41 ESSENTIAL PREREQUISITES PREREQUISITES OF CONTRACTS, Incidental Fraud Incidental fraud is that hich is n!t seri!us in character and ith!ut hich the !ther "art# !uld still ha$e entered int! the c!ntract Ale%andr! Tan&eh $' (e$el!")ent *an& *an & !f the Phili""ines, Phili""ines , Sterlin+ Shi""er# Shi"" er# Lines, Inc' Ru"ert! Ru" ert! ' Tan&eh, Tan&eh, icente Arenas and Asset Pri$ati-ati!n Trust .'R' NO' 1/140, N!$e)2er 11, 031 Le!nen, 56 Facts6 Respondent Ruperto Tankeh, President of Sterling Shipping Lines, obtained loan from Development Bank of the Philippines (DBP) to finance the vessel !" Sterling #ce$ Petitioner Dr$ #le%andro Tankeh together &ith other signatories e'ecuted a promissor note binding himself liable to pa said loan$ Sterling Shipping Lines,m nc$ through respondent Ruperto "$ Tankeh e'ecuted a Deed of #ssignment in favor of DBP$
Thereafter, petitioner &rote a letter to respondent Ruperto Tankeh saing that he &as severing all ties and terminating his involvement &ith Sterling Shipping Lines$ nc$ Petitioner alleged that respondent Ruperto "$ Tankeh had e'ercised deceit and fraud in causing petitioner to bind himself %ointl and severall to pa respondent DBP the amount of the mortgage loan$ #lthough he had been made a stockholder and director of the respondent corporation Sterling Shipping Lines$, petitioner alleged that he had never invested an amount in the corporation and that he had never been an actual member of the board of Directors$ *e alleged that all the mone he had supposedl invested &as provided b respondent Ruperto Tankeh+ ISSUE6 Did respondent Ruperto Tankeh commit fraud in obtaining the petitioners consent to enter into the contract as to &arrant nullit of the contract 7EL(+ -.$ There are t&o tpes of fraud contemplated in the performance of contract dulo incide nte or dolo causante$ Dolo causante determines or is the essential cause of the consent &hile dolo incidente refers onl to some particular or accidents of the obligation$ The effects of dolo causante are nullif of the contract and the indemnification of damages and dolo incidente also oblige the person emploing it pa damages$ There &as no dulo causante or fraud used to obtain the petitioners consent to enter into the contract$ Petitioners had the opportunit to become a&are of the facts that attended the signing of the promissor note$ *e even admitted that he has a la&er/son &ho the petitioner had hoped &ould assist him in the administration of Sterling Shipping Lines, nc$ The totalit of the facts on record belies petitioners claim that fraud &as used to obtain his consent to the contract given his personal circumstances and the applicable la&$ #lthough there &as no fraud that had leer, undertaken to obtain petitioners consent, there &as fraud in the performance of the contract$ The records sho&ed that petitioner had been un%ustl e'cluded from participating in the management of the affairs of the corporation$ This e'clusion from the management in the affairs of Sterling Shipping Lines , nc$ constituted fraud incidental to the performance of the obligation$ n the case of 0eralde1, this 2ourt defined incidental fraud as 3 those &hich are not serious in character and &ithout the other part &ould still have entered into the contract$4#ccordingl, the contract is valid$ *o&ever, because of the presence of incidental fraud , pament of damages is a&arded$
56 RECISSI*LE CONTRACTS, Sli+ht !r Casual *reach The ell8settled rule is that rescissi!n ill n!t 2e "er)itted f!r a sli+ht !r casual 2reach !f the c!ntract Planters (e$el!")ent *an& $' S"!uses Ernest! L!"e- and Fl!rentina L!"e- su2stituted su2stitu ted 2# 5!se"h 9ilfred 5!$en, 5!se"h .il2ert 5!$en and :aril#n 5!$en' .'R' N!' 1;0, Oct!2er 0, 031 *ri!n, 56 FACTS6 7milio and 8lorentina Lope1 obtained a real estate loan of 9 million pesos from Planters Bank to finance the construction of four stor comple'$ //////// //////// loans &ere to be based on the submission submission of %ob accomplishment accomplishment reports$ The econom of the Phil$ Then &orsened$ &orsened$ To finish the %ob :uickl, the spouses loaned another ;$6 million pesos from Planters Bank$ The spouses &ere not able to avail of the full amount of the loan as Planters Bank did not release <==, === pesos of it$ This caused the spouses to file for a rescission of contract &ith damages at the PT2$ n defense, Planters Bank claimed that their refusal to release the loan &as because of violation in the loan agreement, that is , no submission of accomplishment reports and the building of a si' stor dorm$ Planters Bank also states that there can be no rescission of the agreement as there &as onl 9 substantial breach on their part for not releasing <==,=== out of the 5$6 loan$ *ence, this petition for revie& on certiorari. ISSUE6 s Planters Bank liable for a substantial breach on the loan agreement, &hich &ould lead to its recission$4 7EL(6 -.$ Planters Bank refusal to rele ase the remaining balance, &as mere l a slight or casual brea ch as sho&n belo&$ n other &ords, its breach &as not sufficientl fundamental to defeat the ob%ect of the parties in entering into the loan agreement$ The &ell settled is that rescission &ill not be permitted for a slight or casual breach of the contract$ The :uestion of &hethe r a breach of contrac t is substantial depends upon the attending circumstances$
The factual circumstances of this case lead us to the conclusion that Planters Bank substantiall completed &ith its obligation$ Planters Bank released P9,>==$===$== of the P5,6==,===$== loan$ .nl the amount of P<==,===$== &as not released$ This constitute ;?$??@ of the entire loan $ oreover, the progress report dated a 9=, ;A5 states that >@ of the si'/stor building &as alread completed b the spouses Lope1$ 7ven assuming that Planters Bank substantiall breached its obligation, #rticle ;9> of the 2ivil 2ode states that recession cannot take place &hen the things &hich are the ob%ect of the contract are legall in the possession of third persons &ho did not act in bad faith$ n the present case, the mortgaged properties had alread been foreclosed$ The &ere alread sold to the highest bidder at a public auction$ *ence, action for rescission is improper$ 59 OI( CONTRACTS, Ulta ires Acts An act hich is !utside !f the )unici"alit# %urisdicti!n is c!nsidered as a $!id ultra $ires act Land *an& !f the Phili""ines $' Eduard! :' Caca#uran .'R' N!' 1<1;;/' A"ril 1/, 031 Perlas8*erna2e, 56 8#2TS+ The unicipalit Cs Sanggunian Baan, (SB) passed certain resolution to implement a multi/plan to redevelop #goo Pla1a &here the melda 0arden and ose Ri1al onument &ere situated$ To finance phase ; of the said plan, the SB passed a resolution authori1ing then aor 7ufranio 7riguel to obtain a loan from Land Bank and mortgage a portion of the #goo Pla1a lot as collateral$ t further authori1ed the assignment of a portion of its nternal Revenue #llotment (R#) and the monthl income from the proposed pro%ect of &hich &ere used to construct Eiosks on the melda 0arden$ The kiosk &as then the same securities as that of the first loan$ 8or the construction of a commercial center as the second phase of the plan$ Land Bank granted this second loan in favor of the municipalit$ The construction of the commercial center &as, ho&ever , &as vehementl ob%ected to b some residents, led b respondent 2acauran, involving his right as a ta'paer filed a complaints against the officers of the unicipalit and Land Bank assailing the validit of the loans on the ground that the Pla1a Lot used as a collateral is of public dominion$ The RT2 held that the loan agreement &ere null and void$ Th e 2# affirmed the RT2Fs decision$ SSG7+ #re the sub%ect loan agreement ultra vires *7LD+ H7S$ 0enerall an ultra vires act is one committed outside the ob%ect for &hich a corporation is created as defined b the la& of its organi1ation and therefore beond the po&ers conferred upon it b la&$ #n act &hich is outside of the municipalit Cs %urisdiction is considered as a void ultra vires act, &hile an act attended onl b an irregularit but remains &ithin the municipalitFs po&er is considered as an ultra vires act sub%ect to ratification and !or validation$ Records disclose that the said loans &ere e'ecuted b the unicipalit for the purpose of funding the conversion of #goo Pla1a into a commercial center$ *o&ever, the conversion of the said pla1a is beond the unicipalitFs %urisdiction considering the propertFs nature as one for public use and thereb, forming part of the public dominion$ t cannot be the sub%ect of appropriation either b the State or b private persons$ #rticle ;5=A(;) of the 2ivil 2ode provides that a contract &hose purpose is contrar to la&, morals, good customs, public order or public polic is considered void and as such creates no rights or obligations or an %udicial relations$ 2onse:uentl, given the unla&ful purpose, the are considered ultra vires in the primar sense, rendering them void and in effect, non/binding on the unicipalit$ -evertheless, &hile the Sub%ect Loans cannot bind the unicipalit for being ultra vires$ The officers &ho authori1ed the passage of the Sub%ect Resolutions are personall liable$ The sub%ect loans are deemed void$ 55 OI( CONTRACTS, In Pari (elict! An e=ce"ti!n t! the d!ctrine !f in "ari delict! arises hen its a""licati!n c!ntra$enes ell8 esta2lished "u2lic8"!lic# (!)in+! .!n-al! $ 5!hn Tarnate 5r' .'R' N!' 1;3;33, 5anuar# 1>, 0310 *ersa)in, 56 FACTS6 Departments of Public Iorks and *igh&a had a&arded the contract for the improvement of the Sadsadan aoa/a Section of the ountain$ Province of Benguet Road to 0on1alo 2onstruction$ Petitioner Domingo 0on1alo subcontracted to respondent ohn Tarnate r$ the suppl materials and labor for the pro%ect, n furtherance of their agreement, 0on1alo e'ecuted a deed of assignment &hereb he &a assigning to Ternate an amount e:uivalent to ;=@ e:uipment that had been utili1ed in the pro%ect$ ISSUE6 s the petitioner liable for the ;=@ fee not&ithstanding that both parties &ere in pari delicto
7EL(6 ?ES' Petitioner Domingo 0on1alo is liable for the ;=@ fee not&ithstanding that both parties &ere in delicto$0on1alo subcontracted he implementation of the pro%ect to Tarnate in violation of the statutor prohibition provided in PD ;>A5$ Their subcontract &as illegal because it did not bear the approval of the DPI* Secretar$ -ecessaril, the deed of assignment &as also illegal, because it sprung from the subcontract$
The doctrine of in pari delicto is a universal doctrine that holds that no action arises, in e:uit or at la&, from an illegal contract, no suit can be maintained for its specific performance, or to recover the propert to be sold or delivered , or the mone agreed to be paid , or damages for its violation, and &here the parties are in pari delicto, no affirmative relief or an kind &ill be given to one against the other$ -onetheless, the applic ation of the d octrine of in par i delicto is not al&as rigid$ #n accepted e'cepti on, arises &hen its application contravenes &ell/ established public polic$ 0on1alo &ould be un%ustl enriched at the e'pense of Tarnate if the latter &as to be barred from recovering because of the rigid application of the doct rine of in pari delicto$ Lastl ,the letter and spirit of #rticle 66 of the 2ivil 2ode command 0on1alo to make a full reparation or compensation to Tarnate$ The illegalit of their contract should not be allo&ed to deprive Tarnate from being full compensated$ 5> OI( CONTRACTS, In Pari (elict! The d!ctrine !f in "are delict! in ina""lica2le @ if its a""licati!n ill "ut a "re)iu#) t! the circu)$enti!n !r the las as c!nte)"lated 2# the "arties Oscar C!nstantin!, :a=i)a C!nstantin! and Casi)ira :aturin+an $'7eirs !f Pedr! C!nstantin! , 5r' re"resented 2# Asunci!n LaBuidandanan' .'R' N!' 11>3, Oct!2er 0, 031 Pere-, 56 FACTS+ Petitioners and respondents are grandchildren and great grandchildren , respectivel of Pedro 2onstantino Sr$ o&ner of sub%ect lot$ This case involves a Petition for Revie& of the 2# decision reversing the RT2 decision &hich he declared the sub%ect deed and ta' declaration void$
Pedro 2onstantino Sr$ &ho o&ned the sub%ect unregistered parcel of land &as survived b si' children upon his death$ Respondents filed a complaint against petitioners alleging that petitioners asserted their claim of o&nership over the &hole parcel of land o&ned b the late Pedro Sr$ to the e'clusion of respondents &ho &ere occuping a portion thereof$ # ta' declaration in the name of petitioners .scar and a'ima &as also found to be unla&full issued due to the e'ecution of a fictitious deed &herein petitioners misrepresented themselves as the sole and onl heirs of Pedro Sr$ The later divided the lot resulting to t&o ne& ta' declarations$ a'imaFs share &as later conveed to her sister 2asimira to &hom a ne& ta' declaration &as issued$ Petitioners, on the other hand asserted that the sub%ect deed &as valid and that respondent have ad%udicated unto themselves to the e'clusion of other heirs, another parcel of land o&ned b Pedro Sr$ through a deed of 7'tra%udicial Settlement &ith Iaiver$ ISSUE+ #re both parties in pari delicto f or misrepresentation in both deeds 7EL(6 -.$ n this case , there are t&o Deeds of e'tra%udicial assignments unto the signatorie s of the porti ons of the estate of an ancestor co mmon to them and another set or signatories like&ise assigning unto themselves portions of the same estate$ The separate Deeds came into being out of an identical intention of the signatories in both to e'clude their co/heirs of their rightful share in the entire estates of Pedro Sr$ t &as , in realit an assignment of specific portions of the estates of Pedro Sr$ &ithout resorting to a la&ful petition of estate as both sets of heirs intended to e'clude the other heirs$
The inapplicabilit is dictated not onl b the fact that t&o deeds, not one contract are involved, but because such an application &ould result in the validation of both deeds instead of their nullification as necessitated b their illegalit$ t must be emphasi1ed that the underling agreement resulting in the e'ecution of the deeds is nothing but a void agreement$ #ccordingl, in order not to put a premium to the circumvention or the la&s as contemplated b the parties in the instant case, &e must declare both contracts as void$ ndeed an circumvention of the la & cannot be countenanced$ 5? CO:PRO:ISES, alidit# The $alidit# !f a c!)"r!)ise is de"endent u"!n its c!)"liance ith the reBuisites and "rinci"le !f c!ntracts dictated 2# la'' Land *an& !f the Phili""ines $ 7eirs !f S"!uses 5!r+a Ri+!r8S!rian! and :a+in S!rian! .'R' N!' 1/10, 5anuar# 3, 031 *ersa)in 5+ FACTS6 The respondents are the children of the late Spouses Soriano, o&ners of the sub%ect t&o parcels of land$ The properties &ere sub%ected to .peration Land Transfer (.LT) and &ere valued b the Land Bank and the Department of #grarian Reform (D#R) at P;=,===,== ! hectare$ 2ontending that such variation &as too lo& compared to e'isting valuations of agricultural lands, the respondents commenced on action for %ust compensation$ The asked that a final evaluation of the properties be pegged at P;,==$===$== , based on #dministrative .rder -o$ ?;, Series of
;AA6 and Republic #ct -o$ ??><$ Land Bank disagreed, insisting that P$D$ 6< and 7'ecutive .rder -o$ 66 governed the fi'ing of %ust compensation for the properties$ t praed that the valuation b the D#R be retained or that a valuation be made %udiciall$ The RT2 rendered a %udgment ordering the Land Bank of the Philippines to pa the total amount of P;,66<,><;$;= representing the %ust compensation of the properties covered$ .n appeal, the 2# sustained the decision of the RT2$ The court received the oint otion to #pprove the #ttached #greement and the #greement dated -ovember 6A, 6=;6$ Thereb, the parties praed that the 2ourt consider and approve the #greement as its disposi tion of the petition for revie& on certiorari, and render its %udgments in accordance &ith the terms of the #greement$ ISSUE6 s the #greement dated -ovember 6A, 6=;6 valid and binding on the parties 7EL(+ H7S$ There is no :uestion that foregoing #greement &as a compromise that the parties freel and voluntaril entered into for the purpose of finall seeking their dispute in this case$ Gnder #rticle 6=6 of the 2ivil 2ode, a compromise is a contract &hereb the parties, b making reciprocal concession, avoid litigation or put an end to one alread commenced$ #ccordingl, a compromise is either %udicial, if the ob%ective is to put an end to a pending litigation, or e'tra %udicial, if the ob%ective is to avoid a litigation$ #s a contract, a compromise is perfected b mutual consent$ *o&ever, a %udicial compromise , &hile immediatel binding bet&een the parties upon its e'ecution, is not e'ecutor until it is approved b the court and reduced to a %udgments$ The validit of a compromise is dependent u pon its compliance &ith the re:uisit es and principles of contracts dictated b la&$ #lso, the terms and conditions of a compromise must be be contrar to la&, morals, good customs, public polic and public order$ 8inding the #greement to have been validl and voluntaril e'ecuted b the parties in compliance &ith the re:uirements of la&, 2ourt hereb approves it$
5< CONTRACT OF SALE, Ele)ents !f a C!ntract !f Sale A c!ntract !f sale is "erfected at the )!)ent there is )eetin+ !f the !n the thin+ and !n the "rice ABuiles Ri!sa ' Ta2ac! La Suerte C!r"!rati!n .'R' NO' 03/;, Oct!2er 0, 031 :end!-a, 5'6 8#2TS+ Petitioner #:uiles Rosa filed a 2omplaint or #nnulment !Declaration of -ullit of Deed of #bsolute Sale and Transfer 2ertificate of the Title Reconveance and Damages against respondent Tabaco La Suerte 2orporation before the RT2$ Petitioner alleged that he &as the o&ner and in actual possession of a propert situated in Tabaco 2it, #lba b virtue of a deed of cession and :uitclaim e'ecuted b his parents$ *e then obtained loans from Sia Eo Pio, the 27. of respondent in the total amount of P>=,===$==$ Sia Eo Pio presented to petitioner a document purportedl a receipt of the loan &ith an undertaking to pa the total a mount of P>6,===$==$ n September 6==;, petitioner received a letter from respondent informing him that the sub%ect? lot &as alread registered in its name$ Petitioner claimed that b means of fraud, misrepresentation and deceit emploed b Sia Eo Pio, he &as made to sign the documents &hich he thought &as a receipt and undertaking to pa the loan, onl to find out later that it &as a document of sale in favor of respondent$ Petitioner argues that there &as no perfected contract of sale because (;) there &as no transaction bet&een the petitioner and respondent for the sale of the propert in :uestion (6) there &as no boa rd resolution authori1ing Sia Eo Pio to purchase the propertJ (9) there &as no e vidence that the mone received b petitioner from Sia Eo Pio came from petitionerJ and (5) he did not appear before the notar public for notari1ation of the instrument of sale$ ISSUE+ Ias there a perfected and valid contract of sale bet&een petitioner and respondent 7EL(6 -., The elements of a cont ract of sale are + (;) consent or meeting of the minds, that is, consent t o transfer o&nership i n e'change for th e priceJ (6) determinate sub%ect matter, and (9) price certain in mone or its e:uivalent$ The transactions &ere bet&een petitioner, as borro&er, and Sia Eo Pio, as lender not a sale bet&een petitioner and respondent$
The court also look that the element of consent is &anting$ Gnder #rticle ;5<> of the 2ivil 2ode, the contract of sale is perfected at the moment there is a meeting of minds on the thing &hich is the ob%ect of the contract and on the price$ Petitioner ackno&ledged that he signed the receipt for a loan$ There is ho&ever, no proof that it came from respondent as signifing a consideration for a contract of sale$ #ccordingl, there is no basis for a holding that the personal loan of petitione r, from respondent &as the consideration f or the sale of his propert in favor of the latter$ Therefore, there is no perfected and valid contract for sale$ 5 CONTRACT OF SALE, Si)ulated C!ntract !f Sale C!nsiderati!n is essential f!r a sale n!t t! 2e c!nsidered as si)ulated and n!tari-ati!n is n!t essential f!r c!n$erance t! 2e true and 2indin+' (r' L!rna C F!r)aran $' .lenda E' On+ and S!l!)!n S' On+'
.'R' N!' 1;0;4, 5ul# , 031 Pere-, %'6 FACTS6 # parcel of land &as donated to petitioner$ Petitioner immediatel took possession of the land &herein one/half (;!6) thereof is the land in :uestion$ #fter petitioner ac:uired o&nership b &a of donation over the parcel of land, she declared the same for ta'ation$ Gntil the present time she is still in actual possession of the land, including the land in :uestion$ Subse:uentl, 0lenda .ng (respondent) filed a complaint for unla&ful detainer against the plaintiff on the ground that the propert &as alread sold b petitioner in favor of respondent$ Petitioner for her part filed on action for annulment of the Deed of Sale against respondents on the ground that the sale is simulated for &ant of consideration as it &as intended onl to secure the loan obtained b defendant as re:uested b the latter$
SSG7+ s the sale bet&een petitioner and respondent valid *7LD+ -.$ The Supreme 2ourt ruled that the Deed of Sale is simulated for it is devoid of an consideration$ t &as e'ecut ed less than t&o (6) months from the time the sub%ect land &as donated to petitioner b the parents of respondent$ Several ears after the donation, petitioner mortgaged the land to #klan Development Bank$ #lso, from the time of the alleged sale, petitioner has been in actual possession of the sub%ect land$ The S2 also noted that the sale &as registered t&ent/four (65) ears after the e'ecution of the Deed of Sale$ Respondent did not introduce an improvement on the sub%ect land, and petitionerFs house &as erected on part of the sub%ect land$ f the sale &as legitimate, defendant 0lenda should have immediatel taken possession of the land declared it in her name for ta'ation purposes, registered the sale, paid realt ta'es, introduced improvements therein and should not have allo&ed plaintiff to mortgage the land$ These omissions properl militated against respondentFs submission that the sale &as legitimate and the consideration &as paid$ The 2ourt, also noted that &hile the Deed of # bsolute Sale &as notari1ed, it cannot lead to he conclusion that the sale is true conveance to &hich the parties are irrevocabl and undeniabl bound$ #lthough the notari1ation of Deed of #bsolute Sale rest in its favor the presumption of regularit, it does not validate nor make binding an instruments never intended, in the first place, to have na binding effect upon the parties$ Based from the circumstances stated above, the sale bet&een he petitioner and respondents is not valid$ 5A CONTRACT OF SALE, Reser$ati!n !f Onershi" The reser$ati!n !f !nershi" in the c!ntract !f sale d!es n!t chan+e the transacti!n int! a c!ntract t! sell' Ace F!!ds Inc' $' :icr! Pacific Techn!l!+ies C!'Ltd' .'R' NO' 033;30, (ece)2er 11, 031 FACTS6 Respondent T2L sent a letter/proposal for the deliver and sale of computer hard&are and products for various offices of #27 8oods$ #27 accepted and issued Purchase .rders for the sub%ect products$ The products &ere delivered as reflected in the nvoice Receipt, &hich stated a title reservation$ #27 failed to pa the purchase price despite demands and instead sent a letter to T2L stating the return of the sub%ect products thru its sales representative$
#27 filed a complaint before RT2 praing that T2L pull out from its premises the sub%ect products for breach of its 3after deliver services4 obligations$ T2L maintained that it had dul complied &ith its obligations that the products &ere in good conditions, &hen the &ere delivered, installed and configured in #27Fs premises$ t praed that #27 and T2L &as in the nature of a contract to sell ordered T2L to remove the sub%ect products from #27Fs premises and pa actual damages and attorneFs fees$ ISSUE6 s the contract bet&een #27 and T2L a contract of sale 7EL(6 H7S, # contract of sale had been perfected the precise moment #27 8oods sent T2L he Purchase .rder and accepted the latterFs proposal to sell the sub%ect products in consideration of the purchase price$ Thereafter, the reciprocal obligations of the parties/ i$e$ on one hand, of T2L to deliver the said products to #27 -.R 8oods, and on the other hand #27 8oods to pa the purchase price therefore &ithin thirt (9=) das from deliver/alread arose and conse:uentl ma be demanded$ The stipulation concerning T2LFs reservation of o&nership of the sub%ect products as reflected in the nvoice Receipt did not change the comple'ion of the transaction from a contract of sale into a contract to sell$ t had not been sho&n that the file reservation stipulation had been included in the original agreement or had subse:uentl modified or superseded the original agreement of the parties$ The fact that the nvoice Receipt &as signed b a representative of #27 8oods does not b and itself , prove novation of the contract since (;) it &as not sho&n that the signator &as authori1ed b #27 8oods (the actual part to the transaction) to novate the original agreementsJ (6) to sho& that the fact of deliver, and (9) as matter of %udicial notice, invoices are generall issued at the consummation stage of the contract and not its perfection, and have been treated as documents &hich are not actionable per se, although the ma prove sufficient deliver$ Thus, absent an clear indication that the KKK reservation stipulation &as actuall agreed upon the same is deemed to be a mere unilateral imposition on the part of o T2L and &hich has no effect on the nature of the parties original agreement$ #s a contract of sale$ Perforce, the obligations arising therein among others$ #27 8oodFs obligation to pa the purchases price as &ell as to accept the deliver of the goods remain enforceable and substituting$
>= CONTRACT OF SALE, (ate and Place !f (eli$er# The thin+ s!ld is c!nsidered deli$ered t! the 2u#er !nl# hen it is "laced in the 2u#ers "r!cessi!n at the a+reed "lace !f deli$er#' San Fernand! Re+ala Tradin+, Inc' $' Car+ill Phili""ines, Inc' DCar+ill Phili""ines, Inc' $' San Fernand! Re+ala Tradin+, Inc' .'R' NO' 1/33 D .'R' N!' 1/340 , Oct!2er <, 031 A2ad, 56 FACTS6 2argill Philippines nc$ (2argill) and San 8ernando Regala Trading, nc$ (San 8ernando) &ere cane molasses traders that did business &ith each other$ 2argill entered into 2ontract >=6? covering its sale to San 8ernando of 5,=== metric tons (mt$) of molasses$ 2argill agreed to deliver the molasses &ithin the months of 3#pril to a ;AA<4$ t also entered into 2ontract >=5< covering another sale to San 8ernando of >,=== mt$ of molasses$ The deliver period under this contract &as &ithin 3.ctober/-ovember December ;AA?4 2argill alleged that under 2ontract >=6?, it &as offered to deliver 5,=== mt$ of molasses but San 8ernando accepted onl A>; mt$ refusing to accept the rest$ The barge staed at the &harf for <; das, its contents unclaimed b San 8ernando$ Due to dela$ 2argill &as liable for demurrage$ 2argill also suffered damages b &a of unreali1ed profits because it had to sell the cargo to another buer at a loss$ t also alleged that under 2ontract >=5<, San 8ernando failed or refused for un%ustified reasons to accept the deliver$ n its ans&er &ith counterclaim, San 8ernando claimed that 2argill reneged on its contractual obligations to deliver certain :uantities of molasses$ 2argill denied this, insisting that San 8ernando actuall refused to accept deliver of the goods$ ISSUE6 Did both parties commit shortcoming in compling &ith their contractual obligations 7EL(+ H7S$ The 2ourt stated that the thing sold could onl be understood as delivered to the buer &hen it is placed in the buerFs control and possession at the agreed plac e of deliver$ n 2ontract >=6? 2argill presented no evidence that it atte mpted to make additional de liveries to full compl &ith its obligation$ 2ontract >=6? re:uired 2argill to deliver 5,=== mt$ of molasses during the period of 3#pril to a ;AA<4 #nthing less than that :uantit constitute breach of agreement$ Since 2argill onl delivered 6,;6> mt$ of molasses during the agreed period, 2argill should be regarded as having violated 2ontract >=6? &ith respect to the undelivered balance$ Gnder 2ontract >=5<, 2argill &as in breach as the contract provided for deliver of the molasses &ithin the months of .ctober$ -ovember and December ;AA?$ Thus &hen 2argill &rote San 8ernando on a ;AA< proposing to move the deliver dates of this contract to a, une and ul ;AA<, it &as alread in default$ San 8ernandos refusal to signif its conformit means that it &as not amenable to the change, in failing to make an deliver under 2ontract >=5<, 2argill should pa San 8ernando the profit that it lost because of such breach$ The 2ourt ruled that San 8ernando does not need to &rite a demand letter to 2argill for the latters deliver of the molasses as agreed upon, for 2argills obligation under the contract specified the date and place of deliver (.ctober -ovember December ;AA?)$ 8rom the circumstances stated above both parties committed shortcomings in compling &ith their contractual obligations$
>; CONTRACT TO SELL' (istin+uish fr!) C!ntract t! Sale In C!ntract t! sell, !nershi" shall n!t "ass t! the $endees until full "a#)ent !f "urchase "rice, n!n8"a#)ent !f "urchase "rice !nl# +i$es ri+ht t! seller t! C!))and s"ecific "erf!r)ance !r rescissi!n Ali A&an+ $ :unici"alit# !f Isulan, Sultan udarat Pr!$ince .'R' N!' 1;314, 5une 0;, 031 Re#es, 56 8#2TS+ Petitioner #li #kang &as the registered o&ner of a lot located in Sultan Eudarat$ Petitioner sold a t&o/hectare portion of the propert to the unicipalit of sulan, through then sulan aor Datu #mpatuan under a Deed of Sale, the price or consideration of &hich is P9,===$==, to be paid after the e'ecution of the contract$ Respondent immediatel took possession of the propert and began construction of a municipal building, 9A ears later, petitioner filed a civil action for Recover of Possession of Propert and !or Muieting of Title thereon and Damages against the respondent$ Petitioner alleged that the agreement &as one to sell, &hich &as non/consummated, as the purchase price &as not paid$ Respondent denied petitioners allegation that the Deed of Sale &as valid and that it has been in open, continuous and e'clusive possession for the propert for (5=) ears$ ISSUE+ s petitioner entitled to recover o&nership and possession of the propert in dispute 7EL(+ -.$ n a contract of sale, the title to the propert passes to the buer upon the deliver of the thing sold, &hereas in a contract to sell, the o&nership is, b agreement, retained b the seller and is not to pass to the vendee until full pament of the purchase price$ The Deed of Sale e'ecuted b the petitioner and the respondent is a perfected contract of sale, all its element being present$ There &as mutual agreement bet&een them to enter into the sale, as sho&n b their free and voluntar signing of the contract$ There &as also an absolute transfer of o&nership of the propert b the petitioner to the respondent as sho&n in the stipulat ion$(Petitioner) hereb sell, transfer, cede, and conve and assign as b these presents to have sold, transferred, ceded, conve ed and assigned4 There &as also a determined sub%ect matt er, that the t&o/hectare parcel of land as described in the Deed of Sale$ Lastl the price or consideration is at P9,===$==,&hich &as to be paid after its e'ecution of the contract$
7ven assuming that petitioner &as not paid, that fact has no effect on the validit of the contract of sale$ -one/pament of the purchase price merel give rise to a right in favor of petitioner to either demand specific pe rformance or rescission o f the contract$ Therefore, petitioner is not entitled to reco ver o&nership and possession of the propert$ >5 CONTRACT TO SELL, Re)ed# !f Rescissi!n in Case !f *reach The re)ed# !f rescissi!n is a$aila2le hen the 2u#er transferred the title !f the su2%ect land in her na)e ith!ut the &n!led+e and c!nsent !f the seller' S"!uses (elfin O' Tu)i2a# and Aur!ra Tu)i2a# $' S"!uses :el$in A' L!"e- and R!ena T' isitaci!n L!"e-' .'R' N!' 1/1;<0, 5une , 031 (el Castill! %6 FACTS6 Spouses Tumiba o&n a parcel of land in the name of petitioner #urora$ Petitioners e'ecuted an SP# in favor of Renalda, mother of respondent Ro&ena, allo&ing her to offer for sale the sub%ect land$ Subse:uentl, petitioners and respondent Ro&ena agreed to enter into an oral contract to sell over the sub%ect land for the price of P==, ===$== to be paid in ;= ears through monthl installments$ Ro&ena paid the first monthl installment to petitioner, follo&ed b 66 intermittent monthl installments$ #fter paing a total of N;=,===$==, Renalda then transferred the title to the sub%ect land in Ro&enaJs name through a deed of sale &ithout the kno&ledge and consent of petitioner$
Petitioner assails the transaction bet&een Renaldo and respondent for the former allegedl violated the terms of the SP# b selling the sub%ect and &ithout seeking approval of petitioners as to the selling price$ Petitioners also claimed that the monthl paments paid b respondents &ere mere deposits pending agreement as to the purchase price$ ISSUES6 ;$ Ias there a contract to sell bet&een petitioner and respondents 6$ f there is a contract to sell, did respondents breach such contract &ith petitioner 9$ f there is a breach, the contract bet&een petitioner and respondent is petitioner entitled to rescind the contract
7EL(6 ;$ H7S, a contract in sell has been defined a collateral contract &hereb the prospective seller, &hile e'pressl reserving o&ner of the propert despite deli ver to the prospective bu er, binds himself to sell said propert e'clusivel the prospective buer upon fu lfillment of the condition agreed upon, that is full pament of the purchase price$ n a contract to sell, o&nership is retained b the seller and is not to pass until full pament of the price$ Ihile there is no &ritten contract evidencing the contract to sell, it is sufficientl established b the fact that the sub%ect land &as not immediatel through an formal deed of conveance that petitioner continuousl received$ .nl paments from respondent and that respondent admitted that she caused the transfer of the title in her name onl after sometime &hen she believed she had substantiall paid the purchase price$ 6$ H7S, there &as a breach of the contract to sell because the time of the e'ecution of the deed of sale , the full price of the sub%ect land has not et paid$ 9$ H7S, #rt$ ;;A; of the 2ivil 2ode provides that Rescission &ill not be permitted for a slight or casual breach of the contract, but onl for a fundamental breach thereof$ The 2ourt finds that respondents act of transferring the title to the sub%ect in her name &ithout the kno&ledge and consent of petitioners and despite non/pament of the full purchase price is a substantial breach, thus recession can be availed b petitioners$
>5 CONTRACT TO SELL, Failure t! C!)"l# ith the A+ree)ent Failure !f the 2u#er t! c!)"l# ith his !2li+ati!n under c!ntract t! sell "re$ents the !2li+ati!n !f the "r!s"ecti$e seller t! e=ecute the c!rres"!ndin+ deed !f sale' 7eirs !f (eceased (!l!res C' entura $' 7eir !f S"!uses Eustaci! and Trinidad L' Enda#a' .'R' NO' 1<331;, Oct!2er 0, 031 FACTS+ Dolores 2$ "entura entered into a 2ontract to Sell &ith the spouses 7ndaa for the purchase on t&o parcels of land in Parana:ue 2it$ The contract provided that upon full pament, the spouses 7ndaa &ould e'ecute a final deed of sale over the same in favor of "entura$ The latter &as placed in possession of the propert, but before the pament period e'pired$ "entura died$ ISSUE6 Should the respondents be compelled to e'ecute the final deed of sale over the t&o parcel of land in favor of petitioners 7EL(+ -.$ # contract to sell is defined as a bilateral contract &hereb the prospective seller &hile e'pressl reserving the o&nership of the sub%ect propert despite deliver thereof to the prospect ive buer, binds himself t o sell the sai d propert e'clu sivel to the latter upon his fulfillment o f the conditions as agreed upon, i$e$ the full pament of the purchased price and ! or compliance &ith the other obligations stated in the contract to
sell$ The failure of the prospective buer to make full pament abide b his commitment stated in the contract to sell prevents the obligation on the prospective seller to e'ecute the corresponding deed of sale from arising$ #side from the pament of the purchase price and interest on the outstanding balance, the contract to sell like&ise imposed upon petitioners the obligation to pa the real propert ta' over the sub%ect properties$ *o&ever, the records submitted clearl sho& that onl the paments corresponding to the principal obligation and the interest on the outstanding balance &ere paid$ Since the petitioners failed to compl &ith all the obligations stipulated in the contract to sell, the respondents have no obligation to e'ecute a deed of sale over the properties$ Thus, the respondent cannot be compelled to e'ecute a deed of sale in favor of petitioners$ >5 CONTRACT TO SELL, Pr!curin+ Clause Pr!curin+ cause refers t! a cause hich starts a series !f e$ents and results, ith!ut 2rea& in their c!ntinuit#, in the acc!)"lish)ent !f a 2r!&ers "ri)e !2%ecti$e !f "r!ducin+ a "urchaser h! is read#, illin+ and a2le t! 2u# !n the !ners ter)' Oriental Petr!leu) and :ineral C!r"!rati!n $' Tuscan Realt#, Inc' .'R' NO' 1<>41, 5ul# 13, 031 A2ad, 56 FACTS6 Petitioner (.riental Petroleum and inerals 2orporation (.R7L P7TR.L7G) o&ned t&o condominium units at 2orinthian Pla1a in akati 2it$ t gave respondent Tuscan Realt, nc$ (Tuscan Realt) a non/e'clusive authorit to offer these units for sale$ Respondent submitted initial and updated lists of its prospective client/buer that included 0ate&a *oldings 2orporation (0#T7I#H) $ Subse:uentl, .riental Petroleum advised Tuscan Realt that if &ould undertake direct negotiation &ith 0ate&a for the sale of the units, &hich resulted in a contract to sell bet&een them$
ean&hile, 0ate&a assigned its right as buer of the units to #lon1o #ncheta in &hose favor .riental Petroleum e'ecuted a deed of absolute sale$ Prompted b this development, Tuscan Realt demanded pament of its brokerFs commission of P6, =<, ?6, == b .riental Petroleum$ The latter refused to pa, ho&ever, claiming that Tuscan Realt did nothing to close the deal &ith 0ate&a and #ncheta$ Thus, respondent Tuscan Realt did nothing to close its deal &ith 0ate&a and #ncheta$ Thus, respondent Realt filed a complaint for sum of mone &ith application for preliminar attachment against petitioners .riental Petroleum ISSUE6 s respondents Tuscan Realt entitled to a brokers commission for the sale of .riental PetroleumFs condominium units to #ncheta 7EL(6 H7S$ #ppling the principle of procuring cause respondent Tuscan Realt should be given its brokerFs commission$ The term procuring cause refers to a cause &hich starts a series of events and results, &ithout break in the continuit in the accomplishments of a brokerFs prime ob%ective of producing a purchaser &ho is read, &illing and able to bu on the o&nerFs terms$ This is similar to the concept of pro'imate cause in Torts, &ithout &hich the in%ur &ould have occurred$ To be regarded as the procuring cause of a sale, a brokerCs effort must have been the foundation of the negotiations that subse:uentl resulted in a sale$ n this case, it is clear that it &as on account of Tuscan RealtFs effort that .riental Petroleum got connected to 0ate&a the prospective buer, resulting in the latter t&o entering into a contract to sell involving the t&o condominium units$ #lthough 0ate&a turned around and sold the condominium units to #ncheta, the fact is that such ultimate sale could not happened &ithout 0ate&aFs indispensable intervention as immediate buer$
>> CAPACIT? TO CONTRACT' C!ntin+ent Fee C!ntract f!r c!ntin+ent fee e=ecuted 2eteen a la#er and a client is n!t included in the "r!hi2iti!n under Art' 14<1 G>H !f the Ci$il C!de' 7eirs !f :anuelU# E& Li!n+ $' :auricia :eer Castill!, 7eirs !f *uenafl!r U)ali .'R' NO' 1/;40>, 5une >, 031 8#2TS+ Respondent auricia 2astillo &as the o&ner of four parcel of land$ Iith the death of auricia, the land &as e'tra %udiciall partitioned b the respondent heirs of Buenaflor Gmali$ Respondent heirs instituted a civil case before the RT2, for the purpose of seeking the annulment of the transactions involving the sale of the inherited lots to Philippine achiner Parts anufacturing 2o$ nc$ ( PP2)$ The latter ac:uired the inherited properties after the same has been mortgaged to nsurance 2orporation of the Philippines(2P) b one of respondent heirs, and after foreclosure of the mortgage, 2P sold the properties to PP2$ Due to financial difficulties in the prosecution of the civil case, respondents entered into an #0R777-T &hereb the procured the legal services of #tt$ 7dmundo Oapede and the assistance of anuel GH 7k Liong &ho, as financier , agreed to under&rite the litigation e'penses entailed b the case, in e'changed, it &as agreed that in the event of a favorable decision, #tt$ Oepeda and anuel &ould be entitled to a4 share of fort(5=@) of all the realties and !or monetar benefits , gratuities or damages &hich ma be ad%udicated in favor of respondents$ Gpon non/compliance &ith the #0R777-T, petitioners filed a complaint for specific performances against and heirs of Buenaflor , he responds ho&ever that the #0R777-T &as illegal for being contrar to public polic$ SSG7+
s the #0R777-T ordered &ith #tt$ Oepeda valid *7LD+ H7S, #rticle ;5A; (>) of the 2ivil 2ode prohibits la&er from ac:uiring b purchase or assignment the propert of rights involve &hich are ob%ects of the litigation in &hich the intervene b virtue of their profession$ *o&ever the prohibition applied onl during the pendenc of a suit and generall does not cover contracts or contingent fees &here the transfer takes effect onl after the finalit of a favorable %udgment$ #s the #0R777-T is a contract for contingent fees then such agreement does not fall &ithin the prohibition under #rticle ;5A; (>) of the 2ode, *ence it is valid$ >? *REAC7 OF 9ARRANT?, E$icti!n E$icti!n shall ta&e "lace hene$er 2# final %ud+)ent 2ased !n a ri+ht "ri!r t! the sale !n an act i)"uta2le t! the $end!r, the $endees is de"ri$ed !f h!le !r "art !f the thin+ "urchased' *i+na# E=8E$i Phili""ines, Inc' Uni!n *an& !f the Phili""ines' .'R' N!' 1/1><3, Fe2ruar# 10, 0314 (el Castill!, 5' FACTS6 Bigna file a civil case for breach of &arrant against eviction under #rticles ;>5< and ;>5 of the 2ivil 2ode, &ith damages, against Gnion Bank and Robles$
Bigna alleged in its 2omplaints that at the time of the sale, the title to the propert &ho lost due to fire at the Register of Deeds and that at the time of the sale, Gnion Bank represented that there &ere no liens or encumbrances over the propert other than those annotated on the title, and that a reconstitution of the lost little &ould be made$ .n these assurances, Bigna began and completed construction of a building on the propert$ t turned ou t that the propert &as the sub%ect of a civil case instituted b a certain Rosario &ho mortgaged the propert i n favor of Gnion Bank, Bigna began to receive copies of court orders and pleadings relative to the case$ Bigna then issued a demand to Gnion Bank to make good on its &arranties ho&ever despite such demands, it appeared that Bigna &as in %eopard of losing the propert as a result of Gnion BankFs lack of candor and bad faith in not disclosing the pending case$ ean&hile, a decision &as rendered in the civil case filed b Rosario &herein the lo&er court ruled that the mortgage to Gnion Bank &as null and void$ #s a result of this decision, Bigna &as evicted from the propert$ B that time, Bigna had alread started &ith the construction of a ne& building in the sub%ect propert$ SSG7+ s BignaFs eviction valid *7LD+ -., 7viction shall take place &henever b a final %ud gment bases on a right prior to the sale of an act imputabl e to the vendorJ the vendee is deprived for the &hole or of a part of the thing purchased$ n case eviction occurs the vendee shall have the right to demand of the vendor, among others, the return of the value &hich the thing sold had at the time of the eviction, be it greater or less than the price of the sale, the e'penses of the contract, if the vendee has paid them and the damages and interests and ornamental e'penses if the sale &as made in bad faith$ n the case of bar, Bigna purchased the propert &ithout kno&ledge of the pending civil case concerning the sub%ect propert$ Gnion Bank is therefore ans&erable or its e'press undertaking under the deed of sale to defend its title to the Parcels !of land &ith improvement thereon against the claims of an person &hatsoever$ Record reveals no& ever, that Gnion Bank are grossl negligent in the handling and prosecution of the civil case involving the sub%ect propert$ #s a result, the decision became final and e'ecutor and Bigna &as evicted from the propert$ Such negligence in the handling of the case is far from coincidental, it is decidedl glaring, and amounts to bad faith$ Based from these circumstances$ BignaFs eviction is not valid$ ><$ *REAC7 OF 9ARRANT?, Re)ed# !f Rec!u")ent Re)ed# !f rec!u")ent refers t! the reducti!n !r e=tincti!n !f the "rice !f the sa)e ite) !r unit s!ld and n!t t! a different transacti!n !r c!ntract !f sale' First United C!nstruct!rs C!r"!rati!n, et al, $' *a#ahihan Aut!)!ti$e C!r"!rati!n' .'R' N!' 1;4<> , 5anuar# 1>, 0314 FACTS6 Petiti!ner 8irst Gnited 2onstruction 2orporation (8G22) and petitioner Blue Star 2onstruction 2orporation (Blue Star) &ere associate construction firms sharing business on a case to case basis$ The ordered si' units of dump trucks from the respondent, a domestic corporation engaged in the business of importing and reconditioning used apan/made trucks$ # good business relationship &as established bet&een petitioners and respondent so petitioners ordered an additional one unit of *ino Prime over and one unit of 1u1u Transit i 'er$ 8or the additional purchase, petitioners paid cash and the balance through postdated checks$ Gpon presentment of the checks, respondents learned that petitioners ordered the pament stopped$ Petit ioners informed them that the are &ithholding pa ment because respondent failed to repair one of the si' units of dump trucks earlier ordered b petitioner$
Due to petitionerFs refusal to pa, respondents commenced an action for collection against petitioner$ Petitioner contends that the areKKKKKKstopping pament for the last t&o trucks ordered for the alread informed respondent of the defects of one of the dump trucks earlier ordered, and respondent failed to compl &ith its &arrant$ Respondent on the other hand contends that petitioner are not %ustified in &ithholding paments for the last t&o trucks ordered as the purchase of these trucks &as entirel different transaction from the sale of dump trucks &hich petitioner claims as defective$ *7LD+ -., #rticle ;>AA (;) of the 2ivil 2ode &hich provides for the remed of recoupment in diminution or e'tinction of price in case of breach of &arrant b the seller should be interpreted as referring to the reduction or e'tinction of the price of the same item or unit sold and not to a different transaction or contract of sale$ This is a more logical interpretation of the said article considering that it talks of breach of &arrant &ith respect to a particular item sold b the seller$ -ecessaril therefore, the buers remed should relate to the same transaction and not to another$ Defendant appellants act of ordering the pament on the prime mover and transit mi'er stopped &as improper considering that the said sale &as a different contract from that of the dump trucks earlier purchased b defendants/appellants$ Therefore, it &as not proper for petitioner to e'ercise his right of recoupment through &ithholding pament of the trucks mention$ > :ACE(A LA9, Pa#)ent in Install)ent Ri+ht !f 2u#er t! refund accrues !nl# hen he has "aid at least t! #ears !f Install)ent :anuel U# J S!ns, Inc' $' al2uenc!, Inc' .'R' N!' 1/<><4 , Se"t' 11, 031 8#2TS+ Petitioner anuel G Sons, nc, is the registered o&ner of 9 parcels of land$ Petitioner , as vendor, e'ecuted t&o (6) 2onditional Deeds of Sale in favor of respondent, "albuenco, nc$ The parties agreed that in both conditional sale///// and he remaining balance shall be paid &ithin////////////////&as able to pa the do&n paments for both conditional//////////////////// complied &ith the conditions under the conditional deeds of sale in releasing the mortgages of the sub%ect lands, compelling the unla&ful occupants to surrender possession of the sub%ect lots, and paing the mortgage &ith Philippi ne Trust 2ompan$ *o&ever respondents &as not satisfied &ith the manner b &hich petitioner complied &ith the condition a letter/////// its intention to rescind the conditional deeds of sale and attached &ith /////////////// rescission$ ISSUES6
;$ 6$
s respondent entitled to a refund Ias respondent given notice of the notarial rescission
7EL(6 1' -., R$#$ -o$ ?>>6, other&ise kno&n as the Realit nstallment Buer #ct, applies to contracts to sell$ The la& recogni1es the right of the seller in conditional sales of all kinds of real estateFs (industrial, commercial, residential) the right of the seller to cancel the contract upon nonpament of an installment b the buer, &hich is simpl an event that prevents the obligation of the vendor to conve title b the buer &hich is simpl an event that prevents the obligation of the vendor to conve title from ac:uiring binding force$ Gnder the la&, the right of the buer to refund accrues onl &hen he has paid at least t&o ears of installments$ n this case , respondent has paid less than t&o ears of installmentsJ hence it is not entitled to a refund$ 0'
-o$ The court noted that in the complaint initiall filed b the respondent, petitioner filed an ans&er &ith an attached cop of the notarial acts of rescission$ Respondent received a cop of that ans&er &ith all its attachment$ B receipt thereof, respondent alread received notices of the notarial recission, oreover, respondents ad mitted the same &hen it attached those notices to its repl$
>A :ACE(A LA9, Tin ReBuire)ents f!r Rescissi!n N!tarial rescissi!n and "a#)ent !f case surrender $alue f!r a $alid and effecti$e cancellati!n !f the c!ntract under the :aceda La, the )andat!r# tin reBuire)ents !f a n!tari-ed n!tice !f cancellati!n and refund !f the cash surrender $alue )ust 2e c!)"lied ith ' .atchalian Realt#, Inc' $' E$el#n :' An+eles .'R' N!' 030>, N!$e)2er 0/, 031 Car"i!, 56 8#2TS+ Respondent #ngeles purchased a house and lot from 0atchalian Realt, nc$(petitioner) valued at P<>=,===$== and P5>=,===$== respectivel &ith 65@ interest per annum to be paid b installment &ithin the period of ten ears$ The house and for &ere delivered to petitioner in ;AA>$ -onetheless, under the contracts to sell e'ecuted bet&een the parties respondent retained o&nership of the propert until full pament of the purchase price$ #fter sometime, respondent failed to satisf her monthl installement &ith petitioner$ Respondent &as onl able to pa thirt five (9>) installments for the contract to sell involving the house &hile fort/eight (5) installments for the 2ontract to sell involving the lot$$ Respondent &as given at least t&elve (;6 ) notices for pament in a span of three (9) ears but she still failed to settle her account$ #fter giving a total of fift/one (>;) months grace period for both contracts and in consideration of the continued disregard of the demands of petitioner, respondent &as serve &ith a notice of notarial recission b registered mail &hich she allegedl received as evidence b a return receipt$
Petitioner finished a demand letter to respondent demanding pament of the amount of P;;6,9=5$56 as outstanding rentals for her use and occupation of the house and lot and to vacate the same$ Respondent &as informed that the >=@ cash surrender value that she is entitled to has alread been deducted &ith the rentals that she &as not able to pa$ The letter also, states that after deducting the rentals from the refundable amount, respondent still has a balance of P;;6,9=5$56 &hich she is re:uired to settle &ithin fifteen (;>) das from receipt of the demand letter$ ISSUE6 Ias the contract bet&een the petitioner and respondent properl cancelled 7EL(6 -., #lthough a notari1e not ice of cancellation &as given to respondent, petitioner failed to pa the proper cash surrender value in accorda nce &ith the aceda La&$ The court noted that the cash surrender value due to respondent has been compensated &ith the reasonable rent, &hich she o&es$ *o&ever, it &as improper to appl compensation in this case since one of the re:uirements under #rticle ;Q6A= of the 2ivil 2ode on compensation is that the obligation be li:uidated or demandable$ There &as nothing in the contract, &hich provided for the amount of rentals in case the buer defaults in her installment paments$ *ence, the rentals due to 0R cannot be considered as li:uidated$ Since there &as an improper compensation of the obligation, the cash surrender value is not considered as paid$ The 2ourt stated that for a valid and effective cancellation of the contract under aceda La&, the mandator t&in re:uirements of a notari1ed notice of cancellation and refund of the cash surrender value must be complied &ith$ Since petitioner failed to pa he proper cash surrender value to respondent, the contract bet&een petitioner and respondent &as not properl cancelled$
?= (OU*LE SALE, .!!d Faith .!!d Faith is reBuired f!r the rule !n d!u2le sale t! a""l# Pe2lia Alfar! and the heirs !f Pr!s"er!us Alfar! $' s"!uses (u)ala+an et 'al' .'R' N!' 1;;00, 5anuar# 00, 0314 Pere-, 56
FACTS6 On une ;AA>, Pagano sold a lot to petitioner spouses Prosperous and Peblia #lfaro(spouses #lfaro) through a Deed of #bsolute Sale$ To preserve their right of possession of the sub%ect propert , respondents filed this instant petition$
#ccording to respondent Spouses Dumalagan, the are the real o&ner of a portion of the sub%ect propert based on a notari1ed Deed of #bsolute Sale dated December ;AA9$ To prove o&nership and possession, respondent offered in evidence a 2ertificate of 2ompletion and a 2ertificate of .ccupanc, both dated ;= #ugust ;AA9o and "isaan 7lectric 2ompan nc$ electric bills, Right after their purchase from Bagano , respondent Spouses Dumalagan took possession of the sub%ect propert and constructed a nipa hut &hich the latter on leased$ ean&hilek, Spouses Bagano filed a complaint for Declaration of -ullit of Sale &ith Damages and Preliminar n%unction against petitioner entitled, 3Spouses .legario P$ Bagano and 2ecilia 2$ Bagano v$ Spouses Peblia and Prosperous #lfaro (Begano case)$ n said case, this court sustained the validit of the Deed of #bsolute Sale bet&een the petitioners and Spouses Bagano, &hich the appellate court reversed and set aside$ #ccording to the appellate court, petitioners cannot claim good faith b referring to the annotations &ritten at the back of BagaroFs title$ t noted that the annotated adverse claims, even if not in the names of respondents have the effect of charging petitioners as subse:uent buers &ith constructive notice of the defect of the sellers title$ oreover, as sho&n b the records, petitioners had prior kno&ledge that portions of the sub%ect propert have been sold to third person$ SSG7+ s petitioner considered buer in good faith *7LD+ -., Records reveal that there &ere t&o adverse claims annotated in t he title$ *o&ever, petitioners contend that the annotated adverse clai ms have alread e'pired pursuant to Section <= of PD ;>69, &hich provides that an adverse claim shall be effective onl for a period of 9= das from the date of its registration$ Petitioners claim hat the 3constructive notice4 ended 9= das from 66 8ebruar ;AA> or on 69 arch ;AA>$ The la& also states that after the lapse of said period, the annotation of adverse claim ma be cancelled upon filing of a verified petition b the part in interest$ Taken together this means that the cancellation of the adverse claim is still necessar to render it ineffective, other&ise, the inscription &ill remain annotated and shall continue as a lien upon the propert$ Therefore, petitioners cannot claim////// faith on the basis of the supposed infectivit of the annotated adverse claims as the same have not been cancelled at the time of the purchase$ #ssuming that the annotated adverse claim e'pired on 69 arch;AA>, petitioners still cannot claim good faith as the &ere a&are of occupants in the sub%ect propert other than the seller$ The &ere also a&are that aside from the nipa hut, there &ere other structures in the sub%ect propert, one of &hich &as built b Pesarillo$ The rule on double sale is also inapplicable in the case at bar, for it re:uires that good faith is present$ #s correctl held b the appellate 2ourt?, petitioners prior registration of the sub%ec t propert, &ith prior kno&ledge or respondents claim o&nership and possession cannot confer o&nership or better right over the sub%ect propert$
