ALI AKANG, Petitioner, vs.MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE

G.R. No. 186014June 26, 2013

FACTS:

Akang Ali Akang is a member of the Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the registered land owner.

In 1962, a two-hectare portion of the property was sold by the Akang to the Municipality of Isulan through Mayor Datu Ampatuan for PhP 3000.oo, to be used as a government center.

The Municipality of Isulan immediately took possession of the property and began construction of the municipal building. However, 39 years later in 2001, Akang filed a civil action for Recovery of Possession of Subject Property and/or Quieting of Title thereon and Damages against the Municipality of Isulan.

Akang alleged, among others, that the agreement was one to sell, which was not consummated as the purchase price was not paid.

In its answer, the Municipality of Isulan denied the Akangs allegations, claiming that the Deed of Sale was valid; and that it has been in open, continuous and exclusive possession of the property for 40 years.

The RTC rendered judgment in favor of the Akang. The RTC construed the Deed of Sale as a contract to sell, based on the wording of the contract, which allegedly showed that the consideration was still to be paid and delivered on some future date a characteristic of a contract to sell. In addition, the RTC observed that the Deed of Sale was not determinate as to its object since it merely indicated 2 hectares of the 97,163 sq m lot, which is an undivided portion of the entire property owned by the Akang. The RTC found that segregation must first be made to identify the parcel of land indicated in the Deed of Sale and it is only then that the Akang could execute a final deed of absolute sale in favor of the Municipality of Isulan.

As regards the payment of the purchase price, the RTC found the same to have not been made by the Municipality of Isulan.

The RTC also ruled that the Deed of Sale was not approved pursuant to Section 145 of the Administrative Code for Mindanao and Sulu or Section 120 of the Public Land Act, and that the board resolution appropriating the amount of PhP3,000.oo as payment for the property cannot be considered proof of the sale as said Deed of Sale was not presented for examination and approval of the Provincial Board.

The CA, however, on appeal, sustained the Municipality of Isulans arguments and ruled that the Akang is not entitled to recover ownership and possession of the property as the Deed of Sale already transferred ownership thereof to the Municipality of Isulan. The CA held that the doctrines of estoppel and laches must apply against the Akang, that actual payment was paid. The CA also rules that even if Akang was not paid the consideration, it does not affect the validity of the contract of sale for it is not the fact of payment of the price that determines its validity.

ISSUE:Is Akang correct in contending that the contract is merely a contract to sell and not a contract of sale?

HELD:No. The deed of sale is a valid contract of sale, not a mere contract to sell.

A contract of sale is defined under Article 1458 of the Civil Code:By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent.

The elements of a contract of sale are: (a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price certain in money or its equivalent.

A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:A bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold, whereas in a contract to sell, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until full payment of the purchase price.

The Deed of Sale executed by the petitioner and the respondent is a perfected contract of sale, all its elements being present.

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Even assuming, arguendo, that the petitioner was not paid, such non-payment is immaterial and has no effect on the validity of the contract of sale. A contract of sale is a consensual contract and what is required is the meeting of the minds on the object and the price for its perfection and validity. In this case, the contract was perfected the moment the petitioner and the respondent agreed on the object of the sale the two-hectare parcel of land, and the price Three Thousand Pesos (P3,000.00). Non-payment of the purchase price merely gave rise to a right in favor of the petitioner to either demand specific performance or rescission of the contract of sale.

ROGELIO DANTIS, Petitioner,vs.JULIO MAGHINANG, JR., Respondent.

G.R. No. 191696April 10, 2013

FACTS:

Rogelio alleged that he was the registered owner of a parcel of land covered by TCT No. T-125918, with an area of 5,657 square meters, located in Bulacan. Rogelio claims that he acquired ownership of the property through a deed of extrajudicial partition of the estate of his deceased father, Emilio Dantis, and that he had been paying the realty taxes on the said property. Rogelio alleges in a complaint for quieting of title that Julio, Jr. occupied and built a house on a portion of his property without any right and that demands were made upon Julio, Jr. that he vacate the premises but the same fell on deaf ears. He finally alleges and that the acts of Julio, Jr. had created a cloud of doubt over his title and right of possession of his property.

Julio, Jr. denied the material allegations of the complaint. By way of an affirmative defense, he claimed that he was the actual owner of the subject lot where he was living and that he had been in open and continuous possession of the property for almost 30 years. Julio, Jr. says that the subject lot was once tenanted by his ancestral relatives until it was sold by Rogelios father, Emilio, to his father, Julio Maghinang, Sr. and that he succeeded to the ownership of the subject lot after his father died.

RTC rendered its decision declaring Rogelio as the true owner. The CA reversed.

ISSUES:

1. Was Julio able to prove that his father bought the land from Rogelios father?

2. Are the terms of payment necessary for the perfection of a contract of sale?

HELD:

1. No, Julio was not able to prove by preponderance of evidence that there was perfected contract of sale.

"It is an age-old rule in civil cases that he who alleges a fact has the burden of proving it and a mere allegation is not evidence. After carefully sifting through the evidence on record, the Court finds that Rogelio was able to establish a prima facie case in his favor tending to show his exclusive ownership of the parcel of land... In light of Rogelios outright denial of the oral sale together with his insistence of ownership over the subject lot, it behooved upon Julio, Jr. to contravene the formers claim and convince the court that he had a valid defense. The burden of evidence shifted to Julio, Jr. to prove that his father bought the subject lot from Emilio Dantis.

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By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of, and to deliver, a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale is a consensual contract and, thus, is perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. The essential elements of a contract of sale are: a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) determinate subject matter;and c) price certain in money or its equivalent. The absence of any of the essential elements shall negate the existence of a perfected contract of sale.

Seemingly, Julio, Jr. wanted to prove the sale by a receipt when it should be the receipt that should further corroborate the existence of the sale. At best, his testimony only alleges but does not prove the existence of the verbal agreement. Julio, Jr. miserably failed to establish by preponderance of evidence that there was a meeting of the minds of the parties as to the subject matter and the purchase price.

2. Yes, an agreement on the terms and conditions of payment is necessary to perfect a contract of sale.

"In Swedish Match, AB v. Court of Appeals, the Court ruled that the manner of payment of the purchase price was an essential element before a valid and binding contract of sale could exist. Albeit the Civil Code does notexplicitly provide that the minds of the contracting parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise, there is no sale.38 An agreement anent the manner of payment goes into the price so much so that a disagreement on the manner of payment is tantamount to a failure to agree on the price.

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Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale."

NICOLAS P. DIEGO, Petitioner, vs.RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.

G.R. No. 179965February 20, 2013

FACTS:

In 1993, petitioner Nicolas and his brother Rodolfo, respondent, entered into an oral contract to sell covering Nicolas's share of the family's Diego Building situated in Dagupan City. Rodolfo made a downpayment of P250,000.00. It was agreed that the deed of sale shall be executed upon payment of the remaining balance of P250,000.00. However, Rodolfo failed to pay the remaining balance.

Meanwhile, the building was leased out to third parties, but Nicolas's share in the rents were not remitted to him by herein respondent Eduardo, another brother of Nicolas and administrator of the Diego Building. Instead, Eduardo gave Nicolas's monthly share in the rents to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and Eduardo failed to render an accounting and remit his share in the rents and fruits of the building, and Eduardo continued to hand them over to Rodolfo.

Thus, on May 17, 1999, Nicolas filed a Complaint against Rodolfo and Eduardo before the RTC of Dagupan City praying for an accounting of all the transactions over the Diego Building and the delivery of his share in the rents.

Rodolfo and Eduardo filed their Answer, arguing that Nicolas had no more claim in the rents in the Diego Building since he had already sold his share to Rodolfo. Rodolfo admitted having remitted only P250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas only after the latter shall have executed a deed of absolute sale.

The trial court rendered its Decision dismissing the case for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment by the latter of the P250,000.00 balance of the agreed purchase price. The trial court ruled that the sale by Nicolas of his share was already perfected as early as the year 1993 when he received the partial payment. Nicolas has ceased to be a co-owner of the building and is no longer entitled to the fruits of the Diego Building.Nicolas appealed to the CA which sustained the trial court's Decision in toto.

ISSUES:1, Was there a perfected contract of sale of Nicolas share in the the Diego Builfing?

2. Is rescission available as a remedy to the parties?

HELD:

1. No. The contract entered into by Nicolas and Rodolfo was a contract to sell.

The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title to the property until full payment.

There is no dispute that in 1993, Rodolfo agreed to buy Nicolas' share in the Diego Building for the price of P500,000.00. There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received, P250,000.00. Significantly, it is also not disputed that the parties agreed that the remaining amount of P250,000.00 would be paid after Nicolas shall have executed a deed of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation in the contract, "[w]here the vendor promises to execute a deed of absolute sale upon the completion by the vendee of the payment of the price," indicates that the parties entered into a contract to sell. According to this Court, this particular provision is tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court ruled that the agreement to execute a deed of sale upon full payment of the purchase price "shows that the vendors reserved title to the subject property until full payment of the purchase price."

In Tan v. Benolirao, this Court, speaking through Justice Brion, ruled that the parties entered into a contract to sell as revealed by the following stipulation:d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale;

The Court further held that "[j]urisprudence has established that where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to sell."

The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the parties show that they agreed on a contract to sell, not of sale. The absence of a formal deed of conveyance is indicative of a contract to sell.

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In the instant case, the parties were similarly embroiled in an impasse. The parties' agreement was likewise embodied only in a receipt. Also, Nicolas did not want to sign the deed of sale unless he is fully paid. On the other hand, Rodolfo did not want to pay unless a deed of sale is duly executed in his favor. We thus say, pursuant to our ruling in Chua v. Court of Appeals that the agreement between Nicolas and Rodolfo is a contract to sell.

This Court cannot subscribe to the appellate court's view that Nicolas should first execute a deed of absolute sale in favor of Rodolfo, before the latter can be compelled to pay the balance of the price. This is patently ridiculous, and goes against every rule in the book. This pronouncement virtually places the prospective seller in a contract to sell at the mercy of the prospective buyer, and sustaining this point of view would place all contracts to sell in jeopardy of being rendered ineffective by the act of the prospective buyers, who naturally would demand that the deeds of absolute sale be first executed before they pay the balance of the price. Surely, no prospective seller would accommodate.

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Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this case only entered into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the agreed purchase price Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo. This was made clear by the nature of the agreement, by Nicolas's repeated demands for the return of all rents unlawfully and unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo's repeated demands for Nicolas to execute a deed of sale which, as we said before, is a recognition on their part that ownership over the subject property still remains with Nicolas.

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It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the property to the prospective buyer pending the latter's payment of the price in full. It certainly is absurd to assume that in the absence of stipulation, a buyer under a contract to sell is granted ownership of the property even when he has not paid the seller in full. If this were the case, then prospective sellers in a contract to sell would in all likelihood not be paid the balance of the price.

2. No. The remedy of rescission is not available in contracts to sell. As explained in Spouses Santos v. Court of Appeals:

In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it.

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Similarly, we held in Chua v. Court of Appeals that "Article 1592 of the Civil Code permits the buyer to pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until full payment of the price," as in this case.

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price, the contract to sell was deemed terminated or cancelled. As we have held in Chua v. Court of Appeals, "[s]ince the agreement x x x is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition prevents the obligation to sell from arising and ownership is retained by the seller without further remedies by the buyer." Similarly, we held in Reyes v. Tuparan that "petitioner's obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive condition, which is the respondent's full payment of the purchase price. Without respondent's full payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title. Respondent's failure to pay in full the purchase price in full is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to respondent." Otherwise stated, Rodolfo has no right to compel Nicolas to transfer ownership to him because he failed to pay in full the purchase price. Correlatively, Nicolas has no obligation to transfer his ownership over his share in the Diego Building to Rodolfo.

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We find it irrelevant and immaterial that Nicolas described the termination or cancellation of his agreement with Rodolfo as one of rescission. Being a layman, he is understandably not adept in legal terms and their implications. Besides, this Court should not be held captive or bound by the conclusion reached by the parties. The proper characterization of an action should be based on what the law says it to be, not by what a party believed it to be.

EAGLERIDGE DEVELOPMENT CORPORATION, MARCELO N. NAVAL and CRISPIN I. OBEN, Petitioners,vs.CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC. Respondent.

G.R. No. 204700 April 10, 2013

FACTS:

Petitioners Eagleridge Development Corporation (EDC), and sureties Marcelo N. Naval and Crispin I. Oben are the defendants in a collection suit initiated by Export and Industry Bank (EIB) through a Complaint.

By virtue of a Deed of Assignment, EIB transferred EDC's outstanding loan obligations of P10,232,998.00 to respondent Cameron Granville 3 Asset Management, a special purpose vehicle.

On February 22, 2012, EDC filed a Motion for Production/Inspection10 of the Loan Sale and Purchase Agreement (LSPA) dated April 7, 2006 referred to in the Deed of Assignment. Respondent Cameron filed its Comment dated March 14, 2012 alleging that EDC have not shown good cause for the production of the LSPA and that the same is allegedly irrelevant to the case a quo. In response, EDC filed on March 26, 2012 their Reply, explaining that the production of the LSPA was for good cause. They pointed out that the claim of Cameron is based on an obligation purchased after litigation had already been instituted in relation to it. They claimed that pursuant to Article 1634 of the New Civil Code on assignment of credit, the obligation subject of the case a quo is a credit in litigation, which may be extinguished by reimbursing the assignee of the price paid, the judicial costs incurred and interest. Article 1634 provides:

When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on which the same was paid.

The trial court denied EDCs motion for production, ruling that there was failure to show good cause for the production of the LSPA and failure to show that the LSPA is material or contains evidence relevant to an issue involved in the action. EDC filed a Motion for Reconsideration, arguing that the application of Article 1634 of the Civil Code is sanctioned by the Special Purpose Vehicle Law (SPV Law).

According to the trial court, there is no need for the production of the LSPA in order to apprise the EDC of the amount of consideration paid by Cameron in favor of EIB and that it is enough that the Deed of Assignment has been produced by Cameron showing that it has acquired the account of the EDC pursuant to the SPV Law.

ISSUE:

Does EDC have a right to be apprised of the cost of the assignment of their credit to Cameron so that they may properly extinguish their obligation?

HELD:

Yes. The question was whether respondent had acquired a valid title to the credit, i.e., EDCs outstanding loan obligation, and whether it had a right to claim from petitioners. In fact, petitioners had maintained in their motions before the trial court the nullity or non-existence of the assignment of credit purportedly made between respondent and EIB (the original creditor).

As respondent Camerons claim against the petitioners relies entirely on the validity of the Deed of Assignment, it is incumbent upon respondent Cameron to allow petitioners to inspect all documents relevant to the Deed, especially those documents which, by express terms, were referred to and identified in the Deed itself. The LSPA, which pertains to the same subject matter the transfer of the credit to respondent is manifestly useful to petitioners defense.

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Also, Section 19 of the SPV Law expressly states that redemption periods allowed to borrowers under the banking law, the rules of court and/or other laws are applicable. Hence, the equitable right of redemption allowed to a debtor under Article 1634 of the Civil Code is applicable.

Therefore, as petitioners correctly pointed out, they have the right of legal redemption by paying Cameron the transfer price plus the cost of money up to the time of redemption and the judicial costs.

Certainly, it is necessary for the petitioners to be informed of the actual consideration paid by the SPV in its acquisition of the loan, because it would be the starting point for them to negotiate for the extinguishment of their obligation. As pointed out by the petitioners, since the Deed of Assignment merely states For value received, the appropriate information may be supplied by the LSPA. It is self-evident that in order to be able to intelligently match the price paid by respondent for the acquisition of the loan, petitioner must be provided with the necessary information to enable it to make a reasonably informed proposal. Because of the virtual refusal and denial of the production of the LSPA, petitioners were never accorded the chance to reimburse respondent of the consideration the latter has paid.

Consequently, this Court finds and so holds that the denial of the Motion for Production despite the existence of good cause, relevancy and materiality for the production of the LSPA was unreasonable and arbitrary constituting grave abuse of discretion on the part of the trial court. Hence, certiorari properly lies as a remedy in the present case.

FIL-ESTATE GOLF AND DEVELOPMENT, INC. and FILESTATE LAND, INC., Petitioners, vs.VERTEX SALES AND TRADING, INC., Respondent.

G.R. No. 202079June 10, 2013

FACTS:

FEGDI is a stock corporation whose primary business is the development of golf courses. FELI is also a stock corporation, but is engaged in real estate development. FEGDI was the developer of the Forest Hills Golf and Country Club and, in consideration for its financing support and construction efforts, was issued several shares of stock of Forest Hills.

Sometime in August 1997, FEGDI sold, on installment, to RS Asuncion Construction Corporation (RSACC) one Class "C" Common Share of Forest Hills for P1,100,000.00. Prior to the full payment of the purchase price, RSACC sold, on February 11, 1999,5 the Class "C" Common Share to respondent Vertex Sales and Trading, Inc. (Vertex). RSACC advised FEGDI of the sale to Vertex and FEGDI, in turn, instructed Forest Hills to recognize Vertex as a shareholder. For this reason, Vertex enjoyed membership privileges in Forest Hills.

Despite Vertexs full payment, the share remained in the name of FEGDI. 17 months after the sale, Vertex wrote FEDGI a letter demanding the issuance of a stock certificate in its name. FELI replied, initially requested Vertex to first pay the necessary fees for the transfer. Although Vertex complied with the request, no certificate was issued. This prompted Vertex to make a final demand. As the demand went unheeded, Vertex filed a Complaint for Rescission with Damages and Attachment against FEGDI, FELI and Forest Hills. It averred that the petitioners defaulted in their obligation as sellers when they failed and refused to issue the stock certificate covering the subject share despite repeated demands. On the basis of its rights under Article 1191 of the Civil Code, Vertex prayed for the rescission of the sale and demanded the reimbursement of the amount it paid, plus interest. During the pendency of the rescission action (a certificate of stock was issued in Vertexs name, but Vertex refused to accept it.

ISSUE:

1. May the delay in the issuance of a stock certificate be considered a substantial breach as to warrant rescission of the contract of sale?

2. Is FELI a party to the contract of sale given that it is its share of stock that is being sold?

HELD:

1. Yes. Physical delivery is necessary to transfer ownership of stocks.

The factual backdrop of this case is similar to that of Raquel-Santos v. Court of Appeals, where the Court held that in "a sale of shares of stock, physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased."In that case, Trans-Phil Marine Ent., Inc. (Trans-Phil) and Roland Garcia bought Piltel shares from Finvest Securities Co., Inc. (Finvest Securities) in February 1997. Since Finvest Securities failed to deliver the stock certificates, Trans-Phil and Garcia filed an action first for specific performance, which was later on amended to an action for rescission. The Court ruled that Finvest Securities failure to deliver the shares of stock constituted substantial breach of their contract which gave rise to a right on the part of Trans-Phil and Garcia to rescind the sale.Section 63 of the Corporation Code provides:

SEC. 63. Certificate of stock and transfer of shares. The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.

In this case, Vertex fully paid the purchase price by February 11, 1999 but the stock certificate was only delivered on January 23, 2002 after Vertex filed an action for rescission against FEGDI.

Under these facts, considered in relation to the governing law, FEGDI clearly failed to deliver the stock certificates, representing the shares of stock purchased by Vertex, within a reasonable time from the point the shares should have been delivered. This was a substantial breach of their contract that entitles Vertex the right to rescind the sale under Article 1191 of the Civil Code. It is not entirely correct to say that a sale had already been consummated as Vertex already enjoyed the rights a shareholder can exercise. The enjoyment of these rights cannot suffice where the law, by its express terms, requires a specific form to transfer ownership.

2. No. Regarding the involvement of FELI in this case, no privity of contract exists between Vertex and FELI. "As a general rule, a contract is a meeting of minds between two persons. The Civil Code upholds the spirit over the form; thus, it deems an agreement to exist, provided the essential requisites are present. A contract is upheld as long as there is proof of consent, subject matter and cause. Moreover, it is generally obligatory in whatever form it may have been entered into. From the moment there is a meeting of minds between the parties, [the contract] is perfected."

In the sale of the Class "C" Common Share, the parties are only FEGDI, as seller, and Vertex, as buyer. As can be seen from the records, FELI was only dragged into the action when its staff used the wrong letterhead in replying to Vertex and issued the wrong receipt for the payment of transfer taxes. Thus FELI should be absolved from any liability.

FOREST HILLS GOLF & COUNTRY CLUB, Petitioner, vs. VERTEX SALES & TRADING, INC., Respondent.

G.R. No. 202205March 6, 2013

FACTS:

Petitioner Forest Hills is a domestic non-profit stock corporation that operates and maintains a golf and country club facility in Antipolo City. Forest Hills was created as a result of a joint venture agreement between Kings Properties and Fil-Estate Golf (FEGDI). Accordingly, Kings and FEGDI owned the shares of stock of Forest Hills, holding 40% and 60% of the shares, respectively.

In August 1997, FEGDI sold to RS Asuncion Construction Corporation (RSACC) 1) Class C common share of Forest Hills for P1.1 million. Prior to the full payment of the purchase price, RSACC transferred its interests over FEGDI's Class C common share to respondent Vertex. RSACC advised FEGDI of the transfer and FEGDI, in turn, requested Forest Hills to recognize Vertex as a shareholder. Forest Hills acceded to the request, and Vertex was able to enjoy membership privileges in the golf and country club.

Despite the sale of FEGDI's Class C common share to Vertex, the share remained in the name of FEGDI, prompting Vertex to demand for the issuance of a stock certificate in its name. As its demand went unheeded, Vertex filed a complaint for rescission with damages against defendants Forest Hills, FEGDI, and Fil-Estate Land, Inc. (FELI) the developer of the Forest Hills golf course. Vertex averred that the defendants defaulted in their obligation as sellers when they failed and refused to issue the stock certificate covering the Class C common share. It prayed for the rescission of the sale and the return of the sums it paid; it also claimed payment of actual damages for the defendants unjustified refusal to issue the stock certificate.

Forest Hills denied transacting business with Vertex and claimed that it was not a party to the sale of the share; FELI claimed the same defense. While admitting that no stock certificate was issued, FEGDI alleged that Vertex nonetheless was recognized as a stockholder of Forest Hills and, as such, it exercised rights and privileges of one. FEGDI added that during the pendency of Vertex's action for rescission, a stock certificate was issued in Vertex's name, but Vertex refused to accept it.

The RTC dismissed Vertex's complaint after finding that the failure to issue a stock certificate did not constitute a violation of the essential terms of the contract of sale that would warrant its rescission. The RTC noted that the sale was already consummated notwithstanding the non-issuance of the stock certificate. The issuance of a stock certificate is a collateral matter in the consummated sale of the share; the stock certificate is not essential to the creation of the relation of a shareholder.

The CA reversed the RTC. It declared that in the sale of shares of stock, physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased. It based its ruling on Section 63 of the Corporation Code, which requires for a valid transfer of stock

1. the delivery of the stock certificate; 2. the endorsement of the stock certificate by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and3. to be valid against third parties, the transfer must be recorded in the books of the corporation.

ISSUES:1. Is Forest Hills a party to the contract of sale, given that what is being traded is its share of stock?

2. Is restitution a proper effect of Vertexs rescission of the contract of sale?

HELD: 1. No. While Forest Hills questioned and presented its arguments against the CA ruling rescinding the sale of the share in its petition, it is not the proper party to appeal this ruling.

As correctly pointed out by Forest Hills, it was not a party to the sale even though the subject of the sale was its share of stock. The corporation whose shares of stock are the subject of a transfer transaction (through sale, assignment, donation, or any other mode of conveyance) need not be a party to the transaction, as may be inferred from the terms of Section 63 of the Corporation Code. However, to bind the corporation as well as third parties, it is necessary that the transfer is recorded in the books of the corporation. In the present case, the parties to the sale of the share were FEGDI as the seller and Vertex as the buyer (after it succeeded RSACC). As party to the sale, FEGDI is the one who may appeal the ruling rescinding the sale. The remedy of appeal is available to a party who has a present interest in the subject matter of the litigation and [is] aggrieved or prejudiced by the judgment. A party, in turn, is deemed aggrieved or prejudiced when his interest, recognized by law in the subject matter of the lawsuit, is injuriously affected by the judgment, order or decree. The rescission of the sale does not in any way prejudice Forest Hills in such a manner that its interest in the subject matter the share of stock is injuriously affected. Thus, Forest Hills is in no position to appeal the ruling rescinding the sale of the share. Since FEGDI, as party to the sale, filed no appeal against its rescission, we consider as final the CAs ruling on this matter.

2. Yes, but not between Vertex and Forest Hills. A necessary consequence of rescission is restitution: the parties to a rescinded contract must be brought back to their original situation prior to the inception of the contract; hence, they must return what they received pursuant to the contract. Not being a party to the rescinded contract, however, Forest Hills is under no obligation to return the amount paid by Vertex by reason of the sale. Indeed, Vertex failed to present sufficient evidence showing that Forest Hills received the purchase price for the share or any other fee paid on account of the sale (other than the membership fee which we will deal with after) to make Forest Hills jointly or solidarily liable with FEGDI for restitution.

Although Forest Hills received P150,000.00 from Vertex as membership fee, it should be allowed to retain this amount. For three years prior to the rescission of the sale, the nominees of Vertex enjoyed membership privileges and used the golf course and the amenities of Forest Hills. We consider the amount paid as sufficient consideration for the privileges enjoyed by Vertex's nominees as members of Forest Hills.

GATCHALIAN REALTY, INC., Petitioner,vs.EVELYN M. ANGELES, Respondent.

G.R. No. 202358November 27, 2013

FACTS:

On 28 December 1994, respondent Angeles purchased a house and lot, both under contracts to sell, from plaintiff GRI valued at PhP 750,000.00 and PhP 450,000.00), respectively, with 24% interest per annum to be paid by installment within a period of ten years.

The house and lot were delivered to Angeles in 1995. Nonetheless, under the contracts to sell, GRI retained ownership of the property until full payment of the purchase price.

Angeles failed to satisfy her monthly installments, as she was only able to pay 35 installments for the lot and 48 installments for the house. According to GRI, Angeles was given at least 12 notices for payment in a span of 3 years but she still failed to settle her account. She was given 3 more notices reminding her to pay her outstanding balance with warning of impending legal action and/or rescission of the contracts, but to no avail. After being given a total of 51 months grace period for both contracts, Angeles was served with a notice of notarial rescission dated 11 September 2003 by registered mail which she allegedly received on 19 September 2003 as evidenced by a registry return receipt.

Angeles was also furnished by GRI with a demand letter dated 26 September 2003 demanding her to pay PhP 112,304.42 as outstanding reasonable rentals for her use and occupation of the house and lot as of August 2003 and to vacate the same. She was informed in said letter that the 50% refundable amount that she is entitled to has already been deducted from the rentals she incurred during such period that she was not able to pay the installments.

Angeles subsequently sent postal money orders through registered mail to GRI. In a letter dated 27 January 2004, Angeles was notified by GRI of its receipt of a postal money order and was requested to notify GRI of the purpose of the payment. She was informed that if the postal money order was for her amortizations, the money order will not be accepted and she was requested to pick it up from GRIs office. On 29 January 2004, another postal money order was sent by Angeles to GRI. Angeles also informed GRI that the postal money orders were supposed to be payments for her monthly amortization. GRI reiterated that the postal money orders will only be accepted if the same will serve as payment of her outstanding rentals and not as monthly amortization. Still, 4 more postal money orders were sent by Angeles to GRI.

For her continued failure to satisfy her obligations with GRI and her refusal to vacate the house and lot, GRI filed a complaint for unlawful detainer against Angeles.

The MTC ruled in favor of GRI, determining that the case was for an unlawful detainer and assumed jurisdiction. The MTC further held that GRI was able to establish the validity of the rescission. On appeal, the RTC found that the case was one for ejectment. As an ejectment court, the MeTCs jurisdiction is limited only to the issue of possession and does not include the title or ownership of the properties in question.

The RTC pointed out that R.A. 6552 provides that the non-payment by the buyer of an installment prevents the obligation of the seller to convey title arising. Moreover, cancellation of the contract to sell may be done outside the court when the buyer agrees to the cancellation. However, in the present case, Angeles denied knowledge of GRIs notice of cancellation. Cancellation of the contract must be done in accordance with Section 3 of R.A. 6552, which requires a notarial act of rescission and refund to the buyer of the cash surrender value of the payments on the properties. Thus, the RTC held that there is no valid cancellation of the Contract to Sell. On reconsideration, however, the RTC ruled in favor of GRI. The RTC relied on this Courts ruling in Pilar Development Corporation v. Spouses Villar, stating that, the cash surrender value of the payments made by Angeles shall be applied to the rentals that accrued on the property, which rental wasfixed by the court at PhP7,000.oo/month. Thus the RTC ordered Angeles, to pay plaintiff GRI the outstanding rental amount of P48,851.60 with legal interest.

Finally, the CA dismissed GRIs complaint for unlawful detainer, and reversed and set aside the RTCs decision. Although the CA ruled that Angeles received the notice of notarial rescission, it ruled that the actual cancellation of the contract between the parties did not take place because GRI failed to refund to Angeles the cash surrender value.

ISSUE:

1. Was there a valid rescission of the contracts to sell effected by GRI?

2. Did GRI comply with the twin requirements under the Maceda law for valid cancellations of contracts to sell of real property, namely a notarized notice of cancellation and a refund of the cash surrender value?

HELD:

1. No, because the law requires the refunding of a cash surrender value for rescissions of contracts to sell of real property.

Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment Buyer Protection Act, has the declared public policy of protect[ing] buyers of real estate on installment payments against onerous and oppressive conditions.

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It should be noted that Section 3 of R.A. 6552 and paragraph six of Contract Nos. 2271 and 2272, speak of two years of installments. The basis for computation of the term refers to the installments that correspond to the number of months of payments, and not to the number of months that the contract is in effect as well as any grace period that has been given. Both the law and the contracts thus prevent any buyer who has not been diligent in paying his monthly installments from unduly claiming the rights provided in Section 3 of R.A. 6552.

The MeTC, the RTC, and the CA all found that Angeles was able to pay 35 installments for the lot (Contract No. 2271) and 48 installments for the house (Contract No. 2272).21 Angeles thus made installment payments for less than three years on the lot, and exactly four years on the house.

Section 3(a) of R.A. 6552 provides that the total grace period corresponds to one month for every one year of installment payments made, provided that the buyer may exercise this right only once in every five years of the life of the contract and its extensions. The buyers failure to pay the installments due at the expiration of the grace period allows the seller to cancel the contract after 30 days from the buyers receipt of the notice of cancellation or demand for rescission of the contract by a notarial act. Paragraph 6(a) of the contract gave Angeles the same rights.

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GRI claims that it gave Angeles a refund of the cash surrender value of both the house and the lot in the total amount of P574,148.40 when it deducted the amount of the cash surrender value from the amount of rentals due.

For paying more than two years of installments on the lot, Angeles was entitled to receive cash surrender value of her payments on the lot equivalent to fifty per cent of the total payments made. This right is provided by Section 3(b) of R.A. 6552, as well as paragraph 6(b) of the contract. Out of the contract price of P450,000, Angeles paid GRI a total of P364,188.96 consisting of P135,000 as downpayment and P229,188.96 as installments and penalties. The cash surrender value of Angeles payments on the lot amounted to P182,094.48.28

For the same reasons, Angeles was also entitled to receive cash surrender value of the payments on the house equivalent to fifty per cent of the total payments made. Out of the contract price of P750,000, Angeles paid GRI a total of P784,107.84 consisting of P165,000 as downpayment and P619,107.84 as installments and penalties. The cash surrender value of Angeles payments on the house amounted to P392,053.92.30

There was no actual cancellation of the contracts because of GRIs failure to actually refund the cash surrender value to Angeles.

2. No. This Court has been consistent in ruling that a valid and effective cancellation under R.A. 6552 must comply with the mandatory twin requirements of a notarized notice of cancellation and a refund of the cash surrender value.

In Olympia Housing, Inc. v. Panasiatic Travel Corp., we ruled that the notarial act of rescission must be accompanied by the refund of the cash surrender value In Pagtalunan v. Dela Cruz Vda. De Manzano, we ruled that there is no valid cancellation of the Contract to Sell in the absence of a refund of the cash surrender value.

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In view of the absence of a valid cancellation, the Contract to Sell between GRI and Angeles remains valid and subsisting.

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We observe that this case has, from the institution of the complaint, been pending with the courts for 10 years. As both parties prayed for the issuance of reliefs that are just and equitable under the premises, and in the exercise of our discretion, we resolve to dispose of this case in an equitable manner. Considering that GRI did not validly rescind Contracts to Sell Nos. 2271 and 2272, Angeles has two options:

1. The option to pay, within 60 days from the MeTCs determination of the proper amounts, the unpaid balance of the full value of the purchase price of the subject properties plus interest at 6% per annum from 11 November 2003, the date of filing of the complaint, up to the finality of this Decision, and thereafter, at the rate of 6% per annum.43 Upon payment of the full amount, GRI shall immediately execute Deeds of Absolute Sale over the subject properties and deliver the corresponding transfer certificate of title to Angeles.

In the event that the subject properties are no longer available, GRI should offer substitute properties of equal value. Acceptance of the suitability of the substitute properties is Angeles sole prerogative. Should Angeles refuse the substitute properties, GRI shall refund to Angeles the actual value of the subject properties with 6% interest per annum44 computed from 11 November 2003, the date of the filing of the complaint, until fully paid; and

2. The option to accept from GRI P574,148.40, the cash surrender value of the subject properties, with interest at 6% per annum,45 computed from 11 November 2003, the date of the filing of the complaint, until fully paid. Contracts to Sell Nos. 2271 and 2272 shall be deemed cancelled 30 days after Angeles receipt of GRIs full payment of the cash surrender value. No rent is further charged upon Angeles as GRI already had possession of the subject properties on 10 October 2006.

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Should Evelyn M. Angeles choose to pay the unpaid balance, she shall pay, within 60 days from the MeTCs determination of the proper amounts, the unpaid balance of the full value of the purchase price of the subject properties plus interest at 6% per annum from 11 November 2003, the date of filing of the complaint, up to the finality of this Decision, and thereafter, at the rate of 6% per annum. Upon payment of the full amount, GRI shall immediately execute Deeds of Absolute Sale over the subject properties and deliver the corresponding transfer certificate of title to Angeles.

In the event that the subject properties are no longer available, GRI should offer substiute properties of equal value. Should Angeles refuse the substitute properties - GRI shall refund to Angeles the actual value of the subject properties with 6% interest per annum computed from 11 November 2003, the date of the filing of the complaint, until fully paid.

Should Evelyn M. Angeles choose to accept payment of the cash surrender value, she shall receive from GRI P574,148.40 with interest at 6% per annum, computed from 11 November 2003, the date of the filing of the complaint, until fully paid. Contracts to Sell Nos. 2271 and 2272 shall be deemed cancelled 30 days after Angeles' receipt of GRI's full payment of the cash surrender value. No rent is further charged upon Evelyn M. Angeles.

SPOUSES LEHNER and LUDY MARTIRES, Petitionersvs.MENELIA CHUA, Respondent.

G.R. No. 174240March 20, 2013

FACTS:

Subject of the instant controversy are twenty-four memorial lots located at the Holy Cross Memorial Park in Novaliches, Quezon City. Respondent Chua, together with her mother, Florencia R. Calagos, own the disputed property. Their co-ownership is evidenced by a Deed of Sale and Certificate of Perpetual Care.

In 1995, Chua borrowed from petitioner spouses Martires the amount of PhP150,000.oo. The loan was secured by a real estate mortgage over the abovementioned property. Respondent failed to fully settle her obligation. Subsequently, without foreclosure of the mortgage, ownership of the subject lots were transferred in the name of Martires via a Deed of Transfer.

Chua thus filed a Complaint against Martires, Manila Memorial Park Inc., the company which owns the Holy Cross Memorial Park, and the Register of Deeds of Quezon City, praying for the annulment of the contract of mortgage between her and petitioners on the ground that the interest rates imposed are unjust and exorbitant. Chua also sought accounting to determine her liability under the law. She likewise prayed that the Register of Deeds of Quezon City and Manila Memorial Park, Inc. be directed to reconvey the disputed property to her.

The RTC decided in favor of petitioners Martires by dismissing the complaint. On appeal, the CA affirmed, with modification, the judgment of the RTC. The CA ruled that Chua voluntarily entered into a contract of loan and that the execution of the Deed of Transfer is sufficient evidence of petitioners' acquisition of ownership of the subject property.

Respondent filed a Motion for Reconsideration, which the CA granted. The CA reconsidered its findings and concluded that the Deed of Transfer which, on its face, transfers ownership of the subject property to petitioners, is, in fact, an equitable mortgage. The CA held that the true intention of respondent was merely to provide security for her loan and not to transfer ownership of the property to petitioners. The CA so ruled on the basis of its findings that: (1) the consideration, amounting to P150,000.00, for the alleged Deed of Transfer is unusually inadequate, considering that the subject property consists of 24 memorial lots; (2) the Deed of Transfer was executed by reason of the same loan extended by petitioners to respondent; (3) the Deed of Transfer is incomplete and defective; and (4) the lots subject of the Deed of Transfer are one and the same property used to secure respondent's P150,000.00 loan from petitioners.

Hence, this appeal by the Sps. Martires.

ISSUE:

Is the contention of the CA, that the parties never contemplated a transfer of ownership but only an equitable mortgage, correct?

HELD:

Yes. Based on the foregoing, the Court finds no cogent reason to depart from the findings of the CA that the agreement between petitioners and respondent is, in fact, an equitable mortgage.

An equitable mortgage has been defined as one which, although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, there being no impossibility nor anything contrary to law in this intent.

One of the circumstances provided for under Article 1602 of the Civil Code, where a contract shall be presumed to be an equitable mortgage, is where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In the instant case, it has been established that the intent of both petitioners and respondent is that the subject property shall serve as security for the latter's obligation to the former. As correctly pointed out by the CA, the circumstances surrounding the execution of the disputed Deed of Transfer would show that the said document was executed to circumvent the terms of the original agreement and deprive respondent of her mortgaged property without the requisite foreclosure. With respect to the foregoing discussions, it bears to point out that in Misena v. Rongavilla, a case which involves a factual background similar to the present case, this Court arrived at the same ruling. In the said case, the respondent mortgaged a parcel of land to the petitioner as security for the loan which the former obtained from the latter. Subsequently, ownership of the property was conveyed to the petitioner via a Deed of Absolute Sale. Applying Article 1602 of the Civil Code, this Court ruled in favor of the respondent holding that the supposed sale of the property was, in fact, an equitable mortgage as the real intention of the respondent was to provide security for the loan and not to transfer ownership over the property.

DAVID A. RAYMUNDO, Petitioner,vs.GALEN REALTY AND MINING CORPORATION, Respondent.

G.R. No. 191594October 16, 2013

FACTS:

Respondent Galen Realty filed against against Raymundo and Tensorex an action for Reconveyance with Damages. Subject of the case was a transaction between Galen and Raymundo over a house and lot located in Urdaneta Village, Makati City originally covered by TCT in the name of Galen. By virtue of a Deed of Sale dated September 9, 1987 executed between Galen and Raymundo, title to the property was transferred to Raymundo, who later on sold the property to Tensorex, which caused the issuance of a new TCT in Tensorexs name.

The RTC of Makati City ruled that the transaction between Raymundo and Galen was actually an equitable mortgage. On appeal, the CA upheld the RTC decision but modified the loan obligation of Galen and reduced the same to PhP3,865,000.oo. The CA ruled that the Deed of Absolute Sale between plaintiff-appellant and defendant-appellant David Raymundo is declared null and void, being a Deed of Equitable Mortgage. The CA also held that the Deed of Sale between defendant-appellant Raymundo and defendant-appellant Tensorex is declared null and void, and ordered defendant-appellant Raymundo to reconvey the subject property to Galen upon Galens payment to defendant-appellant David Raymundo; or if reconveyance is no longer feasible, for defendants-appellants Raymundo and Tensorex to solidarily pay plaintiff-appellant the fair market value of the subject property by expert appraisal, plus damages, attornes fees, and costs of suit.

Galen moved for the execution of the CA decision. Raymundo and Tensorex opposed the motion, arguing that the CA decision provides for two alternatives one, for Raymundo to reconvey the property to Galen after payment of P3,865,000.00 with legal interest or, two, if reconveyance is no longer feasible, for Raymundo and Tensorex to solidarily pay Galen the fair market value of the property.

RTC granted Galens motion and ordered the issuance of a writ of execution. Galen filed a Counter Manifestation and Opposition claiming that reconveyance is no longer feasible as the property is heavily encumbered and title to the property is still in the name of Tensorex which had already gone out of operations and whose responsible officers are no longer accessible.

ISSUE:

In an equitable mortgage, if the reconveyance of the property is decreed but no longer possible because ownership has passed to an innocent buyer, is the payment of the fair market value sufficient as an alternative remedy?

HELD:

Yes. Nevertheless, the import of the dispositive portion of the CA Decision dated May 7, 2004 is clear. The principal obligation of Raymundo under the judgment is to reconvey the property to Galen; on the other hand, Galens principal obligation is to pay its mortgage obligation to Raymundo. Performance of Raymundos obligation to reconvey is upon Galens payment of its mortgage obligation in the amount of P3,865,000.00 plus legal interest thereon from the date of the filing of the complaint, until fully paid. This is in accord with the nature of the agreement as an equitable mortgage where the real intention of the parties is to charge the real property as security for a debt. It was wrong for the RTC to require Raymundo to show proof of his willingness to reconvey the property because as stressed earlier, their agreement was an equitable mortgage and as such, Galen retained ownership of the property. In Montevirgen, et al. v. CA, et al., the Court was emphatic in stating that the circumstance that the original transaction was subsequently declared to be an equitable mortgage must mean that the title to the subject land which had been transferred to private respondents actually remained or is transferred back to the petitioners herein as owners-mortgagors, conformably to the well-established doctrine that the mortgagee does not become the owner of the mortgaged property because the ownership remains with the mortgagor. Thus, it does not devolve upon Raymundo to determine whether he is willing to reconvey the property or not because it was not his to begin with. If Raymundo refuses to reconvey the property, then the court may direct that the act be done by some other person appointed by it as authorized by Section 10 of Rule 39 of the Rules of Court

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It is only when reconveyance is no longer feasible that Raymundo and Tensorex should pay Galen the fair market value of the property. In other words, it is when the property has passed on to an innocent purchaser for value and in good faith, has been dissipated, or has been subjected to an analogous circumstance which renders the return of the property impossible that Raymundo and/or Tensorex, is obliged to pay Galen the fair market value of the property.

TEODORO A. REYES, Petitioner, vs.ETTORE ROSSI, Respondent.

G.R. No. 159823February 18, 2013

FACTS:

In 1997, Reyes and Advanced Foundation, represented Rossi, executed a deed of conditional sale involving the purchase by Reyes of equipment consisting of a Warman Dredging Pump worth PhP10,000,000.oo. The parties agreed therein that Reyes would pay the sum of PhP3,000,000.oo as downpayment, and the balance of PhP7,000,000.oo will be settled through four post-dated checks. Reyes complied, but in January 1998, he requested the restructuring of his obligation under the deed of conditional sale by replacing the four post-dated checks with nine post-dated checks.

Advanced Foundation assented to Reyes request, and returned the four checks. In turn, Reyes issued and delivered the following nine postdated checks in the aggregate sum of PhP7,125,000.oo drawn against the United Coconut Planters Bank.

Rossi deposited three of the post-dated checks on their maturity dates in Advanced Foundations bank account at the PCI Bank in Makati. Two of the checks were denied payment ostensibly upon Reyes instructions to stop their payment, while the third was dishonored for insufficiency of funds.

Rossi likewise deposited two more checks in Advanced Foundations account at the PCI Bank in Makati, but the checks were returned with the notation Account Closed stamped on them. He did not anymore deposit the three remaining checks on the assumption that they would be similarly dishonored.

In 1998, Reyes commenced an action for rescission of contract and damages in the RTC. Subseuently, Rossi charged Reyes with five counts of estafa and five counts of violation of BP22 for the dishonor of the checks. Another criminal charge for violation of BP22 was lodged against Reyes in another jurisdiction for the dishonor of another check.

Reyes argued that the City Prosecutor should suspend the criminal proceedeings for estafa and BP22 proceedings because of the pendency in the RTC of the civil action for rescission of contract that posed a prejudicial question as to the criminal proceedings.

The CA ruled that the action for rescission of contract did not pose a prejudicial question that would suspend the criminal proceedings.

ISSUE:

Does the rescission of a contract of sale pose a prejudicial question sufficient to suspend a criminal prosecution for BP22?

HELD:

No. The rescission of a contract of sale is not a prejudicial question that will warrant the suspension of the criminal proceedings commenced to prosecute the buyer for violations of the Bouncing Checks Law (Batas Pambansa Blg. 22) arising from the dishonor of the checks the buyer issued in connection with the sale.

xxx

A prejudicial question generally comes into play in a situation where a civil action and a criminal action are both pending, and there exists in the former an issue that must first be determined before the latter may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. The rationale for the suspension on the ground of a prejudicial question is to avoid conflicting decisions.

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Article 1191 of the Civil Code recognizes an implied or tacit resolutory condition in reciprocal obligations. The condition is imposed by law, and applies even if there is no corresponding agreement thereon between the parties. The explanation for this is that in reciprocal obligations a party incurs in delay once the other party has performed his part of the contract; hence, the party who has performed or is ready and willing to perform may rescind the obligation if the other does not perform, or is not ready and willing to perform.

xxx

A careful perusal of the complaint for rescission of contract and damages reveals that the causes of action advanced by respondent Reyes are the alleged misrepresentation committed by the petitioner and AFCSC and their alleged failure to comply with his demand for proofs of ownership. On one hand, he posits that his consent to the contract was vitiated by the fraudulent act of the company in misrepresenting the condition and quality of the dredging pump.

xxx

Accordingly, we agree with the holding of the CA that the civil action for the rescission of contract was not determinative of the guilt or innocence of Reyes.

xxx

Indeed, under the law on contracts, vitiated consent does not make a contract unenforceable but merely voidable, the remedy of which would be to annul the contract since voidable contracts produce legal effects until they are annulled. On the other hand, rescission of contracts in case of breach pursuant to Article 1191 of the Civil Code of the Philippines also presupposes a valid contract unless rescinded or annulled.

As defined, a prejudicial question is one that arises in a case, the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal. The prejudicial question must be determinative of the case before the court but the jurisdiction to try and resolve the question must be lodged in another court or tribunal.

ROBERN DEVELOPMENT CORPORATION and RODOLFO M. BERNARDO, JR., Petitioners, vs.PEOPLE'S LANDLESS ASSOCIATION, Respondent.

G.R. No. 173622March 11, 2013

FACTS:

Al-Amanah owned a lot located in Davao City and covered by TCT 138914. In 1992, Al-Amanah asked some of the members of PELA to desist from building their houses on the lot and to vacate the land, unless they are interested to buy it. The informal settlers thus expressed their interest to buy the lot at PhP100.oo per square meter, which Al-Amanah turned down for being far below its asking price.

In a letter dated March 18, 1993, the informal settlers together with other members comprising PELA offered to purchase the lot for PhP300,000.oo, half of which shall be paid as down payment and the remaining half to be paid within one year.

By May 3, 1993, PELA had deposited PhP150,000.oo as evidenced by four bank receipts. For the first three receipts, the bank labelled the payments as "Partial deposit on sale of TCT No. 138914", while it noted the 4th receipt as "Partial/Full payment on deposit on sale of A/asset TCT No. 138914." In the meantime, the PELA members remained in the property and introduced further improvements.

On November 29, 1993, Al-Amanah wrote then PELA informing them of the Al-Amanahs disapproval of PELAs offer to buy the lot.

PELA replied that it had already reached an agreement with Al-Amanah regarding the sale of the subject lot based on their offered price, asserting that PELA had a definite agreement with the Islamic Bank.

Meanwhile, the Al-Amanah accepted another groups- Roberns- offer to buy. However, when Al-Amanah informed Robern of the acceptance, Robern expressed to Al-Amanah its uncertainty on the status of the subject lot, because PELA insists that they had already bought the lot.To convince Robern that it has no existing contract with PELA, Al-Amanah furnished it with copies of the Head Offices rejection letter of PELAs bid, the demand letters to vacate, and the proof of consignment of PELAs PhP150,000.oo deposit that PELA refused to withdraw. Thus, Robern paid the balance of the purchase price. The Deed of Sale over the land was executed on April 6, 1994 and TCT was issued in Roberns name the following day.

A week later, PELA consigned PhP150,000.oo in the RTC of Davao City. Then it wrote Al-Amanah asking the latter to withdraw the amount consigned.

The RTC dismissed PELAs case It opined that the March 18, 1993 letter PELA has been relying upon as proof of a perfected contract of sale was a mere offer which was already rejected. The RTC held that the annotation appearing in the bottom part of the said letter could not be construed as an acceptance because the same is a mere acknowledgment of receipt of the letter, and not the offer.

The CA reversed the RTC, ruling that there was already a perfected contract of sale between PELA and Al-Amanah. The CA also concluded that Al-Amanah is guilty of bad faith in dealing with PELA because it took Al-Amanah almost seven months to reject PELAs offer while holding on to the PhP150,000.oo deposit. The CA thus adjudged PELA entitled to moral and exemplary damages as well as attorneys fees.

ISSUE:

Is there a perfected contract of sale between PELA and Al-Amanah, such that the sale of the land by Al-Amanah to Robern constitutes a double sale?

HELD:

No, thus the sale between Al-Amanah and Robern is a valid first sale.

A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Thus, for a contract of sale to be valid, all of the following essential elements must concur: "a) consent or meeting of the minds; b) determinate subject matter; and c) price certain in money or its equivalent.

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There is no perfected contract of sale between PELA and Al-Amanah for want of consent and agreement on the price.

After scrutinizing the testimonial and documentary evidence in the records of the case, we find no proof of a perfected contract of sale between Al-Amanah and PELA. The parties did not agree on the price and no consent was given, whether express or implied.

When PELA Secretary Florida Ramos (Ramos) testified, she referred to the March 18, 1993 letter which PELA sent to Al-Amanah as the document supposedly embodying the perfected contract of sale. However, we find that the March 18, 1993 letter referred to was merely an offer to buy.

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We cannot agree with the CAs ratiocination that receipt of the amount, coupled with the phrase written on the four receipts as "deposit on sale of TCT No. 138914," signified a tacit acceptance by Al-Amanah of PELAs offer. For sure, the money PELA gave was not in the concept of an earnest money. Besides, as testified to by then OIC Dalig, it is the usual practice of Al-Amanah to require submission of a bid deposit which is acknowledged by way of bank receipts before it entertains offers.

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Contracts undergo three stages: "a) negotiation which begins from the time the prospective contracting parties indicate interest in the contract and ends at the moment of their agreement[; b) perfection or birth, x x x which takes place when the parties agree upon all the essential elements of the contract x x x; and c) consummation, which occurs when the parties fulfill or perform the terms agreed upon, culminating in the extinguishment thereof."

In the case at bench, the transaction between Al-Amanah and PELA remained in the negotiation stage. The offer never materialized into a perfected sale, for no oral or documentary evidence categorically proves that Al-Amanah expressed amenability to the offered P300,000.00 purchase price. Before the lapse of the 1-year period PELA had set to pay the remaining balance, Al-Amanah expressly rejected its offered purchase price, although it took the latter around seven months to inform the former and this entitled PELA to award of damages.67 Al-Amanahs act of selling the lot to another buyer is the final nail in the coffin of the negotiation with PELA. Clearly, there is no double sale, thus, we find no reason to disturb the consummated sale between Al-Amanah and Robern.

HOSPICIO D. ROSAROSO, et. al. Petitioners, vs.LUCILA LABORTE SORIA, et. al. Respondents.

G.R. No. 194846 June 19, 2013

FACTS:

Spouses Luis Rosaroso and Honorata Duazo acquired several real properties in Daan Bantayan, Cebu City, including the subject properties. The couple had nine (9) children namely: Hospicio, Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and Angelica. On April 25, 1952, Honorata died. Later on, Luis married Lourdes Pastor Rosaroso.

In 1991 a complaint for Declaration of Nullity of Documents with Damages was filed by Luis, as one of the plaintiffs, against his daughter Lucila, Lucilas daughter Laila, and Meridian Realty Corporation. Due to Luis subsequent death, an amended complaint was filed with the spouse of Laila, Ham, and Luis second wife, Lourdes, included as defendants.

The petitioners led by Hospicio allege that Luis, with the full knowledge and consent of his second wife, Lourdes, executed the Deed of Absolute Sale covering the properties in their favor. They also alleged that, despite the fact that the said properties had already been sold to them, respondent Laila, in conspiracy with her mother, Lucila, obtained an SPA from Luis fraudulently whith his thumb mark when Luis was then sick, infirm, blind, and of unsound mind. The petitioners further averred that, through this SPA, a sale took place on August 23, 1994, when the respondents made Luis sign the Deed of Absolute Sale conveying to Meridian the subject property, and that Meridian was in bad faith when it did not make any inquiry as to who were the occupants and owners of said lots. The petitioners claim that if Meridian had only investigated, it would have been informed as to the true status of the subject properties and would have desisted in pursuing their acquisition.

The RTC ruled in favor of petitioners. It held that when Luis executed the deed of sale in favor of Meridian, he was no longer the owner of Lot Nos. 19, 22 and 23 as he had already sold them to his children by his first marriage. In fact, the subject properties had already been delivered to the vendees who had been living there since birth and so had been in actual possession of the said properties. The trial court stated that although the deed of sale was not registered, this fact was not prejudicial to their interest.

However, the CA reversed and set aside the RTC decision. The CA ruled that the first deed of sale in favor of petitioners was void, relying on the testimony of Lourdes that petitioners did not pay her husband. The price or consideration for the sale was simulated to make it appear that payment had been tendered when in fact no payment was made at all.

ISSUE:

1. Is the first sale by Luis of the subject property to his children from his first marriage valid, even though there are allegations that there was no consideration provided?

2. Is Meridian a buyer in good faith, such that it should be awarded the land which was subjected to a double sale?

HELD:

1. Yes, the first sale was valid.

The fact that the first deed of sale was executed, conveying the subject properties in favor of petitioners, was never contested by the respondents. What they vehemently insist, though, is that the said sale was simulated because the purported sale was made without a valid consideration.Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. These presumptions operate against an adversary who has not introduced proof to rebut them. They create the necessity of presenting evidence to rebut the prima facie case they created, and which, if no proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is but, by the presumption, the one who has that burden is relieved for the time being from introducing evidence in support of the averment, because the presumption stands in the place of evidence unless rebutted In this case, the respondents failed to trounce the said presumption. Aside from their bare allegation that the sale was made without a consideration, they failed to supply clear and convincing evidence to back up this claim. It is elementary in procedural law that bare allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules of Court.

2. No. The fact that Meridian had them first registered will not help its cause. In case of double sale, Article 1544 of the Civil Code provides: Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good faith.

Otherwise stated, ownership of an immovable property which is the subject of a double sale shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. The requirement of the law then is two-fold: acquisition in good faith and registration in good faith. Good faith must concur with the registration. If it would be shown that a buyer was in bad faith, the alleged registration they have made amounted to no registration at all.

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When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a buyer in good faith. When a man proposes to buy or deal with realty, his duty is to read the public manuscript, that is, to look and see who is there upon it and what his rights are. A want of caution and diligence, which an honest man of ordinary prudence is accustomed to exercise in making purchases, is in contemplation of law, a want of good faith. The buyer who has failed to know or discover that the land sold to him is in adverse possession of another is a buyer in bad faith.

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One who purchases real property which is in the actual possession of another should, at least make some inquiry concerning the right of those in possession. In the case at bench, the fact that the subject properties were already in the possession of persons other than Luis was never disputed.

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Instead of investigating the rights and interests of the persons occupying the said lots, however, it chose to just believe that Luis still owned them. Simply, Meridian Realty failed to exercise the due diligence required by law of purchasers in acquiring a piece of land in the possession of person or persons other than the seller.

RODOLFO C. SABIDONG, Complainant,vs.NICOLASITO S. SOLAS (Clerk of Court IV), Respondent.

A.M. No. P-01-1448June 25, 2013

FACTS:

Trinidad Sabidong, complainants mother, is one of the longtime occupants of a parcel of land, originally registered in the name of C. N. Hodges.

The Sabidongs are in possession of one-half portion of a Lot 11 of the Hodges Estate, as the other half-portion was occupied by Priscila Saplagio. Lot 11 was the subject of an ejectment suit filed by the Hodges Estate. On May 31, 1983, a decision was rendered in said case ordering the Sabidong to immediately vacate the portion of Lot 11 leased to her and to pay the plaintiff Estate rentals due, attorneys fees, expenses and costs. At the time, respondent Solas was the Clerk of Court III of MTCC, Branch 3, Iloilo City. Sometime in October 1984, Solas submitted an Offer to Purchase on installment Lots 11 and 12. The Administratrix of the Hodges Estate rejected Solass offer in view of an application to purchase already filed by the actual occupant of Lot 12. While the check for initial down payment tendered by Solas was returned to him, he was nevertheless informed that he may file an offer to purchase Lot 11 and that if he could put up a sufficient down payment, the Estate could immediately endorse it for approval of the Probate Court so that the property can be awarded to him should the occupant fail to avail of the priority given to them.

Solas again submitted an Offer to Purchase Lot 11 for the amount of PhP35,100.oo. Solass Offer to Purchase Lot 11 was approved upon the courts observation that the occupants of the subject lots have not manifested their desire to purchase the lots they are occupying. Eventually, a writ of possession was issued in Solas favor.

On motion of Ernesto Pe Benito, Administrator of the Hodges Estate, a writ of demolition was issued by the probate court in favor of Solas and against all adverse occupants of Lot 11.

The SC then received a sworn letter-complaint asserting that as court employee Solas cannot buy property in litigation, and asserting that Solas is not a buyer in good faith. Sabidong averred that Solas met with the Sabidongs and then negotiated for the sale of the property and transfer of the title in their names. Solas made the Sabidongs believe that he is the representative of the estate and that he needed a down payment right away.

The Court Administrator found Solas liable for serious and grave misconduct and dishonesty and recommended the forfeiture of Solass salary for six months, which shall be deducted from his retirement benefits. The SC asked the parties if they are willing to submit the issue for resolution to them, and the parties agreed.

ISSUE:Being a clerk of court, is Solas relatively incapacitated from acquiring the property under litigation?

HELD:

No, Solas was not incapacitated to acquire the subject property because while the property is in litigation, the litigation is not pending in the court where Solas works.

Article 1491, paragraph 5 of the Civil Code prohibits court officers such as clerks of court from acquiring property involved in litigation within the jurisdiction or territory of their courts. Said provision reads:

Article 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:

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(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

The rationale advanced for the prohibition is that public policy disallows the transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons. In so providing, the Code tends to prevent fraud, or more precisely, tends not to give occasion for fraud, which is what can and must be done.

For the prohibition to apply, the sale or assignment of the property must take place during the pendency of the litigation involving the property. Where the property is acquired after the termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches.

In the case at bar, when respondent purchased Lot 11-A on November 21, 1994, the Decision in Civil Case No. 14706 which was promulgated on May 31, 1983 had long become final. Be that as it may, it cannot be said that the property is no longer in litigation at that time considering that it was part of the Hodges Estate then under settlement proceedings.

A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge.36 A property forming part of the estate under judicial settlement continues to be subject of litigation until the probate court issues an order declaring the estate proceedings closed and terminated. The rule is that as long as the order for the distribution of the estate has not been complied with, the probate proceedings cannot be deemed closed and terminated.37 The probate court loses jurisdiction of an estate under administration only after the payment of all the debts and the remaining estate delivered to the heirs entitled to receive the same.38 Since there is no evidence to show that Sp. Proc. No. 1672 in the RTC of Iloilo, Branch 27, had already been closed and terminated at the time of the execution of the Deed of Sale With Mortgage dated November 21, 1994, Lot 11 is still deemed to be in litigation subject to the operation of Article 1491 (5) of the Civil Code.

This notwithstanding, we hold that the sale of Lot 11 in favor of respondent did not violate the rule on disqualification to purchase property because Sp. Proc. No. 1672 was then pending before another court (RTC) and not MTCC where he was Clerk of Court.

SPOUSES DEO AGNER and MARICON AGNER, Petitioners,vs.BPI FAMILY SAVINGS BANK, INC. Respondent.

G.R. No. 182963June 3, 2013

FACTS:

On February 15, 2001, petitioners the Sps. Agner executed a Promissory Note with Chattel Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for receiving the amount of Php834, 768.oo, petitioners shall pay Php 17,391.00 every succeeding month until fully paid; that the loan is secured by a 2001 Mitsubishi Adventure Super Sport; and an interest of 6% per month shall be imposed for failure to pay each installment on or before the stated due date.

On the same day, Citimotors, Inc. assigned all its rights, title and interests in the Promissory Note with Chattel Mortgage to ABN AMRO Savings Bank, Inc. which, in turn, assigned the same to respondent BPI Family Savings Bank, Inc.

For failure to pay four successive installments from May 15, 2002 to August 15, 2002, BPI sent a demand letter to Sps. Agner declaring the entire obligation as due and demandable and requiring to pay Php576,664.04, or surrender the mortgaged vehicle immediately upon receiving the letter. As the demand was left unheeded, respondent filed on October 4, 2002 an action for Replevin and Damages.

A writ of replevin was issued. Despite this, the subject vehicle was not seized. Trial on the merits ensued. The RTC orders Sps. Agner to jointly and severally pay the amount of Php576,664.04 plus interest at the rate of 72% per annum from August 20, 2002 until fully paid, and the costs of suit. Petitioners appealed the decision to the CA), which affirmed the same.

Before the SC, the Sps. Agner argued that respondents remedy of resorting to both actions of replevin and collection of sum of money is contrary to the provision of Article 1484 of the Civil Code.

ISSUE:

Is BPI prevented from pursuing its alternative prayer for a sum of money because it was already granted a writ of replevin for the recovery of the subject property?

HELD:

Lastly, there is no violation of Article 1484 of the Civil Code...

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The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution.

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the vehicle subject matter of this case was never recovered and delivered to respondent despite the issuance of a writ of replevin. As there was no seizure that transpired, it cannot be said that petitioners were deprived of the use and enjoyment of the mortgaged vehicle or that respondent pursued, commenced or concluded its actual foreclosure. The trial court, therefore, rightfully granted the alternative prayer for sum of money, which is equivalent to the remedy of exacting fulfillment of the obligation. Certainly, there is no double recovery or unjust enrichment to speak of.

SPOUSES RUBIN AND P