Roman Santos for the registration of the said parcel of land, consequently the record made by santos was
not in good faith and he cannot base his preference of title thereon. the record to which article 1473 of the civil code refers is that made in
good faith, for the law will not protect anything done in bad faith. CONSEQUENTLY THE RECORD MADE BY SANTOS WAS NOT IN GOOD
FAITH AND HE CANNOT BASE HIS PREFERENCE OF TITLE.

Implied Warranties (Art. 1547)


Sigaya vs. Mayuga

FACTS :

DionisiaAlorsabes owned a three hectare land in Dao, Capiz, denominated as Lot 3603. She sold a portion of the lot to Juanito Fuentes while the
remainder was inherited by her children Paz Dela Cruz, RoselaDela Cruz, and ConsorciaArroja (an adopted child), and a grandson, Francisco Abas, in
representation of his deceased mother Margarita Dela Cruz.

These four heirs executed an Extra-Judicial Settlement with Sale dated Consorcia sold her share with an area of 6,694 square meters to spouses
BallerianoMayuga. ( respondent ) . Paz also sold her share to Honorato de los Santos.

Later, another document entitled Extra-Judicial Partition with Deed of Sale was uncovered wherein the heirs of Dionisia purportedly adjudicated Lot 3603
among themselves and sold their shares to Francisco. Francisco executed a Deed of Sale over Lot 3603 in favor of TeodulfoSigaya. Thus, the title over
Lot 3603 was cancelled and a new one was issued in the name of TEODULFO Sigaya, predecessor-in-interest of the petitioners herein.

( TO WHOM IT IS SOLD ) Respondent Mayuga further asserted that he possesses his portion of the property by virtue of the sale by ConsorciaArroja of
her share to his parents, Sps. BallerianoMayuga. Respondent de los Santos meanwhile averred that Paz Dela Cruz sold her share to him in 1957.
Respondents RoselaDela Cruz-Viva and her husband Jose Viva claimed that the portion of land occupied by them pertains to Rosela's share which she

ISSUE:

HELD:

inherited from Dionisia, while respondent Renato Distor claimed that his wife inherited said property from her father Juanito Fuentes, who in turn bought
the same from Dionisia during her lifetime
Petitioners argue that: Teodulfo, their predecessor-in-interest, purchased the subject property from Francisco, who was in possession of the Original
Certificate of Title (OCT) ), with Extra-Judicial Partition with Deed of Sale . Relying on these instruments and after inspecting the land and seeing that
nobody occupied the same, Teodulfo bought the land and had the title subsequently issued in his name;
-Respondents in their Comment meanwhile contend that: Teodulfo relied on a title that is not in the name of his transferor, Francisco, but on its registered
owner, it was incumbent upon Teodulfo to examine further the extent of the right of the supposed transferor and why there were a lot of occupants in the
land in dispute
WHETHER A PERSON DEALING WITH A REGISTERED LAND CAN SAFELY RELY ON THE CORRECTNESS OF THE CERTIFICATE OF TITLE
ISSUED THEREFOR
Indeed, it is a well-settled rule that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor
and the law will in no way oblige him to go beyond the certificate to determine the condition of the property. Where there is nothing in the certificate of title
to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the
Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that may subsequently defeat his right thereto.
However, this rule shall not apply when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make
such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation. ( IN CASE AT BAR petitioners failed to show that they fall under any of the exceptional
circumstances) .
In this case, preponderance of evidence shows that respondents had been in actual possession of their respective portions even prior to 1960. THUS
( teodulfo is NOT a purchaser in goodfaith ).

Warranty against hidden defects of, or encumbrances upon the thing sold; vendors responsibility in case of breach (Arts. 1560, 1561, 1566)
Yap Kim Chuan v.
Tiaoqui

FACTS :

-plaintiff filed a written complaint in the Court of First Instance of Manila claied that plaintiff leased the building at No. 218 Calle Rosario, owned by the
defendant, up to December 31 of the same year because of the leaks in the roof of the storeroom of said building, without fault or negligence on the
plaintiff's part, some of his merchandise stored in said storeroom was so wet and damaged as to cause him a loss amounting to P1,169

afterwards the defendant expressly authorized the plaintiff to sell the damaged goods at any price, promising to pay the difference between the selling
price and the regular price of the articles in good condition; that by virtue of said authorization and promise, plaintiff accordingly disposed of all the
damaged goods that could be sold, at a loss of P1,169; and that notwithstanding the repeated demands made upon him to pay this amount, according to
promise, said defendant had refused and refuses to pay

defendant filed his answer stating that that the building the plaintiff occupies had been recently finished, the construction thereof having been under the
direction and inspection of an engineer, after approval of the plans and specifications by the engineering and sanitation departments

that the wetting the plaintiff's merchandise sustained from that rainfall was not caused wholly by the leaks and drips but was in large part due to the
improper situation or location of said merchandise inside the building; that in neither case was there fault or negligence on defendant's part, said
occurrence having been unforeseen, or, even being foreseen, unavoidable

-that the wetting the plaintiff's merchandise sustained from that rainfall was not caused wholly by the leaks and drips but was in large part due to the
improper situation or location of said merchandise inside the building; that in neither case was there fault or negligence on defendant's part, said
occurrence having been unforeseen, or, even being foreseen, unavoidable

-Defendant's building, composed of four apartments, had just been finished and a few months ago was inspected by the city engineer and approved for
the use for which it was intended. There is no record that said building presented any indication or sign of having defects in its roof such as might cause
leaks and damage to the merchandise placed therein
HELD:

Article 1562 of the same code reads: "If, at the time of the lease of the estate, the condition of the same was not mentioned, the law presumes that the
lessee received it in good condition, unless there be proof to the contrary."

The fact is that neither the lessor nor the lessees knew that the roof was defective and was going to leak when it rained, for they only became aware of
the leaks during the rainstorm on the afternoon of the day the occurrence was undoubtedly due toforce majeure, being a fortuitous event which could not

have been foreseen by the owner or the plaintiff-tenants, or many other proprietors of stores whose interiors were flooded as a result of that heavy
rainfall, and consequently the damages and losses the water inflicted upon the plaintiffs could not be ascribed to the owner of the premises so as to hold
him liable for the indemnity.
Article 1105 of the same Code prescribes: "No one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable,
with the exception of the cases expressly mentioned in the law or those in which the obligation so declares."
Being evidently a fortuitous event, unforeseeable by any of the litigating parties, inevitable on account of force majeure, the case discloses no proof of
any kind that the defendant Tiaoqui knew that the roof of the building leased to the plaintiffs had cracks or defects in it that would cause leakages, just as
the plaintiff-tenants did not know that fact themselves, for otherwise they would have notified the defendant-lessor in due season and demanded
immediate repair thereof so as to avoid injury to their interests
Nobody, neither the defendant nor the plaintiffs, could have foreseen that on the said afternoon of April 14 it was going to rain in torrents and in an
extraordinary manne
In connection with a lease, warranty is the obligation to repair or correct the error whereunder the lessee took over the property leased, but when the law
declares that the lessor must warrant the thing leased, it is not to be understood that he must also indemnify the lessee. Liability for the warranty is not
equivalent to liability in damages, as the latter is an obligation distinct from the former.
For proper understanding of the provisions of articles 1484 and 1485 of the Civil Code dealing with warranty it is necessary to remember that under their
provisions the-lessor is liable for the warranty of the thing leased against any hidden defects it may have, even when unknown to said lessor, but this
liability for warranty of the thing leased does not amount to an obligation to indemnify the tenant for damages, which is only to be allowed when there is
proof that the lessor acted with fraud and in bad faith by concealing the defect in the thing leased and in not revealing it to the lessee.
Hence, while the lessor is obligated by general rule to warranty of the thing leased, whether or not he may know of the existence therein of defects that
render it inadequate for the use the tenant intends, he is only liable for an indemnity for damages in addition to the warranty when he knew of the defects
in the thing leased and had not revealed them to the lessee, a procedure which induces the presumption that he acted with fraud and in bad faith; but in
order to hold him responsible for the damages and losses caused by such defects there must be the express condition that the lessee should choose
rescission of the contract, according to the prescription of the second paragraph of the article quoted above, whence it is inferred that, should the lessee
insist upon continuing the contract by occupying the property, he must be understood to have waived the indemnity.

Merchantability and fitness distinguished


Moles v. IAC

FACTS :

petitioner needed a linotype printing machine for his printing business, The LM Press at Bacolod City, and applied for an industrial loan with the
Development Bank of the Philippines, (hereinafter, DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend of petitioner introduced
the latter to private respondent, owner of the Diolosa Publishing House in Iloilo City, who had two available machines. Thereafter, petitioner went to Iloilo
City to inspect the two machines offered for sale and was informed that the same were secondhand but functional.

On his second visit to the Diolosa Publishing House, petitioner together with Rogelio Yusay, a letterpress machine operator, decided to buy the linotype
machine, Model 14. The transaction was basically verbal in nature but to facilitate the loan application with the DBP, a pro forma invoice

the machine was delivered to petitioner's publishing house at Tangub, Bacolod City where it was installed by one CrispinoEscurido, private respondent
issued a certification wherein he warranted that the machine sold was in "A-1 condition", together with other express warranties. 7
Prior to the release of the loan, a representative from the DBP, Bacolod, supposedly inspected the machine but he merely looked at it to see that it was
there 8 The inspector's recommendation was favorable and, thereafter, petitioner's loan of P50,000.00 was granted and released.
On November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly as it needed a new distributor bar.
Private respondent made no reply to said letter, so petitioner engaged the services of other technicians. Later, after several telephone calls regarding the
defects in the machine, private respondent sent two technicians to make the necessary repairs but they failed to put the machine in running condition. In
fact, since then petitioner was never able to use the machine
private respondent decided to purchase a new distributor barwhen thereafter petitioner asked private respondent to pay for the price of the distributor bar,
the latter asked petitioner to share the cost with him. Petitioner thus finally decided to indorse the matter to his lawyer.

ISSUE :

WON an article that is sold as a secondhand item, a gives an implied warranty of its quality or fitness.
HELD:

On the basis of the foregoing circumstances, the inescapable conclusion is that private respondent is indeed bound by the express warranty he executed

in favor of herein petitioner


His certification as to the condition of the machine was not made to induce petitioner to purchase it but to confirm in writing for purposes of the financing
aspect of the transaction his representations thereon. Ordinarily, what does not appear on the face of the written instrument should be regarded as
dealer's or trader's talk; 25 conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere
dealer's talk.
is generally held that in the sale of a designated and specific article sold as secondhand, there is no implied warranty as to its quality or fitness for the
purpose intended, at least where it is subject to inspection at the time of the sale. On the other hand, there is also authority to the effect that in a sale of a
secondhand articles there may be, under some circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or for the
particular purpose of the buyer. In a line of decisions rendered by the United States Supreme Court, it had theretofore been held that there is no implied
warranty as to the condition, adaptation, fitness, or suitability for the purpose for which made, or the quality, of an article sold as and for a secondhand
article. Thus, in finding for private respondent, the respondent court cited the ruling in Sison vs. Ago, et al. to the effect that unless goods are sold as to
raise an implied warranty, as a general rule there is no implied warranty in the sale of secondhand articles.
EXCEPTIONS. The general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken from the Uniform Sales Act,
provides: "Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: (1) Where the buyer,
expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the
seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such
purpose;" Furthermore, and of a more determinative role in this case, a perusal of past American decisions likewise reveals a uniform pattern of rulings to
the effect that an express warranty can be made by and also be binding on the seller even in the sale of a secondhand article.
On the question as to whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties, we have to
consider the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an imperfection or defect of such
nature as to engender a certain degree of importance. An imperfection or defect of little consequence does not come within the category of being
redhibitory. 26
(REDHIBITORY DEFECT; MUST BE AN IMPERFECTION OR DEFECT OF SUCH NATURE AS TO ENGENDER A CERTAIN DEGREE OF
IMPORTANCE. On the question as to whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the
parties, we have to consider the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an imperfection or
defect of such nature as to engender a certain degree of importance. An imperfection or defect of little consequence does not come within the category of
being redhibitory.)

Payment of the purchase price (Art. 1524)


Bricktown Devt. Corp
v. Amor Tierra Devt
Corp

FACTS:

Petitioner Bricktown Development Corporation, executed two Contracts to Sell in favor of private respondent Amor Tierra Development, covering a total of
96 residential lots, situated at the Multinational Village Subdivision, La Huerta, Paraaque, Metro Manila, with an aggregate area of 82,888 square
meters. The total price of P21,639,875.00 shall be paid in installments. The parties also executed a Supplemental Agreemen, providing that private
respondent would additionally pay to petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of downpayment
Private respondent was only able to pay a sum of P1,334,443.21
In the meanwhile, the parties continued to negotiate for a possible modification in their agreement
petitioner corporation, through its legal counsel, sent private respondent a "Notice of Cancellation of Contract on account of the latter's continued failure
to pay the installment. Petitioner corporation advised private respondent, that still had the right to pay its arrearages within 30 days from receipt of the
notice "otherwise the actual cancellation of the contract (would) take place."
Several months later, private respondent, through counsel, demanded the refund of private respondent's various payments to petitioner corporation,
allegedly "amounting to P2,455,497.71," with interest
The demand, not having been heeded, private respondent commenced, its action with the court a quo
trial court rendered its decision, declaring the Contracts to Sell and the Supplemental Agreement rescinded; ordering the petitioner corporation, Bricktown
Development Corporation, , to return to the [private respondent] the amount of P1,334,443.21 with interest
appellate court affirmed the trial courts decision; ruled that petitioners themselves delayed or have prevented the performance of the contracts to sell
and supplemental agreement, and thus stopped from cancelling the same.
reasonable ground to believe that because of the negotiations between the parties, coupled with the fact that the plaintiff never took actual possession of


ISSUE:

HELD:

the properties and the defendants did not also dispose of the same during the pendency of said negotiations, the plaintiff was led to believe that the
parties may ultimately enter into another agreement in place of the "contracts to sell." There was, evidently, no malice or bad faith on the part of the
plaintiff in suspending payments. On the contrary, the defendants not only contributed, but had consented to the delay or suspension of payments. They
did not give the plaintiff a categorical answer that their counter-proposals will not materialize.
Hence the present petition
whether or not the contracts to sell were validly rescinded or cancelled by petitioner corporation
whether or not the amounts already remitted by private respondent under said contracts were rightly forfeited by petitioner corporation.
Yes. It were validly rescinded. The cancellation of the contracts to sell by petitioner corporation accords with the contractual covenants of the parties, and
such cancellation must be respected. It may be noteworthy to add that in a contract to sell, the nonpayment of the purchase price (which is normally the
condition for the final sale) can prevent the obligation to convey title from acquiring any obligatory force
The court conclude that petitioner corporation still acted within its legal right to declare the contracts to sell rescinded or cancelled, considering,
nevertheless, the peculiar circumstances found to be extant by the trial court, confirmed by the Court of Appeals, it would be unconscionable, in our view,
to likewise sanction the forfeiture by petitioner corporation of payments made to it by private respondent

Action for payment of price (Art. 1595)


EDCA Publishing and
Distributing Corp. v.
Santos

FACTS:

ISSUE:

HELD:

a person identifying himself as Professor Cruz placed an order by telephone with the petitioner company for 406 books, payable on delivery.
Without verifying his identity, EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz issued a personal check
covering the purchase price of P8,995.65.
Cruz sold 120 of the books to private respondent Santos who, after verifying the seller's ownership from the invoice he showed her, paid him P1,700.00.
Meanwhile, EDCA having become suspicious over a second order placed by Cruz, have prompt them to inquire and have learned that Cruz was an
impostor and that he has no account in with the Philippine Amanah Bank, against which he had drawn the payment check.
EDCA with the help from the police, took their matters with their own hands, set a trap and arrested Cruz. Investigation disclosed his real name as Tomas
de la Pea and his sale of 120 of the books he had ordered from EDCA to the private respondents.
On the night of the same date, They forced their way into the store of the private respondents and threatened Santos with prosecution for buying stolen
property. They seized the 120 books without warrant
Private respondent sued for recovery of the books after demand for their return was rejected by EDCA.
Municipal trial Court rendered a decision recognizing the ownership of private respondent Santos over the books; such decision was sustained by RTC
and CA
A writ of preliminary attachment was issued and the petitioner, after initial refusal, finally surrendered the books to the private respondents.
Hence this present petition. Petitioner contend that because Cruz having no legal title over the books, he could not have validly transfer it to the private
respondent and cites numerous cases holding that the owner who has been unlawfully deprived of personal property is entitled to its recovery except only
where the property was purchased at a public sale. Furthermore they claim that private respondent Santos is in bad faith
W/n EDCA who has been unlawfully deprived of personal property is entitled to its recovery against private respondent Santos
The remedy is not against the private respondents but against Tomas de la Pea, who has caused all this trouble. EDCAs loss cannot be transferred to
Santos who had acted in good faith, and with proper care, when they bought the books from Cruz.
The contention of the petitioner, that private respondent have not establish their ownership over the disputed books is untenable. As stated in Art. 559.
The possession of movable property acquired in good faith is equivalent to a title.XXX
Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents.
The fact that Cruz had not yet paid did not impair the title acquired by the private respondents to the books.
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks.

Action for rescission of contract (Art. 1597)

Ocampo v. CA

FACTS:

ISSUE:

HELD:

Tolosa, the owner of the disputed property, mortgaged the land to the Philippine Veterans Bank and had the encumbrance annotated on his certificate of
title
On 21 April 1975, Tolosa and Ocampo (represented by Borres) entered into an "Agreement to Sell Real Property" whereby Tolosa sells the land to
Ocampo in consideration of P25,000.00, P12,500.00 of which was paid upon signing of the deed and the balance to be due within six (6) months
thereafter.
Before the six-month period to complete the payment of the purchase price expired, Ocampo paid but only the total of P16,700.00. Nevertheless Tolosa
accepted her subsequent late payments
On 6 June 1976, upon learning of the mortgage lien, Ocampo caused her adverse claim to be annotated on Tolosas certificate of title
Tolosa sought the cancellation of Ocampos adverse claim and presented her with two options, namely, a refund of payments made, or a share from the
net proceeds if sold to a third party.
Ocampo through counsel wrote Tolosa expressing her readiness to pay the balance of the purchase price, should Tolosa be ready to deliver to her the
deed of absolute sale and the owners duplicate of OCT for purposes of registration.
On 3 June 1977, Tolosa and Magdalena S. Villaruz executed a "Contract to Sell" selling the same land to Villacruz in consideration of P94,300.00.
On 19 July 1977, Tolosa wrote Ocampo offering to reimburse her what she paid provided she would sign a document canceling her adverse
claim. Failing to convince Ocampo, Tolosa filed a petition to cancel the adverse claim of Ocampo, but such was denied
On 7 October 1977, Tolosa filed an action for "Breach of Contract, Damages and Quieting of Title". Magdalena S. Villaruz, then claiming to have already
bought the land, intervened in the case.
On 9 October 1979, during the pendency of Civil Case No. 12163, Tolosa succeeded in securing from another branch of the court the cancellation of the
adverse claims of Ocampo without notice to her. This paved the way for the registration of the contract of sale of Villaruz and the subsequent issuance of
Transfer Certificate of Title
RTC dismissed the complaint of Tolosa as well as the complaint in intervention of Villacruz, declaring the contract to sell executed between plaintiff
Severino Tolosa and third-party defendant Magdalena Villaruz as null and void and ordering Tolosa to execute the corresponding deed of sale in favor of
Ocampo
CA reversed the trial courts decision, declaring S. Villaruz the absolute owner of the parcel of land covered on the theory that the agreement of Tolosa
and Ocampo was merely a contract to sell. When plaintiff failed to pay the price after the execution of the document of sale as agreed previously, the
contract became null and void for lack of consideration
W/n the failure of Ocampo to complete her payment of the purchase price within the stipulated period accorded Tolosa the option to rescind the contract
Under Art. 1592 of the Civil Code, the failure of Ocampo to complete her payment of the purchase price within the stipulated period merely accorded
Tolosa the option to rescind the contract of sale upon judicial or notarial demand.
However, the letter of rescission claimed to have been sent by Tolosa to was defective because it was not notarized and, more importantly, it was not
proven to have been received by Ocampo.
Likewise, Civil Case No. 12163 could not be considered a judicial demand under Art. 1592 of the Civil Code because it did not pray for the rescission of
the contract. Although the complaint sought the cancellation of Ocampos adverse claim on Tolosas OCT and for the refund of the payments made, these
could not be equivalent to a rescission
Even assuming arguendo that Civil Case No. 12163 was a valid judicial demand, rescission is not granted as a matter of course. Before Civil Case No.
12163 was filed on 7 October 1977, Ocampo not only paid Tolosa a total of P20,600.00 but also discharged Tolosas mortgage debt in the amount of
P4,453.41. Had not Tolosa ordered the Philippine Veterans Bank to return the mortgage debt payment by Ocampo, the purchase price would have been
deemed fully paid.
The offer to pay the balance prior to the demand for rescission is sufficient to defeat Tolosas prerogative under Art. 1592 of the Civil Code.Hence judicial
rescission of the contract is not justified
therefore, pursuant to the rules on double sales, the contract of sale with Ocampo should prevail against Villacruz who, though have registered is first, but
was in bad faith

Recto Law Sale of Movables on Installment (Art. 1484-1486)

Southern Motors Inc. v.


Moscoso

FACTS:

ISSUE:

HELD:

Nonato v. IAC

FACTS:

Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on installment basis, for P6,445.00.
Upon making a down payment, the defendant executed a promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase
price to secure the payment of which, a chattel mortgage was constituted on the truck in favor of the plaintiff.
Of said account, the defendant had paid a total of P550.00, of which P110.00 was applied to the interest and P400.00 to the principal, thus leaving an
unpaid balance of P4,475.00.
The defendant failed to pay 3 installments on the balance of the purchase price.
Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note.
Upon plaintiff's petition, a writ of attachment was issued by the lower court on the properties of the defendant. Pursuant thereto, the said Chevrolet truck,
and a house and lot belonging to defendant, were attached by the Sheriff and said truck was brought to the plaintiff's compound for safe keeping.
After attachment and before the trial of the case on the merits, acting upon the plaintiff's motion for the immediate sale of the mortgaged truck, the
Provincial Sheriff of Iloilo sold the truck at public auction in which plaintiff itself was the only bidder for P1,OOO.OO.
The trial court condemned the defendant to pay the plaintiff the amount of P4,475.00 with interest at the rate of 12% per annum from August 16,
1957,until fully paid, plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.
appellee claims that in filing the complaint, demanding payment of the unpaid balance of the purchase price, it has availed of the first remedy of specific
performance; the appellant, on the other hand, contends that appellee had availed itself of the third remedy of foreclosure of the chattel mortgage on the
truck.
Whether or not the attachment caused to be levied on the truck and its immediate sale at public auction, was tantamount to the foreclosure of the chattel
mortgage on said truck.
No.Article 1484 of the Civil Code provides that in a contract of sale of personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies: (I) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure
to pay cover two or more installments; and (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure
to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.
The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the promissory
note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil
actions, under the Rules of Court.
Had the plaintiff elected the foreclosure, it would not have instituted this case in court; it would not have caused the chattel to be attached under Rule 59,
and had it sold at public auction, in the manner prescribed by Rule 39. That the plaintiff did not intend to foreclose the mortgage truck, is further evinced
by the fact that it had also attached the house and lot of the appellant at SanJose, Antique. We perceive nothing unlawful or irregular in plaintiff's act of
attaching the mortgaged truck itself.
Since the plaintiff has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of the judgment that may be favorably
rendered hereon, on all personal and real properties of the latter not exempt from execution sufficient to satisfy such judgment. It should be noted that a
house and lot at SanJose, Antique were also attached. No one can successfully contest that the attachment was merely an incident to an ordinary civil
action.
The mortgage creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged property and may cause an attachment to
be issued and levied on such property, upon beginning his civil action.
where the action instituted is for specific performance and the mortgaged property subsequently attached and sold by virtue of an execution, the sale
thereof does not amount to a foreclosure of the mortgage; hence, the seller-creditor is entitled to deficiency judgment

In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from the Peoples Car Inc on installment basis.
To secure their complete payment, Nonato executed a promissory note and a chattel mortgage in favor of Peoples Car Inc.
Subsequently, Peoples Car Inc assigned its rights and interest over the note and mortagge in favor of Investors Finance Corp (IFC).

ISSUE:

HELD:

o
o
o

Ridad v. Filipinas
Investment and
Finance Corp

FACTS:

ISSUE:

For failure of the spouses to pay two or more installments, despite demands, the car was repossessed by IFC.
Despite repossession, IFC still demanded from Nonato that they pay the balance of the price of the car. IFC, then, filed a complaint for the payment of the
price of the car with damages
Nonato, in their defense, argued that when the company repossessed the car, IFC had, by that act, effectively cancelled the sale of the vehicle. As such,
it was barred from exacting the recovery of the unpaid balance of the purchase price as mandated by Art 1484.
The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance of the purchase price of the car with interest. CA affirmed the
same.
WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments,
may also demand payment of the balance of the purchase price
No. The applicable law in the case at bar is Art 1484 which provides that:
In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:
o
Exact fulfillment of the obligation, should the vendee fail to pay;
o
Cancel the sale, should the vendee's failure to pay cover two or more installments;
o
Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void.
This provision means that should the vendee or the purchaser of a personal property default in the payment of two or more of the agreed installments, the
vendor or the seller has the option to avail any of these 3 remedieseither to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or
to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as an alternative, not
cumulative, that the exercise of one should bar the exercise of the others
In the present case, it is not disputed that IFC had taken possession of the car purchased by the Nonatos after the spouses defaulted in their payments.
The defense of IFC that it the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full
payment of the spouses is untenable. The receipt issued by IFC to the spouses when it took possession of the vehicle that the vehicle could be redeemed
within 15 days. This could only mean that should the spouses fail to redeem the car within the period provided, IFC would retain permanent possession of
the vehicle. IFC even notified the spouses Nonato that the value of the car was not sufficient to cover the balance of the purchase price and there was no
attempt at all on the part of the company to return the car.
The acts performed by IFC are consistent with the conclusion that it had opted to cancel the sale of the vehicle. Therefore, it is barred from exacting
payment from the petitioners of the balance of the price of the vehicle which it had already repossessed (it cannot have its cake and eat it too)
these remedies are alternative and are not to be exercised cumulatively or successively and the election of one is a waiver of the right to resort to the
others.
the cancellation of the contract bars the vendore from recovering any unpaid balance of the price
for a failure of the buer to pay 2 or more installments, the vendor-mortgagee repossessed the car. The receipt issued by the vendors assignee to the
vendee when it took possession of the vehicle states that the vehicle could be redeemed within 15 days, meaning that should the vendee fail to
redeemed within said period by paying the balance of the purchase price, the assignee would retain permanent possession of the vehicle as it did in fact.
It was held that by this act, the vendor exercised its option to cancel the contract of sale
The spouses Ridad purchased from the Supreme Sales Development Corporation two (2) brand new Ford Consul Sedans complete with accessories. To
secure payment thereof, plaintiffs executed on the same date a promissory note covering the purchase price and a deed of chattel mortgage not only on
the two vehicles purchased but also on another car (Chevrolet) and their franchise or certificate of public convenience granted by the defunct Public
Service Commission for the operation of a taxi fleet with Filipinas Investment.
Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, Filipinas Investment foreclosed on the chattel mortgage on the
Ford Consul Sedans. The foreclosure sale had a deficiency. Consequently, the corporation foreclosed the mortgage constituted on the (Chevrolet) and
their franchise or certificate of public convenience.
Whether Filipinas Investment is precluded from foreclosing the second mortgage to recover the deficiency on the first mortgage

HELD:

No. The vendor of personal property sold on the installment basis is precluded, after foreclosing the chattel mortgage on the thing sold from having a
recourse against the additional security put up by a third party to guarantee the purchasers performance of his obligation on the theory that to sustain the
same would overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, said guarantor will in turn be entitled to
recover what he has paid from the debtor-vendee, and ultimately it will be the latter who will be made to bear the payment of the of the balance of the
price, despite the earlier foreclosure of the chattel mortgage given by him, thereby indirectly subverting the protection given the latter.
If the vendor under such circumstance is prohibited from having a recourse against the additional security for reasons therein stated, there is no ground
why such vendor should not likewise be precluded from further extrajudicially foreclosing the additional security put up by the vendees themselves, as in
the instant case, it being tantamount to a further action 5 that would violate Article 1484 of the Civil Code, for then is actually no between an additional
security put up by the vendee himself and such security put up by a third party insofar as how the burden would ultimately fall on the vendee himself is
concerned.

Borbon vs Servicewide Specialists


Facts:
Defendants Daniel L. Borbon and Francisco Borbon signed a promissory note to the order of Pangasinan Auto Mart
Inc., to pay without notice or demand the amount of P 122856 payable in installment for twelve months and a late
payment charge of 3% shall be added on each unpaid installment. It was further stipulated that acceptance by the holder
of payment of any installment after due date will not be considered as extending the time for payment nor the failure of the
holder to exercise any of its rights be deemed a waiver of such rights. The rights of Pangasinan Auto Mart was later
assigned to Filinvest Credit Corporation. Filinvest assigned all its rights, interest and titleover the Promissory notes and
the chattel mortgate to the plaintiff. Defendants failed to pay their monthly installments, Filinvest demanded from
defendants payment of their installments. After accounts were assigned to the plaintiff, it attempted to collect by sending
a demand letter to the defendant for them to pay their entire obligation. Defendants claim that what they intend to buy
from Pangasinan was a jeepney type isuzu K.C Cab. The vehicle they bought was not delivered. Instead, through
misinterpretation and machination, the Pangasinan Motor Inc. delivered an Isuzu crew cab, as this is the unit available at
their warehouse. Later the representative of Pangasinan Auto mart, Inc. (assignor) told the defendants that their available
stock is an Isuzu Cab but minus the rear body, which the defendants agreed to deliver with the understanding that the
Pangasinan Auto Mart, Inc. will refund the defendants the amount of P10,000.00 to have the rear body completed Despite
communications with the Pangasinan Auto Mart, Inc. the latter was not able to replace the vehicle until the vehicle
delivered was seized by order of this court. the defendants argue that an asignee stands in the place of an assignor
which, to the mind of the court, is correct. The asignee exercise all the rights of the assignor The defendants further claim
that they are not in default of their obligation because the Pangasinan Auto Mart was first guilty of not fulfilling its

obligation in the contract. the defendants claim that neither party incurs delay if the other does not comply with his
obligation.
Issue: WON the petitioners may recover the deficiency
Held:
No. When the seller assigns his credit to another person, the latter is likewise bound by the same law. Accordingly,
when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency, and the sellermortgagee is deemed to have renounced any right thereto. A contrario, in the event of the seller-mortgagee first seeks,
instead, the enforcement of the additional mortgages, guarantees or other security arrangements, he must be then be
held to have lost by waiver or non-choice his lien on the chattel mortgage of the personal property sold by and mortgaged
back to him, although, similar to an action for specific performance, he may still levy on it expenses incurred for the
prosecution of the case, such as attorney's fees, could rightly be awarded.

Pascual vs. Universal Motors Corp.


FACTS:
Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual) executed the real estate mortgage
subject matter of this complaint on December 14, 1960 to secure the payment of the indebtedness of PDP Transit, Inc.
(PDP Trans.) for the purchase of 5 units of Mercedes Benz trucks, with a total purchase price or principal obligation of
P152,506.50 which was to bear interest at 1% per month starting that day, but the plaintiffs' guarantee is not to exceed
P50,000.00 which is the value of the mortgage. The PDP Trans., as the spouses Pasqual's principal, paid to defendantappellant Universal Motors Corporation (Universal Motors) the sum of P92,964.91 on April 5, 1961 for two of the five
Mercedes Benz trucks and on May 22, 1961 for the remaining three, thus leaving a balance of P68,641.69 including
interest due on February 8, 1965.

On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against the PDP Trans. to collect
the balance due under the Chattel Mortgages and to repossess all the units sold to PDP Trans. as the spouse Pascuals
principal, including the 5 units guaranteed under the subject Real (Estate) Mortgage. During the hearinbg, Universal
Motors admitted that it was able to repossess all the units sold to the latter, including the 5 units guaranteed by the subject
real estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the trucks at
public auction. As the real estate mortgagors, the spouses Pascual filed an action with the CFI of Quezon City for the
cancellation of the mortgage they constituted on 2 parcels of land in favor of the Universal Motors to guarantee the
obligation of PDP Trans. to the amount of P50,000. The said CFI rendered judgment in favor of the spouses Pascual and
ordered the cancellation of the mortgage.

ISSUE: W/N Article 1484 of the New Civil Code applicable in the case at bar

HELD: The Supreme Court affirmed the lower courts decision. Appellant Universal Motors argues that Article 1484 is not
applicable to the case at bar because there is no evidence on record that the purchase by PDP Trans. of the 5 trucks was
payable in installments and that the PDP Trans. had failed to pay two or more installments. Universal Motors also
contends that what Article 1484 prohibits is for the vendor to recover from the purchaser the unpaid balance of the price
after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the security put up by a third
party.
The Supreme Court concluded to the contrary, saying that the first issue was whether or not the sale was one on
installments. The lower court found that it was, and that there was failure to pay two or more installments, a finding which
is not subject to review by the Supreme Court.
The next contention is that what article 1484 withholds from the vendor is the right to recover any deficiency from
the purchaser after the foreclosure of the chattel mortgage, and not a recourse to the additional security put up by a third
party to guarantee the purchaser's performance of his obligation. But the Supreme Court to sustain this argument of the
appellant would be to indirectly subvert and public policy overturn the protection given by Article 1484.

Magna Financial vs. Colarina


Facts:
Respondent bought a Multicab from petitioner. To secure the obligation, respondent executed a promissory note and a
chattel mortgage of the vehicle in favor of the petitioner. Respondent then defaulted in payment. Petitioner filed a
complaint for foreclosure of chattel mortgage with replevin. A writ of replevin was issued and the vehicle was turned over
to Magna financial. The trial court and RTC decided in favor of petitioner and ordered respondent to pay the unpaid
balance and foreclose the chattel mortgage. The Court of Appeals reversed the decision.

Issue: Whether or not MFS can avail of the two remedies, payment of unpaid balance and foreclosure of chattel mortgage

Held: No. Petitioner, having elected the foreclosure of chattel mortgage, is not entitled to be paid the balance even though
it did not actually foreclose the chattel mortgage. Article 1484, paragraph 3, provides that if the vendor has availed himself
of the right to foreclose the chattel mortgage, he shall have no further action against the purchaser to recover any unpaid
balance of the purchase price. Any agreement to the contrary shall be void. In other words, in all proceedings for the
foreclosure of chattel mortgages executed on chattels which have been sold on the installment plan, the mortgagee is
limited to the property included in the mortgage. The petitioners prayer contains two remedies, payment of unpaid
balance and foreclosure of chattel mortgage. Such a scheme is not only irregular but is a flagrant circumvention of the
prohibition of the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced
whatever claim it may have under the promissory note.

Filipinas Investment vs Vitug Jr., and Supreme Sales and Development

Facts: Respondent Vitug bought a four-door Consul sedan for Php 14,605. He executed a promissory note providing for
monthly installment payment and at the same time constituted a chattel mortgage over the vehicle. On the same day he
assigned his negotiated the promissory note in favor of herein petitioner Filipinas Investment, assigning thereto all his
rights, including a right of recourse against co-defendant Supreme Sales.Vitug predictably failed to pay for the car, and
petitioner applied for a writ of replevin, but this was negated when Vitug voluntarily surrendered the vehicle. The carwas
sold in public auction but the proceeds left a balance of Php 8, 349.35, which petitioner now wishes to collect from codefendant Supreme Sales.
Issue1.) WON petitioner can collect on the balance from Supreme Sales despite the provision of the Recto Law (Art
1484)?
Held1.) YES. The transaction between appellant and appellee was purely an ordinary discounting transaction whereby the
promissory note executed by defendant Vitug was negotiated by appellee in favor of appellant for a valuable consideration
at a certain discount, accompanied by an assignment also of the chattel mortgage executedby said defendant to secure
the payment of his promissory note and with the express stipulation that should there be any deficiency, recourse could be
had against appellee.Stated otherwise, the remedy presently being sought is not against the buyer of the car or the
defendant Vitug but against the seller, independent of whether or not such seller may have a right of recovery against the
buyer, which, in this case, he does not have under the Recto Law

Olympia Housing VS Panatiatic

Facts: Petitioner and respondent Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell whereby the former agreed
to sell to the latter on installment a condominium unit. Respondent subsequently defaulted in the payment of the monthly
installment. Despite repeated demands to pay, respondent failed to settle her obligation. Hence, petitioner rescinded the
contract and thereafter filed a complaint for Recovery of Possession. On her part, respondent interposed the defense that
she had made substantial payments of the purchase price of the subject condominium unit. The Regional Trial Court
dismissed the complaint ruling that it was prematurely filed without complying with the mandate of Republic Act No. 6552.
The trial court found no notice of cancellation of the demand for rescission of the contract by a notarial act and no full
payment of the cash surrender value to the respondent. On appeal, the Court of Appeals sustained the trial court.
Petitioner elevated the matter before the Supreme Court.
Issue: W/N the Petioner has sufficient cause to file an action for reconveyance
Held:
No. Republic Act No. 6552, otherwise known as the Realty Instalment Buyer Protection Act,a special law governing
transactions that involve, subject to certain exceptions, the sale on instalment basis of real property. The law has been
enacted mainly to protect buyers of real estate on instalment payments against onerous and oppressive conditions.
The enactment recognizes the right of the seller to cancel the contract but any such cancellation must be done in
conformity with the requirements therein prescribed.[12]In addition to the notarial act of rescission, the seller is required to
refund to the buyer the cash surrender value of the payments on the property.[13] The actual cancellation of the contract
can only be deemed to take place upon the expiry of a 30-day period following the receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial act and the full payment of the cash surrender value.

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