Good faith, no annotation, not voided, = just title

A. Contract to Sell
 Diego v. Diego GR no. 179965, Feb. 20, 2013

In 1993, Nicolas P. Diego agreed to sell his share in the Diego Building, Dagupan
City, to his brother Rodolfo P. Diego for PHP 500,000, receiving a PHP 250,000
downpayment. They agreed that a deed of sale would be executed upon the
remaining balance payment. Eduardo P. Diego, another brother and the building’s
administrator, failed to remit Nicolas’s rent shares, instead giving them to Rodolfo
despite Nicolas’s demands. Subsequently, Nicolas filed a Complaint in 1999
against Rodolfo and Eduardo at the RTC of Dagupan City, seeking an
accounting, delivery of his rent share, and damages. Rodolfo and Eduardo
countered, arguing Nicolas had no claim as he had sold his share. The RTC
dismissed the case, ordering Nicolas to execute a deed of absolute sale upon
Rodolfo’s balance payment. The CA affirmed this decision. Nicolas then
appealed to the Supreme Court.

### Issues:
1. Whether or not there was a perfected contract of sale between Nicolas Diego
and Rodolfo Diego.
2. Whether or not Nicolas Diego could unilaterally rescind the agreement due to
Rodolfo’s non-payment.
3. The entitlement of Nicolas Diego to the share of the building’s income and
proper remediation for his grievances.

### Court’s Decision: The Supreme Court clarified that the agreement was a
contract to sell, not a sale, as title transfer was conditioned on full payment, which
Rodolfo failed to fulfill. It held that the contract was terminated or cancelled upon
Rodolfo’s failure to pay the balance, that Nicolas retained ownership, and that
demands for the deed of sale execution were unwarranted without full payment.
The Court ordered Rodolfo and Eduardo to render an accounting, return Nicolas’s
share, and pay damages, emphasizing that the non-payment of the price prevented
the obligation to sell from arising, thus retaining ownership with Nicolas.

### Doctrine: In contracts to sell, ownership is reserved by the seller until full
payment of the purchase price by the buyer. Non-payment prevents the obligation
to sell from arising, maintaining ownership with the seller. Furthermore, the court
differentiated between contracts of sale and contracts to sell, emphasizing the
buyer’s obligation to pay in full before ownership transfers. G.R. No. 179965.
February 20, 2013

### Class Notes: – In a contract to sell, the vendor’s obligation to sell becomes
demandable only after the buyer fulfills the condition (usually full payment). – A
contract to sell is distinct from a contract of sale where the transfer of ownership
is immediate upon agreement. – Non-payment of the purchase price in a contract
to sell leads to the contract’s termination, not rescission. – The seller retains
ownership until the completion of the payment in a contract to sell.

. Thus, in a contract to sell, (only to cancel sale-no need to rescind)

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

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 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. When the petitioners in the
instant case repossessed the disputed house and lot for failure of private
respondents to pay the purchase price in full, they were merely enforcing the
contract and not rescinding it.

B. Warranty for Hidden Defects:

Express Warranties: These are explicitly stated by the seller

or manufacturer and can be found in advertisements,
brochures, or any promotional material regarding the
product.

1. Fee simple
2. Free of defects sold for the sold for the purpose why it was being bought
Thus, unless a contrary intention appears, the following
implied warranties attach to a contract of sale: (a) the seller
has a right to sell the property at the time when the
ownership is to pass, while the buyer shall from that time have
and enjoy the legal and peaceful possession of the property; (b)
the property shall be free from any hidden faults or defects,
or any charge or encumbrance not declared or known to the
buyer; and (c) warranty against eviction, where the buyer
would be deprived of the whole or part of the property
purchased upon a final judgment based on a right prior to
the sale or an act imputable to the seller.
 Geromo et al v. La paz Housing and Development GR No. 211175 (January 18, 2017
Facts:
The case arises from the purchase of housing units in Adelina 1-A Subdivision in San
Pedro, Laguna, Philippines, by the petitioners Atty. Reyes G. Geromo, Florencio
Buentipo, Jr., Ernaldo Yambot, and Lydia Bustamante from La Paz Housing and
Development Corporation (La Paz) through GSIS financing. The units, situated along
the old Litlit Creek, showed serious cracks on floors and walls within two years of
occupancy, prompting the petitioners to request remedial action from La Paz. La Paz’s
response was deemed insufficient by the petitioners. Geological assessments by
government agencies confirmed the differential settlement of the area affecting the
structural integrity of the units. Legal proceedings began with complaints filed by the
petitioners before the Housing and Land Regulatory Board (HLURB), alleging breach

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 of contract against La Paz and GSIS for failing to disclose and rectify the hidden
defects. The case escalated through the HLURB’s Board of Commissioners to the
Office of the President (OP), with final appeals made to the Court of Appeals (CA)
and eventually the Supreme Court.

Issues:
1. Whether La Paz should be held liable for the structural defects on its implied
warranty against hidden defects.
2. Liability of GSIS in the contractual relations governing the sale and financing of the
defective housing units.

Court’s Decision:
The Supreme Court found merit in the petition, reinstating the HLURB Arbiter’s
decision with modifications. La Paz was found liable under the doctrine of implied
warranty against hidden defects as laid out in the Civil Code, specifically Articles
1561 and 1566. The conditions of the implied warranty were met: the defects were
serious, hidden, existed at the time of sale, and timely reported. La Paz’s inaction
and negligence were critical to the Court’s decision, highlighting its responsibility for
the damages due to the failure to properly compact the soil on which the houses were
built. GSIS, however, was not held liable due to its role merely as a financier, not a
party to the purchase contracts.

Doctrine:
The case reiterates the doctrine of implied warranty against hidden defects under the
Civil Code, emphasizing a seller’s liability for defects that render a sold property unfit
for its intended use. It also highlighted the application of the doctrine of res ipsa
loquitur in establishing negligence based on the circumstances of the defect
occurrence.

Class Notes:
1. Implied Warranty Against Hidden Defects: Conditions for applicability include the
seriousness of the defect, its hidden nature, presence at the time of sale, and timely
notification to the seller.
2. Res Ipsa Loquitur: Applicability requires that the incident would not normally occur
without negligence, the item causing harm was under the defendant’s control, and
there was no contribution from the injured party.
3. Civil Code Articles relevant to this case include 1561, 1566 (Implied Warranty
Against Hidden Defects), along with principles surrounding negligence and damages.

C. Delivery or Traditio (Kinds)

Arts. 1477, 1497, 1498, 1499 (Longa Manu and Brevi Manu) and 1500 (Constitutum possesorium)

In Roman and civil law, "longa manu" refers to an indirect transfer of ownership by pointing out
the thing from a distance, while "brevi manu" signifies a direct transfer to someone already in
possession, but not as owner.

Article 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof. (n)

Article 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of
the vendee. (1462a)

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Article 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred.

With regard to movable property, its delivery may also be made by the delivery of the keys of the place or
depository where it is stored or kept. (1463a)

Article 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the
contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale,
or if the latter already had it in his possession for any other reason. (1463a)

Article 1500. There may also be tradition constitutum possessorium. (n)

Constitutum possessorium" in legal terms, particularly from Roman law, refers to an agreement where someone
transfers possession of something to another, but the original possessor retains control over it, often used in
situations like pledging property as security while retaining its use.
Here's a more detailed explanation:
 Definition:
Constitutum possessorium describes a situation where, despite a legal transfer of ownership or
possession, the original possessor continues to hold the property, but now under a different legal title or
capacity.
 Example:
Imagine someone sells a property but then agrees to lease it back from the new owner. The original
owner (now a tenant) has transferred ownership but retains possession, albeit as a tenant, not an owner.
 Common Scenarios:
This concept is often used in situations involving security interests, like when someone pledges property
as collateral for a loan but continues to use it.
 Legal Significance:
The key point is that the original possessor's intention changes. They no longer hold the property as the
owner but as a tenant, usufructuary, or in some other capacity defined by the new agreement.
 Tradition Constitutum Possessorium:
In the context of property law, this is a type of "tradition" (delivery of possession) where the transferor
retains possession but ceases to hold it in the capacity of owner.

D. Sale of Movables on Installment Art 1484

Read: Recto Law,
Baviera pp 247 to 248

Article 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor
may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-

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 A-a) [property property security act (PPSA) foreclosure no longer applies, deficiency can still go after the
buyer]]

E. Option to Buy or Sell Arts 1479, 1318 and 1324

Baviera, p 248 to 249

Article 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration distinct from the price. (1451a)

Article 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established. (1261)

Article 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any
time before acceptance by communicating such withdrawal, except when the option is founded upon a
consideration, as something paid or promised. (n)

F. Right of First Refusal

Baviera, p 249

The Right of First Refusal (ROFR) is a preferential right granted to a party (referred to as the "optionee")
to purchase a specific property under terms to be offered by the owner, should the owner decide to sell it. It
does not compel the owner to sell but merely ensures that the optionee has the first opportunity to purchase
when the property is placed on the market. [must be registered in the registry of deeds]

G. Earnest Money Art 1482

Article 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract. (1454a) [generally cannot be taken back, unless otherwise stated in the
contract]

H. Sale of Immovables on Installment Art. 1592

Maceda Law (RA 6552)
Baviera, pp. 250 to 251

Article 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to
pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made
upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.
(1504a)

REPUBLIC ACT No. 6552

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT

PAYMENTS. (Rep. Act No. 6552)

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Section 1. This Act shall be known as the "Realty Installment Buyer Act."

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against
onerous and oppressive conditions.

Section 3. In all transactions or contracts involving the sale or financing of real estate on installment
payments, including residential condominium apartments but excluding industrial lots, commercial buildings
and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer
is entitled to the following rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by
him which is hereby fixed at the rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the buyer only once in every five years
of the life of the contract and its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent of the total payments made, and, after five years
of installments, an additional five per cent every year but not to exceed ninety per cent of the total
payments made: Provided, That the actual cancellation of the contract shall take place after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by
a notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of
installment payments made.

Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace
period of not less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another
person or to reinstate the contract by updating the account during the grace period and before actual
cancellation of the contract. The deed of sale or assignment shall be done by notarial act.

Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the
purchase price any time without interest and to have such full payment of the purchase price annotated in the
certificate of title covering the property.

Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6,
shall be null and void.

I. Persons disqualified to acquire by purchase

Art. 1491 and1492

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:

(1) The guardian, the property of the person or persons who may be under his guardianship;

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 (2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent
of the principal has been given;

(3) Executors and administrators, the property of the estate under administration;

(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any
government-owned or controlled corporation, or institution, the administration of which has been
intrusted to them; this provision shall apply to judges and government experts who, in any manner
whatsoever, take part in the sale;

(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;

(6) Any others specially disqualified by law. (1459a) [spouses cannot sell to each other – unless complete
separation of property]

Article 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption,
compromises and renunciations. (n)

J. Equitable Mortgage Art 1602 (“as in” – equity )

ARTICLE 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(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 debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the usury laws. (n)

Baviera pp 253 to 254

Martires v. Chua GR No. 174240, March 20, 2014
The case revolves around 24 memorial lots located at Holy Cross Memorial Park, Quezon City
owned by Menelia Chua and her mother under a Deed of Sale and Certificate of Perpetual
Care created on June 4, 1992. Menelia Chua borrowed P150,000 from Spouses Lehner and
Ludy Martires on December 18, 1995, and secured the loan with a real estate mortgage over
the said property, committing to an 8% monthly interest, which would increase by an

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additional 10% monthly in case of default. Without awaiting foreclosure procedures,
ownership of the mortgaged property was transferred to the Martireses through a Deed of Transfer.
Chua filed a complaint at the Regional Trial Court (RTC) of Quezon City on June 23, 1997,
seeking to annul the mortgage contract for being unjust and exorbitant and discovered the
ownership transfer was facilitated with a forged Deed of Transfer and Affidavit of Warranty.
She motioned to amend her complaint to include annulment of these documents, which the
Martireses did not oppose. The RTC initially ruled in favor of the Martireses, a decision
affirmed with modifications by the Court of Appeals (CA) upon appeal.
Chua’s motion for reconsideration led to an Amended Decision by the CA, reversing its earlier
decision and declaring the Deed of Transfer void ab initio, recognizing the transaction as an
equitable mortgage instead. The CA directed the reinstatement of ownership to Chua,
ordering her to pay the original loan amount with a 12% annual interest, deducting prior
payments. The Martireses’ subsequent motions for reconsideration were denied by the CA.

### Issues:
1. Was the Deed of Transfer validly executed and notarized?
2. Should the Deed of Transfer be considered an equitable mortgage?
3. Were the motions for reconsideration properly addressed?

### Court’s Decision:

The Supreme Court denied the petition by the Martireses, affirming the CA’s Amended
Decision. It found:
– The motion for review was time-barred as it was filed out of time.
– Despite the regularity norm attached to notarized documents, the Deed of Transfer’s
notarization was disputed due to procedural irregularities.
– The agreement between Chua and the Martireses was considered an equitable mortgage
rather than an absolute transfer of ownership based on the circumstances and intent behind the transaction.
– The CA is within its jurisdiction to consider unassigned errors if it serves justice and the complete resolution of
the case.

### Doctrine:
An equitable mortgage is determined not merely by the form or terms of an agreement but by the intention
of the parties and the factual circumstances surrounding it. A deed of transfer executed as security for a
debt, despite inadequacy of consideration or irregular procedures, may constitute an equitable mortgage.

### Class Notes:

– Equitable Mortgage: A transaction intended as security for a loan but disguised under a different form (e.g., a
deed of transfer).
– Doctrine of Substantial Compliance: Notarized documents are presumed regular, but
this presumption can be rebutted by clear, strong, and convincing evidence of irregularity or fraud.
– Pactum Commissorium: A prohibited practice where the creditor is authorized to
automatically acquire ownership of the mortgaged property upon the debtor’s failure to fulfill
an obligation, without due foreclosure process.
– Critical Timeline for Filing Appeals: The period for filing a petition for review on
certiorari is jurisdictional, starting from the receipt of the denial of the first motion for
reconsideration. Successive motions do not toll the reglementary period.

K. Legal Redemption Arts. 1619 to 1620, 1623, 1634 and 1635 Exceptions to the right of legal
redemption

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Article 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated
in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other
transaction whereby ownership is transmitted by onerous title. (1521a)

Article 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-
owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in common. (1522a)

Article 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from
the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.

The right of redemption of co-owners excludes that of adjoining owners. (1524a)

[In a legal context, "pre-emption" refers to the right of a specific person or entity to acquire an
asset (like property) before it is offered to others, or to purchase an asset at the same price as a
third-party offer. ]

ARTICLE 1634. 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.

A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the
same is answered.

The debtor may exercise his right within thirty days from the date the assignee demands payment from him. (1535)

Article 1635. From the provisions of the preceding article shall be excepted the assignments or sales made:

(1) To a co-heir or co-owner of the right assigned;

(2) To a creditor in payment of his credit;

(3) To the possessor of a tenement or piece of land which is subject to the right in litigation assigned.
(1536)

Barcellano v. Baas GR No. 165287, September 14, 2011

This case involves the legal redemption of Lot 4485 in Hindi, Bacacay, Albay, owned by the
heirs of Bartolome Bañas. On 17 March 1997, the adjoining property owner, Vicente Medina,
offered his lot for sale to the Bañas heirs, including respondent Dolores Bañas. Subsequently,
on 3 April 1997, Medina sold the property to petitioner Armando Barcellano for P60,000.00,
without the Bañas heirs’ knowledge. Upon learning of the sale the next day, the Bañas heirs
expressed their intention to redeem the property, but were informed that a sale had
already been finalized. Attempts to resolve the dispute through the Barangay Council
were unsuccessful, with Barcellano later offering to sell the property to the Bañas heirs
for P90,000.00.

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 Dolores Bañas initially filed an action for legal redemption with the Regional Trial Court on
24 October 1997 but withdrew it citing economic difficulties. On 11 March 1998, Bañas filed
another action for legal redemption. The trial court dismissed the complaint for failure of
the Bañas heirs to make a formal offer to redeem and to file an action with consignation
of the redemption price within the reglementary period. The Court of Appeals reversed
the trial court’s decision, ruling that the Bañas heirs had validly exercised their right of
redemption through their action filed before the Barangay Council.

1. Was the written notice under Article 1623 of the New Civil Code mandatory for the exercise
of the right of legal redemption?
2. Did the filing of a complaint before the Barangay Council constitute exercise of the right of
redemption?

3. Is a tender of payment and consignation required for the exercise of the right of redemption
when the redemptioner files a case within the 30-day period?

Court’s Decision:

The Supreme Court affirmed the decision of the Court of Appeals, holding that the written
notice as required by Article 1623 of the New Civil Code is mandatory for the exercise of
the right of legal redemption. The Court emphasized that actual knowledge of the sale
does not replace the requirement for written notice. The Court further clarified that the
filing of a complaint before the Barangay Council did not negate the requirement for written
notice. Consequently, without written notice, the 30-day period for the Bañas heirs to
exercise their right of redemption had not commenced. The Court did not find it necessary
to rule on the necessity of tender of payment and consignation, as the absence of written notice
was dispositive of the case.

Doctrine:

The Supreme Court reiterated the indispensable nature of written notice for the exercise of the
right of legal redemption under Article 1623 of the New Civil Code. Knowledge of the sale
acquired in another manner does not satisfy the statutory requirement. The Court also
underscored that deviations from the strict letter of the law regarding written notice are
permitted only under extraordinary circumstances, not present in this case.

Class Notes:

1. Article 1623 of the New Civil Code: Mandates written notice to adjoining owners for the
exercise of the right of legal redemption within thirty (30) days from receipt of such notice.
2. Legal Redemption: A right allowing adjoining owners to redeem property sold to third
parties, contingent upon compliance with statutory procedures including written notice.
3. Rule in Interpretation: Clear and categorical statutory language precludes the necessity for
interpretation – application of the law according to its express terms is required.

Baviera, pp 254 to 256

I. LEASE (can sublease unless there is a stipulation to the contrary)

Cannot assigned then it will be a novation, consent is needed
Lease is terminated, lessee continues to stay, lessor tolerates 15 days or more – lease is extended –
not for the same period, extension based on the payment (pay monthly, weekly renewal is based
on the manner of payment accepted by the lessor)
Arts. 1648, 1650, 1669, 1670 and 1671

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ARTICLE 1642. The contract of lease may be of things, or of work and service. (1542)

ARTICLE 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a
thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than
ninety-nine years shall be valid. (1543a)

ARTICLE 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to
render to the other some service for a price certain, but the relation of principal and agent does not exist between
them. (1544a)

ARTICLE 1645. Consumable goods cannot be the subject matter of a contract of lease, except when they are merely
to be exhibited or when they are accessory to an industrial establishment. (1545a)

Article 1648. Every lease of real estate may be recorded in the Registry of Property. Unless a lease is recorded, it
shall not be binding upon third persons. (1549a)

Article 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the
contrary. (n)

Article 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing
leased, in whole or in part, without prejudice to his responsibility for the performance of the contract toward the
lessor. (1550)

Article 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the need of a
demand. (1565)

Article 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with
the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is
understood that there is an implied new lease, not for the period of the original contract, but for the time established
in articles 1682 and 1687. The other terms of the original contract shall be revived. (1566a)

Article 1671. If the lessee continues enjoying the thing after the expiration of the contract, over the lessor's
objection, the former shall be subject to the responsibilities of a possessor in bad faith. (n)

Baviera, pp. 256 to 258

 Anita Buce v. Sps Galeon et al., GR no. 222785, Mar. 20, 2020
Facts: The case began with a civil action for the recovery of possession initiated
by the Galeon Spouses, Cabrer Spouses, Sands Spouses, Jose M. Tiongco, and
Maria Corazon M. Tiongco (respondents) against Anita Buce (petitioner) over a
parcel of land in Pandacan, Manila. The respondents, heirs to Bernardo and
Dionisio Tiongco, entered into a 15-year lease agreement with the Buce Spouses
in 1979, with an option for a 10-year renewal. However, disputes over rental
increases led the petitioner to file a complaint for specific performance. The court
initially favored the petitioner, stipulating a lease renewal, but this decision was
reversed by the Court of Appeals (CA), marking the end of the lease contract in
1994. The case escalated to the Supreme Court, which ruled against automatic
renewal due to lack of mutual agreement. Despite this, petitioner remained on the
property, leading to a subsequent complaint for recovery of possession. The trial
court ordered the petitioner’s eviction and the payment of rental arrears, a
decision affirmed by the CA with modifications on the reimbursement for the
building constructed by the petitioner.

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 Issues: The Supreme Court tackled the following legal issues:
1. Whether the petitioner has the right to retain the land until reimbursed for
improvements.
2. Whether there was an implied new lease contract between the petitioner and the
respondents.
3. Whether the payment of attorney’s fees was proper.

Court’s Decision:
1. On retention rights, the Court held that as mere lessees, the petitioner was not a
builder in good faith, referencing Article 1678 of the Civil Code. Thus,
respondents were not obligated to reimburse unless they chose to appropriate the
improvements, which was not indicated.
2. Regarding the implied new lease, the Court found that the conditions for such
were not met, particularly because the respondents had issued a notice
contradicting the continuation of the lease.
3. The Court affirmed the payment of attorney’s fees to the respondents due to the
petitioner’s refusal to surrender possession after the lease’s expiration, deeming it
an act of bad faith.

Doctrine: This case underscores the principles surrounding lease agreements,

specifically:
– The non-application of Article 448 of the Civil Code concerning reimbursement
for improvements to lessees, as elucidated by Article 1678.
– The conditions under which an implied new lease under Article 1670 of the
Civil Code may be established.
– The award of attorney’s fees as justified by Article 2208 of the Civil Code in
instances of bad faith.

Class Notes:
– Lease Agreements: Always review terms and conditions, including renewal
clauses. Understand the rights and obligations under Articles 1670 and 1678 of
the Civil Code.
– Implied New Lease: Recognize the elements required for tacita reconduccion as
per Article 1670 and the impact of subsequent owner communication on lease
continuation.
– Improvements by Lessee: Know that under Article 1678, lessees can be
reimbursed for useful improvements only if the lessor opts to appropriate them.
– Attorney’s Fees: Be aware of the circumstances under Article 2208 that justify
the award of attorney’s fees, especially in cases evidencing bad faith.

I. Contract for a piece of work (independent contractor) (made for you “pasadya”) if a
piece of work is broken, maker provides materials damage will be borne will be made
by the maker, if provided by the contracter she bears the lost – if material is weak,
delicate with notice – maker liable

vs. Contract of sale of goods (business of the seller

Arts 1467, 1713, 1714
Supervening increase in cost: Arts. 1724 and 1267 (contractors – when a contractor signs a
contract, increase of price of materials cannot ask for increase unless the owner changes the
design- if not, follow the contract)
Effect of Delay or Loss of thing: Arts 1717 and 1718 ( who bears the loss/destruction – maker
did not tell that the material is weak, provider bears lost,)
Hidden Defect: Art 1723 (same) i(n respect to buildings 0-if a building collapses wwihtin 15
uyears , design – vs architech and engineer // poor materials – contracter – real life, sue all!!)

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 Nakpil and Sons v. CA, GR no 47851, Oct 3, 1986 (
Baviera pp264 to 267

II. Pledge by operation of law (pledge by operation of law vs ordinary pledge) carwash,
laundry) 2 auction rule, no buyer, can now appropriate (PPSA applies – study how it
affects – sale of immovables on installment)
Arts 1731 and 2122, CC

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