AYALA LIFE ASSURANCE, INC., Petitioner, vs.RAY BURTON DEVELOPMENT CORPORATION, Respondent.

G.R. No. 163075 January 23, 2006

Facts:

Ayala Life Assurance, Inc., petitioner, and Ray Burton Development Corporation, entered into a contract as a "Contract to Sell," with a "Side Agreement" of even date, for a parcel of land with a stipulation for an "Event of Default." That “If purchaser (respondent) fails to pay any installment for any reason there will be a late penalty interest, And if default continues the seller has the right to cancel the contract without need of court declaration. In case of cancellation, the seller shall return to the purchaser the amount he received, less penalties, unpaid charges and dues on the property.” Respondent paid down payment and the quarterly amortization. However respondent notified petitioner in writing that it will no longer continue to pay due economic crisis to its business and asked for the immediate cancellation of the contract and for a refund of its previous payments as provided in the contract. Petitioner refused to cancel the contract to sell. Instead filed with the RTC, Makati City, for specific performance for the payment of the remaining unpaid quarterly installments inclusive of interest and penalties.

Respondent answered that they never fail to notify the latter of its inability to pay the remaining installments. In accordance with provisions of the contract to sell providing for the refund to it of the amounts paid, less interest and the sum of 25% of all sums paid as liquidated damages. Trial court rendered a Decision holding that respondent transgressed the law in obvious bad faith. And is sentenced and ordered to pay plaintiff the unpaid balance owing under the contract, interest agreed upon, and penalties. Defendant is further ordered to pay plaintiff the sum of P200,000.00 as attorney’s fees and the costs of suit.

The Court of Appeals rendered a Decision reversing the trial court’s Decision that the parties’ transaction in question is in the nature of a contract to sell, as distinguished from a contract of sale. Hence, the instant petition for review on certiorari.

Issues:

(1) Whether respondent’s non-payment of the balance of the purchase price gave rise to a cause of action on the part of petitioner to demand full payment of the purchase price.

(2) Whether petitioner should refund respondent the amount the latter paid under the contract to sell.

Held:

(1) The event of respondent’s default in payment, under the provisions of the contract, has the right to retain an amount equivalent to 25% of the total payments. As stated by the Court of Appeals, petitioner having been informed in writing by respondent of its intention not to

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proceed with the contract on or prior to incurring delay in payment of succeeding installments, the provisions in the contract relative to penalties and interest find no application.

(2) The court affirms with the Court of Appeals decision in that with respect to the award of interest, petitioner is liable to pay interest of 12% per annum upon the net refundable amount due from the time respondent made the extrajudicial demand upon to refund payment under the Contract to Sell. Under their contract, ownership of the land is retained by petitioner until respondent shall have fully paid the purchase price. Its failure to pay the price in full is not a breach of contract but merely an event that prevents petitioner from conveying the title to respondent, a cause of action for specific performance does not arise. What should govern the parties’ relation are the provisions of their contract on the "Event of Default". The court also finds that the Court of Appeals, in rendering the assailed Decision and Resolution, did not commit any reversible error.

RICARDO CHENG, petitioner, vs. RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO B. DA JOSE, respondents.

G.R. No. 129760. December 29, 1998

Facts:

Ramon B. Genato (Genato) entered into an agreement with Ernesto and Socorro B. Da Jose (Da Jose spouses) over the two parcels of land. The contract was in a public instrument and was annotated. The Da Jose spouses asked and were granted by respondent Genato an extension of another 30 days. However, despite the proof showed by Genato that there was already a first buyer upon the land, Petitioner Ricardo Cheng (Cheng) expressed interest in buying the subject properties and issued a check, Genato issued a handwritten receipt. Genato deposited Cheng’s check. Cheng’s lawyer sent a letter to Genato demanding compliance with their agreement to sell the property to him stating that the contract to sell between him and Genato was already perfected.

Cheng filed complaint for performance to compel, Genato to execute a deed of sale, plus damages and prayer for preliminary attachment. In Answer thereto, Genato alleged that the agreement was not a partial payment but subject to the condition that the prior contract with the Da Jose spouses be first cancelled. The Da Jose spouses answer that they have a superior right to the property as first buyers. And cited Cheng’s bad faith as a buyer being duly informed by Genato of the existing annotated Contract to Sell on the titles.

Lower court ruled that the receipt issued meant a sale and not just a priority or an option to buy. It is not subjected to condition or reservation; the receipt did not provide such condition or reservation. There was a valid rescission of the Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell. And that Cheng should be preferred over the intervenors-Da Jose spouses in the purchase of the subject properties.

Not satisfied with the decision, Genato and Da Jose spouses appealed to the court a quo which reversed such judgment and ruled that the prior contract to sell in favor of the Da Jose spouses

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was not validly rescinded, that the contract to sell between Genato and Cheng, was without force and effect due to the failure to rescind the prior contract; and that Cheng should pay damages to the respondents herein being found to be in bad faith. Hence this petition for review.

Issues:

(1) That the Da Jose spouses’ Contract to Sell has been validly rescinded or resolved

(2) That Ricardo Cheng’s own contract with Genato was not just a contract to sell but one of conditional contract of sale which gave him better rights, thus precluding the application of the rule on double sales under Article 1544, Civil Code

(3) That, in any case, it was error to hold him liable for damages.

Held:

(1) No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid and effective rescission of resolution of the Da Jose spouses’ Contract to Sell, contrary to petitioner’s contentions and the trial court’s erroneous ruling. In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. It is one where the happening of the event gives rise to an obligation. Thus, Ricardo Cheng’s contention that the Contract to Sell between Genato and the Da Jose spouses was rescinded or resolved due to Genato’s unilateral rescission the court finds no support in this case.

(2) The agreement between Cheng and Genato, is a Contract to Sell and not one of Conditional Contract of Sale. Both courts below correctly held that the receipt which was the result of their agreement, is a contract to sell. The knowledge gained by the Da Jose spouses, as first buyers, of the new agreement between Cheng and Genato will not defeat their rights as first buyers but the knowledge gained by Cheng of the first transaction between the Da Jose spouses and Genato defeats his rights even if he is first to register the second transaction, since such knowledge taints his prior registration with bad faith (Article 1544).

(3) Damages were awarded by the appellate court finding that petitioner “was in bad faith when he filed the suit for specific performance knowing fully well that his agreement with Genato did not push through.” bad faith, with wrongful interference with the contractual relations between Genato and the Da Jose spouses, based on these overwhelming evidence (bad faith) on the part of herein petitioner Ricardo Cheng, the court finds that the award of damages made by the appellate court is in order.

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GOLD LOOP PROPERTIES, INC. (GLPI) and EMMANUEL R. ZAPANTA, petitioners, vs.THE COURT OF APPEALS, BHAVNA HARILELA SADHWANI and RAMESH J. SADHWANI, represented by their attorney-in-fact PURSHUTAM DIALANI, respondents.

G.R. No. 122088 January 26, 2001

Facts:

Bhavna Harilela and Ramesh Sadhwani signed a reservation application for one (1) condominium unit at GLPI at Pasig. Reservation once the downpayment was paid in full. Sadhwanis issued a check for reservation fees to Josephine Flores Guina, agent of St. Martin Realty who issued a receipt to them. Sadhwanis paid GLPI and signed a "Contract To Sell"

represented by its GLPI President Emmanuel Zapanta. Ms. Guina assured to furnish him a copy of the contract after its notarization, but Sadhwanis did not receive any copy of it.

However by letter to GLPI, the Sadhwanis offered to resell their rights to the condominium unit they purchased. Petitioners rejected the offer because the offer was unreasonable, unfair and inequitable. Respondent Ramesh J. Sadhwani by letter to GLPI, by counsel made a formal demand for the delivery of a copy of the contract to sell. Spouses Sadhwanis failed to pay any of the monthly amortizations in the payment plan. Petitioners sent a letter demanding payment of the balance and informed that GLPI will rescind the Contract to Sell and automatically forfeit their down payment should they fail to pay within five (5) days from receipt of the letter.

Sadhwanis filed with the Housing and Land Use Regulatory Board (HLURB), a complaint for answer to the complaint the parties submitted their position papers. HLURB Arbiter Roberto F. Paras rendered a decision, ordering GLPI to furnish a copy of the subject Contract to Sell and to accept payment of the agreed purchase price balance of the Condominium unit; Petitioners appealed to the HLURB while respondents interposed a partial appeal. HLURB Board of Commissioners rendered a decision, that the respondents’ appeal is DENIED and complainants’ Partial Appeal is given due course and the Decision subject of MODIFICATION complainants are directed to pay the balance of the purchase price, without interest, within 30 days from receipt hereof while respondents are ordered to accept said payment and turn over to complainants the unit subject of said contract to sell.

Petitioners elevated the case to the Office of the President. Senior Deputy Executive Secretary Leonardo A. Quisumbing rendered a decision dismissing petitioners’ appeal. He also denied petitioners’ motion for reconsideration in a Resolution. Petitioners filed with the Supreme Court a special civil action for certiorari assailing the decision of the Senior Deputy Executive Secretary, Office of the President. The Supreme Court referred the case to the Court of Appeals for proper disposition.

Court of Appeals’ decision dismissing the petition,that the failure of petitioners to give respondents a copy of the contract to sell sued upon, despite repeated demands therefor. Petitioners filed with the Court of Appeals a motion for reconsideration. However, the court denied the motion. Hence this petition.

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Issues:

Whether or not respondents may suspend payment of their monthly amortizations due to failure of petitioners to furnish them copy of the contract to sell.

Held:

The Court find no compelling reason to disturb the factual findings of the Court of Appeals, The private respondents are entitled to a copy of the contract to sell, otherwise they would not be informed of their rights and obligations under the contract. When the Sadhwanis parted with more than one third of the purchase price for the condominium unit, the contract to sell, or what it represents is concrete proof of the purchase and sale of the condominium unit.

TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents.

G.R. No. 119255. April 9, 2003

Facts:

Valdes-Choy advertised for sale her house and lot at Makati City. Chua responded to the advertisement and agreed on a purchase price of P10,800,000.00 payable in cash. Valdes-Choy received from Chua a check for P100,000.00. The receipt signed by Valdes-Choy as seller, and Chua as buyer. Chua secured from Philippine Bank of Commerce (“PBCom”) a manager’s check for P480,000.00. Strangely, Chua gave PBCom a verbal stop payment order claiming that this manager’s check for P480,000.00 “was lost and/or misplaced.” On the same day, Assistant Vice–President notified in writing the PBCom Operations Group of Chua’s stop payment order. Chua and Valdes-Choy met with their counsels to execute documents and arrange the payments. Valdes-Choy as vendor and Chua as vendee signed two Deeds of Absolute Sale. The first Deed of Sale covered the house and lot for the purchase price of P8,000,000.00. The second Deed of Sale covered the furnishings and movable properties in the house for the purchase price of P2,800,000.00. The parties also computed the capital gains tax to amount to P485,000.00.

Parties met again at the office of Valdes-Choy’s counsel. Chua handed to Valdes-Choy the PBCom manager’s check for P485,000.00 so she could pay the capital gains tax. Valdes-Choy issued a receipt showing that Chua had a remaining balance of P10,215,000.00 after deducting the advances made by Chua. Valdes-Choy, accompanied by Chua, deposited the P485,000.00 manager’s check to her account with Traders Royal Bank. She then purchased a Traders Royal Bank manager’s check for the capital gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choy’s counsel and handed the Traders Royal Bank check to the counsel who undertook to pay the capital gains tax. It was then Chua showed to Valdes-Choy a PBCom manager’s check for P10,215,000.00 representing the balance. But Chua did not give the PBCom manager’s check to Valdes-Choy because the TCT was still registered in the name of Valdes-Choy. Chua required to be registered first in his name before he would turn over the check to Valdes-

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Choy. This angered Valdes-Choy who tore up the Deeds of Sale, claiming that what Chua required was not part of their agreement.

Chua confirmed his stop payment order by submitting to PBCom an affidavit of loss of the PBCom Manager’s Check for P480,000.00. PBCom Assistant Vice-President testified that Chua verbally advised the bank for stop-payment order with the bank. Valdes-Choy suggested to her counsel to break the impasse Chua should deposit in escrow the P10,215,000.00 balance. Upon such deposit, Valdes-Choy was willing to cause the issuance of a new TCT in the name of Chua even without receiving the balance of the purchase price. Valdes-Choy believed this was the only way she could protect herself if the certificate of title is transferred in the name of the buyer before she is fully paid. Valdes-Choy’s counsel promised to relay her suggestion to Chua and his counsel, but nothing came out of it.

Chua filed a complaint for performance against Valdes-Choy the trial court dismissed it. Chua re-filed his complaint for specific performance with damages. The trial court rendered judgment in favor of Chua, in applying the provisions of Article 1191 of the new Civil Code, an action for specific performance where the plaintiff, as vendee, wants to pursue the sale. Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. Chua in his Memorandum raises the issue to the Supreme Court.

Issues:

(1) Whether the transaction between Chua and Valdes-Choy is a perfected contract of sale or a mere contract to sell,

(2) Whether Chua can compel Valdes-Choy to cause the issuance of a new TCT in Chua’s name even before payment of the full purchase price.

Held:

(1) The court finds no reason to disturb the ruling of the Court of Appeals. Nevertheless, in order to put to rest all doubts on the matter, the court holds that the agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale. A perusal of the Receipt shows that the true agreement between the parties was a contract to sell.

(2) In a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. In this case, the suspensive condition is the full payment of the purchase price by Chua.

It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price. In a contract to sell, the seller is not obligated to transfer ownership to the buyer. Neither is the seller obligated to cause the issuance of a new certificate of title in the name of the buyer. However, the seller must put all his papers in proper order to the point that he is in a position to transfer ownership of the real property to the buyer upon the signing of the contract of sale.

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Valdes-Choy was in a position to comply with all her obligations as a seller under the contract to sell. First, she already signed the Deeds of Sale in the office of her counsel in the presence of the buyer. Second, she was prepared to turn-over the owner’s duplicate of the TCT to the buyer, along with the tax declarations and latest realty tax receipt. Clearly, at this point Valdes-Choy was ready, able and willing to transfer ownership of the Property to the buyer as required by the contract to sell, and by Articles 1458 and 1495 of the Civil Code to consummate the contract of sale. But such full payment gives rise to Chua’s right to demand the execution of the contract of sale.

ISAIAS F. FABRIGAS and MARCELINA R. FABRIGAS, Petitioners, VS. SAN FRANCISCO DEL MONTE, INC., Respondent. G.R. No. 152346 November 25, 2005

Facts:

San Francisco Del Monte, Inc. entered into an agreement, to sell to Isaias and Marcelina Fabrigas a residential land. After paying downpayment, Spouses Fabrigas took possession of the property but failed to make any installment payments on the balance of the purchase price. Due to the letter of demands and the notice for cancellation of the contract made by Del Monte, Marcelina Fabrigas remitted P13,000.00 and another P12,000.00.

With this happening Marcelina and Del Monte entered into another agreement covering the same property but under restructured terms of payment. Spouses Fabrigas made irregular payments, equivalent to nine (9) installments. Del Monte required petitioners to satisfy said amount immediately. Petitioners only paid the amount of P10,000.00 but Del Monte refused to accept, for the reason that that Contract to Sell (No. 2482-V) had already been previously cancelled. Del Monte sent a letter demanding the payment of accrued installments under new Contract to Sell representing the payments made under the restructured contract, Del Monte allowed petitioners a grace period of thirty (30) days within which to pay the amount asked to avoid rescission of the contract. For failure to pay, Del Monte notified petitioners on March 30, 1989 that Contract to Sell had been cancelled and demanded that petitioners vacate the property. Del Monte instituted an action for Recovery of Possession with Damages against Spouses Fabrigas before the RTC, Makati City. The trial court rendered a Decision upholding the validity of the latest Contract to Sell (No. 2491-V) and ordering Spouses Fabrigas either to complete payments or to vacate the property. Fabrigas elevated the matter to the Court of Appeals, arguing that the trial court should have upheld the validity and existence of Contract to Sell No. 2482-V instead and nullified Contract to Sell No. 2491-V. The Court of Appeals rejected this argument on the ground that Contract to Sell No. 2482-V had been rescinded pursuant to the

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automatic rescission clause therein. While the Court of Appeals declared Contract to Sell No. 2491-V as merely unenforceable for having been executed without petitioner Marcelina’s signature, it upheld its validity upon finding that the contract was subsequently ratified.

Issue:

(1) Was Contract to Sell No. 2482-V extinguished through rescission or was it novated by the subsequent Contract to Sell No. 2491-V? (2) If Contract to Sell No. 2482-V was subsequently novated by Contract to Sell No. 2491-V, are petitioners liable for breach under the subsequent agreement?

Held:

(1) Petitioners’ contention that none of Del Monte’s demand letters constituted a valid rescission of Contract to Sell No. 2482-V is correct. Being an unenforceable contract, Contract to Sell No. 2491-V is susceptible to ratification. As found by the courts below, after being informed of the execution of the contract, the husband, petitioner Isaias Fabrigas, continued remitting payments for the satisfaction of the obligation under Contract to Sell No. 2491-V. These acts constitute ratification of the contract. Such ratification cleanses the contract from all its defects from the moment it was constituted. (2) In sum, Contract to Sell No. 2491-V is valid and binding. There is nothing to prevent respondent Del Monte from enforcing its contractual stipulations and pursuing the proper court action to hold petitioners liable for their breach thereof.

NATALIA CARPENA OPULENCIA, petitioner, vs. COURT OF APPEALS, ALADIN SIMUNDAC and MIGUEL OLIVAN, respondents.

G.R. No. 125835. July 30, 1998

Facts:

Aladin Simundac and Miguel Oliven alleged that Natalia Carpena Opulencia executed in their favor a “CONTRACT TO SELL”, but failed to comply with her obligations under the contract even plaintiffs paid a downpayment, [Private respondents] prayed that [petitioner] be ordered to perform her contractual obligations and to further pay damages. A petition for probate was filed with the Regional Trial Court, Laguna.

The petitioner, instead of submitting her evidence, filed a Demurrer to Evidence. That the contract to sell was null and void for want of approval by the probate court. The contract was subject to a suspensive condition, which was the probate of the will of defendant’s father

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Demetrio Carpena. An Opposition was filed by [private respondents]. It appears that in the court a quo granted the demurrer to evidence and dismissed the complaint.

The trial court’s order of dismissal was elevated to the Court of Appeals by private respondents. The Court of Appeals finds that the contract to sell is valid and binding between the parties, the court cannot as yet order appellee to perform her obligations under the contract because the result of the administration proceedings of the testate Estate of Demetrio Carpena has to be awaited. Hence the court confines adjudication to merely declaring the validity of the questioned Contract to Sell

Issue:

Whether or not the Contract to Sell dated executed by the petitioner and private respondents without the requisite probate court approval is valid.

Held:

The court considered the CONTRACT TO SELL executed by appellee in favor of appellants as valid and binding, because petitioner entered into the Contract to Sell in her capacity as an heiress, she represented herself as the “lawful owner” and seller of the subject parcel of land. She also explained the reason for the sale to be “difficulties in her living” conditions and consequent “need of cash.” These representations clearly evince that she was not acting on behalf of the estate under probate when she entered into the Contract to Sell.

Sps. LORENZO V. LAGANDAON and CECILIA T. LAGANDAON and OVERSEAS AGRICULTURAL DEVELOPMENT CORPORATIONpetitioners, vs. COURT OF APPEALS, Sps. MELITON BANOYO and ASUNCION P. BANOYO, Sps. DEMETRIO B. BATAYOLA and ANITA A. BATAYOLA, BONIFACIO VASQUEZ, Sps. ROMEO M. GOMEZ and ESTER M. GOMEZ, AURORA GOMEZ, Sps. CARLOS V. DAVID and MANUELA C. DAVID, Sps. LEONIDO D. BONGCO and FE V. BONGCO, Sps. RAFAEL S. SOLIDUM and LUCENDA M. SOLIDUM, Sps. RAYMUNDO SITJAR and LUCIA SITJAR AND Sps. BENJAMIN V. VIVA and GILDA VIVA, respondents.

G.R. Nos. 102526-31. May 21, 1998

Facts:

Lorenzo V. Lagandaon Defendants-purchasers refused further payments on their amortization to Pacweld Steel Corporation (Pacweld), together with other lot buyers filed an action for Specific Performance with the Court of First Instance of Manila, Court’s judgment rendered in favor of the plaintiffs and against the defendants.

Although the petitioners’ cause of action was premised on the existence of an alleged modified contract to sell, the Court of Appeals (CA) observed that petitioners did not challenge the trial

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court’s finding that no such contract existed. The CA further ruled that petitioners could no longer raise on appeal their alleged ownership rights over the lots in litigation by the Development Bank of the Philippines (DBP) and from the execution sale. To do so would change their theory before the trial court that herein private respondents defaulted their obligation under the alleged modified contract to sell.

CA held that petitioners had no right to demand the rescission of the various contracts to sell on the basis of the alleged modified contracts to sell which were inexistent. It affirmed the trial court’s decision dismissing the complaint, but deleted the award of attorney’s fees. Hence this petition for review.

Issues:

(1) Whether there were modified contracts to sell

(2) Whether petitioners assumed the obligations of Pacweld.

Held:

(1) No Modified Contracts to Sell. That the original contract to sell between Pacweld and private respondents became “stale” or “inoperative” when DBP acquired the disputed parcels of land, the contracts to sell had indeed been rendered stale because of the foreclosure sale does not necessarily imply that orally modified contracts to sell were subsequently entered into between petitioners as buyers of the foreclosed property, on the one hand, and private respondents as purchasers from Pacweld Corporation, on the other.

(2) Petitioners’ liability, if at all, is limited to their unpaid subscriptions to Pacweld Steel Corporation as stockholders thereof. As a general rule, every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate.

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs.THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents.G.R. No. 103577 October 7, 1996

Facts:

Romulo Coronel executed a "Receipt of Down Payment" in favor of plaintiff Ramona Patricia Alcaraz. Concepcion D. Alcaraz mother of Ramona, paid the down payment. The Property was transferred in their names. Coronels sold the same property to intervenor-appellant Catalina B. Mabanag after paying the downpayment (P300,000.00). Coronels canceled and rescinded the contract with Ramona by depositing the down payment paid by Concepcion in the bank in trust

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for Ramona Patricia Alcaraz. Concepcion, et al., filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens.

Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City. Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina, a new title over the subject property was issued in the name of Catalina. Before the trial court ( RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Specific performance is rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale, to immediately deliver the said document of sale to plaintiffs and upon receipt, ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title in the name of intervenor is canceled and declared to be without force and effect.

Defendants and intervenor and all other persons claiming are ordered to vacate the subject property and deliver possession thereof to plaintiffs. The Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of defendants and intervenors but it was dismissed. A motion for reconsideration was filed by petitioner before the RTC but the same was denied. Petitioners interposed an appeal, but the Court of Appeals rendered its decision fully agreeing with the trial court. Petitioners filed petition to the Supreme Court.

Issue:

Whether or not a complaint for specific performance to compel petitioners to consummate the sale of a parcel of land is binding.

Held:

The court DISMISSED the petition and AFFIRMED the court of Appeals judgment. Based on the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544.

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

Should if be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in Registry of Property.Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the person who presents the oldest title, provided there is good faith.

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected, prior to that between petitioners and Catalina B. Mabanag, and it was correctly upheld by both the courts below. By the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale because as early as a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale he knew that the same property had already been previously

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sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property.

AEROSPACE CHEMICAL INDUSTRIES, INC., petitioner, vs. COURT OF APPEALS, PHILIPPINE PHOSPHATE FERTILIZER, CORP., respondents.G.R. No. 108129. September 23, 1999

Facts:

Aerospace Industries, Inc. purchased sulfuric acid from Philippine Phosphate Fertilizer Corporation (Philphos). Petitioner (as buyer) secures the means of transport to pick-up the purchases from private respondent’s load ports. Per agreement, one load from Basay, Negros Oriental storage tank, while the remaining should be retrieved from Sangi, Cebu. Philpos sent an advisory letter to petitioner to withdraw the sulfuric acid purchased at Basay it had been incurring incremental expense (P2,000.00) for each day of delay in shipment.

Petitioner chartered M/T Sultan Kayumanggi (by Ace Bulk Head Services), to carry the agreed volumes of freight from designated loading areas. But said vessel heavily tilted the master of the ship stopped further loading. Thereafter, the vessel underwent repairs. It again docked at Sangi, Cebu, but again, the vessel tilted. Further loading was aborted. Two survey reports attested that M/T Sultan Kayumanggi sank while carrying sulfuric acid on board.

Petitioner’s counsel wrote to private respondent demand letter for the delivery of the purchases remaining, or legal action would commence. Petitioner filed a complaint for specific performance and/or damages before the Regional Trial Court of Pasig. Private respondent filed its answer with counterclaim, stating that it was the petitioner who was remiss in the performance of its obligation in arranging the shipping requirements of its purchases and, as a consequence, should pay damages. The courts judgment is rendered in favor of plaintiff and against defendant, directing the latter to pay the former damages.

On appeal by private respondent, the C.A. reversed the decision of the trial court, the petitioner is found guilty of delay and negligence in the performance of its obligation. It dismissed the complaint of petitioner and ordered it to pay damages representing the counterclaim of private respondent.

Issues:

(1) Did the respondent court err in holding that the petitioner committed breach of contract, considering that they paid the full value of its purchases, yet received only a portion of said purchases?

(2) Should expenses for the storage and preservation of the purchased fungible goods, be on seller’s account pursuant to Article 1504 of the Civil Code?

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Held:

(1) Article 1170 of Civil Code, ‘Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages..’ as pointed out earlier, petitioner is guilty of delay, after private respondent made the necessary extrajudicial demand by requiring petitioner to lift the cargo at its designated loadports. When petitioner failed to comply with its obligations under the contract it became liable for its shortcomings. It is clear from the plaintiff’s letters to the defendant that it wanted to send the ‘M/T Don Victor’ only if the defendant would confirm that it was ready to deliver 500 MT. This, in spite the representations made by the defendant for the hauling thereof as scheduled and its reminders that any expenses for the delay would be for the account of the plaintiff.” Therefore constrained to declare that the respondent court did not err when it absolved private respondent from any breach of contract.

(2) Article 1504 of the Civil Code clearly states: “Unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer’s risk whether actual delivery has been made or not, except that: (2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party at fault.” The court quotes with approval the findings of the appellate court, thus: “. . . The defendant [herein private respondent] was not remiss in reminding the plaintiff that it would have to bear the said expenses for failure to lift the commodity for an unreasonable length of time. But even assuming that the plaintiff did not consent to be so bound, the provisions of Civil Code come in to make it liable for the damages sought by the defendant.

AMON TRADING CORPORATION and JULIANA MARKETING, P e t i t i o n e r s,VS. HON. COURT OF APPEALS and TRI-REALTY DEVELOPMENT AND CONSTRUCTION CORPORATION, R e s p o n d e n t s

G.R. No. 158585 December 13, 2005

Facts:

Lines & Spaces, represented by Eleanor Bahia Sanchez, order from petitioner Amon Trading Corporation, and from Juliana Marketing bags of cement for Tri-Reality development and construction, but it found out that both cannot deliver all its balance and refunded the amount of undelivered bags of cement to Lines and Spaces in representation of Eleanor Sanchez, but Sanchez had already fled abroad, private respondent filed this case for sum of money against petitioners and Lines & Spaces.

Regional Trial Court of Quezon City, found Lines & Spaces solely liable to private respondent and absolved petitioners of any liability. Tri-Realty partially appealed from the trial court’s

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decision absolving Amon Trading Corporation and Juliana Marketing of any liability to Tri-Realty. In the presently assailed Decision, the Court of Appeals reversed the decision of the trial court and held petitioners Amon Trading Corporation and Juliana Marketing to be jointly and severally liable with Lines & Spaces for the undelivered bags of cement.

Issues:

(1) Whether or not Lines & Spaces is the private respondent’s agent

(2) Whether or not there is privity of contract between petitioners and private respondent.

Held:

(1) There is likewise a dearth of evidence to show that the case at bar is an open-and-shut case of agency between private respondent and Lines & Spaces. Neither Eleanor Sanchez nor Lines & Spaces was an agent for private respondent, but rather a supplier for the latter’s cement needs. All the quibbling about whether Lines & Spaces acted as agent of private respondent is inane because petitioners took orders from Eleanor Sanchez who, after all, was the one who paid them the manager’s checks for the purchase of cement. Sanchez represented herself to be from Lines & Spaces/Tri-Realty, purportedly a single entity.

(2) There is no paper trail linking private respondent to petitioners thereby leaving the latter clueless that private respondent was their true client. In this case, it was the representative of Lines & Spaces who signed the check vouchers. For its failure to establish any of these deterrent measures, private respondent incurred the risk of not being able to recoup the value of the materials it had paid good money for. There was no sufficient showing that petitioners knew that the delivery sites were that of private respondent and for another thing, the deliveries were made by petitioners’ men who have no business nosing around their client’s affairs.

EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, vs.MAYFAIR THEATER, INC., respondent.G.R. No. 133879 November 21, 2001Facts:

Carmelo & Bauermann, Inc. entered into a Contract of Lease with Mayfair Theater Inc. ("Mayfair") for a period of 20 years. The lease covered a portion of the second floor and mezzanine of a two-storey used as a movie house known as Maxim Theater. Mayfair entered into a second Contract of Lease with Carmelo for the lease of another portion of the latter's property — of the second floor of the two-storey building, and two store spaces on the ground floor and the mezzanine, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was likewise for a period of 20 years.

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Both leases, granting Mayfair a right of first refusal to purchase the properties. However, the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. ("Equatorial") without their first being offered to Mayfair. Mayfair filed a Complaint before the Regional Trial Court of Manila for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c) damages. The lower court rendered a Decision in favor of Carmelo and Equatorial. On appeal, the Court of Appeals (CA) completely reversed and set aside the judgment of the lower court. Mayfair filed a Motion for Execution, which the trial court granted. However, Carmelo could no longer be located

Issues: Whether Equatorial is entitled to back rentals;

Held: Rent is a civil fruit that belongs to the owner of the property producing it. Respondent's opposition to the transfer of the property by way of sale to Equatorial was a legally sufficient impediment that effectively prevented the passing of the property into the latter's hands. Decision in Court of Appeals shows that petitioner is not entitled to back rentals, because it never became the owner of the disputed properties due to a failure of delivery. And even assuming arguendo that there was a valid delivery, petitioner's bad faith negates its entitlement to the civil fruits of ownership, like interest and rentals.

NORKIS DISTRIBUTORS, INC., petitioner, vs.THE COURT OF APPEALS & ALBERTO NEPALES, respondents.

G.R. No. 91029 February 7, 1991

Facts:

Avelino Labajo the Branch Manager Norkis Distributors in Bacolod City Alberto Nepales bought from the said branch a brand new Yamaha Wonderbike motorcycle. And was payable by means of Guaranty from the Development Bank of the Philippines (DBP). Hence, Labajo issued Norkis Sales Invoice showing that the contract of sale had been perfected. Nepales signed the sales invoice his conformity with the terms of the sale. however, the motorcycle remained in Norkis' possession.

A registration certificate in Alberto Nepales was issued by the Land Transportation Commission. Nepales paid the registration fees, evidenced by an official receipt. The motorcycle was delivered to Julian Nepales was allegedly the agent of Alberto Nepales but the latter denies it. Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices. The motorcycle met an accident the unit was driven by Zacarias Payba. The unit was a total wreck; it was returned, and stored inside Norkis' warehouse.DBP released the proceeds of private respondent's motorcycle loan to Norkis. Nepales demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with damages against Norkis in the Regional Trial Court of Negros

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Occidental. Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit.

The lower court’s decision is in favor of private respondent. The defendants are ordered to pay solidarity to the plaintiff the present value of the motorcycle plus interest. In lieu of paying the present value of the motorcycle, the defendants can deliver to the plaintiff a brand-new motorcycle of the same brand, kind, and quality as the one which was totally destroyed.On appeal, the Court of appeals affirmed the appealed judgment on, but deleted the award of damages and denied Norkis' motion for reconsideration. Hence, this Petition for Review.

Issue:

Whether there had already been a transfer of ownership of the motorcycle to private respondent at the time it was destroyed.

Held:

The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of delivering the thing. The act, without the intention, is insufficient. The registration in the name of plaintiff-appellee with the Land Registration Commission was not to transfer to Nepales the ownership and dominion over the motorcycle, but only to comply with the requirements of the Development Bank of the Philippines for processing private respondent's motorcycle loan.

Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable to this case, for there was neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-known doctrine of res perit domino.

VIRGINIA A. PEREZ, petitioner, vs. COURT OF APPEALS and BF LIFEMAN INSURANCE CORPORATION, respondents.

G.R. No. 112329. January 28, 2000

Facts:

Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation. Rodolfo Lalog, (agent of BF) visited and convinced Perez to avail again of additional insurance coverage of P50,000.00 Perez accomplished an application form. Virginia A. Perez, Primitivo’s wife, paid P2,075.00 to Lalog the amount received was a "deposit." Lalog lost the application form by

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Perez and he asked the latter to fill up another application form. Perez was required medical examination, which he passed. Primitivo Perez died.

Without knowing that Perez died, BF Lifeman Insurance approved the application and issued the policy for the P50,000.00 2 days after Primitivo Perez’s death. Petitioner Virginia Perez went to Manila to claim the benefits she was paid under the first insurance policy the company refused to pay the claim under the additional policy coverage of P50,000.00. That the additional insurance policy had not been perfected at the time of the death of Primitivo Perez.

Consequently, the insurance company refunded the amount of P2,075.00 which Virginia Perez had paid. BF Lifeman Insurance Corporation filed a complaint against Virginia A. Perez seeking the rescission and declaration of nullity of the insurance contract in question. Petitioner Virginia A. Perez, averred that the deceased had fulfilled all his prestations under the contract. She then filed a counterclaim against private respondent for the collection of actual damages, exemplary damages, attorney’s fees and expenses for litigation.

The trial court rendered a decision in favor of petitioner. The Court of Appeals, reversed the decision of the trial court that the insurance contract could not have been perfected at the time that the policy was issued, Primitivo was already dead. Petitioner’s motion for reconsideration having been denied by respondent court, the instant petition for certiorari was filed on the ground that there was a consummated contract of insurance between the deceased and BF Lifeman Insurance Corporation and that the condition that the policy issued by the corporation be delivered and received by the applicant in good health, being dependent upon the will of the insurance company, and is therefore null and void.

Issue:

Whether or not the recission presupposes the existence of a valid contract.

Held:

The Court held that it is True, rescission presupposes the existence of a valid contract. A contract which is null and void is no contract at all. Hence could not be the subject of rescission.

SPOUSES GOMER and LEONOR RAMOS, Petitioners, Vs. SPOUSES SANTIAGO and MINDA HERUELA, and SPOUSES CHERRY and RAYMOND PALLORI, Respondents.

G.R. No. 145330 October 14, 2005

Facts:

Gomer and Leonor Ramos own a parcel of land, in Cagayan de Oro City, made an agreement with Santiago and Minda Heruela. The agreement is a contract of conditional sale that the

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contract is a sale on installment basis. The spouses Ramos assert that the spouses Heruela’s unjust refusal to pay the balance of the purchase price caused the cancellation of the Deed of Conditional Sale, and that the spouses Heruela were already occupying the land. Cherry and Raymond Pallori (“spouses Pallori”), daughter and son-in-law, respectively, of the spouses Heruela, erected another house on the land. Spouses Ramos filed a complaint for Recovery of Ownership with Damages against the spouses Heruela. The spouses Ramos allege that out of the P15,300 consideration for the sale of the land, the spouses Heruela paid only P4,000.

The spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos. The trial court ruled that the contract is a sale by installment. And that the spouses Ramos are ordered to execute the corresponding Deed of Sale in favor of defendants after the latter have paid the remaining balance and further ordered to pay defendants the sum of Attorney’s fees and litigation expenses. The trial court denied the spouses Ramos’ motion for reconsideration. Hence, this petition.

Issues:

(1) Whether 1592 of the Civil Code are applicable to the present case; (2) Whether the spouses Ramos have a right to cancel the sale; Held:

(1) Art. 159 is applicable to contracts of sale. The agreement is a contract to sell.

(2) However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela. The records do not show when the spouses Ramos made a demand from the spouses Heruela for payment of the balance of the purchase price. The complaint only alleged an “unjust refusal to pay in full the purchase price has caused the Deed of Conditional Sale to be rescinded, revoked and annulled.’’ The complaint for “reconveyance”, the spouses Ramos erroneously considered an action for rescission of the contract.

UNION MOTOR CORPORATION, petitioner-appellant, vs. THE COURT OF APPEALS, JARDINE-MANILA FINANCE, INC., SPOUSES ALBIATO BERNAL and MILAGROS BERNAL, respondents-appelles.

G.R. No. 117187 July 20, 2001

Facts:

Bernal spouses purchased from (petitioner) Union Motor Corporation one Cimarron Jeepney to be paid in installments and executed a promissory note and a deed of chattel mortgage in favor

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of the petitioner, and entered into a contract of assignment of the promissory note and chattel mortgage with Jardine-Manila Finance, Inc through Manuel Sosmeña, an agent of the petitioner, although the respondent spouses have not yet physically possessed the vehicle, Sosmeña required them to sign the receipt as a condition for the delivery of the vehicle.Spouses continued paying the installments even if the subject motor vehicle remained undelivered inasmuch as Jardine-Manila Finance, Inc. promised to deliver the subject jeepney. The respondent spouses have paid a total of worth of installments before they discontinued paying on account of non-delivery of the subject motor vehicle, the reason why the vehicle was not delivered was due to the fact that Sosmeña allegedly took the subject motor vehicle in his personal capacity.

Jardine-Manila Finance, Inc., filed a complaint for a sum of money, against the respondent Bernal spouses before the then Court of First Instance of Manila. The complaint was amended and transferred to the Regional Trial Court of Makati to include petitioner Union Motor Corporation as alternative defendant, after the petitioner filed its answer, the respondent spouses filed their amended answer with cross-claim against the former and counterclaim against Jardine-Manila Finance, Inc. The respondent spouses presented witnesses in support of their defense and counterclaim against the plaintiff and cross-claim against the petitioner. The trial court deemed the presentation of the said witness as having been waived by the petitioner.

Trial court rendered a decision ordering. Not satisfied the petitioner interposed an appeal before the Court of Appeals while the respondent spouses appealed to hold the petitioner solidarily liable with Jardine-Manila Finance, Inc. The appellate court denied both appeals and affirmed the trial court’s decision. Hence this petitiom

Issues:

Whether there has been a delivery, physical or constructive, of the subject motor vehicle.

Held:

The respondent Bernal spouses should bear the loss thereof in accordance with Article 1504 that when the ownership of goods is transferred to the buye, the goods are at the buyer’s risk. But Bernal spouses never came into possession of the subject motor vehicle. Thus, it is but appropriate that they be reimbursed by the petitioner of the initial payment which they made. They also claim that Jardine-Manila Finance, Inc., and the petitioner conspired to defraud and deprive them of the subject motor vehicle for which they suffered damages. The court ruled in favor of the respondent Bernal spouses. Undisputed facts that the respondent Bernal spouses did not come into possession of the subject Cimarron jeepney that was supposed to be delivered to them by the petitioner.

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SPS. ROMULO DELA CRUS & DELIA DE LA CRUZ, et al. VS. ASIAN CONSUMER OF INDUSTRIAL FINANCE CORP. & THE COURT OF APPEALS

G.R. 94828 September 20, 1992

Facts:

ASIAN initiate a petition for extra- judicial foreclosure of the chattel mortgage. But the sheriff failed to recover the motor vehicle Romulo and Delia dela Cruz to surrender it, until petitioners delivered the unit to ASIAN. The motion to recover the balance of the purchase price was instituted.

Issue:

May a chattel mortgage, after opting to foreclose the mortgage but failing afterward to sell the property at public auction, still sue to recover the unpaid balance of the purchase price?

Held:

ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. Thus, the delivery of possession of the mortgaged property of possession of the mortgaged property the mortgagee, the appellee, can only extinguish appellants liability if the mortgaged property when it recovered possession. It is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor of an balance of the purchaser’s outstanding obligation not satisfied by the sale. ( article 1484 of Civil Code). If the vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a timely disavowal of the remedy for foreclosure, and the vendor can still sue for specific performance. Consequently, in the case at bar, there being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for collection of unpaid balance of the purchase price.

RAYMUNDO TOLENTINO & LORENZO ROÑO, Substituted by the Heirs, represented by EMMANUELA ROÑO, as Attorney-in-factVS.Court of APPEALS, etc.

G.R. No. 128759 August 1, 2002

Facts:

Spouses Pedro and Josefina de Guzman were the registered owners of a parcel of land covered by Transfer Certificate Title of the Register of Deed of Quezon City. They obtained a loan from the Rehabilitation Finance Corp. (RFC), Development Bank of the Philippines (DBP), and executed a mortgage as security therefor; they failed to pay the obligation, hence the mortgage

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was foreclosed. Before the redemption period expired. The De Guzman spouses obtained another loan for P18,000, this time from petitioners Raymundo Tolentino and Lorenza Roño, to redeem the property. The parties agreed that repayment would be for a period of 10 years at P150 a month.

The loan with RFC was paid and mortgage was cancelled. Tolentino and Roño, on representation that they needed a security for the loan, requested the De Guzman spouses to sign a Deed of Promise to Sell. They again asked respondents spouses to sign another document. A deed of Absolute Sale, on representation that they wanted the latter’s children to answer for the loan in the event of their parent’s untimely death. Armed with the Deed of Sale, petitioner’s secured the cancellation of TCT 20248T-105 and TCT69164 was issued in their name instead.

Pedro de Guzman died, his widow and their children tried to settle the remaining balance of the loan. Tolentino and Roño, feigning inability to remember the actual arrangements agreed to recovery the property on condition that respondent pay the actual market value obtaining in 1971. Upon verification with the Q.C. registry of Deeds, the De Guzmans found that the title was already in the names of Tolentino and Roño. Consequently, the de Guzamans filed a complaint for declaration of sale as equitable mortgage and reconveyance of property with damages, at the Pasig City RTC.

The court decided in favor of the de Guzmans. Petitioners appealed to the Court of Appeals (C.A), which sustained the trial court’s decision. Petitioners’ motion for reconsideration was denied. Hence, this instant petition.

Issues:

Whether or not the Court of Appeals erred in applying Art. 1602

Held:

The court held that nothing in Article 1602 provision applies only in the absence of an express agreement between the parties. Said provision is applicable in several cases despite the presence of an express agreement between the parties. The contract of sale with right to repurchase was in reality intended to secure the payment of loan. In ruling in favor of respondent and holding that in applying Article 1602 the transaction was an equitable mortgage, the real intention of respondent in signing the document was to provide security for the loan and not to transfer ownership over the property.

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CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A. TULIAO, CORAZON A. JALECO and LILIA A. OLAYON vs. SPOUSES ANTONIO PADUA and EUGENIA PADUA

G.R. No. 165420. June 30, 2005

Facts:

Spouses Eugenia and Antonio Padua owned a 216.40 sq. m. lot with an unfinished residential house Thereafter, Concepcion Ainza bought one-half of an undivided portion of the property from her daughter, Eugenia and the latter’s husband, Antonio, for P100,000.00. No Deed of Absolute Sale was executed to evidence the transaction, but cash payment was received by the respondents, and ownership was transferred to Concepcion through physical delivery to Natividad Tuliao.

However, respondents caused the subdivision of the property into three portions and registered it in their names in violation of the restrictions annotated at the back of the title. Antonio claimed that his wife, Eugenia, admitted that Concepcion offered to buy 1/3 of the property who gave her small amounts over several years which totaled P100,000.00 by 1987 and for which she signed a receipt.

Issue:

Whether there was a valid contract of sale between Eugenia and Concepcion.

Held:

There was a perfected contract of sale between Eugenia and Concepcion. The records show that Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer and agreed to pay P100,000.00 as consideration. The contract of sale was consummated when both parties fully complied with their respective obligations. Eugenia delivered the property to Concepcion, who in turn, paid Eugenia the price of P100,000.00, as evidenced by the receipt. The verbal contract of sale between Eugenia and Concepcion has been completed, executed or partially consummated, as in this case, its enforceability will not be barred by the Statute of Frauds, which applies only to an executory agreement. Thus, the contract of sale between Eugenia and Concepcion being an oral contract, the action to annul the same must be commenced within six years from the time the right of action accrued. It is binding unless annulled. Antonio failed to exercise his right to ask for the annulment within the prescribed period, hence, he is now barred from questioning the validity of the sale between his wife and Concepcion.

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SPS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION,

G.R. No. 139523. May 26, 2005

Facts:

Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173, 800.00 to purchase a house and lot located at Pulang Lupa, Las Piñas, To secure payment, a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings & Loan Association. National Hone Mortgage Finance Corporation (NHMFC) purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan Association for P173, 800.00.

Petitioner Leticia Cannu agreed to buy the property for P120, 000.00 and to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty. Several payments were made leaving a balance of P45, 000.00. A Deed of Sale with Assumption of Mortgage Obligation was made and entered into by and between spouses Fernandina and Gil Galang and spouses Leticia and Felipe Cannu over the house and lot. Petitioners immediately took possession and occupied the house and lot. Despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do so.

Issues:

(1) Whether or not the breach of the obligation is substantial.

(2) Whether or not there was substantial compliance with the obligation to pay the monthly amortization with NHMFC.

Held:

(1) In the case at bar, we find petitioners’ failure to pay the remaining balance of P45,000.00 to be substantial. Taken together with the fact that the last payment made eighteen months before the respondent Fernandina Galang paid the outstanding balance of the mortgage loan with NHMFC, the intention of petitioners to renege on their obligation is utterly clear.

(2) The petitioners were not religious in paying the amortization with the NHMFC. As admitted by them, in the span of three years, their payments covered only thirty months. This, indeed, constitutes another breach or violation of the Deed of Sale with Assumption of Mortgage. On top of this, there was no formal assumption of the mortgage obligation with NHMFC because of the lack of approval by the NHMFC on account of petitioners’ non-submission of requirements in order to be considered as assignees/successors-in-interest over the property covered by the mortgage obligation.

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EDILBERTO CRUZ and SIMPLICIO CRUZ, petitioners, vs. BANCOM FINANCE CORPORATION (NOW UNION BANK OF THE PHILIPPINES), respondent.

G.R. No. 147788. March 19, 2002]

Facts:

Norma Sulit was introduced by Candelaria Sanchez to Edilberto and Simplicio Cruz and offered to purchase the parcel of land owned by the Cruz brothers. The asking-price for the land was P700, 000, but Sulit had only P25,000 which Edilberto accepted as earnest money with the agreement that title would pass to Sulit on the payment of the balance. Sulit failed to pay the balance. Capitalizing on the close relationship of Sanchez with the brothers, Sulit succeeded in having the brothers execute a document of sale in favor of Sanchez who would then obtain a bank loan in her name using the said land as collateral. On the same day, Sanchez executed another Deed of Absolute Sale in favor of Sulit. Sulit assumed all the obligations of Sanchez to the original owners of the land in a Special Agreement. Unknown to the brothers, Sulit managed to obtain a loan from Bancom secured by a mortgage over the land. Because Sulit failed to pay the purchase price stipulated in the Special Agreement, the brothers filed a complaint for reconveyance. Sulit also defaulted in her payment to the Bank and her mortgage was foreclosed. At the auction sale, Bancom was declared the highest bidder.

Issue:

Whether or not the Deeds of Sale were valid and binding.

Held: Simulation takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings. The former takes place when the parties conceal their true agreement” the law states that simulated contract is void. A relative stimulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or pubic policy binds the parties to their agreement.” The Deeds of Sale were executed merely to facilitate the use of the property as collateral to secure a loan from a bank. Although the Deed of Sale between the brothers and Sanchez stipulated a consideration, there was actually no exchange of money. Moreover, the failure of Sulit to take possession of the property sold to her was a clear badge of simulation that rendered the whole transaction void and without force and effect.

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