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Cavite Devt Bank vs. Sps. Lim Facts: Rodolfo Guansing obtained a loan from CDB, secured by a parcel of land. Upon default, the mortgage was foreclosed. The mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem, thus CDB consolidated the property in its name. Subsequently, Lolita Lim offered to purchase the property from CDB evidenced by a written offer to purchase with terms, to wit: there would be 10% option money and the balance shall be payable in cash. Lim paid the option money (Php30,000.00) but later on discovered that the subject property was registered in the name of Perfecto Guansing, father of Rodolfo. It appears however that Perfecto instituted a civil action for the cancellation of his son’s title, and the decision therein has been final and executory. Aggrieved by what they considered a serious misrepresentation on the part of CDB to sell the property, Sps. Lim instituted an action for specific performance and damages. Arguments: Sps. Lim: There was a perfected contract of sale as ruled by the trial court, affirmed by the CA. Cavite Devt Bank: There was no perfected contract of sale. They contend that the contract was merely an option contract not a contract of sale. Lim’s payment of the option money cannot be considered as an earnest money. Issue: WON the amount of Php30,000.00 paid by Lim is an option money or an earnest money. Held: Lim’s payment of Php30,000.00 shall be considered as earnest money, thus there was a perfected contract of sale. An option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract, it binds the party who has given the option not to enter into the principal contract with any other person during the period; designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract to which the parties may enter upon the consummation of the option. An option contract is therefore a contract separate from and preparatory to a contract of sale which, if perfected, does not result in the perfection or consummation of the sale. Only when the option is exercised may a sale be perfected. In this case, however, after the payment of the 10% option money, the Offer to Purchase provides for the payment only of the balance of the purchase price, implying that the "option money" forms part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price. Given CDB's acceptance of Lim's offer to purchase, it appears that a contract of sale was perfected and, indeed, partially executed because of the partial payment of the purchase price. There is, however, a serious legal obstacle to such sale, rendering it impossible for CDB to perform its obligation as seller to deliver and transfer ownership of the property. Nemo dat quod non habet, One cannot give what one does not have. Cronico substituted by Venturanza vs. JM Tuason & Ramirez Facts: JM Tuason was the registered owner of Lot 22. Florencio Cronico offered to buy the lot from JM Tuason with the help of Mary Venturanza. Cronico was required to present proofs of her rights to the lot, and indeed presented certain documents showing her priority rights to buy the lot. Claudio Ramirez also learned that said lot was being sold. Both Cronico and Ramirez then sent individual letters to JM Tuason expressing their desire to purchase the land and requested information concerning the area, the price, and other terms and conditions of the contract to sell. JM Tuason sent separate reply letters to the prospective buyers. Cronico was able to obtain the letter the next day and thus presented the letter to the Head of the Real Estate Department of JM Tuason; and requested Venturanza to issue a check as down payment, but the same was refused. Ramirez, on the other hand, received the letter two days after it was sent stating that the lot was available for sale under the conditions set forth and that said lot was being offered for sale on a first come first serve basis. He then immediately verbally accepted such, followed by a letter to JM Tuason confirming the verbal acceptance, the next day. Counsel of Ramirez then wrote JM Tuason for the early execution of the Contract to Sell with a check as down payment (Mar 31). Counsel of Cronico, however, also wrote JM Tuason requesting that the lot be sold to him (Mar 27). Subsequently, JM Tuason and Ramirez executed a Contract to Sell, which resulted an instant suit. Arguments: Cronico: That the promise to sell is supported by a consideration as to her because she had established her link as successor of Gregorio Venturanza who bought the lot from Juan Ramos who in turn acquired said lot from Pedro Deudor. JM Tuason: As ruled by the CA, the records do not show that JM Tuason's letter-offer or unilateral promise to sell was supported by a consideration other than the selling price.
Issue: WON JM Tuason’s promise to sell the lot to Cronico has a consideration separate from the selling price of said lot and thus binding upon the promissory to comply with such promise. Held: No, the promise of the respondent company to sell the lot in question to the petitioner, Florencia Cronico has no consideration separate from the selling price of said lot. It appears that the Compromise Agreement upon which Cronico predicates her right to buy the lot in question has been rescinded and set aside. (1) In order that a unilateral promise may be binding upon the promisor, Article 1479, Civil Code of the Philippines, requires the concurrence of the condition that the promise be "supported by a consideration distinct from the price. Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. The promisee has the burden of proving such consideration. (Sanchez vs. Rigos, 45 SCRA 368, 372373) The petitioner, Florencia Cronies, has not established the existence of a consideration distinct from the price of the lot in question. (2) The petitioner cannot claim that she had accepted the promise before it was withdrawn because she had violated the condition of "first, come, first served" basis. (3) It was only on March 27, 1962 that the respondent company received a letter from counsel of the petitioner requesting that the lot subject of this litigation be sold to her. The respondent, Claudio R. Ramirez, had on March 23, 1962, confirmed in writing his verbal acceptance of the terms and conditions of the sale of the lot in question. Romero vs. CA Facts: Vigillo Romero, a civil engineer and engaged in a certain business, decided to put up a central warehouse in Manila. Subsequently, Sps. Flores offered a parcel of land registered in the name of Enriqueta Onsiang. Romero visited the property and, except for the presence of squatters in the area, he found the place suitable for the warehouse. Later, Onsiang called on Romero with a proposal that should he advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters, she would agree to sell the property for only P800.00 per square meter. Romero expressed his concurrence. A contract, denominated as "Deed of Conditional Sale" was executed between them. The P50,000.00 was paid. Later on, judgment was rendered ordering ejectment of the squatters. In a letter later on, Onsiang sought to return the P50,000.00 advance payment since she could not get rid of the squatters. Upon Romero’s continued refusal, Onsiang filed a case for rescission of their deed of conditional sale plus damages. Arguments: Romero: The contract of sale between the parties was perfected from the very moment that there was a meeting of the minds of the parties upon the subject lot and the price. Moreover, the contract had already been partially fulfilled and executed upon receipt of the down payment. Onsiang: The Deed of Conditional Sale had been rendered null and void by virtue of her to evict the squatters from the premises within the agreed 60-day period. He also added that she had "decided to retain the property." Issue: WON Onsiang action for rescission is warranted. Held: NO, the action for rescission is not warranted. She is not the injured party. The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. It is private respondent who has failed in her obligation under the contract. Petitioner did not breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to pay, having been made prior to the demand for rescission, assuming for the sake of argument that such a demand is proper under Article 1592 of the Civil Code, would likewise suffice to defeat private respondent's prerogative to rescind thereunder. Sps. Onnie and Amparo Herrera vs. Caguiat Facts: Sps. Onnie and Amparo Herrera are the registered owners of a lot. Godofredo Caguiat offered to buy the lot. Petitioners agreed to sell it. Respondent then gave P100,000.00 as partial payment
evidenced by a Receipt for Partial Payment issued to him, promising to pay the balance of the purchase price on or before a certain date, and then they will execute and sign the final deed of sale. Respondent then wrote petitioners of his readiness to pay the balance and requesting them to prepare the final deed of sale. In reply, petitioners informed through their counsel that they are leaving for abroad and thus cancelling the transaction. Petitioners informed them that they can recover the earnest money at any time and even delivered to respondent’s counsel a PNB Manager’s Check worth P100,000.00 payable to him. Because of the cancellation, respondent filed a complaint for specific performance plus damages. Arguments: Sps. Onnie and Amparo: the Receipt is not a perfected contract of sale as provided for in Article 1458 in relation to Article 1475 of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the perfection of a contract of sale under Article 1482 of the same Code since there was no clear agreement between the parties as to the amount of consideration. Caguiat: As ruled by the trial court, affirmed by the CA, there was a perfected contract of sale relying on the earnest money given by respondent to petitioners, invoking Art 1482 of the CC. Issue: WON the P100,000.00 paid by Caguiat to Sps. Onnie and Amparo Herrera can be considered as earnest money contemplated in Art. 1482. Held: NO. It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. The suspensive condition (payment of the balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him. ---------------------------The partied agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price. Chua vs. CA & Valdez-Choy Facts: Valdez-Choy advertised for sale her paraphernal house and lot. Chua responded to the advertisement and later on both agreed on a purchase price of P10,800,000.00 payable in cash. Valdez-Choy received from Chua a check for P100,000.00 as earnest money. Chua then handed to Valdez-Choy a PBCom manager’s check (P485,000.00) as partial payment. Chua then showed a PBCom manager’s check (P10,215,000.00) representing the balance of the purchase price. However, Chua did not give this PBCom check to Valdez-Choy until a new TCT is issued first in his name. Valdez-Choy, however, wanted to be first paid the full consideration before a new TCT is issued in the name of Chua. As a result, Chua filed and re-filed a complaint for specific performance with damages. Arguments: Chua: He argues for the first time that his payment of earnest money and its acceptance by ValdesChoy precludes the latter from rejecting the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract of sale without following Article 1592 of the Civil Code which requires demand, either judicially or by notarial act, before rescission may take place. Valdez-Choy: As ruled by the CA, Chuas stance to pay the full consideration only after the Property is registered in his name was not the agreement of the parties. Issue: WON Vhua’s payment of the earnest money and its acceptance by Valdes-Choy preclude the latter from rejecting the binding effect of the contract of sale. Held: NO.
1. The agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price.
2. It is true that Article 1482 of the Civil Code provides that [W]henever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The Receipt evidencing the contract to sell stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not consummated should Chua fail to pay the balance of the purchase price. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua to pay the balance of the purchase price. Chua, however, has the right to walk away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus Article 1482, which speaks of a contract of sale, is not applicable. Since the agreement between Valdes-Choy and Chua 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. San Miguel Properties vs. Sps. Huang Facts: San Miguel Properties is engaged in the purchase and sale of real properties, of which include two parcels of land. These properties were offered for sale at P52,140,000.00. Such offer was made to Atty. Dauz on behalf of Sps. Huang. Atty. Dauz wrote San Miguel informing the respondents’ interest to buy the property and enclosed therein a check (P1,000,000.00) as earnest deposit subject to certain conditions, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation. Sobrecarey, San Miguel Properties VP indicated his conformity to the offer; signed the letter; and accepted the earnest deposit. By agreement of the parties, they agreed that respondents will be given 6 months within which to pay. Upon failure of respondents to pay despite the extension of time given, petitioner through its Pres & CEO Gonzales, wrote Atty. Dauz, that they are returning the earnest deposit. Respondent spouses through counsel, wrote petitioner demanding the execution of a deed of conveyance in their favor. They attempted to return the earnest deposit but was refused by San Miguel. Respondent spouses filed a complaint for specific performance. Trial court, upon motion, dismissed the complaint, which was reversed by the CA. Arguments: San Miguel: the Court of Appeals erred in finding that there was a perfected contract of sale between the parties because the letter of respondents, which petitioner accepted, merely resulted in an option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner argues that the absence of agreement as to the mode of payment was fatal to the perfection of the contract of sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority to sell the subject real properties. Sps. Huang: As held by CA, there is a perfected contract of sale since the earnest money was allegedly given by respondents and accepted by petitioner through its vice-president and operations manager, Sobrecarey. The Court holds that respondents did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an "earnest-deposit. Issue: WON the earnest deposit could have been given as earnest money contemplated in Art. 1482, and thus there was a perfected contract of sale. Held: No, hence, there was no perfected contract of sale. In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents’ offer, their contract had not yet been perfected. The first condition for an option period of 30 days
sufficiently shows that a sale was never perfected. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter. Heirs of Cecilio Claudel vs. CA & Heirs of Macario Claudel (Siblings of Cecilio) Facts: Cecilio Claudel acquired from the Bureau of Lands a parcel of land. Thirty-nine years after his death, two branches of Cecilio’s family contested the ownership over the land – the Heirs of Cecilio and the Siblings of Cecilio. The Heirs of Cecilio partitioned the lot among themselves and obtained the corresponding TCTs. Siblings of Cecilio filed a complaint for Cancellation of Titles and Reconveyance with Damages alleging that their parents had purchased from the late Cecilio several portions of the lot. They admitted that the transaction was verbal but they were able to present the subdivision plan. The CFI dismissed the complaint disregarding the evidence. The CA reversed the CFI’s ruling ordering the cancellation of the TCTs issued in the name of the Heirs of Cecilio. As ruled by the CA, the Statute of Frauds applies only to executory contracts and not to consummated sales as in the case at bar where oral evidence may be admitted. Issue: WON a contract of sale of land may be proven orally. Held: Yes, a contract of sale of land may be proven orally subject to certain exceptions. This case falls within the exception. The rule of thumb is that a sale of land, once consummated, is valid regardless of the form it may have been entered into. For nowhere does law or jurisprudence prescribe that the contract of sale be put in writing before such contract can validly cede or transmit rights over a certain real property between the parties themselves. However, in the event that a third party, as in this case, disputes the ownership of the property, the person against whom that claim is brought cannot present any proof of such sale and hence has no means to enforce the contract. Thus the Statute of Frauds was precisely devised to protect the parties in a contract of sale of real property so that no such contract is enforceable unless certain requisites, for purposes of proof, are met. The provisions of the Statute of Frauds pertinent to the present controversy, state: Art. 1403 (Civil Code). The following contracts are unenforceable, unless they are ratified: 2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein; The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced in Writing. Therefore, except under the conditions provided by the Statute of Frauds, the existence of the contract of sale made by Cecilio with his siblings cannot be proved. Sps. Dalion vs. CA & Sabesaje Jr. Facts: Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery, and that subject land is conjugal property, it having been acquired by himself and his wife from Saturnina Sabesaje. They admitted having administered a lot belonging to the grandfather of Sabesaje. They further allege that they never received their commission in the administration of the lot, thus according to Sps. Dalion, Sabesaje’s suit is merely intended to preempt and forestall their threat to sue for the unpaid commissions. Aggrieved by the trial court’s decision, Dalion appealed to the CA. The CA upheld the validity of the sale based, among others, on the testimonies of the people who witnessed the execution of the subject deed. Issue: WON the sale is valid considering that such was executed in a private document.
Held: Yes, the sale is valid. Assuming authenticity of his signature and the genuineness of the document, Dalion nonetheless still impugns the validity of the sale on the ground that the same is embodied in a private document, and did not thus convey title or right to the lot in question since "acts and contracts which have for their object the creation, transmission, modification or extinction of real rights over immovable property must appear in a public instrument". This argument is misplaced. The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument. A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC). The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in a public document. A sale of a real property may be in a private instrument but that contract is valid and binding between the parties upon its perfection. And a party may compel the other party to execute a public instrument embodying their contract affecting real rights once the contract appearing in a private instrument has been perfected (See Art. 1357). Luneta Motor Company vs. Dimagiba Facts: Angel Dimagiba bought from the Luneta Motor Company a truck for a price which was compromised at P16,126.12 payable in 18 monthly installments to guarantee which he executed a chattel mortgage on the same truck on May 7, 1956, and as a further security thereto on Natividad Noriel also executed on the same date a chattel mortgage on another truck which belonged to the latter. It also appears that when Dimagiba failed to pay several installments as he agreed in the promissory note he executed to cover the price of the truck he purchased, the company instituted an action not only to recover the balance of his obligation but to secure the seizure of the two trucks mortgaged with a prayer that the proceeds that may be realized after the sale of said trucks be applied to the payment of the judgment that may be rendered in the case. Because of the vague nature of the allegations contained in the complaint, as well as in its prayer, the court a quo, as well as the Court of Appeals, considered the action taken as one of both replevin and foreclosure of mortgage. Issue: WON the scheme of the company is a flagrant violation of Art. 1484 of the Civil Code. Held: YES As ruled by CFI which the CA affirmed: While it is true that Exhibit "4" on its face appears to be a compromise, there is no question that by virtue of said compromise, the truck of Angel Dimagiba was once more sold to him on the installment plan by Luneta Motor Co. and Angel was made to assume the balance of the account including parts and tires all on credit; the Court does not see that this being the case, the case can be taken out of the operation of Article 1484 of the New Civil Code; the law is quite emphatic when it declares that any agreement to the contrary would be null and void; and the evidence having established the fact that the consideration of the two promissory notes, Exhibits "G" to "I" were casings and inner tubes also as the Court understands incorporated into the truck and covered as plaintiff itself alleges in paragraph 3 of its complaint, in the chattel mortgage, Exhibit "C", the only effect should be as the Court understands Art. 1484 that when plaintiff chose to foreclose the chattel mortgage, it submitted itself to the consequences of the law with the result that having seized the truck of Angel Dimagiba, it could no longer secure any judgment for the balance of the account of Angel and for the reason that Natividad was only a mortgagor in the chattel mortgage to guarantee the fulfillment of the first promissory note, and her liability being only secondary, neither should she be required anymore to pay the balance due unto plaintiff from Angel Dimagiba, so that the result would be that with respect to the money liability prayed for in the complaint, the same will have to be a dismissal.... Said article prescribes three remedies which a vendor may pursue in a contract of sale of personal property the price of which is payable in installments, to wit: (1) exact fulfillment of the obligation; (2) cancel the sale; and (3) foreclose the mortgage on the thing sold. If he chooses the third remedy,
the article provides that he shall have no further action against the purchaser to recover any unpaid balance of the purchase price. It even adds that any agreement to the contrary shall be void. But in the instant case the vendor was not content in choosing any of the three remedies, but chose to avail itself of the first and third remedies. More than that, plaintiff even went to the extent of suing for replevin, in other words, it filed an action containing three remedies: to collect the purchase price, to seize the property purchased, and to foreclose the mortgage executed thereon. Plaintiff even went to the extent of selling first the property of Noriel, who is not the vendee, out of court, and after doing so, it asked the court for judgment in the balance. Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. Pameca Wood Treatment Plant vs. CA & DBP Facts: Pameca obtained a loan from DBP. By virtue of this loan, Pameca executed a promissory note for the amount obtained, promising to pay the loan by installment. As security for said loan, a chattel mortgage was executed over Pameca’s properties in Dumaguete. Upon Pameca’s failure to pay, DBP extrajudicially foreclosed the chattel mortgage, and as sole bidder in the public auction, purchased the same. DBP then filed a complaint for the collection of the balance. Trial court rendered decision in favor of DBP, affirmed by CA. Arguments: Pameca: submits that Art. 1484 of the CC be applied in analogy to preclude the recovery of a deficiency claim. Issue: WON Art 1484, CC, can be applied in the case, hence, precludes DBP from collecting the balance. Held: NO. The said article applies clearly and solely to the sale of personal property the price of which is payable in installments. Although Article 1484, paragraph (3) expressly bars any further action against the purchaser to recover an unpaid balance of the price, where the vendor opts to foreclose the chattel mortgage on the thing sold, should the vendees failure to pay cover two or more installments, this provision is specifically applicable to a sale on installments. To accommodate petitioners prayer even on the basis of equity would be to expand the application of the provisions of Article 1484 to situations beyond its specific purview, and ignore the language and intent of the Chattel Mortgage Law. Equity, which has been aptly described as justice outside legality, is applied only in the absence of, and never against, statutory law or judicial rules of procedure. Sps. Pascual & Torres vs. Universal Motors Corporation Facts: Pascual & Torres executed a real estate mortgage to secure the payment of the indebtedness of PDP Transit for the purchase of 5 units Mercedez Benz, but their guarantee shall not exceed P50,000.00. PDP Transit had paid to Universal Motors some of its indebtedness. But PDP’s obligation guaranteed by Pascual & Torres under the real estate mortgage is further secured by separate deeds of chattel mortgages on the Mercedez Benz units in favor of Univ Motors. Subsequently, Univ Motors filed a ccomplaint against PDP with a petition for a writ of Replevin, to collect the balance due under the Chattel Mortgages and to repossess all the units sold to it. Univ Motors also admitted during the hearing that in its suit against PDP it was able to repossess all the units sold, including the 5 units guaranteed by the real estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the trucks at publication. Thus, Sps. Pascual & Torres filed an action for the cancellation of the mortgage they constituted thereon in favor of Univ Motors to guarantee PDP’s obligation to the extent of P50,000.00. The trial court rendered judgment in favor of the spouses. Arguments: Univ Motors: Among others, the appellant contends that, in any event, what article 1484 prohibits is for the vendor to recover from the purchaser the unpaid balance of the price after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the security put up by a third party. Issue:
What does Art. 1484 prohibit? Held: It is the right to recover any deficiency from the purchaser after the foreclosure of the chattel mortgage and not a recourse to the additional security put up by a third party to guarantee the purchaser's performance of his obligation. A similar argument has been answered by this Court in this wise: "(T)o sustain appellant's argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned." Southern Motors vs. Moscoso Facts: Southern Motors sold to Moscoso one Chevrolet truck on installment basis. Upon making a downpayment, Moscoso executed a promissory note representing the unpaid balance of the purchase price. To secure payment, a chattel mortgage was constituted on the truck in favor of Southern Motors. Moscoso failed to pay 3 installments. Subsequently, Southern Motors filed a complaint against him to recover the unpaid balance of the promissory note. A writ of attachment was issued. The Chevrolet truck and a house and lot belonging to Moscoso were attached by the sheriff. After attachment but before the trial of the case, the Prov Sheriff sold the truck at a public auction, Southern Motors being the only bidder, purchased the same. Trial court then rendered a decision against Moscoso. Arguments: S. Motors: claims that in filing the complaint, demanding payment of the unpaid balance of the purchase price, it has availed of the first remedy provided in said article i.e. to exact fulfillment of the obligation (specific performance) Moscoso: contends that appellee had availed itself of the third remedy viz, the foreclosure of the chattel mortgage on the truck. He submits that the matter should be looked at, not by the allegations in the complaint, but by the very effect and result of the procedural steps taken and that appellee tried to camouflage its acts by filing a complaint purportedly to exact the fulfillment of an obligation petition, in an attempt to circumvent the provisions of Article 1484 of the new Civil Code. He concludes that under his theory, a deficiency judgment would be without legal basis. Issue: What did S. Motors availed of under Art. 1484 of the Civil Code, the first remedy (Exact fulfillment of the obligation) or the third (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.)? Held: Manifestly, the appellee had chosen the first remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the promissory note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions, under the Rules of Court. Had appellee elected the foreclosure, it would not have instituted this case in court; it would not have caused the chattel to be attached under Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39. That the herein appellee did not intend to foreclose the mortgage truck, is further evinced by the fact that it had also attached the house and lot of the appellant at San Jose, Antique. The court perceived nothing unlawful or irregular in appellee's act of attaching the mortgaged truck itself. Since herein appellee has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of the judgment that may be favorably rendered hereon, on all personal and real properties of the latter not exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot at San Jose, Antique were also attached. No one can successfully contest that the attachment was merely an incident to an ordinary civil action. Manuel Pagtalunan vs. Rufina dela Cruz Vda. De Manzano Facts: Patricio Pagtalunan (petitioner’s father), entered into a contract to sell with respondent, whereby the former agreed to sell and the latter to buy, a house and lot which formed half of a parcel of land. The downpayment was paid but the monthly installments were allegedly stopped without any justification. Respondent averred that she and Patricio entered into an agreement suspending the payment of the installments within a certain period. But even before lapse of such period, Patricio resumed demolishing the house. Respondent did not deny that she still owed
Patricio P5,650, but claimed that she did not resume paying her monthly installment because of the unlawful acts committed by Patricio, as well as the filing of the ejectment case against her. A demand to vacate the premises was also ignored by respondent. Petitioner then filed a complaint for unlawful detainer against respondent. MTC rendered a decision in favor of petitioner ruling that respondent’s failure to pay some of the installments resulted in the resolution/termination of the contract to sell. RTC reversed this decision ruling that the agreement could not be automatically rescinded since there was delivery to the buyer. A judicial determination of rescission must be secured by petitioner as a condition precedent to convert the possession de facto of respondent from lawful to unlawful. On appeal, the CA found that the parties, the MTC & RTC, failed to apply RA 6552 (Maceda law); ruling further that the contract to sell was not validly cancelled/rescinded under the RA. Arguments: Petitioner contends that respondent also had more than the grace periods provided under the Maceda Law within which to pay. There is nothing in the Maceda Law, petitioner asserts, which gives the buyer a right to pay arrearages after the grace periods have lapsed, in the event of an invalid demand for rescission. The Maceda Law only provides that actual cancellation shall take place after 30 days from receipt of the notice of cancellation or demand for rescission and upon full payment of the cash surrender value to the buyer. Issue: WON the Maceda law is applicabl; and WON the contract to sell was validly cancelled under the Maceda law. Held: The CA correctly ruled that R.A No. 6552, which governs sales of real estate on installment, is applicable in the resolution of this case. This case originated as an action for unlawful detainer. Respondent is alleged to be illegally withholding possession of the subject property after the termination of the Contract to Sell between Patricio and respondent. It is, therefore, incumbent upon petitioner to prove that the Contract to Sell had been cancelled in accordance with R.A. No. 6552. The pertinent provision of R.A. No. 6552 reads: Sec. 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 cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent 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. R.A. No. 6552, otherwise known as the "Realty Installment Buyer Protection Act," recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. The Court agrees with petitioner that the cancellation of the Contract to Sell may be done outside the court particularly when the buyer agrees to such cancellation. However, the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of R.A. No. 6552, which requires a notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments on the property. Actual cancellation of the contract takes place after 30 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. Based on the records of the case, the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552, among others, Petitioner contends that he has complied with the requirements of cancellation under Sec. 3 (b) of R.A. No. 6552. He asserts that his demand letter dated February 24, 1997 should be considered as the notice of cancellation or demand for rescission by notarial act and that the cash surrender value of the payments on the property has been applied to rentals for the use of the house and lot after respondent stopped payment after January 1980. The Court, however, finds that the letter dated February 24, 1997, which was written by petitioner’s counsel, merely made formal demand upon respondent to vacate the premises in question within
five days from receipt thereof since she had "long ceased to have any right to possess the premises x x x due to her failure to pay without justifiable cause the installment payments x x x." Clearly, the demand letter is not the same as the notice of cancellation or demand for rescission by a notarial actrequired by R.A No. 6552. Mclaughin vs. CA & Flores Facts: Mclaughin & Flores entered into a conditional sale of real property. Mclaughin filed in the CFI for the rescission of the deed due to Flores’ failure to pay the balance. Subsequently, parties submitted a compromise agreement. Later on, Mclaughin wrote to Flores a demanding the latter to pay the balance on or before Oct. 31, 1980 which includes not only that due on June 30 but as well as that which is due on Dec. 31, 1980. Mclaughin then filed a motion for writ of execution alleging that private respondent failed to pay the installment due as well as the monthly rental. Such writ was granted by the trial court. On appeal, CA nullified and set aside the disputed order of the trial court. CA ruled that the general rule is that rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as are substantial and fundamental as to defeat the object of the parties in making the agreement. Arguments: Petitioner invokes the ruling of the Court in its Resolution of November 16, 1978 in the case of Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., to the effect that Republic Act 6552 (the Maceda Law) "recognizes and reaffirms the vendor's right to cancel the contract to sell upon breach and nonpayment of the stipulated installments but requires a grace period after at least two years of regular installment payments ... . " On the other hand, private respondent also invokes said law as an expression of public policy to protect buyers of real estate on installments against onerous and oppressive conditions (Section 2 of Republic Act No. 6552). Issue: WON rescission can be permitted. Held: NO Section 4 of Republic Act No. 6552 which took effect on September 14, 1972 provides as follows: 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 the cancellation or the demand for rescission of the contract by a notarial act. Section 7 of said law provides as follows: Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void. The spirit of these provisions further supports the decision of the appellate court. The record does not contain the complete text of the compromise agreement dated December 20, 1979 and the decision approving it. However, assuming that under the terms of said agreement the December 31, 1980 installment was due and payable when on October 15, 1980, petitioner demanded payment of the balance of P69,059.71 on or before October 31, 1980, petitioner could cancel the contract after thirty days from receipt by private respondent of the notice of cancellation. Considering petitioner's motion for execution filed on November 7, 1980 as a notice of cancellation, petitioner could cancel the contract of conditional sale after thirty days from receipt by private respondent of said motion. Private respondent's tender of payment of the amount of P76,059.71 together with his motion for reconsideration on November 17, 1980 was, therefore, well within the thirty-day period grants by law.. The tender made by private respondent of a certified bank manager's check payable to petitioner was a valid tender of payment.