Roman vs. Grimalt

Facts:

In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the owner, and respondent Andres Grimalt, the purchaser, verbally agreed upon the sale of the schooner Santa Marina. In his letter on June 23, Grimalt agreed to buy the vessel and offered to pay in three installments of P500 each on July 15, September 15, and November 15, provided the title papers to the vessel were in proper form. The title of the vessel, however, was in the name of one Paulina Giron and not in the name of Roman as the alleged owner. Roman promised to perfect his title to the vessel, but failed so the papers he presented did not show that he was the owner of the vessel. On June 25, 1904, the vessel sank in the Manila harbor during a severe storm, even before Roman was able to produce for Grimalt the proper papers showing that the former was in fact the owner of the vessel in question and not Paulina Giron. As a result, Grimalt refused to pay the purchase price when Roman made a demand on June 30, 1904. On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found that the parties had not arrived at a definite understanding, and later dismissed said complaint.

Issue: Whether or not Roman should bear the risk of loss. Ruling: The Supreme Court affirmed the decision of the lower court and declared Roman as the one who should bear the risk of lost because there was no actual contract of sale. If no contract of sale was actually executed by the parties, the loss of the vessel must be borne by its owner and not by a party who only intended to purchase it and who was unable to do so on account of failure on the part of the owner to show proper title to the vessel and thus enable them to draw up the contract of sale. Grimalt was under no obligation to pay the price of the vessel, the purchase of which had not been concluded. The conversations between the parties and the letter Grimalt had written to Roman did not establish a contract sufficient in itself to create reciprocal rights between the parties.

Norkis Distribution Inc vs CA (read this case again in full text along with de leon oblicon)

Facts: Petitioner Norkis Distributors, Inc. is the distributor of Yamaha motorcycles in Negros Occidental with office in Bacolod City with Avelino Labajo as its Branch Manager. On September 20, 1979, private respondent Alberto Nepales bought from the Norkis-Bacolod branch a brand new Yamaha Wonderbike Maroon motorcycle, then displayed in the Norkis showroom. The price of P7,500.00 was payable by means of a Letter of Guaranty from the Development Bank of the Philippines (DBP) which Norkis' Branch Manager Labajo agreed to accept. Hence, credit was extended to Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice) showing that the contract of sale of the motorcycle had been perfected. Nepales signed the sales invoice to signify his conformity with the terms of the sale. In the meantime, however, the motorcycle remained in Norkis' possession.

On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name of Alberto Nepales. Thereafter, the motorcycle was delivered to Julian Nepales who alleged is the agent of the buyer but the latter denies it. The motorcycle met an accident driven by a certain Zacarias Payba. The unit was a total wreck was returned, and stored inside Norkis' warehouse. Nepales paid and demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with damages. The RTC rendered a decision in favour of Nepales. CA affirmed RTC’s decision.

Issue: Who should bear the loss of the motorcycle?

Ruling: NORKIS, the seller. The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of delivering the thing. The act, without the intention, is insufficient.

When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the buyer's motorcycle loan. The Letter of Guarantee issued by the DBP, reveals that the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would not approve private respondent's loan application and, consequently, there would be no sale.

In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition.

Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable to this case, for there was neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-known doctrine of res perit domino.

Southern Motors vs. Moscoso

Facts:

On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold to defendant-appellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase price), to secure the payment of which, a chattel mortgage was constituted on the truck in favor of the plaintif.

Of said account of P4,915.00, the defendant had paid a total of P550.00, of which P110.00 was applied to the interest up to August 15, 1957, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the balance of the purchase price.

On November 4, 1957, the plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note. Upon plaintiff's petition, embodied in the complaint, a writ of attachment was issued by the lower court on the properties Of the defendant.

Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to defendant, were attached by the Sheriff of San Jose, Antique, where defendant was residing on November 25, 1957, and said truck was brought to the plaintiff's compound in Iloilo City, for safe keeping.

Issue: WON the remedy chosen by appellee is the foreclosure of the truck or a specific performance of the defendant’s obligation.

Ruling: Manifestly, the appellee had chosen the first remedy (specific performance). 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.

As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may enforce execution of the judgment rendered in its favor on the personal and real property of the latter not exempt from execution sufficient to satisfy the judgment. That part of the judgment against the properties of the defendant except the mortgaged truck and discharging the writ of attachment on his other properties is erroneous.

We perceive 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. (Sections 1 & 11, Rule 59; Sec. 16, Rule 39).

The mortgage creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged property and may cause an attachment to be issued and levied on such property, upon beginning his civil action.

Pascual vs Universal Motors Corp

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 exceedP50,000.00. 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 deedsof 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 isfor 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: WON UMC correct in its contentions? 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 wouldbe indirectly subverted, and public policy overturned.

Filinvest Credit vs. Ca, Spouses Tan

Facts: Spouses Tan sells gravel produced from crushed rocks used for construction purposes. Wanting to increase production, they asked Mr. Ruben Mercurio to look for a more efficient rock crusher and were referred to Rizal Consolidated Corporation which then had for sale one such machinery.

After inspection of said machinery, couple decided to buy the same and applied for financial assistance from Filinvest Credit Corporation on the conditions that:that the machinery be purchased in the petitioner's name; that it be leased (with option to purchase upon the termination of the lease period) to the private respondents; and that the private respondents execute a real estate mortgage in favor of the petitioner as security for the amount advanced by the latter.

A contract of lease of machinery (with option to purchase) was entered into by the parties stipulating that at the end of the two-year period, the machine would be owned by the spouses. The latter executed a real estate mortgage over two parcels of land issued in favor Filinvest and issues check for P150,550.00, as initial rental (or guaranty deposit), and twenty-four (24) postdated checks corresponding to the 24 monthly rentals.

Three months after the delivery of the machinery, the couple claiming that they had only tested the machine that month, sent a letter-complaint to the Filinvest, alleging that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per hour and refused to pay.

As a consequence of the non-payment of the rentals on the rock crusher as they fell due despite the repeated written demands, Filinvest extrajudicially foreclosed the real estate mortgage.

To thwart the impending auction of their properties, Spouses Jose Sy Bang and Iluminada Tan filed before the RTC (QC) a complaint against Filinvest, asked for the rescission of the contract of lease, annullment of the real estate mortgage. A judgment was rendered in their favor.

On appeal, the petitioner (Filinvest) reasserts that the cause of action should be directed against Rizal Consolidated Corporation, the original owner-seller of the subject rock crusher, or Gemini Motors Sales which served as a conduit facilitator of the purchase of the said machine. The petitioner argues that it is a financing institution engaged in quasi-banking activities, primarily the lending of money to entrepreneurs such as the private respondents and the general public, but certainly not the leasing or selling of heavy machineries like the subject rock crusher. The petitioner denies being the seller of the rock crusher and only admits having financed its acquisition by the private respondents. Further, the petitioner absolves itself of any liability arising out of the lease contract it signed with the private respondents due to the waiver of warranty made by the latter.

Issues:WON Filinvest is immuned from liability arising from the defect of the machinery?

HELD:Yes.

(The contract they entered into is one of a Sale on Installment based on the real intention of the parties.)

It was only after they had inspected and tested the machine, and found it to their satisfaction, that the private respondents sought financial aid from the petitioner. These allegations of the petitioner had never been rebutted by the private respondents. In fact, they were even admitted by the private respondents in the contract they signed.

Moreover, considering that between the parties, it is the private respondents, by reason of their business, who are presumed to be more knowledgeable, if not experts, on the machinery subject of the contract, they should not therefore be heard now to complain of any alleged deficiency of the said machinery. It is their failure or neglect to exercise the caution and prudence of an expert, or, at least, of a prudent man, in the selection, testing, and inspection of the rock crusher that gave rise to their difficulty and to this conflict. A well- established principle in law is that between two parties, he, who by his negligence caused the loss, shall bear the same.

At any rate, even if the private respondents could not be adjudged as negligent, they still are precluded from imputing any liability on the petitioner. One of the stipulations in the contract they entered into with the petitioner is an express waiver of warranties in favor of the latter. By so signing the agreement, the private respondents absolved the petitioner from any liability arising from any defect or deficiency of the machinery they bought.

Taking into account that due to the nature of its business and its mode of providing financial assistance to clients, the petitioner deals in goods over which it has no sufficient know-how or expertise, and the selection of a particular item is left to the client concerned, the latter, therefore, shoulders the responsibility of protecting himself against product defects.

This is where the waiver of warranties is of paramount importance. Common sense dictates that a buyer inspects a product before purchasing it (under the principle of caveat emptor or "buyer beware") and does not return it for defects discovered later on, particularly if the return of the product is not covered by or stipulated in a contract or warranty.

In the case at bar, to declare the waiver as non-effective, as the lower courts did, would impair the obligation of contracts. Certainly, the waiver in question could not be considered a mere surplusage in the contract between the parties. Moreover, nowhere is it shown in the records of the case that the private respondent has argued for its nullity or illegality. In any event, we find no ambiguity in the language of the waiver or the release of warranty. There is therefore no room for any interpretation as to its effect or applicability vis-a- vis the deficient output of the rock crusher. Suffice it to say that the private respondents have validly excused the petitioner from any warranty on the rock crusher. Hence, they should bear the loss for any defect found therein.

WHEREFORE, the Petition is GRANTED; the Decision of the Court of Appeals dated March 17, 1988 is hereby REVERSED AND SET ASIDE, and another one rendered DISMISSING the complaint.

Layug v IAC

DOCTRINE: Even in residential properties, RA 6552 recognizes and reaffirms the vendor’s right to cancel the contract to sell upon breach and non-payment of the stipulated instalments. The one who fails to pay the rest of the instalments as agreed upon is left only to a right to a refund of the cash surrender value of the payments on the property equivalent to 50% of the total payments already made.

FACTS

1) Gabuya brought a suit against Layug for annulment of the contract and for recovery of damages because Layug failed to pay the rest of the instalments for the purchase of 12 lots in Iligan City (agreed to cost P120,000 payable in three yearly instalments). Layug only paid the first 2 installments (P80,000) and failed to pay the last instalment of P40,000.

2) The TC ruled in favour of Gabuya. This was affirmed by the CA.

3) Layug is relying on the stipulation in the contract a) granting him, as vendee, a 30days grace period within which to pay any yearly instalment not paid within the time fixed therefor, and b) declaring him liable, in the event of his failure to pay within the grace period, “for interest at the legal rate.” He argues that the stipulation indicates that rescission was not envisioned as a remedy against a failure to pay instalments and that such failure was not a ground for abrogating the contract but merely generated liability for interest at legal rate…”

ISSUE

Whether or not Gabuya had the right to rescind the contract and should this happen, whether Layug should be entitled to get back the ENTIRE amount he already paid?

HELD

Yes Gabuya could rescind the contract. No, Layug should not be entitled to the entire amount he already paid.

The SC: The grace period clause should be read conjointly with the stipulation on rescission, and in such a manner as to give full effect. The patent and logical import of both provisions, taken together, is that when the vendee fails to pay any instalment on its due date, he becomes entitled to a grace period of 30 days to cure default by paying the amount of the instalment plus interest, but that if he should still fail to pay within the grace period, then rescission of the contract takes place.

Layug cannot be permitted to claim that all his payments should be credited to him in their entirety without regard whatever to the damages his default might have caused to Gabuya.

R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel such contracts upon failure of the vendee to comply with the terms of the sale, but imposes, chiefly for the latter's protection, certain conditions thereon. We have had occasion to rule that "even in residential properties the Act" recognizes and reaffirms the vendor's right to cancel the contract to sell upon breach and nonpayment of the stipulated installments. ..." 

The law provides inter alia  that "in all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments, ..., 15 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:

[Grace Period]

(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 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;

[Refund of "Cash Surrender Value"]

(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 per cent every year but not to exceed ninety per cent of the total payments made; Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He is deemed therefore, in the words of the law, to have "paid at least two years of installments." He therefore had a grace period of "one month .. for every year of installment payments made," or two (2) months (corresponding to the two years of installments paid) within which to pay the final installment. He has thus been left only with the right to a refund of the "cash surrender value of the payments on the property equivalent to fifty percent of the total payments made ," or P40,000.00 (i.e., ½ of the total payments of P80,000.00). Such refund will be the operative act to make effective the cancellation of the contract by Gabuya, conformably with the terms of the law.

FIESTAN VS CA

Facts:

Petitioners spouses Dionisio Fiestan and Juanita Arconada were the owners of a parcel of land situated in Ilocos Sur which they mortgaged to the DBP as security for their P22,400.00 loan. For failure of petitioners to pay their mortgage indebtedness, the lot was acquired by the DBP as the highest bidder at a public auction sale after it was extrajudicially foreclosed by the DBP. A certificate of sale was subsequently issued by the Provincial Sheriff on the same day and the same was registered in the Office of the Register of Deeds. Earlier, petitioners executed a Deed of Sale in favor of DBP which was likewise registered. Upon failure of petitioners to redeem the property within the one-year period, petitioners’ TCT lot was cancelled by the Register of Deeds and in lieu thereof, it was issued to the DBP upon presentation of a duly executed affidavit of consolidation of ownership. The DBP sold the lot to Francisco and the same was registered in the Office of the Register of Deeds. Subsequently, the DBP’s title over the lot was cancelled and in lieu thereof, the TCT was issued to Francisco Peria.

Francisco Peria secured a tax declaration for said lot and accordingly paid the taxes due thereon. He thereafter mortgaged to the PNB as security for his loan of P15,000.00 as required by the bank to increase his original loan since petitioners were still in possession of the lot, the Provincial Sheriff ordered them to vacate the premises. On the other hand, petitioners filed on August 23, 1982 a complaint for annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP, PNB, Francisco Peria and the Register of Deeds before the RTC.

ISSUE:WON DBP is prohibited to acquire the property under Art. 1491(2)?Whether or not that the extrajudicial foreclosure sale is null and void by virtue of lack of a valid levy.

HELD:NO. The prohibition does not apply in the instant case where the sale in dispute was made pursuant to a special power inserted in or attached to the real estate under Act No. 3135 as amended. As special statute, Act 3135 prevails over provisions of Civil Code as general statute. Moreover, even in the absence of such provision, the mortgagee may still purchase the subject property to protect his interest.

 It is a familiar rule of statutory construction that, as between a specific statute and general statute, the former must prevail since it evinces the legislative intent more clearly than a general statute does. 7 The Civil Code (R.A. 386) is of general character while Act No. 3135, as amended, is a special enactment and therefore the latter must prevail. 8

Under Act No. 3135, as amended, a mortgagee-creditor is allowed to participate in the bidding and purchase under the same conditions as any other bidder, as in the case at bar, thus:

Section 5. At any sale, the creditor, trustee, or other person authorized to act for the creditor, may participate in the bidding and purchase under the same conditions as any other bidder, unless the contrary has been expressly provided in the mortgage or trust deed under which the sale is made.

In other words, Section 5 of Act No. 3135, as amended, creates and is designed to create an exception to the general rule that a mortgagee or trustee in a mortgage or deed of trust which contains a power of sale on default may not become the purchaser, either directly or through the agency of a third person, at a sale which he himself makes

under the power. Under such an exception, the title of the mortgagee-creditor over the property cannot be impeached or defeated on the ground that the mortgagee cannot be a purchaser at his own sale.

Needless to state, the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. It is an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an essential and inseparable part of that bilateral agreement. 9 Even in the absence of statutory provision, there is authority to hold that a mortgagee may purchase at a sale under his mortgage to protect his own interest or to avoid a loss to himself by a sale to a third person at a price below the mortgage debt. 10 The express mandate of Section 5 of Act No. 3135, as amended, amply protects the interest of the mortgagee in this jurisdiction.

No. The formalities of a levy, as an essential requisite of a valid execution sale under Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court, are not basic requirements before an extrajudicially foreclosed property be sold at public auction. The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale.In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not be identified or set apart by the sheriff from the whole mass of property of the mortgagor for the purpose of satisfying the mortgage indebtedness. For, the essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the payment or fulfillment of the obligation to answer the amount of indebtedness, in case of default of payment. By virtue of the special power inserted or attached to the mortgage contract, the mortgagor has authorized the mortgagee-¬creditor or any other person authorized to act for him to sell said property in accordance with the formalities required under Act No. 3135, as amended.

The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No. 3135, as amended, were substantially complied with in the instant case.

Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific Company

Facts: On March 24, 1953, Atlantic granted Southwestern an option period to buy the formers barge. On May 11 of the same year, Southwestern Company communicated its acceptance of the option to Atlantic. The latter replied that their understanding was that the "offer of option" is to be a cash transaction and to be effected "at the time the lighter is available." On June 25, Atlantic advised the Southwestern Company that the barge could not be turned over to the latter company. On June 27, 1953, the Southwestern Company filed this action to compel Atlantic to sell the barge in line with the option, depositing with the court a check covering the amount, but said check was later withdrawn with the approval of the court. On June 29, the Atlantic withdrew its "offer of option" with due notices to Southwestern Company.

Atlantic Gulf contends that the option granted to SSM to sell to it barge No. 10 for the sum of P30,000 under the terms stated above has no legal effect because it is not supported by any consideration and in support thereof it invokes article 1479 of the new Civil Code. This article provides:

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

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

On the other hand, SSM contends that, even granting that the "offer of option" is not supported by any consideration, that option became binding on Atlantic gulf when the SSM gave notice to its acceptance, and that having accepted it within the period of option, the offer can no longer be withdrawn and in any event such withdrawal is ineffective. In support of this contention, SSM invokes article 1324 of the Civil Code which provides:

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

Issue: Whether or not the option to sell made to Southwestern Company is null and void because said option to sell is not supported by any consideration.

Ruling:

The Supreme Court reversed the trial court’s decision applying Article 1479 of the new Civil Code. The Court reiterated that "an accepted unilateral promise" can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if said option is not supported by any consideration. The option that Atlantic had provided was without consideration, hence, can be withdrawn notwithstanding Southwestern Company’s acceptance of said option.

Atkins Kroll & Co. vs. Cu Hian Tek

Facts:

Petitioner sent a letter to respondent dated September 13, 1951 offering the latter certain goods with their respective prices until September 23. Respondent accepted the offer unconditionally and delivered the letter of acceptance on September 21, 1951. However, petitioner failed to deliver the commodities it had offered due to shortage of catch of sardines. Due to this failure, respondent sued petitioner. Petitioner was ordered by the CFI of Manila to pay damages. On appeal, the Court of Appeals upheld the ruling of the trial court with some modifications.

Petitioner however argued that upon the acceptance of the offer, it became an accepted unilateral promise to sell a determinate thing for price certain. Hence, for petitioner, there was no contract of sale but merely an option to buy which, though timely accepted, was not enforceable for lack of a separate consideration because in accordance with Art. 1479 of the New Civil Code "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. The argument, manifestly assumes that only a unilateral promise arose when the offeree accepted

Issue:

WON there was a contract of sale between the parties or only a unilateral promise to buy upon acceptance.

Held:

The Supreme Court held that there was a contract of sale between the parties. Petitioner’s argument assumed that only a unilateral promise arose when the respondent accepted the offer, which is incorrect because a bilateral contract to sell and to buy was created upon respondent’s acceptance. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. In this case at bar, however, upon respondent’s acceptance of herein petitioner's offer, a bilateral promise to sell and to buy ensued, and the respondent had immediately assumed the obligations of a purchaser.

The word "option" is found neither in the offer nor in the acceptance. On the contrary accepted "the firm offer for the sale" and adds, "the undersigned buyer has immediately filed an application for import license. An option implies the legal obligation to keep open for the time specified. is  unilateralIt is a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to later. In this case, however, upon accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligations of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilalteral contract of sale.Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that .

If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. .It can be taken for granted, as contended by the defendants, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of this acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts—the offer and the acceptance—could at all events have generated a contract, if none there was before (atrs. 1254 and 1262 of the Civil Code).

Sanchez vs Rigos

Facts:

Nicolas Sanchez and Severina Rigos executed an instrument entitled “Option to Purchase” wherein Mrs. Rigos agreed, promised and committed to sell to Mr. Sanchez a parcel of land for the amount of P1,510 within two years from the date of the instrument, with the understanding that the said option shall be deemed terminated and elapsed if Mr. Sanchez shall fail to exercise his right to buy the property within the stipulated period.

Mrs. Rigos agreed and committed to sell and Mr. Sanchez agreed and committed to buy. But there is nothing in the contract to indicate that her agreement, promise and undertaking is supported by a consideration distinct from the price stipulated for the sale of the land.

Mr. Sanchez has made several tenders of payment in the said amount within the period before any withdrawal from the contract has been made by Mrs. Rigos, but were rejected nevertheless.

Issue:

Can an accepted unilateral promise to sell without consideration distinct from the price be withdrawn arbitrarily?

Held:

No. An accepted promise to sell is an offer to sell when accepted becomes a contract of sale.

Rationale:

Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.

This view has the advantage of avoiding a conflict between Articles 1324 – on the general principles on contracts – and 1479 – on sales – of the Civil Code.

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

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

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price.The Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll and Co. case, and that, insofar as inconsistent therewith, the view adhered to in the Southwestern Sugar & Molasses Co. case should be deemed abandoned or modified.

J. Antonio concurring

I fully agree with the abandonment of the view previously adhered to in Southwestern Sugar & Molasses Co. vs. Atlantic Gulf and Pacific Co. (97 Phil 249) which hold that an option to sell can still be withdrawn, even if accepted, if the same is not supported by any consideration, and the reaffirmance of the doctrine in Atkins, Kroll & Co., Inc. v. Cua Hian Tek (102 Phil 948), holding that “an option implies xxx the legal obligation to keep the offer (to sell) open for the time specified;” that it could be withdrawn before acceptance, if there was no consideration for the option, but once the “offer to sell” is accepted, a bilateral promise to sell and to buy ensues, and the offeree ipso facto assumes the obligations of a purchaser. In other words, if the option is given without a consideration, it is a mere offer to sell, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale. The concurrence of both acts – the offer and the acceptance – could in such event generate a contract.

While the law permits the offerror to withdraw the offer at any time before acceptance even before the period has expired, some writers hold the view, that the offeror cannot exercise this right in an arbitrary or capricious manner. This is upon the principle that an offer implies an obligation on the part of the offeror to maintain it for such length of time as to permit the offeree to decide whether to accept or not, and therefore cannot arbitrarily revoke the offer without being liable for damages which the offeree may suffer. A contrary view would remove the stability and security of business transactions.

Spouses Natino vs. IAC

Facts: On 12 October 1970, petitioners executed a real estate mortgage in favor of respondent bank. Petitioners failed to pay the loan on due date. The bank applied for the extrajudicial foreclosure of the mortgage. At the foreclosure sale, the respondent bank was the highest and winning bidder. A certificate of sale was executed in its favor by the sheriff and the same was registered with the Office of the Register of Deeds. The certificate of sale expressly provided that the redemption period shall be two years from the registration thereof.No redemption was made by petitioners within the two-year period and the sheriff issued a Final Deed of Sale.

Issue: WON the petitioners were given an extension of the period of redemption.

Ruling: We find the petition to be devoid of merit. The attempts to redeem the property were done after the expiration of the redemption period and that no extension of that period was granted to petitioners.Even if the President and Manager of the bank is to be understood to have promised to allow the petitioners to buy the property at any time they have the money, the Bank was not bound by the promise not only because it was not approved or ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported by a consideration distinct from the re-purchase price.The second paragraph of Article 1479 of the Civil Code expressly provides:An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price.WHEREFORE, the instant petition is DISMISSED, with costs against the Petitioners.

Serra vs CA

Facts:

Serra is the owner of a 374 square meter parcel of land located at Quezon St., Masbate, Masbate. In 1975, RCBC, in its desire to put up a branch in Masbate, Masbate, negotiated with Serra for the purchase of the then unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION TO BUY was instead forged by the parties. The contract provides that:

- RCBC shall occupy the land for 25 years from June 1, 1975 to June 1, 2000. - RCBC shall have the option to purchase said parcel of land within a period of 10 years from the date of the signing of the contract at a price not greater than P210.00 per square meter. For this purpose, Serra should, within such ten-year period, register said parcel of land under the TORRENS SYSTEM and all expenses appurtenant thereto shall be for his sole account.- If, for any reason, the land is not registered under the TORRENS SYSTEM within the ten-year period, RCBC shall have the right, upon termination of the lease to be paid by Serra the market value of the building and improvements constructed on the land.- RCBC shall pay Serra a monthly rental of P700.00.- RCBC is authorized to construct at its sole expense a building and such other improvements on the land, which it may need in the pursuance of its business and/or operations; but if RCBC shall fail to exercise its option in case the parcel of land is registered under the TORRENS SYSTEM within the ten-year period mentioned therein, said building and/or improvements, shall become the property of Serra after the expiration of the 25-year lease period without right of reimbursement on the part of the RCBC.Pursuant to said contract, a building and other improvements were constructed on the land which housed the

branch office of RCBC in Masbate, Masbate. Within three years from the signing of the contract, Serra complied with his part of the agreement by having the property registered and placed under the TORRENS SYSTEM.

Serra alleges that as soon as he had the property registered, he kept on pursuing the manager of the branch to effect the sale of the lot as per their agreement. It was not until September 4, 1984, however, when the RCBC decided to exercise its option and informed Serra, through a letter, of its intention to buy the property at the agreed price of not greater than P210 per square meter or a total of P78,430. But much to the surprise of RCBC, Serra replied that he is no longer selling the property. A complaint for specific performance and damages was filed by RCBC against Serra. Serra contended that: (1) RCBC took undue advantage on him when it set in lopsided terms on the contract which was prepared & drawn by RCBC,(2) the option was not supported by any consideration distinct from the price and hence not binding upon him, (3) as a condition for the validity and/or efficacy of the option, it should have been exercised within the reasonable time after the registration of the land under the Torrens System and its delayed action on the option has forfeited whatever its claim to the same, and (4) extraordinary inflation supervened resulting in the unusual decrease in the purchasing power of the currency rendering the terms of the contract unenforceable, inequitable and to the undue enrichment of RCBC. He also alleges that the rental of P700 has become unrealistic and unreasonable, that justice and equity will require its adjustment.

Initially, the trial court dismissed the complaint. Although it found the contract to be valid, the court ruled that the option to buy is unenforceable because it lacked a consideration distinct from the price and that RCBC did not exercise its option within reasonable time. But upon motion for reconsideration of RCBC, the court reversed its decision and ordered Serra to transfer the ownership of the property to RCBC. The Court of Appeals affirmed the trial court’s decision and held that: the contract is valid; the option is supported by a distinct and separate consideration as embodied in the agreement; and there is no basis in granting an adjustment in rental.

Issues & Ruling:

(1) Is the contract of lease with option to buy among the parties is valid? Or is the disputed contract a contract of adhesion?

- There is no dispute that the contract is valid and existing between the parties, as found by both the trial court and the appellate court.

A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his "adhesion" thereto. These types of contracts are as binding as ordinary contracts. Because in reality, the party who adheres to the contract is free to reject it entirely. Although, the SC will not hesitate to rule out blind adherence to terms where facts and circumstances will show that it is basically one-sided.

The SC did not find the situation in the present case to be inequitable. Serra is a highly educated man, who, at the time of the trial was already a CPA-Lawyer, and when he entered into the contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties.

(2) Whether there was no consideration to support the option, distinct from the price, hence the option cannot be exercised.

- Jurisprudence has taught us that an optional contract is a privilege existing only in one party — the buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain merchandise or property, at any time within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires.

On the other hand, what may be regarded as a consideration separate from the price is discussed in the case of Vda. de Quirino v. Palarca wherein the facts are almost on all fours with the case at bar. The said case also involved a lease contract with option to buy where we had occasion to say that "the consideration for the lessor's obligation to sell the leased premises to the lessee, should he choose to exercise his option to purchase the same, is the obligation of the lessee to sell to the lessor the building and/or improvements constructed and/or made by the former, if he fails to exercise his option to buy said premises."

In the present case, the consideration is even more onerous on the part of the lessee since it entails transferring of the building and/or improvements on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated.

(3) Whether extraordinary inflation supervened resulting in the unusual decrease in the purchasing power of the currency making the rental of P700 unrealistic and unreasonable, that justice and equity will require its adjustment.

- There is no basis, legal or factual, in adjusting the amount of the rent. The contract is the law between the parties and if there is indeed reason to adjust the rent, the parties could by themselves negotiate for the amendment of the contract. Neither could we consider the decline of the purchasing power of the Philippine peso

from 1983 to the time of the commencement of the present case in 1985, to be so great as to result in an extraordinary inflation. Extraordinary inflation exists when there is an unimaginable increase or decrease of the purchasing power of the Philippine currency, or fluctuation in the value of pesos manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.

Premises considered, the SC finds that the contract of "LEASE WITH OPTION TO BUY" between petitioner and respondent bank is valid, effective and enforceable, the price being certain and that there was consideration distinct from the price to support the option given to the lessee.

WHEREFORE, the petition was DISMISSED, and the decision of the appellate court was AFFIRMED.

Ridad vs Filipinas Investments

 Facts:

Plaintiffs purchased from Supreme Sales and Development Corporation (Supreme) 2 brand new Ford Consul Sedans, for P26,887 payable in 24 monthly installments.

  To secure payment thereof, plaintiffs executed a promissory note covering the purchase priceand a deed of chattel mortgage on the two vehicles purchased and also on another car(Chevrolet) and plaintiff’s franchise or certificate of public convenience granted by the defunctPublic Service Commission for the operation of a taxi fleet.  With the conformity of plaintiffs, the vendor Supreme assigned its rights, title and interest to thepromissory note and chattel mortgage to the defendant Filipinas Investment and FinanceCorporation. Plaintiffs failed to pay their monthly installments. Filipinas foreclosed the chattel mortgageextra-judicially.

During the public auction, of which the plaintiffs were not notified, the 2 Ford Consul cars werebought by defendant Filipinas, who was as the highest bidder. During another public auction,the rest of the properties (including the taxi franchise) subject of the chattel mortgage weresold, and bought by defendant Filipinas also.

Filipinas subsequently sold the taxi franchise to defendant Jose D. Sebastian, who filed with thePublic Service Commission an application for approval of said sale.

Plaintiffs then filed an action for annulment of contract before the CFI, against Filipinas,Sebastian, and Sheriff San Agustin.

CFI ruling: The chattel mortgage was null and void in so far as the taxi franchise and the usedChevrolet car were concerned, and the sale at public auction of the taxicab franchise was to beof no legal effect. The Certificate of Sale issued by the Sheriff of Manila in favor of Filipinasconcerning the taxi franchise was cancelled and set aside. The assignment made by Filipinas infavor of Jose Sebastian was also declared void and of no legal effect.

The CA certified the defendants’ appeal to the SC. Issue:

Is the chattel mortgage and its subsequent sale valid? NO

Ratio:

1)  Article 1484 of the Civil Code is applicable. Under this article, the vendor of personal property the purchase price of which is payable in installments, has the right, should the vendee default inthe payment of two or more of the agreed installments, to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personalproperty, if one was constituted. The vendor can only choose one option.

2) If the vendor avails himself of the right to foreclose the mortgage, the law prohibits him fromfurther bringing an action against the vendee for the purpose of recovering whatever balance of the debt secured is not satisfied by the foreclosure sale.

3) Purpose of the law is to prevent mortgagees from seizing the mortgaged property, buying it atforeclosure sale for a low price and the bringing suit against the mortgagor for a deficiency judgment.a.  Without the law, the mortgagor-buyer would find himself without the property and stillowing practically the full amount of his original debt.4) In this case, defendant Filipinas chose to foreclose the mortgage upon default of plaintiffs, andbought the vehicles at the public auction as the highest bidder. Filipinas is deemed to have renounced any and all rights which it might otherwise haveunder the promissory note and the chattel mortgage as well as the payment of the unpaidbalance.5)  The lower court rightly declared the nullity of the chattel mortgage in so far as the taxi franchiseand the Chevrolet were concerned, under the authority of the ruling in the case of Levy Hermanos, Inc. v Pacific Commercial Co., et al.

 6)  The vendor’s right to foreclose is limited only on the thing sold. 7) The vendor of personal property sold on installment is precluded, after foreclosing the chattelmortgage on the thing sold, from having a recourse against the additional security put up by a third party to guarantee the purchaser’s performance of his obligation. ( Cruz v Filipinos Investment & Finance Corporation  )

a.Otherwise, if the vendee could still be compelled to pay the balance of the purchase price,the vendee will be made to bear the payment of the balance despite the earlier foreclosure. 

Judgment appealed from is affirmed.

Equitable Realty Development Inc vs Mayfair Theater Inc

FACTS:

-Petitioners are Carmelo & Bauermann, Inc (owner/seller/lessor) Equatorial Realty Development, Inc(buyer)-Respondent is Mayfair Theater, Inc (lessee)

-Carmelo owned a parcel of land with two 2-storey buildings (covered by 4 land titles) at Recto-In 1967, 2 portions of the property (covered by 2 titles) was leased to Mayfair for 20 years-In 1978, Carmelo sold the entire Recto property to Equatorial for P11,300,000-Mayfair petitioned for annulment of the sale on the ground that it was violative of Paragraph 8 of the Contract of lease between respondent and Carmelo, which reads:“That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusiveoption to purchase the same.” -The Trial court ruled in favor of herein petitioners on the ground that Paragraph 8 was interpreted as an option contract-Mayfair appealed and the CA reversed the decision of the Trial court saying that Paragraph 8 should beinterpreted as a “right of first refusal” and not an option contract ISSUES:1. Whether Paragraph 8 constitutes an option contract clause or a right of first refusal2. WON sale of property to Equatorial is valid

HELD:SC ruled in favor of Mayfair ordering recission of the deed of sale and granting him right of first refusal to buy theproperty at P11,300,000.

 The issues were held as follows:

1. RIGHT OF FIRST REFUSAL. The SC agreed with the CA’s ruling that Paragraph 8 cannot constitute an option clause (covered in Article 1324 & 1479 of the Civil Code) for the lack of definite purchasing price in the agreement. Furthermore, the SC ruled that the stipulation in question was created to manifest a reciprocal obligation to guard the interest of Mayfair in case of sale of the property:

(1) to give him theoption to purchase the property or (2) to ensure that purchaser of the property shall recognize the lease agreement earlier made. As such, Paragraph 8 is considered a “right of first refusal”.

 2. NO. Both Carmelo and Equatorial acted in bad faith for entering into Contract of Sale knowing that Paragraph 8 (right of first refusal) was agreed upon in the Contract of Lease and that Mayfair (another party) was interested in the property in question

OR

While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold,

such constructive or symbolic delivery is merely presumptive. It is nullified by the failure of the vendee to take

actual possession of the land sold.

FACTS:

Carmelo & Bauermann, Inc. owned a land, together with two 2-storey buildings at Claro M. Recto Avenue, Manila,

and covered by TCT No. 18529.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. fpr 20 years. The lease

covered a portion of the second floor and mezzanine of a two-storey building with about 1,610 square meters of

floor area, which respondent used as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Lease with Carmelo for another portion of the

latter’s property this time, a part of the second floor of the two-storey building, and two store spaces on the ground

floor. In that space, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was

likewise for a period of 20 years.

Both leases contained a clause giving Mayfair a right of first refusal to purchase the subject properties. Sadly, on

July 30, 1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to Equatorial Realty

Development, Inc. for eleven million smackers, without their first being offered to Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional Trial

Court of Manila for the recission of the Deed of Absolute Sale between Carmelo and Equatorial, specific

performance, and damages. RTC decided for Carmelo and Equatorial. Tsk tsk.

CA reversed and ruled for Mayfair. The SC denied a petition questioning the CA decision. What happened is that

the contract did get rescinded, Equatorial got its money back and asserted that Mayfair have the right to purchase the

lots for 11 million bucks.

Decision became final and executory, so Mayfair deposited with the clerk the 11M (less 847grand withholding)

payment for the properties (Carmelo somehow disappeared).

Meanwhile, on Sept 18, 1997, barely five months after Mayfair submitted its Motion for Execution, Equatorial

demanded from Mayfair backrentals and reasonable compensation for the Mayfair’s continued use of the subject

premises after its lease contracts expired. Remember that Mayfair was still occupying the premises during all this

hullabaloo.

ISSUE:

Whether or not Equatorial was the owner of the subject property and could thus enjoy the fruits and rentals.

HELD:NO.

Nor right of ownership was transferred from Carmelo to Equatorial since there was failure to deliver the property to

the buyer. Compound this with the fact that the sale was even rescinded.

The court went on to assert that rent is a civil fruit that belonged to the owner of the property producing it by right of

accession. Hence, the rentals that fell due from the time of the perfection of the sale to petitioner until its rescission

by final judgment should belong to the owner of the property during that period.

We remember from SALES that in a contract of sale, “one of the contracting parties obligates himself to transfer

ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its

equivalent.”

Ownership of the thing sold is a real right, which the buyer acquires only upon delivery of the thing to him “in any

of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is

transferred from the vendor to the vendee.” This right is transferred, not by contract alone, but by tradition or

delivery. There is delivery if and when the thing sold “is placed in the control and possession of the vendee.”

While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold,

such constructive or symbolic delivery is merely presumptive. It is nullified by the failure of the vendee to take

actual possession of the land sold.

For property to be delivered, we need two things. Delivery of property or title, and transfer of control or custody to

the buyer.

Possession was never acquired by the petitioner. It therefore had no rights to rent.

EDCA PUBLISHING V. SANTOS

Possession of movable property acquired in GF is equivalent to title. There is no need to produce a receipt.

FACTS:

EDCA Publishing sold 406 books to a certain Professor Jose Cruz who ordered these by telephone, which was

agreed to be payable on delivery. The books were subsequently delivered to him with the corresponding invoice, and

he paid with a personal check.

Cruz then sold the 120 of the books to Leonor Santos who asked for verification, and was then showed the invoice

for the books.

EDCA became suspicious when Cruz ordered another set of books even before his check cleared. Upon

investigation, EDCA found that he wasn’t the person he claimed to be (Dean in DLSU). EDCA had the police

capture Cruz, as well as seize the books from Santos. Santos demanded the return of the books.

RTC granted the writ of preliminary attachment.

Subsequent dishonor of a check, which did not render the contract of sale void does not amount to unlawful

deprivation of property. (There was a perfected contract of sale so the proper remedy is specific performance)

ISSUE:

Whether or not the owner was unlawfully deprived of the property?

HELD: No.

Santos was a good faith buyer after taking steps to verify the identity of the seller. When she was showed the

invoice, she reasonably believed that he was a legitimate seller.

With regard to unlawful deprivation, EDCA was not unlawfully deprived of the property by mere failure of

consideration. There was already a perfected contract of sale. Proof was even substantiated when EDCA gave the

invoice as proof of payment upon delivery of the books. This did not amount to unlawful taking, because by the

delivery of EDCA to Cruz, ownership of the books already transferred to him.

Dizon vs Suntay

FACTS:

Respondent Lourdes G. Suntay and one Clarita R. Sison entered into a transaction wherein the Suntay’s three-carat diamond ring, valued atP5,500.00, was delivered to Sison for sale on commission. Upon receiving the ring, Sison executed and delivered to the receipt to Suntay. After the lapse of a considerable time without Clarita R. Sison having returned to the ring to her, Suntay made demands on Clarita R. Sison for the return of said jewelry. Clarita R. Sison, however, could not comply with Suntay’s demands because on June 15, 1962, Melia Sison, niece of the husband of Clarita R. Sison, evidently in connivance with the latter, pledged the ring with the petitioner Dominador Dizon's pawnshop for P2,600.00 without Suntay’s knowledge. When Suntay found out that Clarita R. Sison pledgedthe ring, she filed a case of estafa against the latter with the fiscal's office. Subsequently, Suntay wrote a letter to Dizon on September 22, 1962 asking for the return of her ring which was pledged with the latter’s pawnshop under its Pawnshop Receipt serial B No. 65606, dated June 15,1962.Dizon refused to return the ring, so Suntay filed an action for its recoverywith the CFI of Manila, which declared that she had the right to itspossession. The Court of Appeals likewise affirmed said decision.

ISSUE:Who has the right title over the subject property?

COURT RULING:The Supreme Court affirmed the decision of the lower courts. The controlling provision is Article 559 of the Civil Code which provides that “[T]he possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession ofthe same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.” The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the owner cannot obtain its  return without, reimbursing the price. Hanging on to said exception as his basis, Dizon insisted that the principle of estoppel should apply in this case but the Supreme Court ruled otherwise. In the present case not only has the ownership and the origin of the jewels misappropriated been unquestionably proven but also that Clarita R.Sison, acting fraudulently and in bad faith, disposed of them and pledged them contrary to agreement with no right of ownership, and to the prejudice of Suntay, who was illegally deprived of said jewels and who, as the owner, has an absolute right to recover the jewels from the possessionof whosoever holds them, which in this case is Dizon’s pawnshop. Dizon ought to have been on his guard before accepting the pledge in question, but evidently there was no such precaution availed of and he has no one to blame but himself. While the activity he is engaged in is no doubt legal, it is not to be lost sight of that it thrives on taking advantage of the necessities precisely of that element of our population whose lives are blighted by extreme poverty. From whatever angle the question is viewed then, estoppel certainly cannot be justly invoked.