D.

On the Obligations of the Vendee

1. G.R. No. L-1556 December 7, 1905
JOAQUIN LAFONT vs. MARIA YIA PASCASIO
On the 13th day of November, 1899, the appellant, Joaquin Lafont, was the owner of an
undivided half of the building known as the Philippine Theater, in Manila, and the
appellee, Maria Yia Pascasio, was the owner of the other half. On the day named these
parties made a contract, the seventh, eight, and ninth clauses of which are contained.
On the 25th of April, 1900, the plaintiff caused to be delivered a letter to the defendant, by
means of a notary public.
On the 30th day of April, 1900, plaintiff deposited 1,000 pesos in the Court of First Instance
as the sum required to be paid by him under the contract. He brought this action on the
7th of October, 1902, and in his complaint asked the court to declare, among other
things, that his right to repurchase the property under the terms of the contract still
existed, and that the defendant be required to render an account of the profits of the
theater from the 1st day of March, 1899, to the time when the property should be resold
to the plaintiff. The court below decided that the only relief to which the plaintiff was
entitled was to an accounting from October, 1899, to April, 1900 as provided in clause 9,
and that he had lost the right to repurchase the one-half interest in the property. The
plaintiff has brought the case here by bill of exceptions.
The contract of pacto de retro is defined, and the obligations of the parties thereto are stated,,
in articles 1507 to 1520 of the Civil Code. The agreement which the parties to this suit
made on the 13th day of November, 1899, is a contract of pacto de retro, as the same is
defined in said articles. It is so called in clause 8, above quoted. The rights and
obligations of the parties must be determined by a reference to said articles.
It is claimed by the defendant that the plaintiff was required to deliver the money to the
defendant, and she was entitled to receive it before she was under any obligation to
execute a deed. In other words, that the payment must precede the execution of the
deed. This is based upon the words used in the eighth clause, which the defendant
claims indicate that the money must be returned before the right to reclaim the property
arises. The language used, however, in this particular contract does not differ from that
used in other contracts of a similar nature which have come before us, and the question
raised by the claim of the defendant is whether in a contract of pacto de retro the acts of
paying the money and executing the deed are simultaneous, or whether the former must
precede the latter. Title IV of Book IV of the Civil Code relates to the contract of purchase
and sale, and the provisions above cited with reference to an agreement of pacto de retro
are found in chapter 6 of this title. The general laws governing contracts of purchase and
sale were undoubtedly intended to apply to an agreement of this character. In a contract
of purchase and sale the seller is not required to deliver the thing sold until the price is
paid, in the absence of an agreement to the contrary (art. 1466). Neither is the purchaser
bound to pay the price before the article is delivered to him (art. 1500), and we hold in
this case that the payment of the price and execution of the deed of resale were
simultaneous acts, and that the plaintiff was not required to deliver the money in advance
of the execution of the deed.
The question remains whether the plaintiff did all that he was required by law to do in order to
preserve the rights secured to him by the contract. Article 1518, which defines the
obligations of the seller, is as follows:
The vendor can not exercise the right of repurchase without returning to the vendee the
price of the sale, and furthermore:
1. The expenses of the contract and any other legitimate payment made by reason of the
sale.
2. The useful and necessary expenses incurred by the thing sold.
In regard to the payment of the money the plaintiff did all that the law required him to do. He
offered to pay it to the defendant, and deposited it in the hands of the notary for her.
The defendant in her brief states that repairs exceeding 10,000 pesos in value were made
upon the theater, one-half of which the plaintiff was required to pay before he was entitled

to repurchase the property. But in her answer she did not allege that any such repairs had
been made. Neither in her letter of the 25th of April nor in her letter of the 26th did she so
state. The judgment of the court below makes no finding upon that subject. Whether any
evidence was offered in the court below in regard to this matter we do not know, for the
bill of exceptions does not contain any of the proof presented at the trial, except certain
documents relating to the ownership of the building. There is therefore nothing before us
to show that any repairs had been made, and the plaintiff was therefore under no
obligation, so far as this case shows, to pay the defendant anything on that account.
In regard to the expenses of the contract of repurchase it was not necessary that the plaintiff
should make any tender of this amount to the defendant. It would be his duty under the
law to pay the notary the fees due to him in this respect. It appears, moreover, that the
plaintiff provided a notary and placed him at the disposition of the defendant.
It is not necessary to decide the question as to whether the six months mentioned in the
contract expired on the 30th day of April, as claimed by the plaintiff, or on the 28th day of
April, as claimed by the defendant, for the plaintiff, on the 25th and 26th of April, did all
that the law required him to do to preserve his rights to repurchase the property.
The judgment of the court below is reversed, and after the expiration of twenty days judgment
should be entered in accordance herewith, and the case remanded, with instructions to
enter judgment in favor of the plaintiff, with costs, declaring that he has a right to
repurchase the property sold by him by virtue of the contract of the 13th of November,
1899, by paying 1,000 pesos and the expenses attendant upon the execution of the
contract of resale, and requiring the defendant to render an account, as provided in
clause 9 of the contract, from the 31st day of October, 1899, to the time when the deed of
resale of the property by the defendant to the plaintiff shall be executed. No costs will be
allowed in this court. So ordered
2. Engel Vs. Velasco & CO., 47 Phil. 115
Engel v Velasco & Co.
December 29, 1924
FACTS At the time of the transactions with which we are here concerned,
the plaintiffs were export brokers, or jobbers, of textile merchandise in the
City of New York, while the defendant was the owner, as it still is, of a
large store in Manila where general merchandise is sold both at
wholesale and retail. In connection with this business the defendant from
time to time has occasion to import textile fabrics on a large scale. The
general course of business between the two parties appears to have been
this: The defendant would first obtain from the plaintiffs by cable
information as to the prices of the goods desired, and would there upon
send a cablegram to the plaintiffs, instructing them to buy and hold
specified qualities of goods in the amount and at the prices stated.
Contemporaneously with the sending of the cablegram the defendant
would dispatch by mail more extended instructions, confirming the
cablegram and giving such other advice as was desirable. Upon receipt of
the cabled order, the plaintiffs cabled their acceptance in reply, indicating
the approximate time of delivery or, if the goods could not be obtained, so
advised. At or about the same time, the plaintiffs placed an order for the
same goods with the manufacturer, subject to subsequent specifications
as to patterns and stampings. Upon receiving the defendants written
order by mail the plaintiffs transmitted the instructions contained therein to
the manufacturer for the execution and at the same time prepared and
forwarded to the defendant a formal written sales note, conforming in the
main to the terms specified in the previous communications between the
plaintiffs and the defendant. As a result of this procedure the plaintiffs
came directly obligated to the manufacturer who produced the goods,
while the defendant became obligated to the plaintiffs, assuming that all
conditions essential to the creation of liability had been fulfilled. The

causes of action stated in the three complaints have their origin in sixteen
or seventeen orders nearly all of which were sent to the plaintiffs between
February 5 and April 2, 1920, inclusive. These orders appear to have
been promptly placed with the manufacturers by the plaintiffs, but delay
occurred in the matter of shipment; and when delivery was finally
tendered in Manila of the goods covered by the orders of the lower court,
acceptance was refused. These goods were there upon sold by the
plaintiffs in Manila and claim made upon the defendant for the difference
between the amount realized and the contract price. The goods involved
in the orders covered by case No. 20321 were never shipped from New
York to Manila. and after it was found that said goods would not be here
accepted, the plaintiffs caused the same to be sold in New York City. The
plaintiffs proceed upon the idea of breach of contract on the part of
the defendant in its failure to accept and to pay for the goods covered by
the orders above referred to. On the part of the defense a preliminary
question is made with reference to the admissibility of so much of the
correspondence as was conducted by cable, and for the rest it is claimed
that the plaintiffs have not complied with the terms of the various orders
and that the refusal of the defendant to accept and pay for the goods in
question was justified.
ISSUE W/NOT due to the delay made by plaintiffs, the defendant may
validly refuse to accept and pay for the goods.
HELD NO. From the correspondence exhibited above it is plain that the
defendant is not in a position successfully to invoke delay in the making of
shipments as ground for its release from the obligation to pay for the
merchandise. The requests for delay contained in the cables and letters if
July 7 and September 14 were accordingly dispatched, and the plaintiffs
were kept well informed as to the situation in which the defendant was
placed. It should be noted that the cable and the letter of September 14
were dispatched at a date subsequent to the times originally
stipulated for shipments of most of the goods, indicating that the
defendant waived the delay in delivery. The foregoing discussion suffices
to dispose of the grounds upon which the appellant seeks to justify its
refusal to accept the goods, though we are aware that a number of
points have been vigorously pressed in the voluminous briefs of the
appellant which have not been touched upon in this opinion. The general
discussion, however, indicates what the solution of those matters would
necessarily be if analyzed in accordance with the ideas her accepted. For
the rest we are content to refer to the lengthier exposition contained in
the opinion of the trial court with which, barring one or two points, we fully
agree. We accordingly proceed to consider these features of the case that
are connected with the consequences of the defendants breach of
contract.
3. Castle Brothers, Et Al. Vs. Gutierrez Hermanos, G.R. No. L-4231, April 1, 1908
Castle Brothers v Gutierrez Hermanos
April 01, 1908
FACTS The plaintiffs on 17th of September, 1906, closed a
contract with the defendants, by which the defendants agreed to sell the
plaintiffs 500 bales or hemp at P24 a picul, is admitted by both parties.
The dispute between them is as to whether the hemp which was sold was
to be "good current Manila" as claimed by the plaintiffs, or whether it was
to be of the quality indicated by the four marks (extra superior,
superior, good current, midway, fair current). It was not claimed by
the defendants below, and is not claimed here by them, that the hemp
indicated by those marks is equal to the grade "good current." Mr. Knight

testified that he bought, and Don Leopoldo Criado agreed to sell him, 500
bales of "good current Manila" hemp. That, while some mention of marks
was made, he said he could not accept those marks unless they turned
out to be up to the quality of "good current Manila." Don Leopoldo Criado,
testified that the phrase "good current" was never mentioned in the
conversation; that he stated to Mr. Knight that the defendants had 554
bales of the four marks mentioned, and that of those he sold 500 bales.
The testimony of Mr. Knight is corroborated by the testimony of Mr.
Higginbotham, who was his assistant in the office and who heard the
conversation, and who states that there was a positive agreement on the
part of Don Leopoldo Criado to furnish 500 bales of "good current Manila."
ISSUE W/NOT the defendants may be held liable on account that the
goods were not in good current Manila hemp.
HELD YES. The court below found upon the facts in favor of the
plaintiffs and we think that the evidence sustains such finding. On the 500
bales, delivered, the plaintiffs accepted and paid for 210 bales and no
question as to these bales on made in the case. They refused to accept
299 bales on the ground that it was not good current Manila hemp, called
upon the defendants to furnish 299 bales of that quality and notified them
that, on failure to do so, they would buy the same in the market and
charge the increased cost of the defendants. The defendants refused to
substitute other bales and the plaintiffs bought 299 bales of good current
Manila hemp at P28.50 a picul, P4.50 more per picul than the price at
which the defendants had agreed to furnish them that quality of hemp.
The loss to the plaintiffs was therefore P2,691 and to recover that sum
this action was brought.The judgment of the court below in favor of the
plaintiffs for that amount, is affirmed, with the costs of this instance
against the defendants. So ordered.
4. Dela Cruz Vs. Legaspi et al., G.R. No. L-8024, Nov. 29, 1955
Dela Cruz v Legaspi et. al.
November 29, 1955
FACTS In the Court of First Instance of Antique, in November, 1950,
Eusebio de la Cruz sued Apolonio Legaspi and his wife to compel delivery
of the parcel of land they had sold to him in December, 1949. The
complaint alleged the execution of the contract, the terms thereof, the
refusal of defendants to accept payment of the purchase price of P450
which he had tendered, and undue retention of the realty.
The defendants, in their answer, admitted the sale and the price; but they
alleged that before the document (of sale) "was made, the plaintiff agreed
to pay the defendants the amount of P450 right after the document is
executed that very day December 5, 1949, but after the document was
signed and ratified by the Notary Public and after the plaintiff has taken
the original of the said document, the sad plaintiff refused to pay the sum
of P450 which is the purchase price of the said land in question." They
asserted that for lack of consideration and for deceit, the document of
sale should be annulled.
ISSUE W/NOT Dela Cruz may compel the delivery of the parcel of land
even if there has been a refusal made by Legaspi and his wife.
HELD YES. It cannot be denied that when the document was signed the
cause or consideration existed: P450. The document specifically said so;
and such was undoubtedly the agreement. Subsequent non-payment of
the price at the time agreed upon did not convert the contract into one
without cause or consideration: a nudum pactum. The situation was rather
one in which there is failure to pay the consideration, with its resultant
consequences. In other words, when after the notarization of the contract,

plaintiff failed to hand the money to defendants as he previously

promised, there was default on his part at most, and defendant's' right
was to demand interest legal interest for the delay, pursuant to
article 1501 (3) of the Civil Code, or to demand rescission in court. Such
failure, however, did not ipso facto resolve the contract, no stipulation to
that effect having been alleged. Neither was there any agreement nor
allegation that payment on time was essential. Indeed, even if the
contract of sale herein question had expressly provided for "automatic
rescission upon failure to pay the price," the trial judge could allow plaintiff
to enforce the contract, as the judgment does, in effect because
defendants had not made a previous demand on him, by suit or notarial
act. In the sale of real property, even though it may have been stipulated
that in default of the price within the time agreed upon, the resolution of
the contract shall take place ipso facto, the vendee may pay even after
the expiration of the period, at any time before demand has been made
upon him either by suit or by notarial act. After such demand has been
made the judge cannot grant him further time. (Art. 1504 Civil Code.)
5. Rodolfo Alfonso Vs. Court Of Appeals, Et Al, G.R. No. L-63745, June 8, 1990
Alfonso v Court of Appeals
June 08, 1990
FACTS Mr. and Mrs. Roberto Chanco were the registered owners of a
239-square-meter lot in Barrio Sto. Angel, Sta. Cruz, Laguna. They
entered into an oral agreement with Mr. and Mrs. Rodolfo Alfonso
regarding the lot. But as will shortly be seen, they evidently had different
notions of the precise terms of the agreement. What is undisputed is that
the Alfonsos paid P2,000.00 to the Chancos. It is the Alfonso's claim that
their understanding with the Chancos was that they would pay to them the
sum of P4,000.00, the balance of the consideration for the transfer of the
land to them, as soon as they obtained a loan from the Philippine National
Bank; that they had in fact gotten such a loan and then, on or about
October 6,1973, offered to pay to the Chancos that sum of P4,000.00, but
the Chancos had unjustifiably refused to accept the preferred payment
and had instead sold the property to the Namit Spouses, despite the
Alfonsos' protest made not only to the Chances but also to the Namits.
It is the Chancos' claim, on the other hand, that they were selling their
property because they were in urgent need of money at the time; that they
could thus give the Alfonsos only one week within which to pay the
balance; that when the Alfonsos failed to do so, the Chancos told them
they were cancelling their agreement and sale the property to someone
else, and tried to return the P2,000.00 they had earlier received; that the
Alfonsos refused to accept the P2,000.00 and instead, tendered payment
of an additional sum of P2,500.00 which the Chancos, in turn, rejected;
and that the Chancos then executed a deed of sale, conveying the land to
the spouses, Serafin Namit and Clarita Alvarez, for P6,000.00, and on the
strength thereof, a new certificate of title over the land was issued to the
Namits.
ISSUE W/NOT spouses Alfonso may compel the Chancos to deliver the
lot in question, although it was already sold to the Namits (third party).
HELD NO. Now, the facts declared by the Court of Appeals to have been
satisfactorily proven do not demonstrate the existence of a contract of
sale of the immovable in question but rather, a contract to sell it; hence
the legal provision invoked by the Alfonsos, Article 1592 of the Civil Code,
supra, cannot apply. In Manuel v. Rodriguez, "only the price and the terns
of payment were in writing," but the most important matter in the
controversy, the alleged transfer of title was never "reduced to any written

document. It was held that the contract should not be considered as a

written but an oral one; not a sale but a promise to sell; and that "the
absence of a formal deed of conveyance" was a strong indication "that the
parties did not intend immediate transfer of title, but only a transfer after
full payment of the price." Under these circumstances, the Court ruled
Article 1504 of the Civil Code of 1889 (Art. 1592 of the present Code) to
be inapplicable to the contract in controversy-a contract to sell or promise
to sell-"where title remains with the vendor until fulfillment of a positive
suspensive condition, such as full payment of the price In Roque v.
Lapuz, the Court reiterated the doctrine, affirmed by the "overwhelming
weight of authority culminating in the Luzon Brokerage v. Maritime cases,
that Article, 1592 of the New Civil Code does not apply to a contract to
sell where title remains with the vendor until full payment of the price as in
the case at bar."
6. Abelardo Valarao, Et Al. Vs. Court Of Appeals, Et Al., G.R. No. 130347, March 3, 1999
Abelardo Valarao v Court of Appeals
March 03, 1999
FACTS On September 4, 1987, spouses Abelardo and Gloriosa Valarao,
thru their son Carlos Valarao as their attorney-in-fact, sold to [Private
Respondent] Meden Arellano under a Deed of Conditional Sale a parcel
of land situated in the District of Diliman, Q.C., for the sum of THREE
MILLION TWO HUNDRED TWENTY FIVE THOUSAND PESOS
(P3,225,000.00) payable under a schedule of payment stated therein.
In the same Deed of Conditional Sale, the [private respondent] vendee
obligated herself to encumber by way of real estate mortgage in favor of
[petitioners] vendors her separate piece of property with the condition that
upon full payment of the balance of P2,225,000.00, the said mortgage
shall become null and void and without further force and effect.
It was further stipulated upon that should the vendee fail to pay three (3)
successive monthly installments or any one year-end lump sum payment
within the period stipulated, the sale shall be considered automatically
rescinded without the necessity of judicial action and all payments made
by the vendee shall be forfeited in favor of the vendors by way of rental
for the use and occupancy of the property and as liquidated damages. All
improvements introduced by the vendee to the property shall belong to
the vendors without any right of reimbursement. Petitioner, [had] tried to
pay the installments due [in] the said months, including the amount due
[in] the month of December, but was turned down by the vendors[petitioners] thru their maid, Mary Gonzales, who refused to accept the
payment offered. It appears that Mary Gonzales refused to receive
payment allegedly on orders of her employers who were not at home. On
the other hand, vendors-[petitioners], thru counsel, sent [private
respondent] a letter dated 4 January 1991 (Exh. C) notifying her that they
were enforcing the provision on automatic rescission as a consequence of
which the Deed of Conditional Sale [was deemed] null and void, and xxx
all payments made, as well as the improvements introduced on the
property, [were] thereby forfeited. The letter also made a formal demand
on the [private respondent] to vacate the property should she not heed
the demand of [petitioners] to sign a contract of lease for her continued
stay in the property. In reply, [private respondent] sent a letter dated
January 14, 1991 (Exh. D), denying that she [had] refused to pay the
installments due [in] the months of October, November and December,
and countered that it was [petitioners] who refused to accept payment,
thus constraining her to file a petition for consignation before the Regional
Trial Court of Quezon City.

ISSUE W/NOT the Answer categorically indicating willingness to

accept the amount already due if the [private respondent] would update
the account, praying that if she fail to do so immediately, the Deed of
Conditional Sale be declared rescinded, with costs against the [private
respondent], ordering the latter to vacate and turn over possession of
the premises to the [petitioners].
HELD NO. We believe, that the issue of whether the requirement of a
judicial demand or a notarial act has been fulfilled is immaterial to the
resolution of the present case. In the present case, the Deed of
Conditional Sale is of the same nature as a sale on installment or a
contract to sell, which is not covered by Article 1592. Petitioners-vendors
unmistakably reserved for themselves the title to the property until full
payment of the purchase price by the vendee. Clearly, the agreement was
not a deed of sale, but more in the nature of a contract to sell or of a sale
on installments. Even after the execution of the Deed of Conditional Sale,
the Torrens Certificate of Title remained with and in the name of the
vendors. In rejecting the application of Article 1592 to a contract to sell,
the Court held in Luzon Brokerage that the full payment of the price
(through the punctual performance of the monthly payments) was a
condition precedent to the execution of the final sale and to the transfer of
the property from [the vendor] to the [vendee]; so that there was to be no
actual sale until and unless full payment was made. From the foregoing, it
is clear that petitioners were not justified in refusing to accept the tender
of payment made by private respondent on December 30 and 31, 1990.
Had they accepted it on either of said dates, she would have paid all three
monthly installments due. In other words, there was no deliberate failure
on her part to meet her responsibility to pay. The Court takes note of her
willingness and persistence to do so, and, petitioners cannot now say
otherwise. The fact is: they refused to accept her payment and thus have
no reason to demand the enforcement of the automatic forfeiture clause.
They cannot be rewarded for their own misdeed.
7.

Sps. Jaime Benos, Et Al. Vs. Sps. Gregorio Lawilao, Et AL., G.R. No. 172259,
December 5, 2006
Sps. Benos v Lawilao
December 05, 2006
FACTS On February 11, 1999, petitioner-spouses Jaime and Marina
Benos ("the Benos spouses") and respondent-spouses Gregorio and
Janice Gail Lawilao ("the Lawilao spouses") executed a Pacto de Retro
Sale where the Benos spouses sold their lot and the building erected
thereon for P300,000.00, one half of which was to be paid in cash to the
Benos spouses and the other half to be paid to the bank to pay off the
loan of the Benos spouses which was secured by the same lot and
building. Under the contract, the Benos spouses could redeem the
property within 18 months from date of execution by returning the contract
price, otherwise, the sale would become irrevocable without necessity of
a final deed to consolidate ownership over the property in the name of the
Lawilao spouses. After paying the P150,000.00, the Lawilao spouses
immediately took possession of the property and leased out the building
thereon. However, instead of paying the loan to the bank, Janice Lawilao
restructured it twice. Eventually, the loan became due and demandable.
On August 14, 2000, a son of the Benos spouses paid the bank
P159,000.00 representing the principal and interest. On the same day, the
Lawilao spouses also went to the bank and offered to pay the loan, but
the bank refused to accept the payment. The Lawilao spouses then filed
with the Municipal Circuit Trial Court a petition for consignation against

the bank and simultaneously deposited the amount of P159,000.00. Upon

the banks Motion, the court dismissed the petition for lack of cause of
action. Subsequently, the Lawilao spouses filed with the Municipal Circuit
Trial Court a complaint, for consolidation of ownership. This complaint is
the precursor of the instant petition. The Benos spouses moved to dismiss
on grounds of lack of jurisdiction and lack of cause of action but it was
denied and the parties went to trial.
ISSUE W/NOT the spouses Lawilao may file a consolidation of
ownership on the ground of the refusal of the bank to accept the payment
made by the spouses.
HELD NO. The evidence shows that the Lawilao spouses did not make
a valid tender of payment and consignation of the balance of the contract
price. The Lawilao spouses did not appeal said finding, and it has become
final and binding on them. Although they had repeatedly alleged in their
pleadings that the amount of P159,000.00 was still with the trial court
which the Benos spouses could withdraw anytime, they never made any
step to withdraw the amount and thereafter consign it. Compliance with
the requirements of tender and consignation to have the effect of payment
are mandatory. Tender of payment is the manifestation by debtors of their
desire to comply with or to pay their obligation. If the creditor refuses the
tender of payment without just cause, the debtors are discharged from the
obligation by the consignation of the sum due. Consignation is made by
depositing the proper amount to the judicial authority, before whom the
tender of payment and the announcement of the consignation shall be
proved. All interested parties are to be notified of the consignation.
Compliance with these requisites is mandatory. In the instant case,
records show that the Lawilao spouses filed the petition for consignation
against the bank without notifying the Benos spouses. The petition was
dismissed for lack of cause of action against the bank. Hence, the Lawilao
spouses failed to prove their offer to pay the balance of the purchase
price and consignation. In fact, even before the filing of the consignation
case, the Lawilao spouses never notified the Benos spouses of their offer
to pay. Thus, as far as the Benos are concerned, there was no full and
complete payment of the contract price, which gives them the right to
rescind the contract pursuant to Articles 1191 in relation to Article 1592 of
the Civil Code.
8.

Pilar T. Ocampo Vs. Court Of Appeals Et Al ., G.R. No. 97442 , June 30, 1994

G.R. No. 97442 June 30, 1994 PILAR T. OCAMPO, Petitioner, v. COURT OF
APPEALS and MAGDALENA S. VILLARUZ, Respondents.
TOPIC: Consequences of Failure to Comply with Prestation NCC Article
1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent
upon him. The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible. The court shall
decree the rescission claimed, unless there be just cause authorizing
the fixing of a period. This is understood to be without prejudice to the
rights of third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law. (1124) NCC 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)
FACTS: Two (2) documents, an "Agreement to Sell Real Property" and a
"Contract to Sell," covering the same parcel of land were executed by
a seller in favor of two (2) different buyers. Both buyers now assert
against
each
other
a
better
title
to
the
property.chanroblesvirtualawlibrarychanrobles
Tolosa and Ocampo (represented by Borres) entered into an "Agreement
to Sell Real Property" 3whereby Tolosa "sells, cedes and transfers" the
land to Ocampo in consideration of P25,000.00, P12,500.00 of which
was paid upon signing of the deed and the balance to be due within
six (6) months thereafter. Paragraph 4 of the contract provides that
"immediately upon complete payment of the purchase price . . . by the
VENDEE, the VENDOR . . . agrees to execute and deliver unto the
VENDEE whatever pertinent document or documents necessary to
implement this sale and to transfer title to the VENDEE."chan
Subject property is mortgaged the land to the Philippine Veterans Bank
and had the encumbrance annotated on his certificate of title
Before the six-month period to complete the payment of the purchase
price expired, Ocampo paid but only the total of P16,700.00.
4Nevertheless Tolosa accepted her subsequent late payments
amounting to P3,900.00.
Upon learning of the mortgage lien, Ocampo caused her adverse claim
to be annotated on Tolosas certificate of title
Later on, Tolosa sought the cancellation of Ocampos adverse claim and
presented her with two options, namely, a refund of payments made,
or a share from the net proceeds if sold to a third party.
Subsequently, Tolosa and Magdalena S. Villaruz executed a "Contract to
Sell" 9whereby Tolosa "sells, cedes, transfers, and conveys" to Villaruz
the same land in consideration of P94,300.00. The amount of
P15,000.00 was to be paid upon execution and the balance upon
cancellation of all liens and encumbrances from the certificate of title.
The contract stipulated the immediate conveyance of the physical
possession of the land to Villaruz, although no deed of definite sale
would be delivered to her unless the price was fully paid.
Tolosa wrote Ocampo offering to reimburse her what she paid provided
she would sign a document canceling her adverse claim. Failing to
convince Ocampo, Tolosa filed a petition in the Court of First Instance
of Iloilo to cancel the adverse claim of Ocampo. The petition was
however denied but Tolosa was able to get a favourable decision in
another branch of the court.
The contract of sale between Tolosa and Villaruz was registered and a
new title in the name of Villaruz was eventually issued.
Aggrived Ocampo filed a third party complaint against Villaruz
RTC decided in favour of Ocampo declaring the agreement between
Talosa and Villaruz as null and void and ordered Tolosa to execute the
corresponding Deed of Sale in favour of Ocampo.

 CA reversed RTC s decision upholding the agreement between Tolosa

and Villaruz, hence, this appeal. The appellate court upheld the sale in
favor of Villaruz on the theory that the 21 April 1975 agreement of
Tolosa and Ocampo was merely a contract to sell. It claimed that in the
absence of a deed of absolute sale in favor of Ocampo, in relation to
par. 4 of the contract, Tolosa retained ownership over the land and
validly
conveyed
the
same
to
Villaruz.chanroblesvirtualawlibrarychanrobles
ISSUE: WON Tolosa has the right to rescind the contract entered between
him and Ocampo.
RULING: NO. CA decision reversed and set aside and RTC ruling reinstated
The agreement between Tolosa and Ocampo dated 21 April 1975
although titled "Agreement to Sell Real Property" was a perfected
contract of absolute sale. Paragraph 4 pertains to the undertaking of
the seller to execute and deliver to the buyer any document deemed
necessary by law to implement the sale and transfer title since the
parties were unsure of what documents were pertinent. If the intent
was for the seller to retain ownership and possession of the land
through non-delivery of certain documents unless the price be fully
paid, par. 4 alone should be inutile; it should have been
complemented with a proviso that the sale would not be implemented
nor the title considered transferred unless another document
specifically for said purpose be first executed and delivered to the
buyer. In this regard, no right to retain ownership and possession of
the land pending full payment of the price can be inferred from the
fact that no delivery was made to Ocampo. The failure of the buyer to
pay the price in full within a fixed period does not, by itself, bar the
transfer of the ownership or possession, 19much less dissolve the
contract of sale. Under Art. 1592 of the Civil Code, the failure of
Ocampo to complete her payment of the purchase price within the
stipulated period merely accorded Tolosa the option to rescind the
contract of sale upon judicial or notarial demand.obles virtual law
library However, the letter of 2 August 1977 claimed to have been
sent by Tolosa to Ocampo rescinding the contract of sale was defective
because it was not notarized and, more importantly, it was not proven
to have been received by Ocampo. hanrobles Likewise, Civil Case No.
12163 could not be considered a judicial demand under Art. 1592 of
the Civil Code because it did not pray for the rescission of the
contract. Although the complaint sought the cancellation of Ocampos
adverse claim on Tolosas OCT and for the refund of the payments
made, these could not be equivalent to a rescission. Even assuming
arguendo that Civil Case No. 12163 was a valid judicial demand,
rescission is not granted as a matter of course. Before Civil Case No.
12163 was filed on 7 October 1977, Ocampo not only paid Tolosa a
total of P20,600.00 but also discharged Tolosas mortgage debt in the
amount of P4,453.41. Had not Tolosa ordered the Philippine Veterans
Bank to return the mortgage debt payment by Ocampo, the purchase
price would have been deemed fully paid. Tolosa, on the other hand, is

now precluded from raising the issue of late payments. His unqualified
acceptance of payments after the six-month period expired
constitutes waiver of the period and, hence, of the ground to rescind
under Art. 1592. In any case, however, the breach on the part of
Ocampo was only slight if not outweighed by the bad faith of Tolosa in
reneging in his own prestations, hence, judicial rescission of the
contract cannot be justified. Angeles v. Calasanz. While the contract
dated 3 June 1977 in favor of Villaruz is also a contract of sale, that of
Ocampo should prevail pursuant to Art. 1544 of the Civil code on
double sales. While Villaruz may have registered his contract or came
into possession ahead of Ocampo, Villaruz was never in good faith
since Ocampo already had her adverse claim annotated on Tolosas
title before the sale between Tolosa and Villaruz
9. Caridad Estates, Inc. Vs. Santero, 7 Phil. 114
Facts: On November 28, 1934, the Caridad Estates, Inc., through its manager, Hammon H.

Buck, leased to Pablo Santero cadastral lots Nos. 1080 B-1, 1080 b-2 and 1116 in
the municipality of Cavite, Cavite, for one year for P2,200. Said lands were used for
fishpond and salt bed purposes. About three months prior to the expiration of the
contract of lease, or on August 24, 1935, the lessor sold the same lots to the leases
for P30,000, payable as follows: P1,500 on the execution of the agreement; P4,000
on or before December, 1935; P4,500 on or before March, 1936; and the remaining
balance of P20,000 in ten years, each annual installment to be paid on or before the
month of August of each year beginning 1937. In said contract (Exhibit A), the
parties stipulated that should the vendee fail to make the payments agreed upon
within sixty days of the date they fall due, the total balance shall become due and
payable and recoverable by an action at law, or the vendor may recover possession
of the property and consider any and all sums paid by the vendee forfeited. On
account of the purchase price of P30,000, the vendee, defendant-appellant here,
made the following payments: P1,500 on August 12, 1935 (Exhibit 7), P435 on
December 28, 1935 (Exhibit 8), P225 on December 31, 1935 (Exhibit 9), P2,460 on
January 3, 1936 (Exhibits 10 and 11), P1,500 on May 1, 1936 (Exhibit 12), and
P1,470 on May 3, 1936 (Exhibits 13 and 14). As things thus stood, the amount
outstanding in vendee's account as of March, 1936, was P2,445.20. The defendantappellant claims that he offered to pay this amount on September 21, 1936, with
check No. C-65060, but the plaintiff refused to accept payment on the ground that
the contract of sale had been definitely cancelled since September 15, 1936, when
the same lands were conveyed by sale to Triston Sison. On the other hand, it is
alleged by the plaintiff-appellee that on August 31, 1936, its general manager by
formal communication (Exhibit B), advised the defendant of the revocation of the
contract of sale and asked the latter to vacate the premises immediately thereafter.
As the defendants-appellant would not surrender possession of the lands in
question, the Caridad Estates, Inc., on October 2, 1936, filed a complaint for illegal
detainer and recovery of rentals against Pablo Santero in the justice of the peace of
court of Cavite. The defendant, on January 27, 1937, submitted his answer, the
principal argument of which being that the justice of the peace of court was without
jurisdiction to entertain the action as it involved, besides the question of ownership,
a contract of P30,000. On May 28, 1937, the court rendered its decision, ordering
the defendant to surrender the property in question, and to pay the plaintiff, for its
use and occupation, a monthly rental of P200, beginning September 16, 1936, until
actual delivery, with legal interest from the commencement of the suit. His exception
and motion for new trial having been denied, the defendant-appellant, on February
2, 1938, moved to declare the provincial sheriff in contempt of court for the reasons

stated in his petition, and on February 11, 1938, presented another motion praying
for the dissolution of the order of execution issued by the justice of the peace court
of Cavite on June 2, 1937. On March 22, 1938, the Court of First Instance
disallowed the two motions of the defendant.
Issue: whether or not provisions of the contract of sale (Exhibit A), more specifically

paragraphs 3 and 4 thereof, violate those legal principles which condemn pacto
commissorio
Held: As may be seen, paragraph 4 gives the vendor, if the vendee fails to make the

specified payments, the option of (1) considering the total remaining purchase price
due and payable and recoverable by an action at law or (2) recovering the
possession of the property in which case any and all sums paid by the vendee shall
be regarded as rental for the use and occupancy of the property. On the other hand,
paragraph 3 obligates the vendee to deliver the possession of the property and the
improvements thereon in good condition and repair in the event that the vendor
should demand the return of the same on account of noncompliance with the terms
and conditions of payment. It is quite plain, therefore, that the course followed by the
vendor in cancelling the contract and demanding the repossession of the property
was well supported by the employed in consonance with, the covenants embodied in
their agreement. As the stipulations in question do not violate the prohibitive
provisions of the land or defeat morals and public order they constitute the law
between the parties, binding and effectual upon them. (Arts. 1255 and 1278, Civil
Code; Jimeno vs. Gacilago, 12 Phil., 16.). On article 1504 of the Civil Code, and
vigorously argues that whatever be the provision of the contract, resolution may not
be declared in the absence of a demand upon the vendee "either judicially or by a
notarial act." A cursory reading of the provision would be the best refutation of the
appellant's argument, as it leaves no doubt as to its inapplicability in the present
instance. The contract (Exhibit A) is a sale in installment, in which the parties have
laid down the procedure to be followed in the event the vendee failed to fulfill his
obligation. There is, consequently, no occasion for the application of the
requirements of article 1504. Taking up the argument that the stipulations outlined in
paragraphs 3 and 4 of the contract have resulted in apactum commissorium, we are
of the opinion that the objection is without legal basis. Historically and in point of
strict law, pactum commissorium, referred to in Law 41, title 5, and Law 12, title 12 of
the Fifth Partida, and included in articles 1859 and 1884 of the Civil Code,
presupposes the existence of mortgage or pledge or that of antichresis.
(Alcantara vs. Alinea et al., 8 Phil., 111.) Upon this account, it becomes hardly
conceivable, although the argument has been employed here rather extravagantly,
that the idea of pactum commissorium should occur in the present contract of sale,
considering that, it is admitted, the person to whom the property is forfeited is the
real and equitable owner of the same because title would not pass until equitable
owner of the same because title would not pass until the payment of the last
installment. At most, the provisions in point, as the parties themselves have
indicated in the contract, is a penal clause which carries the express waiver of the
vendee to any and all sums he paid when the vendor, upon his inability to comply
with his duty, seeks to recover possession of the property, a conclusive recognition
of the right of the vendor to said sums, and avoid unnecessary litigation designed to
enforce fulfillment of the terms and conditions agreed upon.
10.

DOCTRINE

Roque Vs. Lapuz, 96 SCRA 741

(SHORT VERSION)
Plaintiff Roque and defendant Lapuz entered in an agreement of sale for a couple of lots to be paid in 120
equal monthly payments. After some time, Lapuz requested Roque if he can substitute the present lots and
move and occupy to another lot. The new lots are corner lots which have better location, thus much more
expensive. Roque agreed to the request of Lapuz but Roque charged a higher rate which correspond to
the higher value of the new lot. Lapuz first agreed to the new rate but he never paid for another instalment
again. Roque made demands that Lapuz pay his accrued instalments but the latter refused to comply with
the demands. Roque then demanded the vacation of the land but still to no avail. The petitioner brought
the matter to the courts and CA granted Lapuz a period of (90) ninety days to pay the balance remaining.
SC reversed CA holding that having been in default and acted in bad faith, he is not entitled to the new
period of 90 days
FACTS (Just read this if you want the details, otherwise the short version will suffice)
Sometime in 1964. plaintiff Roque and defendant Lapuz entered into an agreement of sale covering Lots
1, 2 and 9, Block 1, of said property, payable in 120 equal monthly installments at the rate of P16.00,
P15.00 per square meter, respectively. In accordance with said agreement, defendant paid to plaintiff the
sum of P150.00 as deposit and the further sum of P740.56 to complete the payment of four monthly
installments covering the months of July, August, September, and October, 1954.
On January 24, 1955, defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2
and 9, the subject with Lots 4 and 12, Block 2 of the Rockville Subdivision, which are corner lots, to
which request plaintiff graciously acceded. The evidence discloses that defendant proposed to plaintiff
modification of their previous contract to sell because he found it quite difficult to pay the monthly
installments on the three lots, and besides the two lots he had chosen were better lots, being corner lots. In
addition, it was agreed that the purchase price of these two lots would be at the uniform rate of P17.00 per
square meter payable in 120 equal monthly installments, with interest at 8% annually on the balance
unpaid. Pursuant to this new agreement, defendant occupied and possessed Lots 4 and 12, and enclosed
them, including the portion where his house now stands, with barbed wires and adobe walls. However,
aside from the deposit of P150.00 and the amount of P740.56, which were paid under their previous
agreement, defendant failed to make any further payment on account of the agreed monthly installments
for the two lots in dispute, under the new contract to sell. Plaintiff demanded upon defendant not only to
pay the stipulated monthly installments in arrears, but also to make up-to-date his payments, but
defendant
refused
to
comply
with
plaintiff's
demands.
On or about November 3, 1957, plaintiff demanded upon defendant to vacate the lots in question and to
pay the reasonable rentals thereon at the rate of P60.00 per month from August, 1955. On January 22,
1960, petitioner Felipe C, Roque filed the complaint against defendant Nicanor Lapuz for rescission and
cancellation of the agreement of sale between them involving the two lots in question and prayed that
judgment be rendered ordering the rescission and cancellation of the agreement of sale, the defendant to
vacate the two parcels of land and remove his house therefrom and to pay to the plaintiff the reasonable
rental thereof at the rate of P60.00 a month from August 1955 until such time as he shall have vacated the
premises, and to pay the sum of P2,000.00 as attorney's fees, costs of the suit and award such other relief
or
remedy
as
may
be
deemed
just
and
equitable
in
the
premises.
The Court of Appeals rendered its decision that the defendant Nicanor Lapuz is granted a period of
ninety (90) days from entry hereof within which to pay the balance. Hence, this appeal.
ISSUES/HELD

(1) WoN Lapuz is entitled to the benefits of the third paragraph of Article 1191 New Civil Code, for
fixing period - NO
RATIO
(1) No. Respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having
been in default and acted in bad faith, he is not entitled to the new period of 90 days from entry of
judgment within which to pay petitioner the balance of P11,434.44 with interest due on the purchase price
of P12,325.00 for the two lots. To allow and grant respondent an additional period for him to pay the
balance of the purchase price, which balance is about 92% of the agreed price, would be tantamount to
excusing his bad faith and sanctioning the deliberate infringement of a contractual obligation that is
repugnant and contrary to the stability, security and obligatory force of contracts. Moreover, respondent's
failure to pay the succeeding 116 monthly installments after paying only 4 monthly installments is a
substantial and material breach on his part, not merely casual, which takes the case out of the application
of
the
benefits
of
pa
paragraph
3,
Art.
1191,
N.C.C.
Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which
the trial court and the appellate court, in the latter's original decision, granted in the form of rental at the
rate of P60.00 per month from August, 1955 until respondent shall have actually vacated the premises,
plus P2,000.00 as attorney's fees. The Court affirmed the same to be fair and reasonable. The Court also
sustained the right of the petitioner to the possession of the land, ordering thereby respondent to vacate
the same and remove his house therefrom.
DECISION
Judgment reversed.