III.

PRICE

Certainty as to price
Toyota Shaw, Inc. v. CA G.R. No. L-116650
By Vladimir Linawan
Facts:
Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace upon contacting
Toyota Shaw, Inc., he was told that there was an available unit. Sosa and his son, Gilbert, went
to the Toyota office at Shaw Boulevard,.There they met Popong Bernardo, a sales
representative of Toyota.
Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on June 17
Bernardo then signed "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw,
Inc."
It was also agreed by the parties that the balance of the purchase price would be paid by credit
financing through B.A. Finance, and for this Gilbert, on behalf of his father, signed the
documents of Toyota and B.A. Finance pertaining to the application for financing.
On June 15, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00. They
met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. 928., the
Sales Supervisor of Bernardo, checked and approved the VSP.
On June 17 however the vehicle was not delivered to since, according to Bernardo nasulot ang
unit ng ibang malakas although according to Toyota a particular unit was already reserved and
earmarked but could not be released by reason of disapproval of the financing and uncertainty
of the payment of the price. Sosa then asked for refund of the down payment which Toyota did
by issuing checks in his favor, the receipt of which was shown by a check voucher of Toyota,
which Sosa signed with the reservation, "without prejudice to our future claims for damages."
Sosa subsequently sent two letters to Toyota in the first demanding the down payment plus
interest and in the second for damages. Toyota refused to accede. Hence petitioner filed a case
before the RTC. In its answer to the complaint, Toyota alleged that no sale was entered into
between it and Sosa, that Bernardo had no authority to sign As special and affirmative
defenses, it alleged that: the VSP did not state date of delivery; Sosa had not completed the
documents required by the financing company, and as a matter of policy, the vehicle could not
and would not be released prior to full compliance with financing requirements, The Trial Court
declared that the agreement between Sosa and Bernardo was a valid perfected contract of
Sale. On Appeal the C.A. affirmed the decision of the Trial Court in toto.
Issue:
Whether or not the document, executed and signed by the petitioner's sales representative, is a
perfected contract of sale?
Ruling:

NO, it is not a contract of sale No obligation on the part of Toyota to transfer ownership of a
determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a
price certain appears therein.
The provision on the down payment of P100,000.00 made no specific reference to a sale
of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on
installment basis, as the VSP executed the following day confirmed. But nothing was
mentioned about the full purchase price and the manner the installments were to be paid.
This Court had already ruled that a definite agreement on the manner of payment of the
price is an essential element in the formation of a binding and enforceable contract of
sale. This is so because the agreement as to the manner of payment goes into the price such
that a disagreement on the manner of payment is tantamount to a failure to agree on the price.
Definiteness as to the price is an essential element of a binding agreement to sell
personal property.

Sps. Edrada v. Sps. Ramos GR. No. 154413

By Dane Malate
Facts:
Respondent spouses Eduardo and Carmencita Ramos (respondents) are the owners of two (2)
fishing vessels, the "Lady Lalaine" and the "Lady Theresa." On 1 April 1996, respondents and
petitioners executed an untitled handwritten document which lies at the center of the present
controversy. Its full text is reproduced below:
1st April 1996
This is to acknowledge that Fishing Vessels Lady Lalaine and Lady Theresa owned by
Eduardo O. Ramos are now in my possession and received in good running and serviceable
order. As such, the vessels are now my responsibility.
Documents pertaining to the sale and agreement of payments between me and the owner of the
vessel to follow. The agreed price for the vessel is Nine Hundred Thousand Only (P900,000.00).
Upon the signing of the document, petitioners delivered to respondents four (4) postdated Far
East Bank and Trust Company (FEBTC) checks payable to cash drawn by petitioner Rosella
Edrada, in various amounts totaling One Hundred Forty Thousand Pesos (P140,000.00). The
first three (3) checks were honored upon presentment to the drawee bank while the fourth check
for One Hundred Thousand Pesos (P100,000.00) was dishonored because of a "stop payment"
order.
On 3 June 1996, respondents filed an action against petitioners for specific performance with
damages before the RTC. Petitioners averred that the document sued upon merely embodies
an agreement brought about by the loans they extended to respondents. According to
petitioners, respondents allowed them to manage or administer the fishing vessels as a
business on the understanding that should they find the business profitable, the vessels would
be sold to them for Nine Hundred Thousand Pesos (P900,000.00). But petitioners "decided to

call it quits" after spending a hefty sum for the repair and maintenance of the vessels which
were already in dilapidated condition.
Issue:
Whether or not the document is a perfected contract of sale
Ruling: NO
We disagree with the RTC and the Court of Appeals that the document is a perfected contract of
sale.
The agreement may confirm the receipt by respondents of the two vessels and their purchase
price. However, there is no equivocal agreement to transfer ownership of the vessel, but a mere
commitment that "documents pertaining to the sale and agreement of payments[are] to
follow." Evidently, the document or documents which would formalize the transfer of ownership
and contain the terms of payment of the purchase price, or the period when such would become
due and demandable, have yet to be executed. But no such document was executed and no
such terms were stipulated upon.
The fact that there is a stated total purchase price should not lead to the conclusion that a
contract of sale had been perfected. We held that before a valid and binding contract of sale can
exist, the manner of payment of the purchase price must first be established, as such stands as
essential to the validity of the sale.
After all, such agreement on the terms of payment is integral to the element of a price certain,
such that a disagreement on the manner of payment is tantamount to a failure to agree on the
price.

Effect of Gross Inadequacy

Hulst v. P.R. Builders
By Dane Malate
Facts:
Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch
nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of
a 210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel,
Batangas.
When respondent failed to comply with its verbal promise to complete the project by June 1995,
the spouses Hulst filed before the Housing and Land Use Regulatory Board a complaint for
rescission of contract with interest, damages and attorney's fees. HLURB ruled in favor
petitioner.
On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of
Execution the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer
Certificates of Title

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent
Motion to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy
since the aggregate appraised value of the levied properties at P6,500.00 per sq m is
P83,616,000.00, based on the Appraisal Report of Henry Hunter Bayne Co., Inc. dated
December 11, 1996, which is over and above the judgment award. At 10:15 a.m. of the
scheduled auction date of April 28, 2000, respondent's counsel objected to the conduct of the
public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy was
pending resolution.
Absent any restraining order from the HLURB, the Sheriff proceeded to sell the 15 parcels of
land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels of land for
the total amount of P5,450,653.33. the same day, while the Sheriff was at the HLURB office to
remit the legal fees relative to the auction sale and to submit the Certificates of Sale for the
signature of HLURB Director Belen G. Ceniza (HLURB Director), he received the Order dated
April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings on the matter. Four
months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order
setting aside the sheriff's levy on respondent's real properties reasoning that the difference
between the amounts is shocking to the conscience
Issue:
Whether or not gross inadequacy of the price affects the validity of an execution sale?
Ruling: NO
Gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of
equity, a transaction may be invalidated on the ground of inadequacy of price, or when such
inadequacy shocks one's conscience as to justify the courts to interfere; such does not follow
when the law gives the owner the right to redeem as when a sale is made at public auction,
upon the theory that the lesser the price, the easier it is for the owner to effect redemption.
When there is a right to redeem, inadequacy of price should not be material because the
judgment debtor may re-acquire the property or else sell his right to redeem and thus recover
any loss he claims to have suffered by reason of the price obtained at the execution sale.
In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised
Rules of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to satisfy
the judgment and the lawful fees." Each of the 15 levied properties was successively bidded
upon and sold, one after the other until the judgment debt and the lawful fees were fully
satisfied.
The Rules of Court do not require that the value of the property levied be exactly the same as
the judgment debt; it can be less or more than the amount of debt. This is the contingency
addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the Sheriff does
not determine the exact valuation of the levied property.
In determining what amount of property is sufficient out of which to secure satisfaction of the
execution, the Sheriff is left to his own judgment.

IV. PERFECTION OF CONTRACT OF SALE

Lloyds Enterprises & Credit Corp V. Dolleton 555 SCRA 143
Facts: Respondents, spouses Dolleton, were the registered owners of a parcel of land covered
by TCT No. 153554. On the property is a four-door apartment building being leased by
respondents to various tenants. On 9 August 1990, respondents mortgaged the property to
Santos to secure a loan in the amount of P100,000.00. Upon payment of the loan, Santos
executed a release and cancellation of the mortgage. The same was annotated on the TCT.
On 15 September 1994, TCT No. 153554 in the name of respondents was cancelled and a new
TCT No. 197220 was issued in the name of Gagan on the basis of a Deed of Absolute Sale
dated 5 August 1994 whereby respondents purportedly sold to Gagan the subject property
for the sum of P120,000.00.
On 19 September 1994, petitioner Lloyds Enterprises and Credit Corporation lent to Gagan and
her live-in partner, Guevarra the sum of P391,512.00 and was secured by a real estate
mortgage on the subject property, which was duly annotated on TCT No. 197220. After payment
of the loan, petitioner executed a Cancellation of Mortgage. On even date, petitioner granted
another loan to Gagan and Guevarra for a bigger sum of P542,928.00 and a new real estate
mortgage was constituted over the property. This undated mortgage deed appears to have been
notarized in 1995. The second real estate mortgage was likewise annotated on the TCT.
However, Gagan and Guevarra failed to pay the second loan upon its maturity. Thus, petitioner
instituted extrajudicial foreclosure proceedings on the subject property. At the auction sale,
petitioners bid of P645,000.00 was declared the highest. The property was not redeemed within
the one-year period, hence, ownership was consolidated in favor of petitioner. TCT No. 210363
was issued in the name of petitioner.
Respondents filed a complaint, praying among others for the nullification of the Deed of
Absolute Sale, the two real estate mortgage contracts and the extrajudicial foreclosure
proceedings; the cancellation of TCT Nos. 197220 and 210363; and the restoration of TCT No.
153554 in the name of respondents.
Respondents denied having executed the Deed of Absolute Sale and alleged that they had
merely offered to sell to defendant Gagan the subject property for P900,000.00 on installment
basis so that they could pay their loan obligation to Santos. They averred that after defendant
Gagan had initially paid P200,000.00, they entrusted the owners copy of TCT No. 153554 to
defendant Gagan who however undertoon to effect the cancellation of the mortgage in favor of
Santos and to prepare the contract of sale on installment basis. Respondents further alleged
that except for the additional amount of P185,000.00, defendant Gagan was unable to pay the
balance of the purchase price. They also accused Gagan of having caused the fraudulent
cancellation of TCT No. 153554 and the issuance of TCT No. 197220 in her name, and of
eventually using TCT No. 197220 to secure the loans obtained from petitioner.
Issue: Whether or not petitioners as mortgagee-purchaser in good faith took the necessary step
which an ordinary and prudent man would have taken before buying the property in question
Ruling: The SC affirmed the ruling of the CA and held the petitioners negligent for failing to
verify the actual condition of the property, particularly as to who is in actual possession and if
the premises are leased to third persons and who is receiving the rental payments.

The circumstance that the certificate of title covering the property offered as security was newly
issued should have put petitioner on guard and prompted it to conduct an investigation
surrounding the transfer of the property to defendant Gagan. Had it inquired further, petitioner
would have discovered that the property was sold for an unconscionably low consideration of
only P120,000.00 when it could have fetched as high as P900,000.00. A purchaser cannot close
his eyes to facts which should put a reasonable man on his guard and claim that he acted in
good faith under the belief that there was no defect in the title of the vendor. His mere refusal to
believe that such defect exists or the willful closing of his eyes to the possibility of the existence
of a defect in his vendor's title, will not make him an innocent purchaser for value if it afterwards
develops that the title was in fact defective, and it appears that he had such notice of the defect
as would have led to its discovery had he acted with that measure of precaution which may
reasonably be required of a prudent man in a like situation.
Petitioner is engaged in the business of extending credit to the public and is, thus,
expected to exercise due diligence in dealing with properties offered as security. When
the purchaser or mortgagee is a financing institution, the general rule that a purchaser or
mortgagee of land is not required to look further than what appears on the face of the title does
not apply. Petitioner must bear the loss of the property because of its failure to ascertain
the true ownership of the subject property, notwithstanding the fact that it is engaged in
the business of offering real estate loans to the public and is, therefore, required to
exercise a higher degree of diligence in investigating the status and condition of the
properties offered as securities.

Heirs of Mascunana v. CA 461 SCRA 186

Facts:
Masunana bought a parcel of land from the Wuthrich siblings. Part of which Mascunana,
he later sold to Sumilhig. The contract price is 4,690 with 3,690 as down payment. Their
agreement says, That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid
by the VENDEE unto the VENDOR as soon as the above-portions of Lot 124 shall have
been surveyed in the name of the VENDEE and all papers pertinent and necessary to the
issuance of a separate Certificate of Title in the name of the VENDEE shall have been
prepared. Sumilhig later sold the same lot to Layumas. Years after, Layumas wrote to the
heirs of Mascunana offering to pay the 1,000 balance of the purchase price of the
property. The addressee, however, refused to receive the mail matter. Heirs Mascunana
then filed a complaint for recovery of possession against Barte.
Issue:
Whether or not the contract of alienation of the subject lot in favor of Sumilhig was a
contract to sell or a contract of sale.
Held:
It is a contract of sale. Article 1458 of the New Civil Code provides: By the contract of
sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent. A contract of sale may be absolute or conditional. Thus, there are three
essential elements of sale,. consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price, determinate subject matter; and Price certain in

money or its equivalent. In this case, there was a meeting of the minds between the
vendor and the vendee, when the vendor undertook to deliver and transfer ownership over
the property covered by the deed of absolute sale to the vendee for the price of P4,690.00
of which P3,690.00 was paid by the vendee to the vendor as down payment. The vendor
undertook to have the property sold, surveyed and segregated and a separate title therefor
issued in the name of the vendee, upon which the latter would be obliged to pay the
balance of P1,000.00. There was no stipulation in the deed that the title to the property
remained with the vendor, or that the right to unilaterally resolve the contract upon the
buyers failure to pay within a fixed period was given to such vendor. Patently, the
contract executed by the parties is a deed of sale and not a contract to sell.
:

Option Contract -option contract vs. contract of sale

Sanchez v. Rigos G.R. no. L-25494
Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court ofAppeals
FACTS
- April 3, 1961 Sanchez and Rigos executed an instrument called Option toPurchase
- - Rigos committed to sell to Sanchez a parcel of land in Nueva Ecija for the sum
ofP1,510.00
- .- Within two years from the said date, if Sanchez shall not exercise his right to buythe
property, the option shall be terminated
- - Within the said period, Sanchez made several attempts to pay P1,510.00 to Rigosbut
Rigos rejected these payments- March 12, 1963
Sanchez deposited the amount in the Court of First Instance inNueva Ecija- Feb. 28,
1964
- Rigos ordered by the lower court to accept the payments of Sanchez and to execute in
Sanchezs favor the deed of conveyance for theproperty. Petitioners Claim
- - By virtue of the document executed, Rigos had agreed and committed to sell
theproperty and he, in turn, agreed and committed to buy
- .- Thus the promise contained in the contract is reciprocally demandable. Respondents
Comments
- - The contract is a unilateral promise to sell.- The contract was unsupported by any
valuable consideration and is thus null andvoid when viewed in the light of the Civil
Code.
ISSUE
- WON a promise to buy and sell existed between the parties involved
HELD
- YES
Ratio
- An accepted unilateral promise' can only have a binding effect if supportedby a
consideration, which means that the option can still be withdrawn, even ifaccepted, if the
same is not supported by any consideration.Since there may be novalid contract without

a cause or consideration, the promisor is not bound by hispromise and may, accordingly,
withdraw it. Pending notice of its withdrawal, hisaccepted promise partakes, however, of
the nature of an offer to sell which, ifaccepted, results in a perfected contract of sale.
Reasoning
- The case is dependent on A1479 of the Civil Code which states that: An
acceptedunilateral promise to buy or to sell a determinate thing for a price certain is
bindingupon the promisor if the promise is supported by a consideration distinct from
theprice.
- - The document drawn between Rigos and Sanchez does not require Sanchez to
purchase the property. It is not a contract to buy and sell.
- - Rigos committed to sell the property to Sanchez but the document does not state that
the promise or undertaking is supported by consideration distinct from theprice
stipulated.
- - The lower court relied on A1354.The Supreme Court however makes the following
notes with regard to the use of that provision vis--vis A1479

Right of First Refusal

Guzman Bocaling & Co. v. Bonnevie G.R. 86150
Facts:
Africa Valdez de Reynoso leased a parcel of land with two buildings constructedthereon to
Raoul S. Bonnevie and Christopher Bonnevie, for a period of one yearbeginning August 8,
1976, at a monthly rental of P4,000.00, with an agreement thatshould Africa decide to sell the
property, the respondent lessee shall be givent thefirst priority to purchase the same. Then on
November 1976, Africa sent a letter to the respondents that she was sellingthe property for the
amount of P600,000 less a mortgage loan of P100,000, givingthem 30 days to exercise their
right of first priority. Failure to exercise the saidright, respondents should vacate the property not
later than March 1977. Then on January 1977, Africa informed that the property have been
sold to the petitioner,because respondents failed to exercise their right to do such.Respondent s
on the other hand informed Africa that they have not received theirletter and refused to vacate
the property. And on April of the same year, Africademanded that they vacate the property
for failure to pay rent for four months,which they refused. Hence a complaint for ejectment was
filed against them. Duringthe pendency of the ejectment case, respondent filed an action for
annulment of thesale between Africa and the herein petitioner and for the cancellation of the
transfercertificate of title in the name of the latter. Asking also that Africa be required to sellthe
property to them under the same terms and conditions agreed upon in theContract of Sale in
favor of the petitioner. Then on May 1980, the City Court ruled that the respondent to vacate the
premises,and deliver possession of the property to the petitioner as well as pay the rent dueto
them. Upon appeal to the Court of First Instance of Manila, affirmed the saidejection case with
modification and granted respondents petition to cancel the Deedof Sale executed between
Africa and the petitioner and ordered her to sell theproperty to respondent, and for petitioner
and Africa to pay respondent fordamages. CA affirmed the said decision but with modification on
the amount of damages. Hence the petition.
Issue:
WON the respondent court erred in ruling that the grant of first priority to purchase the subject
properties by the judicial administratrix needed no authority from theprobate court;

WON the Contract of Sale executed between the parties was not voidable but rescissible;
WON petitioner is a buyer in bad faith.
Ruling:
On the first issue, Africa failed to show that the letter sent by registered mail wasreceived by the
respondents, only a photocopy of the letter without any receivingsignature coming from the
latter. Furthermore, even if the latter received the letterand did not exercise their right of first
priority, Africa would still be guilty of violatingParagraph 20 of the Contract of Lease which
specifically stated that the privaterespondents could exercise the right of first priority, "all things
and conditions beingequal." Since Africa had offered a lesser amount to the petitioner and
moreadvantageous offer than that was offered to the respondent. Also, respondent courtis
correct that it was not necessary to secure the approval by the probate court of the Contract of
Lease because it did not involve an alienation of real property of theestate nor did the term of
the lease exceed one year so as top make it fall underArticle 1878(8) of the Civil Code.In the
second issue, private respondents have the right to rescind the contract of sale because Africa
had failed to comply with her duty to give them first opportunityto purchase the subject
property. The petitioner argues that assuming the Contract of Sale to be voidable, only
theparties thereto could bring an action to annul it pursuant to Article 1397 of the CivilCode. It is
stressed that private respondents are strangers to the agreement andtherefore have no
personality to seek its annulment. The respondent court correctly held that the Contract of Sale
was not voidable butrescissible. Under Article 1380 to 1381 (3) of the Civil Code, a contract
otherwisevalid may nonetheless be subsequently rescinded by reason of injury to thirdpersons,
like creditors. The status of creditors could be validly accorded theBonnevies for they had
substantial interests that were prejudiced by the sale of thesubject property to the petitioner
without recognizing their right of first priorityunder the Contract of Lease.Rescission is a remedy
granted by law to the contracting parties and evento third persons, to secure reparation for
damages caused to them by a contract,even if this should be valid, by means of the restoration
of things to their conditionat the moment prior to the celebration of said contract. It is a relief
allowed for theprotection of one of the contracting parties and even third persons from all
injuryand damage the contract may cause, or to protect some incompatible and preferentright
created by the contract. Recission implies a contract which, even if initiallyvalid, produces a
lesion or pecuniary damage to someone that justifies itsinvalidation for reasons of equity.It is
true that the acquisition by a third person of the property subject of the
contract is an obstacle to the action for its rescission where it is shown that suchthird person is
in lawful possession of the subject of the contract and that he did notact in bad faith. However,
this rule is not applicable in the case before us becausethe petitioner is not considered a third
party in relation to the Contract of Sale normay its possession of the subject property be
regarded as acquired lawfully and ingood faith. Petitioner was aware f the lease in favor of
the Bonnevies, who wereactually occupying the subject property at the time it was sold to
it. Although theContract of Lease was not annotated on the transfer certificate of title in
the nameof the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny
actualknowledge of such lease which was equivalent to and indeed more binding thanpresumed
notice by registration.A purchaser in good faith and for value is one who buys the property of
anotherwithout notice that some other person has a right to or interest in such property andpays
a full and fair price for the same at the time of such purchase or before he hasnotice of the claim
or interest of some other person in the property. Good faithconnotes an honest intention
to abstain from taking unconscientious advantage of another. Tested by these principles, the
petitioner cannot tenably claim to be abuyer in good faith as it had notice of the lease of the
property by the Bonneviesand such knowledge should have cautioned it to look deeper into the

agreement todetermine if it involved stipulations that would prejudice its

own interests.Petitioners insistence that it was not aware of the right of first priority granted
bythe Contract of Lease, If Guzman-Bocaling failed to inquire about the terms of theLease
Contract, which includes Par. 20 on priority right given to the Bonnevies, ithad only itself to
blame. Having known that the property it was buying was underlease, it behooved it as a
prudent person to have required Reynoso or the broker toshow to it the Contract of Lease in
which Par. 20 is contained

Riviera Filipina Inc. v. CA et al G.R. 117355

Facts:
Respondent Reyes executed a ten year renewable Contract of Lease with Riviera involving a
1,018 square meter parcel of land which was a subject of a Real Estate Mortgage executed by
Reyes in favor of Prudential Bank. But the loan with Prudential Bank remained unpaid upon
maturity so the bank foreclosed the mortgage thereon and emerged as the highest bidder at the
public auction sale. Reyes decided to sell the property offered it to Reviera. After seven months,
Riviera offered to buy the property but Reyes denied it and increased the price of the property.
Reyes counsel informed Riviera that he is selling the property for P6,000 per square meter and
to confirm their conversation, Riviera sent a letter stating his interest in buying the property for
the fixed and final price of P5,000 per square meters but Reyes did not accede to said price.
Then Reyes confided to Traballo and the latter expressed interest in buying the said property for
P5,300 per square meter but he did not have enough amount so he looked for a partner.
Despite of the impending expiration of the redemption period of the foreclosed mortgaged
property and the deal between Reyes and Traballo was not yet formally concluded, Reyes
decided to approach Riviera and requested Atty. Alinea to approach Angeles and find out if the
latter was still interested in buying the subject property and ask him to raise his offer for the
purchase of the said property a little higher but Riviera said that his offer is P5,000 per square
meter so Reyes did not agree.
Cypress and Trading Corporation, were able to come up with the amount sufficient to cover the
redemption money, with which Reyes paid to the Prudential Bank to redeem the subject
property and Reyes executed a Deed of Absolute Sale covering the subject property. Cypress
and Cornhill mortgaged the subject property to Urban Development Bank. Riviera sought from
Reyes, Cypress and Cornhill a resale of the subject property to it claiming that its right of first
refusal under the lease contract was violated but his attempts were unsuccessful. Riviera filed
the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to transfer the
disputed title to the land in favor of Riviera upon its payment of the price paid by Cypress and
Cornhill.
Issue:
Whether or not petitioner can still exercise his right of first refusal.

Held:
No. The held that in order to have full compliance with the contractual right granting petitioner
the first option to purchase, the sale of the properties for the price for which they were finally
sold to a third person should have likewise been first offered to the former. Further, there should
be identity of terms and conditions to be offered to the buyer holding a right of first refusal if
such right is not to be rendered illusory. Lastly, the basis of the right of first refusal must be the
current offer to sell of the seller or offer to purchase of any prospective buyer. Thus, the
prevailing doctrine is that a right of first refusal means identity of terms and conditions to be
offered to the lessee and all other prospective buyers and a contract of sale entered into in
violation of a right of first refusal of another person, while valid, is rescissible.

Paranaque Kings Enterprises Inc. v. CA G.R. 111538

Facts:

PR Catalina L. Santos is the owner of 8 parcels of land located at Paraaque, Metro

Manila.

November 28, 1977: a certain Frederick Chua leased the subject property from
defendant Catalina L. Santos, the said lease was registered in the Register of Deeds.

February 12, 1979: Frederick Chua assigned all his rights and interest and participation
in the leased property to Lee Ching Bing, by virtue of a deed of assignment and with the
conformity of defendant Santos, the said assignment was also registered.

August 6, 1979: Lee Ching Bing also assigned all his rights and interest in the leased
property to Paraaque Kings Enterprises, Incorporated by virtue of a deed of assignment and
with the conformity of defendant Santos. Their contract provided that:

"9. That in case the properties subject of the lease agreement are sold or encumbered,
Lessors shall impose as a condition that the buyer or mortgagee thereof shall recognize and be
bound by all the terms and conditions of this lease agreement and shall respect this Contract of
Lease as if they are the LESSORS thereof and in case of sale, LESSEE shall have the first
option or priority to buy the properties subject of the lease;"

September 21, 1988: Catalina Santos sold the eight parcels of land subject of the lease
to defendant David Raymundo for a consideration of P5,000,000.

Upon learning of this fact, the representative of Paranaque King wrote a letter to
defendant Santos, requesting her to rectify the error and consequently realizing the error, she
had it reconveyed to her for the same consideration of P5M.

Only 2 days after Catalina Santos sold her properties did she reply to Paranaque Kings
letter saying period has lapsed.

July 6, 1989: counsel for defendant Santos informed the petitioners Paranaque Kings
that the new owner is RAYMUNDO.

From the preceding facts, it is clear that the sale was simulated and that there was a
collusion between the respondents Santos and Raymundo in the sales of the leased properties
(defendants SANTOS and RAYMUNDO have the same counsel who represented both of them
in their exchange of communication with PKs counsel, a fact that led to the conclusion that a
collusion exist between them, among others)

Petitioner Paranaque demanded from the defendants to rectify their unlawful acts that
they committed, but defendants refused and failed to comply with plaintiffs just and valid
demands.

RTC issued the order dismissing the complaint for lack of a valid cause of action. CA
affirmed in toto.
Issue: Is such right of first refusal enforceable by an action for specific performance? YES
(WON the complaint filed by Paranaque Kings states a valid cause of action. YES)
Held:
Paranaque Kings was granted a first option or priority to purchase the subject property
(Based on the Par. 9 of the Lease Contract)
A careful examination of the complaint filed by Paranaque Kings reveals that it sufficiently
alleges an actionable contractual breach on the part of private respondents.
Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the latter
was granted the "first option or priority" to purchase the leased properties in case Santos
decided to sell. If Santos never decided to sell at all, there can never be a breach, much less an
enforcement of such "right."
But on September 21, 1988, Santos sold said properties to Respondent Raymundo without first
offering these to petitioner. Santos indeed realized her error, since she repurchased the
properties after petitioner complained. Thereafter, she offered to sell the properties to petitioner
for P15 million, which petitioner, however, rejected because of the "ridiculous" price. But Santos
again appeared to have violated the same provision of the lease contract when she finally
resold the properties to respondent Raymundo for only P9 million without first offering them to
petitioner at such price. Whether there was actual breach which entitled petitioner to damages
and/or other just or equitable relief, is a question which can better be resolved after trial on the
merits where each party can present evidence to prove their respective allegations and
defenses.
The basis of the right of first refusal must be the current offer to sell of the seller or offer
to purchase of any prospective buyer.

Only after the optionee fails to exercise its right of first priority under the same terms and within
the period contemplated, could the owner validly offer to sell the property to a third person,
again, under the same terms as offered to the optionee.
The contention of Raymundo that he is not a privy to the contract is untenable
With respect to the contention of respondent Raymundo that he is not privy to the lease
contract, not being the lessor nor the lessee referred to therein, he could thus not have violated
its provisions, but he is nevertheless a proper party. Clearly, he stepped into the shoes of the
owner-lessor of the land as, by virtue of his purchase, he assumed all the obligations of the
lessor under the lease contract. Moreover, he received benefits in the form of rental payments.
Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the
properties to him. Both pleadings also alleged collusion between him and respondent Santos
which defeated the exercise by petitioner of its right of first refusal.
In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if
not indispensable, party to the case. A favorable judgment for the petitioner will necessarily
affect the rights of respondent Raymundo as the buyer of the property over which petitioner
would like to assert its right of first option to buy.
Deed of Assignment included the option to purchase
The provisions of the deeds of assignment with regard to matters assigned were very clear.
Under the first assignment between Frederick Chua as assignor and Lee Ching Bing as
assignee, it was expressly stated that:
. . . . the ASSIGNOR hereby CEDES, TRANSFERS and ASSIGNS to herein ASSIGNEE, all his
rights, interest and participation over said premises afore-described, . . . .
And under the subsequent assignment executed between Lee Ching Bing as assignor and the
petitioner, represented by its Vice President Vicenta Lo Chiong, as assignee, it was likewise
expressly stipulated that;
. . . . the ASSIGNOR hereby sells, transfers and assigns all his rights, interest and participation
over said leased premises, . . . .
One of such rights included in the contract of lease and, therefore, in the assignments of rights
was the lessee's right of first option or priority to buy the properties subject of the lease, as
provided in paragraph 9 of the assigned lease contract. The deed of assignment need not be
very specific as to which rights and obligations were passed on to the assignee. It is understood
in the general provision aforequoted that all specific rights and obligations contained in the

contract of lease are those referred to as being assigned. Needless to state, respondent Santos
gave her unqualified conformity to both assignments of rights.
Ruling: WHEREFORE, the petition is GRANTED. The assailed decisions of the trial court and
Court of Appeals are hereby REVERSED and SET ASIDE. The case is REMANDED to the
Regional Trial Court of Makati for further proceedings.

V. PARTIES TO A CONTRACT OF SALE

Special Incapacity -guardians, agents, and administrators

Lao v. Genato G.R. L-5641
Facts: Spouses Juan and Candelaria Lao were promisees in a Mutual Agreement of
Promise to Sell executed between them and Sotero Dionisio III, the son of the heir and
administrator of the intestate estate of deceased Rosenda Abuton, Sotero Dionisio Jr. The
Laos were promised by Dionisio III a commercial property belonging to such estate.
On June 25,1980, Dionisio Jr. filed with the Probate Court a Motion for Authority
to Sell which the said court granted. Thereafter, he sold to his son Dionisio III the subject
property for P75,000. The latter then sold the same property in favor of a certain William
Go for P80,000. Subsequently, the title was transferred to Go. On August 27, 1980,
Florida Nuqui (another heir of the estate), filed a motion for Annulment of the Deeds of Absolute
Sale on the ground that the sale and subsequent transfer of title of the property
were grossly inadequate. According to Nuqui, the market value of the property is
P400,000.
On February 6, 1981, the Laos filed a Manifestation wherein they alleged that
Dionisio Jr., without revealing that the property had already been sold to Go, entered into
a Mutual Agreement of Promise to Sell to the former for P220,000 (the Laos even offered
to pay for the property for P300,000). They further alleged that they paid the earnest
money with a check worth P70,000 in favor of Dionisio III. Moreover, the Laos
contended that the agreement regarding the balance will only be paid upon the production
of the TCT and the execution of the final Deed of Sale.
Because of the conflict, all the parties, except the Lao spouses and Dionisio III,
entered an Amicable Settlement. The Lao spouses filed an opposition but despite such
opposition, respondent Judge Genato approved the Amicable Settlement.
ISSUE:
Whether or not the sale between the administrator and his son valid.
HELD:
NO. A sale made by an administrator of decedents property which is fictitious
and illegal cannot be made lawful by the assent thereto of the heirs and approval by the
trial court of the compromise settlement, being prejudicial to creditors and to
government.
The price was grossly low. Dionisio III had no income whatsoever. On top of that,
not a single centavo of the P75,000 was ever accounted for nor reported to the Probate
Court. Dionisio Jr. was only compelled to admit that the actual consideration for the sale
made by him was P200,000 and not for P80,000 (This happened in the amicable

settlement).
In addition, the offer by the Laos of P300,000 for the purchase of the property is
more beneficial and advantageous. No satisfactory and convincing reason appeared given
the rejection and non-acceptance of said offer, thus giving rise to a well-grounded
suspicion that a collusion of some sort exists between the administrator and the heirs to
defraud the creditors and the government

Public Officers and Employees

Fronilda v.RTC G.R. 72306

Facts:
The Controverted
were
partestate
of the of
estate
of the
late
M. Catolos
The Controverted
ParcelsParcels
were part
of the
the late
Julio
M.Julio
Catolos
subject of intestate
estate proceedings, wherein Respondent Amonoy acted
as counsel for some of the heirs from 1959 until 1968 by his own admission.
Pasamba
in the Project
Partition approved
byFornilda
the Court
onAsuncion
12 January
These properties
wereofadjudicated
to Alfonso
and
M.
1965
On 20 January
January 1965,
1965, or
oronly
onlyeight
eight(8)
(8)days
daysthereafter,
thereafter,and
andwhile
while
hehe
was
was
stillstill intervening in the
case as counsel, these properties were mortgaged by
petitioners' predecessor-in-interest to Respondent Amonoy to secure
payment of the latter's attorney's fees in the amount of P27,600.00
instituted
anmortgage
action forindebtedness
judicial foreclosure
of paid,
mortgage
on 21 January
1970
Since the
was not
Respondent
Amonoy
followed
where Respondent
Amonoy
was the
sole bidder
P23,600.00
The mortgage
was subsequently
ordered
foreclosed
andfor
auction
sale
obtained
a deficiency
judgment.indebtedness, he applied for and further
Being short
of the mortgage
Issue:
Whether or not the mortgage constituted on the Controverted Parcels in favor
of Respondent Amonoy comes within the scope of the prohibition in Article 1491 of the
Civil Code
Ruling:
YES
Art.
1491.
The following
persons
cannot
acquire
The
pertinent
portions of
the said
Articles
read: by purchase
even at a public or judicial or auction, either in person or through
the mediation of another:
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, ... the property and
rights in litigation or levied upon on execution before the court
within whose junction or territory they exercise their respective
functions; this prohibition includes the act of acquitting by
assignment and shall apply to lawyers with respect to the
property and rights which may be the object of any litigation in
which they may take part by virtue of their profession. (Emphasis
supplied)
either
bythe
purchase
or assignment
property
or rights involved
Under
aforequoted
provision,the
a lawyer
is prohibited
from acquiring
which are the object of the litigation in which they intervene by virtue
of their profession. The prohibition on purchase is all embracing to include
not only sales to private individuals but also public or judicial sales
and
stillthe
existed,
the very
of trust
and confidence
sought
be
At client
the time
mortgage
was relation
executed,
therefore,
the relationship
ofto
lawyer

protected by the prohibition, when a lawyer occupies a vantage position to

press upon or dictate terms to a harassed client. From the time of the
execution of the mortgage in his favor, Respondent Amonoy had already
asserted a title adverse to his clients' interests at a time when the
relationship of lawyer and client had not yet been severed.
Article
1491 ofthat
the the
Civilmortgage
Code is expressly
prohibited
byinlaw,
the same must
Considering
contract, entered
into
contravention
of
be held inexistent and void ab initio

Dir. of Lands v. Ababa G.R. L-26096

Facts
Maximo Abarquez was plaintiff in a case for annulment of sale of a parcel of land against his
sister Agripina. Since he had neither properties nor money to pay his counsel Atty. Alberto
Fernandez, he contracted with the latter for contingent fees as payment for his services. The
consideration for such contract was half of the land to be awarded to Abarquez.
Abarquez was able to annul the sale. Thereafter, Atty. Fernandez waited for Abarquez to comply
with his obligation under the document executed by him on June 10, 1961 by delivering the onehalf (1/2) portion of the said parcels of land.
Abarquez refused to deliver the portion. Instead, he offered 2/3 of the parcel for sale to the Sps.
Larrazabal. Atty. Fernandez immediately filed with the trial court a motion to annotate his
attorney's lien on the TCT of the property and by notifying the prospective buyers of his claim
over the one-half portion of the parcels of land. He also filed an affidavit of adverse claim with
the Register of Deeds of Cebu. By virtue of the registration of said affidavit, the adverse claim
for one-half (1/2) of the lots covered by the June 10, 1961 document was annotated on the TCT.
Despite these developments, Abarquez still sold 2/3 of the land to the spouses. When the land
was sought to be registered, the adverse claim of Atty. Fernandez necessarily had to appear on
the new transfer certificate of title. This annotation was subject to a cancellation proceedings
filed by the spouses which was denied by the lower court. They appealed the decision
immediately to the Supreme Court.
The spouses contend that a contract for the contingent fee herein violates Article 1491 (5) of the
NCC because it involves an assignment of a property subject of litigation.
Issue
Whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez, is
prohibited by the Article 1491 of the New Civil Code and Canon 10 of the Canons of
Professional Ethics.
Held.
No. Article 1491 prohibits only the sale or assignment between the lawyer and his client, of
property which is the subject of litigation. In Rosario Vda. de Laig vs. Court of Appeals, "The
prohibition in said article applies only to a sale or assignment to the lawyer by his client
of the property which is the subject of litigation. In other words, for the prohibition to
operate, the sale or assignment of the property must take place during the pendency of
the litigation involving the property."

Also, in Albano vs. Ramos, the attorney was allowed to recover in a separate action her
attorney's fees of one-third (1/3) of the lands and damages recovered as stipulated in the
contingent fee contract.
Thus, a contract for a contingent fee is not covered by Article 1491 because the transfer or
assignment of the property in litigation takes effect only after the finality of a favorable
judgment.
In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-half (1/2) of
whatever Abarquez might recover from his share in the lots in question, is contingent upon the
success of the appeal. Hence, the payment of the attorney's fees, that is, the transfer or
assignment of one-half (1/2) of the property in litigation will take place only if the appeal
prospers. Therefore, the transfer actually takes effect after the finality of a favorable
judgment rendered on appeal and not during the pendency of the litigation involving the
property in question. Consequently, the contract for a contingent fee is not covered by Article
1491.
Neither does the contract violate the Canons of Professional Ethics. Canon 13 of the Canons
expressly recognizes contingent fees by way of exception to Canon 10 upon which the spouses
relied. While Canon 10 prohibits a lawyer from purchasing ". . . any interest in the subject matter
of the litigation which he is conducting", Canon 13, on the other hand, allows a reasonable
contingent fee contract, thus: "A contract for a contingent fee where sanctioned by law, should
be reasonable under all the circumstances of the case, including the risk and uncertainty of the
compensation, but should always be subject to the supervision of a court, as to its
reasonableness."
In Rosario Vda. de Laig vs. Court of Appeals, the Court held that contingent fees are
recognized in this jurisdiction which contingent fees may be a portion of the property in
litigation. Also, a contingent fee contract is always subject to the supervision of the courts
with respect to the stipulated amount and may be reduced or nullified. So that in the event
that there is any undue influence or fraud in the execution of the contract or that the fee is
excessive, the client is not without remedy because the court will amply protect him.
Thus, under the provisions of Article 1491 and Canons 10 and 13 of the Canons of
Professional Ethics, a contract for a contingent fee is valid. Decision of the lower court
affirmed.

Sarosa vda. De Barsobia v. Cuenco 113 SCRA 547

decision
For
review
CA
is
declaring
the
Victoriano
(now
T.
Cuenco
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Sagay,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
sum
of
P1,050.00
possession
and
enjoyed
August
the
fruits
5,
thereof.
On
sold
the
litigated
property
Cuenco
to
Victoriano
Filipino,
for
March
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
naturalized
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
of
CA
declaring
Victoriano
T.
Cuenco
(now
Victoriano
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
P1,050.00
possession
and
enjoyed
August
fruits
5,
thereof.
On
sold
the
litigated
property
Cuenco
to
Victoriano
Filipino,
for
the
March
sum
of
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
Sagay,
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
naturalized
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
CA
declaring
Victoriano
T.
Cuenco
(now
T.
Victoriano
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
P1,050.00
possession
and
enjoyed
August
fruits
5,
thereof.
On
sold
the
litigated
property
Cuenco
to
Victoriano
Filipino,
for
the
March
sum
of
P5,000.00.
On
"usurped"
the
controverted
and
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
Sagay,
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
Pacita
Vallar
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
CA
declaring
Victoriano
T.
Cuenco
(now
T.
naturalized
Victoriano
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
sum
of
P1,050.00
possession
and
enjoyed
the
August
fruits
5,
thereof.
On
sold
the
litigated
property
Cuenco
to
Victoriano
Filipino,
for
March
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
CA
declaring
Victoriano
T.
Cuenco
(now
Sagay,
T.
Victoriano
naturalized
half
portion
(on
adjoining
parcels
of
Barrio
Mancapagao,
Oriental
Camiguin
(now
province).
owned
previously
by
a
had
sold
it
to
the
deceased)
and
Filipino
citizens.
widow,
sold
the
land
in
Ong
King
Po
who
possession
and
enjoyed
fruits
the
of
the
property.
litigated
the
property
to
naturalized
Filipino
who
of
the
property.
controverted
property
property
Vallar.
to
Pacita
not
her
intention
to
to
evidence
her
indebtedness
to
Ong
King
Po.
case
for
Forcible
Entry
MTC
which
was
later
question
of
possession
determined
without
first
ownership
half
portion
(on
adjoining
parcels
of
Barrio
Mancapagao,
Oriental
(now
Camiguin
province).
owned
previously
by
a
had
sold
it
to
the
deceased)
and
Filipino
citizens.
widow,
sold
the
land
in
Ong
King
Po
who
possession
the
and
enjoyed
fruits
of
the
property.
litigated
the
property
to
naturalized
Filipino
who
of
the
property.
controverted
property
property
to
Pacita
Vallar.
not
her
intention
to
to
indebtedness
evidence
her
to
Ong
King
Po.
case
for
Forcible
Entry
MTC
which
was
later
question
of
possession
determined
without
first
ownership
half
portion
(on
adjoining
parcels
of
Barrio
Mancapagao,
Oriental
Camiguin
(now
province).
owned
previously
by
a
had
sold
it
to
the
deceased)
and
Filipino
citizens.
widow,
sold
the
land
in
Ong
King
Po
who
possession
and
enjoyed
fruits
the
of
the
property.
litigated
the
property
to
naturalized
Filipino
who
of
the
property.
controverted
property
of
Cuenco
CA
declaring
(now
Victoriano
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Sagay,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
.Ong
sum
of
P1,050.00
possession
and
enjoyed
the
August
fruits
5,
thereof.
On
sold
the
litigated
property
T.
Cuenco
to
Victoriano
naturalized
Filipino,
for
March
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
Victoriano
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
of
T.
Cuenco
CA
declaring
(now
Victoriano
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Sagay,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
afor
Chinese,
Ong
King
Po,
for
.Ong
P1,050.00
possession
and
enjoyed
August
fruits
5,
thereof.
On
sold
the
litigated
property
Cuenco
to
Victoriano
Filipino,
the
March
sum
of
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
Victoriano
naturalized
Cuenco,
Filipino
a
isfor
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
Facts:

Facts: For review is the decision of CA declaring Victoriano T. Cuenco (nowthe respondent) as
the absolute owner of a coconut land in question. The lot incontroversy is a one-half portion (on
the northern side) of two adjoining parcels ofcoconut land located at Barrio Mancapagao,
Sagay, Camiguin, Misamis Oriental(now Camiguin province), with an area of 29,150 square
meters, more or less.The entire land was owned previously by a certain Leocadia Balisado, who

hadsold it to the spouses Patricio Barsobia (now deceased) and Epifania Sarsosa,Filipino
citizens. On September 5, 1936, Epifania Sarsosa then a widow, sold theland in controversy to
a Chinese, Ong King Po, for the sum of P1,050.00 .OngKing Po took actual possession and
enjoyed the fruits thereof. On August 5,1961, Ong King Po sold the litigated property to
Victoriano T. Cuenco (respondent herein), a naturalized Filipino, for the sum of P5,000.00. On
March6, 1962, Epifania "usurped" the controverted property, and on July 26, 1962,Epifania
(through her only daughter and child, Emeteria Barsobia), sold a one-half (1/2) portion of the
land in question to Pacita W. Vallar, the other petitionerherein .On September 19, 1962,
respondent filed a Forcible Entry case againstEpifania before the Municipal Court of Sagay,
Camiguin. The case wasdismissed for lack of jurisdiction since, as the laws then stood, the
question ofpossession could not be properly determined without first settling that ofownership.
On December 27, 1966, respondent instituted before the Court ofFirst Instance of Misamis
Oriental a Complaint for recovery of possession andownership of the litigated land, against
Epifania and Pacita Vallar
Issue: Whether or not Victoriano Cuenco, a naturalized Filipino is the rightful land owner after
buying it from Ong King Po, a Chinese

HELD: YES. The SC declared that the sale by Epifania to Ong King Po was voidas it is against
public policy under the 1935 Constitution and that Cuenco was therightful owner as Epifania is
also barred by laches

absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Misamis
Sagay,
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
P1,050.00
possession
and
enjoyed
August
fruits
5,
thereof.
On
sold
the
litigated
property
T.
Cuenco
to
Victoriano
Filipino,
for
the
March
sum
of
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
Victoriano
naturalized
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
CA
declaring
Victoriano
T.
Cuenco
(now
Sagay,
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
P1,050.00
possession
and
enjoyed
August
fruits
5,
thereof.
On
sold
the
litigated
property
T.
Cuenco
to
Victoriano
Filipino,
for
the
March
sum
of
P5,000.00.
On
"usurped"
the
controverted
and
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
Pacita
Vallar
Victoriano
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
CA
declaring
Victoriano
T.
Cuenco
(now
naturalized
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Sagay,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
sum
of
P1,050.00
possession
and
enjoyed
the
August
fruits
5,
thereof.
On
sold
the
litigated
property
T.
Cuenco
to
Victoriano
Filipino,
for
March
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
Victoriano
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
CA
declaring
Victoriano
T.
Cuenco
(now
naturalized
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Sagay,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
P1,050.00
possession
and
enjoyed
August
fruits
5,
thereof.
On
sold
the
litigated
property
T.
Cuenco
to
Victoriano
Filipino,
for
the
March
sum
of
P5,000.00.
On
"usurped"
the
controverted
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
and
Pacita
Vallar
Victoriano
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
CA
declaring
Victoriano
T.
Cuenco
(now
Sagay,
absolute
owner
of
a
coconut
The
lot
in
land
in
question.
portion
(on
the
northern
side)
parcels
of
of
two
adjoining
Barrio
Mancapagao,
Misamis
Camiguin,
Oriental
with
an
area
of
29,150
square
less.
meters,
more
or
owned
previously
by
a
certain
Balisado,
Leocadia
who
had
Patricio
Barsobia
(now
deceased)
Sarsosa,
and
Epifania
September
5,
1936,
Epifania
widow,
sold
Sarsosa
the
then
a
Chinese,
Ong
King
Po,
for
.Ong
P1,050.00
possession
and
enjoyed
August
fruits
5,
thereof.
On
sold
the
litigated
property
T.
Cuenco
to
Victoriano
naturalized
Filipino,
for
the
March
sum
of
P5,000.00.
On
"usurped"
the
controverted
and
on
July
26,
property,
1962,
only
daughter
and
child,
Emeteria
a
oneBarsobia),
sold
land
in
question
to
Pacita
W.
petitioner
Vallar,
the
other
1962,
respondent
filed
a
Forcible
against
Entry
case
Municipal
Court
of
case
was
Camiguin.
The
jurisdiction
since,
as
the
laws
question
then
of
stood,
the
be
properly
determined
first
settling
without
that
of
27,
1966,
respondent
instituted
Court
of
before
Oriental
a
Complaint
for
recovery
possession
land,
against
Epifania
Pacita
Vallar
Victoriano
Cuenco,
Filipino
a
is
the
rightful
buying
Po,
a
Chinese
it
from
Ong
King
P1,050.00
.Ong
sum
of
P5,000.00.
On
March
"usurped"
controverted
the
property,
and
on
July
26,
1962,
only
Emeteria
daughter
and
child,
possession
and
enjoyed
the
August
fruits
5,
thereof.
On
sold
the
litigated
property
T.
Cuenco
to
Victoriano
naturalized
Filipino,
for
declared
that
the
sale
by
Epifania
was
void
to
Ong
King
Po
policy
under
the
1935
Constitution
Cuenco
was
the
and
that
is
also
barred
by
laches
Herrera v. Luy Kim Guan 1 SCRA 406
Facts: Herein plaintiff is the legitimate heir of Luis Herrera. Luis Herrera, now deceased, owned
three parcels of land. Before leaving for China in 1931 or early part of 1932, Luis Herrera
executed a deed of General Power of Attorney which authorized defendant Luy Kim
Guan to administer and sell the aforementioned parcels of land. He died on an unknown
date.
On the dates of July 23, 1937, August 4, 1937, and September 11, 1939, the three parcels
of land were respectfully sold to different individuals through the attorney-in-fact of Luis
Herrera Luy Kim Guan. Herein plaintiff assails the assumption that Luis Herrera died
on 1936 and so herein defendant Luy Kim Guan had no right to sell the parcels of land
because Luis Herrera had died prior to the transactions thus extinguishing their agentprincipal relationship. Thus according to the plaintiff, the transactions should be null and
void.
Issue:
Whether or not the transactions should be null and void since they were made without
any authorit
Held:
No.
The Court held that even granting argument that Luis Herrera did die in 1936, plaintiffs
presented no proof and there is no indication in the record, that the age Luy Kim Guan
was aware of the death of his prince at the time he sold the property. The death of the
principal does not render the act of an agent unenforceable, where the latter had no
knowledge of such extinguishment the agency

Vicente Godinez v. Fong Pak Luen G.R. L-36731

Facts: The plaintiffs filed a case to recover a parcel of land sold by their father Jose Godinez to
defendant Fong Pak Luen. Said defendant executed a power of attorney in favour of his codefendant Kwan Pun Ming, who conveyed and sold the above described parcel of land to codefendant Trinidad S. Navata. The latter is aware of and with full knowledge that Fong Pak Luen is a
Chinese citizen as well as Kwan Pun Ming, who under the law are prohibited and disqualified to
acquire real property; that Fong Pak Luen has not acquired any title or interest in said parcel of land
as purported contract of sale executed by Jose Godinez alone was contrary to law and considered
non-existent. The defendant filed her answer that the complaint does not state a cause of action
since it appears from the allegation that the property is registered in the name of Jose Godinez so
that as his sole property he may dispose of the same; that the cause of action has been barred by
the statute of limitations as the alleged document of sale executed by Jose Godinez on November
27, 1941, conveyed the property to defendant Fong Pak Luen as a result of which a title was issued

to said defendant; that under Article 1144(1) of the Civil Code, an action based upon a written
contract must be brought within 10 years from the time the right of action accrues; that the right of
action accrued on November 27, 1941 but the complaint was filed only on September 30, 1966,
beyond the 10-year period provided by law. The trial court issued an order dismissing the complaint.
A motion for reconsideration was filed by plaintiffs but was denied.
Issue: Whether or not the sale was null and void ab initio since it violates applicable provisions of the
Constitution and the Civil Code.
Ruling: No. Prescription may never be invoked to defend that which the Constitution prohibits.
However, we see no necessity from the facts of this case to pass upon the nature of the contract of
sale executed by Jose Godinez and Fong Pak Luen whether void ab initio, illegal per se, or merely
prohibited. It is enough to stress that insofar as the vendee is concerned, prescription is unavailing.
But neither can the vendor or his heirs rely on an argument based on imprescriptibility because the
land sold in 1941 is now in the hands of a Filipino citizen against whom the constitutional
prescription was never intended to apply. As earlier mentioned, Fong Pak Luen, the disqualified alien
vendee later sold the same property to Navata, a Filipino citizen qualified to acquire real property.
Navata, as a naturalized citizen, was constitutionally qualified to own the subject property.

Jacobus Bernhard v. PR Builders Inc. G.R. 156364

Facts:
Petitioner contends that the Contract to Sell between petitioner and respondent
involved a condominium unit and did not violate the Constitutional proscription against
ownership of land by aliens. He argues that the contract to sell will not transfer to the
buyer ownership of the land on which the unit is situated; thus, the buyer will not get a
transfer certificate of title but merely a Condominium Certificate of Title as evidence of
ownership; a perusal of the contract will show that what the buyer acquires is the seller's
title and rights to and interests in the unit and the common areas.
The Contract to Sell between petitioner and respondent provides as follows:
Section 3. TITLE AND OWNERSHIP OF UNIT Upon full payment by the BUYER of the
purchase price stipulated in Section 2 hereof, x x x, the SELLER shall deliver to the BUYER the
Deed of Absolute Sale conveying its rights, interests and title to the UNIT and to the common
areas appurtenant to such UNIT, and the corresponding Condominium Certificate of Title in the
SELLER's name; x x x
The Seller shall register with the proper Registry of Deeds, the Master Deed with the
Declaration of Restrictions and other documents and shall immediately comply with all
requirements of Republic Act No. 4726 (The Condominium Act) and Presidential Decree
No. 957 (Regulating the Sale of Subdivision Lots and Condominiums, Providing
Penalties for Violations Thereof). It is hereby understood that all title, rights and interest
so conveyed shall be subject to the provisions of the Condominium Act, the Master Deed
with Declaration of Restrictions, the Articles of Incorporation and By-Laws and the
Rules and Regulations of the Condominium Corporation, zoning regulations and such
other restrictions on the use of the property as annotated on the title or may be imposed
by any government agency or instrumentality having jurisdiction thereon.[4] (Emphasis
supplied) Under Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act,
foreign nationals can own Philippine real estate through the purchase of condominium units or
townhouses constituted under the Condominium principle with Condominium Certificates of
Title.

Issue: w/n the purchase of a condo unit by an alien falls under the express prohibition of land
ownership by aliens
Ruling: No. Considering that the rights and liabilities of the parties under the Contract to
Sell is covered by the Condominium Act wherein petitioner as unit owner was simply a
member of the Condominium Corporation and the land remained owned by respondent, then
the constitutional proscription against aliens owning real property does not apply to
the present case. There being no circumvention of the constitutional prohibition, the
Court's pronouncements on the invalidity of the Contract of Sale should be set aside.