ANDAYA VS MAMANSALA

FACTS:

On June 13, 1934, Isidro Fenis sold the land in question to Eustaquia Llanes, with right of
repurchase within a period of five years. After the expiry of said period, and without repurchasing
the said property, Isidro Fenis sold it again to Maria Viloria. Then, Maria Viloria sold by way of sale
with right to repurchase within a period of one year, the said property together with another parcel
of land to defendant Melencio Manansala. Upon the expiry of the said period, Manansala registered
with the Register of Deeds an affidavit consolidating his title on the property. A year later, Maria
Viloria sold by way of absolute sale the same property to Ciriaco Casiño, Fidela Valdez, and the
plaintiff spouses Ariston Andaya and Micaela Cabrito, for P4,800.00.

Then, Llanes instituted a civil case to quiet title and recover possession from Casino.
Subsequently, Manansala sold the land to Valdez and Casino for P1500. It was stipulated that there
was a warranty (i)that said land is free from all liens and encumbrances and (ii) in case of eviction,
the vendor shall answer to the vendee in the manner provided by law.

Subsequently, Llanes included Manansala, Valdez, Cabrito and Andaya as co-defendants. The
case was decided in favor of Llanes. A writ of execution was issued and the land was sold at a public
auction.

Andaya and Cabrito instituted a case against Manansala in the CFI of Ilocos Sur for the
recovery of damages because of the breach of warranty of title and against eviction. Manansala
denied liability and stated that his co-purchasers pleaded him to sell to them at a low price after the
case instituted by Llanes against them.

The lower court decided that it is inequitable to hold defendant liable under ART 1555 since
plaintiffs apparently knew that the warranty could not have been intended. And that the obligation
of the defendant is that of a vendor in cases of a rescission of contract.

ISSUE:

Whether Manansala shall be liable as a vendor in cases of a rescission of a contract

HELD:

NO. HE is exempt from liability.

The vendor's liability for warranty against eviction in a contract of sale is waivable and may
be renounced by the vendee (ART 1548). Not having appealed from the decision of the lower court,
appellees are bound by these findings, the implication of which is that they not only renounced or
waived the warranty against eviction, but that they knew of the danger of eviction and assumed its
consequences. Therefore, the appellant is not even obliged to restore to them the price of the land
at the time of eviction, but is completely exempt from liability whatsoever.

ART 1544: When the vendee has waived the right to warranty in case of eviction, and eviction shall
occur, the vendor shall only pay the price which the thing sold had at the time of the eviction, unless
the vendee has made the waiver with knowledge of the danger of eviction and assumed its
consequences.
 Neither may appellant be condemned to return the price received from appellees on the
theory of rescission of their contract of sale, as held by the court below. In the first place, the remedy
of rescission contemplates that the one demanding it is able to return whatever he has received
under the contract; and when this cannot be done, rescission cannot be carried out (Art. 1385). It is
for this reason that the law on sales does not make rescission a remedy in case the vendee is totally
evicted from the thing sold, as in this case, for he can no longer restore the thing to the vendor. It is
only when the vendee loses "a part of the thing sold of such importance, in relation to the whole,
that he would not have purchased it without said part" that he may ask for rescission, but he has
"the obligation return the thing without other encumbrances than those which it had when he
acquired it" (Art. 1556). In the second place, appellees, as already stated, assumed the risk of
eviction, which stops them from asking for rescission even were it possible for them to restore what
they had received under the contract.

On their part, appellees claim that in view of the eviction from the land in question, they are
entitled to recover from appellant more items of damages under Article 1555 than the mere return
of the price with interests as ordered by the trial court. The claim is untenable, not only because
appellant, as we have held, is exempt from any liability for appellees eviction, but also because not
having appealed from the decision of the lower court, appellees cannot ask for a modification
thereof or an award of damages not included therein.
 BARENG VS CA

FACTS:

Vicente Bareng purchased from respondent Alegria the cinematographic equipment installed
at the Pioneer Theater in Laoag, Ilocos Norte, for the sum of P15,000. P10,000 of which was paid,
and Bareng signed 4 promissory notes for the balance. The first promissory note amounting to
P1,000 was duly paid by Bareng. On February 15, 1952, shortly before the second note fell due, the
other respondent Agustin Ruiz informed Bareng that he was a co-owner of the equipment in
question, and several days later, Ruiz sent Bareng a telegram instructing him to suspend payments to
Alegria for thebalance of the price as he was not agreeable to the sale. When Alegria sought to
collect the second note on the same day, Bareng only paid P400 and refused to make any more
payments on account of Ruiz’s claims.

On March 31, 1952, Ruiz filed suit against Alegria and Bareng for his share in the price of the
cinema equipment. Thereafter in May of the same year, Alegria and Ruiz reached a compromise
wherein the former recognized the latter as co-owner of the equipment sold to Bareng and promised
to pay 2/3 of whatever amount he could recover from the latter. Alegria then sued Bareng for the
amount of P13,500, allegedly the unpaid balance of the price. But Bareng answered that only P3,600
had not been paid, and prayed for the rescission of the sale for the supposed violation of Alegria of
certain express warranties as to the quality of the equipment, and asked for payment of damages for
alleged violation of Alegria’s warranty of title. Bareng added that he is not liable to pay interests to
Alegria because he was justified in suspending payment of the balance of the price of the equipment
from the time he learned of Ruiz’s adverse claims over said equipment, pursuant to Art. 1590 of the
Civil Code.

ISSUE:

Whether or not Bareng is liable to pay interest of the unpaid balance of the price of the equipment.

HELD:

Bareng is liable to pay interest of the unpaid balance of the price of the equipment in
question. Art. 1590 of the Civil Code provides that: “Should the vendee be disturbed in the
possession or ownership of the thing acquired, or should he have reasonable grounds to fear such
disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of
the price until the vendor has caused the disturbance or danger to cease, unless the latter gives
security for the return of the price in a proper case, or it has been stipulated that, notwithstanding
any such contingency, the vendee shall be bound to make the payment. A mere act of trespass shall
not authorize the suspension of the payment of the price.”

It is undisputed that petitioner had the right to suspend payment of the balance of the price
of the cinema equipment in question to his vendor from the time he was informed by Ruiz of the
latter’s claims of co-ownership thereof, especially upon his receipt of Ruiz’s telegram wherein the
latter asserted that he was not agreeable to the sale. However, said right of Barend ended as soon as
“the vendor has caused the disturbance or danger to cease,” which, in this case, was when Alegria
reached a compromise with Ruiz whereby Ruiz expressed his conformity to the sale to Bareng,
subject to the payment of his share in the price by Alegria. From the time Alegria and Ruiz reached
this settlement, there was no longer any danger of threat to Bareng’s ownership and full enjoyment
of the equipment he bought from Alegria, by virtue of which Alegria sued petitioner for the unpaid
balance. Bareng admitted his indebtedness in the amount of P3,600, yet he did not tender payment
of said amount nor did he deposit the same in court, but instead sought for rescission of the sale. It
is clear that Bareng was in default on the unpaid balance of the price of the equipment from the date
of filing of the complaint by Alegria, and under Art. 2209 of the Civil Code, he must pay legal interests
thereon from said date.
 LUZON BROKERAGE CO. VS MARITIME BUILDING CO.

DOCTRINE:

The distinction between contracts of sale and contract to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under contracts to
sell in case of failure of the other party to complete payment, to extra judicially terminate the
operation of the contract, refuse conveyance and retain the sums or installments already received,
where such rights are expressly provided for, as in this case.

FACTS:

Myers Corp sold a land to Maritime. In the agreement, they agreed on an installment plan
and that if Maritime missed a payment, the contract will be annulled and the payments already
made will be forfeited. Maritime failed to pay so Myers annulled the contract and did not return
payments. SC says Myers can do this because under contracts to sell, promisors, in case of failure of
the other party to complete payment, can extra judicially terminate the contract, refuse conveyance,
and retain installments already received, where such rights are provided.

In Manila, Myers owned 3 parcels of land w/ improvements. Myers then entered into a
contract called a “Deed of Conditional Sale” with Maritime Building. Myers sold the land for P1
Million. They agreed on the manner of payment (installment, initial payment upon execution of
contract, interest rate). In the contract it was stipulated that in case of failure of buyer to pay any of
the installments, the contract will be annulled at the option of the seller and all payments made by
the buyer is forfeited.

Later on, the stipulated installment of P10k with 5% interest was amended to P5k with 5.5%
per annum. Maritime paid the monthly instalments but failed to pay the monthly instalment of
March. The VP of Maritime wrote to the Pres of Myers requesting for a moratorium on the monthly
payment of the installments because the company was undergoing financial problems. Myers
refused. For the months of March, April, and May, Maritime failed to pay and did not heed the
demand of Myers. Myers wrote Maritime cancelling the “Deed of Conditional Sale”. Myers
demanded return of possession of properties. Held Maritime liable for use and occupation
amounting to P10k per month.

In the meantime, Luzon Brokerage was leasing the property from Maritime. Myers
demanded from Luzon the payment of monthly rentals of P10k. Myers also demanded surrender of
property. While actions and cross claims between Myers and Maritime were happening, the contract
between Maritime and Luzon was extended for 4 more years. Turns out, Maritime’s suspension of its
payments to Myers Corp arose from a previous event: An award of back wages made by the Court of
Industrial Relations in favor of Luzon Labor Union (employees employed by Luzon). FH Myers was a
major stockholder of Luzon Brokerage. FH Myers promised to indemnify Schedler (who controlled
Maritime) when Schedler purchased FH Myers’s stock in Luzon Brokerage company. (This
indemnification is for the award of back wages by the CIR). Schedler claims that after FH Myers
estates closed, he was notified that the indemnity on the Labor Union case will not be honored
anymore. And so, Schedler advised Myers Corp that Maritime is withholding payments to Myers Corp
in order to offset the liability when Myers heirs failed to honor the indemnity agreement. TC ruled
Maritime in breach of contract.

ISSUE:

Whether or not Myers can extra judicially terminate the contract?

HELD:

Yes. Failure to pay monthly installments constitute a breach of contract. Default was not
made in good faith. The letter to Myers Corp means that the non-payment of installments was
deliberately made to coerce Myers Corp into answering for an alleged promise of the dead FH Myers.
Whatever obligation FH Myers had assumed is not an obligation of Myers Corp. No proof that the
board of Myers Corp agreed to assume responsibility to debts of FH Myers and heirs.

Schedler allowed the estate proceedings of FH Myers to close without providing liability. By
the balance (of payment) in the Deed of Conditional Sale, Maritime was attempting to burden Myers
Corp with an uncollectible debt, since enforcement against FH Myers estate was already barred.
Maritime acted in bad faith. Maritime’s contract with Myers is not the ordinary sale contemplated in
NCC 1592 (transferring ownership simultaneously with delivery). The distinction between contracts
of sale and contract to sell with reserved title has been recognized by this Court in repeated
decisions upholding the power of promisors under contracts to sell in case of failure of the other
party to complete payment, to extra judicially terminate the operation of the contract, refuse
conveyance and retain the sums or installments already received, where such rights are expressly
provided for, as in this case.
 HOLGADO VS CA

FACTS:

Spouses Nombre and Cari-an died without a child. Nombre’s heirs include his nephews and
grandnephews. Two parcels of land formed part of the estate of Nombre and Cari-an. The Private
Respondents, heirs of Cari-an executed a Deed of Sale in favor of petitioners Escanlar and Holgado.
Petitioners paid P50,000.00 as a form of downpayment, but was unable to pay the remaining balance
(paid only 12 installments). Being former lessees, petitioners continued in possession of the said lots,
and continued to pay rent. Private Respondent later sold the said lots to the Chua spouses. Private
Respondent then filed an action for cancellation of sale against petitioners, for failure to pay the
balance. Petitioners however, sold their rights and interests over the said lots to Jayme, and turned
over possession.

The Regional Trial Court ruled that the Sale to petitioners was nullified since all the
properties of the estate had been transferred and titled to in the name of the Chua spouses. On
appeal, the Court of Appeals affirmed, questioned deed of sale (one with petitioners) is a contract to
sell because it shall become effective only upon approval by the probate court and upon full payment
of the purchase price.

ISSUE:

Whether or not the sale was a contract to sell and therefore, private respondents may rescind the
contract the moment the buyer fails to pay.

HELD:

The sale of rights, interests and participation as to 1/2 portion pro indiviso of the two subject
lots is a contract of sale for the following reasons:

First, private respondents as sellers did not reserve unto themselves the ownership of the
property until full payment of the unpaid balance of P225,000.00.

Second, there is no stipulation giving the sellers the right to unilaterally rescind the contract
the moment the buyer fails to pay within the fixed period. Prior to the sale, petitioners were already
in possession of the subject property as lessees. Upon sale to them of the rights, interests and
participation as to the 1/2 portion pro indiviso, they remained in possession, not in concept of
lessees anymore but as owners through symbolic delivery known as traditio brevi manu.

Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the
vendee upon actual or constructive delivery thereof. In a contract of sale, the non-payment of the
price is a resolutory condition which extinguishes the transaction that, for a time, existed and
discharges the obligations created thereunder. The remedy of an unpaid seller in a contract of sale is
to seek either specific performance or rescission. In contracts to sell, ownership is retained by the
seller and is not to pass until the full payment of the price. Such payment is a positive suspensive
condition, the failure of which is not a breach of contract but simply an event that prevented the
obligation of the vendor to convey title from acquiring binding force. To illustrate, although a deed of
conditional sale is denominated as such, absent a proviso that title to the property sold is reserved in
the vendor until full payment of the purchase price nor a stipulation giving the vendor the right to
unilaterally rescind the contract the moment the vendee fails to pay within a fixed period, by its
nature, it shall be declared a deed of absolute sale.
 BANDONG VS AUSTRIA

FACTS:

This case is about the land sold by the plaintiff sometime in 1905 for 350 to Antonio
Ventenilla, since decease. The contact stipulates that the plaintiff reserves the right to repurchase
the land at the same price and not subject to interest on the money or the products of the land, but
in the month of March of any year, if we repurchase. However, it is only in 1913 that the vendors
offered to repurchase in the month of March. This offer was declined on the ground that the right to
repurchase had prescribed: a contention which is renewed by the defendant in this action, who is the
widow of original vendee, deriving title through him.

ISSUE:

Whether or not the right to repurchase the land has prescribed.

HELD:

No, the plaintiff right has still not prescribed. The court believes that the right to repurchase
expired at the end of four years from the date of the contract, relying in support of this ruling on the
provisions of article 1508 of the Civil Code, which are as follows: The right mentioned in the
preceding article (right to repurchase), in the absence of an express agreement, shall last four years
counted from the date of the contract. In case of stipulation, the period of redemption shall not
exceed ten years.

Evidently, the parties having expressly agreed that the vendors should have the right to
repurchase in the month of March of any year after the date of the contract, the only statutory
limitation placed upon them in the exercise of that right is the limitation found in the second
paragraph of article 1508 of the Civil Code cited above, which limits the power of the vendor, even by
express agreement, to reserve a right to repurchase for a longer period than ten years. We conclude,
therefore, that the provisions of the contract of sale, whereby the parties undertook by express
agreement to secure to the vendors a right to repurchase in the month of March of any year after
the date of the contract, were valid and binding upon the parties for a period of ten years from the
date of the contract but wholly without force and effect thereafter. It is admitted that the vendors
offered to repurchase the land in question in the month of March, 1913, less than eight years from
the date of the contract.
 REYES VS ROSALES

On July 29, 1902, Rivera sold a parcel of land to Reyes and Ordoveza for 800 pesos under
pacto de recto, on the condition, however, that the repurchase could not be made until after three
years from the date of the contract of sale. In this document Rivera states that he was of age. On
May 29, 1903, Rivera sold his right to repurchase to Rosales for 1,075 pesos. In the document
evidencing this sale, Rivera states that he is 23 years of age. Rosales, who is the plaintiff in this case,
alleges that in January, 1908, he tendered 800 pesos to Reyes and Ordoveza with the request that
the land be surrendered to him in accordance with the contract entered into between them and
Rivera in 1902, but that they refused to accept the money and comply with his request.

1. The first objection to the complaint is that is inconsistent because plaintiff asks that the
contract in question be annulled on the ground that Rivera was a minor when he entered into it in
1902, and then asks that the defendants be required to deliver the land to him upon payment to
them of 800 pesos, as per its terms. There is no basis for this objection for the reason that the
inconsistency alleged appears in the prayer for relief.

"The demand in the complaint is no part of the statement of the cause of action, and does
not give it character. The facts alleged do this, and, the plaintiff is entitled to as much relief as they
warrant."cralaw virtua1aw library

See also Philips on Code Pleading (sec. 205), where it is said: "The prayer for relief, though
part of the complaint, is no part of the cause of action. A single right of action may entitle the
plaintiff to several kinds of relief, and several rights of action may authorize but a single relief."cralaw
virtua1aw library

The contract of 1902 cannot be annulled, however, for the reason that Rivera ratified it by
entering into the contract with Rosales in 1903, wherein he stated he was 23 years of age, thus
making applicable the provisions of article 1311 (Civil Code), which provides: "It shall be understood
that there is an implied confirmation when, being aware of the cause of the nullity and such cause
having ceased to exist, the person who may have a right to invoke should execute an act which
necessarily implies his wish to renounce such a right."cralaw virtua1aw library

2. The next objection to the complaint is that the right to repurchase had expired before
Rosales attempted to exercise it. This is based upon the first paragraph of article 1508 of the Civil
Code, which reads: "The right (to repurchase) . . . in the absence of an express agreement, shall last
four years counted from the date of the contract."cralaw virtua1aw library

The contract of 1902 provided that the right to repurchase could not be exercised within
three years from the date of the contract.
 The second paragraph of article 1508 reads: "Should there be an agreement, the period shall
not exceed ten years."cralaw virtua1aw library

Under the Partidas, as under the Roman Law, no attempt was made to limit the duration of
contracts with pacto de retro. Unless limited by the contract of the parties, it was generally held that
the right to repurchase was perpetual. By its decision of May 12, 1875, the supreme court of Spain
first attempted to place a restriction upon the length of such contracts by holding that they gave rise
to a personal prescription of actions. (23 Scaevola, 767.) In recent times, however, practically all
those countries where such sales are recognized have found it advisable to limit the time within
which the right of redemption can be exercised. (4 Bonel’s Com. on the Civil Code, 519.) As stated in
Yadao v. Yadao (20 Phil. Rep., 260): "A pacto de retro is, in a certain aspect, the suspension of the
title to the land involved. We are of the opinion that it was the intention of the legislature to limit the
continuance of such a condition, with the purpose that the title to the real estate in question should
be definitely placed, it being, in the opinion of the legislature, against public policy to permit such an
uncertain condition relative to the title to real estate to continue for more than ten years."cralaw
virtua1aw library

It might be added that there are many characteristics of these sales with pacto de retro
which stamp them as being in the nature of usurious loans. The property is usually sold for a much
smaller sum than it is actually worth, as witness the present case, where Rivera sold the property to
the defendants for eight hundred pesos, and then sold his right to repurchase for a considerably
larger amount. During the time the right to repurchase lasts the purchaser either takes possession of
the property and receives the fruits thereof, or the vendor becomes his tenant and pays him rent for
the use of the property. The chief inducement for purchasing property under such conditions is
either the hope that the vendor will not be able to raise the amount of the redemption price within
the time allowed, or else the prospect of enjoying the products of a property acquired at less than its
market value. Doubtful conditions in such a contract should not therefore be construed too harshly
against the vendor.

A stipulation in the contract providing that the right to repurchase is suspended for a certain
time is undoubtedly a benefit to both the vendor and the purchaser. To the latter it affords a basis
upon which he may plan his management and use of the property with some accuracy during the
time it is in his possession, as he is no danger of being suddenly ousted by the vendor’s confronting
him with the redemption price and demanding the surrender of the property. And for the security
thus afforded to the purchaser in the enjoyment of the property he will be more inclined to pay a
greater sum for it than he would in the absence of such a provision, thereby benefiting the vendor.

In the present case, the only stipulation of the parties with reference to the right to
repurchase was that it could not be exercised within three years from the date of the sale. Had it not
been for this condition, it is evident that the right would have expired four years from the date of the
sale. But if it were held that, regardless of such a provision, the redemption right expires within four
years from the date of the contract unless there is a special provision as to how long this right, once
effective, shall continue, many otherwise perfectly valid contracts can be conceived in which the
redemption privilege would be unenforceable. For instance, if the stipulation in question had
provided that the right to redeem could not be exercised within five years from the date of the
contract, it is quite apparent that, according to the argument advanced by the defendants, the
vendor could not have redeemed the property at all, for the right to do so would have expired one
year previously.

In such a case the question arises, Upon what basis must the duration of the right to
repurchase be calculated? Any such contract must necessarily be terminated ten years from the date
of its execution, but should the vendor have the privilege to exercise this right for the balance of the
ten years, or should he be allowed only for years on the ground that there was no express agreement
of the parties upon this point? In all such case it would seem that the vendor should be allowed four
years from the expiration of the time within which the right to redeem could not be exercised, or in
the event that four years would extent the life of the contract beyond ten years, the balance of the
ten year period, on the ground that the vendors, where the right to redeem is not thus suspended
and no express agreement as to length of time during which it may be exercised is made, are also
allowed four years. This construction, it must be conceded, is the most logical and just.

"When a statute or instrument is equally susceptible of two interpretations, one in favor of

natural right and the other against it, the former is to be adopted." (Sec. 294, Code Civ. Proc.)

The provisions of article 1508 are strictly analogous to the statute of limitations upon
actions. As the date on which a right of action expires is determined by the date it accrues and not be
some prior event which might be considered as its inchoate beginning, so the right to repurchase is
to be calculated from the day upon which that right may be freely exercised by the vendor, subject,
of course, to the ten-year limitation of the law. Manresa (vol. 10, p. 303) touches upon this
question:jgc:chanrobles.com.ph

"The starting point for calculating it (the redemption period) we understand is always the
date of the contract, since, although the Code only so states in the first of the two said cases, in the
second it is expressly prohibited that the period shall exist more than ten years, and it is clear that it
would last longer if it were agreed, for example, that it would not begin to run until a certain time
had elapsed after the date of the contract. This agreement, in so far as it might imply an extension of
ten years, we believe would be null as being contrary to the manifest spirit of the law."cralaw
virtua1aw library

We are of the opinion that the effect of the express stipulation or agreement in the contract
which we have been discussing was to extend the life of the contract to seven years from the date of
its execution.

3. The next point raised is that the complaint is defective in that it does not allege that the
redemption price was judicially deposited upon the refusal of the defendants to surrender the
property. In support of this contention counsel for the defendants rely upon the case of Angao v.
Clavano (17 Phil. Rep., 152); 10 Manresa 337,338; and a decision of the supreme court of Spain of
October 16, 1906, cited by Manresa.

Manresa and the supreme court of Spain in its decision of October 16, 1906, rely chiefly
upon the second paragraph of article 1618 of the Spanish Code of Civil Procedure, wherein it is
provided that in order to perfect a right of action for the recovery of things sold with the right of
redemption, the redemption price must be deposited or, in the event that the price cannot be
ascertained, a bond for its payment be executed. The is a matter of procedure only, and the
provisions of that code are no longer in effect in this country.

An analogy might be drawn from the provisions of section 465 of Act No. 190, which reads:
"The judgment debtor, or redemptioner, may redeem the property from the purchaser, at any time
within twelve months after the sale, on paying to the purchaser the amount of his
purchase, . . ."cralaw virtua1aw library

This language is fully as strong as the language of article 1518 of the Civil Code, which
provides that the "vendor cannot exercise the right of redemption without returning to the vendee
the price of the sale." Neither section 465 nor article 1518 makes any provision for cases where the
possessor of the property refuses to accept the redemption price and surrender the property. This
court, in Brusas v. Infante (13 Phil. Rep., 217), where a judgment debtor sought to redeem property
sold under execution and the purchaser refused to accept the price paid for it and surrender the
property, held that the offer having been proven, it was not necessary for the judgment debtor to
deposit the redemption price.

Again, in the Chattel Mortgage Law, Act No. 1508, a chattel mortgage is defined as a
conditional sale, "the condition being that the sale shall be void upon the seller paying to the
purchase a sum of money or doing some other act named. If the condition is performed according to
its terms, the mortgage and sale immediately become void and the mortgagee is thereby divested of
his title." (Sec. 3.)

Section 8 provides: "If the mortgage . . . after performance of the condition before or after
the breach thereof, or after tender of the performance of the condition . . ."cralaw virtua1aw library

A chattel mortgage, it will be observed, is in many respects similar to a sale under pacto de
retro, and under section 8 of the Chattel Mortgage Law, a tender of performance is sufficient.

But the settled rule in this jurisdiction upon the precise question involved in this case is that
an offer of the money, where the sum required is fixed and certain, is sufficient, and that it is
unnecessary to deposit it.
 In Lafont v. Pascasio (5 Phil. Rep., 391), the right to repurchase expired on April 30. On April
25 the vendor caused a notary public to deliver a letter to his vendee requesting that she deliver the
original document of sale to the notary in order that he might draw up the contract of repurchase.
This she refused to do, and the next day the vendor sent her another letter by the same notary,
advising her that the latter had in his possession the necessary money to redeem the property, and
requesting that she accept the same and execute the proper contract of repurchase. This proposition
was also refused, and on April 30, the vendor deposited the amount of the redemption price with
the Court of First Instance. This court said:jgc:chanrobles.com.ph

"The question remains whether the plaintiff did all that he was required by law to do in order
to preserve the right secured to him by the contract.

x x x

"In regard to the payment of the money, the plaintiff did all that the law required him to do.
He offered to pay it to the defendant and deposited it in the hands of a rotary for her.

x x x

"It is not necessary to decide the question as to whether the six months mentioned in the
contract expired on the 30th day of April as claimed by the plaintiff or on the 28th day of April as
claimed by the defendant, for the plaintiff, on the 25th and 26th of April, did all that the law required
him to do to preserve his right to repurchase the property."cralaw virtua1aw library

In Villegas v. Capistrano (9 Phil. Rep., 416), the right to repurchase expired on May 13. The
vendor, on that date, sent an agent to the residence of the vendee with the necessary money, who
found only his wife at home. She told him that she had no authority to act for her husband, but that
she would inform him on his return of what had taken place. The money was offered to the
defendant himself on May 15, but was refused on the ground that the agent had no authority to act
for the vendor. Between this time and June 25 various attempts were made to pay the money but
without but without avail, and on the latter day the agent deposited the redemption price with the
Court of First Instance. The court, after quoting extensively from Lafont v. Pascasio, supra,
said:jgc:chanrobles.com.ph
 "That case is decisive of this. When the plaintiff, on the 13th of May, by his duly authorized
agent, presented himself at the residence of the defendant and offered to deliver the money, he did
all that the law required him to do to preserve his rights to repurchase. The subsequent deposit of
the amount with the clerk of the court was simply additional security for the defendant, but was not
a necessary act to be performed by the plaintiff."cralaw virtua1aw library

In Fructo v. Fuentes (15 Phil. Rep., 362), the right to repurchase expired on September 16. On
that day an agent of the vendor called at the vendee’s residence and remained there all day awaiting
the latter, who was not at home. The agent offered the money to the vendee’s wife, but she refused
to accept it, telling him to await her husband’s return. On the following day, the agent again called at
the vendee’s residence but could not find him at home. On the following day the agent was
successful in finding the vendee at home, but the latter refused to recognize him as an agent of the
vendor and declined to accept the money. On the 20th of September the vendor personally offered
his vendee the redemption price, but the latter refused to accept it. In disposing of this case it was
said:jgc:chanrobles.com.ph

"Under these findings of fact it is clearly shown that the plaintiff, not only on the day when
the contract fell due made an effort to pay the amount due for the purpose of repurchasing the land
in question, but on several consecutive days was this effort made. Without intending to hold that the
vendor of land under a pacto de retro does not lose his right to repurchase the same on the day of
the maturity of the contract, yet where, as in the present case, at the time of the maturity of the
contract, he makes a diligent effort to repurchase, as was done in the present case, and fails by
reason of circumstances over which he has no control, we are of the opinion and so hold that he
does not lose his right to repurchase his land, by reason of his failure to repurchase on the day of
maturity."cralaw virtua1aw library

In Retes v. Suelto (20 Phil. Rep., 394), the above three cases were cited and affirmed upon
the following state of facts. The right to redeem expired on March 16, and on February 24 the vendor
tendered the amount due, but the vendee refused to accept it. On March 5 the vendor cited his
vendee to appear before a justice of the peace and made a judicial offer to pay the amount of the
redemption price, which the purchaser again refused to accept. The money was then deposited to
the credit of the purchaser with the municipal president. This court said:jgc:chanrobles.com.ph

"From the record it appears that the plaintiff had done all that he was required to do for the
purpose of securing the return of the possession of the land in question and was entitled to the
possession of the same from and after the date on which he made legal offer to pay the amount of
the indebtedness due the defendant. (Lafont v. Pacasio, 5 Phil. Rep., 391.) When a person having the
right under a contract of pacto de retro makes a bona fide offer to repurchase, in accordance with
the agreement and tenders the necessary amount of money, he has done all the law requires of him
to preserve his right and to entitle him to the possession of the property. (Villegas v. Capistrano, 9
Phil. Rep., 416; Fructo v. Fuentes, 15 Phil Rep., 362.)"
 In the case of Angao v. Clavano (17 Phil. Rep., 152), the facts were these: Plaintiff entered
into a contract with the defendant on September 25, 1900, whereby a parcel of land owned by him
was sold to Clavano with the right to repurchase, to be exercised within one year after the marriage
of the vendor. The vendor married on September 8, 1903, and did not offer to repurchase the
property until August, 1906. In this case no motion was made for a new trial under section 497 of the
Code of Civil Procedure, so the findings of fact were not before this court. It was
said:jgc:chanrobles.com.ph

"On September 9, 1904, the year immediately following the date of defendant’s marriage
had already fully elapsed and, up to the 8th of September of the said year, that being the last day of
the year following his marriage, he had not yet repurchased the property, therefore, from the said
date, September 9, defendant’s right had already lapsed, for the year had passed and this last date
arrived without his having repurchased the land."cralaw virtua1aw library

The further remarks of the court to the effect that if the vendee refuses to accept the
amount of the price when offered it must be placed on deposit in order to prevent title vesting
absolutely in the vendee were purely obiter. Such a rule has certainly never been adopted in this
jurisdiction. On the contrary, the settled rule, as evidenced by the four decisions discussed above is
that a bona fide offer of the of the redemption price, where that is certain and fixed, is sufficient to
preserve the vendor’s right of action in cases where the offer is refused. These four decisions dealing,
as they do, with the rule of property, and extending over a period of years, cannot be lightly
disregarded. They must be held to have crystallized the rule which must obtain in this jurisdiction.

For the above reasons, we are of the opinion that the complaint alleges sufficient facts to
constitute a cause of action. The judgment appealed from is reversed, and the cause remanded, with
instructions to require the defendants to answer without costs.
 MEDEL VS FRANCISCO

On May 16, 1917, Carlos N. Francisco sold the land belonging to him, described in transfer
certificate of title No. 3598 to Telesforo Calasan with a right of repurchase, which was noted on the
back thereof on May 16, 1917. Telesforo Calasan, in turn, sold this land to Ponciano Medel on
December 4, 1926.

On January 17, 1927 Ponciano Medel brought this action in the Court of First Instance for the
purpose of compelling the register of deeds to cancel the notation of the right of repurchase on the
title to this land on account of the time within which to exercise said right having expired, Ponciano
Medel contends that the period within which to exercise this right is four years while Carlos N.
Francisco, on the other hand, contends that it is ten years. The trial court admitting that the period is
ten years and it not having expired yet when this action was filed, denied the petition.

The only question involved in this appeal is whether the period for the repurchase of the
land, which Carlos N. Francisco reserved the right to do when the sale was made, is four or ten years.
The stipulation is noted on the title in the following terms:

"This sale is made with the condition that the vendor Carlos N. Francisco reserves the right to
repurchase, at the cost price of this sale, a fourth part of the land above described from which he can
remove earth for the sole and exclusive use of his earthen jar factory when, the same is established."

According to article 1508 of the Civil Code, the right of repurchase, in the absence of any
express agreement, lasts four years and, in case of stipulation, the period shall not exceed ten years.

A term means a period of time within which an act may, or must, be performed or a fact take
place. Applied to the right of repurchase, it is the time within which this right may be exercised. It
necessarily involves a beginning and an end of time. The clause of the contract quoted does not
express, in this sense, a stipulation of time. According to its terms, the vendor Carlos N. Francisco
reserved the right to redeem the land when he might have an earthen jar factory. This does not
mean that he could repurchase the land any time before he had the earthen jar factory, but when he
had it . That is especially so when it is taken into consideration that there is a condition imposed for
the repurchase of the land, to wit that it is to be used solely and exclusively for the manufacture of
earthen jars. According to this clause of the contract, it is evident that the establishment of an
earthen jar factory is the fact that would give birth to the right of repurchase. In this sense, what is
really stipulated in the clause is the suspension of the right of repurchase until the earthen jar factory
has been established. If this is all, the meaning of this clause is then clear that the parties did not
stipulate any time for exercising the right of repurchase; and, in accordance with the law, the right
lasts no longer than four years from the date of the contract, which period has already expired
without having been made use of.
 These four years must be counted from the date of the contract notwithstanding the
suspension of the exercise of the right of repurchase, because the stipulation of this suspension is
null and void, it having exceeded four years, which constitutes the legal period of this right. (Santos
vs. Heirs of Crisostomo and Tiongson, 41 Phil., 342.)

The judgment appealed from is reversed and it is held that the right of repurchase reserved
by the vendor Carlos N. Francisco has expired, and the cancellation by the register of deeds of the
notation of this right on the title must be, as it is hereby, ordered, without special pronouncement as
to costs. So ordered.
 BALUYOT VS VENEGAS

FACTS:

Plaintiffs are the heirs of Crisanto Baluyot, who in life sold a parcel of land to defendant
Eulogio E. Venegas. The sale, executed on July 24, 1951 the condition of repurchase which stipulates
that at anytime after the expiration of the period of ten (10) years to be computed from October 1,
1951, the Vendor, his heirs or successors-in-interest has the option and priority to purchase the afore
described parcel of land for the same consideration of P4,000.00.

On July 18, 1963 plaintiffs filed a complaint against the defendant compelling them to convey
the land pursuant to the agreement stipulated in the contact. The CFI ruled in favor of the plaintiff
but the CA reversed its decision ruling that the stipulation in the contract giving the vendor the
"option" to purchase back the land after 10 years is void and contrary to law. Hence, reason for this
petition.

ISSUE:

Whether or not the plaintiff has the right to repurchase the land after 10 years.

Held: No, the petition is devoid of merits. The contract here was executed in July 1951. The
option or right to repurchase was sought to be exercised twelve (12) years thereafter, or in 1963.
Indeed, by express agreement it could not have been exercised except "after the expiration of the
period of ten (10) years . . . from October 1, 1951." Such a stipulation is not legally feasible because it
is prohibited by Article 1606, which limits the period for repurchase, in case there is an agreement,
to the maximum of ten years from the date of the contract. In other words, the right to repurchase in
the present case did not even arise, since by the time it was supposed to begin it was already
interdicted by the law.

Plaintiffs stress the obligatory force of obligation arising from contract (Art. 1159 Civil
Code). But the same code provides in Article 1306 that while the contracting parties are free to
establish any claims or conditions they may deem advisable, the same must not be contrary to law,
morals, good customs, public order or public policy.

It is suggested that the defense in this case is in the nature of prescription of action and
consequently may not be pleaded for the first time on appeal, as defendant does in this case.
However, Article 1606 of the Civil Code concerning the period of repurchase is not a statute of
limitation. It is a rule of substantive law which goes into the validity of the period agreed upon, and
requires no affirmative plea in the answer to be applicable.
 TACDORO VS ARCENAS

On December 22, 1958, petitioner-appellee Juan Tacdoro filed in the Court of First Instance
of Davao a petition (docketed as Misc. Case No. 374) alleging, among other things, that appellant
Jesus Arcenas had sold to the petitioner, con pacto de retro, a residential house situated at Bolton
Street, Davao City, and covered under Tax Declaration No. R-1452; that February 16, 1957 was the
original expiry dated fixed by the parties for the repurchase, but, upon subsequent agreement, the
period was extended for another year counted from the aforesaid date; and that the term of the
repurchase had expired without the right of repurchase having been exercised by the vendor.
Accordingly, petitioner prayed that the court order a judicial consolidation of ownership over the
property sold pursuant to the provisions of Article 1607 of the Civil Code.

The petition was heard on December 24, 1958, the date set by the petitioner. Appellant was
served a copy of the said petition two days previously, or on December 22, 1958; but no summons
was served by the court.

On January 6, 1959, the court a quo entered an order consolidating ownership of the
property in question in favor of the petitioner. On January 10, 1959, appellant filed a motion for
reconsideration, contending that the lower court had no jurisdiction to consider the petition of the
appellee for lack of summons, and that the denominated pacto de retro sale was in fact an equitable
mortgage. This motion was denied by the court in its order of January 21, 1959.

From the two orders aforesaid, Jesus Arcenas appealed to us on points of law.

The appeal is well taken. Article 1607 of the Civil Code states:jgc:chanrobles.com.ph

"In case of real property, the consolidation of ownership in the vendee by virtue of the
failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the
Registry of Property without a judicial order, after the vendor has been duly heard." (Italics supplied)

The code did not provide for any specific procedure to be observed in securing the judicial
order above-mentioned. Accordingly, we should fall back on the ordinary rules of procedure
applicable. As correctly pointed out by the appellant, the petition to consolidate ownership under
the article aforequoted does not partake of the nature of a motion, 1 it not being merely an incident
to an action or a special proceeding (see Sec. 1, Rule 26, Rules of Court; 60 C.J.S. 7), but is an
ordinary civil action cognizable by the Court of First Instance. As such ordinary action, it should be
governed by the rules established for summons found in Rule 7 of the Rules of Court, stating, among
other things, that upon the "filing of the complaint, the clerk of court shall forthwith issue the
corresponding summons to the defendant" (Sec. 1). The defendant would then be entitled to a
period of fifteen (15) days from service of such summons within which to file either a motion to
dismiss the petition (Sec. 1, Rule 8) or an answer (Sec. 1, Rule 9). The failure of the court to properly
observe these rules is sufficient cause for validly attacking its consequent judgments and or orders
even on jurisdictional grounds (See Salmon & Pacific Commercial Co. v. Tan Cueco, Et Al., 36 Phil.,
556).

That the vendor or retro should be made a party-defendant to the proceedings and,
therefore, be entitled to notice of the same, is clearly inferable from the codal provision that the
judicial order consolidating ownership in the vendee a retro shall not issue unless "after the vendor
has been duly heard" (Art. 1607, Civil Code, supra); which statement would also imply that the
proceedings therein to be taken are in no way to be construed as merely summary in nature. This
conclusion is further fortified by other provisions of the new Civil code such as articles 1602, 1603,
1604, 1605 and 1606, which are all indicated of the legislative intent to accord the vendor a retro the
maximum safeguards for the protection of his legal rights under the true agreement of the parties.
Experience has demonstrated too often that many sales with right of repurchase have been devised
only to circumvent or ignore our usury laws and for this reason, the law looks upon them with
disfavor (Report of the Code Commission, pp. 63-64). When, therefore, Article 1607 speaks of a
judicial order after the vendor shall have been duly heard, it contemplates none other than a regular
court proceeding under the governing Rules of Court, wherein the parties are given full opportunity
to lay bare before the court their real covenant. Furthermore, the obvious intent of our Civil Code, in
requiring a judicial confirmation of the consolidation in the vendee a retro of the ownership over the
property sold, is not only to have all doubts over the true nature of the transaction speedily
ascertained and decided, but also to prevent the interposition of buyers in good faith while such
determination is being made. Under the former method of consolidation by a mere extra-judicial
affidavit of the buyer a retro, the latter could easily cut off any claims of the seller by disposing of the
property, after such consolidation, to strangers in good faith and without notice. The chances of the
seller a retro to recover his property would thus be nullified, even if the transaction were really
proved to be a mortgage and not a sale.

The Court below, therefor, erred in considering that judicial consolidation of ownership
under Article 1607 of the new Civil Code can be had by a mere motion with three days’ notice,
instead of requiring an independent proceeding, for which docket fees are chargeable. As aforesaid,
a motion could only exist as an incident to a principal suit or proceeding.

It is still premature to decide here and now whether the agreement in question is a true
pacto de retro sale or in reality a mere equitable mortgage. Upon the other hand, the arguments
advanced by the appellant convince us that his exceptions to the orders appealed from were not
taken merely for frivolous reasons.

Wherefore, the orders appealed from are set aside; and appellant Jesus Arcenas is hereby
given a period of 15 days from the finality of this judgment within which to file in the court below his
answer to the petition. The case is ordered remanded to the lower court for further proceedings in
accordance with this opinion. Costs in this instance against petitioner-appellee Juan Tacdoro.