2017 BAR SUGGESTED ANSWER:

VII.

Alice agreed to sell a parcel of land with an area of 500 square meters NO, because there was no previous sale of the same property prior to its
registered in her name and covered by TCT No. 12345 in favor of sale to Chona.
Bernadette for the amount of P900,000. Their agreement dated October
15, 2015, reads as follows:

I, Bernadette, agree to buy the lot owned by Alice covered by TCT No. Despite the earlier transaction of Alice with Bernadette, the former is not
12345 for the amount of P900,000 subject to the following schedule of guilty of double sale because the previous transaction with Bernadette is
payment: charactrerized as a contract to sell. In a contract to sell, there being no
previous sale of the property, a third person buying such property despite
Upon signing of agreement – P100,000 the fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and
November 15, 2015 – P200,000 the prospective buyer cannot seek the relief of reconveyance of the
property. There is no double sale in such case. Title to the property will
December 15, 2015 – P200,000 transfer to the buyer after registration because there is no defect in the
owner-sellers title per se, but the latter, of course, may be sued for
January 15, 2016 – P200,000 damages by the intending buyer. [Basis: Coronel v. CA, 263 SCRA 15
(1996); discussed in pp. 363-366, Vol. 2, Rabuya’s Civil Law Reviewer]
February 15, 2016 – P200,000

Title to the property shall be transferred upon full payment of P900,000

on or before February 15, 2016. 2016 bar
After making the initial payment of P100,000 on October 15, 2015, and IX
the second installment of P200,000 on November 15, 2015, Bernadette
defaulted despite repeated demands from Alice. Butch got a loan from Hagibis Corporation (Hagibis) but he defaulted in
the payment. A case for collection of a sum of money was filed against
In December 2016, Bernadette offered to pay her balance but Alice him. As a defense, Butch claims that there was already an arrangement
refused and told her that the land was no longer for sale. Due to the with Hagibis on the payment of the loan. To implement the same, Butch
refusal, Bernadette caused the annotation of her adverse claim upon already surrendered five (5) service utility vehicles (SUVs) to the
TCT No. 12345 on December 19, 2016. Later on, Bernadette discovered company for it to sell and the proceeds to be credited to the loan as
that Alice had sold the property to Chona on February 5, 2016, and that payment. Was the obligation of Butch extinguished by reason of dacion
TCT No. 12345 had been cancelled and another one issued (TCT No. en pago upon the surrender of the SUVs? Decide and explain. (5%)
67891) in favor of Chona as the new owner.
SUGGESTED ANSWER
Bernadette sued Alice and Chona for specific performance, annulment of
sale and cancellation of TCT No. 67891. Bernadette insisted that she had No. Dacion en pago under 1245 of New Civil Code is not a
entered into a contract of sale with Alice; and that because Alice had recognized mode of extinguishing an obligation. The proper option
engaged in double sale, TCT No. 67891 should be cancelled and another is foreclosure.
title be issued in Bernadette’s favor.

XV
a. Did Alice and Bernadette enter into a contract of sale of the lot
covered by TCT No. 12345? Explain your answer. (4%) Peter and Paul entered into a Contract to Sell whereby Peter, the lot
owner, agreed to sell to Paul his lot on November 6, 2016 for the price of
SUGGESTED ANSWER: Pl ,000,000.00 to be paid at the residence of Peter in Makati City at 1 :00
p.m. If the full price is paid in cash at the specified time and place, then
No, because in the agreement between Alice and Bernadette the Peter will execute a Deed of Absolute Sale and deliver the title to Paul.
ownership is reserved in the vendor and is not to pass to the vendee until
full payment of the purchase price, which makes the contract one of On November 6, 2016, Paul did not show up and was not heard of from
contract to sell and not a contract of sale. that date on. In view of the nonperformance by Paul of his obligation,
Peter sent a letter to Paul that he is expressly and extra-judicially
Distinctions between a contract to sell and a contract of sale are well- declaring the Contract to Sell rescinded and of no legal and binding
established in jurisprudence. In a contract of sale, the title to the property effect. Peter further stated that failure on the part of Paul to contest the
passes to the vendee upon the delivery of the thing sold; in a contract to rescission within thirty (30) days from receipt of said letter shall mean
sell, ownership is, by agreement, reserved in the vendor and is not to that the latter agreed to the rescission.
pass to the vendee until full payment of the purchase price. Otherwise
stated, in a contract of sale, the vendor loses ownership over the Paul did not reply to this letter for five (5) years. Thus, Peter decided to
property and cannot recover it until and unless the contract is resolved or sell his lot to Henry in 2021. After hearing that Henry bought the lot, Paul
rescinded; whereas, in a contract to sell, title is retained by the vendor now questions the sale of the lot to Henry and files a complaint for
until full payment of the price. In the latter contract, payment of the price nullification of the sale.
is a positive suspensive condition, failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from [a] Is the exercise by Peter of his power to rescind extra-judicially the
becoming effective. [Saberon v. Ventanilla, Jr., 722 SCRA 287 (2014); Contract to Sell the proper and legal way of rescinding said contract?
Spouses Torrecampo v. Alindogan, 545 Phil. 686 (2007); discussed in Explain. (2.5%)
pp. 363-366, Vol. 2, Rabuya’s Civil Law Reviewer]
[b] In case Paul made a downpayment pursuant to a stipulation in the
In the case at bar, the contract entered between the parties is a contract Contract to Sell, what is the legal remedy of Peter? (2.5%)
to sell because ownership is retained by the vendor and is not to pass to
the vendee until full payment of the purchase price. SUGGESTED ANSWER: WALA

b. Did Alice engage in double sale of the property? Explain your

answer. (4%)
2015 bar. Under Art. 1324, when the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time before
XI. acceptance by communicating such withdrawal, except when the option
is founded upon consideration, as something paid or promised.
Jackie, 16, inherited a townhouse. Because she wanted to study in an
exclusive school, she sold her townhouse by signing a Deed of Sale and An accepted unilateral promise to buy or sell a determinate thing for a
turning over possession of the same to the buyer. When the buyer price certain is binding upon him if the promise is supported by a
discovered that she was still a minor, she promised to execute another consideration distinct from the price (Art. 1479). Consideration in an
Deed of Sale when she turns 18. When Jackie turned 25 and was option contract may be anything of value,, unlike in sale where it must be
already working, she wanted to annul the sale and return the buyer's the price certain in money or its equivalent (San Miguel Properties Inc. v.
money to recover her townhouse. Was the sale contract void, voidable or Spouses Huang, G.R. No. 137290, July 31, 2000).
valid? Can Jackie still recover the property? Explain. (4%)

SUGGESTED ANSWER: WALA

Here, the case of Jack Daniels Black and the P5,000.00 “pulutan” money
2014 bar was a consideration to “seal their agreement,” an agreement that
Marcelo is given until June 30, 2012 to buy the parcel of land. There is
IV. also no showing that such consideration will be considered part of the
purchase price. Thus, Sergio’s unilateral withdrawal of the offer violated
Nante, a registered owner of a parcel of land in Quezon City, sold the the Option Contract between him and Marcelo.
property to Monica under a deed of sale which reads as follows:

"That for and in consideration of the sum of P500,000.00, value to be

paid and delivered to me, and receipt of which shall be acknowledged by Can Sergio claim that whatever they might have agreed upon
me to the full satisfaction of Monica, referred to as Vendee, I hereby sell, cannot be enforced because any agreement relating to the sale of
transfer, cede, convey, and assign, as by these presents, I do have sold, real property must be supported by evidence in writing and they
transferred, ceded, conveyed and assigned a parcel of land covered by never reduced their agreement to writing? (3%)
TCT No. 2468 in favor of the Vendee."
SUGGESTED ANSWER:
After delivery of the initial payment of P100,000.00, Monica immediately
took possession of the property. Five (5) months after, Monica failed to No. Sergio’s claim has no legal basis.
pay the remaining balance of the purchase price. Nante filed an action for
the recovery of possession of the property. Nante alleged that the The contract at issue in the present case is the option contract, not the
agreement was one to sell,which was not consummated as the full contract of sale for the real property. Therefore, Art. 1403 does not apply.
contract price was not paid. Is the contention of Nante tenable? Why?
(4%) The Statute of Frauds covers an agreement for the sale of real property
or of an interest therein. Such agreement is unenforceable by action,
Suggested Answer: unless the same, or some note or memorandum, thereof, be in writing,
(Art. 1403 (e), Civil Code). Here, Marcelo and Sergio merely entered into
No. In a contract to sell, the vendee reserves the right to transfer the an Option Contract, which refers to a unilateral promise to buy or sell,
ownership of the property until the full payment of the agreed price; the which need not be in writing to be enforceable (Sanchez v. Rigos, G.R.
non-payment of which would give right to the vendor to recover the No. L-25494, June 14, 1972, citing Atkins, Kroll and Co. Inc. v. Cua Hian
property. Here, the deed is clearly one of sale, and not to sell, for the Tek and Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific
intention of Nante is clear to transfer the ownership to Monica for and in Co.).
consideration of the agreed contract price; the non-payment of which
would give the right to Nante to demand specific performance or ALTERNATIVE ANSWER:
rescission of the contract with damages.
No. Sergio’s claim has no legal basis.
Option Contract; Liquor & “Pulutan” as Consideration (2013)
The contract of sale has already been partially executed which takes it
outside the ambit of the Statute of Frauds is applicable only to executory
contracts, not to contracts that are totally or partially performed
No.III.Sergio is the registered owner of a 500-square meter land. His (Carbonnel v. Poncio, G.R. No. L-11231, May 12, 1958).
friend, Marcelo, who has long been interested in the property, succeeded
in persuading Sergio to sell it to him. On June 2, 2012, they agreed on
the purchase price of P600,000 and that Sergio would give Marcelo up to
June30, 2012 within which to raise the amount. Marcelo, in a light tone
usual between them, said that they should seal their agreement through
a case of Jack Daniels Black and P5,000 "pulutan" money which he
immediately handed to Sergio and which the latter accepted. The friends
then sat down and drank the first bottle from the case of bourbon.
Right of First Refusal; Lessee; Effect (2008)

On June 15, 2013, Sergio learned of another buyer, Roberto, who was No.XVI. Dux leased his house to Iris for a period of 2 years, at the rate of
offering P800,000 in ready cash for the land. When Roberto confirmed P25,000.00 monthly, payable annually in advance. The contract
that he could pay in cash as soon as Sergio could get the documentation stipulated that it may be renewed for another 2-year period upon mutual
ready, Sergio decided to withdraw his offer to Marcelo, hoping to just agreement of the parties. The contract also granted Iris the right of first
explain matters to his friend. Marcelo, however, objected when the refusal to purchase the property at any time during the lease, if Dux
withdrawal was communicated to him, taking the position that they have decides to sell the property at the same price that the property is offered
a firm and binding agreement that Sergio cannot simply walk away from for sale to a third party. Twenty-three months after execution of the lease
because he has an option to buy that is duly supported by a duly contract, Dux sold breach of her right of first refusal. Dux said there was
accepted valuable consideration. no breach because the property was sold to his mother who is not a third
party. Iris filed an action to rescind the sale and to compel Dux to sell the
Does Marcelo have a cause of action against Sergio? (5%) property to her at the same price. Alternatively, she asked the court to
extend the lease for another 2 years on the same terms.
SUGGESTED ANSWER:
(A). Can Iris seek rescission of the sale of the property to Dux's mother?
(3%)

Yes. Marcelo has a cause of action against Sergio. SUGGESTED ANSWER:

Yes, because the right of first refusal is included in the contract will apply, and the transaction is covered by the Statute of Frauds. (Art.
signed by the parties. Only if the lessee failed to exercise the right 1403 par. (2) Civil Code)
of first refusal could the lessor lawfully sell the subject property to
others, under no less than the same terms and conditions Conditional Sale vs. Absolute Sale (1997)
previously offered to the lessee. Granting that the mother is not a
third party, this would make her privy to the agreement of Dux and Distinguish between a conditional sale, on the one hand, and an
Iris, aware of the right of first refusal. This makes the mother a absolute sale, on the other hand.
buyer in bad faith, hence giving more ground for rescission of the
sale to her (Equatorial Realty, et al. v. Mayfair Theater, G.R. No. SUGGESTED ANSWER:
106063, 21 Nov. 1996).
A CONDITIONAL SALE is one where the vendor is granted the right to
ALTERNATIVE ANSWER: unilaterally rescind the contract predicated on the fulfillment or non-
fulfillment, as the case may be, of the prescribed condition. An
ABSOLUTE SALE is one where the title to the property is not reserved
to the vendor or if the vendor is not granted the right to rescind the
No, Iris cannot seek rescission of the sale of the property to Dux’s contract based on the fulfillment or nonfulfillment, as the case may be,
mother because the sale is not one of those rescissible contracts of the prescribed condition.
under Art. 1381 of the Civil Code.
Contract of Sale vs. Agency to Sell (1999)
(B). Will the alternative prayer for extension of the lease prosper?
(2%)

SUGGESTED ANSWER: A granted B the exclusive right to sell his brand of Maong pants in
Isabela, the price for his merchandise payable within 60 days from
delivery, and promising B a commission of 20% on all sales. After the
delivery of the merchandise to B but before he could sell any of them,
No. The contract stipulated that it may be renewed for another 2-year B’s store in Isabela was completely burned without his fault, together
period upon mutual agreement of the parties. Contracts are binding with all of A's pants. Must B pay A for his lost pants? Why? (5%)
between the parties; validity or compliance cannot be left to the will of
one of the parties (Art. 1308, Civil Code).

ALTERNATIVE ANSWER: SUGGESTED ANSWER:

The contract between A and B is a sale not an agency to sell because

the price is payable by B upon 60 days from delivery even if B is unable
It depends. The alternative prayer for the extension of the lease may to resell it. If B were an agent, he is not bound to pay the price if he is
prosper if unable to resell it.

there is a stipulation in the contract of sale; (b) Dux's mother is aware of As a buyer, ownership passed to B upon delivery and, under Art. 1504
the existing contract of lease; or (c) the lease is recorded in the Registry of the Civil Code, the thing perishes for the owner. Hence, B must still
of Property (Art. 1676, Civil Code). pay the price.

Contract of Sale; Marital Community Property; Formalities (2006)

Assignment of Credit vs. Subrogation (1993) Spouses Biong and Linda wanted to sell their house. They found a
prospective buyer, Ray. Linda negotiated with Ray for the sale of the
Peter Co, a trader from Manila, has dealt business with Allied property. They agreed on a fair price of P2 Million. Ray sent Linda a
Commodities in Hongkong for five years. All through the years, Peter Co letter confirming his intention to buy the property. Later, another couple,
accumulated an indebtedness of P500,000.00 with Allied Commodities. Bernie and Elena, offered a similar house at a lower price of P 1.5
Upon demand by its agent in Manila, Peter Co paid Allied Commodities Million. But Ray insisted on buying the house of Biong and Linda for
by check the amount owed. Upon deposit in the payee's account in sentimental reasons. Ray prepared a deed of sale to be signed by the
Manila, the check was dishonored for insufficiency of funds. For and in couple and a manager's check for P2 Million. After receiving the P2
consideration of P1.00, Allied Commodities assigned the credit to Hadji Million, Biong signed the deed of sale. However, Linda was not able to
Butu who brought suit against Peter Co in the RTC of Manila for sign it because she was abroad. On her return, she refused to sign the
recovery of the amount owed. Peter Co moved to dismiss the complaint document saying she changed her mind. Linda filed suit for nullification
against him on the ground that Hadji Butu was not a real party in interest of the deed of sale and for moral and exemplary damages against Ray.
and, therefore, without legal capacity to sue and that he had not agreed
to a subrogation of creditor. Will Peter Co's defense of absence of
agreement to a subrogation of creditor prosper?

SUGGESTED ANSWER:
Will the suit prosper? Explain. (2.5%)
No, Co's defense will not prosper. This is not a case of subrogation, but
an assignment of credit. ASSIGNMENT OF CREDIT is the process of ALTERNATIVE ANSWER:
transferring the right of the assignor to the assignee. The assignment
may be done either gratuitously or onerously, in which case, the No, the suit will not prosper. The contract of sale was
assignment has an effect similar to that of a sale (Nyco Sales
Corp.v.BA Finance Corp. G.R No.71694. Aug.16, 1991 200 SCRA perfected when Linda and Ray agreed on the object of the
637). As a result of the assignment, the plaintiff acquired all the rights of
sale and the price [Art. 1475, New Civil Code]. The consent
the assignor including the right to sue in his own name as the legal
assignee. In assignment, the debtor's consent is not essential for the of Linda has already been given, as shown by her agreement
validity of the assignment
to the price of the sale. There is therefore consent on her part

as the consent need not be given in any specific form. Hence,

ALTERNATIVE ANSWER:
her consent may be given by implication, especially since she
No, the defense of Peter Co will not prosper. Hadji Butu validly acquired
his right by an assignment of credit under Article 1624 of the Civil Code. was aware of, and participated in the sale of the property
However, the provisions on the contract of sale (Article 1475 Civil Code)
(Pelayo v. CA, G.R. No. 141323, June 8, 2005). Her action for in the Regional Trial Court to annul the order and to enjoin its
enforcement. Y and A were able to forge a compromise agreement under
moral and exemplary damages will also not prosper because which A agreed to a twenty percent (20%) increase in the monthly
rentals. They further agreed that the lease will expire two (2) years later
the case does not fall under any of those mentioned in Art. and that in the event that Y would sell the property, either A or his
daughter B shall have the right of first refusal. The Compromise
2219 and 2232 of the Civil Code. Agreement was approved by the court. Six (6) months before the
expiration of the lease, A died. Y sold the property to the Visorro Realty
ALTERNATIVE ANSWER:
Corp. without notifying B. B then filed an action to rescind the sale in
The suit will prosper. Sale of community property requires written favor of the corporation and to compel Y to sell the property to her since
consent of both spouses. The failure or refusal of Linda to affix her under the Compromise Agreement, she was given the right of first refusal
signature on the deed of sale, coupled with her express declaration of which, she maintains is a stipulation pour atrui under
opposing the sale negates any valid consent on her part. The consent of Article 1311 of the Civil Code. Is she correct?
Biong by himself is insufficient to effect a valid sale
SUGGESTED ANSWER:
of communityproperty (Art. 96, Family Code; Abalos v. Macatangay,
G.R. No. 155043, september 30, 2004). B is not correct. Her action cannot prosper. Article 1311 requires that the
third person intended to be benefited must communicate his acceptance
Does Ray have any cause of action against Biong and Linda? Can he
to the obligor before the revocation. There is no showing that B
also recover damages from the spouses? Explain.
manifested her acceptance to Y at any time before the death of A and
Considering that the contract has already been perfected and taken out before the sale. Hence, B cannot enforce any right under the alleged
of the operation of the statute of frauds, Ray can compel Linda and Biong stipulation pour atrui.
to observe the form required by law in order for the property to be
Double Sales (2001)
registered in the name of Ray which can be filed together with the action
for the recovery of house [Art. 1357 New Civil Code]. In the alternative, On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On
he can recover the amount of Two million pesos (P2,000,000.00) that he June 30, 1995, he sold the same land to Jose. Who has a better right if:
paid. Otherwise, it would result in solutio indebiti or unjust enrichment.
a) the first sale is registered ahead of the second sale, with knowledge
Ray can recover moral damages on the ground that the action filed by of the latter. Why?
Linda is clearly an unfounded civil suit which falls under malicious
prosecution (Ponce v. Legaspi, G.R.No.79184, May 6,1992). b) the second sale is registered ahead of the first sale, with knowledge
of the latter? Why?

SUGGESTED ANSWER:
Contract to Sell (2001)
(a) The first buyer has the better right if his sale was first to be
Arturo gave Richard a receipt which states: registered, even though the first buyer knew of the second sale. The fact
that he knew of the second sale at the time of his registration does not
Receipt
make him as acting in bad faith because the sale to him was ahead in
Received from Richard as down payment for my 1995 time, hence, has a priority in right. What creates bad faith in the case of
double sale of land is knowledge of a previous sale.
Toyota Corolla with plate No. XYZ-1 23………….. P50.000.00
b) The first buyer is still to be preferred, where the second sale is
Balance payable: 12/30/01…….. P50 000.00 registered ahead of the first sale but with knowledge of the latter. This is
because the second buyer, who at the
September 15, 2001. time he registered his sale knew that the property had
already been sold to someone else, acted in bad faith. (Article
(Sgd.) Arturo 1544, C.C.)

Does this receipt evidence a contract to sell? Why? Double Sales (2004)

SUGGESTED ANSWER: JV, owner of a parcel of land, sold it to PP. But the deed of sale was not
registered. One year later, JV sold the parcel again to RR, who
It is a contract of sale because the seller did not reserve ownership until succeeded to register the deed and to obtain a transfer certificate of title
he was fully paid. over the property in his own name.
Contract to Sell vs.Contract of Sale (1997) Who has a better right over the parcel of land, RR or PP? Why? Explain
the legal basis for your answer.
State the basic difference (only in their legal effects) between a
contract to sell, on the one hand, and a contract of sale, on the other. SUGGESTED ANSWER:
SUGGESTED ANSWER: It depends on whether or not RR is an innocent purchaser for
value. Under the Torrens System, a deed or instrument operated only as
In a CONTRACT OF SALE, ownership is transferred to the buyer upon a contract between the parties and as evidence of authority to the
delivery of the object to him while in a CONTRACT TO SELL, ownership Register of Deeds to make the registration. It is the registration of the
is retained by the seller until the purchase price is fully paid. In a contract deed or the instrument that is the operative act that conveys or affects
to sell, delivery of the object does not confer ownership upon the buyer. the land. (Sec. 51, P.D. No. 1529).
In a contract of sale, there is only one contract
executed between the seller and the buyer, while in a contract to In cases of double sale of titled land, it is a well-settled rule
sell, there are two contracts, first the contract to that the buyer who first registers the sale in good faith acquires a
sell (which is a conditional or preparatory sale) and a second, the better right to the land. (Art. 1544, Civil Code).
final deed of sale or the principal contract which is executed after full
payment of the purchase price. Persons dealing with property covered by Torrens title are not required to
go beyond what appears on its
Contract to Sell; Acceptance; Right of First Refusal (1991) face. (Orquiola v. CA 386 SCRA 301, [2002]; Domingo v. Races, 401
SCRA 197, [2003]). Thus, absent any showing that RR knew about, or
A is the lessee of an apartment owned by Y. A allowed his married but ought to have known the prior sale of the land to PP or that he acted in
employed daughter B, whose husband works in Kuwait, to occupy it. The bad faith, and being first to register the sale, RR acquired a good and a
relationship between Y and A soured. Since he has no reason at all to clean title to the property as against PP.
eject A, Y, in connivance with the City Engineer, secured from the latter
an order for the demolition of the building. A immediately filed an action Equitable Mortgage (1991)
On 20 December 1970, Juliet, a widow, borrowed from Romeo price. However, Pedro retained the owner’s duplicate of said title.
P4,000.00 and, as security therefore, she executed a deed of mortgage Thereafter, Juan, as lessor, and Pedro, as lessee, executed a contract of
over one of her two (2) registered lots which has a market value of lease over the property for a period of one (1) year with a monthly
P15,000.00. The document and the certificate of title of the property were rental of Pl,000.00. Pedro, as lessee, was also obligated to pay the realty
delivered to Romeo. taxes on the property during the period of lease.

On 2 June 1971, Juliet obtained an additional sum of P3,000 from Subsequently, Pedro filed a complaint against Juan for the reformation of
Romeo. On this date, however, Romeo caused the the Deed of Absolute Sale, alleging that the transaction covered by the
preparation of a deed of absolute sale of the above property, to deed was an equitable mortgage. In his verified answer to the complaint,
which Juliet affixed her signature without first reading the document. The Juan alleged that the property was sold to him under the Deed of
consideration indicated is P7,000.00. She thought that this document Absolute Sale, and interposed counterclaims to recover possession of
was similar to the first she signed. When she reached home, her son X, the property and to compel Pedro to turn over to him the owner’s
after reading the duplicate copy of the deed, informed her that what she duplicate of title.
signed was not a mortgage but a deed of absolute sale. On the following
day, 3 June 1971, Juliet, accompanied by X, went back to Romeo and Resolve the case with reasons.
demanded the reformation it, Romeo prepared and signed a document
wherein, as vendee in the deed of sale above mentioned, he obligated SUGGESTED ANSWER:
and bound himself to resell the land to Juliet or her heirs and successors
for the same consideration as reflected in the deed of sale (P7,000) The complaint of Pedro against Juan should be dismissed. The instances
within a period of two (2) years, or until 3 June 1973. It is further stated when a contract — regardless of its nomenclature — may be presumed
therein that should the Vendor (Juliet) fail to exercise her right to redeem to be an equitable mortgage are enumerated in Article 1602 of the Civil
within the said period, the conveyance shall be deemed absolute and Code: “Art. 1602. The contract shall be presumed to be an
irrevocable. Romeo did not take equitable mortgage, in any of the following cases:
possession of the property. He did not pay the taxes thereon.
1. When the price of a sale with right to repurchase is unusually
Juliet died in January I973 without having repurchased the property. Her inadequate:
only surviving heir, her son X, failed to repurchase the property on or
2. When the vendor remains in possession as lessee or otherwise;
before 3 June 1973. In 1975,
Romeo sold the property to Y for P50,000.00. Upon learning of the 3. When upon or after the expiration of the right to repurchase another
sale, X filed an action for the nullification of the sale and for the recovery instrument extending the period of redemption or granting a new period is
of the property on the ground that the so-called deed of absolute sale executed;
executed by his mother was merely an equitable mortgage, taking into
account the inadequacy of the price and the failure of Romeo to 4. When the purchaser retains for himself a part of the purchase price;
take possession of the property and to pay the taxes thereon. Romeo
and Y maintain that there was a valid absolute sale and that the 5. When the vendor binds himself to pay the taxes on the thing sold;
document signed by the former on 3 June 1973 was merely a promise to
sell. 6. In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment of
a) If you were the Judge, would you uphold the theory of X? a debt or the performance of any other obligation.

b) If you decide in favor of Romeo and Y, would you uphold the validity “In any of the foregoing cases, any money, fruits, or other benefit to be
of the promise to sell? received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.”
SUGGESTED ANSWER:
Article 1604 states that “the provisions of article 1602 shall also apply to
A. I will not uphold the theory of X for the nullification of the sale and for a contract purporting to be an absolute sale.”
the recovery of the property on the ground that the so-called sale was
only an equitable mortgage. An equitable mortgage may arise only if, in For Articles 1602 and 1604 to apply, two requisites must concur: 1) the
truth, the sale was one with the right of repurchase. The facts of the case parties entered into a contract denominated as a contract of sale; and 2)
state that the right to repurchase was granted after the absolute deed of their intention was to secure an existing debt by way of mortgage (Heirs
sale was executed. Following the rule of Balite v. Lim, G.R. No. 152168, December 10, 2004).
in Cruzo vs. Carriaga (174 SCRA 330), a deed of repurchase executed
independently of the deed of sale where the two stipulations are found in In the given case, although Pedro retained possession of the property as
two instruments instead of one document, the lessee after the execution of the Deed of Sale, there is no showing that
right of repurchase would amount only to one option granted by the the intention of the parties was to secure an existing debt by way of
buyer to the seller. Since the contract cannot be upheld as a mortgage. Hence, the complaint of Pedro should be dismissed.
contract of sale with the right to repurchase, Art. 1602 of the Civil Code
on equitable mortgage will not apply. The rule could have been different if Immovable Property; Rescission of Contract (2003)
both deeds were executed on the same occasion or date, in which case,
under the ruling in spouses Claravall v. CA (190 SCRA 439),the contract X sold a parcel of land to Y on 01 January 2002, payment and delivery to
may still be sustained as an equitable mortgage, given the circumstances be made on 01 February 2002. It was stipulated that if payment were not
expressed in Art. 1602. The reserved right to repurchase is then to be made by Y on 01 February 2002, the sale between the parties
deemed an original intention. would automatically be rescinded. Y failed to pay on 01 February 2002,
but offered to pay three days later, which payment X refused to accept,
B. If I were to decide in favor of Romeo and Y, I would not uphold the claiming that their contract of sale had already been rescinded. Is X’s
validity of the promise to sell, so as to contention correct? Why?
enforce it by an action for specific performance. The promise to sell
would only amount to a mere offer and, therefore, it is not enforceable SUGGESTED ANSWER:
unless it was sought to be exercised before a withdrawal or denial
thereof. No, X is not correct. In the sale of immovable property, even though it
may have been stipulated, as in this case, that upon failure to pay the
Even assuming the facts given at the end of the case, there price at the time agreed upon the
would have been no separate consideration for such promise to sell. rescission of the contract shall of right take place, the vendee may
The contract would at most amount to an option which again may not be pay, even after the expiration of the period, as long as no demand for
the basis for an action for specific performance. rescission of the contract has been made upon him either judicially or by
a notarial act
Equitable Mortgage vs. Sale (2005) (Article 1592, New Civil code). Since no demand for rescission was made
on Y, either judicially or by a notarial act, X cannot refuse to accept the
On July 14, 2004, Pedro executed in favor of Juan a Deed of Absolute payment offered by Y three (3) days after the expiration of the period.
Sale over a parcel of land covered by TCT No. 6245. It appears in the
Deed of Sale that Pedro received from Juan P120,000.00 as purchase ANOTHER SUGGESTED ANSWER:
This is a contract to sell and not a contract of absolute sale, since as (1) After having paid installments for at least two years, the buyer is
there has been no delivery of the land. Article 1592 of the New Civil code entitled to a mandatory grace period of one month for every year of
is not applicable. Instead, installment payments made, to pay the unpaid installments without
Article 1595 of the New Civil Code applies. The seller has two alternative interest.
remedies: (1) specific performance, or (2) rescission or resolution under
Article 1191 of the New Civil code. In both remedies, damages are due If the contract is cancelled, the seller shall refund to the buyer the cash
because of default. surrender value equivalent to fifty percent (50%) of the total payments
made, and after five years of installments, an additional five percent (5%)
ALTERNATIVE ANSWER: every year but not to exceed ninety percent (90%) of the total payments
made.
Yes, the contract was automatically rescinded upon Y’s failure to pay on
01 February 2002. By the express terms of the contract, there is no need (2) In case the installments paid were less than 2 years, the seller shall
for X to make a demand in order for rescission to take give the buyer a grace period of not less than 60 days. If the buyer fails
place. (Article 1191, New Civil Code, Suria v. IAC, 151 SCRA 661 to pay the installments due at the expiration of the grace period, the
[1987]; U.P. v. delos Angeles, 35 SCRA 102 [1970]). seller may cancel the contract after 30 days from receipt by the buyer of
the notice of cancellation or demand for rescission by notarial act.
Maceda Law (2000)
The RECTO LAW (Art. 1484} refers to sale of movables payable in
Priscilla purchased a condominium unit in Makati City from the Citiland installments and limiting the right of seller, in case of default by the buyer,
Corporation for a price of P10 Million, payable P3 Million down and the to one of three remedies:
balance with interest thereon
at 14% per annum payable in sixty (60) equal monthly installments a) exact fulfillment;
of P198,333.33. They executed a Deed of Conditional Sale in which it is
stipulated that should the vendee fail to pay three (3) successive b) cancel the sale if two or more installments have not been paid;
installments, the sale
shall be deemed automatically rescinded without the necessity of c) foreclose the chattel mortgage on the things sold, also in case of
judicial action and all payments made by the vendee shall be forfeited in default of two or more installments, with no further action against the
favor of the vendor by way of purchaser.
rental for the use and occupancy of the unit and as liquidated
damages. For 46 months, Priscilla paid the monthly installments Option Contract (2002)
religiously, but on the 47th and 48th months, she failed to pay. On the
Explain the nature of an option contract.
49th month, she tried to pay the installments due but the vendor refused
to receive the payments tendered by her. The following month, the SUGGESTED ANSWER:
vendor sent her a notice that it was rescinding the Deed of Conditional
Sale pursuant to the stipulation for automatic rescission, and demanded An OPTION CONTRACT is one granting a privilege to buy or sell within
that she vacate the premises. She an agreed time and at a determined price. It must be supported by a
replied that the contract cannot be rescinded without judicial demand consideration distinct from the price. (Art. 1479 and 1482, NCC)
or notarial act pursuant to Article 1592 of the Civil Code.
Option Contract; Earnest Money (1993)
a) Is Article 1592 applicable?
LT applied with BPI to purchase a house and lot in Quezon City, one of
b) Can the vendor rescind the contract? its acquired assets. The amount offered was P1,000,000.00 payabale, as
follows: P200,000.00 down payment, the balance of P800,000.00
SUGGESTED ANSWER: payable within 90 days from June 1, 1985. BPI accepted the offer,
whereupon LT drew a check for P200,000.00 in favor of BPI which the
a) Article 1592 of the Civil Code does not apply to a conditional
latter thereafter deposited in its account. On September
sale. In Valarao v. CA, 304 SCRA 155, the Supreme Court held that
5, 1985, LT wrote BPI requesting extension until October 10, 1985 within
Article 1592 applies only to a contract of sale and not to a
which to pay the balance, to which BPI agreed. On October 5, 1985, due
Deed of Conditional Sale where the seller has reserved title to the
to the expected delay in the remittance of the needed amount by his
property until full payment of the purchase price. The law applicable is
financier from the United States, LT wrote BPI requesting a last
the Maceda Law.
extension until October 30, 1985, within which to pay the balance. BPI
SUGGESTED ANSWER: denied LTs request because another had offered to buy the same
property for P1,500,000.00. BPI cancelled its agreement with LT and
b) No, the vendor cannot rescind the contract under the offered to return to him the amount of P200,000.00 that LT had paid to it.
circumstances. Under the Maceda Law, which is the law applicable, the On October
seller on installment may not rescind the contract till after the lapse of the 20, 1985, upon receipt of the amount of P800,000.00 from his US
mandatory grace period financier, LT offered to pay the amount by tendering a cashier’s check
of 30 days for every one year of installment payments, and only after 30 therefor but which BPI refused to accept.
days from notice of cancellation or demand for rescission by a notarial LT then filed a complaint against BPI in the RTC for specific
act. In this case, the refusal of the seller to accept payment from the performance and deposited in court the amount of P800,000.00. Is BPI
buyer on the 49th month was not justified because the buyer was entitled legally correct in canceling its contract with LT?
to 60 days grace period and the payment was tendered within that
period. Moreover, the notice of rescission served by the seller on the SUGGESTED ANSWER:
buyer was not effective because the notice was not by a notarial act.
BPI is not correct in canceling the contract with LT.
Besides, the seller may still pay within 30 days from such notarial notice
In Lina Topacio v Court of Appeals and BPI Investment (G.R. No.
before rescission may be effected. All these requirements for a valid
102606, July 3, 1993, 211 SCRA 291) the Supreme Court held that the
rescission were not complied with by the seller. Hence, the rescission is
earnest money is part of the purchase price and is proof of the perfection
invalid.
of the contract. Secondly, notarial or judicial rescission under Art. 1592
Maceda Law; Recto Law (1999) and 1991 of the Civil Code is
necessary (Taguba v. de Leon, 132 SCRA 722.)
What are the so-called “Maceda” and “Recto” laws in connection with
sales on installments? Give the most important features of each law. ALTERNATIVE ANSWER:

SUGGESTED ANSWER: BPI is correct in canceling its contract with LT but BPI must do so by way
of judicial rescission under Article
The MACEDA LAW (R.A. 655) is applicable to sales of immovable 1191 Civil Code. The law requires a judicial action, and mere notice of
property on installments. The most important features rescission is insufficient if it is resisted. The law
are (Rillo v. CA, 247 SCRA 461): also provides that slight breach is not a ground for
rescission (Song Fo & Co. vs. Hawaiian Phil Co., 47 Phil. 821). Delay
in the fulfillment of the obligation (Art. 1169, Civil Code) is a ground to
rescind, only if time is of the essence. Otherwise, the court may refuse by the vendee and the Register of Deeds. The period of 30 days never
the rescission if there is a just cause for the fixing of a period. tolled. She can still avail of that right.

Perfected Sale; Acceptance of Earnest Money (2002) ALTERNATIVE ANSWER:

Bert offers to buy Simeon’s property under the following terms and Adela can no longer exercise her right of redemption. As co-owner, she
conditions: P1 million purchase price, 10% option money, the balance had only 30 days from the time she received written notice of the sale
payable in cash upon the clearance of the property of all illegal which in this case took the form of a copy of the deed of sale being given
occupants. The option money is promptly paid and Simeon clears the to her (Conejero v.CA,16 SCRA 775 [1966]). The law does not
property of illegal occupants in no time at all. However, when Bert prescribe any particular form of written notice, nor any distinctive method
tenders payment of the balance and ask Simeon for the deed for for notifying the redemptioner (Etcuban v.CA, 148 SCRA 507 [1987]).So
absolute sale, Simeon suddenly has a change of heart, claiming that the long as the redemptioner was informed in writing, he has no cause to
deal is disadvantageous to him as he has found out that the property can complain (Distrito v. CA, 197 SCRA 606, 609 [1991]). In fact, in Distrito,
fetch three time the agreed purchase price. Bert seeks specific a written notice was held unnecessary where the co-owner had actual
performance but Simeon contends that he has merely given Bert an knowledge of the sale, having acted as middleman and being present
option to buy and nothing more, and offers to return the option money when the vendor signed the deed of sale.
which Bert refuses to accept.
Right of First Refusal; Lessee; Effect (1996)
B. Will Bert’s action for specific performance prosper?
Explain. Ubaldo is the owner of a building which has been leased by Remigio for
the past 20 years. Ubaldo has repeatedly assured Remigio that if he
C. May Simeon justify his refusal to proceed with the sale by the fact should decide to sell the building, he will give Remigio the right of first
that the deal is financially disadvantageous to him? Explain. refusal. On June
30, 1994, Ubaldo informed Remigio that he was willing to sell the building
SUGGESTED ANSWER: for P5 Million. The following day, Remigio sent
a letter to Ubaldo offering to buy the building at P4.5 Million.
B. Bert’s action for specific performance will prosper because there Ubaldo did not reply. One week later, Remigio
was a binding agreement of sale, not just an option contract. The sale received a letter from Santos informing him that the building has
was perfected upon acceptance by Simeon of 10% of the agreed price. been sold to him by Ubaldo for P5 Million, and that he will not renew
This amount is in really earnest money which, under Art. 1482, “shall be Remigio’s lease when it expires. Remigio filed an action against Ubaldo
considered as part of the price and as proof of the perfection of the and Santos for cancellation of the sale, and to compel Ubaldo to execute
contract.” (Topacio v. CA, 211 SCRA 291 [1992]; Villongco Realty v. a deed of absolute sale in his favor, based on his right of first refusal.
Bormaheco, 65 SCRA 352 [1975]).
a) Will the action prosper? Explain.
C. Simeon cannot justify his refusal to proceed with
the sale by the fact that the deal is financially b) If Ubaldo had given Remigio an option to purchase the building
disadvantageous to him. Having made a bad bargain is not a legal instead of a right of first refusal, will your answer be the same? Explain.
ground for pulling out a biding contract of sale, in the absence of some
actionable wrong by the other party (Vales v.Villa, 35 Phi l769 [1916]), SUGGESTED ANSWER:
and no such wrong has been committed by Bert.
No, the action to compel Ubaldo to execute the deed of absolute sale will
Redemption; Legal; Formalities (2001) not prosper. According to Ang Yu v. Court of Appeals (238 SCRA 602),
the right of first refusal is not based on contract but is predicated on the
Betty and Lydia were co- provisions of human relations and, therefore, its violation is predicated on
owners of a parcel of land. Last January 31, 2001, when she paid her quasi-delict. Secondly, the right of first refusal implies that the offer of the
real estate tax, Betty discovered that Lydia has sold her share to Emma person in whose favor that right was given must conform with the same
on November 10, 2000. The following day, Betty offered to redeem her terms and conditions as those given to the offeree. In this case, however,
share from Emma, but the latter replied that Betty’s right to redeem has Remigio was offering only P4.5 Million instead of P5 Million.
already prescribed. Is Emma correct or not? Why?
ALTERNATIVE ANSWER:
SUGGESTED ANSWER:
No, the action will not prosper. The lessee’s right of first refusal does not
Emma, the buyer, is not correct. Betty can still enforce her right of legal go so far as to give him the power to dictate on the lessor the price at
redemption as a co-owner. Article 1623 of the Civil Code gives a co- which the latter should
owner 30 days from written notice of the sale by the vendor to exercise sell his property. Upon the facts given, the lessor had
his right of legal redemption. In the present problem, the 30-day period sufficiently complied with his commitment to give the lessee a right of first
for the exercise by Betty of her right of redemption had not even begun to refusal when he offered to sell the property to the lessee for P5 Million,
run because no notice in writing of the sale appears to have been given which was the same price he got in selling it to Santos. He certainly had
to her by Lydia. the right to treat the lessee’s counter-offer of a lesser amount as a
rejection of his offer to sell at P5 Million. Thus, he was free to find
Redemption; Legal; Formalities (2002) another buyer upon receipt of such unacceptable counter-offer
(Art. 1319. NCC).
Adela and Beth are co-owners of a parcel of land. Beth sold her
undivided share of the property to Xandro, who promptly notified Adela of SUGGESTED ANSWER:
the sale and furnished the latter a copy of the deed of absolute sale.
When Xandro presented the deed for registration, the register of deeds Yes, the answer will be the same. The action will not prosper
also notified Adela of the sale, enclosing a copy of the deed with the because an option must be supported by a consideration separate and
notice. However, Adela ignored the notices. A year later, Xandro filed a distinct from the purchase price. In this case there is no separate
petition for the partition of the property. Upon receipt of summons, Adela consideration. Therefore, the option may be withdrawn by Ubaldo at any
immediately tendered the requisite amount for the redemption. Xandro time. (Art. 1324, NCC)
contends that Adela lost her right of redemption after the expiration of 30
days from her receipt of the notice of the sale given by him. Right of First Refusal; Lessee; Effect (1998)

May Adela still exercise her right of redemption? Explain. In a 20-year lease contract over a building, the lessee is expressly
granted a right of first refusal should the lessor decide to sell both the
SUGGESTED ANSWER: land and building. However, the lessor sold the property to a third person
who knew about the lease and in fact agreed to respect it. Consequently,
Yes, Adela may still exercise her right of redemption the lessee brings an action against both the lessor-seller and the buyer
notwithstanding the lapse of more than 30 days from notice of the sale (a) to rescind the sale and (b) to compel specific performance of his
given to her because Article 1623 of the New Civil Code requires that the right of first refusal in the sense that the lessor should be ordered to
notice in writing of the sale must come from the prospective vendor or execute a deed of absolute sale in favor of the lessee at the same price.
vendor as the case may be. In this case, the notice of the sale was given
The defendants contend that the plaintiff can neither seek rescission of shall be paid upon delivery of the car to E and the balance of P75,000.00
the sale nor compel specific performance of a “mere” right of first refusal. shall be paid in five equal monthly installments of P15,000.00 each. The
Decide the case. car was delivered to E, and E paid the amount of P75.000.00 to D. Less
than one month thereafter, the car was stolen from E’s garage with no
SUGGESTED ANSWER: fault on E’s part and was never recovered. Is E legally bound to pay the
said unpaid balance of P75.000.00? Explain your answer.
The action filed by the lessee, for both rescission of the offending sale
and specific performance of the right of first refusal which was violated, SUGGESTED ANSWER:
should prosper. The ruling
in Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc. (264 Yes, E is legally bound to pay the balance of P75,000.00. The ownership
SCRA 483), a case with similar facts, sustains both rights of action of the car sold was acquired by E from the
because the buyer in the subsequent sale knew the existence of right of moment it was delivered to him. Having acquired ownership, E
first refusal, hence in bad faith. bears the risk of the loss of the thing under the doctrine of res perit
domino (Articles 1496. 1497, Civil Code).
ANOTHER ANSWER:

The action to rescind the sale and to compel the right to first refusal will
not prosper. (Ang Yu Asuncion vs. CA, 238 SCRA 602).The Court
ruled in a unanimous en banc decision that the right of first refusal is not
founded upon contract but on a quasi-delictual relationship covered by
the principles of human relations and unjust enrichment (Art. 19, et seq.
Civil Code). Hence the only action that will prosper according to the
Supreme Court is an “action for damages in a proper forum for the
purpose.”

Right of Repurchase (1993)

On January 2, 1980, A and B entered into a contract whereby A s

old to B a parcel of land for and in
consideration of P10.000.00. A reserving to himself the right to
repurchase the same. Because they were friends, no period was agreed
upon for the repurchase of the property.

1) Until when must A exercise his right of repurchase?

2) If A fails to redeem the property within the allowable period, what

would you advise B to do for his better protection?

SUGGESTED ANSWER:

1) A can exercise his right of repurchase within four (4)

years from the date of the contract (Art. 1606, Civil Code).

SUGGESTED ANSWER:

2) I would advise B to file an action for consolidation of title and obtain a

judicial order of consolidation which must be recorded in the Registry of
Property (Art. 1607. Civil Code).

Transfer of Ownership; Non-Payment of the Price (1991)

Pablo sold his car to Alfonso who issued a postdated check in full
payment therefor. Before the maturity of the check,
Alfonso sold the car to Gregorio who later sold it to Gabriel. When
presented for payment, the check issued by Alfonso was dishonored by
the drawee bank for the reason that he, Alfonso, had already closed his
account even before he issued his check.

Pablo sued to recover the car from Gabriel alleging that he (Pablo) had
been unlawfully deprived of it by reason of Alfonso’s deception. Will the
suit prosper?

SUGGESTED ANSWER:

No. The suit will not prosper because Pablo was not unlawfully deprived
of the car although he was unlawfully deprived of the price. The
perfection of the sale and the delivery of the car was enough to allow
Alfonso to have a right of ownership over the car, which can be lawfully
transferred to Gregorio. Art. 559 applies only to a person who is in
possession in good faith of the property, and not to the owner
thereof. Alfonso, in the problem, was the owner, and, hence, Gabriel
acquired the title to the car.

Non-payment of the price in a contract of sale does not render ineffective

the obligation to deliver. The obligation to deliver a thing is different from
the obligation to pay its price. EDCA Publishing Co. v .Santos (1990)

Transfer of Ownership; Risk of Loss (1990)

D sold a second-hand car to E for P150,000.00 The agreement

between D and E was that half of the purchase price, or P75,000.00,