SALES – RIGHTS AND OBLIGATION OF THE VENDEE The lower court, having minutely analyzed the evidence adduced
he lower court, having minutely analyzed the evidence adduced by the parties held that neither
G.R. No. L-29449 December 29, 1928
LEODEGARIO AZARRAGA, plaintiff-appellee,
vs.
MARIA GAY, defendant-appellant.
VILLAMOR, J.:
By a public document Exhibit A, dated January 17, 1921, the plaintiff sold two parcels of lands to
the defendant for the lump sum of P47,000, payable in installments.
The conditions of the payment were: P5,000 at the time of signing the contract Exhibit A; P20,000
upon delivery by the vendor to the purchaser of the Torrens title to the first parcel described in the
deed of sale, P10,000 upon delivery by the vendor to the purchaser of Torrens title to the second
parcel; and lastly the sum of P12,000 one year after the delivery of the Torrens title to the second
parcel.
The vendee paid P5,000 to the vendor when the contract was signed. The vendor delivered the
Torrens title to the first parcel to the vendee who, pursuant to the agreement, paid him P20,000. In
the month of March 1921, Torrens title to the second parcel was issued and forthwith delivered by
the vendor to the vendee who, however, failed to pay the P10,000 as agreed, neither did she pay
the remaining P12,000 one year after having received the Torrens title to the second parcel.
The plaintiff here claims the sum of P22,000, with legal interest from the month of April 1921 on
the sum of P10,000, and from April 1922 on the sum of P12,000, until full payment of the amounts
claimed.
The defendant admits that she purchased the two parcels of land referred to by plaintiff, by virtue
of the deed of sale Exhibit A, but alleges in defense: (a) That the plaintiff knowing that the second
parcels of land he sold had an area of 60 hectares, by misrepresentation lead the defendant to
believe that said second parcel contained 98 hectares, and thus made it appear in the deed of sale
and induced the vendee to bind herself to pay the price of P47,000 for the two parcels of land, which
he represented contained an area of no less than 200 hectares, to which price the defendant would
not have bound herself had she known that the real area of the second parcel was 60 hectares, and,
consequently, she is entitled to a reduction in the price of the two parcels in proportion to the area
lacking, that is, that the price be reduced to P38,000; (b) that the defendant, in addition to the
amounts acknowledged by the plaintiff, had paid other sums amounting to P4,000; and (c) that the
defendants never refused to pay the justly reduced price, but the plaintiff refused to receive the
just amount of the debt.
And by way of cross-complaint, the defendant prays that she be indemnified in the sum of P15,000
for damages sustained by her by reason of the malicious filing of the instant complaint.
The plaintiff, replying to the amended answer, alleges that the contract of sale in question was made
only for the lump sum of P47,000, and not at the rate of so much per hectare, and that the
defendant's claim for alleged damages has prescribed.
the plaintiff nor the defendant gave any importance to the area of the land in consenting to the
contract in question, and that there having been no fraud when the parties agreed to the lump sum
for the two parcels of land described in the deed Exhibit A, following article 1471 of the Civil Code,
ordered the defendant to pay the plaintiff the sum of P19,300 with legal interest at 8 per cent per
annum from April 30, 1921 on the sum of P7,300, and from April 30, 1922, on the sum of P12,000.
And finally dismissed the defendant's cross-complaint, without special pronuncement as to costs.
A motion for a new trial having been denied, this case was brought up to this court through the
proper bill of exceptions.
The appellant alleges that the trial court erred in not considering that the plaintiff induced the
defendant by deceit, to pay him the stipulated price for the two parcels he sold, stating falsely in
the deed of sale that the second of said parcels had an area of 98 hectares when he knew that in
reality it only had about 60 hectares more or less, or at least, if such deceit was not practised that
mre that there was a mistake on the part of Maria Gay in believing that said second parcel contained
98 hectares.
As a question of fact the trial court found from the evidence adduced by the parties, that the plaintiff
had not practised any deception in agreeing with the defendant upon the sale of the two parcels of
land described in Exhibit A. We concur with the trial court in this conclusion. It appears of record
that before the execution of the contract Exhibit A, the defendant went over the plaintiff's land and
made her wn calculations as to the area of said two parcels. But this not all. The plaintiff delivered
to the defendant the documents covering the land he was trying to sell. As to the first parcel there
is no question whatever and the defendant's contention is limited solely to the actual area of the
second parcel. The defendant had document Exhibit 4 in her possession which is the deed by which
the plaintiff acquired the land from the original owner, Crispulo Beramo, in which document it
appears that the area of the second parcel is about 70 hectares. It was the defendant who intrusted
the drawing of the deed of sale Exhibit A to her attorney and notary, Hontiveros, and it is to be
presumed that both she and the lawyer who drew the document Exhibit A, had read the contents
of the document Exhibit 4. The plaintiff declares that he signed the document between 5 and 7 in
the afternoon of that day and he did not pay any attention to the area of the second parcel, probably
in the belief that in the drawing of the document the data concerning the area of the land had been
taken from the said Exhibit 4. The defendant testified that she received from the plaintiff a note or
piece of paper containing the data to be inserted in the contract Exhibit A. The plaintiff denies this
and said note or piece of paper was not presented at the trial. We are of opinion that this testimony
of the defendant's is unimportant, because, in reality, if the plaintiff had delivered Exhibit 4 to the
defendant, there was no need to deliver to her another note to indicate the area of the second
which already appeared in the said Exhibit 4.
If, notwithstanding the fact that it appeared in Exhibit 4 that the area of the second parcel was,
approximately, 70 hectares, the defendant, however, stated in said document Exhibit A that said
second parcel contained 98 hectares as was admitted by him in his interviews with the plaintiff in
the months of April and June, 1924, then she has no right to claim from the plaintiff the shortage in
area of the second parcel. Furthermore, there is no evidence of record that the plaintiff made
representatin to the defendant as to the area of said second parcel, and even if he did make such
false representations as are now imputed to him by the defendant, the latter accepted such
representations at her own risk and she is the only one responsible for the consqunces of her
inexcusable credulousness. In the case of Songco vs. Sellner (37 Phil., 254), the court said:
 The law allows considerable latitude to seller's statements, or dealer's talk; and experience
teaches that it as exceedingly risky to accept it at its face value.
Assertions concerning the property which is the subject of a contract of sale, or in regard to its
qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high
price and are always understood as affording to buyers no grund from omitting to make inquires.
A man who relies upon such an affirmation made by a person whose interest might so readily
prompt him to exaggerate the value of his property does so at his peril, and must take the
consequences of his own imprudence.
The defendant had ample opportunity to appraise herself of the condition of the land which she
purchased, and the plaintiff did nothing to prevent her from making such investigation as she
deemed fit, and as was said in Songco vs. Sellner, supra, when the purchaser proceeds to make
investigations by himself, and the vendor does nothing to prevent such investigation from being as
complete as the former might wish, the purchaser cannot later allege that the vendor made false
representations to him. (National Cash Register Co. vs. Townsend, 137 N. C., 652; 70 L. R. A., 349;
Williamson vs. Holt, 147 N. C., 515.) The same doctrine has been sustained by the courts of the
United States in the following cases, among others: Misrepresentation by a vendor of real property
with reference to its area are not actionable, where a correct description of the property was given
in the deed and recorded chain of title, which the purchaser's agent undertook to investigate and
report upon, and the vendor made on effort to prevent a full investigation." (Shappirio vs. Goldberg,
48 Law. ed., 419.) "One who contracts for the purchase of real estate in reliance on the
representations and statements of the vendor as to its character and value, but after he has visited
and examined it for himself, and has had the means and opportunity of verifying such statements,
cannot avoid the contract on the ground that they were false or exaggerated." (Brown vs. Smith,
109 Fed., 26.)
That the defendant knew that the area of the second parcel was only about 70 hectares is shown
by the fact that she received the document Exhibit 4 before the execution of the contract Exhibit A,
as also Exhibit E-3 on September 30, 1920; which is the notification of the day for the trial of the
application for registratin of said parcel, wherein it appears that it had an area of 60 hectares more
or less, and by the fact that she received from the plaintiff in the month of June 1924 the copy of
the plans of the two parcels, wherein appear their respective areas; and yet, in spite of all this, she
did not complain of the difference in the area of said second parcel until the year 1926. Moreover,
the record contains several of the defendant's letters to the plaintiff in the years 1921 to 1925, in
which said defendant acknowledges her debt, and confining herself to petitioning for extentions of
time within which to make payment for the reasons given therein. But in none of these letters is
there any allusion to such lack of area, nor did she complain to the plaintiff of the supposed deceit
of which she believes she is a victim. All of which, in our opinion, shows that no such deceit was
practised, as the trial court rightly found.
As to the alleged error to the effect that the trial court failed to order the reduction from the price
due on the second parcel as stated in the contract of sale Exhibit A, the proportional price of the
area lacking, we are of the opinion that said error has no legal ground.
It appears that by the contract Exhibit A, the parties agreed to the sale of two parcels of land, the
first one containing 102 hectares, 67 ares and 32 centares, and the second one containing about 98
hectares, for the lump sum of P47,000 payable partly in cash and partly in installments. Said two
parcels are defind by means of the boundaries given in the instrument. Therefore, the case falls
within the provision of article 1471 of the Civil Code, which reads as follows:
ART. 1471. In case of the sale of real estate for a lump sum and not at the rate of a specified price
for each unit of measure, there shall be no increase or decrease of the price even if the area be
found to be more or less than that stated in the contract.
The same rule shall apply when two or more estates are sold for a single price; but, if in addition
to a statement of the boundaries, which is indispensable in every conveyance of real estate, the
area of the estate should be designated in the contract, the vendor shall be obliged to deliver all
that is included with such boundaries, even should it exceed the area specified in the contract;
and, should he not be able to do so, he shall suffer a reduction of the price in proportion to what
is lacking of the area, unless the contract be annulled by reason of the vendee's refusal to accept
anything other than that which was stipulated.
The plaintiff contends that, in accrdance with the first paragraph of this article, the defendant has
no right to ask for the reduction of price, whatever may be the area of the two parcels of land sold
her. On the ther hand, the defendant contends that, according to paragraph 2 of the same article
of the Civil Code, she has a right to ask for a reduction of the price due on the second parcel, in
proportion to the area lacking.
In his comments on the article cited, Manresa says, among other things:
. . . if the sale was made for a price per unit of measure or number, the consideration of the
contract with respect to the vendee, is the number of such units, or, if you wish, the thing
purchased as determined by the stipulated number of units. But if, on the other hand, the sale
was made for a lump sum, the consideration of the contract is the object sold, independently of
its number or measure, the thing as determined by the stipulated boundaries, which has been
called in law a determinate object.
This difference in consideration between the two cases implies a distinct regulation of the
obligation to deliver the object, because, for an acquittance delivery must be made in accordance
with the agreement of the parties, and the performance of the agreement must show the
confirmation in fact, of the consideratin which induces each of the parties to enter into the
contract.
From all this, it follows that the provisions of article 1471 concerning the delivery of determinate
objects had to be materially different from those governing the delivery of things sold a price per
unit of measure or number. Let us examine it, and for the sake of greater clearness, let us
expound it as we understand it.
With respect to the delivery of determinate objects two cases may arise, either the determinate
object is delivered as stipulated, that is, delivering everything included within the boundaries,
inasmuch as it is the entirety thereof that distinguishes the determinate object; or that such
entirety is impaired in the delivery by failing to deliver to the purchaser something included within
the boundaries. These are the two cases for which the Code has provided although, in our
opinion, it has not been sufficiently explicit in expressing the distinction; hence, at first sight, the
article seems somewhat difficult to understand.
The first paragraph and the first clause of the second paragraph of article 1471 deal with the first
of said cases; that is where everything included within the boundaries as set forth in the contract
has been delivered. The Code goes on to consider the case where a definite area or number has
been expressed in the contract, and enunciates the rule to be followed when, after delivery, the
area included within said bundaries is found not to coincide with the aforesaid content or
number. Said rule may be thus stated: Whether or not the object of sale be one realty for a lump
sum, or two or more for a single price also a lump sum, and, consequently, not for so much per
unit of measure or number, there shall be no increase or decrease in the price even if the area be
found to be more or less than that stated in the contract.
Thus understood the reason for the regulation is clear and no doubts can arise from its
application. It is concerned with determinate objects. The consideration of the contract, and the
thing to be delivered is a determinate object, and not the number of units it contains. The price
is determined with relation to it; hence, its greater or lesser area cannot influence the increase
or decrease of the price agreed upon. We have just learned the reason for the regulation, bearing
in mind that the Code has rightly considered an object as determinate for the purposes now
treated, when it is a single realty as when it is two or more, so long as they are solds for a single
price constituting a lump sum and not for a specified amount per unit of measure or number.
We have stated that the second possible case in the delivery of determinate objects is that in
which, on account or circumstances of diverse possible origins, everything included within the
boundaries is not delivered.
We have indicated about that where everything included within the boundaries is delivered there
can be no increase or decrease in price, no matter whether the area be more or less than that
given in the contract. From this a very important consequence follows, to wit: That if the vendor
is bound to deliver a determinate object, he is bound to deliver all of it, that is, everything within
its boundaries, in the contract, and that from the moment he fails to do so, either because he
cannot, or because, ignoring the meaning of the contract, he alleges that it contains a greater
area than that stipulated, the contract is partially unfulfilled and it is but just the certain actions
be available to the vendee for the protection of his right.
The rule in the latter case is found in the second paragraph of article 1471, with the exception of
the first clause which refers of the former hypothesis. This rule may be stated as follows: Whether
or not the object of the sale be one realty for a lump sum, or two or more for a single price also
a lump sum, and, consequently not at the rate of a specified price for each unit of measuring or
number, the vendor shall be bound to deliver everything that is included within the boundaries
stated, although it may exceed the area or number expressed in the contract; in case he cannot
deliver it, the purchaser shall have the right either to reduce the price proportionately to what is
lacking of the area or number, or to rescind the contract at his option.
Comprehending the meaning of a sale of a determinate object, it is easily understod how, in cases
wherein by virtue of the rule enunciated, the vendor has to deliver a greater area than that
expressed in the contract, there is, strictly speaking, no excess of area, inasmuch as one may
always properly ask, excess with respect to what? With respect to the area appearing in the deed,
it will be answered. But as this area was not taken into account in entering into the contract
inasmuch as the parties made neither the amount of the price, nor the efficacy of the contract to
depend on the number of its units; since area was written in to fulfill a formal requisite demanded
by the present rules upon the drawing of public instruments, but as a condition essential to the
contract, which, if it were not true, would not be consummated, it results in the long run, that
this detail of the written recital, with respect to which the excess is to be estimated, is so
negligible, so inconsistent, so haphazard, and in the vast majority of cases so wide of the mark,
that it is impossible to calculate the excess; and considering the nature of a contract of sale of a
definite object, it cannot be strictly held that there is any excess at all.
If everything within the stipulated boundaries is not delivered, then the determination object
which was the consideration of the contract for the vendee, is not delivered; hence his power to
nullify it. However, it might be (and this he alone can say), that although he has not received the
object, according to the stipulated terms, it suits him; hence his power to carry the contract into
effect with the just decrease in price referred to in the article under comment.
The manner in which the matter covered by this article was distributed in its two paragraphs
constributes to making it difficult to understand. The rule might have been clearly stated had the
first clause of the second paragraph been included in the first paragraph, the latter to end with
the words: "The same rule shall apply when two or more estates are sold fos a single price." And
if by constituting an independent paragraph, with the rest of the second paragraph, it were made
to appear more expressly that the rule of the second paragraph thus drawn referred to all the
cases of paragraph one, as we have expounded, namely, to the case of a sale of one single estate
and that of two or more for one single price, the rule would have been clearer.
In our opinion, this would have better answered what we deem to be the indubitable intention
of the legislator.
Some eminent commentators construe the last part of article 1471 in a different way. To them
the phrase "and should he not be able to do so" as applied to the vendor, does not mean as
apparently it does "should he not be able to deliver all that is included within the boundaries
stated," but this other thing namely, that if by reason of the fact that a less area is included within
the boundaries than that expressed in the contract, it is not possible for the vendor to comply
therewith according to its literal sense, he must suffer the effects of the nullity of the contract or
a reduction of the price proportionately what may be lacking of the area or number. It is added
as a ground for this solution that if the vendor fulfills the obligations, as stated in the article, by
delivering what is not included with in the boundaries, there can never be any case of
proportionate reduction of the price on account of shortage of area, because he does not give
less who delivers all that he bound himself to.1awphi1.net
According to this opinion, which we believe erroneous, if within the boundaries of the property
sold, there is included more area than that expressed in the title deeds, nothing can be claimed
by the vendor who losses the value of that excess, but if there is less area, then he loses also
because either the price is reduced or the contract is annulled. This theory would be anomalous
in case of sale of properties in bulk, but, especially, would work a gross injustice which the
legislator never intended.
There is no such thing. So long as the vendor can deliver, and for that reason, delivers all the land
included within the boundaries assigned to the property, there can be no claim whatsoever either
on his part, although the area may be found to be much greater than what was expressed, nor
on the part of the puchaser although that area may be in reality much smaller. But as he sold
everything within the boundaries and this is all the purchaser has paid, or must pay for whether
much or little, if afterwards it is found that he cannot deliver all, because, for instance, a part, a
building, a valley, various pieces of land, a glen, etc., are not his, there is no sale of a determinate
object, there is no longer a sale of the object agreed upon, and the solution given by the article
is then just and logical: Either the contract is annulled or the price reduced proportionately.
We have quoted from Manresa's Commentaries at length for a better understanding of the doctrine
on the matter, inasmuch as the contending counsel have inserted in their respective briefs only such
portions of said commentaries as relate to their respective contentions.

It may be seen from a careful reading of the commentaries on said article 1471, that the great author
distinguishes between the two cases dealt with in article 1471, and formulates the proper rules for
each. In the delivery of a determinate object, says the author, two cases may arise; either the
determinate object is delivered as stipulated, that is, delivering everything included within the
boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object; or that
such entirely is impaired in the delivery by failing to deliver to the purchaser something included
within the boundaries. For the first case, Manresa gives the following rule: "Whether or not the
object of the sale be one realty for a lump sum, or two or more for a single price also a lump sum,
and, consequently, not for so much per unit of measure or number, there shall be no increase or
decrease in the price ecven if the area be found to be more or less than that stated in the contract."
And for the second case, this other: "Whether or not the object of the sale one realty for a lump
sum, or two or more for a single price also a lump sum, and, consequently, not at the rate a specified
price for each unit of measure or number, the vendor shall be bnound to deliver everything that is
included within the boundaries stated, although it may exceed the area or number expressed in the
contract; in case he cannot deliver it, the purchaser shall have the right either to reduce the price
proportionately to what is lacking of the area or number, or to rescind the contract, at his option."

Considering the facts of the present controversy, it seems clear to us that the rule formulated for
the second paragraph or article 1471 is inapplicable in the instant case inasmuch as all the land
included within the boundaries of the two parcels sold has been delivered inits entirety to the
vendee. There is no division of the land enclosed within the boundaries of the properties sold; the
determinate object which is the subject matter of the contract has been delivered by the vendor in
its entirety as he obligate himself to do. Therefore, there is no right to complain either on the part
of the vendor, even if there be a greater area than that stated in the deed, or on the part of the
vendee, though the area of the second parcel be really much smaller. (Irureta Goyena vs.
Tambunting, 1 Phil., 490.)

With regard to the damages prayed for by the defendant, the lower court finally dismissed the cross-
complaint without special pronouncement as to costs. And according to the decision of the Supreme
Court od Spain of 1897, a judgment absolving a party from a claim of damages against him, who has
not contravened his obligations, does not violate articles 1101 and 1108 of the Civil Code.

With respect to the question of interest, the lower court likewise held that, as the defendant had
not paid the sum of P7,300 on April 30, 1921, when the plaintiff had delivered the certificate of title,
she was in default from that date and also from the date of one year thereafter, with respect to the
sum of P12,000, contituting the last period of the obligation. We are of the opinion that the lower
court has committed no error which should be corrected by this court.

The judgment appealed from being in accordance with the law, it should be as it is hereby, affirmed
with costs against the appellant. So ordered.
SALES – RIGHTS AND OBLIGATION OF THE VENDEE – ACCEPT DELIVERY – REMEDIES
G.R. No. L-16394 December 17, 1966
JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners,
vs.
ROSA HERNANDEZ, respondent.
REYES, J.B.L., J.:
Appeal from the decision of the Court of Appeals in its Case CA-G.R. No. 20582-R, in effect reversing
the decision of the Court of First Instance of Bulacan in its Civil Case No. 1036.
The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned a 115,850-
square meter parcel of land situated in barrio Balasing, Sta. Maria, Bulacan, and covered by Transfer
Certificate of Title No. T-3598. On 28 May 1954, they sold two (2) separate portions of the land for
P11,000.00 to the herein respondent Rosa Hernandez. These portions were described in the deed
of sale as follows:
Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria Perez, at Aurelio Perez; sa
Timugan, sa lupang kasanib; sa Silanganan, kay Mariano Flores at Emilio Ignacio; sa Kanluran, kay
Cornelio Ignacio; Mayroong (12,500), m.c. humigit kumulang.
Bahaguing nasa gawing Silanganan Humahanga sa Hilagaan, sa kay Rosa Hernandez; sa
Silanganan, kay Domingo Hernandez at Antonio Hernandez; sa Timugan, sa Sta. Maria-Tigbi Road;
at sa Kanluran, sa lupang kasanib (Jose Sta. Ana, Jr.), mayroong (26,500) metros cuadrados,
humigit kumulang.
After the sale (there were two other previous sales to different vendees of other portions of the
land), the petitioners-spouses caused the preparation of a subdivision plan, Psd-43187, was
approved on 13 January 1955 by the Director of Lands. Rosa Hernandez, however, unlike the
previous vendees, did not conform to the plan and refused to execute an agreement of subdivision
and partition for registration with the Register of Deeds of Bulacan; and she, likewise, refused to
vacate the areas that she had occupied. Instead, she caused the preparation of a different
subdivision plan, which was approved by the Director of Lands on 24 February 1955. This plan, Psd-
42844, tallied with the areas that the defendant, Rosa Hernandez, had actually occupied.
On 28 February 1955, herein petitioners-spouses filed suit against respondent Rosa Hernandez in
the Court of First Instance of Bulacan, claiming that said defendant was occupying an excess of
17,000 square meters in area of what she had bought from them. Defendant Rosa Hernandez, on
the other hand, claimed that the alleged excess, was part of the areas that she bought.
The trial court observed:
The only question, therefore, to be determined by the Court is whether or not the plaintiffs had
sold two portions without clear boundaries but with exact areas (12,500 sq. m. and 26,000 sq.
m.) at the rate of P.29 per square meter or, as defendant Rosa Hernandez claimed, two portions,
the areas of which were not definite but which were well defined on the land and with definite
boundaries and sold for the lump sum of P11,000.00.
Finding for the plaintiffs, the said court ordered the defendant, among other things, to vacate "the
excess portions actually occupied by her and to confine her occupation only to Lots 4-a and 4-b as
shown in the plan, Exhibit E, of the plaintiffs . . .," referring to Psd-43187.
Not satisfied with the judgment, defendant Hernandez appealed to the Court of Appeals.
The Court of Appeals dismissed the complaint and declared Rosa Hernandez the owner of lots 4-a
and 4-b in her plan, Psd-42844, upon the following findings:
The contract between appellees and appellant (Exhibit D) provided for the sale of two separate
portions of the same land for the single consideration of P11,000.00. Appellee Jose Santa Ana, Jr.
said the transaction was by a unit of measure or per square meter, and that although the actual
total purchase price of the two parcels of land was P11,300.00 at P0.29 per square meter the
parties agreed to the sale at the reduced price of P11,000.00. The appellant denied this claim of
appellees. Gonzalo V. Ignacio, the notarial officer before the contract of sale was executed, failed
to corroborate Sta. Ana upon this point. Upon the contrary, Ignacio testified that appellant
complained to him and the appellees to the effect that the areas stated in the contract were less
than the actual areas of the parcels of land being sold and here we quote the notarial officer's
own words:
"That the area stated in the document will not be the one to prevail but the one to prevail is
the boundary of the land which you already know." (p. 74, Innocencio).
Sta. Ana is the nephew of the appellant, and the former's assurance probably appeased the latter
against insisting in the correction of the areas stated in the contract of sale.
Two witnesses testified for the appellant. Jesus Policarpio divulged that the same parcels of land
involved in this case were previously offered to him by the appellees for the single purchase price
of P12,000.00. Julio Hernandez stated that his sister, the herein appellant, had offered P10,000.00
as against the appellees' price of P12,000.00, and that he was able to persuade the parties to
meet halfway on the price. Furthermore the previous conveyances made by the appellees for
other portions of the same property (Exhibits B and C) are also for lump sums.
The difference in area of 17,000 square meters is about one-half of the total area of the two
parcels of land stated in the document, but not for this alone may we infer gross mistake on the
part of appellees. The appellees admit the lands in question were separated from the rest of their
property by a long and continuous "pilapil" or dike, and there is convincing proof to show that
the bigger lot (Lot 4-a) was wholly tenanted for appellees by Ciriaco Nicolas and Santiago Castillo
and the smaller lot (Lot 4-b) was wholly tenanted for said appellees by Gregorio Gatchalian. These
facts support the theory that the two parcels of land sold to the appellant were identified by the
conspicuous boundaries and the extent or area each tenant used to till for the vendors. Again,
appellees should not be heard to complain about the deficiency in the area because as registered
owners and possessors of the entire land since 1949 they can rightly be presumed to have
acquired a good estimate of the value and areas of the portions they subsequently sold.
The Court of Appeals concluded by applying to the case Article 1542 of the new Civil Code:
 In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or decrease of the price, although there be greater
or less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but if,
besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its
area or number should be designated in the contract, the vendor shall be bound to deliver all that
is included within said boundaries, even when it exceeds the area or number specified in the
contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion
to what is lacking in the area or number, unless the contract is rescinded because the vendee
does not accede to the failure to deliver what has been stipulated.
and declared Rosa Hernandez the owner of the whole of lots 4-a and 4-b of her own subdivision
Plan Psd-42844, notwithstanding their increased area as compared to that specified in the deed of
sale.
In turn, the Sta. Ana spouses appealed to this Court, assigning the following errors:
The Court of Appeals committed a grave error of law when it departed from the accepted and
usual course of judicial proceedings, by disturbing the findings of fact of the trial court, made
upon conflicting testimonies of the witnesses for the plaintiffs, now in the petitioners, and the
defendant, now the respondent, Rosa Hernandez.
The Court of Appeals committed a grave error of law when it held that the deed of sale, Exhibit
D, was for a lump sum, despite the fact that the boundaries given therein were not sufficiently
certain and the boundaries indicated did not clearly identify the land, thereby erroneously
deciding a question of substance in a way not in accord with law and the applicable decisions of
this Honorable Court.
On the face of the foregoing assignments of error and the petitioners' discussions thereabout, their
position can be summarized as follows: that the Court of Appeals erred in substituting its own
findings of fact for that of the trial court's, without strong and cogent reasons for the substitution,
contrary to the rule that appellate courts shall not disturb the findings of fact of trial courts in the
absence of such strong and cogent reasons; and that Article 1542 of the Civil Code of the Philippines
does not apply, allegedly because the boundaries, as shown in the deed of sale, are not definite.
In the first assignment of error, the petitioner spouses complain against the failure of the Court of
Appeals to accept the findings of fact made by the Court of First Instance. The credibility of
witnesses and the weighing of conflicting evidence are matters within the exclusive authority of the
Court of Appeals, and it is not necessarily bound by the conclusions of the trial court. Both the
Judiciary Act (R.A. 296, section 29) and the Rules of Court (Rule 45, section 2) only allow a review of
decisions of the Court of Appeals on questions of law; and numerous decisions of this Court have
invariably and repeatedly held that findings of fact by the Court of Appeals are conclusive and not
reviewable by the Supreme Court (Galang vs. Court of Appeals, L-17248, 29 January 1962; Fonacier
vs. Court of Appeals, 96 Phil. 418, 421; and cases therein cited; Onglengco vs. Ozaeta, 70 Phil. 43;
Nazareno vs. Magwagi, 71 Phil. 101). Barring, therefore, a showing that the findings complained of
are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute
serious abuse of discretion, such findings must stand, for this Court is not expected or required to
examine and contrast the oral and documentary evidence submitted by the parties. As pointed out
by former Chief Justice Moran in his Comments on the Rules of Court (1963 Ed., Vol. 2, p. 412), the
law creating the Court of Appeals was intended mainly to take away from the Supreme Court the
work of examining the evidence, and confine its task for the determination of questions which do
not call for the reading and study of transcripts containing the testimony of witnesses.
The first assignment of error must, therefore, be overruled. We now turn to the second.
Despite the incontestable fact that the deed of sale in favor of Rosa Hernandez recites a price in a
lump sum (P11,000.00) for both lots (Annex "C", Complaint, Rec. on App., p. 21), appellants insist
that the recited area should be taken as controlling. They combat the application of Article 1542 of
the Civil Code, on the ground that the boundaries given in the deed are indefinite. They point out
that the southern boundary of the small parcel is merely given as "lupang kasanib" and that the
same occurs with the western boundary of the bigger lot, which is recited as "lupang kasanib (Jose
Sta. Ana, Jr.)". The Court of Appeals, however, found as a fact that —
the two parcels of land sold to appellant (i.e., appellee herein, Rosa Hernandez) were identified
by the conspicuous boundaries. (Emphasis supplied)
consisting in a long and continuous pilapil or dike that separated the lands in question from the rest
of the property. On the basis of such findings, that can not be questioned at this stage, for reasons
already shown, it is unquestionable that the sale made was of a definite and identified tract, a corpus
certum, that obligated the vendors to deliver to the buyer all the land within the boundaries,
irrespective of whether its real area should be greater or smaller than what is recited in the deed
(Goyena vs. Tambunting, 1 Phil. 490; Teran vs. Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil.
599; Mondragon vs. Santos, 87 Phil. 471). And this is particularly true where, as in the case now
before this Court, the area given is qualified to be approximate only ("humigit kumulang", i.e., more
or less Rec. on App., p. 22).
To hold the buyer to no more than the area recited on the deed, it must be made clear therein that
the sale was made by unit of measure at a definite price for each unit.
If the defendant intended to buy by the meter be should have so stated in the contract (Goyena
vs. Tambunting, supra).
The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish Civil Code (copied
verbatim in our Article 1542) is highly persuasive that as between the absence of a recital of a given
price per unit of measurement, and the specification of the total area sold, the former must prevail
and determines the applicability of the norms concerning sales for a lump sum.
La venta a cuerpo cierto indudablemente se verifica cuando en el contrato no solo no es precisado
el precio singular por unidad de medida, sino que tampoco son indicadas los dimensiones
globales bales del inmueble, pero tambien se verifica cuando aun ng habiendo sido indicado un
precio singular por unidad de medida, sin embargo es especificada la dimension total del
inmueble, en cuyo ultimo caso entre los dos indices en contraste, constituido uno por la falta de
un precio singular por unidad de medida, y otro por la concrecion de las dimensiones globales del
unmueble, la Ley da prevalencia al mero y presume que aquella individualizacion no habia tenido
para las partes valor esencial, que solo constituia una superabundancia, y no significa que las
partes hayan convenido aquel precio global solo en cuanto el inmueble tuviese efectivamente
 aquellas dimensiones totales, siendo de estimar que esta es una presuncion absoluta, contra la
cual ni el comprador ni el vendedor pueden articular prueba contraria.

Por tanto, ni el comprador ni el vendedor pueden pretender una disminucicion o,

respectivamente un suplemento de precio, cuando las dimensiones globales del unmueble
resulten despues mayores o menores de las indicadas en el contrato, aunque aduzcan que solo
en tanto han convenido el aquel precio en cuanto creian que las dimensiones de la cosa fueran
las precisadas en el contrato. (Tribunal Supreme de España, Sent. de 26 Junio 1956; Rep. Jurisp.
Aranzadi, 2.729) (Emphasis supplied)

The Civil Code's rule as to sales "a cuerpo cierto" was not modified by Act 496, section 58, prohibiting
the issuance of a certificate of title to a grantee of part of a registered tract until a subdivision plan
and technical description are duly approved by the Director of Lands, and authorizing only the entry
of a memorandum on the grantor's certificate of title in default of such plan. The latter provision is
purely a procedural directive to Registers of Deeds that does not attempt to govern the rights of
vendor and vendee inter se, that remain controlled by the Civil Code of the Philippines. It does not
even bar the registration of the contract itself to bind the land.

WHEREFORE, the decision of the Court of Appeals, in its case No. 20582-R, is hereby affirmed. Costs
against the appellants, Jose Santa Ana, Jr. and Lourdes Sto. Domingo.
SALES – RIGHTS AND OBLIGATION OF THE VENDEE – ACCEPT DELIVERY – REMEDIES
G.R. No. 108515 October 16, 1995
LUIS BALANTAKBO, AMADEO BALANTAKBO and HEIRS OF SANCHO BALANTAKBO, petitioners,
vs.
COURT OF APPEALS and LAGUNA AGRO-INDUSTRIAL, COCONUT COOPERATIVE, INC.,
respondents.
NARVASA, C.J.:
Private respondent Laguna Agro-Industrial Coconut Cooperative, Inc. (hereafter simply LAGUNA), a
family corporation organized by the heirs of the deceased spouses Honorio Sumaya and Crispina
Orlanda, was the plaintiff in an action to quiet title over a parcel of unregistered coconut land in Bo.
Dita. Liliw, Laguna, filed in the Regional Trial Court, Br. XXVII, Laguna against herein private
respondents and docketed as Civil Case No. SC-1367
The complaint in said action alleged basically that the land in question had been purchased by the
Sumaya spouses (LAGUNA's predecessors) for P800.00 from Consuelo Vda. de Balantakbo (mother
of petitioner Luis Balantakbo and Sancho Balantakbo), the sale being evidenced by a deed1 executed
by Consuelo on December 13, 1955; and that some twenty (20) years later, or on March 8, 1975,
the seller's heirs, intruded into the land and harvested the coconuts found therein.
In their answer the Balantakbos denied knowledge of the sale and alleged that the land claimed
sued for was different from that owned and held by them.
In the course of the trial the parties, stipulated upon the following facts and circumstances, to wit:
1) on October 8, 1975: — the genuineness and due execution of (a) the Deed of Extrajudicial
Partition executed on December 10, 1945 by the heirs of the deceased Jose Balantakbo, Sr., and of
(b) the affidavit of Consuelo J. Vda. de Balantakbo executed November 3, 1952, adjudicating to
herself ownership of the property left by the deceased Raul Balantakbo;
2) on July 21, 1981: — (a) the description of the land subject of the suit, i.e., as having an area of
2,000 square meters, and as being bounded by the property of named individuals, and (b) the
substance of their respective contentions, viz:
1) LAGUNA's theory that what had been sold to its predecessors, the Sumaya Spouses, was the
land within the identified boundaries, regardless of the area; and
2) the Balantakbos' countervailing theory that the land within said boundaries had an area of
6,870 square meters, more or less, only a portion thereof measuring 2,000 square meters, having
been sold by their mother to the Sumayas: and they are therefore the owners of the remaining
area of 4,870 square meters which they had in fact long possessed.
The Regional Trial Court rendered judgment (per Judge Francisco C. Manabat, Branch 27, Sta. Cruz,
Laguna) in favor of the Balantakbos, dismissing LAGUNA's complaint, upholding the former's theory
of the case and ruling that what was contemplated in the descriptive words "more or less"
immediately following the stated area of 2,000 square meters in the description of the land was
construable as referring only to a "slight difference" in said area, 2 not to a difference as large as
4,870 square meters, or more than double the 2,000 square meters actually stated and intended to
be sold.
The judgment was appealed to the Court of Appeals which after due proceedings reversed it by
decision promulgated on July 9, 1992. The Appellate Court declared LAGUNA the owner of the entire
land, not only of a 2,000-square meter portion thereof, ruling that the area embraced within the
stated boundaries prevails over the area set forth in the descriptions which must have been based
on mere estimates, and that the buyer was entitled to receive all that was included within the
boundaries thus stated in the deed of sale.3
The Court finds no reversible error in said judgment now on appeal by certiorari by the Balantakbos.
The issue here may be stated simply, thus: In case of conflict between the area described and the
actual boundaries of the land, which should prevail?
And it is by no means a novel question. On the contrary, the rule is quite well-settled that what
really defines a piece of land is not the area, calculated with more or less certainty mentioned in
the description, but the boundaries therein laid down, as enclosing the land and indicating its limits. 4
In Dichoso, supra, this Court held:
. . . In a contract of sale of land in mass, it is well established that the specific boundaries stated
in the contract must control over any statement with respect to the area contained within its
boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose
the area with mathematical accuracy. It is sufficient that its extent is objectively indicated with
sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. 5
The case at bar is on all fours with this Court's ruling in the recent case of Miguel Semira vs. Court
of Appeals and Buenaventura An, G.R. No. 76031, promulgated on March 2, 19946 There, private
respondent purchased a parcel of land designated as Lot 4221 in Sto. Niño, Taysan, Batangas for
P850.00 from one Juana Rodriguez. The sale was evidenced by a "Kasulatan ng Bilihan ng Lupa"
executed on January 4, 1961 on which appeared the estimated area of the property as 822.5 square
meters with its boundaries defined. On October 18, 1972, the private respondent sold the lot to his
nephew, Cipriano Ramirez, with the same area and boundaries, the eastern side of which had now
reflected private respondent's subsequent acquisition of an adjoining property from Pascual
Hornilla. On March 12, 1979, Ramirez in turn sold the lot to the petitioner for P20,000,00 but this
time, the area stated in the document of sale was 2,200 sq. m. as actually delimited by its boundaries
and confirmed by the cadastral survey conducted in 1974. When the petitioner occupied the
premises and began construction of a rice-mill thereon, private respondent filed a complaint for
forcible entry in the MCTC, claiming that Lot 4221 belonging to petitioner should only be 822.5 sq.
m. and that the excess of 1,377 sq. m. allegedly forcibly occupied formed part of his Lot 4215
acquired in 1964 from P. Hornilla over which was subsequently issued OCT No. P-12694 in his name
covering said lot and another lot which he (respondent) had also acquired, both having a combined
area of 19,606 sq. m. The MCTC adjudged petitioner the rightful and lawful owner and possessor of
the area in question and threw out the ejectment suit. On appeal, the RTC reversed and was
thereafter sustained by the Court of Appeals. This Court in turn reversed the CA judgment and
reinstated the MCTC decision, holding:
 We have repeatedly ruled that where land is sold for a lump sum and not so much per unit of
measure or number, the boundaries of the land stated in the contract determine the effects and
scope of the sale, not the area thereof. 7 Hence, the vendors are obligated to deliver all the land
included within the boundaries, regardless of whether the real area should be greater or smaller
than that recited in the deed. This is particularly true where the area is described as "humigit
kumulang," that is, more or less. 8 These conclusions are drawn from Art. 1542 of the Civil Code
which states
In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit
of measure or number, there shall be no increase or decrease of the price, although there be
a greater or less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but
if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate,
its area or number should be designated in the contract, the vendor shall be bound to deliver
all that is included within said boundaries, even when it exceeds the area or number specified
in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number, unless the contract is rescinded because
the vendee does not accede to the failure to deliver what has been stipulated. 9
In the present case, it is clear that the disputed parcel of unregistered land was sufficiently identified
and described. The Second Partial Stipulation of Facts submitted by the Parties sufficiently
demonstrates that the parties lay claim to one and the same parcel of land, that descended to Raul
Balantakbo from his father Jose Balantakbo, Sr. 10 later inherited by Consuelo Joaquin Vda. de
Balantakbo from the same Raul, her son 11 and then sold by Consuelo to the Spouses Honorio
Sumaya and Crispina Orlanda. Uniform descriptions of the subject lot were made in the Deed of Sale
executed by Consuelo Joaquin Vda. de Balantakbo in favor of herein private respondent in 1955, in
the Affidavit of Self-Adjudication executed by Consuelo on November 3, 1952, and in the
Extrajudicial Partition of December 10, 1945, to wit:
A parcel of land with the improvements thereon, with fence of madre-cacao trees, situated in
Barrio Dita, Municipality of Lilio. Bounded on the N., by Jose Balantakbo; on the E., by Jose
Balantakbo; on the S., by Venancio Villarica; and on the W., by Cornelio Napil and Prudencio
Ardeza. Containing an area of 2,000 square meters, more or less.
It appears, too, that after the 1970 survey of the property when the true area of the lot was
determined to be 6,870 square meters, more or less, Luis Balantakbo was able to secure in 1975 a
new Tax Declaration No. 9397 in the name of the Heirs of Jose Balantakbo, Sr., covering a 4,873
square-meter parcel of land located at Dita, Liliw, Laguna. Tax Declaration No. 9397 was supposedly
a revival of Tax Declaration No. 42, which, as mentioned in the first paragraph of the Second Partial
Stipulation of Facts, covered the property then described as containing an area of 2,000 square
meters, more or less. This shows that the Tax Declaration No. 9397, obtained by Luis Balantakbo,
covers the same lot, which contains an area equivalent to the difference between the actual area
of the subject land and the area mentioned in the deed of sale, sold to the Sumayas and not another
separate parcel of land.
Moreover, in his testimony, petitioner Luis Balantakbo admitted that the supposed separate parcel
of land for which he obtained a tax declaration is part and parcel of the land inherited by his brother
Raul, then by his mother Consuelo, and thereafter sold by the latter to the Sumayas, Thus:
COURT:
So when your mother sold the land even under Exhibit A, Deed of Sale in 1955, she sold
unsurveyed land of 2,000 square meters which when surveyed in 1970 it turns out to be 6,000
plus square meters?
WITNESS:
Yes, your Honor. 12
Since it was only in 1970 that the true area of the disputed property was determined after a survey,
Consuelo Joaquin Vda. de Balantakbo could not have sold in 1955 only a portion of the lot which
then was known (or believed) to have an area of only 2,000 square meters, more or less, as
mentioned in all the documents covering the land.
And apart from the Tax Declaration secured by Luis Balantakbo after the survey of the subject
property, petitioners failed to present other proof in support of their argument that the land
claimed by them is different from that sold by their mother Consuelo Joaquin Vda. de Balantakbo
to the Sumayas.
Clearly, therefore, the position taken by petitioners that there are two different parcels of land
involved is untenable. Only one parcel of land is involved and the respondent Appellate Court
correctly formulated and resolved affirmatively in favor of private respondent the issue of whether
the actual boundaries should prevail over the area described.
Petitioners' reliance on the Asiain case 13 is misplaced. Following the arguments advanced by the
trial court, petitioners contend that the descriptive words "more or less" after the area which is
2,000 square meters refer only to a slight or inconsiderable difference or a reasonable excess or
deficiency, hence could not have included the 4,870 square meters claimed by petitioners, which is
more than double the area of the lot sold by petitioners' mother to the Sumayas in 1955. In Asiain,
the main consideration of the transaction between the seller Asiain and the buyer Jalandoni was
the size or the area of the land. To convince Jalandoni to buy the land, Asiain even guaranteed that
the land would produce so much sugar in piculs, hence the relevance of the phrase "more or less"
which followed the statement if area in hectares which Asiain assured his land contains. It
developed, however that the area was much less than what was thus represented by the seller. The
Court therein ruled that the mistake with reference to the subject matter of the contract was such
as to render it rescindable, at the buyer's option.
The case at bar is clearly quite different, the stated area being only an additional description of the
land already sufficiently identified and described as being fenced by madre cacao trees and bounded
on all sides by properties with identified owners or holders.
As correctly held by the respondent Appellate Court, this is a case where the land was sold a cuerpo
cierto for a lump sum of P800.00 and not at the rate of a certain sum per unit of measure or number,
with boundaries clearly delimited, hence the area embraced within said boundaries must be held
to prevail over the area indicated in the documents.
WHEREFORE, the petition is DENIED for lack of merit. The appealed decision of the respondent
Court of Appeals is AFFIRMED in toto.
SO ORDERED.
SALES – RIGHTS AND OBLIGATION OF THE VENDEE – PAY PRICE/REMEDIES – SUSPENSION OF
PAYMENTS
G.R. No. L-8024 November 29, 1955
EUSEBIO DE LA CRUZ, plaintiff-appellee,
vs.
APOLONIO LEGASPI and CONCORDIA SAMPEROY, defendants-appellants.
BENGZON, J.:
In the Court of First Instance of Antique, in November, 1950, Eusebio de la Cruz sued Apolonio
Legaspi and his wife to compel delivery of the parcel of land they had sold to him in December,
1949. The complaint alleged the execution of the contract, the terms thereof, the refusal of
defendants to accept payment of the purchse price of P450 which he had tendered, and undue
retention of the realty.
The defendants, in their answer, admitted the sale and the price; but they alleged that before the
document (of sale) "was made, the plaintiff agreed to pay the defendants the amount of P450 right
after the document is executed that very day December 5, 1949, but after the document was signed
and ratified by the Notary Public and after the plaintiff has taken the original of the said document,
the sad plaintiff refused to pay the sum of P450 which is the purchase price of the said land in
question." They asserted that for lack of consideration and for deceit, the document of sald should
be annulled.
Plaintiff's next move was a petition for judgment on the pleadings, contending that the allegations
of the answer gave the defendants no excuse to retain the property, rejecting the price.
Joining the motion for judgment on the pleadings, the defendants maintained that the sale should
be annulled pursuant to their answer's allegatios.
The Honorable F. Imperial Reyes, Judge, rendered judgment (a) ordering plaintiff to pay the price of
P450 to defendants: (b) ordering the latter to receive such price and immediately after such receipt,
to deliver possession of the property to plaintiff.
Having failed in a motion to reconsider, defendants appealed in due time. The seven errors assigned
in their printed brief, assail the correctness of the judgment, maintaining two principal propositions,
namely: (1) the trial judge erroneously disregarded their allegations, in their answer, of non-
payment of the price, as hereinbefore quoted; (2) such allegations which must be deemed admitted
by plaintiff when he moved for judgment on the pleadings — established a good defense, because
the contract was without consideration, and was resolved by plaintiff's failure to pay the price "right
after the document was executed.
As to the first proposition, the decision does not say so, but there is no reason to doubt that as
requested in the plaintiff's motion, His Honor considered the allegations made both in the complaint
and in the answer.
However, he found that defendants' allegations constituted no defense. He read the law correctly,
as we shall forthwith explain.
On the second proposition, appellants rightly say that the Civil Code — not the New Civil Code —
regulates the transaction, which occurred in 1949. Yet they err in the assertion that as 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. It cannot be denied that when the document was
signed the cause or consideration existed: P450. The document specifically said so; and such was
undoubtedly the agreement. Subsequent non-payment of the price at the time agreed upon did not
convert the contract into one without cause or consideration: a nudum pactum. (Levy vs. Johnson,
4 Phil. 650; Puato vs. Mendoza, 64 Phil, 457.) The situation was rather one in which there is failure
to pay the consideration, with its resultant consequences. In other words, when after the
notarization of the contract, plaintiff fialed to hand the money to defendants as he previously
promised, there was default on his part at most, and defendants' right was to demand interest —
legal interest — for the delay, pursuant to article 1501 (3) of the Civil Code (Villaruel vs. Tan King,
43 Phil. 251), or to demand rescission in court. (Escueta vs. Pardo, 42 Off. Gaz. 2759; Cortes vs.
Bibano, 41 Phil. 298.) Such failure, however, did not ipso facto resolve the contract, no stipulation
to that effect having been alleged. (Cf. Warner Barnes & Co. vs. Inza, 43 Phil., 505.) Neither was
there any agreement nor allegation that payment on time was essential. (Cf. Abella vs. Francisco,
55 Phil., 447; Berg vs. Magdalena Estate, 92 Phil., 110.
Indeed, even if the contract of sale herein question had expressly provided for "automatic rescission
upon failure to pay the price," the trial judge could allow plaintiff to enforce the contract, as the
judgment does, in effect because defendants had not made a previous demand on him, by suit or
notarial act.
In the sale of real property, even though it may have been stipulated that in default of the price
within the time agreed upon, the resolution of the contract shall take place ipso facto, the vendee
may pay even after the expiration of the period, at any time before demand has been made upon
him either by suit or by notarial act. After such demand has been made the judge cannot grant
him further time. (Art. 1504 Civil Code.).
By the way, this previous demand, Manresa explains, is a demand for rescission. (Manresa Civil
Code, Vol. 10, p. 288, 2d Ed.; Villaruel vs. Tan King, 43 Phil. 251.).
The appealed judgment will therefore be affirmed, with costs against appellants. So ordered.
SALES – RIGHTS AND OBLIGATION OF THE VENDEE – PAY PRICE/REMEDIES – SALE OF REAL
PROPERTY
G.R. No. 155594 September 27, 2004
RHODORA G. BLAS, petitioner,
vs.
LINDA ANGELES-HUTALLA, respondent.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review of the Decision1 and Resolution2 of the Court of Appeals (CA) in
CA-G.R. CV No. 63978 filed by Rhodora G. Blas.
Respondent Linda Angeles-Hutalla was a Filipino citizen who later became a naturalized citizen of
the United States of America. She owned a grocery store and a restaurant in Sunnyvale, California,
which was beside the small store owned by petitioner Rhodora Blas, a Filipino citizen and the wife
of Victor Blas, also residents of Sunnyvale.
The respondent mentioned to the petitioner that she owned a residential lot located at No. 843
Kapasigan St., Plainview, Mandaluyong, Metro Manila, on which a three-door apartment stood, and
that she was selling the same. The petitioner expressed her interest in purchasing the property. At
that time, the property was not yet registered in the respondent’s name. The respondent and the
petitioner agreed to return to the Philippines so that the latter could see the property. They arrived
in the Philippines in June 1988. The petitioner saw the property and discovered that one of the
apartment units was occupied by the stepmother of the respondent and the latter’s nephew.
Nevertheless, the petitioner decided to purchase the property. Thereafter, the respondent
executed an unnotarized deed of sale over the property, including the three-door apartment, in
favor of the petitioner for the price of ₱250,000.3 Although the respondent claimed in the said deed
that she was the registered owner of the property, the space for the number of the torrens title in
her name was left blank. The petitioner left the deed with her sister Rodelia Goot and, forthwith,
returned to the United States. However, the deed was not filed or recorded in the Register of Deeds.
After a month’s stay in the Philippines, the respondent returned to the United States. The parties
executed on August 8, 1988 a Deed of Sale4 over the property inclusive of the apartment for the
price of US$40,000, and the respondent acknowledged therein the receipt of the said amount. The
deed was notarized by Notary Public Renato A. Calura of the Santa Clara County, who also acted as
a witness to the deed. However, the parties also executed, on the same day, a Real Estate Purchase
Contract and Receipt for Deposit (REPCRD)5 also notarized by Calura. It was made to appear in the
said deed that of the purchase price of US$40,000, the petitioner made a payment of US$5,000 and
obliged herself to pay US$5,000 on or before August 31, 1988, and US$7,000 on or before January
31, 1989. To pay the balance of US$23,000, the petitioner secured, from the respondent, a loan of
US$23,000 payable monthly for eight (8) years, at a monthly installment of US$527.08 plus interest
thereon at the rate of fifteen percent (15%) per annum, the first monthly installment falling due on
February 28, 1989 and the last monthly installment to fall due on the last day of February 1997,
thus:
2. TERMS AND CONDITIONS:
1. Balance of loan to be financed by Seller, Linda H. Cook, for a period of eight (8) years at an
interest rate of 15% per annum, payable in installments of $527.68 per month.
2. Buyer and Seller agree that the monthly payments of $527.08 will begin on FEBRUARY 28,
1989 and will continue each last day of the month until the last day of FEBRUARY 1997. The
total amount of all payments, constituting both principal and interest, will be $50,600 Dollars.
3. A late charge of $26.35 will be added to any payments received more than ten days (10)
after the payment due date.
4. Buyers to purchase the property in the "as is" condition.
5. Buyers agree to pay all court and legal costs in the case of default of any condition of this
contract or in consequence of any legal dispute resulting therefrom.
6. Seller to deliver Title of the Property to the Buyer upon completion of all the requirements
and conditions of this agreement and upon the satisfactory payment of all monies specified.
7. Seller agrees that the Buyer, at any time, may pay off the financed amount sooner than the
terms herein specified, in which case, the interest charges will be adjusted accordingly.
3. This contract consists of two (2) pages of which this is the first.
4. Buyer and Seller agree to act diligently and in good faith in the performance of this contract.
5. FINANCING to be provided by Seller under the terms and conditions herein stated. 6
The petitioner executed a promissory note7 promising to pay the respondent the amount of
US$5,000 on or before August 31, 1988; and the amount of US$7,000 on or before January 31, 1989.
The petitioner took possession of the property and allowed Lerma Laygo, Elma Aguilar, and her
sister Rodelia Blas Goot, to occupy the two vacant apartment units.
In the meantime, the Register of Deeds issued on April 28, 1989 Transfer Certificate of Title (TCT)8
No. 2184 under the name of the respondent over the residential lot. On October 10, 1989, the
petitioner and her sister Emily Garcia signed a document9 stating that the deed of sale executed by
the respondent in June 1988 in the Philippines had been executed only for the purpose of evicting
the respondent’s stepmother and nephew from the apartment and that all parties are bound by the
original contract and nothing else.
On January 8, 1998, the respondent, through counsel, wrote Rodelia Goot demanding that she and
the two other tenants in the apartment vacate the property within twenty (20) days from receipt
thereof.10 On February 2, 1998, the respondent’s counsel received a Letter from the petitioner’s
counsel dated January 28, 1998, claiming that the latter’s client had purchased the property and
that, as such, she was the owner thereof. He then concluded that the demand for the eviction of his
client’s sister and the two other tenants in the apartment was without legal basis.11
Subsequently, the respondent, through her attorney-in-fact, filed a complaint against the petitioner
and the two other tenants in the apartment with the barangay captain. In a Letter12 dated February
5, 1998, the petitioner informed the respondent that she had filed a complaint against the latter in
the proper court in Santa Clara, California, United States of America, for the rescission of the deed
of sale. The respondent, through counsel, thereafter, wrote the petitioner’s counsel on the same
day, maintaining that being the registered owner of the property, she had a better right to possess
the same.
On February 9, 1998, the petitioner filed a Complaint against the respondent in the Regional Trial
Court (RTC) of Mandaluyong City, Branch 214, for specific performance and delivery of title,
docketed as Civil Case No. MC-98-122. She alleged therein that she had paid the purchase price in
full and despite her demands, the respondent failed and refused to deliver the torrens title over the
property in her name. She prayed that judgment be rendered in her favor:
WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that,
after due notice and hearing, a judgment be rendered:
a. Ordering the defendant to surrender to the plaintiff the owner’s duplicate original of the
certificate of title over the property subject matter of this complaint or in the alternative,
ordering the Register of Deeds of the City of Mandaluyong to cancel Transfer Certificate of
Title No. 2184 in the name of the defendant and in lieu thereof, a new one be issued in the
name of the plaintiff;
b. Ordering the defendant to pay the plaintiff the amount of One Million Pesos
(₱1,000,000.00) as actual and compensatory damages;
c. Ordering the defendant to pay the plaintiff the amount of One Hundred Thousand Pesos
(₱100,000.00) as Moral Damages;
d. Ordering the defendant to pay the plaintiff the amount of One Hundred Thousand Pesos
(₱100,000.00) as Exemplary Damages;
e. Ordering the defendant to pay the plaintiff the amount [of] One Hundred Thousand Pesos
(₱100,000.00), plus Three Thousand Pesos (₱3,000.00), by way of Attorney’s Fees; and
f. Costs of suit.
Other reliefs, just and equitable under the premises, are also prayed for.13
The petitioner appended to her complaint a copy of the unnotarized deed of sale14 executed by the
respondent in the Philippines in June 1988.
In her answer to the complaint, the respondent, through her attorney-in-fact, alleged, inter alia,
that the real and binding deed was the REPCRD notarized in Santa Clara by Renato Calura on August
9, 1988, not the deed of sale appended to the complaint. She, likewise, alleged that the balance of
the purchase price was still US$26,289.28. The respondent further stated that, under the said deed,
she was entitled to repossess the property for the petitioner’s failure to comply with the conditions
therein, and prayed that judgment be rendered in her favor, thus:
WHEREFORE, PREMISES CONSIDERED, after trial on the merits, this Honorable Court
rendered judgment:
1. Declaring the Real Estate Purchase Contract and Receipt for Deposit (Annex
"5") rescinded and consider all payments made by the plaintiff as rentals for
the use of the property; further ordering defendant to surrender the said
house and lot located at #843 Kapasigan St., Plainview Subd., Mandaluyong
City, to herein plaintiff and/or her attorney-in-fact;
2. Ordering plaintiff to pay defendant on her counterclaims as follows:
a) Actual damages …………………… P100,000.00
b) Moral damages ……………………. 500,000.00
c) Exemplary damages ………………. 500,000.00
d) Attorney’s fees ……………………. 250,000.00
Defendant prays for such other relief and remedy which may be deemed just and equitable under
the premises.15
The respondent appended to her answer a copy16 of the REPCRD as well as the document signed by
the petitioner and her sister Emily dated October 10, 1989.
In her answer, through her attorney-in-fact, to the request for admission filed by the petitioner, the
respondent denied the genuineness and due execution of the unnotarized deed of sale executed by
her in June 1988 in the Philippines.
Additional Evidence for the Petitioner
The petitioner testified that, as indicated in the deed of sale17 which the respondent executed in
the Philippines, she purchased the property for ₱250,000, which she paid in full to the respondent
at the Intercontinental Hotel, where she was then billeted. However, the respondent did not issue
any receipt therefor. The petitioner then requested her to deliver the owner’s duplicate of title over
the property so that the deed of sale could be notarized and filed with the register of deeds, and
the title, thereafter, transferred in her name, but the respondent refused. Considering that the title
to the property was not yet in her name, the petitioner did not pay the realty taxes for the property
since 1988.
Additional Evidence of the Respondent
The respondent testified that she sold the property for US$40,000, under the deed of sale18 and the
REPCRD.19 She averred that the petitioner made a downpayment of US$5,000 at the
Intercontinental Hotel in Makati City after their arrival in the Philippines in June 1988. However, she
failed to pay the installment due on January 31, 1989 in the amount of US$7,000. The petitioner
merely paid the monthly installments on her loan on an irregular basis until the last installment
payment in the amount of US$500 in March 1997.20 The respondent averred that the petitioner still
had a balance on the downpayment of the property and on her loan inclusive of "late fees,"
computed, thus:
1) Balance of Downpayment inclusive of "
late fees" as of September 1997 ……..………. US$12,658.8521
2) Balance of Loan as of September 1997 ……… 8,533.7722
US$21,192.62
The respondent declared the property for taxation purposes in 1998 and paid the realty taxes due
therefor.23
On June 8, 1999, the trial court rendered judgment and ordered the dismissal of the complaint as
well as the respondent’s counterclaim. The trial court ruled that the real and binding deed of sale
executed by the parties was the REPCRD and that since the petitioner failed to pay in full the
purchase price of the property, the respondent had the right to rescind the said contract and regain
possession of the property. The fallo of the decision reads:
WHEREFORE, the complaint for specific performance against herein defendant is hereby
DISMISSED. Plaintiff is hereby ordered to reconvey possession of the subject property to
herein defendant. The counterclaim of defendant is, likewise, dismissed.
SO ORDERED.24
The petitioner appealed the decision to the CA where she asserted the following:
I
THE HONORABLE TRIAL COURT ERRED IN HOLDING THAT THE REAL CONTRACT BETWEEN THE
PARTIES IS THE REAL ESTATE PURCHASE CONTRACT.
II
ASSUMING, WITHOUT ADMITTING, THAT THE REAL CONTRACT BETWEEN THE PARTIES, IS THE
REAL ESTATE PURCHASE CONTRACT, THE REGIONAL TRIAL COURT GRAVELY ERRED IN ORDERING
THE RECONVEYANCE OF THE PROPERTY AND TREATING THE SUMS PAID BY HEREIN APPELLANT
AS RENTAL FOR THE USE OF THE SAME.25
The petitioner averred, inter alia, that the Maceda Law should apply in her favor. On May 14, 2002,
the CA rendered judgment affirming the decision of the RTC. The appellate court held that the deed
of sale executed by the respondent in the Philippines26 was superseded by the deed of sale she
executed in the United States.27 The CA also ruled that although notarized in the United States of
America, the REPCRD28 is admissible in evidence since the genuineness and due execution was
admitted by the respondent. The appellate court rejected the application of the Maceda Law
because the petitioner failed to invoke the same in the trial court and did so for the first time only
in the CA.
Upon the denial of her motion for reconsideration of the said decision, the petitioner sought relief
in this Court via a petition for review, asserting that –
A.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN RULING THAT THE DOCUMENT DENOMINATED AS "REAL ESTATE PURCHASE
CONTRACT WITH RECEIPT OF DEPOSIT" IS ADMISSIBLE IN EVIDENCE.
B.
BOTH THE TRIAL COURT AND THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR
IN RULING THAT THE APPLICABILITY OF THE MACEDA LAW CANNOT BE CONSIDERED. 29
On the first issue, the petitioner avers that she objected to the admission in evidence of the REPCRD
precisely because the respondent failed to prove the authenticity of the deed. She asserts that the
REPCRD was never marked in evidence during the pre-trial, nor presented during the trial. By her
failure to present Notary Public Renato Calura, the respondent even failed to prove that the REPCRD
was executed and notarized in accordance with law. She avers that the respondent also failed to
prove compliance with the requirements of Section 2 of Act No. 2103, and cites our ruling in Lopez
v. Court of Appeals.30 The petitioner claims that what the respondent identified, by her testimony,
was the Deed of Sale31 she executed on August 8, 1988 in California, and which she adopted as her
evidence.
For her part, the respondent contends that the petitioner failed to challenge the Order of the trial
court dated December 1, 1998 admitting the REPCRD in evidence. She insists that she complied with
Section 20, Rule 132 of the Rules of Court, as amended, and that the petitioner herself admitted the
genuineness and due execution of the REPCRD when she testified.
For its part, the CA admitted in evidence the REPCRD with the following ratiocination:
We agree that the authenticity and due execution of Exhibit "4-A" was not sufficiently
established.
While the Real Estate Purchase Contract and Receipt for Deposit marked as Exhibit "4-A" was
allegedly notarized in the United States of America, it could not be admitted in evidence in
Philippine courts unless it is certified as such in accordance with the provisions of Section 24, Rule
132 of the Rules of Court by a secretary of the embassy or legation, consul-general, consul, vice-
consul, consular agent or by any officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept of said public document and authenticated by the seal
of his office. Since the Real Estate Purchase Contract and Receipt for Deposit was not accordingly
certified, the deed could only be considered as a private document and must be accompanied by
proof of its due execution and authenticity before it could be received in evidence.
In the Rules, there are two (2) ways by which the due execution and authenticity of private
document are proved, thus:
"SEC. 20. Proof of private document. – Before any private document offered as authentic is
received in evidence, its due execution and authenticity must be proved either:
 (a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting of the maker.
Any other private document need only be identified as that which it is claimed to be."
Upon closer scrutiny of the records, however, we discovered that plaintiff-appellant did not
interpose a timely objection to the receipt of this document in evidence, thus, explaining the trial
court’s declaration that "[i]ndeed, the best evidence to establish the true intent of the parties is
not less than the Real Estate Purchase Contract and Receipt for Deposit (Real Purchase Contract),
Exh. 4-A, whose genuineness and due execution, have remained unchallenged." The Rules of
Court pertinently provides in Rule 132, thus:
"SEC. 35. When to make offer. – xxx
Documentary and object evidence shall be offered after the presentation of a party’s
testimonial evidence. Such offer shall be done orally unless allowed by the court to be done in
writing.
SEC. 36. Objection. – Objection to evidence offered orally must be made immediately after the
offer is made.
Objection to a question propounded in the course of the oral examination of a witness shall be
made as soon as the grounds therefor shall become reasonably apparent.
An offer of evidence in writing shall be objected to within three (3) days after notice of the
offer unless a different period is allowed by the court.
In any case, the grounds for the objections must be specified." [Emphasis supplied.]
In an Order dated 5 October 1998, the court a quo declared:
"As prayed for by Atty. Clodualdo C. de Jesus, defendant is given a period of five (5) days from
today to submit his written formal offer of evidence furnishing a copy to Atty. Juanito I. Velasco,
Jr., who is, likewise, given a period of five (5) days to submit his comment. xxx"
Plaintiff-appellant received a copy of defendant-appellee’s formal offer of evidence on 19
October 1998, but filed her comments and objections thereto only eleven (11) days later or on
30 October 1998. Clearly, this was beyond the period set by the Rules and by the trial court.
The established doctrine is that when a party failed to interpose a timely objection to evidence
at the time they were offered in evidence, such objection shall be considered as waived. In Tison
v. Court of Appeals, the Supreme Court set out the applicable principle in the following terms:
"[F]or while the documentary evidence submitted by petitioners do not strictly conform to the
rules on their admissibility, we are, however, of the considered opinion that the same may be
admitted by reason of private respondent’s failure to interpose any timely objection thereto at
the time they were being offered in evidence. It is elementary that an objection shall be made at
the time when an alleged inadmissible document is offered in evidence, otherwise, the objection
shall be treated as waived, since the right to object is merely a privilege which the party may
waive.
As explained in Abrenica vs. Gonda, et al., it has been repeatedly laid down as a rule of evidence
that a protest or objection against the admission of any evidence must be made at the proper
time, otherwise, it will be deemed to have been waived. The proper time is when from the
question addressed to the witness, or from the answer thereto, or from the presentation of the
proof, the inadmissibility of the evidence is, or may be inferred.
Thus, a failure to except to the evidence because it does not conform with the statute is a waiver
of the provisions of the law. That objection to a question put to a witness must be made at the
time the question is asked. An objection to the admission of evidence on the ground of
incompetency, taken after the testimony has been given, is too late. Thus, for instance, failure to
object to parol evidence given on the stand, where the party is in a position to object, is a waiver
of any objections thereto." [Emphasis added.]
We find no sufficient reason, therefore, to reverse the trial court’s ruling on the admissibility of
Exhibit "4-A."32
The contention of the petitioner has no merit.
We agree that the petitioner objected to the admission of the REPCRD when it was formally offered
in evidence33 by the respondent on the ground that its authenticity had not been established. In her
memorandum,34 the petitioner averred that the REPCRD violated the parol evidence rule,
notwithstanding which the trial court admitted the same as part of the evidence of the
respondent.35 However, on appeal in the CA, the petitioner invoked the Maceda Law, under which
a buyer who has paid at least two years of installments under a contract of sale of real estate on
installment payments, including residential apartments, is granted a grace period of one month for
every year of installment payments made. The petitioner thereby admitted that she had made
installment payments not only on the downpayment for the property but also on her loan from the
respondent as provided for in the REPCRD. By invoking the Maceda Law, the petitioner thereby
admitted the due execution, authenticity and the binding effect of the REPCRD. After having
admitted that she had partially complied with the terms and conditions set forth therein, the
petitioner can no longer assail the REPCRD without running afoul the doctrine of estoppel. The
petitioner had either of two choices – take a definite and unequivocal stance and assert that the
REPCRD was not authentic and, as such, inadmissible in evidence; or maintain that the said deed
was valid and authentic, and that she had, in fact, partially complied with the terms and conditions
therein set forth. Indeed, the petitioner cannot validly invoke two defenses which are patently
inconsistent with each other. Furthermore, this is not a case of the petitioner asserting two
alternative causes of action, for the fact of the matter is, she failed to allege alternative causes of
action in her complaint.
The record shows that the petitioner had been insisting, all along, in the trial court that the real and
binding documents between her and the respondent are the following: the Deed of Sale 36 the
respondent executed in the Philippines in June 1988; and the Deed of Sale37 the latter executed in
California on August 8, 1988. But then, on appeal, the petitioner sculptured a two-pronged,
diametrically antithetical attack of the trial court’s decision, claiming that the REPCRD was null and
void and inadmissible in evidence; but later stressed that the REPCRD was valid and binding on the
parties. The petitioner sought refuge in the Maceda Law as a prop for an alternative relief to fend
off the rescission of the REPCRD and the eviction of her sister and the latter’s tenants from the
property. We agree with the following pronouncement of the CA:
Third. Plaintiff-appellant’s assertion that we apply the Maceda Law is repugnant to her theory
that she has fully paid the consideration of the contract of sale. In so insisting on the benefit of
the statute, plaintiff-appellant is in reality abandoning her theory and is belatedly conforming
with defendant-appellee’s position. Thus, to allow her to switch theories for convenience would
be seriously offensive to the rules of fair play especially because defendant-appellee already
underwent the inconvenience and the tediousness of a lawsuit upon instance of plaintiff-
appellant. To even consider the application of this law for the benefit of defendant-appellee is an
inconsideration to the other. We invoke the pronouncement of the Supreme Court stating that
"the rule is well-settled that points of law, theories, issues, and arguments not adequately
brought to the attention of the trial court need not be, and ordinarily will not be considered, by
a reviewing court as they cannot be raised for the first time on appeal because this would be
offensive to the basic rules of fair play, justice, and due process." 38
The petitioner’s insistence that the real and binding contract between her and the respondent is
the deed of sale executed by the respondent on August 8, 1988, 39 and not the REPCRD, is in sharp
contrast to the contrary ruling of the CA, thus:
Second. We observe that Exhibit "B" and Exhibit "4" are so grossly inconsistent to allow them to
be construed together. The only conclusion is that Exhibit "4" superseded Exhibit "B," thus, the
agreed consideration for the sale is US$40,000 and not the Ph₱250,000.00 as stated in Exhibit
"B." By plaintiff-defendant’s admission, the only amount she has ever paid to defendant-appellee
is Ph₱250,000.00. Hence, Blas’s insistence of full payment is clearly without basis.40
…
From the foregoing the (sic) testimony, Hutalla clarified that Exhibit "D" for the plaintiff-appellant
or Exhibit "4" to defendant-appellee does not stand alone but should be read together with
Exhibit "4-A." This explanation is plausible considering that the two documents were signed by
the contracting parties and their witness on the same day, 9 August 1998. Moreover, the terms
stated in the two (2) contracts are not inconsistent; the Real Estate Purchase Contract with
Receipt for Deposit only set forth in detail the schedule of payment for the consideration in the
Deed of Sale or Exhibit "4."41
On this score, however, we are not in full accord with the CA nor the petitioner.
It is settled that the real nature of a contract may be determined from the express terms of the
written agreement and from the contemporaneous and subsequent acts of the parties thereto. 42 In
the construction or interpretation of an instrument, the intention of the parties is primordial and is
to be pursued.43 If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.44 If the contract appears to
be contrary to the evident intentions of the parties, the latter shall prevail over the former. 45 The
denomination given by the parties in their contract is not conclusive of the nature of the contents.46
The agreement of the parties may be embodied in only one contract or in two or more separate
writings. In such event, the writings of the parties should be read and interpreted together in such
a way as to render their intention effective.47
It bears stressing that the petitioner and/or the respondent executed the following:
Document Date Exhibit Number
Deed of Sale48 June 1988 Exhibit "B"
Deed of Sale49 August 8, 1988 Exhibits "D" and "4"
REPCRD50 August 5, 1988 Exhibit "4-A"
Certificate51 October 10, 198952 Exhibit "5"
Under the first deed of sale,53 the respondent sold the property to the petitioner for ₱250,000, and
the respondent acknowledged receipt of such amount from the petitioner. Under the REPCRD dated
August 5, 1988 which was notarized on August 8, 1988, the respondent sold the property to the
petitioner for US$40,000 with a downpayment of US$17,000, payable in installments; the balance
via a loan from the respondent payable in monthly installments. Under the second deed of sale 54
the respondent executed in California, the property was sold to the petitioner for US$40,000,
receipt of which the respondent acknowledged. The two deeds of sale are inconsistent because
while the purchase price under the first deed is only ₱250,000, the purchase price of the property
under the second deed is US$40,000. The Court notes that in 1988, the rate of exchange was ₱21.33
to a US dollar;55 hence, the equivalent par value of US$40,000 was ₱553,200.
The petitioner certified under a document56 that the first deed of sale did not reflect the true
intention of the parties because the respondent executed the same merely to convince her
stepmother and nephew to vacate the property. While the petitioner also certified in the same
document that the only real and binding contract between her and the respondent was the original
contract and that any other agreement would be null and void, she nevertheless signed the REPCRD
on August 5, 1988 and made partial payments over time as set forth therein. The petitioner could
not have referred to the second deed of sale as the "original contract" because she made partial
payments to the respondent under the REPCRD even after signing the said certificate.57 Taking into
consideration all the foregoing documents in connection with the partial payments made by the
petitioner to the respondent during the period of August 8, 1988 to March 1997, the parties
intended the REPCRD and the second deed of sale58 to be the real and binding contracts between
them.
We are convinced, beyond cavil, that under the two contracts, the petitioner and the respondent
entered into a contract of sale over the subject property for the price of US$40,000, with a
downpayment of US$17,000, payable as follows: US$5,000 having been already paid by the
petitioner to the respondent at the Intercontinental Hotel in June 1988; US$5,000 on or before
August 31, 1988; and US$7,000 on or before January 31, 1989. Considering that the petitioner
obtained a loan from the respondent, the balance of US$23,000 was, likewise, already paid.
However, of the US$17,000 downpayment, the petitioner managed to pay only US$10,000, and
failed to pay US$7,000 due on or before January 31, 1989, exclusive of "late fees."
It must be stressed that a sale is at once perfected when a person (the seller) obligates himself, for
a price certain, to deliver and to transfer ownership of a specified thing or right to another (the
buyer) over which the latter agrees.59 From the time the contract is perfected, the parties are bound
not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.60
In a contract of sale, the title to the property passes to the vendee upon the constructive or actual
delivery thereof, as provided for in Article 1477 of the New Civil Code. The vendor loses ownership
over the property and cannot recover it until and unless the contract is rescinded by a notarial deed
or by judicial action as provided for in Article 1592 of the New Civil Code. A contract of sale is
absolute, absent any stipulation therein reserving title over the property to the vendee until full
payment of the purchase price nor giving the vendor the right to unilaterally rescind the contract in
case of non-payment.61 In a contract of sale, the non-payment of the price is a resolutory condition
which extinguishes the transaction that, for a time existed, and discharges the obligations created
thereunder.62 Having failed to pay, in full, the purchase price of the property as agreed upon by her
and the respondent, the petitioner’s plea for a reversal of the decision of the appellate court is
bereft of factual and legal basis.

The petitioner cannot find refuge in Article 1592 of the New Civil Code which reads:

Article 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon, the rescission of the contract
shall of right take place, the vendee may pay, even after the period, as long as no demand
for the rescission of the contract had been made upon him either judicially or by a notarial
act. After the demand, the court may not grant a new term.

This is so because (a) the respondent sought the rescission of the REPCRD in her answer
to the complaint of the petitioner; (b) the petitioner failed to tender the amount of
US$7,000 inclusive of the "late fees" due, and to consign the same before the trial court
upon the filing of her complaint therein or in the course thereof. Under Article 1256 of
the New Civil Code, the petitioner shall be released from liability only by the consignation
of the amount due after compliance with the requirements prescribed by law.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision dated May 14, 2002 of the
Court of Appeals is AFFIRMED. No costs.

SO ORDERED.
SALES – RIGHTS AND OBLIGATION OF THE VENDEE – PAY PRICE/REMEDIES – EFFECT OF NON
PAYMENT
G.R. No. 137552 June 16, 2000
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z. LAFORTEZA, DENNIS Z.
LAFORTEZA, and LEA Z. LAFORTEZA, petitioners,
vs.
ALONZO MACHUCA, respondent.
GONZAGA-REYES, J.:
This Petition for Review on Certiorari seeks the reversal of the Decision of the Court of Appeals 1 in
CA G.R. CV No. 147457 entitled "ALONZO MACHUCA versus ROBERTO Z. LAFORTEZA, GONZALO Z.
LAFORTEZA, LEA ZULUETA-LAFORTEZA, MICHAEL Z. LAFORTEZA, and DENNIS Z. LAFORTEZA".
The following facts as found by the Court of Appeals are undisputed:
The property involved consists of a house and lot located at No. 7757 Sherwood Street, Marcelo
Green Village, Parañaque, Metro Manila, covered by Transfer Certificate of Title (TCT) No.
(220656) 8941 of the Registered of Deeds of Parañaque (Exhibit "D", Plaintiff, record, pp. 331-
332). The subject property is registered in the name of the late Francisco Q. Laforteza, although
it is conjugal in nature (Exhibit "8", Defendants, record pp. 331-386).
On August 2, 1988, defendant Lea Zulueta-Laforteza executed a Special Power of Attorney in
favor of defendants Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., appointing both as her
Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for
the settlement of the estate of the late Francisco Q. Laforteza (Exh. "A", Plaintiff, record, pp. 323-
325).
Likewise on the same day, defendant Michael Z. Laforteza executed a Special Power of Attorney
in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr., likewise, granting the same
authority (Exh. "B", record, pp. 326-328) Both agency instruments contained a provision that in
any document or paper to exercise authority granted, the signature of both attorneys- in-fact
must be affixed.
On October 27, 1988, defendant Dennis Z. Laforteza executed a Special Power of Attorney in favor
of defendant Roberto Z. Laforteza for the purpose of selling the subject property (Exh. "C",
Plaintiff, record, pp. 329-330). A year later, on October 30, 1989, Dennis Z. Laforteza executed
another Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo
Laforteza, Jr. naming both attorneys-in-fact for the purpose of selling the subject property and
signing any document for the settlement of the estate of the late Francisco Q. Laforteza. The
subsequent agency instrument (Exh, "2", record, pp. 371-373) contained similar provisions that
both attorneys-in-fact should sign any document or paper executed in the exercise of their
authority.1âwphi1.nêt
In the exercise of the above authority, on January 20, 1989, the heirs of the late Francisco Q.
Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a
Memorandum of Agreement (Contract to Sell) with the plaintiff 2 over the subject property for
the sum of SIX HUNDRED THIRTY THOUSAND PESOS (P630,000.00) payable as follows:
(a) P30,000.00 as earnest money, to be forfeited in favor of the defendants if the sale is not
effected due to the fault of the plaintiff;
(b) P600,000.00 upon issuance of the new certificate of title in the name of the late Francisco
Q. Laforteza and upon execution of an extra-judicial settlement of the decedent's estate with
sale in favor of the plaintiff (Par. 2, Exh. "E", record, pp. 335-336).
Significantly, the fourth paragraph of the Memorandum of Agreement (Contract to Sell) dated
January 20, 1989 (Exh. "E", supra.) contained a provision as follows:
. . . . Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified in
writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of
P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial
Settlement with sale.
On January 20, 1989, plaintiff paid the earnest money of THIRTY THOUSAND PESOS (P30,000.00),
plus rentals for the subject property (Exh. "F", Plaintiff, record, p. 339).
On September 18, 1998 3 , defendant heirs, through their counsel wrote a letter (Exh. 1,
Defendants, record, p. 370) to the plaintiff furnishing the latter a copy of the reconstituted title
to the subject property, advising him that he had thirty (3) days to produce the balance of SIX
HUNDRED PESOS (sic) (P600,000.00) under the Memorandum of Agreement which plaintiff
received on the same date.
On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an extension of the
THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the balance of SIX
HUNDRED THOUSAND PESOS (P600,000.00) (Exh. "G", Plaintiff, record, pp. 341-342). Defendant
Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to
the plaintiff's letter request (Exh. "G-1 and "G-2", Plaintiff, record, p. 342). The extension,
however, does not appear to have been approved by Gonzalo Z. Laforteza, the second attorney-
in-fact as his conformity does not appear to have been secured.
On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z.
Laforteza, that he already had the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00)
covered by United Coconut Planters Bank Manager's Check No. 000814 dated November 15, 1989
(TSN, August 25, 1992, p. 11; Exhs. "H", record, pp. 343-344; "M", records p. 350; and "N", record,
p. 351). However, the defendants, refused to accept the balance (TSN, August 24, 1992, p. 14;
Exhs. "M-1", Plaintiff, record, p. 350; and "N-1", Plaintiff, record, p. 351). Defendant Roberto Z.
Laforteza had told him that the subject property was no longer for sale (TSN, October 20, 1992,
p. 19; Exh. "J", record, p. 347).
On November 20, 1998 4 , defendants informed plaintiff that they were canceling the
Memorandum of Agreement (Contract to Sell) in view of the plaintiff's failure to comply with his
contractual obligations (Exh. "3").
Thereafter, plaintiff reiterated his request to tender payment of the balance of SIX HUNDRED
THOUSAND PESOS (P600,000.00). Defendants, however, insisted on the rescission of the
Memorandum of Agreement. Thereafter, plaintiff filed the instant action for specific
performance. The lower court rendered judgment on July 6, 1994 in favor of the plaintiff, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Alonzo Machuca and against
the defendant heirs of the late Francisco Q. Laforteza, ordering the said defendants.
(a) To accept the balance of P600,000.00 as full payment of the consideration for the
purchase of the house and lot located at No. 7757 Sherwood Street, Marcelo Green Village,
Parañaque, Metro Manila, covered by Transfer Certificate of Title No. (220656) 8941 of the
Registry of Deeds of Rizal Parañaque, Branch;
(b) To execute a registrable deed of absolute sale over the subject property in favor of the
plaintiff;
(c) Jointly and severally to pay the plaintiff the sum of P20,000.00 as attorney's fees plus cost
of suit.
SO ORDERED. (Rollo, pp. 74-75). 5
Petitioners appealed to the Court of Appeals, which affirmed with modification the decision of
the lower court; the dispositive portion of the Decision reads:
WHEREFORE, the questioned decision of the lower court is hereby AFFIRMED with the
MODIFICATION that defendant heirs Lea Zulueta-Laforteza, Michael Z. Laforteza, Dennis Z.
Laforteza and Roberto Z. Laforteza including Gonzalo Z. Laforteza, Jr. are hereby ordered to
pay jointly and severally the sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages.
SO ORDERED. 6
Motion for Reconsideration was denied but the Decision was modified so as to absolve Gonzalo
Z. Laforteza, Jr. from liability for the payment of moral damages. 7 Hence this petition wherein
the petitioners raise the following issues:
I. WHETHER THE TRIAL AND APPELLATE COURTS CORRECTLY CONSTRUED THE MEMORANDUM
OF AGREEMENT AS IMPOSING RECIPROCAL OBLIGATIONS.
II. WHETHER THE COURTS A QUO CORRECTLY RULED THAT RESCISSION WILL NOT LIE IN THE
INSTANT CASE.
III. WHETHER THE RESPONDENT IS UNDER ESTOPPEL FROM RAISING THE ALLEGED DEFECT IN
THE SPECIAL POWER OF ATTORNEY DATED 30 OCTOBER 1989 EXECUTED BY DENNIS
LAFORTEZA.
IV. SUPPOSING EX GRATIA ARGUMENTI THE MEMORANDUM OF AGREEMENT IMPOSES
RECIPROCAL OBLIGATIONS, WHETHER THE PETITIONERS MAY BE COMPELLED TO SELL THE
SUBJECT PROPERTY WHEN THE RESPONDENT FAILED TO MAKE A JUDICIAL CONSIGNATION OF
THE PURCHASE PRICE?
V. WHETHER THE PETITIONERS ARE IN BAD FAITH SO TO AS MAKE THEM LIABLE FOR MORAL
DAMAGES? 8
The petitioners contend that the Memorandum of Agreement is merely a lease agreement with
"option to purchase". As it was merely an option, it only gave the respondent a right to purchase
the subject property within a limited period without imposing upon them any obligation to
purchase it. Since the respondent's tender of payment was made after the lapse of the option
agreement, his tender did not give rise to the perfection of a contract of sale.
It is further maintained by the petitioners that the Court of Appeals erred in ruling that rescission
of the contract was already out of the question. Rescission implies that a contract of sale was
perfected unlike the Memorandum of Agreement in question which as previously stated is
allegedly only an option contract.
Petitioner adds that at most, the Memorandum of Agreement (Contract to Sell) is a mere contract
to sell, as indicated in its title. The obligation of the petitioners to sell the property to the
respondent was conditioned upon the issuance of a new certificate of title and the execution of
the extrajudicial partition with sale and payment of the P600,000.00. This is why possession of
the subject property was not delivered to the respondent as the owner of the property but only
as the lessee thereof. And the failure of the respondent to pay the purchase price in full prevented
the petitioners' obligation to convey title from acquiring obligatory force.
Petitioners also allege that assuming for the sake of argument that a contract of sale was indeed
perfected, the Court of Appeals still erred in holding that respondent's failure to pay the purchase
price of P600,000.00 was only a "slight or casual breach".
The petitioners also claim that the Court of Appeals erred in ruling that they were not ready to
comply with their obligation to execute the extrajudicial settlement. The Power of Attorney to
execute a Deed of Sale made by Dennis Z. Laforteza was sufficient and necessarily included the
power to execute an extrajudicial settlement. At any rate, the respondent is estopped from
claiming that the petitioners were not ready to comply with their obligation for he acknowledged
the petitioners' ability to do so when he requested for an extension of time within which to pay
the purchase price. Had he truly believed that the petitioners were not ready, he would not have
needed to ask for said extension.
Finally, the petitioners allege that the respondent's uncorroborated testimony that third persons
offered a higher price for the property is hearsay and should not be given any evidentiary weight.
Thus, the order of the lower court awarding moral damages was without any legal basis.
The appeal is bereft of merit.
A perusal of the Memorandum Agreement shows that the transaction between the petitioners
and the respondent was one of sale and lease. The terms of the agreement read:
1. For and in consideration of the sum of PESOS: SIX HUNDRED THIRTY THOUSAND (P630,000.00)
payable in a manner herein below indicated, SELLER-LESSOR hereby agree to sell unto BUYER-
LESSEE the property described in the first WHEREAS of this Agreement within six (6) months from
the execution date hereof, or upon issuance by the Court of a new owner's certificate of title and
the execution of extrajudicial partition with sale of the estate of Francisco Laforteza, whichever
is earlier;
 2. The above-mentioned sum of PESOS: SIX HUNDRED THIRTY THOUSAND (P630,000.00) shall be
paid in the following manner:
P30,000.00 — as earnest money and as consideration for this Agreement, which amount shall
be forfeited in favor of SELLER-LESSORS if the sale is not effected because of the fault or option
of BUYER-LESSEE;
P600,000.00 — upon the issuance of the new certificate of title in the name of the late
Francisco Laforteza and upon the execution of an Extrajudicial Settlement of his estate with
sale in favor of BUYER-LESSEE free from lien or any encumbrances.
3. Parties reasonably estimate that the issuance of a new title in place of the lost one, as well as
the execution of extrajudicial settlement of estate with sale to herein BUYER-LESSEE will be
completed within six (6) months from the execution of this Agreement. It is therefore agreed
that during the six months period, BUYER-LESSEE will be leasing the subject property for six
months period at the monthly rate of PESOS: THREE THOUSAND FIVE HUNDRED (P3,500.00).
Provided however, that if the issuance of new title and the execution of Extrajudicial Partition is
completed prior to the expiration of the six months period, BUYER-LESSEE shall only be liable
for rentals for the corresponding period commencing from his occupancy of the premises to the
execution and completion of the Extrajudicial Settlement of the estate, provided further that if
after the expiration of six (6) months, the lost title is not yet replaced and the extra judicial
partition is not executed, BUYER-LESSEE shall no longer be required to pay rentals and shall
continue to occupy, and use the premises until subject condition is complied by SELLER-LESSOR;
4. It is hereby agreed that within reasonable time from the execution of this Agreement and the
payment by BUYER-LESSEE of the amount of P30,000.00 as herein above provided, SELLER-
LESSORS shall immediately file the corresponding petition for the issuance of a new title in lieu
of the lost one in the proper Courts. Upon issuance by the proper Courts of the new title, the
BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be
paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale. 9
A contract of sale is a consensual contract and is perfected at the moment there is a meeting of
the minds upon the thing which is the object of the contract and upon the price. 10 From that
moment the parties may reciprocally demand performance subject to the provisions of the law
governing the form of contracts. 11 The elements of a valid contract of sale under Article 1458 of
the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price
certain money or its equivalent. 12
In the case at bench, there was a perfected agreement between the petitioners and the
respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver
the house and lot located at 7757 Sherwood St., Marcelo Green Village, Parañaque and the
respondent to pay the price amounting to six hundred thousand pesos (P600,000.00). All the
elements of a contract of sale were thus present. However, the balance of the purchase price was
to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of
the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate.
Prior to the issuance of the "reconstituted" title, the respondent was already placed in possession
of the house and lot as lessee thereof for six months at a monthly rate of three thousand five
hundred pesos (P3,500.00). It was stipulated that should the issuance of the new title and the
execution of the extrajudicial settlement be completed prior to expiration of the six-month period,
the respondent would be liable only for the rentals pertaining to the period commencing from the
date of the execution of the agreement up to the execution of the extrajudicial settlement. It was
also expressly stipulated that if after the expiration of the six month period, the lost title was not
yet replaced and the extrajudicial partition was not yet executed, the respondent would no longer
be required to pay rentals and would continue to occupy and use the premises until the subject
condition was complied with the petitioners.
The six-month period during which the respondent would be in possession of the property as
lessee, was clearly not a period within which to exercise an option. An option is a contract granting
a privilege to buy or sell within an agreed time and at a determined price. An option contract is a
separate and distinct contract from that which the parties may enter into upon the consummation
of the option. 13 An option must be supported by consideration.14 An option contract is governed
by the second paragraph of Article 1479 of the Civil Code 15 , which reads:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.
In the present case, the six-month period merely delayed the demandability of the contract of
sale and did not determine its perfection for after the expiration of the six-month period, there
was an absolute obligation on the part of the petitioners and the respondent to comply with the
terms of the sale. The parties made a "reasonable estimate" that the reconstitution the lost title
of the house and lot would take approximately six months and thus presumed that after six
months, both parties would be able to comply with what was reciprocally incumbent upon them.
The fact that after the expiration of the six-month period, the respondent would retain
possession of the house and lot without need of paying rentals for the use therefor, clearly
indicated that the parties contemplated that ownership over the property would already be
transferred by that time.
The issuance of the new certificate of title in the name of the late Francisco Laforteza and the
execution of an extrajudicial settlement of his estate was not a condition which determined the
perfection of the contract of sale. Petitioners' contention that since the condition was not met, they
no longer had an obligation to proceed with the sale of the house and lot is unconvincing. The
petitioners fail to distinguish between a condition imposed upon the perfection of the contract and
a condition imposed on the performance of an obligation. Failure to comply with the first condition
results in the failure of a contract, while the failure to comply with the second condition only gives
the other party the option either to refuse to proceed with the sale or to waive the condition. Thus,
Art. 1545 of the Civil Code states:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition
which is not performed, such party may refuse to proceed with the contract or he may waive
performance of the condition. If the other party has promised that the condition should happen
or be performed, such first mentioned party may also treat the nonperformance of the condition
as a breach of warranty.
Where the ownership in the things has not passed, the buyer may treat the fulfillment by the
seller of his obligation to deliver the same as described and as warranted expressly or by
implication in the contract of sale as a condition of the obligation of the buyer to perform his
promise to accept and pay for the thing. 16
In the case at bar, there was already a perfected contract. The condition was imposed only on the
performance of the obligations contained therein. Considering however that the title was eventually
"reconstituted" and that the petitioners admit their ability to execute the extrajudicial settlement
of their father's estate, the respondent had a right to demand fulfillment of the petitioners'
obligation to deliver and transfer ownership of the house and lot.
What further militates against petitioners' argument that they did not enter into a contract or sale
is the fact that the respondent paid thirty thousand pesos (P30,000.00) as earnest money. Earnest
money is something of value to show that the buyer was really in earnest, and given to the seller to
bind the bargain.17 Whenever earnest money is given in a contract of sale, it is considered as part of
the purchase price and proof of the perfection of the contract. 18
We do not subscribe to the petitioners' view that the Memorandum Agreement was a contract to
sell. There is nothing contained in the Memorandum Agreement from which it can reasonably be
deduced that the parties intended to enter into a contract to sell, i.e. one whereby the prospective
seller would explicitly reserve the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the property subject of
the contract to sell until the full payment of the price, such payment being a positive suspensive
condition, the failure of which is not considered a breach, casual or serious, but simply an event
which prevented the obligation from acquiring any obligatory force. 19 There is clearly no express
reservation of title made by the petitioners over the property, or any provision which would impose
non-payment of the price as a condition for the contract's entering into force. Although the
memorandum agreement was also denominated as a "Contract to Sell", we hold that the parties
contemplated a contract of sale. A deed of sale is absolute in nature although denominated a
conditional sale in the absence of a stipulation reserving title in the petitioners until full payment of
the purchase price. 20 In such cases, ownership of the thing sold passes to the vendee upon actual
or constructive delivery thereof. 21 The mere fact that the obligation of the respondent to pay the
balance of the purchase price was made subject to the condition that the petitioners first deliver
the reconstituted title of the house and lot does not make the contract a contract to sell for such
condition is not inconsistent with a contract of sale. 22
The next issue to be addressed is whether the failure of the respondent to pay the balance of the
purchase price within the period allowed is fatal to his right to enforce the agreement.
We rule in the negative.
Admittedly, the failure of the respondent to pay the balance of the purchase price was a breach of
the contract and was a ground for rescission thereof. The extension of thirty (30) days allegedly
granted to the respondent by Roberto Z. Laforteza (assisted by his counsel Attorney Romeo
Gutierrez) was correctly found by the Court of Appeals to be ineffective inasmuch as the signature
of Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers of Attorney. 23
However, the evidence reveals that after the expiration of the six-month period provided for in the
contract, the petitioners were not ready to comply with what was incumbent upon them, i.e. the
delivery of the reconstituted title of the house and lot. It was only on September 18, 1989 or nearly
eight months after the execution of the Memorandum of Agreement when the petitioners informed
the respondent that they already had a copy of the reconstituted title and demanded the payment
of the balance of the purchase price. The respondent could not therefore be considered in delay for
in reciprocal obligations, neither party incurs in delay if the other party does not comply or is not
ready to comply in a proper manner with what was incumbent upon him. 24
Even assuming for the sake of argument that the petitioners were ready to comply with their
obligation, we find that rescission of the contract will still not prosper. The rescission of a sale of an
immovable property is specifically governed by Article 1592 of the New Civil Code, which reads:
In the sale of immovable property, even though it may have been stipulated that upon failure to
pay the price at the time agreed upon the rescission of the contract shall of right take place, the
vendee may pay, even after the expiration of the period, as long as no demand for rescission of
the contract has been made upon him either judicially or by a notarial act. After the demand, the
court may not grant him a new term. 25
It is not disputed that the petitioners did not make a judicial or notarial demand for
rescission.1avvphi1 The November 20, 1989 letter of the petitioners informing the respondent of
the automatic rescission of the agreement did not amount to a demand for rescission, as it was not
notarized. 26 It was also made five days after the respondent's attempt to make the payment of the
purchase price. This offer to pay prior to the demand for rescission is sufficient to defeat the
petitioners' right under article 1592 of the Civil Code. 27 Besides, the Memorandum Agreement
between the parties did not contain a clause expressly authorizing the automatic cancellation of the
contract without court intervention in the event that the terms thereof were violated. A seller
cannot unilaterally and extrajudicially rescind a contract or sale where there is no express
stipulation authorizing him to extrajudicially rescind. 28 Neither was there a judicial demand for the
rescission thereof. Thus, when the respondent filed his complaint for specific performance, the
agreement was still in force inasmuch as the contract was not yet rescinded. At any rate, considering
that the six-month period was merely an approximation of the time if would take to reconstitute
the lost title and was not a condition imposed on the perfection of the contract and considering
further that the delay in payment was only thirty days which was caused by the respondents
justified but mistaken belief that an extension to pay was granted to him, we agree with the Court
of Appeals that the delay of one month in payment was a mere casual breach that would not entitle
the respondents to rescind the contract. Rescission of a contract will not be permitted for a slight
or casual breach, but only such substantial and fundamental breach as would defeat the very object
of the parties in making the agreemant. 29
Petitioners' insistence that the respondent should have consignated the amount is not
determinative of whether respondent's action for specific performance will lie. Petitioners
themselves point out that the effect of cansignation is to extinguish the obligation. It releases the
debtor from responsibility therefor. 30 The failure of the respondent to consignate the P600,000.00
is not tantamount to a breach of the contract for by the fact of tendering payment, he was willing
and able to comply with his obligation.
The Court of Appeals correctly found the petitioners guilty of bad faith and awarded moral
damages to the respondent. As found by the said Court, the petitioners refused to comply with,
their obligation for the reason that they were offered a higher price therefor and the respondent
was even offered P100,000.00 by the petitioners' lawyer, Attorney Gutierrez, to relinquish his
rights over the property. The award of moral damages is in accordance with Article 1191 31 of the
Civil Code pursuant to Article 2220 which provides that moral damages may be awarded in case
of breach of contract where the defendant acted in bad faith. The amount awarded depends on
the discretion of the court based on the circumstances of each case. 32 Under the circumstances,
the award given by the Court of Appeals amounting to P50,000.00 appears to us to be fair and
reasonable.
ACCORDINGLY, the decision of the Court of Appeals in CA G.R. CV No. 47457 is AFFIRMED and the
instant petition is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.
SALES – RIGHTS AND OBLIGATION OF THE VENDEE – PAY PRICE/REMEDIES – EFFECT OF NON
PAYMENT
G.R. No. L-25885 January 31, 1972
LUZON BROKERAGE CO., INC., plaintiff-appellee,
vs.
MARITIME BUILDING CO., INC., and MYERS BUILDING CO., INC., defendants, MARITIME
BUILDING CO., INC., defendant-appellant.
REYES, J.B.L., J.:p
Direct appeal (prior to the effectivity of Republic Act 5440) by Maritime Building Co., Inc. from a
decision of the Court of First Instance of Manila (in its Civil Case No. 47319), the dispositive part of
which provides as follows:
FOR ALL THE FOREGOING CONSIDERATIONS, judgment is hereby rendered declaring that the
Myers Building Co., Inc. is entitled to receive the rentals which the plaintiff has been paying,
including those already deposited in Court, thereby relieving the plaintiff of any obligation to pay
the same to any other party, and ordering the Maritime Building Co., Inc. to pay the commission
fees paid by the Myers Building Co., Inc. to the Clerk of this Court, plus the sum of P3,000.00 as
and for attorney's fees.
On the cross-claim by the Myers Building Co., Inc., the Maritima Building Co., Inc. is hereby
ordered to pay the Myers Building Co., Inc. the sum of P10,000.00 damages, plus the sum of
P30,000.00, representing rentals wrongfully collected by it from the plaintiff corresponding to
the months of March, April and May, 1961 and the costs hereof.
The antecedents of the litigation are summarized in the appealed judgment thus:
This is an action for interpleading.
It appears that on April 30, 1949, in the City of Manila, the 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., whereby the former sold the same to the latter for
P1,000,000.00, Philippine currency. P50,000.00 of this price was paid upon the execution of the
said contract and the parties agreed that the balance of P950,000.00 was to be paid in monthly
installments at the rate of P10,000.00 with interest of 5% per annum until the same was fully
paid.
In Par. (O), 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.
Later, the monthly installment of P10,000.00 above-stipulated with 5% interest per annum was
amended or decreased to P5,000.00 per month and the interest was raised to 5-1/2% per annum.
The monthly installments under the contract was regularly paid by the Bary Building Co., Inc.
and/or the Maritime Co., Inc. until the end of February, 1961. It failed to pay the monthly
installment corresponding to the month of March 1961, for which 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. However, 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.
Notwithstanding the denial of this request for moratorium by the Myers Board of Directors the
Maritime Building Co., Inc. failed to pay the monthly installments corresponding to the months
of March, April and May, 1961. Whereupon, on May 16, 1961, the 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.
Then, on June 5, 1961, the 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.
In the meantime, the 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.
After the filing of this action, the 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, from April, 1964
to March 31, 1968.
The 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.
It should be further elucidated that the suspension by the appellant Maritime Building Co., Inc.
(hereinafter called Maritime) of the payment of installments due from it to appellee Myers Building
Co., Inc. (hereinafter designated as Myers Corporation) arose from an award of backwages made by
the Court of Industrial Relations in favor of members of Luzon Labor Union who served the Fil-
American forces in Bataan in early 1942 at the instance of the employer Luzon Brokerage Co. and
for which F. H. Myers, former majority stockholder of the Luzon Brokerage Co., had allegedly
promised to indemnify E. M. Schedler (who controlled Maritime) when the latter purchased Myers'
stock in the Brokerage Company. Schedler contended that he was being sued for the backpay award
of some P325,000, when it was a liability of Myers, or of the latter's estate upon his death. In his
letter to Myers Corporation (Exhibit "11", Maritime) dated 7 April 1961 (two months and ten days
before the initial complaint in the case at bar), Schedler claimed the following:
 At all times when the F. H. Myers Estate was open in the Philippine Islands and open in San
Francisco, the Myers Estate or heirs assumed the defense of the Labor Union claims and led us to
believe that they would indemnify us therefrom.
Recently, however, for the first time, and after both the Philippine and San Francisco F. H. Myers
Estates were closed, we have been notified that the F. H. Myers indemnity on the Labor Union
case will not be honored, and in fact Mrs. Schedler and I have been sued in the Philippines by my
successor in interest, Mr. Wentholt, and have been put to considerable expense.
You are advised that my wife and I, as the owners of the Maritime Building 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.
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 stipulating that:
(d) It is hereby agreed, covenanted and stipulated by and between the parties hereto that the
Vendor will execute and deliver to the Vendee a definite or absolute deed of sale upon the full
payment by the vendee of the unpaid balance of the purchase price hereinabove stipulated; that
should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to
comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale
shall automatically and without any further formality, become null and void, and all sums so paid
by the Vendee by reason thereof, shall be considered as rentals and the Vendor shall then and
there be free to enter into the premises, take possession thereof or sell the properties to any
other party.
xxx xxx xxx
(o) In case the Vendee fails to make payment or payments, or any part thereof, as herein
provided, or fails to perform any of the covenants or agreements hereof, this contract shall, at
the option of the Vendor, be annulled and, in such event, all payments made by the Vendee to
the Vendor by virtue of this contract shall be forfeited and retained by the Vendor in full
satisfaction of the liquidated damages by said Vendor sustained; and the said Vendor shall have
the right to forthwith re-enter, and take possession of, the premises subject-matter of this
contract.
"The remedy of forfeiture stated in the next-preceding paragraph shall not be exclusive of any
other remedy, but the Vendor shall have every other remedy granted it by virtue of this contract,
by law, and by equity."
From the judgment of the court below, the dispositive portion whereof has been transcribed at
the start of this opinion, Myers duly appealed to this Court.
The main issue posed by appellant is that there has been no breach of contract by Maritime; and
assuming that there was one, that the appellee Myers was not entitled to rescind or resolve the
contract without recoursing to judicial process.
It is difficult to understand how appellant Maritime can seriously contend that its failure or refusal
to pay the P5,000 monthly installments corresponding to the months of March, April and May, 1961
did not constitute a breach of contract with Myers, when said agreement (transcribed in the Record
on Appeal, pages 59-71) 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. (Contract, paragraph b; Record on Appeal, page 63)
Contrary to appellant Maritime's averments, the default was not made in good faith. The text of the
letter to Myers (Exhibit "11", Maritime), heretofore quoted, 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. This is apparent also from appellant's letter to
his counsel (Exhibit "12", Maritime):
... I do not wish to deposit pesos representing the months of March, April and May, since the
Myers refusal to honor the indemnity concerning the labor claims has caused me to disburse (sic)
roughly $10,000.00 to date in fees, cost and travel expenses. However, if the Myers people will
deposit in trust with Mr. C. Parsons 25,000 pesos to cover my costs to date, I will then deposit
with Mr. Parsons, in trust, 15,000 pesos for March, April and May and will also post a monthly
deposit of 5,000 pesos until the dispute is settled. The dispute won't be settled in my mind, unless
and until:
a) The Myers people indemnify me fully the labor cases;
b) The labor cases are terminated favorably to Luzon Brokerage and no liability exists;
c) The Myers people pay any judgment entered on the labor cases thereby releasing me; or
d) It is finally determined either in San Francisco or in the Philippines by a court that the Myers
heirs must honor the indemnity which Mr. F. H. Myers promised when I purchased Luzon
Brokerage Company.
Yet appellant Maritime (assuming that it had validly acquired the claims of its president and
controlling stockholder, E. M. Schedler) 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).
No proof exists that the board of directors of the Myers Corporation had agreed to assume
responsibility for the debts (if any) that the late Myers or his heirs had incurred in favor of Schedler.
Not only this, but it is apparent from the letters quoted heretofore that Schedler had allowed the
estate proceedings of the late F. M. Myers to close without providing for any contingent liability in
Schedler's favor; so that by offsetting the alleged debt of Myers to him, against the balance of the
price due under the "Deed of Conditional Sale", appellant Maritime was in fact attempting to burden
the Myers Building Company with an uncollectible debt, since enforcement thereof against the
estate of F. H. Myers was already barred.
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" (Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and
therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo,
Teoria de Obligaciones, Vol. 1, page 116).
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. To do otherwise
would be to sanction a deliberate and reiterated infringement of the contractual obligations
incurred by Maritime, an attitude repugnant to the stability and obligatory force of contracts.
From another point of view, it is irrelevant whether appellant Maritime's infringement of its
contract was casual or serious, for as pointed out by this Court in Manuel vs. Rodriguez, 109 Phil. 1,
at page 10 —
The contention of plaintiff-appellant that Payatas Subdivision Inc. had no right to cancel the
contract as there was only a "casual breach" is likewise untenable. In contracts to sell, where
ownership is retained by the seller and is not to pass until the full payment of the price, such
payment, as we said, is a positive suspensive condition, the failure of which 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 with Article 1117 of the Old Civil Code. To argue that there
was only a casual breach is to proceed from the assumption that the contract is one of absolute
sale, where non-payment is a resolutory condition, which is not the case.
But it is argued for Maritime that even if it had really violated the Contract of Conditional Sale with
Myers, the latter could not extrajudicially rescind or resolve the contract, but must first recourse to
the courts. While recognizing that paragraph (d) of the deed of conditional sale expressly provides
inter alia —
that should the Vendee fail to pay any of the monthly installments when due, or otherwise fail to
comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale
shall automatically and without any further formality, become null and void, and all sums so paid
by the Vendee by reason thereof shall be considered as rentals.. (Emphasis supplied)
herein appellant Maritime avers that paragraph (e) of the deed contemplates that a suit should be
brought in court for a judicial declaration of rescission. The paragraph relied upon by Maritime is
couched in the following, terms:
(e) It is also hereby agreed, covenanted and stipulated by and between the parties hereto that
should the Vendor rescind this Deed of Conditional Sale, for any of the reasons stipulated in the
preceding paragraph, the Vendee by these presents obligates itself to peacefully deliver the
properties subject of this contract to the Vendor, and in the event that the Vendee refuses to
peacefully deliver the possession of the properties subject of this contract to the Vendor in case
of rescission, and a suit should be brought in court by the Vendor to seek judicial declaration of
rescission and take possession of the properties subject of this contract, the Vendee hereby
obligates itself to pay all the expenses to be incurred by reason of such suit and in addition
obligates itself to pay the sum of P10,000.00, in concept of damages, penalty and attorney's fees.
Correlation of this paragraph (e) with the preceding paragraph (d) of the Deed of Conditional Sale
(quoted in page 5 of this opinion) 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". The step contemplated is logical since the Vendor can not, by himself,
dispossess the Vendee manu militari, if the latter should refuse to vacate despite the violation of
the contract, since no party can take the law in his own hands. But the bringing of such an action in
no way contradicts or restricts the automatic termination of the contract in case the Vendee (i.e.,
appellant Maritime) should not comply with the agreement.
Anyway, this Court has repeatedly held that —
Well settled is, however, the rule that a judicial action for the rescission of a contract is not
necessary where the contract provides that it may be revoked and cancelled for violation of any
of its terms and conditions" (Lopez vs. Commissioner of Customs, L-28235, 30 January 1971, 37
SCRA 327, 334,, and cases cited therein).1 (Emphasis supplied.)
Resort to judicial action for rescission is obviously not contemplated.... The validity of the
stipulation can not be seriously disputed. It is in the nature of a facultative resolutory condition
which in many cases has been upheld by this Court. (Ponce Enrile vs. Court of Appeals, L-27549,
30 Sept. 1969; 29 SCRA 504).
The obvious remedy of the party opposing the rescission for any reason being to file the
corresponding action to question the rescission and enforce the agreement, as indicated in our
decision in University of the Philippines vs. Walfrido de los Angeles,
L-28602, 29 September 1970, 35 SCRA 107.
Of course, it must be understood that the act of a party in treating a contract 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. If
the other party denies that rescission is justified, it is free to resort to judicial action in its own
behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the
resolution of the contract was not warranted, the responsible party will be sentenced to
damages; in the contrary case, the resolution will be affirmed, and the consequent indemnity
awarded to the party prejudiced.
In other words, the party who deems the contract violated may consider it resolved or rescinded,
and act accordingly, without previous court action, but it proceeds at its own risk. For it is only
the final judgment of the corresponding court that will conclusively and finally settle whether the
action taken was or was not correct in law. But the law definitely does not require that the
contracting party who believes itself injured must first file suit and wait for a judgment before
taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach
 will have to passively sit and watch its damages accumulate during the pendency of the suit until
the final judgment of rescission is rendered when the law itself requires that he should exercise
due diligence to minimize its own damages (Civil Code, Article 2203).
Maritime likewise invokes Article 1592 of the Civil Code of the Philippines as entitling it to pay
despite its default:
ART. 1592. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take
place, the vendee may pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term.
Luzon should pay to Myers the rentals of the building beginning from June, 1961, under penalty of
ejectment (Record on Appeal, pages 14-15). In doubt as to who was entitled to the rentals, Luzon
filed this action for interpleader against Myers and Maritime, and deposited the rentals in court as
they fell due. The appellant Maritime moved to dismiss on the ground that (a) Luzon could not
entertain doubts as to whom the rentals should be paid since Luzon had leased the building from
Maritime since 1949, renewing the contract from time to time, and Myers had no right to cancel
the lease; and (b) that Luzon was not a disinterested party, since it tended to favor appellee Myers.
The court below overruled Maritime's objections and We see no plausible reason to overturn the
order. While Myers was not a party to the lease, its cancellation of the conditional sale of the
premises to Maritime, Luzon's lessor, could not but raise reasonable doubts as to the continuation
of the lease, for the termination of the lessor's right of possession of the premises necessarily ended
its right to the rentals falling due thereafter. The preceding portion of our opinion is conclusive that
Luzon's doubts were grounded under the law and the jurisprudence of this Court.

Assuming arguendo that Article 1592 is applicable, the cross-claim filed by Myers against Maritime
in the court below constituted a judicial demand for rescission that satisfies the requirements of
said article.
But even if it were not so, 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 (see paragraph [d], ante, page 5). In suing to recover possession of the building from
Maritime, 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.
No adequate proof exists that Luzon was favoring any one of the contending parties. It was
interested in being protected against prejudice deriving from the result of the controversy,
regardless of who should win. For the purpose it was simpler for Luzon to compel the disputants to
litigate between themselves, rather than chance being sued by Myers, and later being compelled to
proceed against Maritime to recoup its losses. In any event, Maritime ultimately confirmed the act
of Luzon in suing for interpleader, by agreeing to renew Luzon's lease in 1963 during the pendency
of the present action, and authorizing Luzon to continue depositing the rentals in court "until
otherwise directed by a court of competent jurisdiction" (Exhibit "18-Maritime"). The procedural
objection has thus become moot.
PREMISES CONSIDERED, the appealed decision should be, and hereby is, affirmed, and appellant
Maritime Building Co., as well as appellee Luzon Brokerage Co., are further ordered to surrender
the premises to the appellee Myers Building Co. Costs against appellant.

The distinction between contracts of sale and contract to sell with reserved title has been
recognized by this Court in repeated decisions2 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, as in the case at bar.

Maritime's appeal that it would be iniquituous that it should be compelled to forfeit the P973,000
already paid to Myers, as a result of its failure to make good a balance of only P319,300.65, payable
at P5,000 monthly, becomes unimpressive when it is considered that while obligated to pay the
price of one million pesos at P5,000 monthly, plus interest, Maritime, on the other hand, had leased
the building to Luzon Brokerage, Inc. since 1949; and Luzon paid P13,000 a month rent, from
September, 1951 to August 1956, and thereafter until 1961, at P10,000 a month, thus paying a total
of around one and a half million pesos in rentals to Maritime. Even adding to Maritime's losses of
P973,000 the P10,000 damages and P3,000 attorneys' fees awarded by the trial court, it is
undeniable that appellant Maritime has come out of the entire transaction still at a profit to itself.

There remains the procedural objection raised by appellant Maritime to this interpleader action
filed by the Luzon Brokerage Co., the lessee of the building conditionally sold by Myers to Maritime.
It should be recalled that when Maritime defaulted in its payments to Myers, and the latter notified
the former that it was cancelling the contract of conditional sale, Myers also notified Luzon
Brokerage, Maritime's lessee of the building, of the cancellation of the sale, and demanded that
SALES – RIGHTS AND OBLIGATION OF THE VENDEE – PAY PRICE/REMEDIES – MACEDA LAW
G.R. No. 141205 May 9, 2002
ACTIVE REALTY & DEVELOPMENT CORPORATION, petitioner,
vs.
NECITA G. DAROYA, represented by Attorney-In-Fact Shirley Daroya-Quinones, respondents.
PUNO, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks to
reverse and set aside the Resolution of the Court of Appeals, dated August 3, 1999, denying due
course to petitioner’s appeal for insufficiency of form and substance.1âwphi1.nêt
Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner and developer of Town &
Country Hills Executive Village in Antipolo, Rizal. On January 2, 1985, it entered into a Contract to
Sell1 with respondent NECITA DAROYA, a contract worker in the Middle East, whereby the latter
agreed to buy a 515 sq. m. lot for P224,025.00 in petitioner’s subdivision.
The contract to sell stipulated that the respondent shall pay the initial amount of P53,766.00 upon
execution of the contract and the balance of P170,259.00 in sixty (60) monthly installments of
P4,893.35. Adding the down payment and installment payments, it would appear that the total
amount is P346,367.00, a figure higher than that stated as the contract price.
On May 5, 1989, petitioner accepted respondent’s amortization in the amount of P40,000.00. By
August 8, 1989, respondent was in default of P15,282.85 representing three (3) monthly
amortizations. Petitioner sent respondent a notice of cancellation 2 of their contract to sell, to take
effect thirty (30) days from receipt of the letter. It does not appear from the records, however, when
respondent received the letter. Nonetheless, when respondent offered to pay for the balance of
the contract price, petitioner refused as it has allegedly sold the lot to another buyer.
On August 26, 1991, respondent filed a complaint for specific performance and damages3 against
petitioner before the Arbitration Branch of the Housing and Land Use Regulatory Board (HLURB). It
sought to compel the petitioner to execute a final Deed of Absolute Sale in respondent’s favor after
she pays any balance that may still be due from her. Respondent claimed that she is entitled to the
final deed of sale after she offered to pay the balance of P24,048.47, considering that she has
already paid the total sum of P314,816.76, which amount is P90,835.76 more than the total
contract price of P224,025.00.
On June 14, 1993, HLURB Arbiter Alfredo M. Tan II found for the respondent. He ruled that the
cancellation of the contract to sell was void as petitioner failed to pay the cash surrender value to
respondent as mandated by law. However, as the subject lot was already sold to a third party and
the respondent had agreed to a full refund of her installment payments, petitioner was ordered to
refund to respondent all her payments in the amount of P314,816.70, with 12% interest per
annum from August 26, 1991 (the date of the filing of the complaint) until fully paid and to pay
P10,000.00 as attorney’s fees.4
On appeal, the HLURB Board of Commissioners set aside the Arbiter’s Decision. The Board refused
to apply the remedies provided under the Maceda Law and instead deemed it fit to formulate an
"equitable" solution to the case. It ruled that, as both parties were at fault, i.e., respondent incurred
in delay in her installment payments and respondent failed to send a notarized notice of
cancellation, petitioner was ordered to refund to the respondent one half of the total amount she
has paid or P157,408.35, which was allegedly akin to the remedy provided under the Maceda Law.5
Respondent appealed to the Office of the President. On June 2, 1998, then Chief Presidential
Counsel Renato C. Corona, acting by authority of the President, modified the Decision of the HLURB
as he found that it was not in accord with the provisions of the Maceda Law. He held that as
petitioner did not comply with the legal requisites for a valid cancellation of the contract, the
contract to sell between the parties subsisted and concluded that respondent was entitled to the
lot after payment of her outstanding balance. However, as the petitioner disclosed that the lot was
already sold to another person and that the actual value of the lot as of the date of the contract was
P1,700.00 per square meter, petitioner was ordered to refund to the respondent the amount of
P875,000.00, the true and actual value of the lot as of the date of the contract, with interest at
12% per annum computed from August 26, 1991 until fully paid, or to deliver a substitute lot at
the choice of respondent.6
Upon denial of its motion for reconsideration, petitioner assailed the Decision in the Court of
Appeals. However, its petition for review7 was denied due course for insufficiency in form and
substance,8 because: 1) no affidavit of service was attached to the petition; 2) except for certified
true copies of the decision and resolution of the Office of the President, no other material portions
of the record, as would support the allegations in the petition, were attached; and, 3) the
certification of forum-shopping was signed by the head counsel and vice-president of the petitioner
corporation who was not authorized by a Board Resolution to represent petitioner.
Petitioner moved for reconsideration. The Court of Appeals denied it on an entirely new ground,
i.e., for untimely filing of the petition for review.9
Petitioner now impugns the decision of the Court of Appeals and raises the following procedural
issues:
I
THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN RELYING TOO MUCH ON FORM
RATHER THAN ON THE MERITS OF THE PETITION THEREBY DENYING PETITIONER OF ITS
RIGHT TO DUE PROCESS.
II
THE HONORABLE COURT OF APPEALS ANCHORED THE DENIAL OF PETITIONER’S MOTION
FOR RECONSIDERATION ON INCONSISTENT AND CONFLICTING RULINGS NOT BORNE BY
THE FACTS AND THE RECORDS OF THE CASE.
On the procedural points raised, we find for the petitioner.
Our perusal of the record reveals that petitioner substantially complied with the formal
requirements of Rule 43 of the Rules of Court.10 First, as to the non-attachment of the affidavit of
service, the records bear that the petition was accompanied by the original registry receipts issued
by the post office, showing that the petition and its annexes were served upon the parties.
Moreover, respondent’s counsel of record, Atty. Sergio Guadiz, actually received a copy of the
petition.11 Second, petitioner likewise complied with Section 6 (c) of Rule 43 requiring the
submission of copies of the award, judgment, final order and resolution appealed from. Its petition
was accompanied by the duplicate original of the appealed Decision of the Chief Presidential Legal
Counsel and his Resolution denying petitioner’s motion for reconsideration, the Decision of the
HLURB Board of Commissioners and that of the HLURB arbiter. A perusal of these documents will
reveal that they contained all the relevant facts of the case from which the appellate body can form
its own decision. Its failure to submit the other documents, like the Complaint, Answer, Position
Papers and Appeal Memoranda of the parties before the HLURB, was due to the refusal of the Office
of the President to give them a certified true copy of these documents which were submitted with
said Office. Third, as to the lack of Board Resolution by petitioner corporation authorizing Atty. Rene
Katigbak, its Chief Legal Counsel and Vice-President for Legal Affairs, to represent it in the filing of
the appeal, petitioner admits that this was due to its honest belief that such authority is not required
as it was not mentioned in Section 6(c) of Rule 43.12 To make up for such omission, petitioner
submitted a Secretary’s Certificate13 confirming and ratifying the authority of Atty. Katigbak to
represent petitioner. Finally, we find that the Court of Appeals erred in denying petitioner’s motion
for reconsideration due to untimely filing as the records clearly show that it was filed on June 25,
1999, a day before the expiration of the period to appeal granted by the Court of Appeals.14
In denying due course to the petition, the appellate court gave premium to form and failed to
consider the important rights of the parties in the case at bar.15 At the very least, petitioner
substantially complied with the procedural requirements for appeal, hence, it is best to give due
course to the petition at bar to clarify the rights and duties of a buyer in contracts to sell real estate
on installment basis.
The issue to be resolved is whether or not the petitioner can be compelled to refund to the
respondent the value of the lot or to deliver a substitute lot at respondent’s option.
We find for the respondent and rule in the affirmative.1âwphi1.nêt
The contract to sell in the case at bar is governed by Republic Act No. 6552 -- "The Realty Installment
Buyer Protection Act," or more popularly known as the Maceda Law -- which came into effect in
September 1972. Its declared public policy is to protect buyers of real estate on installment basis
against onerous and oppressive conditions.16 The law seeks to address the acute housing shortage
problem in our country that has prompted thousands of middle and lower class buyers of houses,
lots and condominium units to enter into all sorts of contracts with private housing developers
involving installment schemes. Lot buyers, mostly low income earners eager to acquire a lot upon
which to build their homes, readily affix their signatures on these contracts, without an opportunity
to question the onerous provisions therein as the contract is offered to them on a "take it or leave
it" basis.17 Most of these contracts of adhesion, drawn exclusively by the developers, entrap
innocent buyers by requiring cash deposits for reservation agreements which oftentimes include, in
fine print, onerous default clauses where all the installment payments made will be forfeited upon
failure to pay any installment due even if the buyers had made payments for several years.18 Real
estate developers thus enjoy an unnecessary advantage over lot buyers who they often exploit with
iniquitous results. They get to forfeit all the installment payments of defaulting buyers and resell
the same lot to another buyer with the same exigent conditions. To help especially the low income
lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers
and protect them from one-sided and pernicious contract stipulations.
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default
in the payment of succeeding installments, where he has already paid at least two (2) years of
installments, thus:
"(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him, which is hereby fixed at the rate of one month grace period
for every one year of installment payments made; x x x
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty per cent of the total payments
made; provided, that the actual cancellation of the contract shall take place after thirty
days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer."
In this case, respondent has already paid in four (4) years a total of P314,860.76 or P90,835.76
more than the contract price of P224,035.00. In April 1989, petitioner decided to cancel the
contract when the respondent incurred in delay in the payment of P15,282.85, representing three
(3) monthly amortizations. Petitioner refused to accept respondent’s subsequent tender of
payment of the outstanding balance alleging that it has already cancelled the contract and sold the
subject lot to another buyer. However, the records clearly show that the petitioner failed to comply
with the mandatory twin requirements for a valid and effective cancellation under the law,19 i.e.,
he failed to send a notarized notice of cancellation and refund the cash surrender value. At no time,
from the date it gave a notice of cancellation up to the time immediately before the respondent
filed the case against petitioner, did the latter exert effort to pay the cash surrender value. In fact,
the records disclose that it was only during the preliminary hearing of the case before the HLURB
arbiter when petitioner offered to pay the cash surrender value. Petitioner justifies its inaction on
the ground that the respondent was always out of the country. Even then, the records are bereft of
evidence to show that petitioner attempted to pay the cash surrender value to respondent through
her last known address. The omission is surprising considering that even during the times
respondent was out of the country, petitioner has been sending her written notices to remind her
to pay her installment arrears through her last known address. Clearly, had respondent not filed a
case demanding a final deed of sale in her favor, petitioner would not have lifted a finger to give
respondent what was due her – actual payment of the cash surrender value, among others. In
disregard of basic equitable principles, petitioner’s stance would enable it to resell the property,
keep respondent’s installment payments, not to mention the cash surrender value which it was
obligated to return. The Layug20 case cited by petitioner is inapropos. In Layug, the lot buyer did not
pay for the outstanding balance of his account and the Court found that notarial rescission or
cancellation was no longer necessary as the seller has already filed in court a case for rescission of
the contract to sell. In the case at bar, respondent offered to pay for her outstanding balance of the
contract price but respondent refused to accept it. Neither did petitioner adduce proof that the
respondent’s offer to pay was made after the effectivity date stated in its notice of cancellation.
Moreover, there was no formal notice of cancellation or court action to rescind the contract. Given
the circumstances, we find it illegal and iniquitous that petitioner, without complying with the
mandatory legal requirements for canceling the contract, forfeited both respondent’s land and
hard-earned money after she has paid for, not just the contract price, but more than the
consideration stated in the contract to sell.
Thus, for failure to cancel the contract in accordance with the procedure provided by law, we hold
that the contract to sell between the parties remains valid and subsisting. Following Section 3(a)
of R.A. No. 6552, respondent has the right to offer to pay for the balance of the purchase price,
without interest, which she did in this case. Ordinarily, petitioner would have had no other
recourse but to accept payment. However, respondent can no longer exercise this right as the
subject lot was already sold by the petitioner to another buyer which lot, as admitted by the
petitioner, was valued at P1,700.00 per square meter. As respondent lost her chance to pay for the
balance of the P875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund
to respondent the actual value of the lot resold, i.e., P875,000.00, with 12% interest per annum
computed from August 26, 1991 until fully paid or to deliver a substitute lot at the option of the
respondent.

On a final note, it would not be amiss to stress that the HLURB Board Decision ordering petitioner
to refund to respondent one half of her total payments is not an equitable solution as it punished
the respondent for her delinquent payments but totally disregarded petitioner’s failure to comply
with the mandatory requisites for a valid cancellation of the contract to sell. The Board failed to
consider that the Maceda law was enacted to remedy the plight of low and middle-income lot
buyers, save them from the exacting default clauses in real estate sales and assure them of a home
they can call their own. Neither would the Decision of the HLURB Arbiter ordering a full refund of
the installment payments of respondent in the amount of P314,816.70 be justified as, under the
law, respondent is entitled to the lot she purchased after payment of her outstanding balance which
she was ready and willing to do. Thus, to penalize the petitioner for failing in its obligation to deliver
the subject lot and to give the respondent what is rightly hers, the petitioner was correctly ordered
to refund to the respondent the actual value of the land (P875,000.00) she lost to another buyer,
plus interest at the rate of 12% per annum from August 26, 1991 until fully paid or to deliver a
substitute lot at the choice of the respondent.1âwphi1.nêt

IN VIEW WHEREOF, the Decision of then Chief Presidential Legal Assistant Renato Corona, Office of
the President, dated June 2, 1998, is AFFIRMED in toto. Costs against petitioner.

SO ORDERED.
SALES – ACTIONS FOR BREACH OF CONTRACT / REMEDIES – GOODS - REMEDIES OF THE BUYER He agreed to the delivery of 300,000 gallons of molasses at the same price as last year under the
same condition, and the same to start after the completion of our grinding season. He requested
G.R. No. 23769 September 16, 1925 if possible to let you have molasses during January, February and March or in other words, while
we are grinding, and we agreed with him that we would to the best of our ability, altho we are
somewhat handicapped. But we believe we can let you have 25,000 gallons during each of the
SONG FO & COMPANY, plaintiff-appellee,
milling months, altho it interfere with the shipping of our own and planters sugars to Iloilo. Mr.
vs.
Song Fo also asked if we could supply him with another 100,000 gallons of molasses, and we
HAWAIIAN PHILIPPINE CO., defendant-appellant.
stated we believe that this is possible and will do our best to let you have these extra 100,000
gallons during the next year the same to be taken by you before November 1st, 1923, along with
MALCOLM, J.: the 300,000, making 400,000 gallons in all.

In the court of First Instance of Iloilo, Song Fo & Company, plaintiff, presented a complaint with two Regarding the payment for our molasses, Mr. Song Fo gave us to understand that you would pay
causes of action for breach of contract against the Hawaiian-Philippine Co., defendant, in which us at the end of each month for molasses delivered to you.
judgment was asked for P70,369.50, with legal interest, and costs. In an amended answer and cross-
complaint, the defendant set up the special defense that since the plaintiff had defaulted in the
Hoping that this is satisfactory and awaiting your answer regarding this matter, we remain.
payment for the molasses delivered to it by the defendant under the contract between the parties,
the latter was compelled to cancel and rescind the said contract. The case was submitted for
decision on a stipulation of facts and the exhibits therein mentioned. The judgment of the trial court Yours very truly,
condemned the defendant to pay to the plaintiff a total of P35,317.93, with legal interest from the
date of the presentation of the complaint, and with costs.
HAWAIIAN-PHILIPPINE COMPANY
BY R. C. PITCAIRN
From the judgment of the Court of First Instance the defendant only has appealed. In this court it Administrator.
has made the following assignment of errors: "I. The lower court erred in finding that appellant had
agreed to sell to the appellee 400,000, and not only 300,000, gallons of molasses. II. The lower court
erred in finding that the appellant rescinded without sufficient cause the contract for the sale of Exhibit G is the answer of the manager of Song Fo & Company to the Hawaiian-Philippine Co. on
molasses executed by it and the appellee. III. The lower court erred in rendering judgment in favor December 16, 1922. This letter reads:
of the appellee and not in favor of the appellant in accordance with the prayer of its answer and
cross-complaint. IV. The lower court erred in denying appellant's motion for a new trial." The
specified errors raise three questions which we will consider in the order suggested by the December 16th, 1922.
appellant.

1. Did the defendant agree to sell to the plaintiff 400,000 gallons of molasses or 300,000 gallons Messrs. HAWAIIAN-PHILIPPINE CO.,
of molasses? The trial court found the former amount to be correct. The appellant contends that Silay, Neg. Occ., P.I.
the smaller amount was the basis of the agreement.
DEAR SIRS: We are in receipt of your favours dated the 9th and the 13th inst. and understood all
The contract of the parties is in writing. It is found principally in the documents, Exhibits F and G. their contents.
The First mentioned exhibit is a letter addressed by the administrator of the Hawaiian-Philippine
Co. to Song Fo & Company on December 13, 1922. It reads: In connection to yours of the 13th inst. we regret to hear that you mentioned Mr. Song Fo the
one who visited your Central, but it was not for he was Mr. Song Heng, the representative and
the manager of Messrs. Song Fo & Co.
SILAY, OCC. NEGROS, P.I.
December 13, 1922
With reference to the contents of your letter dated the 13th inst. we confirm all the arrangements
you have stated and in order to make the contract clear, we hereby quote below our old contract
Messrs. SONG FO AND CO. as amended, as per our new arrangements.
Iloilo, Iloilo.
(a) Price, at 2 cents per gallon delivered at the central.
DEAR SIRS: Confirming our conversation we had today with your Mr. Song Fo, who visited this
Central, we wish to state as follows: (b) All handling charges and expenses at the central and at the dock at Mambaguid for our
account.
 (c) For services of one locomotive and flat cars necessary for our six tanks at the rate of P48 for Feb. 27 206.16 do do Do
the round trip dock to central and central to dock. This service to be restricted to one trip for the Mar. 5 206.16 do do Do
six tanks. Mar. 16 206.16 Mar. 20/23 Apr. 2/23 Apr. 19
Mar. 24 206.16 Mar. 31/23 do Do
Yours very truly, Mar. 29 206.16 do do Do

SONG FO & COMPANY
By __________________________
Manager.
We agree with appellant that the above quoted correspondence is susceptible of but one
interpretation. The Hawaiian-Philippine Co. agreed to deliver to Song Fo & Company 300,000 gallons
of molasses. The Hawaiian-Philippine Co. also believed it possible to accommodate Song Fo &
Company by supplying the latter company with an extra 100,000 gallons. But the language used
with reference to the additional 100,000 gallons was not a definite promise. Still less did it constitute
an obligation.
Some doubt has risen as to when Song Fo & Company was expected to make payments for the
molasses delivered. Exhibit F speaks of payments "at the end of each month." Exhibit G is silent on
the point. Exhibit M, a letter of March 28, 1923, from Warner, Barnes & Co., Ltd., the agent of the
Hawaiian-Philippine Co. to Song Fo & Company, mentions "payment on presentation of bills for each
delivery." Exhibit O, another letter from Warner, Barnes & Co., Ltd. to Song Fo & Company dated
April 2, 1923, is of a similar tenor. Exhibit P, a communication sent direct by the Hawaiian-Philippine
Co. to Song Fo & Company on April 2, 1923, by which the Hawaiian-Philippine Co. gave notice of the
termination of the contract, gave as the reason for the rescission, the breach by Song Fo & Company
of this condition: "You will recall that under the arrangements made for taking our molasses, you
were to meet our accounts upon presentation and at each delivery." Not far removed from this
statement, is the allegation of plaintiff in its complaint that "plaintiff agreed to pay defendant, at
the end of each month upon presentation accounts."

If Exhibit T relied upon by the trial court shows anything, it is simply that the defendant did not
Resolving such ambiguity as exists and having in mind ordinary business practice, a reasonable
consider itself obliged to deliver to the plaintiff molasses in any amount. On the other hand, Exhibit
deduction is that Song Fo & Company was to pay the Hawaiian-Philippine Co. upon presentation of
A, a letter written by the manager of Song Fo & Company on October 17, 1922, expressly mentions
accounts at the end of each month. Under this hypothesis, Song Fo & Company should have paid
an understanding between the parties of a contract for P300,000 gallons of molasses.
for the molasses delivered in December, 1922, and for which accounts were received by it on
January 5, 1923, not later than January 31 of that year. Instead, payment was not made until
We sustain appellant's point of view on the first question and rule that the contract between the February 20, 1923. All the rest of the molasses was paid for either on time or ahead of time.
parties provided for the delivery by the Hawaiian-Philippine Co. to song Fo & Company of 300,000
gallons of molasses.
The terms of payment fixed by the parties are controlling. The time of payment stipulated for in the
contract should be treated as of the essence of the contract. Theoretically, agreeable to certain
2. Had the Hawaiian-Philippine Co. the right to rescind the contract of sale made with Song Fo & conditions which could easily be imagined, the Hawaiian-Philippine Co. would have had the right to
Company? The trial judge answers No, the appellant Yes. rescind the contract because of the breach of Song Fo & Company. But actually, there is here
present no outstanding fact which would legally sanction the rescission of the contract by the
Turning to Exhibit F, we note this sentence: "Regarding the payment for our molasses, Mr. Song Fo Hawaiian-Philippine Co.
(Mr. Song Heng) gave us to understand that you would pay us at the end of each month for molasses
delivered to you." In Exhibit G, we find Song Fo & Company stating that they understand the The general rule is that rescission will not be permitted for a slight or casual breach of the contract,
contents of Exhibit F, and that they confirm all the arrangements you have stated, and in order to but only for such breaches as are so substantial and fundamental as to defeat the object of the
make the contract clear, we hereby quote below our old contract as amended, as per our new parties in making the agreement. A delay in payment for a small quantity of molasses for some
arrangements. (a) Price, at 2 cents per gallon delivered at the central." In connection with the twenty days is not such a violation of an essential condition of the contract was warrants rescission
portion of the contract having reference to the payment for the molasses, the parties have agree for non-performance. Not only this, but the Hawaiian-Philippine Co. waived this condition when it
on a table showing the date of delivery of the molasses, the amount and date thereof, the date of arose by accepting payment of the overdue accounts and continuing with the contract. Thereafter,
receipt of account by plaintiff, and date of payment. The table mentioned is as follows: Song Fo & Company was not in default in payment so that the Hawaiian-Philippine co. had in reality
no excuse for writing its letter of April 2, 1923, cancelling the contract. (Warner, Barnes & Co. vs.
Date of delivery Account and date thereof Date of receipt Date of Inza [1922], 43 Phil., 505.)
of account by payment
plaintiff We rule that the appellant had no legal right to rescind the contract of sale because of the failure
1922 1923 1923 of Song Fo & Company to pay for the molasses within the time agreed upon by the parties. We
Dec. 18 P206.16 Dec. 26/22 Jan. 5 Feb. 20 sustain the finding of the trial judge in this respect.
Dec. 29 206.16 Jan. 3/23 do Do
1923
3. On the basis first, of a contract for 300,000 gallons of molasses, and second, of a contract
Jan. 5 206.16 Jan. 9/23 Mar. 7 or 8 Mar. 31
imprudently breached by the Hawaiian-Philippine Co., what is the measure of damages? We again
Feb. 12 206.16 Mar. 12/23 do Do
turn to the facts as agreed upon by the parties.
The first cause of action of the plaintiff is based on the greater expense to which it was put in being
compelled to secure molasses from other sources. Three hundred thousand gallons of molasses was
the total of the agreement, as we have seen. As conceded by the plaintiff, 55,006 gallons of molasses
were delivered by the defendant to the plaintiff before the breach. This leaves 244,994 gallons of
molasses undelivered which the plaintiff had to purchase in the open market. As expressly conceded
by the plaintiff at page 25 of its brief, 100,000 gallons of molasses were secured from the Central
North Negros Sugar Co., Inc., at two centavos a gallon. As this is the same price specified in the
contract between the plaintiff and the defendant, the plaintiff accordingly suffered no material loss
in having to make this purchase. So 244,994 gallons minus the 100,000 gallons just mentioned
leaves as a result 144,994 gallons. As to this amount, the plaintiff admits that it could have secured
it and more from the Central Victorias Milling Company, at three and one-half centavos per gallon.
In other words, the plaintiff had to pay the Central Victorias Milling company one and one-half
centavos a gallon more for the molasses than it would have had to pay the Hawaiian-Philippine Co.
Translated into pesos and centavos, this meant a loss to the plaintiff of approximately P2,174.91.
As the conditions existing at the central of the Hawaiian-Philippine Co. may have been different
than those found at the Central North Negros Sugar Co., Inc., and the Central Victorias Milling
Company, and as not alone through the delay but through expenses of transportation and incidental
expenses, the plaintiff may have been put to greater cost in making the purchase of the molasses
in the open market, we would concede under the first cause of action in round figures P3,000.

The second cause of action relates to lost profits on account of the breach of the contract. The only
evidence in the record on this question is the stipulation of counsel to the effect that had Mr. Song
Heng, the manager of Song Fo & Company, been called as a witness, he would have testified that
the plaintiff would have realized a profit of P14,948.43, if the contract of December 13, 1922, had
been fulfilled by the defendant. Indisputably, this statement falls far short of presenting proof on
which to make a finding as to damages.

In the first place, the testimony which Mr. Song Heng would have given undoubtedly would follow
the same line of thought as found in the decision of the trial court, which we have found to be
unsustainable. In the second place, had Mr. Song Heng taken the witness-stand and made the
statement attributed to him, it would have been insufficient proof of the allegations of the
complaint, and the fact that it is a part of the stipulation by counsel does not change this result. And
lastly, the testimony of the witness Song Heng, it we may dignify it as such, is a mere conclusion,
not a proven fact. As to what items up the more than P14,000 of alleged lost profits, whether loss
of sales or loss of customers, or what not, we have no means of knowing.

We rule that the plaintiff is entitled to recover damages from the defendant for breach of contract
on the first cause of action in the amount of P3,000 and on the second cause of action in no amount.
Appellant's assignments of error are accordingly found to be well taken in part and not well taken
in part.

Agreeable to the foregoing, the judgment appealed from shall be modified and the plaintiff shall
have and recover from the defendant the sum of P3,000, with legal interest form October 2, 1923,
until payment. Without special finding as to costs in either instance, it is so ordered.
SALES – ACTIONS FOR BREACH OF CONTRACT / REMEDIES – GOODS - REMEDIES OF THE BUYER
G.R. No. 118325 January 29, 1997
VIRGILIO M. DEL ROSARIO and CORAZON PAREDES-DEL ROSARIO, petitioners,
vs.
COURT OF APPEALS and METAL FORMING CORPORATION, respondents.
NARVASA, C.J.:
On August 28, 1995, the Court En Banc promulgated judgment in the case of Metal Forming
Corporation v. Office of the President, etc., et al.,1 dismissing the petitioner's appeal and affirming
the decision of the Office of the President dated April 30, 1993. The latter decision in turn affirmed
that of the Department of Trade and Industry rendered on May 29, 1991 in an administrative case
initiated against Metal Forming Corporation (hereafter, MFC) by complaint of the "spouses Virgillo
M. del Rosario and Corazon Paredes-del Rosario."
The Del Rosarios' complaint, filed on November 21, 1990, charged MFC with a violation of Section
3 of Act No. 3740, "An Act to Penalize Fraudulent Advertising, Mislabeling or Misbranding of Any
Product, Stocks, Bonds, etc." It alleged that:2
1) "in selling to the public roofing materials known as "Banawe" shingles, . . . (MFC) made
representations on the durability of the product and the sturdiness of its installation" through
massive advertisements in print media and television. . . (and) brochures :"
2) these representations — particularly those characterizing the shingles as "STRUCTURALLY SAFE
AND STRONG" and that the "BANAWE METAL TILE structure acts as a single unit against wind and
storm pressure due to the strong hook action on its overlaps" — "prompted. . . (the Del Rosarios)
to buy the "Banawe" shingles and. . . (have) them installed at their residence;" but
3) "(b)arely two (2) months after completion of the installation, portions of the roof of. . . (the Del
Rosarios) were blown away by strong wind brought about by typhoon "Ruping."
After due proceedings, the DTI rendered judgment declaring that MFC had indeed misrepresented
its product because "as the records showed," strong winds actually blew off part of the
structure/roof of the Del Rosario Spouses and the same acted in parts (instead of as a single unit)
when strong winds blew, a part remaining while another part was blown off. MFC was accordingly
sentenced to pay an "administrative fine of P10,000.00" (within ten [10] days from finality of the
decision), otherwise its "business name and registration. . . would be deemed suspended and its
establishment closed until the fine was fully paid."
As already stated, the decision of the DTI (of May 29, 1991) was, on appeal, affirmed in toto by the
Office of the President on April 30, 1993; and the latter judgment was in turn affirmed by this
Court on August 28, 1995 with a modification solely as to the fine, which was reduced to
P5,000.00. In said judgment of August 28, 1995, this Court, stressing that the factual findings of
such administrative bodies as the Office of the President are generally to be accorded respect, if
not indeed invested with finality, pronounced as correct that Office's ruling, among others, that:
(A)lthough the occurrence of a typhoon is a fortuitous event which by itself might have exempted
petitioner from liability to private respondents —
". . . it cannot efface the fundamental fact that (petitioner) acted in bad faith and/or with gross
negligence in failing to deliver the necessary accessories for the proper installation of the
structure. . . and actually installed inferior roofing materials at (private respondents') residence,
in violation of the proper installation procedure expressly specified in the former's brochures and
advertisements for installation, i.e., the metal tile attached to the roof panels should be by two
(2) self-drilling screws for one [1] metal cleat. However, instead of conforming with this
procedure, (petitioner) attached some of the metal cleats with only one (1)-inch ordinary nail
each and others were fastened with only one (1) wood screw each.. . ."
It appears that MFC replaced and repaired the roof free of charge, evidently acknowledging that the
damage was covered by its one-year warranty on the materials and the installation. The repair work
was observed and analyzed by the Esteban Adjusters and Valuers, Inc., which was engaged by the
Del Rosarios to determine the cause of the destruction.3 The repair; work was begun on October
23, 1989, with the delivery of replacement tiles, and completed on November 7, 1989. Thereafter
the Esteban Adjusters and Valuers, Inc. submitted its report to the Del Rosarios, dated November
8, 1989,4 in which it made the following conclusion:
The "Banawe" metal tiles which were detached from the roof trusses were not fastened with two
(2) wood screws on each metal cleat as required but only with a single wood screw or a
combination of a single wood screw and a 1-inch nail which is contrary to the design and
specification. We have observed during the course of repai(r) works that some "Banawe" metal
tiles installed were no longer than the roof span, hence there is overlapping on the ridge roll/hip.
It is very evident that the original subcontractor (which we were not able to identify) were in
haste to complete the project. . . .
MFC however declined to concede liability for the other damages claimed by the Del Rosario
Spouses to have been caused to the interior of their home. This prompted the latter to commence
a civil action against MFC on April 16, 1990 in the Regional Trial Court of Manila. 5 In this suit,
docketed as Civil Case No. 90-52734, the spouses sought to recover from MFC, damages resulting
from the events just narrated, contending that aside from the destruction of the roof of their house,
injury was also caused to its electrical wiring, ceiling, furtures, walls, wall paper, wood parquet
flooring and furniture.6 The plaintiff spouses reckoned their actual damages at P1,008,003.00 —
"representing the estimated cost of the repair, restoration and/or replacement of the damaged
areas and items in plaintiffs' house and the .cost of the inspection conducted by the independent
adjuster (engaged by them), with legal interests thereon from 21 February 1990 when defendant
(MFL) received the formal demand from plaintiffs until fully paid." 7 They also prayed for an award
to them of moral damages in the sum of P3,000,000,00, exemplary damages in the amount of
P1,000,000.00, and attorney's fees in the sum of P1,000,000.00.
MFC moved to dismiss the complaint for lack of cause of action. If stated that it had no contractual
relationship with the Del Rosarios since the contract for the purchase and installation of the roofing,
upon which the latter's claims were based, was actually entered into between it and another
person, Jesus M. Puno (an engineer identified as the Del Rosarios' contractor). The Trial Court
denied the motion. MFC assailed that denial in the Court of Appeals, but was rebuffed; and its
recourse to this Court (G.R. No. 95514) was also unsuccessful.8
Trial then ensued after which judgment was rendered on November 18, 1991 by the Regional Trial
Court in favor of the Del Rosarios,9 the dispositive portion of which reads as follows:10
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, to
pay: —
"a) Actual Damages in the amount of ONE MILLION EIGHT THOUSAND THREE (P1,008,003.00)
PESOS, with legal interest thereon, from June 31, 1990 until fully paid;
"b) Moral Damages in the amount of FIVE HUNDRED THOUSAND (P500,000.00) PESOS;
"c) Exemplary Damages in the amount of THREE HUNDRED THOUSAND (P300,000.00) PESOS; and
"d) Attorney's fees and expenses of litigation in the amount of ONE HUNDRED FIFTY THOUSAND
(P150,000.00) PESOS.
Counter claims filed by the defendant are dismissed.
SO ORDERED.
The Trial Court held the corporation liable for breach of its contract for the supply and installation
of the roofing materials in the Del Rosarios' residence. According to the Court:11
The following facts were duly established from the evidence supporting plaintiffs' claim for
damages:
"1 There was actually serious damages caused on plaintiffs' house on account of faulty or inferior
installation;
"2. Defendant himself admitted its liability by making partial repairs of the roofing of "Banawe"
shingles, free of charge, after the typhoon. . . (Ruping);
"3. There was an expressed warranty specified in the brochure that there should be two (2) metal
screws for one (1) cleat but the same was violated by the defendant who only used one (1) 1-inch
nail or a combination of one (1) metal screw to one (1) cleat;
"4. There is ample evidence including the testimony of Engr. Puno that it was defendant Metal
Forming Corporation who. . . (had) a contract with the plaintiffs for the supply and installation of
roofing materials in plaintiffs' residential house located at No. 17 Tabuena Street, Corinthian
Gardens, Quezon City; and
"5. There was a declared warranty by the defendants relied upon by the plaintiffs and that the
defendant was guilty of fraud and/or breach of warranty."
Parenthetically, these conclusions are substantially the same as those made by the Department of
Trade and Industry in its own judgment rendered on May 29, 1991 — affirmed by the Office of the
President in a decision dated April 30, 1993, and ultimately by this Court En Banc in its decision
promulgated on August 28, 1995.12 The Trial Court ruled that there was privity of contract between
the Del Rosarios and MFC; Engineer Puno acted as MFC's agent in the signing of the contracts for
the supply and installation of the "Banawe'' shingles; hence, the contract was really between the
Del Rosarios and that company.13
MFC appealed to the Court of Appeals. In its Decision promulgated on June 29, 1994.14 said Court
reversed the Trial Court's judgment, It ruled that there was no privity of contract between the Del
Rosarios and MFC, for the following reasons:15
a. The contracts for the supply of materials and installation of the roof were signed by Engr. Puno.
On the face of the contracts, it does not appear that the Del Rosarios were parties to it or that it
was entered into for their benefit. It does not also appear that Engr. Puno acted as agent of the
Del Rosarios nor of the corporation.
b. The holding of the trial court that Engr. Puno was an agent of the corporation is not borne out
by the records. There is no evidence, apart from Engr. Puno's testimony, to show that any agency
exists.
c. The nature of the relationship between the Del Rosarios and Engr. Puno is also not clear from
the records of the case.
d. While it may be implicit in the complaint of the Del Rosarios that there was a contract between
them and the corporation, this is not supported by the evidence presented.
There being no such privity, according to the Court of Appeals, the Del Rosarios had no cause of
action against MFC for breach of warranties, there being no law allowing them to proceed directly
against those whom their contractor had subcontracted to furnish materials and do part of the work
that the latter was engaged to perform.16
The Del Rosarios appealed, and in this Court expectedly present for resolution, 17 the issue of
"'WHETHER OR NOT THERE IS A PRIVITY OF CONTRACT BETWEEN THE PARTIES,'"
There is merit in the petition. The essential issue is whether or not upon the facts established by the
evidence, MFC is answerable to the Del Rosarios for the damage caused to the latter's residence
when its roof, made of shingles purchased from and installed by the former, was blown away by a
typhoon. The Court rules that it is.
The facts on record — including those set forth in the final judgment of the Court En Banc involving
the same parties, adverted to in the opening paragraph of this opinion, supra.18 of which judgment
official cognizance may properly be, as it is hereby, taken — constitute adequate basis for a verdict
against MFC. These are the following:
1. MFC was engaged in the business of selling to the public roofing materials known as "Banawe"
shingles or metal tiles, and through extensive advertisements in media and in its brochures, made
representations respecting the durability of its tiles and the sturdiness of roofing installed in
accordance with its particularly described method, These representations included statements
that the shingles are "STRUCTURALLY SAFE AND STRONG" and that the "BANAWE METAL TILE
structure acts as a single unit against wind and storm pressure due to the strong hook action on
its overlaps."
 2. After reading MFC's brochures and advertisements, the Del Rosario Spouses instructed their
contractor, Engineer Puno, to use the "Banawe" shingles or metal tiles in the roofing of their
house then under construction.19
3. In other words, paraphrasing Article 1546 of the Civil Code, MFC, as seller to the general public
had made a affirmations of fact and promises relating to its advertised product, the "Banawe"
tiles, the natural tendency of which was to induce the buyers, as infact it did induce the Del
Rosarios, to purchase the same, relying thereon.
4. Pursuant to the Del Rosarios' instructions. Puno placed orders with MFC and signed the
pertinent contracts for the purchase of the shingles, accepted deliveries thereof and signed
corresponding invoices, and made payments thereon with the spouses funds.20
5. Deliveries of the "Banawe" metal tiles or shingles were made by MFC's employees to the
construction site of the Del Rosarios' residence; and installation of the metal tiles in the roof of
the Del Rosario's house was made by MFC's workers.
6. MFC "acted in bad faith and/or with gross negligence in failing to deliver the necessary
accessories for the proper installation of the structure. . . and actually installed inferior roofing
materials at (private respondents') residence, in violation of the proper installation procedure
expressly specified in the former's brochures and advertisements for installation, i.e., the metal
tile attached to the roof panels should be by two (2) self-drilling screws for one (1) metal cleat. .
. (but) instead of conforming with this procedure, (petitioner) attached some of the metal cleats
with only one (l)-inch ordinary nail each and others were fastened with only one (1) wood screw
each. . ."21
7. As a result, barely two (2) months after completion of the installation of the roof by MFC's
workers, portions thereof were blown away by the winds of typhoon "Ruping,"
8. MFC replaced the roof free of charge, in acknowledgment of its one-year warranty on the
materials and their installation.
All the quibbling about whether Engineer Puno acted as agent of MFC or of the spouses, is pointless.
The matter is not a factor in determining MFC's liability for its workers' use of inferior materials and
their defective installation of the "Banawe" metal tiles in the roof of the latter's residence,
Prescinding from the persuasive proof on record that at all times material and with regard to the
acquisition and installation of the metal tiles or shingles, Puno was in truth acting as contractor of
the Del Rosarios and on their instructions,22 ascertainment of the definite identity of the person
who actually ordered the shingles from MFC is utterly inconsequential — it might just as well have
been a construction foreman, a trusted domestic, or any friend or acquaintance of the Del Rosarios
— in view of the indisputable fact not only (1) that the tiles were delivered to the Del Rosarios and
used in fabricating the roof of their home, but also (2) that it was the employees and workers of
MFC who (a) delivered the shingles or metal tiles to the construction site of the Del Rosarios' home,
and (b) undertook and completed the installation thereof These they did in bad faith, using inferior
materials and assembling them in a manner contrary to MFC's express representations in its
brochures and advertisements circulated and broadcast to the general public — which
representations had, in the first place, induced the Del Rosarios to choose the metal tiles in question
for their roofing. In fine, since MFC, in bad faith and with gross negligence, infringed the express
warranty made by it to the general public in connection with the "Banawe" tiles brought to and set
up in the house of the Del Rosarios who had relied on the warranty, and thereby caused them
considerable injury, the identity of the individual who actually dealt with MFC and asked the latter
to make such delivery and installation is of little moment.
Turning now to the matter of damages, it is the Del Rosarios' contention that the pecuniary
detriment to their home amounted to P1,008,003.00, covering not only the destruction of the roof,
but also substantial harm to the electrical wiring, ceiling, fixtures, walls, wallpaper, wood parquet
flooring and furniture.23 They rely on the Report of the Esteban Adjusters and Valuers, Inc., 24 to
which the Regional Trial Court accorded full credit. But that report contains no statement whatever
of the amount of the damage. Indeed, the testimony of Engineer Abril, the representative of the
Esteban Adjusters and Valuers, Inc., is that his firm had been retained only to determine the cause
of the damage, not to estimate and assess it.25 A similar aridity as to the amount of the damage,
unfortunately characterizes the testimony of Atty. Virgilio Del Rosario and the rest of the spouses'
proofs. There is therefore no evidentiary foundation upon which to lay an award of actual damages.
The Trial Court's grant thereof must be struck down. Lufthansa German Airlines vs. CA, et al.,
promulgated on April 21, 1995,26 inter alia ruled that:
Actual or compensatory damages cannot be presumed, but must be duly proved and proved with
reasonable degree of certainty. A court cannot rely on speculations, conjectures or guesswork as
to the fact and amount of damages, but must depend upon competent proof that they have
(been) suffered and on evidence of the actual amount thereof.
Its grant of moral and exemplary damages was justified by the Trial Court as follows:27
Form the evidence presented, plaintiffs' sufferings have been duly and substantially proven by
the defendant's fraudulent actuation and breach of warranty, and thereby entitled for the claim
of damages and litigation costs as enunciated by the testimony of the plaintiff... that the damages
to his house caused sufferings and feelings of shock. helplessness, fears, embarrassment and
anger, thereby entitling him to Moral Damages which should be assessed at P500,000.00.
"The moral damages. . . . (are awarded) for indemnity or reparation not punishment or correction,
that is, an award to entitle the injured party to obtain means (of) diversions and amusement that
will serve to alleviate the moral sufferings he has undergone by reason of defendant's culpable
action. (RNB Surety and Ins. Co. v. IAC, G.R No. 64515, June 22, 1984, 129 SCRA 745)."
That MFC did in truth act with bad faith, in flagrant breach of its express warranties made to the
general public and in wanton disregard of the rights of the Del Rosarios who relied on those
warranties, is adequately demonstrated by the recorded proofs. The law explicitly authorizes the
award of moral damages "in breaches of contract where the defendant acted fraudulently or in
bad faith."28 There being, moreover, satisfactory evidence of the psychological and mental trauma
actually suffered by the Del Rosarios, the grant to them of moral damages is warranted. Over a
period of about a month. they experienced "feelings of shock, helplessness, fear, embarrassment
and anger."29 As declared by this Court in Makabili v. Court of Appeals,30 among other precedents:
It is essential. . . . in the award of damages that the claimant must have satisfactorily proven
during the trial the existence of the factual basis of the damages and its causal connection to
defendant's acts. This is so because moral damages though incapable of pecuniary estimation,
are in the category of an award designed to compensate the claimant for actual injury suffered
and not to impose a penalty on the wrongdoer (Enervida v. De la Torre, 55 SCRA 340 [1974.] and
 are allowable only when specifically prayed for in the complaint. (San Miguel Brewery, Inc. v.
Magno, 21 SCRA 292 [1968])
As reflected in the records of the case, the Court of Appeals was in agreement with the findings
of the trial court that petitioners suffered anguish, embarrassment and mental sufferings due to
the failure of private respondent to perform its obligation to petitioners. According to the Court
of Appeals, private respondent acted in wanton disregard of the rights of petitioners. These
pronouncements lay the basis and justification for this Court to award petitioners moral and
exemplary damages."
This Court also agrees with the Trial Court that exemplary damages are properly exigible of MFC,
"Article 2229 of the Civil Code provides that such damages may be imposed by way of example or
correction for the public good, While exemplary damages cannot be recovered as a matter of right,
they need not be proved, although plaintiff must show that he is entitled to moral, temperate or
compensatory damages before the court may consider the question of whether or not exemplary
damages should be awarded."31 "Exemplary damages are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a negative incentive to curb socially
deleterious actions."32
However, the same statutory and jurisprudential standards just mentioned dictate reduction of the
amounts of moral and exemplary damages fixed by the Trial Court. There is, to be sure, no hard and
fast rule for determining what would be a fair amount of moral (or exemplary) damages, each case
having to be governed by its attendant particulars, Generally, the amount of moral damages should
be commensurate with the actual loss or injury suffered. In the case of PNB v. C.A, just cited,33 this
Court quoted with approval the following observation from RCPI v. Rodriguez, 34 viz.:
. . . Nevertheless, we find the award of P100,000.00 as moral damages in favor of respondent
Rodriguez excessive and unconscionable. In the case of Prudenciado v. Alliance Transport System,
Inc. (148 SCRA 440 [1987]) we said: ". . . [I]t is undisputed that the trial courts are given discretion
to determine the amount of moral damages (Alcantara v. Surro, 93 Phil. 472) and that the Court
of Appeals can only modify or change the amount awarded when they are palpably and
scandalously excessive "so as to indicate that it was the result of passion, prejudice or corruption
on the part of the trial court" (Gellada v. Warner Barnes & Co., Inc., 57 O.G. [4] 7347, 7358; Sadie
v. Bacharach Motors Co., Inc., 57 O.G. [4] 636 and Adone v. Bacharach Motor Co., Inc., 57 O.G.
656). But in more recent cases where the awards of moral and exemplary damages are far too
excessive compared to the actual loses sustained by the aggrieved party, this Court ruled that
they should be reduced to more reasonable amounts.. . . (Emphasis ours.)
In another case involving strikingly analogous facts decided in 1994, Geraldez vs. CA.,36 where no
actual damages were adjudicated but moral and exemplary damages in similar amounts
(P500.000.00 and P300,000.00, respectively) were awarded by the Trial Court, as in this case, this
Court reduced the amount of moral damages to P100,000.00 and of exemplary damages to
P50,000.00. The Court sees no reason to adopt a different treatment in the case at bar, and
accordingly reduces the moral damages from P500,000.00 to P100,000.00, and the exemplary
damages from P300,000.00 to P50,000.00.
Finally, like the adjudication of actual or compensatory damages, the award of attorney's fees must
be deleted. The matter was dealt with only in the dispositive portion of the Trial Court's decision.
Since the judgment does not say why attorney's fees are awarded, there is no basis for such award,
which should consequently be removed. So did this Court rule, for instance, in Scott Consultants
and Resource Development Corp., Inc. vs. CA, et al.:37
It is settled that the award of attorney's fees is the exception rather than the rule and counsel's
fees are not to be awarded every time a party wins. The power of the court to award attorney's
fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification; its
basis cannot be left to speculation or conjecture. Where granted. the court must explicitly state
in the body of the decision, and not only in the dispositive portion thereof, the legal reason for
the award of attorney's fees.
WHEREFORE, the challenged Decision of the Court of Appeals of June 29, 1994 is REVERSED and SET
ASIDE; and the Decision of the Regional Trial Court of November 18, 1991 is REINSTATED AND
AFFIRMED, with the modification that the award of actual damages and attorney's fees is deleted,
and the moral and exemplary damages awarded are reduced from P500,000.00 to P100,000.00, and
from P300,000.00 to P50,000.00, respectively.
IT IS SO ORDERED.

In other words, the moral damages awarded must be commensurate with the loss or injury
suffered.

In the same case (PNB v. CA), this Court35 found the amount of exemplary damages required to be
paid (P1,000,000.00) "too excessive" and reduced it to an "equitable level" (P25,000.00).

. . . (T)he award of P1,000,000.00 exemplary damages is also far too excessive and should likewise
be reduced to an equitable level. Exemplary damages are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a negative incentive to curb socially
deleterious actions.
SALES – ACTIONS FOR BREACH OF CONTRACT / REMEDIES – MOVABLES ON INSTALLMENTS 7. That plaintiff Cruz defaulted in the payment of the promisory note (Annex "A") ; that the only
sum ever paid to the defendant was Five Hundred Pesos (P500.00) on October 2, 1963, which
G.R. No. L-24772 May 27, 1968 was applied as partial payment of interests on his principal obligation; that, notwithstanding
defendant's demands, Cruz made no payment on any of the installments stipulated in the
promissory note;
RUPERTO G. CRUZ, ET AL., plaintiffs-appellees,
vs.
FILIPINAS INVESTMENT and FINANCE CORPORATION, defendant-appellant. 8. That by reason of Cruz's default, defendant took steps to foreclose the chattel mortgage on
the bus; that said vehicle had been damaged in an accident while in the possession of plaintiff
Cruz;
REYES, J.B.L., J.:

9. That at the foreclosure sale held on January 31, 1964 by the Sheriff of Manila, the defendant
Appeal interposed by Filipinas Investment & Finance Corporation from the decision of the Court of
was the highest bidder, defendant's bid being for Fifteen Thousand Pesos (P15,000.00)...;
First Instance of Rizal (Quezon City) in Civil Case No. Q-7949.1ªvvphi1.nêt

10. That the proceeds of the sale of the bus were not sufficient to cover the expenses of sale, the
In the action commenced by Ruperto G. Cruz and Felicidad V. Vda. de Reyes in the Court of First
principal obligation, interests, and attorney's fees, i.e., they were not sufficient to discharge fully
Instance of Rizal (Civil Case No. Q-7949), for cancellation of the real estate mortgage constituted on
the indebtedness of plaintiff Cruz to the defendant;
the land of the latter 1 in favor of defendant Filipinas Investment & Finance Corporation (as assignee
of the Far East Motor Corporation), the parties submitted the case for decision on the following
stipulation of facts: 11. That on February 12, 1964, preparatory to foreclosing its real estate mortgage on Mrs. Reyes'
land, defendant paid the mortgage indebtedness of Mrs. Reyes to the Development Bank of the
Philippines, in the sum of P2,148.07, the unpaid balance of said obligation...;
1. Their personal circumstances and legal capacities to sue and be sued;

12. That pursuant to a provision in the real estate mortgage contract, authorizing the mortgagee
2. That on July 15, 1963, plaintiff Ruperto G. Cruz purchased on installments, from the Far East
to foreclose the mortgage judicially or extra-judicially, defendant on February 29, 1964 requested
Motor Corporation, one (1) unit of Isuzu Diesel Bus, described in the complaint, for P44,616.24,
the Provincial Sheriff of Bulacan to take possession of, and sell, the land subject of the Real Estate
Philippine Currency, payable in installments of P1,487.20 per month for thirty (30) months,
Mortgage, Annex "B-1", to satisfy the sum of P43,318.92, the total outstanding obligation of the
beginning October 22, 1963, with 12 % interest per annum, until fully paid. As evidence of said
plaintiffs to the defendant, as itemized in the Statement of Account, which is made a part hereof
indebtedness, plaintiff Cruz executed and delivered to the Far East Motor Corporation a
as Annex "F"...;
negotiable promissory note in the sum of P44,616.24, ...;

13. That notices of sale were duly posted and served to the Mortgagor, Mrs. Reyes, pursuant to
3. That to secure the payment of the promissory note, Annex "A", Cruz executed in favor of the
and in compliance with the requirements of Act 3135...;
seller, Far East Motor Corporation, a chattel mortgage over the aforesaid motor vehicle...;

4. That as no down payment was made by Cruz, the seller, Far East Motor Corporation, on the
very improvements thereon, in San Miguel, Bulacan...; same date, July 15, 1963, required and
Cruz agreed to give, additional security for his obligation besides the chattel mortgage, Annex
"B"; that said additional security was given by plaintiff Felicidad Vda. de Reyes in the form of
SECOND MORTGAGE on a parcel of land owned by her, together with the building and
5. That said land has an area of 68,902 square meters, more or less, and covered by Transfer
Certificate of Title No. 36480 of the Registry of Deeds of Bulacan in the name of plaintiff Mrs.
Reyes; and that it was at the time mortgaged to the Development Bank of the Philippines to
secure a loan of P2,600.00 obtained by Mrs. Reyes from that bank;
6. That also on July 15, 1963, the Far East Motor Corporation for value received indorsed the
promissory note and assigned all its rights and interest in the Deeds of Chattel Mortgage and in
the Deed of Real Estate Mortgage (Annexes "A", "B" and "B-l") to the defendant, Filipinas
Investment & Finance Corporation, with due notice of such assignment to the plaintiffs...;
14. That on March 20, 1964, plaintiff Reyes through counsel, wrote a letter to the defendant
asking for the cancellation of the real estate mortgage on her land, but defendant did not comply
with such demand as it was of the belief that plaintiff's request was without any legal basis;
15. That at the request of the plaintiffs, the provincial Sheriff of Bulacan held in abeyance the sale
of the mortgaged real estate pending the result of this action.
Passing upon the issues which, by agreement of the parties, were limited to — (1) "Whether
defendant, which has already extrajudicially foreclosed the chattel mortgage executed by the buyer,
plaintiff Cruz, on the bus sold to him on installments, may also extrajudicially foreclose the real
estate mortgage constituted by plaintiff Mrs. Reyes on her own land, as additional security, for the
payment of the balance of Cruz' Obligation, still remaining unpaid"; and (2) whether or not the
contending parties are entitled to attorney's fees — the court below, in its decision of April 21, 1965,
sustained the plaintiffs' stand and declared that the extrajudicial foreclosure of the chattel
mortgage on the bus barred further action against the additional security put up by plaintiff Reyes.
Consequently, the real estate mortgage constituted on the land of said plaintiff was ordered
cancelled and defendant was directed to pay the plaintiffs attorney's fees in the sum of P200.00.
Defendant filed the present appeal raising the same questions presented in the lower court.
There is no controversy that, involving as it does a sale of personal property on installments, the
pertinent legal provision in this case is Article 1484 of the Civil Code of the Philippines, 2 which reads:
ART. 1484. 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:
(1) 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;
(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 aforequoted provision is clear and simple: should the vendee or purchaser of a personal
property default in the payment of two or more of the agreed installments, the vendor or seller has
the option to avail of any one of these three remedies — either 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 alternative, not
cumulative, 3 that the exercise of one would bar the exercise of the others. 4 It may also be stated
that the established rule is to the effect that the foreclosure and actual sale of a mortgaged chattel
bars further recovery by the vendor of any balance on the purchaser's outstanding obligation not
so satisfied by the sale. 5 And the reason for this doctrine was aptly stated in the case of Bachrach
Motor Co. vs. Millan, supra, thus:
Undoubtedly the principal object of the above amendment 6 was to remedy the abuses
committed in connection with the foreclosure of chattel mortgages. This amendment prevents
mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and
then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result
of this procedure was that the mortgagor found himself minus the property and still owing
practically the full amount of his original indebtedness. Under this amendment the vendor of
personal property, the purchase price of which is payable in installments, has the right to cancel
the sale or foreclose the mortgage if one has been given on the property. Whichever right the
vendor elects he need not return to the purchaser the amount of the installments already paid,
"if there be in agreement to that effect". Furthermore, if the vendor avails himself of the right to
foreclose the mortgage the amendment prohibits him from bringing an action against the
purchaser for the unpaid balance.
It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract;
that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that
defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than
the purchaser's outstanding obligation. Defendant-appellant, however, sought to collect the
supported deficiency by going against the real estate mortgage which was admittedly constituted
on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz' obligation,
claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil
Code, is only the right to recover "against the purchaser", and not a recourse to the additional
security put up, not by the purchaser himself, but by a third person.
There is no merit in this contention. To sustain appellant's argument is to overlook the fact that if
the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in
turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code) ; so
that ultimately, it will be the vendee who will be made to bear the payment of the balance of the
price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection
given by Article 1484 would be indirectly subverted, and public policy overturned.
Neither is there validity to appellant's allegation that, since the law speaks of "action", the
restriction should be confined only to the bringing of judicial suits or proceedings in court.
The word "action" is without a definite or exclusive meaning. It has been invariably defined as —
... the legal demand of one's right, or rights; the lawful demand of one's rights in the form
given by law; a demand of a right in a court of justice; the lawful demand of one's right in
a court of justice; the legal and formal demand of ones rights from another person or
party, made and insisted on in a court of justice; a claim made before a tribunal; an
assertion in a court of justice of a right given by law; a demand or legal proceeding in a
court of justice to secure one's rights; the prosecution of some demand in a court of
justice; the means by which men litigate with each other; the means that the law has
provided to put the cause of action into effect;.... (Gutierrez Hermanos vs. De la Riva, 46
Phil. 827, 834-835).
Considering the purpose for which the prohibition contained in Article 1484 was intended, the word
"action" used therein may be construed as referring to any judicial or extrajudicial proceeding by
virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied
balance of the purchase price from the purchaser or his privy. Certainly, an extrajudicial foreclosure
of a real estate mortgage is one such proceeding.
The provision of law and jurisprudence on the matter being explicit, so that this litigation could have
been avoided, the award by the lower court of attorney's fees to the plaintiff's in the sum of P200.00
is reasonable and in order.
However, we find merit in appellant's complaint against the trial court's failure to order the
reimbursement by appellee Vda. de Reyes of the amount which the former paid to the Development
Bank of the Philippines, for the release of the first mortgage on the land of said appellee. To the
extent that she was benefited by such payment, plaintiff-appellee Vda. de Reyes should have been
required to reimburse the appellant.
WHEREFORE, the decision appealed from is modified, by ordering plaintiff-appellee Felicidad Vda.
de Reyes to reimburse to defendant-appellant Filipinas Investment & Finance Corporation the sum
of P2,148.07, with legal interest thereon from the finality of this decision until it is fully paid. In all
other respects, the judgment of the court below is affirmed, with costs against the defendant-
appellant.
SALES – ACTIONS FOR BREACH OF CONTRACT / REMEDIES – MOVABLES ON INSTALLMENTS
G.R. No. L-39806 January 27, 1983
LUIS RIDAD and LOURDES RIDAD, plaintiffs-appellees,
vs.
FILIPINAS INVESTMENT and FINANCE CORPORATION, JOSE D. SEBASTIAN and JOSE SAN
AGUSTIN, in his capacity as Sheriff, defendants-appellants.
DE CASTRO, J:
Appeal from the decision of the Court of First Instance of Rizal, Branch I, in Civil Case No. 9140 for
annulment of contract, originally filed with the Court of Appeals but was subsequently certified to
this Court pursuant to Section 3 of Rule 50 of the Rules of Court, there being no issue of fact involved
in this appeal.
The materials facts of the case appearing on record may be stated as follows: On April 14, 1964,
plaintiffs purchased from the Supreme Sales arid Development Corporation two (2) brand new Ford
Consul Sedans complete with accessories, for P26,887 payable in 24 monthly installments. 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 plaintiffs' franchise or certificate of public convenience granted by the defunct
Public Service Commission for the operation of a taxi fleet. Then, with the conformity of the
plaintiffs, the vendor assigned its rights, title and interest to the above-mentioned promissory note
and chattel mortgage to defendant Filipinas Investment and Finance Corporation.
Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, the
defendant corporation foreclosed the chattel mortgage extra-judicially, and at the public auction
sale of the two Ford Consul cars, of which the plaintiffs were not notified, the defendant corporation
was the highest bidder and purchaser. Another auction sale was held on November 16, 1965,
involving the remaining properties subject of the deed of chattel mortgage since plaintiffs'
obligation was not fully satisfied by the sale of the aforesaid vehicles, and at the public auction sale,
the franchise of plaintiffs to operate five units of taxicab service was sold for P8,000 to the highest
bidder, herein defendant corporation, which subsequently sold and conveyed the same to herein
defendant Jose D. Sebastian, who then filed with the Public Service Commission an application for
approval of said sale in his favor.
On February 21, 1966, plaintiffs filed an action for annulment of contract before the Court of First
Instance of Rizal, Branch I, with Filipinas Investment and Finance Corporation, Jose D. Sebastian and
Sheriff Jose San Agustin, as party-defendants. By agreement of the parties, the case was submitted
for decision in the lower court on the basis of the documentary evidence adduced by the parties
during the pre-trial conference. Thereafter, the lower court rendered judgment as follows:
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court declares the chattel mortgage, Exhibit "C",
to be null and void in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are
concerned, and the sale at public auction conducted by the City Sheriff of Manila concerning said
taxicab franchise, to be of no legal effect.1äwphï1.ñët The certificate of sale issued by the City
Sheriff of Manila in favor of Filipinas Investment and Finance Corporation concerning plaintiffs'
taxicab franchise for P8,000 is accordingly cancelled and set aside, and the assignment thereof
made by Filipinas Investment in favor of defendant Jose Sebastian is declared void and of no legal
effect. (Record on Appeal, p. 128).
From the foregoing judgment, defendants appealed to the Court of Appeals which, as earlier
stated, certified the appeal to this Court, appellants imputing to the lower court five alleged
errors, as follows:
I
THE LOWER COURT ERRED IN DECLARING THE CHATTEL MORTGAGE, EXHIBIT "C", NULL AND
VOID.
II
THE LOWER COURT ERRED IN HOLDING THAT THE SALE AT PUBLIC AUCTION CONDUCTED BY THE
CITY SHERIFF OF MANILA CONCERNING THE TAXICAB FRANCHISE IS OF NO LEGAL EFFECT.
III
THE LOWER COURT ERRED IN SETTING ASIDE THE CERTIFICATE OF SALE ISSUED BY THE CITY
SHERIFF OF MANILA IN FAVOR OF FILIPINAS INVESTMENT AND FINANCE CORPORATION
COVERING PLAINTIFFS' TAXICAB FRANCHISE.
IV
THE LOWER COURT ERRED IN DECLARING VOID AND OF NO LEGAL EFFECT THE ASSIGNMENT OF
THE TAXICAB FRANCHISE MADE BY FILIPINAS INVESTMENT AND FINANCE CORPORATION IN
FAVOR OF DEFENDANT.
V
THE LOWER COURT (sic) IN NOT DECIDING THE CASE IN FAVOR OF THE DEFENDANTS. Appellants'
Brief, pp. 9 & 10)
From the aforequoted assignment of errors, the decisive issue for consideration is the validity of the
chattel mortgage in so far as the franchise and the subsequent sale thereof are concerned.
The resolution of said issue is unquestionably governed by the provisions of Article 1484 of the Civil
Code which states:
Art. 1484. In a contract of sale of personal property the price of which is payable in installments,
the vendor may exercise y of the following remedies:
(1) 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;
(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.
Under the above-quoted article of the Civil Code, the vendor of personal property the purchase action 5 that would violate Article 1484 of the Civil Code, for then is actually no between an
price of which is payable in installments, has the right, should the vendee default in the payment of additional security put up by the vendee himself and such security put up by a third party insofar as
two or more of the agreed installments, to exact fulfillment by the purchaser of the obligation, or how the burden would ultimately fall on the vendee himself is concerned.
to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was
constituted. 1 Whichever right the vendor elects, he cannot avail of the other, these remedies being Reliance on the ruling in Southern Motors, inc. v. Moscoso, 2 SCRA 168, that in sales on installments,
alternative, not cumulative. 2 Furthermore, if the vendor avails himself of the right to foreclose his where the action instituted is for and the mortgaged property is subsequently attached and sold,
mortgage, the law prohibits him from further bringing an action against the vendee for the purpose the sales thereof does not amount to a foreclosure of the mortgage, hence, the seller creditor is
of recovering whatever balance of the debt secured not satisfied by the foreclosure sale. 3 The entitled to a deficiency judgment, does not for the stand of the appellants for that case is entirely
precise purpose of the law is to prevent mortgagees from seizing the mortgaged property, buying it different from the case at bar. In that case, the vendor has availed of the first remedy provided by
at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency Article 1484 of the Civil Code, i.e., to exact fulfillment of the obligation whereas in the present case,
judgment, otherwise, the mortgagor-buyer would find himself without the property and still owing the remedy availed of was foreclosure of the chattel mortgage.
practically the full amount of his original indebtedness. 4
The foregoing disposition renders superfluous a determination of the other issue raised by the
In the instant case, defendant corporation elected to foreclose its mortgage upon default by the parties as to the validity of the auction sale, in so far as the franchise of plaintiffs is concerned, which
plaintiffs in the payment of the agreed installments. Having chosen to foreclose the chattel sale had been admittedly held without any notice to the plaintiffs.
mortgage, and bought the purchased vehicles at the public auction as the highest bidder, it
submitted itself to the consequences of the law as specifically mentioned, by which it is deemed to
IN VIEW HEREOF, the judgment appealed from is hereby affirmed, with costs against the appellants.
have renounced any and all rights which it might otherwise have under the promissory note and the
chattel mortgage as well as the payment of the unpaid balance.
SO ORDERED.
Consequently, the lower court rightly declared the nullity of the chattel mortgage in question in so
far as the taxicab franchise and the used Chevrolet car of plaintiffs are concerned, under the
authority of the ruling in the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil.
587, the facts of which are similar to those in the case at bar. There, we have the same situation
wherein the vendees offered as security for the payment of the purchase price not only the motor
vehicles which were bought on installment, but also a residential lot and a house of strong materials.
This Court sustained the pronouncement made by the lower court on the nullity of the mortgage in
so far as it included the house and lot of the vendees, holding that under the law, should the vendor
choose to foreclose the mortgage, he has to content himself with the proceeds of the sale at the
public auction of the chattels which were sold on installment and mortgaged to him and having
chosen the remedy of foreclosure, he cannot nor should he be allowed to insist on the sale of the
house and lot of the vendees, for to do so would be equivalent to obtaining a writ of execution
against them concerning other properties which are separate and distinct from those which were
sold on installment. This would indeed be contrary to public policy and the very spirit and purpose
of the law, limiting the vendor's right to foreclose the chattel mortgage only on the thing sold.

In the case of Cruz v. Filipinos Investment & Finance Corporation, 23 SCRA 791, this Court ruled that
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 purchaser's 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. Consequently, the additional
mortgage was ordered cancelled. Said ruling was reiterated in the case of Pascual v. Universal
Motors Corporation, 61 SCRA 121. 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
SALES – ACTIONS FOR BREACH OF CONTRACT / REMEDIES – IMMOVABLE ON INSTALLMENTS -
REALTY PROPERTY BUYER PROTECTION ACT
G.R. No. 99346 February 7, 1995
CASA FILIPINA REALTY CORPORATION, petitioner,
vs.
OFFICE OF THE PRESIDENT and Spouses DENNIS and REBECCA SEVILLA, respondents.
RESOLUTION
ROMERO, J.:
This is a motion for the reconsideration of the Resolution of August 5, 1991 1 dismissing the instant
petition for certiorari for failure of herein petitioner Casa Filipina Realty Corporation to sufficiently
show that respondent public officials have committed any reversible error in their decision which is
unfavorable to the petitioner.
The records show that sometime in May or June 1984, spouses Dennis and Rebecca Sevilla agreed
to purchase from Casa Filipina Realty Corporation (CFRC) a parcel of land with an area of about 264
square meters located in Barrio San Dionisio, Parañaque, Metro Manila and identified as Lot 7, Block
6, Phase IV, Casa Filipina II Subdivision. The parties agreed that the purchase price of P150,480.00
would be paid on installment basis with P36,115.20 as down payment and P3,560.86 as monthly
installment for five (5) years at 28% amortization interest per annum. The agreement was embodied
in a contract to sell executed on November 15, 1984.
In the ensuing months after the execution of the contract, the Sevilla spouses failed to pay the
amortizations on time. The last installments they paid were for April to July 1985, which they paid,
including penalties, on September 25, 1985.
On November 5, 1985, Dennis Sevilla wrote a letter to CFRC calling its attention to the absence of
any improvement in the subdivision and his discovery that, upon checking with the Register of
Deeds of Pasay City, the mother title of the subdivision was under lis pendens and mortgaged to
ComSavings Bank (formerly Royal Savings Bank). Sevilla, therefore, requested a refund of all
installment payments made on account of the contract.2
On November 19, 1985, the Sevilla spouses filed a complaint against CFRC with the Office of
Appeals, Adjudication and Legal Affairs (OAALA) of the Human Settlements Regulatory Commission.
They prayed for the refund of P70,431.12 which was the total amount they had paid CFRC on
account of the contract, plus legal interest thereon from the date of the reservation or from the
date of the contract to sell, whichever is applicable, attorney's fees of P5,000.00, and
moral/liquidated damages in the amount of P20,000.00 and the costs of the suit.
After due hearing, the OAALA rendered the decision of October 13, 1987 finding CFRC to be without
license to sell the subdivision involved. OAALA held that, even assuming that CFRC had a license to
sell, it was still liable for violation of Sec. 20 of Presidential Decree No. 957 as it had failed to develop
the subdivision. In so holding, the OAALA took judicial notice of the report of Danilo B. Agus on the
ocular inspection he had conducted on December 5, 1986 in the same subdivision project in
"Ernesto Ola v. Casa Filipina Realty and Development Corporation", HLURB Case No. REM-0102386-
3013, for non-development. Hence, the OAALA ordered CFRC to refund the Sevilla couple the
amount of P70,431.12 with 28% interest per annum computed from November 19, 1985, the date
of the filing of the complaint, until fully paid and to pay P4,000.00 as attorney's fees and P3,000.00
as administrative fine for violation of Sec. 20 of P.D. No. 957.
Said decision was affirmed by the Housing and Land Use Regulatory Board (HLURB) on June 21, 1988
with the modification that instead of the 28% interest charged upon CFRC by the OAALA on the
refundable amount, HLURB imposed only 6%.
On January 31, 1990, the Office of the President dismissed for lack of merit the appeal taken by
CFRC and affirmed the June 21, 1988 decision of the HLURB.3 CFRC filed a motion for the
reconsideration of the decision of the Office of the President but it was denied on May 7, 1991.4
Hence, CFRC filed the instant petition5 which, as earlier stated, was dismissed by this Court on
August 5, 1991.
Petitioner's motion for reconsideration is anchored on the contention that the petition should not
have been dismissed as it involves the "interpretation and/or application"6 of provisions of law as
the court has to determine whether it is Sec. 23 or 24 of P.D. No. 957 which should be applied in
the instant case. Petitioner argues that since private respondents desisted from paying the agreed
installments, they should have notified the CFRC of such desistance in accordance with Sec. 23.
Moreover, since private respondents desistance from further paying the amortization was due to
litis pendentia and the mortgage of the mother title of the subdivision, Sec. 24 should have been
applied in the case.
As regards the interest charged on the refundable amount, petitioner contends that while it is not
averse to making a refund, the 3% delinquency interest charged upon private respondents for their
late amortizations should not be included in the amount refundable and the refund should be in
accordance with P.D. No. 957.
For a clear resolution of the motion for reconsideration, the provisions of P.D. No. 957 involved
herein must be noted:
Sec. 23. Non-Forfeiture of Payments. — No installment payment made by a
buyer in a subdivision or condominium project for a lot or unit he contracted to
buy shall be forfeited in favor of the owner or developer when the buyer, after
due notice to the owner or developer, desists from further payment due to the
failure of the owner or developer to develop the subdivision or condominium
project according to the approved plans and within the time limit for complying
with the same. Such buyer may, at his option, be reimbursed the total amount
paid including amortization interests but excluding delinquency interests, with
interest thereon at the legal rate.
Sec. 24. Failure to pay installments. — The rights of the buyer in the event of his
failure to pay the installments due for reasons other than failure of the owner
or developer to develop the project shall be governed by Republic Act No. 6552.
In arguing for the reconsideration of the Resolution of August 5, 1991 dismissing the petition,
petitioner underscores the holding of the Office of the President that Sec. 23 "does not require that
a notice be given first before a demand for refund can be made" as the notice and demand "can be
made in the same letter or communication" which was exactly what private respondents
did.7 While petitioner agrees that the notice and demand for reimbursement may be made in one
communication, it avers that Sec. 23 clearly provides that there can be no forfeiture of payments
made by a buyer only if such buyer has first given notice to the developer that he will not pay the
installments anymore on the ground that the subdivision where the lot being bought is located has
not been developed.
Petitioner's contention is premised on its misleading statement that the private respondents'
desistance from further paying the amortization was based merely on the notice of lis pendens and
the mortgage annotated on the mother title of subject property8 or on "reasons other than
nondevelopment."9 This is belied by the letter itself which, for clarity, we quote in full:
November 5, 1985
MR. AUGUSTO S. PARCERO
Vice President
CASA FILIPINA REALTY CORP.
3rd Flr., Corinthian Plaza
Legaspi Vill., Makati, Metro Manila
Dear Sir:
This is in connection of our lot we purchased at CASA FILIPINA SUBDIVISION, more particularly
described as follows:
Phase IV Block #6 Lot #7
As we see and understand that the property mentioned has no development improvements
even on the project features. Since we convinced to pay the reservation and the full down
payment and now the amortization, we keep on visiting the place for construction . . . (illegible)
and we don't even know where our lot is exactly located, nor we go over the place because of
the overhead growth of the cogon grass.
The last time I arrived from Saudi Arabia, we decided to check at the Register of Deeds of Pasay
regarding the said lot, and we found out that the mother title has a Less Pendins case and we
also found out that the said title was under mortgage to Com Savings Bank formerly Royal
Saving Bank.
In behalf of this unexpected circumstances, we are requesting for a refund for the money we
paid up to Casa Filipina Realty Corporation.
Hoping for your kind consideration regarding this matter.
Thank you.
Very truly yours,
(Sgd.)
DENNIS S. SEVILLA
(Buyer) 10
Private respondent's refusal to continue paying the amortization is thus based on two principal
grounds: nondevelopment of the subdivision and the encumbrance of the property subject of the
sale which became apparent to the buyer only after conducting his own investigation. As such, the
case falls squarely within the purview of both Secs. 23 and 24 of P.D. No. 957.
Considering, however, the peculiar circumstances of this case, we agree with the Solicitor General
that the requirements of Sec. 23 have been complied with by the private respondents. In this regard,
public respondent, after conceding the petitioner's argument that Sec. 23 requires the buyer to
notify the developer or subdivision owner of his intention not to remit further payments on the
property on account of nondevelopment of the subdivision, states:
Appellant's reading of Section 23 elicits our concurrence. However, its claim that appellees had
failed to give the required notice before demanding for refund, is not borne out by the evidence.
Records show that in a letter of November 5, 1985, Dennis Sevilla already gave notice to appellant
regarding, among other things, the nondevelopment of the subdivision, and therein demanded
for refund. To our mind, Section 23 does not require that a notice be given first before a demand
for refund can be made. The notice and the demand can be made in the same letter or
communication, and this is what the appellees did.
But appellant would insist that, when appellees demanded a refund of installments paid in their
letter of November 5, 1985, they were already in default as of August 30, 1985, and that their
said demand had "the sound of belated and hindsight attempt to cover up the default for which
contract cancellation would be the necessary consequence." We find the contention untenable.
The general rule is that an obligor incurs in delay (default) only after a demand, judicial or
extrajudicial, has been made from him for the fulfillment of his obligation. Thus, Article 1169 of
the Civil Code provides that "Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation." Here, there was no such demand by the appellant. The letters it sent to appellees
were the usual remind letters that are ordinarily sent by creditors to late-paying debtors. They
are not the demand contemplated by law. 11
Being in accord with the spirit behind P.D. No. 947, public respondent's conclusions are hereby
affirmed. This decree, aptly entitled "The Subdivision and Condominium Buyers' Protective Decree",
was issued in the wake of numerous reports that many real estate subdivision owners, developers,
operators and/or sellers "have reneged on their representations and obligations to provide and
maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems and other
basic requirements" for the health and safety of home and lot buyer's. 12 It was designed to stem
the tide of "fraudulent manipulations perpetrated by unscrupulous subdivision and condominium
sellers and operators, such as failure to deliver titles to buyers or titles free from liens and
encumbrances." 13 Should the notice requirement provided for in Sec. 23 be construed as required
to be given before a buyer desists from further paying amortizations as in this case, the intent of
the law to protect subdivision lot buyers, such as private respondents, will tend to be defeated.
It should be noted that the petitioner did not only fail to develop the subdivision it was selling but
had also encumbered the property prior to selling the same. The inscription of acts and transactions
relating to the ownership and other rights over immovable property, even as it serves as a
constructive notice to the whole world, is intended to protect the person in whose favor the entry
is made and the public in general against any possible undue prejudice due to ignorance on the
status of the realty. The rule on constructive notice is not so designed, however, as to allow a person
to escape from a lawfully incurred liability. Thus, a vendor of real estate whereon an adverse claim
is validly annotated cannot invoke such registration to avoid his own obligation to make a full
disclosure to the vendee of adverse claims affecting the property. The registration protects the
adverse claimant because of the rule on constructive notice but not the person who makes the
conveyance. It behooves such real estate developer and dealers to make proper arrangements with
the financial institutions to allow the release of titles to buyers upon their full payment of the
purchase price.

Moreover, the HLURB found that petitioner had not secured a license prior to the sale of the subject
lot 14 which is a requirement of Sec. 5 of P.D. No. 957. These factual findings of the administrative
bodies which are equipped with expertise as far as their jurisdiction is concerned, should be
accorded, not only respect but even finality as they are supported by substantial evidence even if
not overwhelming or preponderant. 15 Thus, a stringent application of the law is demanded as far
as petitioner is concerned.

On the issue of delinquency interest which Sec. 23 of P.D. No. 957 explicitly excludes from the
amount to be reimbursed to lot buyers, the Solicitor General avers that since the matter has been
belatedly raised, the same should be deemed waived. 16 However, while the rule is that no error
which does not affect jurisdiction will be considered unless stated in the assignment of errors, the
trend in modern-day procedure is to accord the courts broad discretionary power such that the
appellate court may consider matters bearing on the issues submitted for resolution which the
parties failed to raise or which the lower court ignored. Since rules of procedure are mere tools
designed to facilitate the attainment of justice, their strict and rigid application which would result
in technicalities that tend to frustrate rather than promote substantial justice, must always be
avoided. 17 Technicality should not be allowed to stand in the way of equitably and completely
resolving the rights and obligations of the parties. 18

ACCORDINGLY, petitioner's motion for reconsideration of the resolution of August 5, 1991

dismissing the instant petition for certiorari is hereby DENIED and the decision of the Office of the
President is AFFIRMED. This Resolution is immediately executory. No costs.

SO ORDERED.
SALES – EXTINGUISHMENT – CONVENTIONAL REDEMPTION
G.R. No. 152199 June 23, 2005
LUIS S. MISTERIO, GABRIEL S. MISTERIO, FRANCIS S. MISTERIO, THELMA S. MISTERIO and
ESTELLA S. MISTERIO-TAGIMACRUZ, petitioners,
vs.
CEBU STATE COLLEGE OF SCIENCE AND TECHNOLOGY (CSCST), duly represented by its President,
DR. JOSE SAL TAN, respondent.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari to annul the Decision1 dated July 31, 2000 of the Court of
Appeals (CA) in CA-G.R. CV No. 53592, as well as its Resolution2 denying the motion for
reconsideration. The CA reversed and set aside the Decision3 of the Regional Trial Court (RTC) of
Cebu City, Branch 18, in Civil Case No. CEB-15267.
The Antecedents
Sudlon Agricultural High School (SAHS) was established in Cebu Province on August 2, 1948. The
administrative and supervisory control of the school was handled by the Division of Schools of the
same province. The original site of the school was in Sudlon, about 33 kilometers from Cebu City via
the Tabunak-Talisay Highway.
In 1952, the Provincial Board of Cebu granted the usufruct of 41 parcels of land, covering 104.5441
hectares of the Banilad Friar Lands Estate to the SAHS. Pursuant to Republic Act No. 948, SAHS was
nationalized on June 20, 1953.
On December 31, 1956, Asuncion Sadaya-Misterio executed a Deed of Sale of a parcel of land
denominated as Lot No. 1064 of the Banilad Friar Lands Estate, in favor of the SAHS. The property
had an area of 4,563 square meters and was situated at Lahug, Cebu City, covered by Transfer
Certificate of Title (TCT) No. 13086 of the Registry of Deeds of the province of Cebu. The sale was
subject to the right of the vendor to repurchase the property after the high school shall have ceased
to exist, or shall have transferred its site elsewhere.
Consequently, on May 22, 1957, TCT No. 13086 was cancelled and in lieu thereof, TCT No. 15959
was issued by the Registry of Deeds of Cebu City in the name of SAHS.4 The right of the vendor to
repurchase the property was annotated at the dorsal portion thereof.
On March 18, 1960, the Provincial Board of Cebu, through Resolution No. 491, donated the
aforementioned 41 lots to SAHS, subject to two (2) conditions: (1) that if the SAHS ceases to operate,
the ownership of the lots would automatically revert to the province, and (2) that the SAHS could
not alienate, lease or encumber the properties.
On June 10, 1983, Batas Pambansa (B.P.) Blg. 412, entitled "An Act Converting the Cebu School of
Arts and Trades in Cebu City into a Chartered College to be Known as the Cebu State College of
Science and Technology, Expanding its Jurisdiction and Curricular Programs" took effect. The law
incorporated and consolidated as one school system certain vocational schools in the province of
Cebu, including the SAHS, and which became an extension of the Cebu State College of Science and
Technology (CSCST).
In the meantime, the province of Cebu decided to recover the 41 lots it had earlier donated to SAHS
on the ground that the said deed was void. The province of Cebu opined that based on the initial
report of its provincial attorney, the SAHS had no personality to accept the donation.
In the meantime, Asuncion died intestate. When her heirs learned that the province of Cebu was
trying to recover the property it had earlier donated to SAHS, they went to the province of Cebu on
August 19, 1998, informing it of their intention to exercise their right to repurchase the property as
stipulated in the aforecited deed of sale executed by their predecessor-in-interest.
On February 1, 1989, the province of Cebu (represented by then Governor Emilio M. R. Osmeña),
and the CSCST (represented by then DECS Secretary Lourdes R. Quisumbing), entered into a
Memorandum of Agreement over the 40 parcels of land, allocating 53 hectares to the province of
Cebu, and 51 hectares for the SAHS. The agreement was ratified by the Sangguniang Panlalawigan
and the SAHS Board of Trustees.
In a Letter5 dated March 13, 1990, the heirs of the late Asuncion Sadaya-Misterio, through their
counsel, Atty. Ricardo G. Padilla, informed CSCST of the heirs’ intention to exercise the option to
repurchase Lot No. 1064 granted to them under the deed of sale, as the SAHS had ceased to exist.
In response thereto, Jesus T. Bonilla, as Vocational School Superintendent II of CSCST, wrote Atty.
Padilla on March 29, 1990, informing the latter that the SAHS still existed and "[i]n fact, from a
purely secondary school it is now offering collegiate courses." He explained that "what has been
changed is only the name of the school [to CSCST] which does not imply the loss of its existence."6
On December 23, 1993, Luis, Gabriel, Francis, Thelma, all surnamed Misterio, and Estella S. Misterio-
Tagimacruz, the legitimate heirs of the late Asuncion Sadaya-Misterio and herein petitioners, filed
a Complaint7 before the RTC of Cebu City, Branch 18, for "Nullity of Sale and/or Redemption."
Named party-defendants were the CSCST, Armand Fabella as CSCST Chairman, and Dr. Mussolini C.
Barillo as CSCST President, herein respondents. Docketed as Civil Case No. 66-15267, the complaint
alleged in part as follows:
FIRST CAUSE OF ACTION
12. Sudlon Agricultural High School at the time of the execution of the contract of sale with the
late Asuncion Sadaya sometime on December 31, 1956 had no juridical personality of it’s (sic)
own. Hence, it cannot acquire and possess any property, including the parcel of land subject of
this action.
13. The Contract of Sale executed was, therefore, null and void and therefore non-existent.
Thus, the land subject of the sale should be reconveyed to the legitimate heirs of Asuncion
Sadaya.
SECOND CAUSE OF ACTION
 14. On June 10, 1983, Batas Pambansa Blg. 412 was enacted, abolishing the then Sudlon
Agricultural College and converting it to become part of the Cebu State College for Science and
Technology (CSCST).
15. The said law also transferred all the personnel, properties, including buildings, sites, and
improvements, records, obligations, monies and appropriation of Sudlon to the CSCST.
16. The abolition of Sudhon and it’s (sic) merger or consolidation as part of CSCST had rendered
operative the condition in the Deed of Sale granting the vendor and her heirs, Asuncion Sadaya,
the right to redeem Lot No. 1064.
17. By the legislative act of merging or consolidating Sudlon Agricultural College with other
colleges, the separate existence of the constituent schools including Sudlon Agricultural College
has ceased to exist as a legal consequence of merger or consolidation.
18. CSCST, as transferee of the land subject of sale, is the actual possessor of the land and is the
proper party-defendant for redemption.8
The petitioners prayed that, after due proceeding, judgment be rendered in their favor, thus –
WHEREFORE, the foregoing premises considered, it is most respectfully prayed of this Honorable
Court to render a decision in favor of the plaintiffs to the following effect:
1. Declare the Contract of Sale between the late Asuncion Sadaya and Sudlon Agricultural High
School as null and void for the latter has no legal personality and cannot own a real property.
As a consequence, to order the actual possessor of the land CSCST to deliver and reconvey the
land to plaintiffs and the latter is willing to return the money received.
2. In the alternative, declare that Sudlon Agricultural High School has ceased to exist and allow
the plaintiffs to redeem Lot 1064 in the amount stipulated in the contract.
3. Other reliefs just and equitable under the premises are prayed for.9
In their answer to the complaint, the respondents alleged that:
11. Complainants in their complaint failed to state sufficient cause of action which may be
considered enough ground to dismiss this instant case;
12. The complainants are estopped from contesting the juridical capacity of Sudlon to own or
acquire this property which is the subject of this case, after a long period of silence or inaction
from the transfer of the title in favor of Sudlon Agricultural School;
13. The contract of sale having been mutually and freely entered into by the parties is valid and
binding between the vendor and the vendee, including their successors-in-interest; hence,
reconveyance is not proper;
14. The enactment of B.P. 412, which is the Charter of the College has not caused the abolition
of Sudlon Agricultural School. In fact, the school has now grown into a higher status, because it
has now admitted collegiate students, in addition to its secondary students;
15. The instruction of the Sudlon Agricultural School is actually carried out right on the same
site which complainants claim have ceased to exist not the site of the school transferred
somewhere else. Therefore, the conditions in the deed of sale have not rendered operative the
right of the vendor to exercise the same.10
After the preliminary conference on May 23, 1994, the trial court issued a pre-trial order defining
the issues as follows:
… (1) whether Sudlon Agricultural School has still retained its personality as such school or it had
ceased to exist, and (2) whether the plaintiffs have the right to exercise the right of redemption over
the property.
Upon the order of the RTC, the Clerk of Court conducted an ocular inspection on Lot No. 1064. The
court-appointed commissioner submitted his report11 on June 10, 1994.
On November 29, 1995, the RTC rendered judgment, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing considerations, JUDGMENT is hereby rendered in favor of
the plaintiffs and against the defendants declaring the Deed of Sale entered into by and between
Asuncion Sadaya and Sudlon Agricultural High School as null and void for the latter’s lack of juridical
personality to acquire real property or to enter into such transaction or having ceased to exist and
ordering the Cebu State College of Science and Technology being the actual possessor of the land,
Lot 1064, to deliver and reconvey the same to plaintiffs upon payment of the aforementioned
purchased price.
No pronouncement as to costs.
SO ORDERED.12
The RTC ruled that the donation was void ab initio as the SAHS, in the first place, did not have the
personality to be a donee of real property. Moreover, with the enactment of B.P. Blg. 412, the SAHS
ceased to exist and to operate as such. The RTC declared that, under the Corporation Code, the
constituent corporations (SAHS and CSCST) became one through the merger or consolidation, with
CSCST as the surviving entity. Whether Lot No. 1064 was still being used for school purposes was of
no moment, and to "say that [SAHS] still exists but is now forming part of CSCST is stretching the
interpretation of the contract too far." It concluded that no prescription lay as against an inexistent
contract.
The CSCST, through the Office of Solicitor General (OSG), appealed the decision to the CA, and
outlined the following assignment of errors:
I
THE TRIAL COURT ERRED IN NOT STICKING TO THE ISSUES DEFINED BY THE PARTIES DURING PRE-
TRIAL.
II
THE TRIAL COURT ERRED IN NOT HOLDING THAT APPELLEES ARE ESTOPPED FROM QUESTIONING
THE PERSONALITY OF THE SUDLON AGRICULTURAL HIGH SCHOOL.
III
THE TRIAL COURT ERRED IN GIVING WEIGHT TO INADMISSIBLE AND SELF-SERVING EVIDENCE.
IV
THE TRIAL COURT ERRED IN NOT HOLDING THAT APPELLEES’ ACTION IS BARRED BY PRESCRIPTION.
V The petitioners filed a motion for the reconsideration of the decision, which the CA denied in a
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE DEED OF SALE IS A CONSENSUAL CONTRACT
FREELY ENTERED INTO BY THE PARTIES AND NOT A CONTRACT OF ADHESION.
VI
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE DEED OF SALE IS NOT AMBIGUOUS.
VII
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE LOT SUBJECT OF THE SALE IS STILL BEING
USED FOR SCHOOL PURPOSES AS ORIGINALLY INTENDED BY THE PARTIES.
VIII
THE TRIAL COURT ERRED IN NOT HOLDING THAT B.P. [BLG.] 412 DID NOT DISSOLVE OR
EXTINGUISH SUDLON AGRICULTURAL HIGH SCHOOL BUT MERELY SUBJECTED THE SAME TO THE
SUPERVISION AND ADMINISTRATION OF CSCST.
IX
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE SUDLON AGRICULTURAL HIGH SCHOOL
AND/OR CSCST IS/ARE NOT CORPORATIONS GOVERNED BY THE COPORATION CODE.
On October 3, 1997, the CSCST and the province of Cebu executed a Deed for Reversion, in which
the CSCST deeded to the province of Cebu the property covered by TCT No. 15959. Based on the
said deed, TCT No. 146351 was issued by the Register of Deeds on November 12, 1997 in the name
of the province of Cebu.13 Annotated at the dorsal portion thereof was the notice of the pending
cases before the RTC and the CA.
On July 31, 2000, the CA rendered its decision reversing the RTC’s decision. The fallo of the decision
reads:
WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and a new one issued, DISMISSING
the instant complaint for lack of merit.
SO ORDERED.14
The appellate court held that the lower court should have confined itself to the issues defined by
the parties during pre-trial, namely, (1) whether Sudlon Agricultural School still retained its
personality as such school or was still in existence; and (2) whether the petitioners had the right to
exercise the right to repurchase the property. The CA declared that the trial of the case should have
been limited to these two issues.
While it affirmed the RTC ruling that the SAHS had ceased to exist when B.P. Blg. 412 took effect,
the appellate court ruled that the period for the petitioners to repurchase the property expired on
June 1987, four years after the enactment of B.P. Blg. 412. It held that the period within which the
property was to be repurchased must be restrictively applied in order to settle ownership and title
at the soonest possible time, and not to leave such title to the subject property uncertain.
Resolution dated January 25, 2002.
The petitioners filed the present petition for review on certiorari, contending that the CA erred in
(a) resolving the appeal of the respondents based on prescription, although the issue was never
raised during the trial; and (b) resolving that their action had already prescribed.
The petition is without merit.
The petitioners fault the CA for holding that their right to repurchase Lot No. 1064 had long since
prescribed. Citing Article 1606(3) of the New Civil Code, they argue that "[p]rescription should start
to run from the time it is legally feasible for the party to redeem the land, which is the time when
the action to redeem has accrued." The petitioners argue that this is so since the issue of whether
the SAHS had ceased to exist had still yet to be resolved. The petitioners posit that unless and until
judgment would be rendered stating that the SAHS has ceased to exist, the period to repurchase
the property would not start to run. It is only from the finality of the said judgment that the right to
repurchase the property may be exercised; hence, they still had thirty (30) days from the date of
the promulgation of the CA decision within which to repurchase the property. The petitioners
further aver that since the lien, their right to repurchase the property, was annotated on the title of
the land, the right to exercise the same is imprescriptible. They argue that they had been vigilant of
their right to repurchase the property, as far back as 1973. In fact, they made tender of payment in
March 1990, well within the ten-year prescriptive period. They point out that the CSCST had
abandoned its defense of prescription by contending that the condition for repurchase had not yet
become operational.
The OSG, for its part, contends that the petitioners’ reliance on Article 1606(3) of the New Civil Code
is misplaced, because the law applies only to sales where the right to repurchase is not expressly
agreed upon by the parties. Here, the right to repurchase is unquestionable. The OSG, likewise,
argues that the annotation of the right of redemption has no bearing on the issue of prescription. It
posits that the "Torrens System has absolutely nothing to do with the period of prescription of one’s
right to repurchase, as in the instant case." The OSG concludes that whatever right the petitioners
had on the property had already prescribed by the mere lapse of time, by reason of
negligence.1avvphi1.net
Central to the issue is the following provision in the deed of sale executed by Asuncion Sadaya-
Misterio in favor of the SAHS:
That the Vendee herein, the SUDLON AGRICULTURAL HIGH SCHOOL, hereby obligates itself to use
the aforementioned Lot No. 1064 for school purposes only, and it is a condition attached to this
contract that the aforementioned vendee obligates itself to give the Vendor herein, the right to
repurchase the said lot by paying to the Vendee herein the aforementioned consideration of
₱9,130.00 only, after the aforementioned SUDLON AGRICULTURAL HIGH SCHOOL shall ceased (sic)
to exist or shall have transferred its school site elsewhere.15
The essence of a pacto de retro sale is that title and ownership of the property sold is immediately
rested in the vendee a retro, subject to the restrictive condition of repurchase by the vendor a retro
within the period provided in Article 1606 of the New Civil Code, to wit:
Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last
four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.lawphil.net
However, the vendor may still exercise the right to repurchase within thirty days from the time
final judgment was rendered in a civil action on the basis that the contract was a true sale with
right to repurchase.
The failure of the vendee a retro to repurchase the property vests upon the latter by operation of
law the absolute title and ownership over the property sold.16
Pending the repurchase of the property, the vendee a retro may alienate, mortgage or encumber
the same, but such alienation or encumbrance is as revocable as is his right. If the vendor a retro
repurchases the property, the right of the vendee a retro is resolved, because he has to return the
property free from all damages and encumbrances imposed by him. 17 The vendor a retro may also
register his right to repurchase under the Land Registration Act and may be enforced against any
person deriving title from the vendee a retro.18
In this case, the vendor a retro and the vendee a retro did not agree on any period for the exercise
of the right to repurchase the property. Hence, the vendor a retro may extend the said right within
four days from the happening of the allocated condition contained in the deed: (a) the cessation of
the existence of the SAHS, or (b) the transfer of the school to other site.
We note that, as gleaned from the petitioners’ complaint before the trial court, they alleged that
the SAHS ceased to exist on June 10, 1983, when B.P. Blg. 412 took effect, abolishing therein the
SAHS which, in the meantime, had been converted into the Sudlon Agricultural College. The CA
found the position of the petitioners to be correct, and declared that conformably to the condition
in the deed of sale, and under Article 1606 of the New Civil Code, the right of the petitioners as
successors-in-interest of the vendee a retro commenced to run on June 10, 1983. Hence, they had
until June 10, 1987 within which to repurchase the property; however, they failed to do so.
It is true that respondent CSCST, through counsel, was of the view that despite the effectivity of B.P.
Blg. 412, the structure and facilities of the SAHS remained in the property and, as such, it cannot be
said that the said school had ceased to exist. It argued that the phrase "SAHS ceased to exist" in the
deed meant that the structure and facilities of the school would be destroyed or dismantled, and
had no relation whatsoever to the abolition of the school and its integration into the Cebu State
College for Science and Technology. However, the CA rejected the position of the respondent CSCST,
as well as that of the OSG, and affirmed that of the petitioners.
The four-year period for the petitioners to repurchase the property was not suspended merely and
solely because there was a divergence of opinion between the petitioners, on the one hand, and
the respondent, on the other, as to the precise meaning of the phrase "after the SAHS shall cease
to exist" in the deed of sale. The existence of the petitioners’ right to repurchase the property was
not dependent upon the prior final interpretation by the court of the said phrase. Indeed, the
petitioners specifically alleged in the complaint that:
FIRST CAUSE OF ACTION
12. Sudlon Agricultural High School at the time of the execution of the contract of sale with the
late Asuncion Sadaya sometime on December 31, 1956 had no juridical personality of its own.
Hence, it cannot acquire and possess any property, including the parcel of land subject of this
action.
13. The Contract of Sale executed was therefore null and void and therefore non-existent. Thus,
the land subject of sale should be reconveyed to the legitimate heirs of Asuncion Sadaya.
SECOND CAUSE OF ACTION
14. On June 10, 1983, Batas Pambansa Blg. 412 was enacted abolishing the then Sudlon
Agricultural College and converting it to become part of the Cebu State College for Science and
Technology (CSCST).
15. The said law also transferred all the personnel, properties, including buildings, sites, and
improvements, records, obligations, monies and appropriations of Sudlon to the CSCST.
16. The abolition of Sudlon and its merger or consolidation as part of CSCST had rendered
operative the condition in the Deed of Sale granting the vendor and her heirs, Asuncion Sadaya,
the right to redeem Lot No. 1064.
17. By the legislative act of merging or consolidating Sudlon Agricultural College with other
colleges, the separate existence of the constituent schools including Sudlon Agricultural College
has ceased to exist as a legal consequence of merger or consolidation.
18. CSCST, as transferee of the land subject of sale, is the actual possessor of the land and is the
proper party defendant for redemption.19
The petitioners are estopped from changing on appeal their theory of the case in the trial court and
in the CA.20
We agree with the contention of the OSG that the annotation of the petitioners’ right to repurchase
the property at the dorsal side of TCT No. 15959 has no relation whatsoever to the issue as to when
such right had prescribed. The annotation was only for the purpose of notifying third parties of the
petitioners’ right to repurchase the property under the terms of the deed of sale, and the law.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED DUE COURSE. Costs against the
petitioners.
SO ORDERED.
SALES – EXTINGUISHMENT – CONVENTIONAL REDEMPTION
G.R. No. 151098 March 21, 2006
ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA GAJUDO, BALTAZAR GAJUDO and DANILO
ARAHAN CHUA, Petitioners,
vs.
TRADERS ROYAL BANK,1Respondent.
DECISION
PANGANIBAN, CJ:
The mere fact that a defendant is declared in default does not automatically result in the grant of
the prayers of the plaintiff. To win, the latter must still present the same quantum of evidence that
would be required if the defendant were still present. A party that defaults is not deprived of its
rights, except the right to be heard and to present evidence to the trial court. If the evidence
presented does not support a judgment for the plaintiff, the complaint should be dismissed, even if
the defendant may not have been heard or allowed to present any countervailing evidence.
The Case
Before us is a Petition for Review 2 under Rule 45 of the Rules of Court, assailing the June 29, 2001
Decision3 and December 6, 2001 Resolution4 of the Court of Appeals (CA) in CA-GR CV No. 43889.
The CA disposed as follows:
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the partial judgment appealed from, must be, as it
hereby is, VACATED and SET ASIDE, and another one entered DISMISSING the complaint at bench.
Without costs."5
The assailed Resolution denied petitioners’ Motion for Reconsideration6 for lack of merit.
The Facts
The CA narrated the facts as follows:
"[Petitioners] filed a complaint before the Regional Trial Court of Quezon City, Branch 90, against
[respondent] Traders Royal Bank, the City Sheriff of Quezon City and the Register of Deeds of
Quezon City. Docketed thereat as Civil Case No. Q-41203, the complaint sought the annulment of
the extra-judicial foreclosure and auction sale made by [the] city sheriff of Quezon City of a parcel
of land covered by TCT No. 16711 of the Register of Deeds of Quezon City, the conventional
redemption thereof, and prayed for damages and the issuance of a writ of preliminary injunction.
"The complaint alleged that in mid 1977[, Petitioner] Danilo Chua obtained a loan from [respondent]
bank in the amount of P75,000.00 secured by a real estate mortgage over a parcel of land covered
by TCT No. 16711, and owned in common by the [petitioners]; that when the loan was not paid,
[respondent] bank commenced extra-judicial foreclosure proceedings on the property; that the
auction sale of the property was set on 10 June 1981, but was reset to 31 August 1981, on [Petitioner
Chua’s] request, which, however, was made without the knowledge and conformity of the other
[petitioners]; that on the re-scheduled auction sale, [the] Sheriff of Quezon City sold the property
to the [respondent] bank, the highest bidder therein, for the sum of P24,911.30; that the auction
sale was tainted with irregularity because, amongst others, the bid price was shockingly or
unconscionably, low; that the other [petitioners] failed to redeem the property due to their lack of
knowledge of their right of redemption, and want of sufficient education; that, although the period
of redemption had long expired, [Petitioner] Chua offered to buy back, and [respondent] bank also
agreed to sell back, the foreclosed property, on the understanding that Chua would pay
[respondent] bank the amount of P40,135.53, representing the sum that the bank paid at the
auction sale, plus interest; that [Petitioner] Chua made an initial payment thereon in the amount of
P4,000.00, covered by Interbank Check No. 09173938, dated 16 February 1984, duly receipted by
[respondent] bank; that, in a sudden change of position, [respondent] bank wrote Chua, on 20
February 1984, asking that he could repurchase the property, but based on the current market value
thereof; and that sometime later, or on 22 March 1984, [respondent] bank wrote Chua anew,
requiring him to tender a new offer to counter the offer made thereon by another buyer.
"Traversing [petitioners’] complaint, [respondent] bank, upon 05 July 1984, filed its answer with
counterclaim, thereunder asserting that the foreclosure sale of the mortgaged property was done
in accordance with law; and that the bid price was neither unconscionable, nor shockingly low; that
[petitioners] slept on their rights when they failed to redeem the property within the one year
statutory period; and that [respondent] bank, in offering to sell the property to [Petitioner] Chua on
the basis of its current market price, was acting conformably with law, and with legitimate banking
practice and regulations.
"Pre-trial having been concluded, the parties entered upon trial, which dragged/lengthened to
several months due to postponements. Upon 11 June 1988, however, a big conflagration hit the
City Hall of Quezon City, which destroyed, amongst other things, the records of the case. After the
records were reconstituted, [petitioners] discovered that the foreclosed property was sold by
[respondent] bank to the Ceroferr Realty Corporation, and that the notice of lis pendens annotated
on the certificate of title of the foreclosed property, had already been cancelled. Accordingly,
[petitioners], with leave of court, amended their complaint, but the Trial Court dismissed the case
‘without prejudice’ due to [petitioners’] failure to pay additional filing fees.
"So, upon 11 June 1990, [petitioners] re-filed the complaint with the same Court, whereat it was
docketed as Civil Case No. 90-5749, and assigned to Branch 98: the amended complaint substantially
reproduced the allegations of the original complaint. But [petitioners] this time impleaded as
additional defendants the Ceroferr Realty Corporation and/or Cesar Roque, and Lorna Roque, and
included an additional cause of action, to wit: that said new defendants conspired with [respondent]
bank in [canceling] the notice of lis pendens by falsifying a letter sent to and filed with the office of
the Register of Deeds of Quezon City, purportedly for the cancellation of said notice.
"Summons was served on [respondent] bank on 26 September 1990, per Sheriff’s Return dated 08
October 1990. Supposing that all the defendants had filed their answer, [petitioners] filed, on 23
October 1991, a motion to set case for pre-trial, which motion was, however, denied by the Trial
Court in its Order of 25 October 1991, on the ground that [respondent] bank has not yet filed its
answer. On 13 November 1991[, petitioners] filed a motion for reconsideration, thereunder alleging
that they received by registered mail, on 19 October 1990, a copy of [respondent] bank’s answer
with counterclaim, dated 04 October 1990, which copy was attached to the motion. In its Order of
14 November 1991, the trial Court denied for lack of merit, the motion for reconsideration, therein
holding that the answer with counterclaim filed by [respondent] bank referred to another civil case
pending before Branch 90 of the same Court.
"For this reason, [petitioners] filed on 02 December 1991 a motion to declare [respondent] bank in
default, thereunder alleging that no answer has been filed despite the service of summons on it on
26 September 1990.
"On 13 December 1991, the Trial Court declared the motion submitted for resolution upon
submission by [petitioners] of proof of service of the motion on [respondent] bank.
"Thus, on 16 January 1992, upon proof that [petitioners] had indeed served [respondent] bank with
a copy of said motion, the Trial Court issued an Order of default against [respondent] bank.
"Upon 01 December 1992, on [petitioners’] motion, they were by the Court allowed to present
evidence ex parte on 07 January 1993, insofar as [respondent] bank was concerned.
"Thereafter, or on 08 February 1993, the Trial Court rendered the new questioned partial decision. 7
"Aggrieved, [respondent] bank filed a motion to set aside [the] partial decision by default against
Traders Royal Bank and admit [respondent] Traders Royal Bank’s x x x Answer with counterclaim:
thereunder it averred, amongst others, that the erroneous filing of said answer was due to an
honest mistake of the typist and inadvertence of its counsel.
"The [trial court] thumbed down the motion in its Order of 26 July 1993."8
Respondent bank appealed the Partial Decision9 to the CA. During the pendency of that appeal,
Ceroferr Realty Corporation and/or Cesar and/or Lorna Roque filed a Manifestation with Motion 10
asking the CA to discharge them as parties, because the case against them had already been
dismissed on the basis of their Compromise Agreement11 with petitioners. On May 14, 1996, the CA
issued a Resolution12 granting Ceroferr et al.’s Manifestation with Motion to discharge movants as
parties to the appeal. The Court, though, deferred resolution of the matters raised in the Comment 13
of respondent bank. The latter contended that the Partial Decision had been novated by the
Compromise Agreement, whose effect of res judicata had rendered that Decision functus officio.
Ruling of the Court of Appeals
The CA ruled in favor of respondent bank. Deemed, however, to have rested on shaky ground was
the latter’s "Motion to Set Aside Partial Decision by Default Against Traders Royal Bank and Admit
Defendant Traders Royal Bank’s Answer."14 The reasons offered by the bank for failing to file an
answer were considered by the appellate court to be "at once specious, shallow and sophistical and
can hardly be dignified as a ‘mistake’ or ‘excusable negligence,’ which ordinary prudence could not
have guarded against."15
In particular, the CA ruled that the erroneous docket number placed on the Answer filed before the
trial court was not an excusable negligence by the bank’s counsel. The latter had a bounden duty to
be scrupulously careful in reviewing pleadings. Also, there were several opportunities to discover
and rectify the mistake, but these were not taken. Moreover, the bank’s Motion to Set Aside the
Partial Decision and to Admit [the] Answer was not accompanied by an affidavit of merit. These
mistakes and the inexcusable negligence committed by respondent’s lawyer were binding on the
bank.
On the issue of whether petitioners had convincingly established their right to relief, the appellate
court held that there was no ground to invalidate the foreclosure sale of the mortgaged property.
First, under Section 3 of Act No. 3135, an extrajudicial foreclosure sale did not require personal
notice to the mortgagor. Second, there was no allegation or proof of noncompliance with the
publication requirement and the public posting of the notice of sale, provided under Act No. 3135,
as amended. Third, there was no showing of inadequacy of price as no competent evidence was
presented to show the real market value of the land sold or the readiness of another buyer to offer
a price higher than that at which the property had been sold.
Moreover, petitioners failed to prove that the bank had agreed to sell the property back to them.
After pointing out that the redemption period had long expired, respondent’s written
communications to Petitioner Chua only showed, at most, that the former had made a proposal for
the latter to buy back the property at the current market price; and that Petitioner Chua was
requested to make an offer to repurchase the property, because another buyer had already made
an offer to buy it. On the other hand, respondent noted that the Interbank check for P4,000 was for
"deposit only." Thus, there was no showing that the check had been issued to cover part of the
repurchase price.
The appellate court also held that the Compromise Agreement had not resulted in the novation of
the Partial Decision, because the two were not incompatible. In fact, the bank was not even a party
to the Agreement. Petitioners’ recognition of Ceroferr’s title to the mortgaged property was
intended to preclude future litigation against it.
Hence this Petition.16
Issues
In their Memorandum, petitioners raise the following issues:
"1. Whether or not the Respondent Court of Appeals erred in failing to apply the provisions of
Section 3, Rule 9 of the 1997 Rules of Civil Procedure [and in applying instead] the rule on
preponderance of evidence under Section 1, Rule 133 of the Rules of Court.
"2. Whether or not the respondent appellate court failed to apply the conventional redemption rule
provided for under Article 1601 of the New Civil Code.
"3. Whether or not this Honorable Court can exercise its judicial prerogative to evaluate the findings
of facts."17
The first issue is one of law and may be taken up by the Court without hindrance, pursuant to Section
1 of Rule 45 of the Rules of Court.18 The second and the third issues, however, would entail an
evaluation of the factual findings of the appellate court, a function ordinarily not assumed by this
Court, unless in some excepted cases. The Court will thus rule on the first issue before addressing
the second and the third issues jointly.
The Court’s Ruling
The Petition has no merit.
First Issue:
Quantum of Proof
Petitioners challenge the CA Decision for applying Section 3 of Rule 9 of the Rules of Court, rather
than Section 1 of Rule 133 of the same Rules. In essence, petitioners argue that the quantum of
evidence for judgments flowing from a default order under Section 3 of Rule 9 is not the same as
that provided for in Section 1 of Rule 133.
For ease of discussion, these two rules will be reproduced below, starting with Section 3 of Rule 9
of the Rules of Court:
"Sec. 3. Default; declaration of. – If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party, and
proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to
render judgment granting the claimant such relief as his pleading may warrant, unless the court in
its discretion requires the claimant to submit evidence. Such reception of evidence may be
delegated to the clerk of court.
"(a) Effect of order of default. – A party in default shall be entitled to notice of subsequent
proceedings but not to take part in the trial.
"(b) Relief from order of default. – A party declared in default may at any time after notice
thereof and before judgment file a motion under oath to set aside the order of default
upon proper showing that his failure to answer was due to fraud, accident, mistake or
excusable negligence and that he has a meritorious defense. In such case, the order of
default may be set aside on such terms and conditions as the judge may impose in the
interest of justice.
"(c) Effect of partial default. – When a pleading asserting a claim states a common cause
of action against several defending parties, some of whom answer and the others fail to
do so, the court shall try the case against all upon the answers thus filed and render
judgment upon the evidence presented.
"(d) Extent of relief to be awarded. – A judgment rendered against a party in default shall
not exceed the amount or be different in kind from that prayed for nor award unliquidated
damages.
"(e) Where no defaults allowed. – If the defending party in an action for annulment or
declaration of nullity of marriage or for legal separation fails to answer, the court shall
order the prosecuting attorney to investigate whether or nor a collusion between the
parties exists, and if there is no collusion, to intervene for the State in order to see to it
thatthe evidence submitted is not fabricated."
We now quote Section 1 of Rule 133:
"SECTION 1. Preponderance of evidence, how determined. – In civil cases, the party having the
burden of proof must establish his case by a preponderance of evidence. In determining where the
preponderance or superior weight of evidence on the issues involved lies, the court may consider
all the facts and circumstances of the case, the witnesses’ manner of testifying, their intelligence,
their means and opportunity of knowing the facts to which they are testifying, the nature of the
facts to which they testify, the probability or improbability of their testimony, their interest or want
of interest, and also their personal credibility so far as the same may legitimately appear upon the
trial. The court may also consider the number of witnesses, though the preponderance is not
necessarily with the greater number."
Between the two rules, there is no incompatibility that would preclude the application of either one
of them. To begin with, Section 3 of Rule 9 governs the procedure which the trial court is directed
to take when a defendant fails to file an answer. According to this provision, the court "shall proceed
to render judgment granting the claimant such relief as his pleading may warrant," subject to the
court’s discretion on whether to require the presentation of evidence ex parte. The same provision
also sets down guidelines on the nature and extent of the relief that may be granted. In particular,
the court’s judgment "shall not exceed the amount or be different in kind from that prayed for nor
award unliquidated damages."
As in other civil cases, basic is the rule that the party making allegations has the burden of proving
them by a preponderance of evidence.19 Moreover, parties must rely on the strength of their own
evidence, not upon the weakness of the defense offered by their opponent. 20 This principle holds
true, especially when the latter has had no opportunity to present evidence because of a default
order. Needless to say, the extent of the relief that may be granted can only be as much as has been
alleged and proved21 with preponderant evidence required under Section 1 of Rule 133.
Regarding judgments by default, it was explained in Pascua v. Florendo22 that complainants are not
automatically entitled to the relief prayed for, once the defendants are declared in default.
Favorable relief can be granted only after the court has ascertained that the relief is warranted by
the evidence offered and the facts proven by the presenting party. In Pascua, this Court ruled that
"x x x it would be meaningless to require presentation of evidence if every time the other party is
declared in default, a decision would automatically be rendered in favor of the non-defaulting party
and exactly according to the tenor of his prayer. This is not contemplated by the Rules nor is it
sanctioned by the due process clause."23
The import of a judgment by default was further clarified in Lim Tanhu v. Ramolete. 24 The following
disquisition is most instructive:
"Unequivocal, in the literal sense, as these provisions [referring to the subject of default then under
Rule 18 of the old Rules of Civil Procedure] are, they do not readily convey the full import of what
they contemplate. To begin with, contrary to the immediate notion that can be drawn from their
language, these provisions are not to be understood as meaning that default or the failure of the
defendant to answer should ‘be interpreted as an admission by the said defendant that the
plaintiff’s cause of action find support in the law or that plaintiff is entitled to the relief prayed for.’
x x x.
xxxxxxxxx
"Being declared in default does not constitute a waiver of rights except that of being heard and of
presenting evidence in the trial court. x x x.
"In other words, a defaulted defendant is not actually thrown out of court. While in a sense it may
be said that by defaulting he leaves himself at the mercy of the court, the rules see to it that any
judgment against him must be in accordance with law. The evidence to support the plaintiff’s cause
is, of course, presented in his absence, but the court is not supposed to admit that which is basically
incompetent. Although the defendant would not be in a position to object, elementary justice
requires that only legal evidence should be considered against him. If the evidence presented should
not be sufficient to justify a judgment for the plaintiff, the complaint must be dismissed. And if an
unfavorable judgment should be justifiable, it cannot exceed in amount or be different in kind from
what is prayed for in the complaint."25
In sum, while petitioners were allowed to present evidence ex parte under Section 3 of Rule 9, they
were not excused from establishing their claims for damages by the required quantum of proof
under Section 1 of Rule 133. Stated differently, any advantage they may have gained from the ex
parte presentation of evidence does not lower the degree of proof required. Clearly then, there is
no incompatibility between the two rules.
Second and Third Issues:
Review of the Evidence
Petitioners urge this Court to depart from the general rule that the lower courts’ findings of fact are
not reviewable in a petition for review.26 In support of their plea, they cite the conflicting findings
of the trial and the appellate courts, as well as the alleged conjectures and surmises made by the
CA in arriving at its Decision.
Indeed, the differences between the findings of the two courts a quo, leading to entirely disparate
dispositions, is reason enough for this Court to review the evidence in this case.27 Whether the CA
indulged in surmises and conjectures when it issued the assailed Decision will thus be determined.
At the outset, it behooves this Court to clarify the CA’s impression that no evidence was presented
in the case which might have contributed to petitioners’ challenge to its Decision. The appellate
court’s observation was based on the notation by the lower court’s clerk of court that there were
no separate folders for exhibits and transcripts, because "there was no actual hearing conducted in
this case."28
True, there was no hearing conducted between petitioners and respondent, precisely because the
latter had been declared in default, and petitioners had therefore been ordered to present their
evidence ex parte. But the absence of a hearing did not mean that no evidence was presented. The
Partial Decision dated February 8, 1993, in fact clearly enumerated the pieces of evidence adduced
by petitioners during the ex parte presentation on January 7, 1993. The documentary evidence they
presented consisted of the following:
1. A copy of respondent bank’s Petition for the extrajudicial foreclosure and auction sale
of the mortgaged parcel of land29
2. The Certificate of Sale that was a consequence of the foreclosure sale30
3. A Statement of Account dated February 15, 1984, showing Petitioner Chua’s
outstanding debt in the amount of P40,135.5331
4. A copy of the Interbank check dated February 16, 1984, in the amount of P4,00032
5. The Official Receipt issued by the bank acknowledging the check33
6. The bank’s letter dated February 20, 1984, advising Petitioner Chua of the sale of the
property at an extrajudicial public auction; the lapse of the period of redemption; and an
invitation to purchase the property at its current market price34
7. Another letter from the bank dated March 22, 1984, inviting Petitioner Chua to submit,
within five days, an offer to buy the same property, which another buyer had offered to
buy35
8. A copy of the Notice of Lis Pendens, the filing of which was done after that of the
Amended Complaint36
9. A copy of the title showing the inscription of the Notice of Lis Pendens37
10. A copy of the Absolute Deed of Sale to Cerrofer38
11. A copy of a letter dated August 29, 1986, made and signed by petitioners’ counsel,
requesting the cancellation of the Notice of Lis Pendens39
12. A copy of a page of the Memorandum of Encumbrance from TCT No. (314341) 7778/T-
3940
Having clarified this matter, we proceed to review the facts.
Petitioners do not deny that the one-year period for legal redemption had already lapsed when
respondent bank supposedly offered to sell the property in question. The records clearly show that
the Certificate of Sale following the extrajudicial public auction of the property was registered on
June 21, 1982, the date from which the legal redemption period was to be reckoned. 41 Petitioners
insist, though, that they had the right to repurchase the property through conventional redemption,
as provided under Article 1601 of the Civil Code, worded as follows:
"ART. 1601. Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon."
It is true that the one-year period of redemption provided in Act No. 3135, as amended -- the law
under which the property here was sold in a foreclosure sale -- is only directory and, as such can be
extended by agreement of the parties.42 However, it has also been held that for legal redemption
to be converted into conventional redemption, two requisites must be established: 1) voluntary
agreement of the parties to extend the redemption period; and 2) the debtor’s commitment to pay
the redemption price on a fixed date.43 Thus, assuming that an offer was made to Petitioner Chua
to buy back the property after the lapse of the period of legal redemption, petitioners needed to
show that the parties had agreed to extend the period, and that Petitioner Chua had committed to
pay the redemption price on a fixed date.
The letters sent by the bank to Petitioner Chua on February 20 and March 22, 1984, do not
convincingly show that the parties arrived at a firm agreement for the repurchase of the property.
What can be gleaned from the February 20 letter is that Petitioner Chua proposed to pay the
redemption price for the property, but that the bank refused to accede to his request, because the
one-year redemption period had already lapsed. 44 The bank, though, had offered to sell back the
property to him at the current market value. Indeed, an examination of his earlier letter of February
17, 1984, readily reveals that he expressed willingness to settle his account with the bank, but that
his "present financial situation precludes [him] from effecting an immediate settlement x x x."45
On the other hand, the letter dated March 22, 1984, clearly states that "x x x the Bank rejected [his]
request to redeem said property due to [the] lapse of [the] one (1) year legal redemption period."46
Nonetheless, he was "[invited] to submit an offer to buy the same property in five (5) days from
receipt [of the letter]."47 Petitioner Chua was also informed that the bank had received an offer to
purchase the foreclosed property. As to the P4,000 check enclosed in his proposal dated February
17, 1984, as a token of his good faith, he was advised that the amount was still outstanding in the
books of the bank and could be claimed by him if he thought the invitation was not feasible.
More important, there was no showing that petitioners had committed to pay the redemption price
on a fixed date. True, Petitioner Chua had attempted to establish a previous agreement to
repurchase the property for less than its fair market value. He had submitted in evidence a
Statement of Account48 dated February 15, 1984, showing a balance of P40,135.53; the Interbank
check dated February 16, 1984 , for P4,000, which was deposited to the account of respondent
bank;49 and the Official Receipt for the check.50
Granting that these documents evinced an agreement, petitioners were still unable to establish a
firm commitment on their part to pay the redemption price on a fixed date. On the contrary, the
February 17 letter of Petitioner Chua to the bank clearly manifested that he was not capable of
paying the account immediately. For this reason, he proposed to pay in "three or four installments"
without a specification of dates for the payments, but with a plea for a reduction of the interest
charges. That proposal was rejected.
Indeed, other than the Interbank check marked "for deposit" by respondent bank, no other
evidence was presented to establish that petitioners had offered to pay the alleged redemption
price of P40,135.53 on a fixed date. For that matter, petitioners have not shown that they tendered
payment of the balance and/or consigned the payment to the court, in order to fulfill their part of
the purported agreement. These remedies are available to an aggrieved debtor under Article 1256
of the Civil Code,51 when the creditor unjustly refuses to accept the payment of an obligation.
The next question that presents itself for resolution is the propriety of the CA’s ruling vacating the
Partial Decision of the regional trial court (RTC) and dismissing the case. To recall, the RTC had
resolved to withhold a ruling on petitioners’ right to redeem conventionally and/or order the
reconveyance of the property in question, pending a determination of the validity of the sale to
Cerrofer Realty Corporation and Spouses Cesar and Lorna Roque. The trial court, however, granted
the prayer for damages against respondent bank. The RTC ruled as follows:
"The evidence presented by [petitioners] in so far as the cause of action against [respondent]
Traders Royal Bank is concerned are preponderant to support the claims of the [petitioners].
However, in view of the fact that the property subject matter of this case has already been conveyed
to defendant Cerrofer Realty Corporation thus the issue as to whether or not the said conveyance
or sale is valid is sill pending between the [petitioners] and [respondents] Cerrofer Realty
Corporation and Cesar Roque and Lorna Roque. Hence, this Court resolves to grant the prayer for
damages against Traders Royal Bank.
"The claims of the [petitioners] as against [respondent] Traders Royal Bank having been established
and proved by evidence, judgment is hereby rendered ordering [respondent] Traders Royal Bank to
pay [petitioners] actual damage or the market value of the land in question in the sum of
P500,000.00; the sum of P70,000.00 as compensatory damages; the sum of P200,000.00 to the heirs
of [petitioner] Danilo Chua; and attorney’s fees in the sum of P30,000.00."52
In the light of the pending issue as to the validity of the sale of the property to the third parties
(Cerrofer Realty Corporation and Spouses Roque), the trial court properly withheld judgment on the
matter and thus left the prayer for damages as the sole issue for resolution.
To adjudge damages, paragraph (d) of Section 3 of Rule 9 of the Rules of Court provides that a
judgment against a party in default "shall not exceed the amount or be different in kind from that
prayed for nor award unliquidated damages." The proscription against the award of unliquidated
damages is significant, because it means that the damages to be awarded must be proved
convincingly, in accordance with the quantum of evidence required in civil cases.
Unfortunately for petitioners, the grant of damages was not sufficiently supported by the evidence
for the following reasons.
First, petitioners were not deprived of their property without cause. As correctly pointed out by the
CA, Act No. 3135, as amended, does not require personal notice to the mortgagor.53 In the present
case, there has been no allegation -- much less, proof -- of noncompliance with the requirement of
publication and public posting of the notice of sale, as required by Áct No. 3135. Neither has there
been competent evidence to show that the price paid at the foreclosure sale was inadequate.54 To
be sure, there was no ground to invalidate the sale.
Second, as previously stated, petitioners have not convincingly established their right to damages
on the basis of the purported agreement to repurchase. Without reiterating our prior discussion on
this point, we stress that entitlement to actual and compensatory damages must be proved even
under Section 3 of Rule 9 of the Rules of Court. The same is true with regard to awards for moral
damages and attorney’s fees, which were also granted by the trial court.
In sum, petitioners have failed to convince this Court of the cogency of their position,
notwithstanding the advantage they enjoyed in presenting their evidence ex parte. Not in every
case of default by the defendant is the complainant entitled to win automatically.
WHEREFORE, this Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED.
Costs against petitioners.
SO ORDERED.
SALES – EXTINGUISHMENT – CONVENTIONAL REDEMPTION – EQUITABLE MORTGAGE - 5. That defendants ARADOR VALDEHUEZA and REDICULO VALDEHUEZA have executed two
DEFINITION documents of DEED OF PACTO DE RETRO SALE in favor of the plaintiff herein, LUCIA TAN of two
portions of a parcel of land which is described in the second cause of action with the total amount
G.R. No. L-38745 August 6, 1975 of ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00), Philippine Currency, copies of said
documents are marked as 'Annex D' and Annex E', respectively and made as integral parts of this
stipulation of facts.
LUCIA TAN, plaintiff-appellee,
vs.
ARADOR VALDEHUEZA and REDICULO VALDEHUEZA, defendants-appellants. 6. That from the execution of the Deed of Sale with right to repurchase mentioned in the second
cause of action, defendants Arador Valdehueza and Rediculo Valdehueza remained in the
possession of the land; that land taxes to the said land were paid by the same said defendants.
CASTRO, J.:

Civil case 2002 referred to in stipulation of fact no. 4 was a complaint for injunction filed by Tan
This appeal was certified to this Court by the Court of Appeals as involving questions purely of law.
on July 24, 1957 against the Valdehuezas, to enjoin them "from entering the above-described
parcel of land and gathering the nuts therein ...." This complaint and the counterclaim were
The decision a quo was rendered by the Court of First Instance of Misamis Occidental (Branch I) in subsequently dismissed for failure of the parties "to seek for the immediate trial thereof, thus
an action instituted by the plaintiff-appellee Lucia Tan against the defendants-appellants Arador evincing lack of interest on their part to proceed with the case. 1
Valdehueza and Rediculo Valdehueza (docketed as civil case 2574) for (a) declaration of ownership
and recovery of possession of the parcel of land described in the first cause of action of the
The Deed of Pacto de Retro referred to in stipulation of fact no. 5 as "Annex D" (dated August 5,
complaint, and (b) consolidation of ownership of two portions of another parcel of (unregistered)
1955) was not registered in the Registry of Deeds, while the Deed of Pacto de Retro referred to as
land described in the second cause of action of the complaint, purportedly sold to the plaintiff in
"Annex E" (dated March 15, 1955) was registered.
two separate deeds of pacto de retro.

On the basis of the stipulation of facts and the annexes, the trial court rendered judgment, as
After the issues were joined, the parties submitted the following stipulation of facts:
follows:

1. That parties admit the legal capacity of plaintiff to sue; that defendants herein, Arador,
WHEREFORE, judgment is hereby rendered in favor of the plaintiff:
Rediculo, Pacita, Concepcion and Rosario, all surnamed Valdehueza, are brothers and sisters; that
the answer filed by Arador and Rediculo stand as the answer of Pacita, Concepcion and Rosario.
1. Declaring Lucia Tan the absolute owner of the property described in the first cause of action of
the amended complaint; and ordering the herein defendants not to encroach and molest her in
2. That the parties admit the identity of the land in the first cause of action.
the exercise of her proprietary rights; and, from which property they must be dispossessed;

3. That the parcel of land described in the first cause of action was the subject matter of the public
2. Ordering the defendants, Arador Valdehueza and Rediculo Valdehueza jointly and severally to
auction sale held on May 6, 1955 at the Capitol Building in Oroquieta, Misamis Occidental,
pay to the plaintiff, Lucia Tan, on Annex 'E' the amount of P1,200, with legal interest of 6% as of
wherein the plaintiff was the highest bidder and as such a Certificate of Sale was executed by MR.
August 15, 1966, within 90 days to be deposited with the Office of the Court within 90 days from
VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff in favor of LUCIA TAN the herein
the date of service of this decision, and that in default of such payment the property shall be sold
plaintiff. Due to the failure of defendant Arador Valdehueza to redeem the said land within the
in accordance with the Rules of Court for the release of the mortgage debt, plus costs;
period of one year as being provided by law, MR. VICENTE D. ROA who was then the Ex-Officio
Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff LUCIA TAN.
3. And as regards the land covered by deed of pacto de retro annex 'D', the herein defendants
Arador Valdehueza and Rediculo Valdehueza are hereby ordered to pay the plaintiff the amount
A copy of the NOTICE OF SHERIFFS SALE is hereby marked as 'Annex A', the CERTIFICATE OF SALE
of P300 with legal interest of 6% from August 15, 1966, the said land serving as guaranty of the
is marked as 'Annex B' and the ABSOLUTE DEED OF SALE is hereby marked as Annex C and all of
said amount of payment;
which are made as integral parts of this stipulation of facts.

4. Sentencing the defendants Arador Valdehueza and Rediculo Valdehueza to pay jointly and
4. That the party-plaintiff is the same plaintiff in Civil Case No. 2002; that the parties defendants
severally to the herein plaintiff Lucia Tan the amount of 1,000.00 as attorney's fees; and .
Arador, Rediculo and Pacita, all Valdehueza were the same parties-defendants in the same said
Civil Case No. 2002; the complaint in Civil Case No. 2002 to be marked as Exhibit 1; the answer as
Exhibit 2 and the order dated May 22, 1963 as Exhibit 3, and said exhibits are made integral part 5. To pay the costs of the proceedings.
of this stipulation.
The Valdehuezas appealed, assigning the following errors:
 That the lower court erred in failing to adjudge on the first cause of action that there exists res stated in the pacto de retro contracts, as the lower court has directed, and that therefore the court
judicata; and should have ordered evidence to be adduced on the harvest.

That the lower court erred in making a finding on the second cause of action that the transactions
between the parties were simple loan, instead, it should be declared as equitable mortgage.
We affirm in part and modify in part.
1. Relying on Section 3 of Rule 17 of the Rules of Court which pertinently provides that a dismissal
for failure to prosecute "shall have the effect of an adjudication upon the merits," the Valdehuezas
submit that the dismissal of civil case 2002 operated, upon the principle of res judicata, as a bar to
the first cause of action in civil case 2574. We rule that this contention is untenable as the causes of
action in the two cases are not identical. Case 2002 was for injunction against the entry into and the
gathering of nuts from the land, while case 2574 seeks to "remove any doubt or cloud of the
plaintiff's ownership ..." (Amended complaint, Rec. on App., p. 27), with a prayer for declaration of
ownership and recovery of possession.
The record does not support this claim. Nowhere in the original and the amended complaints is an
allegation of delivery to the plaintiff of the harvest from the land involved in the second cause of
action. Hence, the defendants' answer had none to affirm.
In submitting their stipulation of facts, the parties prayed "for its approval and maybe made the
basis of the decision of this Honorable Court. " (emphasis supplied) This, the court did. It cannot
therefore be faulted for not receiving evidence on who profited from the harvest.
4. The imposition of legal interest on the amounts subject of the equitable mortgages, P1,200 and
P300, respectively, is without legal basis, for, "No interest shall be due unless it has been expressly
stipulated in writing." (Article 1956, new Civil Code) Furthermore, the plaintiff did not pray for such
interest; her thesis was a consolidation of ownership, which was properly rejected, the contracts
being equitable mortgages.

Applying the test of absence of inconsistency between prior and subsequent judgments, 2 we hold
that the failure of Tan, in case 2002, to secure an injunction against the Valdehuezas to prevent
them from entering the land and gathering nuts is not inconsistent with her being adjudged, in case
2574, as owner of the land with right to recover possession thereof. Case 2002 involved only the
possession of the land and the fruits thereof, while case 2574 involves ownership of the land, with
possession as a mere attribute of ownership. The judgment in the first case could not and did not
encompass the judgment in the second, although the second judgment would encompass the first.
Moreover, the new Civil Code provides that suitors in actions to quiet title "need not be in
possession of said property.3
With the definitive resolution of the rights of the parties as discussed above, we find it needless to
pass upon the plaintiffs petition for receivership. Should the circumstances so warrant, she may
address the said petition to the court a quo.
ACCORDINGLY, the judgment a quo is hereby modified, as follows: (a) the amounts of P1,200 and
P300 mentioned in Annexes E and D shall bear interest at six percent per annum from the finality
of this decision; and (b) the parcel of land covered by Annex D shall be treated in the same manner
as that covered by Annex E, should the defendants fail to pay to the plaintiff the sum of P300 within
90 days from the finality of this decision. In all other respects the judgment is affirmed. No costs.

2. The trial court treated the registered deed of pacto de retro as an equitable mortgage but
considered the unregistered deed of pacto de retro "as a mere case of simple loan, secured by the
property thus sold under pacto de retro," on the ground that no suit lies to foreclose an unregistered
mortgage. It would appear that the trial judge had not updated himself on law and jurisprudence;
he cited, in support of his ruling, article 1875 of the old Civil Code and decisions of this Court circa
1910 and 1912.

Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity
of a mortgage even as between the parties, but under article 2125 of the new Civil Code (in effect
since August 30,1950), this is no longer so.4

If the instrument is not recorded, the mortgage is nonetheless binding between

the parties. (Article 2125, 2nd sentence).

The Valdehuezas having remained in possession of the land and the realty taxes having been paid
by them, the contracts which purported to be pacto de retro transactions are presumed to be
equitable mortgages,5 whether registered or not, there being no third parties involved.

3. The Valdehuezas claim that their answer to the complaint of the plaintiff affirmed that they
remained in possession of the land and gave the proceeds of the harvest to the plaintiff; it is thus
argued that they would suffer double prejudice if they are to pay legal interest on the amounts
SALES – EXTINGUISHMENT – CONVENTIONAL REDEMPTION – DISTINGUISH FROM OPTION TO
BUY
G.R. No. L-3031 March 15, 1951
AMANDA MADAMBA VDA. DE ADIARTE, plaintiff-appellee,
vs.
EMILIANA TUMANENG, defendant-appellant.
PADILLA, J.:
Amanda Madamba Vda. de Adiarte was the owner of two parcels of land situated in the barrio of
Tabtabagan, municipality of Banna, Ilocos Norte, the first comprising an area of 3,296 square meters
and the second, of 6,592 square meters, assessed at P220 and P350, respectively more particularly
described in the second paragraph of the complaint filed in this case. On 25 February 1929, for and
in consideration of P1,100, the owner sold the two parcels of land to the spouse Cirilio Agudong and
Emilliana Tumaneng for her the right to repurchase them within ten years. On 29 February 1944,
the vendees presented for registration under and pursuant to the provisions of Act 3344 the deed
of sale with the right to repurchase in the office of the Registrar of Deeds in and for the Province of
Ilocos Norte. On 6 April 1944, the vendor called on the vendees at their residence in three
municipality of Sarrat, the same province, offering to repurchase the two parcels of land. At first
Crilio Agudong to resell, but later on, at about noon of that day, he called on the vendor, who was
taking lunch in the house of Lorenzo Pasion, and told her that he had changed his mind and that he
was then decided to resell the parcels of land on condition that he would have them in his
possession for the following two years. And to show his good faith he wrote in Ilocano dialect a
document which translated into Spanish reads, as follows:
Yo, Cirilio Agudong, mayor de edad, casado y residente en este barrio No. 15, declaro que hoy 6 de
Abril de 1944 vino Doña Amanda Cristobal, dueña terreno sita en Sineg-guep, Cabaruan, Banna, que
yo he comprado con pacto de retro y que ya ha vencido hace anos y que la escritura otorgada ya
esta registrada y me significo su deseo de recomprarlo y como quiera que se expreso en terminos
precisos y respetuosos reconociendo mi derecho pudo convencerma y me conformo en pertirla a
recomprar su terreno pero nos hemos convenido en que yo trabajara aun por dos anos agricolas o
sean dos anos y pasados los dos anos lo recibire la cantidad con que me vendio cuando se cancelara
el registro que se hizo-a mi favor.
En testimonio de lo cual, firmo la presente hoy a 6 de Abril de 1944.
(Fdo.) CIRILO AGUDONG
In October 1944, Cirilio Agudong died. On or after 6 April 1946, the vendor offered to repurchase
the two parcels of land from one of the vendees, the widow of the late Cirilo Agudong, as promised
by the latter during his lifetime in the document quoted above, but the widow of the deceased
refused to receive the sum of P1,100 tendered to her by the vendor and to resell the two parcels of
land. In view thereof, this action was brought to compel the widow of the late Cirilo Agudong to
accept the sum of P1,100 tendered by the plaintiff and to execute in favor of the latter a deed of
sale of two parcels of land. The plaintiff prays also for damages and for costs.
In her answer the defendant denies knowledge of any agreement entered into by and between her
late husband and the plaintiff, as alleged by the latter in her complaint.
At the trial, the parties submitted a stipulation of facts. Upon the evidence and the stipulation of
facts, the trial court rendered judgment as prayed for, but without pronouncement as to damages
and costs. A motion for reconsideration was denied. The defendant has appealed. After review of
the judgment appealed from, the Court of Appeals found only questions of law are involved in the
appeal, and for that reason it certified the appeal to this Court.
The errors assigned by the appellant as committed by the trial court are: (1) the pronouncement
that the promise to sell (Exhibit A) signed by the late Cirilo Agudong in his lifetime is lawful and valid,
and (2) the order to the appellant to accept the sum of P1,100 tendered by the appellee without
the three heirs of the deceased Cirilo Agudong having been made party defendants. These same
questions were raised in her motion for reconsideration and passed upon the trial court.
There can be no controversy that after the lapse of the ten-year period agreed upon in the deed of
sale with the right to repurchase executed by the appellee, as vendor, the appellant and her
husband, as vendees, became the absolute owners of the two parcels of land sold to them by the
appellee. The promise to sell and convey the two parcels of land made by Cirilo Agudong, after he
and his wife had become absolute owners thereof, cannot be regarded as a promise to resell the
parcels of land by virtue of the right to repurchase reserved by the vendor, because that right was
lost to the latter after the expiration of ten years agreed upon without making the repurchase of
the two parcels of land. Hence there is no room for the application of the provisions of article 1508
of the Civil Code which prohibit an agreement or stipulation for redemption of the property sold
beyond ten years from the date of the contract. The term "recomprar" (repurchase) was used for
lack of better term available or known to Cirilo Agudong, taking into consideration his degree of
instruction. It is usual and ordinary to refer to a sale or conveyance of real or personal property, as
a resale or repurchase, if the vendee had been the former owner thereof. It is not improper for the
former owner to say that he is repurchasing what he had sold and for the purchaser to say that he
is reselling to the former owner what he had bought from him. For the same reasons, the promise
to sell, upon which the appellee rests he right to demand the specific performance thereof, cannot
be deemed a novation. The latter cannot be brought about without existing contract which is
substituted or replaced by another either by the change of the subject matter, or by substantial
alterations of the terms, of the original contract, or by substitution of another for the debtor, or by
subrogation of another to the rights of the creditor. In this case, the original contract of sale with
the right to repurchase reserved by the vendor to longer existed at the time the promise to sell was
made by the purchaser — who had become the absolute owner after the lapse of the period of time
for repurchase — to the seller — who had lost all her right to the property sold, because of her
failure to repurchase it within the time agreed upon.
The promise to sell made by Cirilo Agudong not only binds and his estate, now that he is dead, but
also his wife, the appellant herein, because in the absence of proof that one-half of the purchase
price was paraphernal, the presumption is that it was conjugal, and the property acquired with the
conjugal funds also be conjugal, and the contract made by the husband as regards conjugal property
binds the wife. The promise referred to, not being contrary to law, morals, or public order or policy,
is lawful, valid and enforceable.
The second point raised by the appellant is well taken. But there seems to be no defense which may
be pleaded or set up by the children and heirs of the late Cirilo Agudong, who are bound by such
acts of their late father as they affect his estate, except the one set up by the appellant, the widow
of the deceased and mother of the said children. Therefore, to expedite the disposition of this case
without resort to technicalities, the appellee is directed to amend her complaint by impleading the
children and heirs of the late Cirilo Agudong, who, if under age, will be represented by the appellant,
their mother, as guardian ad litem to be appointed by the trial court. Upon the filing of the amended
complaint, the appellee will serve a copy thereof upon the appellant, as guardian ad litem of the
new party defendants who are minors, or copies thereof upon the children and heirs of the late
Cirilo Agudong, if already of age; and if within 15 days from service of a copy or copies of the
amended complaint, no answer be filed, or if an answer be filed by said guardian ad litem or by the
children and heirs of the late Cirilo Agudong, if of age, setting up no other defense than the one
already set up by their mother, the appellant herein, and passed upon by the trial court and this
Court, then the judgment appealed from is affirmed, with costs against the appellant. If the answer
or answers filed by the new party defendants, if of age, o by their guardian ad litem, if under age,
set up a new valid defense, then the judgment appealed from is set aside, without costs, and the
trial court is directed to hear such evidence as the new party defendants may desire to present, and
after hearing to render judgment in the case.
SALES – EXTINGUISHMENT – LEGAL REDEMPTION - PERIOD
G.R. No. L-15499 February 28, 1962
ANGELA M. BUTTE, plaintiff-appellant,
vs.
MANUEL UY and SONS, INC., defendant-appellee.
REYES, J.B.L., J.:
Appeal from a decision of the Court of First instance of Manila dismissing the action for legal
redemption filed by plaintiff-appellant.
It appears that Jose V. Ramirez, during his lifetime, was a co-owner of a house and lot located at
Sta. Cruz, Manila, as shown by Transfer Certificate of Title No. 52789, issued in the name of the
following co-owners: Marie Garnier Vda. de Ramirez, 1/6; Jose V. Ramirez, 1/6; Jose E. Ramirez, 1/6;
Rita de Ramirez, 1/6; and Jose Ma. Ramirez, 1/6.
On October 20, 1951, Jose V. Ramirez died. Subsequently, Special Proceeding No. 15026 was
instituted to settle his estate, that included the one-sixth (1/6) undivided share in the
aforementioned property. And although his last will and testament, wherein he bequeathed his
estate to his children and grandchildren and one-third (1/3) of the free portion to Mrs. Angela M.
Butte, hereinafter referred to as plaintiff-appellant, has been admitted to probate, the estate
proceedings are still pending up to the present on account of the claims of creditors which exceed
the assets of the deceased. The Bank of the Philippine Islands was appointed judicial administrator.
Meanwhile, on December 9, 1958, Mrs. Marie Garnier Vda. de Ramirez, one of the co-owners of the
late Jose V. Ramirez in the Sta. Cruz property, sold her undivided 1/6 share to Manuel Uy & Sons,
Inc. defendant-appellant herein, for the sum of P500,000.00. After the execution by her attorney-
in-fact, Mrs. Elsa R. Chambers, of an affidavit to the effect that formal notices of the sale had been
sent to all possible redemptioners, the deed of sale was duly registered and Transfer Certificate of
Title No. 52789 was cancelled in lieu of which a new one was issued in the name of the vendee and
the other-co-owners.
On the same day (December 9, 1958), Manuel Uy & Sons, Inc. sent a letter to the Bank of the
Philippine Islands as judicial administrator of the estate of the late Jose V. Ramirez informing it of
the above-mentioned sale. This letter, together with that of the bank, was forwarded by the latter
to Mrs. Butte c/o her counsel Delgado, Flores & Macapagal, Escolta, Manila, and having received
the same on December 10, 1958, said law office delivered them to plaintiff-appellant's son, Mr.
Miguel Papa, who in turn personally handed the letters to his mother, Mrs. Butte, on December 11
and 12, 1958. Aside from this letter of defendant-appellant, the vendor, thru her attorney-in-fact
Mrs. Chambers, wrote said bank on December 11, 1958 confirming vendee's letter regarding the
sale of her 1/6 share in the Sta. Cruz property for the sum of P500,000.00. Said letter was received
by the bank on December 15, 1958 and having endorsed it to Mrs. Butte's counsel, the latter
received the same on December 16, 1958. Appellant received the letter on December 19, 1958.
On January 15, 1959, Mrs. Angela M. Butte, thru Atty. Resplandor Sobretodo, sent a letter and a
Philippine National Bank cashier's check in the amount of P500,000.00 to Manuel Uy & Sons, Inc.
offering to redeem the 1/6 share sold by Mrs. Marie Garnier Vda. de Ramirez. This tender having
been refused, plaintiff on the same day consigned the amount in court and filed the corresponding
action for legal redemption. Without prejudice to the determination by the court of the reasonable
and fair market value of the property sold which she alleged to be grossly excessive, plaintiff prayed
for conveyance of the property, and for actual, moral and exemplary damages.
After the filing by defendant of its answer containing a counterclaim, and plaintiff's reply thereto,
trial was held, after which the court rendered decision on May 13, 1959, dismissing plaintiff's
complaint on the grounds that she has no right to redeem the property and that, if ever she had
any, she exercised the same beyond the statutory 30-day period for legal redemptions provided by
the Civil Code. The counterclaim of defendant for damages was likewise dismissed for not being
sufficiently established. Both parties appealed directly to this Court.
Based on the foregoing facts, the main issues posed in this appeal are: (1) whether or not plaintiff-
appellant, having been bequeathed 1/3 of the free portion of the estate of Jose V. Ramirez, can
exercise the right of legal redemption over the 1/6 share sold by Mrs. Marie Garnier Vda. de Ramirez
despite the presence of the judicial administrator and pending the final distribution of her share in
the testate proceedings; and (2) whether or not she exercised the right of legal redemption within
the period prescribed by law.
The applicable law involved in the present case is contained in Articles 1620, p. 1, and 1623 of the
Civil Code of the Philippines, which read as follows:
ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all
the other-co-owners or of any of them, are sold to a third person. If the price of the alienation is
grossly excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in
proportion to the share they may respectively have in the thing owned in common. (1522a)
ART. 1623. The right of legal predemption or redemption shall not be exercised except within
thirty days from the notice in writing by the respective vendor, or by the vendor, as the case may
be. The deed of sale shall not be accorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice thereof at all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners. (1524a)
That the appellant Angela M. Butte is entitled to exercise the right of legal redemption is clear. As
testamentary heir of the estate of J.V. Ramirez, she and her co-heirs acquired an interest in the
undivided one-sixth (1/6) share owned by her predecessor (causante) in the Santa Cruz property,
from the moment of the death of the aforesaid co-owner, J.V. Ramirez. By law, the rights to the
succession of a deceased persons are transmitted to his heirs from the moment of his death, and
the right of succession includes all property rights and obligations that survive the decedent.
ART. 776. The inheritance includes all the property, rights and obligations of a person which are
not extinguished by his death. (659)
ART. 777. The rights to the succession are transmitted from the moment of the death of the
decedent. (657a)
 ART. 947. The legatee or devisee acquires a right to the pure and simple legacies or devisees
from the death of the testator, and transmits it to his heirs. (881a)
The principle of transmission as of the time of the predecessor's death is basic in our Civil Code, and
is supported by other related articles. Thus, the capacity of the heir is determined as of the time the
decedent died (Art. 1034); the legitime is to be computed as of the same moment(Art. 908), and so
is the in officiousness of the donation inter vivos (Art. 771). Similarly, the legacies of credit and
remission are valid only in the amount due and outstanding at the death of the testator (Art.
935),and the fruits accruing after that instant are deemed to pertain to the legatee (Art. 948).
As a consequence of this fundamental rule of succession, the heirs of Jose V. Ramirez acquired his
undivided share in the Sta. Cruz property from the moment of his death, and from that instant, they
became co-owners in the aforesaid property, together with the original surviving co-owners of their
decedent (causante). A co-owner of an undivided share is necessarily a co-owner of the whole.
Wherefore, any one of the Ramirez heirs, as such co-owner, became entitled to exercise the right
of legal redemption (retracto de comuneros) as soon as another co-owner (Maria Garnier Vda. de
Ramirez) had sold her undivided share to a stranger, Manuel Uy & Sons, Inc. This right of redemption
vested exclusively in consideration of the redemptioner's share which the law nowhere takes into
account.
The situation is in no wise altered by the existence of a judicial administrator of the estate of Jose
V. Ramirez while under the Rules of Court the administrator has the right to the possession of the
real and personal estate of the deceased, so far as needed for the payment of the decedent's debts
and the expenses of administration (sec. 3, Rule 85), and the administrator may bring or defend
actions for the recovery or protection of the property or rights of the deceased (sec. 2, Rule 88),
such rights of possession and administration do not include the right of legal redemption of the
undivided share sold to Uy & Company by Mrs. Garnier Ramirez. The reason is obvious: this right of
legal redemption only came into existence when the sale to Uy & Sons, Inc. was perfected, eight (8)
years after the death of Jose V. Ramirez, and formed no part of his estate. The redemption right
vested in the heirs originally, in their individual capacity, they did not derivatively acquire it from
their decedent, for when Jose V. Ramirez died, none of the other co-owners of the Sta. Cruz property
had as yet sold his undivided share to a stranger. Hence, there was nothing to redeem and no right
of redemption; and if the late Ramirez had no such right at his death, he could not transmit it to his
own heirs. Much less could Ramirez acquire such right of redemption eight years after his death,
when the sale to Uy & Sons, Inc. was made; because death extinguishes civil personality, and,
therefore, all further juridical capacity to acquire or transmit rights and obligations of any kind (Civil
Code of the Phil., Art. 42).
It is argued that the actual share of appellant Mrs. Butte in the estate of Jose V. Ramirez has not
been specifically determined as yet, that it is still contingent; and that the liquidation of estate of
Jose V. Ramirez may require the alienation of the decedent's undivided portion in the Sta. Cruz
property, in which event Mrs. Butte would have no interest in said undivided portion. Even if it were
true, the fact would remain that so long as that undivided share remains in the estate, the heirs of
Jose V. Ramirez own it, as the deceased did own it before his demise, so that his heirs are now as
much co-owners of the Sta. Cruz property as Jose V. Ramirez was himself a co-owner thereof during
his lifetime. As co-owners of the property, the heirs of Jose V. Ramirez, or any one of them, became
personally vested with right of legal redemption as soon as Mrs. Garnier sold her own pro-indiviso
interest to Uy & Sons. Even if subsequently, the undivided share of Ramirez (and of his heirs) should
eventually be sold to satisfy the creditors of the estate, it would not destroy their ownership of it
before the sale, but would only convey or transfer it as in turn sold (of it actually is sold) to pay his
creditors. Hence, the right of any of the Ramirez heirs to redeem the Garnier share will not be
retroactively affected. All that the law requires is that the legal redemptioner should be a co-owner
at the time the undivided share of another co-owner is sold to a stranger. Whether or not the
redemptioner will continue being a co-owner after exercising the legal redemptioner is irrelevant
for the purposes of law.
Nor it can be argued that if the original share of Ramirez is sold by the administrator, his heirs would
stand in law as never having acquired that share. This would only be true if the inheritance is
repudiated or the heir's quality as such is voided. But where the heirship is undisputed, the
purchaser of hereditary property is not deemed to have acquired the title directly from the
deceased Ramirez, because a dead man can not convey title, nor from the administrator who owns
no part of the estate; the purchaser can only derive his title from the Ramirez heirs, represented by
the administrator, as their trustee or legal representative.
The right of appellant Angela M. Butte to make the redemption being established, the next point of
inquiry is whether she had made or tendered the redemption price within the 30 days from notices
as prescribed by law. This period, be it noted, is peremptory, because the policy of the law is not to
leave the purchaser's title in uncertainty beyond the established 30-day period. In considering
whether or not the offer to redeem was timely, we think that the notice given by the vendee (buyer)
should not be taken into account. The text of Article 1623 clearly and expressly prescribes that the
thirty days for making the redemption are to be counted from notice in writing by the vendor. Under
the old law (Civ. Code of 1889, Art. 1524), it was immaterial who gave the notice; so long as the
redeeming co-owner learned of the alienation in favor of the stranger, the redemption period began
to run. It is thus apparent that the Philippine legislature in Article 1623 deliberately selected a
particular method of giving notice, and that method must be deemed exclusive (39 Am. Jur., 237;
Payne vs. State, 12 S.W. [2d] 528). As ruled in Wampler vs. Lecompte, 150 Atl. 458 (affd. in 75 Law
Ed. [U.S.] 275) —
Why these provisions were inserted in the statute we are not informed, but we may
assume until the contrary is shown, that a state of facts in respect thereto existed, which
warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the seller, and not by the buyer, are
easily divined. The seller of an undivided interest is in the best position to know who are his co-
owners that under the law must be notified of the sale. Also, the notice by the seller removes all
doubts as to the fact of the sale, its perfection; and its validity, the notice being a reaffirmation
thereof, so that the party need not entertain doubt that the seller may still contest the alienation.
This assurance would not exist if the notice should be given by the buyer.
The notice which became operative is that given by Mrs. Chambers, in her capacity as attorney-in-
fact of the vendor Marie Garnier Vda. de Ramirez. Under date of December 11, 1958, she wrote the
Administrator Bank of the Philippine Islands that her principal's one-sixth (1/6) share in the Sta. Cruz
property had been sold to Manuel Uy & Sons, Inc. for P500,000.00. The Bank received this notice
on December 15, 1958, and on the same day endorsed it to Mrs. Butte, care of Delgado, Flores and
Macapagal (her attorneys), who received the same on December 16, 1958. Mrs. Butte tendered
redemption and upon the vendee's refusal, judicially consigned the price of P500,000.00 on January
15, 1959. The latter date was the last one of the thirty days allowed by the Code for the redemption,
counted by excluding December 16, 1958 and including January 15, 1959, pursuant to Article 13 of
the Civil Code. Therefore, the redemption was made in due time.
The date of receipt of the vendor's notice by the Administrator Bank (December 15) can not be
counted as determining the start of thirty days; for the Administrator of the estate was not a proper
redemptioner, since, as previously shown, the right to redeem the share of Marie Garnier did not
form part of the estate of Jose V. Ramirez.

We find no jurisdiction for appellant's claim that the P500,000,00. paid by Uy & Sons, Inc. for the
Garnier share is grossly excessive. Gross excess cannot be predicated on mere individual estimates
of market price by a single realtor.

The redemption and consignation having been properly made, the Uy counterclaim for damages
and attorney's fees predicated on the assumption that plaintiff's action was clearly unfounded,
becomes untenable.

PREMISES CONSIDERED, the judgment appealed from is hereby reversed and set aside, and another
one entered:

(a) Declaring the consignation of P500,000,00 made by appellant Angela M. Butte duly
and properly made;

(b) Declaring that said appellant properly exercised in due time the legal redemption of
the one-sixth (1/6) undivided portion of the land covered by Certificate of Title No. 59363
of the Office of the Register of Deeds of the City of Manila, sold on December 9, 1958 by
Marie Garnier Vda. de Ramirez to appellant Manuel Uy & Sons, Inc.

(c) Ordering appellant Manuel Uy & Sons, Inc. to accept the consigned price and to convey
to Angela M. Butte the undivided portion above referred to, within 30 days from the time
our decision becomes final, and subsequently to account for the rentals and fruits of the
redeemed share from and after January 15, 1958, until its conveyance; and.

(d) Ordering the return of the records to the court of origin for further proceedings
conformable to this opinion.

Without finding as to costs.

SALES – EXTINGUISHMENT – LEGAL REDEMPTION - PERIOD
G.R. No. L-36083 September 5, 1975
Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON DOROMAL, JR., and
GAUDELIA VEGA, petitioners,
vs.
HON. COURT OF APPEALS and FILOMENA JAVELLANA, respondents.
BARREDO, J.:
Petition for review of the decision of the Court of Appeals in CA-G.R. No. 47945-R entitled Filomena
Javellana vs. Spouses Ramon Doromal, Sr., et al. which reversed the decision of the Court of First
Instance of Iloilo that had in turn dismissed herein private respondent Filomena Javellana's action
for redemption of a certain property sold by her co-owners to herein petitioners for having been
made out of time.
The factual background found by the Court of Appeals and which is binding on this Court, the same
not being assailed by petitioners as being capricious, is as follows:
IT RESULTING: That the facts are quite simple; Lot 3504 of the cadastral survey of Iloilo, situated
in the poblacion of La Paz, one of its districts, with an area of a little more than 2-½ hectares was
originally decreed in the name of the late Justice Antonio Horilleno, in 1916, under Original
Certificate of Title No. 1314, Exh. A; but before he died, on a date not particularized in the record,
he executed a last will and testament attesting to the fact that it was a co-ownership between
himself and his brothers and sisters, Exh. C; so that the truth was that the owners or better stated,
the co-owners were; beside Justice Horilleno,
"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was succeeded by her only
daughter and heir herein plaintiff. Filomena Javellana, in the proportion of 1/7 undivided
ownership each; now then, even though their right had not as yet been annotated in the title, the
co-owners led by Carlos, and as to deceased Justice Antonio Horilleno, his daughter Mary,
sometime since early 1967, had wanted to sell their shares, or if possible if Filomena Javellana
were agreeable, to sell the entire property, and they hired an acquaintance Cresencia Harder, to
look for buyers, and the latter came to interest defendants, the father and son, named Ramon
Doromal, Sr. and Jr., and in preparation for the execution of the sale, since the brothers and
sisters Horilleno were scattered in various parts of the country, Carlos in Ilocos Sur, Mary in
Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan City, they all executed
various powers of attorney in favor of their niece, Mary H. Jimenez Exh. 1-8, they also caused
preparation of a power of attorney of identical tenor for signature by plaintiff, Filomena Javellana,
Exh. M, and sent it with a letter of Carlos, Exh. 7 dated 18 January, 1968 unto her thru Mrs. Harder,
and here, Carlos informed her that the price was P4.00 a square meter, — although it now turns
out according to Exh. 3 that as early as 22 October, 1967, Carlos had received in check as earnest
money from defendant Ramon Doromal, Jr., the sum of P5,000.00 and the price therein agreed
upon was five (P5.00) pesos a square meter as indeed in another letter also of Carlos to Plaintiff
in 5 November, 1967, Exh. 6, he had told her that the Doromals had given the earnest money of
P5,000.00 at P5.00 a square meter, — at any rate, plaintiff not being agreeable, did not sign the
power of attorney, and the rest of the co-owners went ahead with their sale of their 6/7, Carlos
first seeing to it that the deed of sale by their common attorney in fact, Mary H. Jimenez be signed
and ratified as it was signed and ratified in Candon, Ilocos Sur, on 15 January, 1968, Exh. 2, then
brought to Iloilo by Carlos in the same month, and because the Register of Deeds of Iloilo refused
to register right away, since the original registered owner, Justice Antonio Horilleno was already
dead, Carlos had to ask as he did, hire Atty. Teotimo Arandela to file a petition within the cadastral
case, on 26 February, 1968, for the purpose, Exh. C, after which Carlos returned to Luzon, and
after compliance with the requisites of publication, hearing and notice, the petition was
approved, and we now see that on 29 April, 1968, Carlos already back in Iloilo went to the Register
of Deeds and caused the registration of the order of the cadastral court approving the issuance
of a new title in the name of the co-owners, as well as of the deed of sale to the Doromals, as a
result of which on that same date, a new title was issued TCT No. 23152, in the name of the
Horillenos to 6/7 and plaintiff Filomena Javellana to 1/7, Exh. D, only to be cancelled on the same
day under TCT No. 23153, Exh. 2, already in the names of the vendees Doromals for 6/7 and to
herein plaintiff, Filomena Javellana, 1/7, and the next day 30 April, 1968, the Doromals paid unto
Carlos by check, the sum of P97,000.00 Exh. 1, of Chartered Bank which was later substituted by
check of Phil. National Bank, because there was no Chartered Bank Branch in Ilocos Sur, but
besides this amount paid in check, the Doromals according to their evidence still paid an
additional amount in cash of P18,250.00 since the agreed price was P5.00 a square meter; and
thus was consummated the transaction, but it is here where complications set in,
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo, plaintiff's
lawyer, Atty. Arturo H. Villanueva, bringing with him her letter of that date, reading,
"P.O. Box 189, Bacolod City
June 10, 1968
Mr. & Mrs. Ramon Doromal, Sr.
and Mr. and Mrs. Ramon Doromal, Jr.
"Dumangas Iloilo
Dear Mr. and Mrs. Doromal:
The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., of this City. Through him, I
am making a formal offer to repurchase or redeem from you the 6/7 undivided share in Lot No.
3504, of the Iloilo Cadastre, which you bought from my erstwhile co-owners, the Horillenos, for
the sum of P30,000.00, Atty. Villanueva has with him the sum of P30,000.00 in cash, which he will
deliver to you as soon as you execute the contract of sale in my favor.
Thank you very much for whatever favorable consideration you can give this request.
Very truly yours,
(SIGNED)
Mrs. FILOMENA JAVELLANA"
p. 26, Exh. "J", Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he had the P30,000.00 with him
in cash, and tendered it to them, for the exercise of the legal redemption, the Doromals were
aghast, and refused. and the very next day as has been said. 11 June, 1968, plaintiff filed this case,
and in the trial, thru oral and documentary proofs sought to show that as co-owner, she had the
 right to redeem at the price stated in the deed of sale, Exh. 2, namely P30,000.00 of the but
defendants in answer, and in their evidence, oral and documentary sought to show that plaintiff
had no more right to redeem and that if ever she should have, that it should be at the true and
real price by them paid, namely, the total sum of P115,250.00, and trial judge, after hearing the
evidence, believed defendants, that plaintiff had no more right, to redeem, because,
"Plaintiff was informed of the intended sale of the 6/7 share belonging to the Horillenos."
and that,
"The plaintiff have every reason to be grateful to Atty. Carlos Horilleno because in the petition
for declaration of heirs of her late uncle Antonio Horilleno in whose name only the Original
Certificate of Title covering the Lot in question was issued, her uncle Atty. Carlos Horilleno
included her as one of the heirs of said Antonio Horilleno. Instead, she filed this case to redeem
the 6/7 share sold to the Doromals for the simple reason that the consideration in the deed of
sale is the sum of P30,000.00 only instead of P115,250.00 approximately which was actually paid
by the defendants to her co-owners, thus she wants to enrich herself at the expense of her own
blood relatives who are her aunts, uncles and cousins. The consideration of P30,000.00 only was
placed in the deed of sale to minimize the payment of the registration fees, stamps, and sales tax.
pp. 77-78, R.A.,
and dismiss and further condemned plaintiff to pay attorney's fees, and moral and exemplary
damages as set forth in few pages back, it is because of this that plaintiff has come here and
contends, that Lower Court erred:
"I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of the Iloilo Cadastre, the right
of legal redemption under Art. 1620, of the Civil Code:
"II. ... as a consequence of the above error, in refusing to order the defendants-appellees, the
vendees of a portion of the aforesaid Lot No. 3504 which they bought from the co-owners of the
plaintiff-appellant, to reconvey the portion they purchased to the herein plaintiff-appellant..
"III. ... in admitting extrinsic evidence in the determination of the consideration of the sale,
instead of simply adhering to the purchase price of P30,000.00, set forth in the pertinent Deed of
Sale executed by the vendors and owners of the plaintiff-appellant in favor of the defendants-
appellees.
"IV. ... in dismissing the complaint filed in this case." pp. 1-3, Appellant's Brief,. which can be
reduced to the simple question of whether or not on tile basis of the evidence and the law, the
judgment appealed from should be maintained; (Pp. 16-22, Record.) .
Upon these facts, the Court of Appeals reversed the trial court's decision and held that although
respondent Javellana was informed of her co-owners' proposal to sell the land in question to
petitioners she was, however, "never notified ... least of all, in writing", of the actual execution
and registration of the corresponding deed of sale, hence, said respondent's right to redeem had
not yet expired at the time she made her offer for that purpose thru her letter of June 10, 1968
delivered to petitioners on even date. The intermediate court further held that the redemption
price to be paid by respondent should be that stated in the deed of sale which is P30,000
notwithstanding that the preponderance of the evidence proves that the actual price paid by
petitioners was P115,250. Thus, in their brief, petitioners assign the following alleged errors:
I P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show that the
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN WRITING OF THE SALE
CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE REFERS TO A NOTICE IN WRITING AFTER
THE EXECUTION AND REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF THE DOCUMENT
OF SALE.
II
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE INSCRIPTION OF THE SALE IN THE
REGISTRY OF PROPERTY TAKES EFFECT AS AGAINST THIRD PERSONS INCLUDING CLAIMS OF
POSSIBLE REDEMPTIONERS.
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT TO REDEEM, THE COURT
OF APPEALS ERRED IN HOLDING THAT THE REDEMPTION PRICE SHOULD BE THAT STATED IN THE
DEED OF SALE. (Pp. 1-2, Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 co-owner of
the property in dispute. The thrust of their first assignment of error is that for purposes of Article
1623 of the Civil Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within
thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case
may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied
by an affidavit of the vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit 7, and
November 5, 1967, Exhibit 6, constituted the required notice in writing from which the 30-day
period fixed in said provision should be computed. But to start with, there is no showing that said
letters were in fact received by respondent and when they were actually received. Besides,
petitioners do not pinpoint which of these two letters, their dates being more than two months
apart, is the required notice. In any event, as found by the appellate court, neither of said letters
referred to a consummated sale. As may be observed, it was Carlos Horilleno alone who signed
them, and as of January 18, 1968, powers of attorney from the various co-owners were still to be
secured. Indeed, the later letter of January 18, 1968 mentioned that the price was P4.00 per square
meter whereas in the earlier letter of November 5, 1967 it was P5.00, as in fact, on that basis, as
early as October 27, 1967, Carlos had already received P5,000 from petitioners supposedly as
earnest money, of which, however, mention was made by him to his niece only in the later letter of
January 18, 1968, the explanation being that "at later negotiation it was increased to P5.00 per
square meter." (p. 4 of petitioners' brief as appellees in the Court of Appeals quoting from the
decision of the trial court.) In other words, while the letters relied upon by petitioners could convey
the idea that more or less some kind of consensus had been arrived at among the other co-owners
to sell the property in dispute to petitioners, it cannot be said definitely that such a sale had even
been actually perfected. The fact alone that in the later letter of January 18, 1968 the price indicated
was P4.00 per square meter while in that of November 5, 1967, what was stated was P5.00 per
square meter negatives the possibility that a "price definite" had already been agreed upon. While
same was in the concept of the earnest money contemplated in Article 1482 of the Civil Code,
invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual
milieu thereof extant in the record, We are more inclined to believe that the said P5,000 were paid
in the concept of earnest money as the term was understood under the Old Civil Code, that is, as a
guarantee that the buyer would not back out, considering that it is not clear that there was already
a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the
property should respondent Javellana refuse to agree to part with her 1/7 share.
In the light of these considerations, it cannot be said that the Court of Appeals erred in holding that
the letters aforementioned sufficed to comply with the requirement of notice of a sale by co-owners
under Article 1623 of the Civil Code. We are of the considered opinion and so hold that for purposes
of the co-owner's right of redemption granted by Article 1620 of the Civil Code, the notice in writing
which Article 1623 requires to be made to the other co-owners and from receipt of which the 30-
day period to redeem should be counted is a notice not only of a perfected sale but of the actual
execution and delivery of the deed of sale. This is implied from the latter portion of Article 1623
which requires that before a register of deeds can record a sale by a co-owner, there must be
presented to him, an affidavit to the effect that the notice of the sale had been sent in writing to
the other co-owners. A sale may not be presented to the register of deeds for registration unless it
be in the form of a duly executed public instrument. Moreover, the law prefers that all the terms
and conditions of the sale should be definite and in writing. As aptly observed by Justice Gatmaitan
in the decision under review, Article 1619 of the Civil Code bestows unto a co-owner the right to
redeem and "to be subrogated under the same terms and conditions stipulated in the contract",
and to avoid any controversy as to the terms and conditions under which the right to redeem may
be exercised, it is best that the period therefor should not be deemed to have commenced unless
the notice of the disposition is made after the formal deed of disposal has been duly executed. And
it being beyond dispute that respondent herein has never been notified in writing of the execution
of the deed of sale by which petitioners acquired the subject property, it necessarily follows that
her tender to redeem the same made on June 10, 1968 was well within the period prescribed by
law. Indeed, it is immaterial when she might have actually come to know about said deed, it
appearing she has never been shown a copy thereof through a written communication by either
any of the petitioners-purchasers or any of her co-owners-vendees. (Cornejo et al. vs. CA et al., 16
SCRA 775.)
The only other pivotal issue raised by petitioners relates to the price which respondent offered for
the redemption in question. In this connection, from the decision of the Court of Appeals, We gather
that there is "decisive preponderance of evidence" establishing "that the price paid by defendants
was not that stated in the document, Exhibit 2, of P30,000 but much more, at least P97,000,
according to the check, Exhibit 1, if not a total of P115,250.00 because another amount in cash of
P18,250 was paid afterwards."
It is, therefore, the contention of petitioners here that considering said finding of fact of the
intermediate court, it erred in holding nevertheless that "the redemption price should be that stated
in the deed of sale."
Again, petitioners' contention cannot be sustained. As stated in the decision under review, the trial
court found that "the consideration of P30,000 only was placed in the deed of sale to minimize the
payment of the registration fees, stamps and sales tax." With this undisputed fact in mind, it is
impossible for the Supreme Court to sanction petitioners' pragmatic but immoral posture. Being
patently violative of public policy and injurious to public interest, the seemingly wide practice of
understating considerations of transactions for the purpose of evading taxes and fees due to the
government must be condemned and all parties guilty thereof must be made to suffer the
consequences of their ill-advised agreement to defraud the state. Verily, the trial court fell short of
its devotion and loyalty to the Republic in officially giving its stamp of approval to the stand of
petitioners and even berating respondent Javellana as wanting to enrich herself "at the expense of
her own blood relatives who are her aunts, uncles and cousins." On the contrary, said "blood
relatives" should have been sternly told, as We here hold, that they are in pari-delicto with
petitioners in committing tax evasion and should not receive any consideration from any court in
respect to the money paid for the sale in dispute. Their situation is similar to that of parties to an
illegal contract.1
Of course, the Court of Appeals was also eminently correct in its considerations supporting the
conclusion that the redemption in controversy should be only for the price stipulated in the deed,
regardless of what might have been actually paid by petitioners that style inimitable and all his own,
Justice Gatmaitan states those considerations thus:
CONSIDERING: As to this that the evidence has established with decisive preponderance that the
price paid by defendants was not that stated in the document, Exh. 2 of P30,000.00 but much
more, at least P97,000.00 according to the check, Exh. 1 if not a total of P115,250.00 because
another amount in cash of P18,250.00 was paid afterwards, perhaps it would be neither correct
nor just that plaintiff should be permitted to redeem at only P30,000.00, that at first glance would
practically enrich her by the difference, on the other hand, after some reflection, this Court can
not but have to bear in mind certain definite points.
1st — According to Art. 1619
"Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated
in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by
any other transaction whereby ownership is transmitted by onerous title." pp. 471-472, New Civil
Code,
and note that redemptioner right is to be subrogated
"upon the same terms and conditions stipulated in the contract."
and here, the stipulation in the public evidence of the contract, made public by both vendors and
vendees is that the price was P30,000.00;
2nd — According to Art. 1620,
"A co-owner of a thing may exercise the right of redemption in case the share of all the other co-
owners or any of them, are sold to a third person. If the price of the alienation is grossly excessive,
the redemptioner shall pay only a reasonable one. p. 472, New Civil Code, .
from which it is seen that if the price paid is 'grossly excessive' redemptioner is required to pay
only a reasonable one; not that actually paid by the vendee, going to show that the law seeks to
protect redemptioner and converts his position into one not that of a contractually but of a legally
subrogated creditor as to the right of redemption, if the price is not 'grossly excessive', what the
law had intended redemptioner to pay can be read in Art. 1623.
 The right of a legal pre-emption or redemption shall not be exercised except within thirty (30)
days from the notice in writing by the prospective vendor, or by the vendor as the case may
be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by
an affidavit of the vendor that he has given written notice thereof of all possible
redemptioners.' p. 473, New Civil Code,
redemptioners on the price of the sale, to what they had solemnly averred in a public document
required by the law to be the only basis for that exercise of redemption; (Pp. 24-27, Record.)
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against petitioners..

if that be so that affidavit must have been intended by the lawmakers for a definite purpose, to
argue that this affidavit has no purpose is to go against all canons of statutory construction, no law
mandatory in character and worse, prohibitive should be understood to have no purpose at all,
that would be an absurdity, that purpose could not but have been to give a clear and unmistakable
guide to redemptioner, on how much he should pay and when he should redeem; from this must
follow that that notice must have been intended to state the truth and if vendor and vendee should
have instead, decided to state an untruth therein, it is they who should bear the consequences of
having thereby misled the redemptioner who had the right to rely and act thereon and on nothing
else; stated otherwise, all the elements of equitable estoppel are here since the requirement of
the law is to submit the affidavit of notice to all possible redemptioners, that affidavit to be a
condition precedent to registration of the sale therefore, the law must have intended that it be by
the parties understood that they were there asking a solemn representation to all possible
redemptioners, who upon faith of that are thus induced to act, and here worse for the parties to
the sale, they sought to avoid compliance with the law and certainly refusal to comply cannot be
rewarded with exception and acceptance of the plea that they cannot be now estopped by their
own representation, and this Court notes that in the trial and to this appeal, plaintiff earnestly
insisted and insists on their estoppel;

3rd — If therefore, here vendors had only attempted to comply with the law, they would have
been obligated to send a copy of the deed of sale unto Filomena Javellana and from that copy,
Filomena would have been notified that she should if she had wanted to redeem, offered no more,
no less, that P30,000.00, within 30 days, it would have been impossible for vendors and vendees
to have inserted in the affidavit that the price was truly P97,000.00 plus P18,250.00 or a total of
P115,250.00; in other words, if defendants had only complied with the law, they would have been
obligated to accept the redemption money of only P30,000.00;

4th — If it be argued that foregoing solution would mean unjust enrichment for plaintiff, it need
only be remembered that plaintiff's right is not contractual, but a mere legal one, the exercise of
a right granted by the law, and the law is definite that she can subrogate herself in place of the
buyer,

"upon the same terms and conditions stipulated in the contract,"

in the words of Art. 1619, and here the price

"stipulated in the contract"

was P30,000.00, in other words, if this be possible enrichment on the part of Filomena, it was not
unjust but just enrichment because permitted by the law; if it still be argued that plaintiff would
thus be enabled to abuse her right, the answer simply is that what she is seeking to enforce is not
an abuse but a mere exercise of a right; if it be stated that just the same, the effect of sustaining
plaintiff would be to promote not justice but injustice, the answer again simply is that this solution
is not unjust because it only binds the parties to make good their solemn representation to possible
SALES – EXTINGUISHMENT – LEGAL REDEMPTION - INSTANCES
G.R. No. 133079. August 9, 2005]
SPS. MAXIMO LANDRITO, JR. and PACITA EDGALANI, Petitioners,
vs.
THE HONORABLE COURT OF APPEALS; SPS. BENJAMIN SAN DIEGO and CARMENCITA SAN
DIEGO; The EX-OFFICIO SHERIFF and CLERK OF COURT of the Regional Trial Court, Makati City;
and the REGISTER OF DEEDS, Makati City, Respondent.
DECISION
GARCIA, J.:
Herein petitioners, the spouses Maximo Landrito, Jr. and Pacita Landrito, have come to this Court
via this petition for review on certiorari under Rule 45 of the Rules of Court to seek the reversal and
setting aside of the decision dated 12 December 19971 and resolution dated 10 March 19982 of the
Court of Appeals in CA-G.R. CV No. 48896, affirming an earlier order of the Regional Trial Court at
Makati City which granted the motion to dismiss filed by the herein private respondents, the
spouses Benjamin San Diego and Carmencita San Diego, in its Civil Case No. 94-2950, a complaint
for annulment of extrajudicial foreclosure and auction sale, thereat commenced by them against
the San Diegos, the ex-officio sheriff and the Register of Deeds of Makati City.
The facts:
In July 1990, petitioners obtained a loan of ₱350,000.00 from respondent Carmencita San Diego. To
secure payment thereof, petitioners executed on 02 August 1990 in favor of the same respondent
a deed of real estate mortgage over their parcel of land located at Bayanan, Muntinlupa, Rizal and
registered in their names under Transfer Certificate of Title No. (432281) S-21000.
After making substantial payments, petitioners again obtained and were granted by Carmencita San
Diego an additional loan of One Million Pesos (₱1,000,000.00). To secure this additional loan, the
parties executed on 13 September 1991 an "Amendment of Real Estate Mortgage", whereunder
they stipulated that the loan shall be paid within six (6) months from 16 September 1991, and if not
paid within said period, the mortgagee shall have the right to declare the mortgage due and may
immediately foreclose the same judicially or extrajudicially, in accordance with law.
It appears that petitioners defaulted in paying their loan and continuously refused to comply with
their obligation despite repeated demands therefor, prompting respondent Carmencita San Diego
to send them on 27 April 1993, a final notice of demand requiring them to settle their financial
obligation which, by then, already amounted to ₱1,950,000.00.
On 30 June 1993, after her efforts to collect proved futile, respondent Carmencita San Diego filed
with the Office of the Clerk of Court and Ex-Officio Sheriff of RTC-Makati, a petition for the
extrajudicial foreclosure of the mortgage.
On 06 July 1993, said office sent to the parties a Notice of Sheriff’s Sale, therein announcing that
petitioners’ mortgaged property will be sold in a public auction to be conducted on 11 August 1993
at 10:00 o’clock in the morning, copies of which notice were posted in several conspicuous places
within the sheriff’s territorial jurisdiction.
As announced, on 11 August 1993, at 10:00 o’clock in the morning, the public auction sale was held
and the mortgaged property sold to respondent Carmencita San Diego as the highest bidder for
₱2,000,000.00, as evidenced by the Sheriff’s Certificate of Sale issued in her favor on 07 October
1993.
On 29 October 1993, respondent San Diego caused the registration of the same sheriff’s certificate
of sale with the Office of the Register of Deeds, Makati City, and duly inscribed on the same date at
the dorsal side of the petitioners’ TCT No. (432281) S-21000.
With the petitioners having failed to redeem their property within the 1-year redemption period
from the date of inscription of the sheriff’s certificate of sale, as provided for in Act No. 3135, as
amended, the San Diegos caused the consolidation of title over the foreclosed property in their
names.
Then, on 09 November 1994, before the Regional Trial Court at Makati City, petitioners filed their
complaint for annulment of the extrajudicial foreclosure and auction sale, with damages. In their
complaint, thereat docketed as Civil Case No. 94-2950, petitioners alleged that (1) said foreclosure
and auction sale were null and void for failure to comply with the requirements of notice and
publication, as mandated by Act 3135, as amended; (2) the mortgaged property was illegally
foreclosed in the light of the settled rule that an action to foreclose a mortgage must be limited to
the amount mentioned in the mortgage document, in this case, ₱1,000,000.00, which amount was
allegedly bloated by respondent Carmencita San Diego to ₱1,950,000.00; and (3) the San Diegos’
application for consolidation of title was premature because the husband, Benjamin San Diego,
allegedly granted them an extension of the period of redemption up to 11 November 1994.
To the complaint, respondents interposed a Motion to Dismiss, therein alleging that said complaint
failed to state a cause of action as no primary right of the petitioners had been violated since they
actually failed to exercise their right of redemption within the one-year redemption period, adding
that petitioners never took any action which may stall the running of the same period, thereby
leaving them no further right or interest in the property in question.
In an order dated 13 January 1995, the trial court granted respondents’ motion to dismiss and
accordingly dismissed petitioners’ complaint, saying that the latter’s cause of action, if any, is
already barred by laches on account of their failure or neglect for an unreasonable length of time
to do that which, by exercising due diligence, could or should have been done earlier. Further, the
trial court ruled that petitioners’ inaction constituted a waiver on their part.
Therefrom, petitioners went on appeal to the Court of Appeals in CA-G.R. CV No. 48896.
As stated at the outset hereof, the appellate court, in its decision of 12 December 1997, dismissed
petitioners’ appeal and affirmed in toto the trial court’s order of dismissal. With their motion for
reconsideration having been denied by the same court in its resolution of 10 March 1998, 3
petitioners are now with us via the present recourse, faulting the Court of Appeals, as follows:
1. The Court of Appeals gravely erred in avoiding to resolve in the assailed Decision and in the
questioned Resolution the basic issue as to whether or not the extra-judicial foreclosure and public
auction sale of the subject parcel of land are valid and lawful when the amount stated in letter-
request or the petition for extra-judicial foreclosure and in the notice of sheriff sale doubled the
amount stipulated in the Amendment of Real Estate Mortgage;
2. The Court of Appeals has similarly committed serious error in considering that the complaint of
the petitioner is a complaint for redemption when in the caption; in the body; and in the prayer of
the complaint, petitioner spouses have sought the nullity as void ab initio the extra-judicial
foreclosure and auction sale of the subject property;
3. The respondent Appellate Court likewise incredulously erred to have resolved the admissibility
and probative value of the statement of account attached as Annex "E" of the complaint when it
was not yet presented in evidence; because the stage of the case at the time the assailed dismissal
order was issued, was yet in the period of pleadings;
4. The Court of Appeals has grievously erred in affirming the assailed dismissal order by declaring
petitioner spouses to have been guilty of laches in failing to redeem during the legal period of
redemption the foreclosed parcel of land; when the cause of the failure to redeem was the illegal
increase by 100% of the original obligation, stated in the Amendment of Real Estate Mortgage and
bloating of the redemption price from Two Million Pesos (P2,000,000.00) to Three Million Four
Hundred Ninety One Thousand Two Hundred Twenty Five & 98/100 Pesos (P3,491,225.98).
We DENY.
The records indubitably show that at the time of the foreclosure sale on 11 August 1993, petitioners
were already in default in their loan obligation to respondent Carmencita San Diego.
Much earlier, or on 27 April 1993, a final notice of demand for payment had been sent to them,
despite which they still failed to pay. Hence, respondent Carmencita San Diego’s resort to
extrajudicial foreclosure, provided no less in the parties’ "Amendment of Real Estate Mortgage".
The rule has been, and still is, that in real estate mortgage, when the principal obligation is not paid
when due, the mortgagee has the right to foreclose on the mortgage and to have the mortgaged
property seized and sold with the view of applying the proceeds thereof to the payment of the
obligation.4
Here, the validity of the extrajudicial foreclosure on 11 August 1993 was virtually confirmed by the
trial court when it dismissed petitioners’ complaint, and rightly so, what with the fact that
petitioners failed to exercise their right of redemption within the 1-year period therefor counted
from the registration of the sheriff’s certificate of sale.
It is petitioners’ main submission, however, that the very reason why they did not avail of their
redemption right is because Mrs. San Diego bloated their original loan of ₱1,000,000.00 to
₱1,950,000.00, an issue supposedly not considered and/or addressed by the appellate court in the
decision under review. In this regard, petitioners argue that the Court of Appeals, in sustaining the
extrajudicial foreclosure proceedings, thereby go against the established jurisprudence that an
action for foreclosure must be limited to the amount mentioned in the mortgage document,
₱1,000,000.00 in this case.
We do not take issue with petitioners’ submission that a mortgage may be foreclosed only for the
amount appearing in the mortgage document, more so where, as here, the mortgage contract
entered into by the parties is evidently silent on the payment of interest.
However, contrary to petitioners’ claim, the appellate court did pass upon the legal issue raised by
them, albeit ruling that petitioners had been barred by laches from raising the same. We quote from
the challenged decision:
[Petitioners] next argued that the mortgaged property was illegally foreclosed since it is a well
settled rule that an action to foreclose a mortgage must be limited to the amount mentioned in the
mortgage.
The argument is without merit.
It appears from the evidence on record that despite due notice and publication of the same in a
newspaper of general circulation (Exhs. "5", "5-A" and "5-B", pp. 53-55, Record), [petitioners] did
not bother to attend the foreclosure sale nor raise any question regarding the propriety of the sale.
It was only on November 9, 1994, or more than one year from the registration of the Sheriff’s
Certificate of Sale, that [petitioners] filed the instant complaint. Clearly, [petitioners] had slept on
their rights and are therefore guilty of laches, which is defined as the failure or neglect for an
unreasonable or explained length of time to do that which, by exercising due diligence, could or
should have been done earlier, failure of which gives rise to the presumption that the person
possessed of the right or privilege has abandoned or has declined to assert the same. (Words in
bracket added.)
For sure, in the very petition they filed in this case, petitioners have not offered any valid excuse
why, despite notice to them of the petition for extrajudicial foreclosure filed by the respondents,
they failed to attend the proceedings and there voiced out what they are now claiming. Truly, laches
has worked against them.
The law on redemption of mortgaged property is clear. Republic Act No. 3135 (An Act to Regulate
the Sale of Property Under Special Powers Inserted In Or Annexed to Real Estate Mortgages), as
amended by Republic Act No. 4118, provides in Section 6 thereof, thus:
"Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of
said debtor, or any person having a lien on the property subsequent to the mortgage or deed of
trust under which the property is sold, may redeem the same at any time within the term of one
year from and after the date of the sale; xxx" (Emphasis supplied)
In a long line of cases5 , this Court has consistently ruled that the one-year redemption period should
be counted not from the date of foreclosure sale, but from the time the certificate of sale is
registered with the Register of Deeds. Here, it is not disputed that the sheriff’s certificate of sale
was registered on 29 October 1993.
And under Article 13 of the New Civil Code6 , a year is understood to have three hundred sixty-five
(365) days each. Thus, excluding the first day and counting from 30 October 1993 (under paragraph
3 of Article 13 of the New Civil Code), and bearing in mind that 1994 was a leap year, petitioners
had only until 29 October 1994, the 365th day after registration of the sheriff’s certificate of sale on
29 October 1993, within which to redeem the foreclosed property in accordance with law. And since No pronouncement as to costs.
29 October 1994 fell on a Saturday, petitioners had until the following working day, 31 October
1994, within which to exercise their right of redemption. SO ORDERED.

From the foregoing, it is clear as day that even the complaint filed by the petitioners with the trial
court on 09 November 1994 was instituted beyond the 1-year redemption period. In fact,
petitioners no less acknowledged that their complaint for annulment of extrajudicial foreclosure
and auction sale was filed about eleven (11) days after the redemption period had already expired
on 29 October 19947 . They merely harp on the alleged increase in the redemption price of the
mortgaged property as the reason for their failure to redeem the same. However, and as already
pointed out herein, they chose not, despite notice, to appear during the foreclosure proceedings.

Of course, petitioners presently insist that they requested for and were granted an extension of
time within which to redeem their property, relying on a handwritten note allegedly written by Mrs.
San Diego’s husband on petitioners’ statement of account, indicating therein the date 11 November
1994 as the last day to pay their outstanding account in full. Even assuming, in gratia argumenti,
that they were indeed granted such an extension, the hard reality, however, is that at no time at all
did petitioners make a valid offer to redeem coupled with a tender of the redemption price.

Even on this score, petitioners’ case must fall.

For, in Lazo v. Republic Surety & Insurance Co., Inc.8 , this Court has made it clear that it is only where,
by voluntary agreement of the parties, consisting of extensions of the redemption period, followed
by commitment by the debtor to pay the redemption price at a fixed date, will the concept of legal
redemption be converted into one of conventional redemption.

Here, there is no showing whatsoever that petitioners agreed to pay the redemption price on or
before 11 November 1994, as allegedly set by Mrs. San Diego’s husband. On the contrary, their act
of filing their complaint on 09 November 1994 to declare the nullity of the foreclosure sale is
indicative of their refusal to pay the redemption price on the alleged deadline set by the husband.
At the very least, if they so believed that their loan obligation was only for ₱1,000,000.00,
petitioners should have made an offer to redeem within one (1) year from the registration of the
sheriff’s certificate of sale, together with a tender of the same amount. This, they never did.

It must be remembered that the period of redemption is not a prescriptive period but a condition
precedent provided by law to restrict the right of the person exercising redemption.
Correspondingly, if a person exercising the right of redemption has offered to redeem the property
within the period fixed, he is considered to have complied with the condition precedent prescribed
by law and may thereafter bring an action to enforce redemption. If, on the other hand, the period
is allowed to lapse before the right of redemption is exercised, then the action to enforce
redemption will not prosper, even if the action is brought within the ordinary prescriptive period.
Moreover, the period within which to redeem the property sold at a sheriff’s sale is not suspended
by the institution of an action to annul the foreclosure sale. 9 It is clear, then, that petitioners have
lost any right or interest over the subject property primarily because of their failure to redeem the
same in the manner and within the period prescribed by law. Their belated attempts to question
the legality and validity of the foreclosure proceedings and public auction must accordingly fail.

WHEREFORE, the instant petition is DENIED and the challenged decision and resolution of the
Court of Appeals AFFIRMED.
SALES – EXTINGUISHMENT – LEGAL REDEMPTION - INSTANCES
G.R. No. 137792 August 12, 2003
SPOUSES RICARDO ROSALES and ERLINDA SIBUG, Petitioners,
vs.
SPOUSES ALFONSO and LOURDES SUBA, THE CITY SHERIFF OF MANILA, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Challenged in the instant petition for review on certiorari are the Resolutions1 dated November 25,
1998 and February 26, 1999 of the Court of Appeals dismissing the petition for certiorari in CA G.R.
SP No. 49634, "Spouses Ricardo Rosales and Erlinda Sibug vs. Alfonso and Lourdes Suba."
On June 13, 1997, the Regional Trial Court, Branch 13, Manila rendered a Decision2 in Civil Cases
Nos. 94-72303 and 94-72379, the dispositive portion of which reads:
"WHEREFORE, judgment is rendered:
(1) Declaring the Deed of Sale of Exhibit D, G and I, affecting the property in question, as
an equitable mortgage;
(2) Declaring the parties Erlinda Sibug and Ricardo Rosales, within 90 days from finality
of this Decision, to deposit with the Clerk of Court, for payment to the parties Felicisimo
Macaspac and Elena Jiao, the sum of ₱65,000.00, with interest at nine (9) percent per
annum from September 30, 1982 until payment is made, plus the sum of ₱219.76 as
reimbursement for real estate taxes;
(3) Directing the parties Felicisimo Macaspac and Elena Jiao, upon the deposit on their
behalf of the amounts specified in the foregoing paragraph, to execute a deed of
reconveyance of the property in question to Erlinda Sibug, married to Ricardo Rosales,
and the Register of Deeds of Manila shall cancel Transfer Certificate of Title No. 150540
in the name of the Macaspacs (Exh. E) and issue new title in the name of Sibug;
(4) For non-compliance by Sibug and Rosales of the directive in paragraph (2) of this
dispositive portion, let the property be sold in accordance with the Rules of Court for the
release of the mortgage debt and the issuance of title to the purchaser.
"SO ORDERED."3
The decision became final and executory. Spouses Ricardo and Erlinda Rosales, judgment debtors
and herein petitioners, failed to comply with paragraph 2 quoted above, i.e., to deposit with the
Clerk of Court, within 90 days from finality of the Decision, ₱65,000.00, etc., to be paid to Felicisimo
Macaspac and Elena Jiao. This prompted Macaspac, as judgment creditor, to file with the trial court
a motion for execution.
Petitioners opposed the motion for being premature, asserting that the decision has not yet
attained finality. On March 5, 1998, they filed a manifestation and motion informing the court of
their difficulty in paying Macaspac as there is no correct computation of the judgment debt.
On February 23, 1998, Macaspac filed a supplemental motion for execution stating that the amount
due him is ₱243,864.08.
Petitioners failed to pay the amount. On March 25, 1998, the trial court issued a writ of execution
ordering the sale of the property subject of litigation for the satisfaction of the judgment.
On May 15, 1998, an auction sale of the property was held wherein petitioners participated.
However, the property was sold for ₱285,000.00 to spouses Alfonso and Lourdes Suba, herein
respondents, being the highest bidders. On July 15, 1998, the trial court issued an order confirming
the sale of the property and directing the sheriff to issue a final deed of sale in their favor.
On July 28, 1998, Macaspac filed a motion praying for the release to him of the amount of
₱176,176.06 from the proceeds of the auction sale, prompting petitioners to file a motion praying
that an independent certified public accountant be appointed to settle the exact amount due to
movant Macaspac.
Meanwhile, on August 3, 1998, the Register of Deeds of Manila issued a new Transfer Certificate of
Title over the subject property in the names of respondents.
On August 18, 1998, respondents filed with the trial court a motion for a writ of possession,
contending that the confirmation of the sale "effectively cut off petitioners’ equity of redemption."
Petitioners on the other hand, filed a motion for reconsideration of the order dated July 15, 1998
confirming the sale of the property to respondents.
On October 19, 1998, the trial court, acting upon both motions, issued an order (1) granting
respondents’ prayer for a writ of possession and (2) denying petitioners’ motion for reconsideration.
The trial court ruled that petitioners have no right to redeem the property since the case is for
judicial foreclosure of mortgage under Rule 68 of the 1997 Rules of Civil Procedure, as amended.
Hence, respondents, as purchasers of the property, are entitled to its possession as a matter of
right.
Forthwith, petitioners filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R.
SP No. 49634, alleging that the trial court committed grave abuse of discretion amounting to lack
or excess of jurisdiction in issuing a writ of possession to respondents and in denying their motion
for reconsideration of the order dated July 15, 1998 confirming the sale of the property to said
respondents.
On November 25, 1998, the CA dismissed outright the petition for lack of merit, holding that there
is no right of redemption in case of judicial foreclosure of mortgage. Petitioners’ motion for
reconsideration was also denied.
Hence this petition.
In the main, petitioners fault the Appellate Court in applying the rules on judicial foreclosure of
mortgage. They contend that their loan with Macaspac is unsecured, hence, its payment entails an
execution of judgment for money under Section 9 in relation to Section 25, Rule 39 of the 1997
Rules of Civil Procedure, as amended,4 allowing the judgment debtor one (1) year from the date of
registration of the certificate of sale within which to redeem the foreclosed property.
Respondents, upon the other hand, insist that petitioners are actually questioning the decision of
the trial court dated June 13, 1997 which has long become final and executory; and that the latter
have no right to redeem a mortgaged property which has been judicially foreclosed.
Petitioners’ contention lacks merit. The decision of the trial court, which is final and executory,
declared the transaction between petitioners and Macaspac an equitable mortgage. In
Matanguihan vs. Court of Appeals,5 this Court defined an equitable mortgage as "one which
although lacking in some formality, or form or words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge real property as security for a debt, and
contains nothing impossible or contrary to law." An equitable mortgage is not different from a real
estate mortgage, and the lien created thereby ought not to be defeated by requiring compliance
with the formalities necessary to the validity of a voluntary real estate mortgage.6 Since the parties’
transaction is an equitable mortgage and that the trial court ordered its foreclosure, execution of
judgment is governed by Sections 2 and 3, Rule 68 of the 1997 Rules of Civil Procedure, as amended,
quoted as follows:
SEC. 2. Judgment on foreclosure for payment or sale. – If upon the trial in such action the court shall
find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff
upon the mortgage debt or obligation, including interest and other charges as approved by the
court, and costs, and shall render judgment for the sum so found due and order that the same be
paid to the court or to the judgment obligee within a period of not less that ninety (90) days nor
more than one hundred twenty (120) days from the entry of judgment, and that in default of such
payment the property shall be sold at public auction to satisfy the judgment.
SEC. 3. Sale of mortgaged property, effect. – When the defendant, after being directed to do so as
provided in the next preceding section, fails to pay the amount of the judgment within the period
specified therein, the court, upon motion, shall order the property to be sold in the manner and
under the provisions of Rule 39 and other regulations governing sales of real estate under execution.
Such sale shall not effect the rights of persons holding prior encumbrances upon the property or a
part thereof, and when confirmed by an order of the court, also upon motion, it shall operate to
divest the rights in the property of all the parties to the action and to vest their rights in the
purchaser, subject to such rights of redemption as may be allowed by law.
x x x."
In Huerta Alba Resort, Inc. vs. Court of Appeals,7 we held that the right of redemption is not
recognized in a judicial foreclosure, thus:
"The right of redemption in relation to a mortgage–understood in the sense of a prerogative to
re-acquire mortgaged property after registration of the foreclosure sale–exists only in the case of
the extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosure
except only where the mortgagee is the Philippine National bank or a bank or a banking
institution.
"Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of
redemption within one (1) year from the registration of the sheriff’s certificate of foreclosure sale.
"Where the foreclosure is judicially effected, however, no equivalent right of redemption exists.
The law declares that a judicial foreclosure sale, ‘when confirmed by an order of the court, x x x
shall operate to divest the rights of all the parties to the action and to vest their rights in the
purchaser, subject to such rights of redemption as may be allowed by law.’ Such rights
exceptionally ‘allowed by law’ (i.e., even after the confirmation by an order of the court) are those
granted by the charter of the Philippine National Bank (Act Nos. 2747 and 2938), and the General
Banking Act (R.A.337). These laws confer on the mortgagor, his successors in interest or any
judgment creditor of the mortgagor, the right to redeem the property sold on foreclosure–after
confirmation by the court of the foreclosure sale–which right may be exercised within a period of
one (1) year, counted from the date of registration of the certificate of sale in the Registry of
Property.
"But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if
the mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale,
‘when confirmed by an order of the court, x x x shall operate to divest the rights of all the parties
to the action and to vest their rights in the purchaser.’ There then exists only what is known as
the equity of redemption. This is simply the right of the defendant mortgagor to extinguish the
mortgage and retain ownership of the property by paying the secured debt within the 90-day
period after the judgment becomes final, in accordance with Rule 68, or even after the foreclosure
sale but prior to its confirmation.
xxx
"This is the mortgagor’s equity (not right) of redemption which, as above stated, may be exercised
by him even beyond the 90-day period ‘from the date of service of the order,’ and even after the
foreclosure sale itself, provided it be before the order of confirmation of the sale. After such order
of confirmation, no redemption can be effected any longer." (Italics supplied)
Clearly, as a general rule, there is no right of redemption in a judicial foreclosure of mortgage. The
only exemption is when the mortgagee is the Philippine National Bank or a bank or a banking
institution. Since the mortgagee in this case is not one of those mentioned, no right of redemption
exists in favor of petitioners. They merely have an equity of redemption, which, to reiterate, is
simply their right, as mortgagor, to extinguish the mortgage and retain ownership of the property
by paying the secured debt prior to the confirmation of the foreclosure sale. However, instead of
exercising this equity of redemption, petitioners chose to delay the proceedings by filing several
manifestations with the trial court. Thus, they only have themselves to blame for the consequent
loss of their property.
WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals dated November 25,
1998 and February 26, 1999 in CA G.R. SP No. 49634 are AFFIRMED.
SO ORDERED.
SALES – EXTINGUISHMENT – LEGAL REDEMPTION - INSTANCES
G.R. No. 178449 October 17, 2008
METROPOLITAN BANK AND TRUST COMPANY, petitioner,
vs.
SPOUSES ELISA TAN AND ANTONIO TAN and SPOUSES LILIAN TAN AND MARCIAL SEE,
respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure
which seeks to set aside the Decision1 of the Court of Appeals dated 31 January 2007 in CA-G.R. CV
No. 86214 affirming in toto the Decision2 of Branch 32 of the Regional Trial Court (RTC) of Manila in
Civil Case No. 97-85012 and its Resolution3 dated 15 June 2007 denying petitioner’s motion for
reconsideration.
The factual antecedents are as follows:
In June 1974, Ylang-Ylang Merchandising Company, a partnership between Angelita Rodriguez and
respondent Antonio Tan, obtained a loan in the amount of ₱250,000.00 from petitioner
Metropolitan Bank and Trust Company (Metrobank). To secure payment of the same, respondents
spouses Marcial See and Lilian Tan4 constituted a real estate mortgage in favor of petitioner over
their property consisting of 469.40 square meters, located in the District of Paco, Manila, covered
by Transfer Certificate of Title (TCT) No. 105233 of the Registry of Deeds of Manila. The mortgage,
dated 14 June 1974, was annotated at the back of the title.5
Subsequently, after the partnership had changed its name to Ajax Marketing Company, albeit
without changing its composition, it obtained another loan in July 1976 in the amount of
₱150,000.00 from Metrobank. Again, to secure the loan, spouses Marcial See and Lilian Tan
executed in favor of Metrobank a second real estate mortgage dated 26 August 1976 over the same
property. As in the first instance, the mortgage was annotated at the back of TCT No. 105233.6
On 19 February 1979, the partnership (Ajax Marketing Company) was converted into a corporation
denominated as Ajax Marketing and Development Corporation (Ajax Marketing), with the original
partners (Angelita Rodriguez and Antonio Tan) as incorporators and three additional incorporators,
namely, respondent Elisa Tan, the wife of respondent Antonio Tan, and Jose San Diego and Tessie
San Diego. Ajax Marketing obtained from Metrobank a loan in the amount ₱600,000.00, the
payment of which was secured by another real estate mortgage executed by the spouses Marcial
See and Lilian Tan over the same property in favor of Metrobank. The third real estate mortgage
was annotated at the back of TCT No. 105233.
On 2 December 1980, the three loans with an aggregate amount of ₱1,000,000.00 were re-
structured and consolidated into one loan and Ajax Marketing, represented by Antonio Tan as Board
Chairman/President and in his personal capacity as solidary co-obligor, and Elisa Tan as Vice-
President/Treasurer and in her personal capacity as solidary co-obligor, executed Promissory Note
(PN) No. BDS-3605. Said loan was payable in eight (8) equal quarterly installments of ₱125,000.00
starting 2 March 1981 until fully paid.7
On 24 April 1984, Metrobank filed a case for sum of money before the RTC of Manila against Ajax
Marketing, Elisa Tan and Antonio Tan for another loan earlier obtained in the amount of
₱970,000.00 that the latter obtained from the former for which they executed Promissory Note
(PN) No. BDS-3583. The case was docketed as Civil Case No. 84-24065.8 Subsequently, the lower
court decided this case in favor of Metrobank which decision was affirmed by the Court of Appeals.
For failure of Ajax Marketing to pay its obligation contained in PN No. BDS-3605, Metrobank
foreclosed the real estate mortgage. On 19 June 1984, the mortgaged property was sold at public
auction for ₱1,775,040.00 to Metrobank, it having the highest and winning bid.
On 11 December 1984, Civil Case No. 85-33933 for Annulment and Cancellation of Extra-judicial
Foreclosure Sale with Preliminary Injunction, Restraining Order and Damages was filed by Ajax
Marketing and spouses Marcial See and Lilian Tan, represented by their Attorney-in-Fact, Elisa Tan,
and spouses Antonio Tan and Elisa Tan (spouses Tan) against Metrobank and the Registry of Deeds
of Manila. The complaint asked that the extrajudicial foreclosure, as well as the auction sale, be
declared null and void on the ground that the real estate mortgages constituted on the property
covered by TCT No. 105233 have been extinguished or novated when PN No. BDS-3605 was
executed. The trial court upheld the validity of the extra-judicial foreclosure. On appeal to the Court
of Appeals, the appellate court affirmed the decision of the trial court. The decision was appealed
to the Supreme Court.
In a letter dated 2 February 1995, spouses Antonio Tan and Elisa Tan wrote Metrobank a letter 9
containing, inter alia, the following:
To end the controversy once and for all, the undersigned spouses hereby proposes (sic) to fully
settle the obligations of the borrowers in exchange of your release of the Real Estate Mortgage you
are presently holding, to wit:
1. We propose to pay the total amount of ₱2MM to be paid as follows:
a) Downpayment of ₱600,000.00 two (2) weeks upon approval of our proposal;
b) Balance of ₱1.4MM shall no longer be subject to interest and to be liquidated in 24 months or
₱58,333.33 to be covered by postdated checks.
2. Attorney’s fees shall be separately paid by us.
On 14 September 1995, this Court rendered its Decision10 in Civil Case No. 85-33933 for Annulment
and Cancellation of Extra-judicial Foreclosure Sale with Preliminary Injunction, Restraining Order and
Damages. We ruled:
[P]etitioners argue that a novation occurred when their three (3) loans which are all secured by the
same real estate property covered by TCT No. 105233 were consolidated into a single loan of ₱1
million under Promissory Note No. BDS-3605, thereby extinguishing their monetary obligations and
releasing the mortgaged property from liability.
xxxx
The attendant facts herein do not make a case of novation. There is nothing in the records to show
the unequivocal intent of the parties to novate the three loan agreements through the execution of
PN No. BDS-3065. The provisions of PN No. BDS-3605 yield no indication of the extinguishment of,
or an incompatibility with, the three loan agreements secured by the real estate mortgages over
TCT No. 105233. x x x
xxxx
x x x [P]etitioners posit that the extra-judicial foreclosure is invalid as it included two unsecured
loans: one, the consolidated loan of ₱1.0 million under PN BDS No. 3605, and two, the ₱970,000.00
loan under PN BDS No. 3583 subsequently extended by Metrobank.
An action to foreclose a mortgage is usually limited to the amount mentioned in the mortgage, but
where on the four corners of the mortgage contracts, as in this case, the intent of the contracting
parties is manifest that the mortgaged property shall also answer for future loans or advancements
then the same is not improper as it is valid and binding between the parties. For merely
consolidating and expediently making current the three previous loans, the loan of ₱1.0 million
under PN BDS No. 3605, secured by the real estate property, was correctly included in the
foreclosure’s bid price. The inclusion of the unsecured loan of ₱970,000.00 under PN BDS No. 3583,
however, was found to be improper by public respondent which ruling we shall not disturb for
Metrobank’s failure to appeal therefrom. Nonetheless, the inclusion of PN BDS No. 3583 in the bid
price did not invalidate the foreclosure proceedings. As correctly pointed out by the Court of
Appeals, the proceeds of the auction sale should be applied to the obligation pertaining to PN BDS
No. 3605 only, plus interests, expenses and other charges accruing thereto. It is Metrobank’s duty
as mortgagee to return the surplus in the selling price to the mortgagors.
On 12 September 1997, spouses Elisa Tan and Antonio Tan and spouses Lilian Tan and Marcial See
filed a civil case for Specific Performance, Injunction and Damages before the RTC of Manila, Branch
30, against Metrobank and Ajax Marketing (origin of the instant petition). They prayed, among other
things, that Metrobank be ordered to allow them (spouses Tan) to exercise their right of redemption
over the subject foreclosed property and to accept the amount of ₱1,609,334.61 as the redemption
price, and to order Ajax Marketing to reimburse them the amount which they will pay as redemption
price for the foreclosed property.11
On 4 November 1997, an amended compliant was filed.12 They included as defendants John Doe
and Peter Doe. They made the following allegations:
Spouses See and spouses Tan alleged that the property covered by TCT No. 105233, though
registered in the names of spouses Marcial See and Lilian Tan See is, in reality, co-owned by
respondents and their other siblings. They further allege that after the foreclosure sale, they offered
to redeem the property within the one-year redemption period and they discovered that
Metrobank included in the bid price an amount covered by PN No. BDS-3583 not secured by the
mortgage over TCT No. 105233. They claim that while the tender and offer of the redemption was
seasonably made, same cannot be made because Metrobank was ambivalent with respect to the
redemption price. Redemption, they claim, was rendered doubly difficult when Metrobank filed
Civil Case No. 84-24065 with the RTC of Manila to collect on PN No. BDS-3583. On their part, they
filed Civil Case No. 85-33933 before the RTC of Manila for annulment and cancellation of the extra-
judicial foreclosure of the mortgage over TCT No. 105233 rendering more difficult the resumption
of negotiation for redemption of the foreclosed property. On 14 September 1995, the Supreme
Court, in G.R. No. 118585, declared the extra-judicial foreclosure valid but found the inclusion of PN
No. BDS-3583 in the bid price to be improper but same did not invalidate the foreclosure
proceedings. After said decision, they resumed to negotiate for the redemption of the foreclosed
property and tendered and offered ₱1,609,334.61 which Metrobank rejected and declined. They
further alleged that Metrobank encouraged their other siblings to repurchase the foreclosed
property at a price over and above the lawful redemption price. In fact, Metrobank sold the property
to John and Peter Doe for ₱11,500,000.00 in complete disregard of their right of redemption. They
claim that Metrobank cannot sell the property because ownership thereof has not been vested
absolutely in its favor until they have exercised their right of redemption. The sale of the property
to their other siblings was fraudulent and therefore void. Because of the sale, they and their other
siblings were divested of their share in the property and are additionally required by the purchasing
siblings to reimburse a portion of the repurchase price (₱11,500,000.00), thereby fomenting trouble
within the family. They asked, among other things, that the sale of the property between Metrobank
and defendants John and Peter Doe be declared null and void ab initio and that Metrobank be
ordered to allow them to exercise their right of redemption by accepting the amount of
₱1,609,334.61 as the redemption price.
On 6 November 1997, Spouses Marcial See and Lilian Tan executed a document entitled "Deed of
Redemption and Reconveyance" wherein it was stated that the latter (redemptioners) paid
Metrobank on 12 September 1997 the amount of ₱11,500,000.00 representing the redemption
price for the reconveyance/redemption of the foreclosed property (TCT No. 105233).13
On 2 February 1998, Metrobank filed a Motion to Dismiss on the ground that the claims and
demands in the amended complaint have been extinguished. Metrobank disclosed that the subject
property was not sold to John and Peter Doe, but to spouses Marcial See and Lilian Tan. As
registered owners of the property, the spouses were allowed to exercise their right of redemption
on 6 November 1997 as evidenced by the Deed of Redemption and Reconveyance.14 On 7 December
1998, the motion was denied.15
On 3 February 1999, Metrobank filed its Answer with Counterclaim. It declared that John and Peter
Doe are none other than spouses Marcial See and Lilian Tan. It alleged that neither Ajax Marketing
nor the plaintiffs (respondents herein) were able to redeem the subject property within the one-
year period which commenced from the date (20 June 1984) the Certificate of Sale issued by the
auctioning sheriff was registered with the concerned Registry of Deeds. Respondents did not even
approach Metrobank to negotiate the redemption of said property. Instead, Ajax Marketing and
respondents instituted on 11 December 1984 an action to annul said extra-judicial foreclosure
which foreclosure was upheld by the Supreme Court in G.R. No. 118585 on 14 September 1995. It
was only in 1997 that spouses Marcial See and Lilian Tan communicated with Metrobank their
intention to buy back the subject property. Metrobank agreed to sell the property for the
"redemption" price of ₱11,500,000.00. It further denied the allegations with respect to the actual
ownership of the subject property. It added that the sale of the foreclosed property to spouses
Marcial See and Lilian Tan was not fraudulent and that property was redeemed at a mutually agreed
price. It explained that spouses Marcial See and Lilian Tan are the proper "redemptioners" of the
subject property being the registered owners thereof. As such, Metrobank had the right to allow
said spouses to redeem the property and to reconvey the same under mutually agreed terms. It
stressed that assuming arguendo that spouses Marcial See and Lilian Tan never redeemed the
subject property, spouses Elisa Tan and Antonio Tan offered the amount of ₱1,609,334.61 when
they communicated with Metrobank in 1997 which amount they believe was the redemption price
"in esse," Metrobank had rightfully rejected the same for Act No. 3135, as amended, requires the
payment of the redemption price equivalent to the winning bid price (₱1,775,040.00) plus interest
up to the time of redemption, together with the amount of any assessments or taxes paid by the
purchaser after the auction sale, and interest on such last-named amount at the same rate.16
In its Reply to the Answer, respondents claim the "Deed of Redemption and Reconveyance" does
not bear the true and genuine signatures of spouses Marcial See and Lilian Tan. It said that assuming
arguendo that the Deed of Redemption and Reconveyance is true, the difference between
₱11,500,000.00 and ₱1,775,040.00 should be refunded to them.17
On 10 January 2000, the pre-trial of the case was terminated.18 Thereafter, the case was heard.
Respondents-spouses Elisa and Antonio Tan testified in court on their behalf, while for the defense,
only Rito A. Negado, employee of Metrobank, testified on respondents’ loan with Metrobank, the
execution of respondents Marcial See and Lilian Tan of the accommodation mortgage in favor of
Metrobank, and respondents’ failure to pay their obligation which led Metrobank to initiate extra-
judicial foreclosure proceedings.
While the case was being heard, the presiding judge hearing the case voluntarily inhibited himself
from the case. Consequently, the case was re-raffled to Branch 32 of RTC, Manila.19
On 5 May 2005, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE, premises considered, JUDGMENT is hereby rendered DECLARING the "DEED OF
REDEMPTION AND RECONVEYANCE" between Defendant Bank and the Sps. Marcial See and Lilian
Tan NULL and VOID ab initio. It is hereby further ADJUDGED that:
1. Plaintiffs Spouses Elisa and Antonio Tan are reinstated as Redemptioners with the right to redeem
the property foreclosed and mortgaged as they are hereby directed to pay Defendant Bank the sum
of Php 1,609,334.61 as redemption price in accordance with the Decision in G.R. No. 118585 and in
turn, Defendant Metrobank is ordered to reconvey TCT No. 105233 to plaintiffs in exchange for the
said redemption price.
2. Defendant Bank is ordered to refund and pay to plaintiffs Sps. Marcial See and Lilian Tan the sum
of Php11,500,000.00 with interests at the rate of 12% per annum beginning September 1995 until
the whole obligation is fully paid;
3. Defendant Bank is finally ordered to pay, in addition to the costs of suit, the sum of Php50,000.00
as and for attorney’s fees over and above the contingent arrangement for legal services rendered
to plaintiffs Elisa and Antonio Tan by their lawyers.20
The RTC ruled that the nullification of the Deed of Redemption and Reconveyance dated 6
November 1997 is warranted. It declared that spouses Elisa and Antonio Tan, as mortgagors of the
foreclosed property, are entitled to exercise their right as redemptioners. As such, they should pay
Metrobank as redemption price the amount of Php1,609,334.61 or Php1,775,040.00, as the case
may be, the latter price being Metrobank’s winning bid. The fact that spouses Marcial See and Lilian
Tan are the registered owners of the property foreclosed is not sufficient to entitle them to redeem
over and above the willingness of spouses Elisa and Antonio Tan to exercise their right of
redemption. Spouses Elisa and Antonio Tan have the preferential right as redemptioners of what
they have mortgaged.
The trial court ruled that spouses Elisa and Antonio Tan are fully within their right to redeem the
foreclosed property after the finality of the Decision in G.R. No. 118585. Technically, it said, the
tender and offer of redemption of spouses Elisa and Antonio Tan was within the one-year period
reckoned from the registration of the Certificate of Sale in the Registry of Deeds because the
redemption period was "freezed" when respondents were forced to file Civil Case No. 85-33933
(Annulment and Cancellation of Extra-judicial Foreclosure Sale with Preliminary Injunction,
Restraining Order and Damages) on 11 December 1984 after said tender of redemption price was
refused as a result of a misunderstanding as to its amount. Respondents insisted to redeem on the
basis of their PN No. BDS-3605 while Metrobank demanded that the redemption price should
include the unsecured PN No. BDS-3583. The filing of Civil Case No. 85-33933 within the one-year
redemption period preserved spouses Elisa and Antonio Tan’s right of redemption until said case
has been decided with finality. Citing State Investment House, Inc. v. Court of Appeals,21 Belisario v.
Intermediate Appellate Court22 and Hi-Yield Realty, Inc. v. Court of Appeals,23 the Court said that the
filing of the Civil Complaint has the effect of freezing the redemption period and preserves the right
of the mortgagor to redeem the property foreclosed, and that the filing of the court action to
enforce the correct redemption price is equivalent to a formal offer to redeem. The offer to redeem
in this case made sometime in 1985 was "frozen" and remained fresh and unexpired until Civil Case
No. 85-33933 was finally decided by the Supreme Court on 14 September 1995. Thereafter, the
redemption period resumed to run anew.
Metrobank appealed said decision to the Court of Appeals. On 31 January 2007, the appellate court
affirmed in toto the decision of the trial court. It disposed of the case as follows:
WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit and the assailed
decision of the court a quo is hereby AFFIRMED in toto. No costs.24
The Court of Appeals said that the spouses Elisa and Antonio Tan were granted, no less by the
Supreme Court, the right to redeem the contested property. However, despite the finality of the
Supreme Court decision in G.R. No. 118585, Metrobank ignored spouses Elisa and Antonio Tan’s
right to redeem and instead allowed spouses Marcial See and Lilian Tan to redeem the property. It
described such act of Metrobank to be contemptuous. It brushed away Metrobank’s argument that
spouses Elisa and Antonio Tan have no more right to redeem as they failed to make a valid tender
since what they did was a mere proposal failing to actually deliver the redemption price. The
appellate court added that Metrobank has no right to demand from spouses Elisa and Antonio Tan
the actual delivery of the redemption price because it is not legally capacitated to surrender the
possession and title of the subject property to said spouses until such time the redemption of
spouses Marcial See and Lilian Tan is declared null and void. It agreed with the trial court that the
one-year period to redeem the foreclosed property was deemed suspended.
The motion for reconsideration filed by Metrobank was denied.
Hence, this appeal via petition for review on certiorari.
Initially, this Court denied the petition for insufficient or defective verification and for failure to
show that the appellate court committed reversible error as to warrant the exercise by this Court
of its discretionary appellate jurisdiction.25 Metrobank filed a motion for the reconsideration. On 12
November 2007, the Court granted the motion and set aside the resolution denying the petition,
and required respondents to comment thereon within ten days from receipt of notice.26
Respondents filed their Comment27 to which Metrobank filed a Reply.28
The Court gave due course to the petition and required the parties to submit their respective
memoranda.29
Metrobank makes the following assignment of errors:
WHETHER THE COURT OF APPEALS ERRED IN DECLARING THAT METROBANK MUST BE LEGALLY
CAPACITATED TO SURRENDER POSSESSION AND TITLE TO THE SUBJECT PROPERTY IN ORDER FOR IT
TO BE ABLE TO INVOKE THE LEGAL REQUIREMENT OF THE LAW THAT THERE MUST BE AN ACTUAL
TENDER OR DELIVERY OF THE REDEMPTION PRICE FOR AN OFFER TO REDEEM TO BE BINDING.
WHETHER THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT RESPONDENT SPOUSES
ANTONIO AND ELISA TAN’S TENDER AND OFFER OF REDEMPTION WAS WITHIN THE ONE-YEAR
PERIOD STARTING FROM THE REGISTRATION OF THE CERTIFICATE OF SALE CONSIDERING THAT THE
REDEMPTION PERIOD WAS "FREEZED" WHEN RESPONDENTS WERE FORCED TO FILE CIVIL CASE NO.
85-33933 ON DECEMBER 11, 1984 AFTER THEIR TENDER OF THE REDEMPTION PRICE WAS REFUSED
BY METROBANK AND THAT THE REDEMPTION PERIOD REMAINED FRESH AND UNEXPIRED UNTIL
CIVIL CASE NO. 85-33933 WAS FINALLY ADJUDICATED BY THE SUPREME COURT IN SEPTEMBER
1995.
WHETHER THE COURT OF APPEALS ERRED IN DECLARING THAT METROBANK IS LIABLE TO PAY
RESPONDENTS ATTORNEY’S FEES.
WHETHER THE COURT OF APPEALS ERRED IN DECLARING THAT THE TRIAL COURT WAS CORRECT IN
SUBMITTING THE CASE IMMEDIATELY FOR DECISION AS THERE WAS UNREASONABLE DELAY ON
THE PART OF METROBANK IN THE PRESENTATION OF ITS EVIDENCE. 30
There is no dispute that respondents were already in default in the payment of their obligation.
Thus, Metrobank had the right to foreclose any real estate mortgage executed in its favor as security
for the loans it has given to respondents. Foreclosure is valid where the debtor is in default in the
payment of his obligation. In a real estate mortgage when the principal obligation is not paid when
due, the mortgagee has the right to foreclose the mortgage and to have the property seized and
sold with the view of applying the proceeds to the payment of the obligation.31
In the resolution of this case, two primary issues have to be resolved:
1. Did the filing of Civil Case No. 85-33933 (Annulment and Cancellation of Extra-judicial Foreclosure
Sale with Preliminary Injunction, Restraining Order and Damages) by respondents on 11 December
1984 interrupt the running of the one-year redemption period?
2. Did spouses Elisa and Antonio Tan exercise their right of redemption within the one-year period
allowed by law?
From the records, the foreclosure sale was on 19 June 1984 and the Certificate of Sale issued by the
sheriff was registered with the Registry of Deeds of Manila on 20 June 1984. On 11 December 1984,
Civil Case No. 85-33933 for Annulment and Cancellation of Extra-judicial Foreclosure Sale was filed
by respondents. On 2 February 1995, spouses Antonio Tan and Elisa Tan wrote Metrobank a letter
proposing to redeem the subject for ₱2,000,000.00 payable as follows: downpayment of
₱600,000.00 and the balance payable in 24 months (₱58,333.33/month) without interest.
Thereafter, on 14 September 1995, this Court, in G.R. No. 118585, ruled with finality that the
extrajudicial foreclosure and sale were valid.
The lower courts ruled that the filing of Civil Case No. 85-33933 suspended the running of the one-
year redemption period for which spouses Elisa and Antonio Tan can exercise their right of
redemption. The tender and offer of redemption made by spouses Elisa and Antonio Tan was within
the one-year redemption period. On the other hand, Metrobank insists that the filing of said case
did not toll the running of said redemption period and that they failed to exercise said right with the
allowable period of one year.
The filing of Civil Case No. 85-33933 (Annulment and Cancellation of Extra-judicial Foreclosure Sale)
did not toll the running of the one-year redemption period. Settled is the rule that the period within
which to redeem the property sold at a sheriff’s sale is not suspended by the institution of an action
to annul the foreclosure sale.32 Thus, both lower courts erred in ruling that the one-year redemption
period was interrupted.
It is apparent from the complaint filed in Civil Case No. 85-33933 that the issue advanced by
respondents is whether the extrajudicial foreclosure, as well as the auction sale, is void because the
real estate mortgages constituted on the property covered by TCT No. 105233 have been
extinguished or novated when PN No. BDS-3605 was executed. There is nothing in the complaint
that deals with any right of redemption. Respondents wanted to have the extrajudicial foreclosure
proceedings nullified on the ground that their obligation under PN No. BDS-3605 was no longer
secured by any mortgage.
We likewise find the declaration of the Court of Appeals that the spouses Elisa and Antonio Tan
were granted by the Supreme Court the right to redeem the contested property pursuant to G.R.
No. 118585 to be without basis. There is nothing in G.R. No. 118585 that gave respondents the right
to redeem. This Court did not even determine the amount of the redemption price which, in the
first place, was not raised as an issue. What was upheld in said case was the validity of the
extrajudicial foreclosure despite the inclusion therein of an unsecured loan.
Having ruled that Civil Case No. 85-33933 did not toll the running of the one-year redemption
period, did spouses Elisa and Antonio Tan exercise their right o redemption within this period? They
did not.
Section 6 of Republic Act No. 3135,33 as amended by Republic Act No. 4118, provides:
Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of
said debtor, or any person having a lien on the property subsequent to the mortgage or deed of
trust under which the property is sold, may redeem the same at any time within the term of one
year from and after the date of the sale; x x x. (Emphasis supplied.)
We, however, have consistently ruled that the one-year redemption period should be counted not
from the date of foreclosure sale, but from the time the certificate of sale is registered with the
Registry of Deeds.34
In the case before us, the certificate of sale was registered with the Registry of Deeds of Manila on
20 June 1984. Under Article 13 of the Civil Code, a year is understood to be three hundred sixty-five
(365) days. Thus excluding the first day and counting from 20 June 1984, respondents spouses Tan
had only until 20 June 1985 within which to redeem the foreclosed property in accordance with law.
Prior to this date, they did not exercise their right to redeem the foreclosed property.
The only credible evidence respondents presented to show that they allegedly offered to redeem
the subject property was the letter35 of spouses Elisa and Antonio Tan dated 2 February 1995 where
they offered the amount of two million pesos (in installment) as settlement of their obligation and
for the release of the real estate mortgages on TCT No. 105233. Other than this, we find nothing
concrete to prove that they (spouses Tan) tried to redeem within the one-year period and even
after when this Court ruled in G.R. No. 118585 on 14 September 1995. Their claims that they
tendered their offer to redeem on various times are all unsubstantiated and which Metrobank has
denied.
The general rule in redemption is that it is not sufficient that a person offering to redeem manifests
his/her desire to do so. The statement of intention must be accompanied by an actual and
simultaneous tender of payment. This constitutes the exercise of the right to repurchase. Bona fide
redemption necessarily implies a reasonable and valid tender of the entire purchase price,
otherwise the rule on the redemption period fixed by law can easily be circumvented.36 There is no
cogent reason for requiring the vendee to accept payment by installments from the redemptioner,
as it would ultimately result in an indefinite extension of the redemption period.37
In order to effect a redemption, the judgment debtor must pay the purchaser the redemption price
composed of the following: (1) the price which the purchaser paid for the property; (2) interest of
1% per month on the purchase price; (3) the amount of any assessment or taxes which the
purchaser may have paid on the property after the purchase; and (4) interest of 1% per month on
such assessment and taxes.38
Even assuming that such offer was made by the spouses Elisa and Antonio Tan within the one-year
redemption period, we find said offer in the amount of two million pesos to be invalid and
ineffectual. It is clear from the letter that the tender was in installments. Same will not do for there
is no showing that Metrobank agreed via such payment. By paying in installments, the redemption
period will be extended. It could be otherwise if Metrobank agreed; in such case, the concept of
legal redemption will be converted into one of conventional redemption.39 Moreover, though there
was an offer, there was no evidence that there was an actual and simultaneous tender of payment.
Redemption within the period allowed by law is not a matter of intent but a question of payment
or valid tender of the full redemption price within said period.40
The trial court, citing State Investment House, Inc. v. Court of Appeals,41 Belisario v. Intermediate
Appellate Court42 and Hi-Yield Realty, Inc. v. Court of Appeals,43 declared that the filing of the Civil
Complaint has the effect of freezing the redemption period and preserves the right of the mortgagor
to redeem the property foreclosed, and that the filing of the court action to enforce the correct
redemption price is equivalent to a formal offer to redeem. Such rule has no application in the
instant case. Such rule applies only when the complaint to enforce a repurchase is filed within the
period of redemption in which case, the same will be equivalent to an offer to redeem and have
the effect of preserving the right of redemption. In the case before us, the complaint for
redemption (Specific Performance) was filed beyond the one-year redemption period or on 12
September 1997, more than twelve years from 20 June 1985 which is the last day of said period.
We do not consider the complaint filed by respondents on 11 December 1984, docketed as Civil
Case No. 85-33933, for Annulment and Cancellation of Extra-judicial Foreclosure Sale to be an action
for judicial redemption because its purpose was not for redemption but for nullification of
extrajudicial foreclosure sale.
In the case at bar, respondents spouses Elisa and Antonio Tan failed to show good faith on their
part. They have failed to validly tender any redemption price nor consigned any amount, in any of
the cases they have filed, which they believed was the correct amount, if only to show their
willingness and ability to pay. It is not difficult to understand why the redemption price should either
be fully offered in legal tender or else validly consigned in court. Only by such means can the auction
winner be assured that the offer to redeem is being done in good faith.44
In the case before us, though the respondents spouses Marcial See and Lilian Tan signed a document
entitled "Deed of Redemption and Reconveyance" wherein they were called the "Redemptioners"
and that they paid the amount of ₱11,500,000.00 for the subject property, this Court finds that
what was entered into by them and Metrobank was not a redemption, but a sale. Being already the
absolute owner of the subject property because spouses Elisa and Antonio Tan failed to properly
exercise their right of redemption, Metrobank can sell, to a price of its liking, the foreclosed property
to interested buyers which in this case are respondents spouses Marcial See and Lilian Tan. The
price itself (₱11,500,000.00) is indicative of a sale. If it were a redemption, the price would only be
the winning bid price (₱1,775,040.00) plus interest up to the time of redemption, together with the
amount of any assessments or taxes paid by the purchaser after the auction sale, and interest on
such last-named amount at the same rate.
The appellate court’s ruling that Metrobank had no right to demand from spouses Elisa and Antonio
Tan the actual delivery of the redemption price because it is not legally capacitated to surrender
the possession and title of the subject property to said spouses until such time the redemption of
spouses Marcial See and Lillian Tan is declared null and void, is flawed.
Metrobank, as the highest bidder in the public auction sale, can demand from the redemptioner, in
this case spouses Elisa and Antonio Tan, the purchase price and taxes it had paid for the property,
together with interests with the one-year redemption period. If same is not paid by the
redemptioner within the time prescribed by law, the latter loses his/her right to redeem, and the
buyer of the foreclosed property becomes its absolute owner. Prior to selling the property to
spouses Marcial See and Lilian Tan via the Deed of Redemption and Reconveyance, Metrobank
already consolidated its ownership over the foreclosed property. We will not nullify the
"redemption" (purchase) made by spouses Marcial See and Lilian Tan so that respondents spouses
Elisa and Antonio Tan can exercise their right of redemption which has long been lost for their failure
to exercise the same in accordance with law.
The trial court’s ruling that respondents spouses Elisa and Antonio Tan should be allowed to redeem
the foreclosed property because Metrobank "allowed the execution of the Deed of Redemption and
Reconveyance to a wrong person and for wrong reason" is erroneous. As explained above, we
consider the "redemption" for ₱11,500,000.00 made by spouses Marcial See and Lilian Tan to be a
sale in the guise of a redemption. Such "redemption" will not restore respondents spouses Elisa and
Antonio Tan’s right to legally redeem the subject property which right they have lost.
Respondents spouses Elisa and Antonio Tan were granted by the law the right of redemption which
they failed to exercise validly and effectively. Having failed to redeem the foreclosed property in the
manner and within the period prescribed by law, they have lost any right and interest over the
subject property. In so doing, Metrobank has the right to dispose of said property as it deems fit.
WHEREFORE, all the foregoing considered, the instant petition for review on certiorari is GRANTED
and the Decision of the Court of Appeals dated 31 January 2007 and its Resolution dated 15 June
2007 in CA-G.R. CV No. 86214 are hereby REVERSED and SET ASIDE. The complaint in Civil Case No.
97-85012 before the Regional Trial Court of Manila, Branch 32, is DISMISSED.
SO ORDERED.
SALES – EXTINGUISHMENT – LEGAL REDEMPTION - INSTANCES
G.R. No. 143896. July 8, 2005
BANCO FILIPINO SSAVINGS AND MORTGAGE BANK, Petitioners,
vs.
COURT OF APPEALS and SANTIAGO (Isabela) MEMORIAL PARK, INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed by petitioner seeking to annul the Decision1 of
the Court of Appeals (CA) dated March 31, 2000 in CA-G.R. CV No. 47044, which reversed the Order
of the trial court dated May 10, 1994, dismissing private respondent’s complaint for failure to state
a cause of action; and the Resolution dated July 3, 20002
denying petitioner’s motion for reconsideration.
On December 20, 1993, private respondent Santiago (Isabela) Memorial Park, Inc. filed a complaint
for redemption and specific performance with the Regional Trial Court of Santiago, Isabela, Branch
21, against herein petitioner Banco Filipino Savings & Mortgage Bank, the material and relevant
allegations of which read as follows:
COMPLAINT
Plaintiff, by counsel, to this Honorable Court most respectfully alleges:
1. …………….
2. …………….
3. That in February 1981, plaintiff mortgaged the above described property in favor of defendant to
secure a loan of ₱500,000.00 obtained by plaintiff from defendant;
4. That due to the failure of plaintiff to pay the aforementioned loan, defendant foreclosed the
mortgage and in consequence thereof Sheriff David R. Medina of this Honorable Court issued a
SHERIFF’S CERTIFICATE OF SALE in favor of defendant which is dated October 9, 1990 and which
instrument was inscribed at the back of TCT T-128647 of Isabela on January 21, 1991;
5. That in a letter of the President of plaintiff dated August 6, 1991, plaintiff made manifest its
interest to exercise its right of redemption and made an offer of ₱700,000.00 as redemption to
defendant through the then Deputy Liquidator, ROSAURO NAPA; this started the negotiation for the
redemption of the above described property;
6. That in a letter of the Deputy Liquidator dated January 23, 1992, plaintiff was given up to the end
of March 1992 to negotiate and make special arrangement for any satisfactory plan of payment for
the redemption;
7. That in a letter of the Deputy Liquidator dated March 12, 1992, plaintiff was directed to remit at
least ₱50,000.00 to defendant which would manifest the interest and willingness of plaintiff to
redeem the property, and forthwith on March 24, 1992, plaintiff remitted the sum of ₱50,000.00 to
defendant which was duly receipted by the latter under Official Receipt No. 279968 A dated March
24, 1992;
8. That in a letter of the President of plaintiff dated January 20, 1993, plaintiff amended its first offer
and made an offer of ₱1,000,000.00 as redemption which offer included a plan of payment;
9. That between January 20, 1993 to November 1993, plaintiff exerted earnest efforts in order to
finally effect the redemption, but defendant dilly dallied on the matter.
10. That in a letter of Atty. ORLANDO O. SAMSON, Senior Vice President of defendant, dated
November 5, 1993, there is a turn-around by defendant and is now demanding ₱5,830,000.00 as
purchase price of the property, instead of the original agreed redemption;
11. That the delay of the defendant in the finalization of the terms of redemption did not in any
manner alter the right of plaintiff to redeem the property from defendant;
12. That plaintiff is still in actual possession of the property and intend to remain in actual possession
of the property, while defendant was never in actual possession of said property;
13. That plaintiff is ready and willing to pay the redemption money, which is the total bank claim of
₱925,448.17 plus lawful interest and other allowable expenses incident to the foreclosure
proceedings:
14. That the latest actuations of defendant are indicative of the refusal of defendant to allow the
exercise of redemption by herein plaintiff, reason for which there is a need for judicial
determination of the rights and obligations of the parties to this case;
15. That on account of the unlawful actuations of defendant in refusing the redemption of the
property by plaintiff, the latter engaged the services of counsel for a fee of ₱30,000.00 which
defendant should pay to plaintiff.
WHEREFORE, it is respectfully prayed of this Honorable Court that, after due hearing, judgment be
rendered:
a. ordering defendant to accept from plaintiff the lawful redemption amount which shall be
determined by this Honorable Court;
b. ordering defendant to execute the necessary instrument in order to effect the redemption of the
property;
c. ordering defendant to pay to plaintiff the sum of ₱30,000.00 by way of attorney’s fees;
AND PLAINTIFF PRAYS for further reliefs just and equitable under the premises.
Petitioner filed a motion to dismiss on the ground that the complaint does not state a cause of
action. It alleges that assuming that the allegations in the complaint are true and correct, still there
was no redemption effected within one year from the date of registration of the sheriff’s certificate
of sale with the Register of Deeds on January 21, 1991, thus private respondent had lost its right to
redeem the subject land. Petitioner claimed that the letter cited in paragraph 5 of the complaint
was a mere offer to redeem the property which was promptly answered by a letter dated August
28, 1991, which categorically denied private respondent’s offer and stated that when it comes to
redemption, the basis of payment is the total claim of the bank at the time the property was
foreclosed plus 12% thereof and all litigation expenses attached thereto or its present appraised
value whichever is higher; that the letter mentioned in paragraph 6 of the complaint dated January
23, 1992 of the Deputy Liquidator was about negotiation and special arrangement and not
redemption for at that stage the period of redemption had already expired; that the letter
mentioned in paragraph 7 dated March 12, 1992 was of the postponement of the consolidation of
the subject property and not of any extension for the period of redemption; that the amount of
₱50,000.00 remitted by private respondent was in consideration of the postponement of the
consolidation of the property in petitioner’s name and as manifestation of private respondent’s
sincerity to repurchase the foreclosed property; that when private respondent remitted
₱50,000.00, the Deputy Liquidator of petitioner bank requested the legal counsel of petitioner to
defer consolidation of property in petitioner’s name; that in a letter dated November 5, 1993,
petitioner’s Senior Vice President declared that the subject property is available for repurchase in
the amount of ₱5,830,600.00 to which private respondent in another letter asked for an extension
of 30 days to make an offer.
Private respondent filed its opposition to the motion to dismiss alleging among others that the
complaint states a cause of action; that the annexes of the motion to dismiss should not be
considered in the resolution of such motion.
On May 10, 1994, the trial court rendered an Order3 dismissing the complaint. It ratiocinated that
(1) the letter dated August 6, 1991 was an offer to redeem for ₱700,000.00 without any tender of
the money; (2) the reply letter of petitioner dated August 28, 1991 stated that the redemption price
is ₱1,146,837.81 representing the bank’s claim of ₱925,448.17 plus 12% interest and expenses of
foreclosure or the appraised value which was ₱1,457,650.00; (3) the March 12, 1992 letter of the
petitioner categorically informed private respondent that the period for redemption had expired,
however, the bank agreed to postpone the consolidation of title of the land in the bank’s name up
to the end of March 1992 if the plaintiff shall deposit ₱50,000.00 in order to avoid consolidation.
Under Section 6 of Act 3135, on redemption of foreclosed property, it is provided that a debtor may
redeem the property at anytime within one year from and after the date of sale, i.e., one year period
to be reckoned from the registration of the sheriff’s certificate of sale. The registration of sheriff’s
sale was on January 21, 1991 so that the redemption period was until January 21, 1992; that
although there was an offer to redeem the property for ₱700,000.00 on August 6, 1991, which was
within the redemption period, there was no tender of redemption price and the ₱700,000.00
offered was not the correct redemption price. It found that the complaint did not state that private
respondent tendered the correct redemption price within the redemption period as required under
Section 30 of Rule 39 of the Rules of Court. Private respondent’s motion for reconsideration was
denied in an Order dated July 25, 1994.4
Private respondent filed its appeal with the CA which reversed the trial court in its assailed decision,
the dispositive portion of which reads:
WHEREFORE, the Orders of the respondent trial court dated May 10, 1994, and July 25, 1994 are
hereby REVERSED and SET ASIDE. The appellants are declared entitled to repurchase the property
in question within THIRTY (30) days from notice hereof which shall be effected upon payment of the
repurchase price of ₱925,448.17 less ₱50,000.00, which is the deposit on the redemption price, with
legal interest from March 24, 1992, the time the contract extending the period of redemption of
the property took effect until it is fully paid.5
The CA ruled that:
A perusal of the allegations in the complaint shows that there was sufficient basis to make out a
case against Banco Filipino. The complaint alleged that as early as August 6, 1991 or about six (6)
months before the statutory period for redemption would expire, the appellant had exerted earnest
efforts to effect the redemption of the property in question and that after an agreement had been
reached by the parties, with the corresponding deposit on the redemption price had been given by
the appellant, the appellee bank led the appellant to believe that the appellee was negotiating with
the former in good faith. However, the true intention of the appellee bank was to refuse the
redemption of the property as manifested by its act of increasing the amount of the redemption
price after the period for redemption had expired and after a deposit on the redemption price had
been duly accepted by it as evidenced by a receipt issued by the appellee.
Even assuming however that the appellant is now barred from exercising its right of redemption,
yet it can still repurchase the property in question based on a new contract entered into between
the parties extending the period within which to purchase the property as evidenced by the
appellee’s Deputy Liquidator Rosauro Napa’s letter to Belen Jocson dated March 12, 1992 and the
letter addressed to Atty. German M. Balot, Legal Counsel, Banco Filipino – Santiago, Isabela dated
April 7, 1992.
...
In the case of Philippine National Bank vs. Court of Appeals, the Court held: Indeed under Article
1482 of the Civil Code, earnest money given in a sale transaction is considered part of the purchase
price and proof of the perfection of the sale. This provision, however, gives no more than a
disputable presumption that prevails in the absence of contrary or rebuttal evidence. In the instant
case, the letter-agreements themselves are the evidence of an intention on the part of herein
private parties to enter into negotiations leading to a contract of sale that is mutually acceptable as
to absolutely bind them to the performance of their obligations thereunder. The letter-agreements
are replete with substantial condition precedents, acceptance of which on the part of private
respondent must first be made in order for petitioner to proceed to the next step in the
negotiations.
...6
In compliance with the CA decision, private respondent on April 27, 2000, made a tender of payment
and consignation with the CA in the amount of ₱1,300,987.96 through a Philippine National Bank
check which was duly receipted by the appellate court. 7
Hence, the herein petition for review on certiorari filed by petitioner alleging that the appellate
court erred in holding that (1) the allegations in the complaint of private respondent against
petitioner are sufficient to constitute a cause of action for redemption and specific performance;
and (2) respondent was entitled to repurchase back from petitioner it’s foreclosed property for only
₱925,448.17.
The basic issue is whether private respondent’s complaint for redemption and specific performance
states a cause of action against petitioner.
It is a well-settled rule that the existence of a cause of action is determined by the allegations in the
complaint.8 In resolving a motion to dismiss based on the failure to state a cause of action, only the
facts alleged in the complaint must be considered. The test is whether the court can render a valid
judgment on the complaint based on the facts alleged and the prayer asked for.9 Indeed, the
elementary test for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded. Only ultimate facts and not legal conclusions or evidentiary
facts, which should not be alleged in the complaint in the first place, are considered for purposes of
applying the test.10
Based on the allegations in the complaint, we find that private respondent has no cause of action
for redemption against petitioner.
Paragraph 4 of the complaint states:
4. That due to the failure of plaintiff to pay the aforementioned loan, defendant foreclosed the
mortgage and in consequence thereof Sheriff David R. Medina of this Honorable Court issued a
SHERIFF’S CERTIFICATE OF SALE in favor of defendant which is dated October 9, 1990 and which
instrument was inscribed at the back of TCT T-128647 of Isabela on January 21, 1991;
The sheriff’s certificate of sale was registered on January 21, 1991. Section 6 of Act 3135 provides
for the requisites for a valid redemption, thus:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of
said debtor, or any person having a lien on the property subsequent to the mortgage or deed of
trust under which the property is sold, may redeem the same at any time within the term of one
year from and after the date of sale; and such redemption shall be governed by the provisions of
sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil
Procedure,11 insofar as these are not inconsistent with the provisions of this Act.
However, considering that petitioner is a banking institution, the determination of the redemption
price is governed by Section 78 of the General Banking Act which provides:
In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate
which is security for any loan granted before the passage of this Act or under the provisions of this
Act, the mortgagor or debtor whose real property has been sold at public auction, judicially or
extrajudicially, for the full or partial payment of an obligation to any bank, banking or credit
institution, within the purview of this Act shall have the right, within one year after the sale of the
real estate as a result of the foreclosure of the respective mortgage, to redeem the property by
paying the amount fixed by the court in the order of execution, or the amount due under the
mortgage deed, as the case may be, with interest thereon at the rate specified in the mortgage, and
all the costs, and judicial and other expenses incurred by the bank or institution concerned by
reason of the execution and sale and as a result of the custody of said property less the income
received from the property.
Clearly, the right of redemption should be exercised within the specified time limit, which is one
year from the date of registration of the certificate of sale. The redemptioner should make an actual
tender in good faith of the full amount of the purchase price as provided above, i.e., the amount
fixed by the court in the order of execution or the amount due under the mortgage deed, as the
case may be, with interest thereon at the rate specified in the mortgage, and all the costs, and
judicial and other expenses incurred by the bank or institution concerned by reason of the execution
and sale and as a result of the custody of said property less the income received from the property.
In case of disagreement over the redemption price, the redemptioner may preserve his right of
redemption through judicial action which in every case must be filed within the one-year period of
redemption.12 The filing of the court action to enforce redemption, being equivalent to a formal
offer to redeem, would have the effect of preserving his redemptive rights and "freezing" the
expiration of the one-year period. In this case, the period of redemption expired on January 21,
1992. The complaint was filed on December 20, 1992.
Moreover, while the complaint alleges that private respondent made an offer to redeem the subject
property on August 6, 1991, which was within the period of redemption, it is not alleged in the
complaint that there was an actual tender of payment of the redemption price as required by the
rules. It was alleged that private respondent merely made an offer of ₱700,000.00 as redemption
price, which however, as stated under paragraph 13 of the same complaint, the redemption money
was the total bank claim of ₱925,448.17 plus lawful interest and other allowable expenses incident
to the foreclosure proceedings. Thus, the offer was even very much lower than the price paid by
petitioner as the highest bidder in the auction sale.
In BPI Family Savings Bank, Inc. vs. Veloso,13 we held:
The general rule in redemption is that it is not sufficient that a person offering to redeem manifests
his desire to do so. The statement of intention must be accompanied by an actual and simultaneous
tender of payment. This constitutes the exercise of the right to repurchase.
...
Whether or not respondents were diligent in asserting their willingness to pay is irrelevant.
Redemption within the period allowed by law is not a matter of intent but a question of payment
or valid tender of the full redemption price within said period.
Although the letter dated January 23, 1992 gave private respondent up to the end of March 1992,
to negotiate and make special arrangement for a satisfactory plan of payment for the redemption,
there was no categorical allegation in the complaint that the original period of redemption had been
extended. Assuming arguendo that the period for redemption had been extended, i.e., up to end of
March 1992, still private respondent failed to exercise its right within said period. This is shown by
private respondent’s allegation under paragraph 8 of its complaint that in a letter dated January 20,
1993, private respondent’s President amended his first offer and made an offer of ₱1 million as
redemption price. Notably, such offer was made beyond the end of the March 1992 alleged
extended period. Thus, private respondent has no more right to seek redemption by force of law
which petitioner was bound to accept.
We find that the CA also erred in stating that assuming appellant is now barred from exercising its
right of redemption, it can still repurchase the property in question based on a new contract entered
into between the parties extending the period within which to purchase the property.

The allegations in the complaint do not show that a new contract was entered into between the
parties. The March 12, 1992 letter referred to by the CA as well as in the complaint only directed
private respondent to remit at least ₱50,000.00 to petitioner as a manifestation of the former’s
interest and willingness to redeem the property. Thus, the ₱50,000.00 remitted by private
respondent was only the first step to show its interest in redeeming the property. In no way did it
establish that a contract of sale, as found by the CA, had been perfected and that the ₱50,000.00
remitted by private respondent is considered as earnest money.

Article 1475 of the Civil Code provides:

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.

There was no showing in the complaint that private respondent and petitioner had already agreed
on the purchase price of the foreclosed property. In fact, the allegations in paragraphs 8 to 10 of
the complaint show otherwise, thus:

8. That in a letter of the President of plaintiff dated January 20, 1993, plaintiff amended its first offer
and made an offer of ₱1,000,000.00 as redemption which offer included a plan of payment;

9. That between January 20, 1993 to November 1993, plaintiff exerted earnest efforts in order to
finally effect the redemption, but defendant dilly dallied on the matter.

10. That in a letter of Atty. ORLANDO O. SAMSON, Senior Vice President of defendant, dated
November 5, 1993, there is a turn-around by defendant and is now demanding ₱5,830,000.00 as
purchase price of the property, instead of the original agreed redemption;

The complaint does not allege that there was already a meeting of the minds of the parties.

Based on the foregoing, there is no basis for the order of the CA to allow private respondent to
repurchase the foreclosed property in the amount of ₱925,448.17 plus the expenses incurred in the
sale of the property, including the necessary and useful expenses made on the thing sold.

WHEREFORE, the decision of the Court of Appeals dated March 31, 2000 is hereby REVERSED and
SET ASIDE. The Order of the Regional Trial Court of Santiago, Isabela, Branch 21, dated May 10,
1994 in Civil Case No. 2036 dismissing the complaint for redemption and specific performance is
REINSTATED and AFFIRMED.

SO ORDERED.