LLOYD'S ENTERPRISES AND CREDIT CORPORATION, PETITIONERS

VS
SPS. FERDINAND AND PERSEVERANDA DOLLETON, RESPONDENTS

[G.R. No. 171373, June 18, 2008]

FACTS:

Spouses Dolleton, were the registered owners of a parcel of land covered by TCT No. 153554 with a four-door apartment building being leased
to various tenants. Respondents mortgaged the property to a certain Santos to secure a loan in the amount of P100,000.00. Upon payment of
the loan on 15 August 1994, 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, Gagan and Gueverra mortgaged said property with TCT No. 197220 to petitioner LECC for second loan of P542,928.00
and was annotated on said Title. However, Gagan and Guevarra failed to pay the loan upon maturity. Thus, petitioner foreclosed mortgaged
property being the highest bidder and was not redeemed within the one-year period. Hence, ownership was consolidated in favor of petitioner
and was issue a new TCT No. 210363 cancelling TCT No. 197220.

Petitioner then sent notices to the apartment tenants on the transfer of ownership and rentals were not remitted to respondents anymore,
prompting the latter to cause the annotation of an adverse claim on TCT No. 210363.

Respondents prayed among others for the restoration of TCT No. 153554 and nullification of the Deed of Absolute Sale, and the extrajudicial
foreclosure proceedings. They denied having executed the Deed of Absolute Sale and alleged that they had merely offered to sell to Gagan the
subject property for P900,000.00 on installment basis so that they could pay their loan obligation to Santos. After Gagan had initially paid
P200,000.00, they entrusted the owner's copy of TCT No. 153554 to him. Gagan was unable to pay the balance of the purchase price, rather she
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.

Respondents also faulted petitioner for failing to make adequate inquiries on the true ownership of the property considering the suspicious
circumstances surrounding Gagan's and Guevarra's request for loan immediately after the issuance of the new certificate of title.

The RTC declared the Deed of Absolute Sale between Gagan and Dolleton as spurious and directed the reconveyance of the property to the
true and genuine owners, the spouses Dolleton. CA affirmed RTC’s decision.

ISSUE:

WON Petitioner is a Mortgagee and Buyer in Good Faith

RULING:

The Court affirmed the reconveyance of the property to respondents Dolleton as petitioner is not a mortgagee in good faith, hence, foreclosure
was not valid. Petitioner failed 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, who is receiving the rental payments therefore.

Appellant LECC merely submitted in evidence forms for credit investigation on the borrower's capacity to pay, there is no showing that they
actually inspected the property offered as collateral. Had precautionary measure been taken, the lending company's representatives would
have easily discovered that the four (4)-door apartment in the premises being mortgaged is rented by tenants and they could have been
provided with information that plaintiffs-appellees are still the present lessors/owners thereof.

Moreover, 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. 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. The failure of respondent to take
such precautionary steps is considered negligence on its part and would thereby preclude the defense of good faith.
Sanchez vs. Rigos 45 SCRA 368 June 1972
FACTS:

In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant Severina Rigos "agreed, promised and
committed ... to sell" to plaintiff-appellee Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date, a parcel of land situated
in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be deemed "terminated and elapsed," if “Sanchez
shall fail to exercise his right to buy the property" within the stipulated period. On March 12, 1963, Sanchez deposited the sum of Pl,510.00
with the CFI of Nueva Ecija and filed an action for specific performance and damages against Rigos for the latter’s refusal to accept several
tenders of payment that Sanchez made to purchase the subject land.

Defendant Rigos contended that the contract between them was only “a unilateral promise to sell, and the same being unsupported by any
valuable consideration, by force of the New Civil Code, is null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by
virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land
described in the option. The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially
consigned, and to execute in his favor the requisite deed of conveyance. The Court of Appeals certified the case at bar to the Supreme Court for
it involves a question purely of law.

ISSUE:

Was there a contract to buy and sell between the parties or only a unilateral promise to sell?

COURT RULING:

The Supreme Court affirmed the lower court’s decision. The instrument executed in 1961 is not a "contract to buy and sell," but merely granted
plaintiff an "option" to buy, as indicated by its own title "Option to Purchase." The option did not impose upon plaintiff Sanchez the obligation
to purchase defendant Rigos' property. Rigos "agreed, promised and committed" herself to sell the land to Sanchez for P1,510.00, but there is
nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from
the price" stipulated for the sale of the land. The lower court relied upon Article 1354 of the Civil Code when it presumed the existence of said
consideration, but the said Article only applies to contracts in general.

However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the case at bar because the latter’s 2nd paragraph
refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." Since there may be no valid contract
without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal,
his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Upon mature
deliberation, the Court reiterates the doctrine laid down in the Atkins case and deemed abandoned or modified the view adhered to in the
Southwestern Company case.

Riviera Filipina Inc. vs. CA

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.

Parañaque Kings Enterprises, Inc. vs Court of Appeals 268 SCRA 727. February 26, 1997
Facts:

Defendant Catalina Santos is the owner of 8 parcels of land located in Parañaque. Frederick Chua leased the property of defendant and
assigned all rights and interest and participation in the leased property to Lee Ching Bing by deed of assignment. Lee Ching Bing also assigned all
his rights and interest in the leased property to Parañaque Kings Enterprises, Inc. All of these contracts/deeds were registered.

Paragraph 9 of the assigned leased (sic) contract provides among others 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;

Defendant Santos sold the eight parcels of land subject of the lease to Defendant David Raymundo, for a consideration of P5Million, in
contravention of the contract of lease, for the first option or priority to buy was not offered by defendant Santos to the plaintiff. Santos, realizing
the error, she had it reconveyed to her for the same consideration of P5Million and subsequently the property was offered for sale to plaintiff
for the sum of P15Million, however the period of 10 days to make good of the offer expired. Another deed of sale was executed by Santos in
favor of Raymundo for consideration of P9Million. Hence, the petitioner filed a complaint before the RTC.

RTC dismissed the complaint for lack of a valid cause of action. It ratiocinated that Santos complied with the lease agreement by offering
the properties for sale to the plaintiff and there was a definite refusal on the part of the plaintiff to accept the offer. CA affirmed in toto the
ruling of RTC.

Issue: Whether or not there is valid cause of action.

Ruling: Yes. The principal legal question, as stated earlier, is whether the complaint filed by herein petitioner in the lower court states a valid
cause of action. Since such question assumes the facts alleged in the complaint as true, it follows that the determination thereof is one of law,
and not of facts. There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts,
and there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts.

A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever
law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right, and (3) an act or omission
on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which
the latter may maintain an action for recovery of damages.

A careful examination of the complaint 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 decision of the RTC and CA are reversed and set aside. The case is remanded to the RTC for further proceedings.
 SERGIO AMONOY, petitioner, v. SPOUSES JOSE GUTIERREZ AND ANGELA FORNILDA,
respondents.
G.R. No. 140420. February 15, 2001

Facts:

Amonoy was the counsel of the successors of the deceased Julio Cantolos for the settlement of
the latter’s estate. On January 1965, the lots were adjudicated to Asuncion Pasamba and Alfonso
Formilda. On January 20, 1965, Pasamba and Formilda executed a deed of real estate mortgage
on the said two lots adjudicated to them, in favor of Amonoy to secure the payment of his
attorney’s fees. But on August 6, 1969, after the taxes had been paid, the claims settled and the
properties adjudicated, the estate was declared closed and terminated. When Pasamba and
Formilda passed away, Formilda was succeeded by the spouses Gutierrez. On January 21, 1970,
Amonoy filed for the closure of the two lots alleging the non-payment of attorney’s fees. The
herein respondents denied the allegation, but judgment was rendered in favor of Amonoy.

Still for failure to pay attorney’s fees, the lots were foreclosed. Amonoy was able to buy the lots
by auction where the house of the spouses Gutierrez was situated. On Amonoy’s motion of April
24, 1986, orders were implemented for the demolition of structures in the said lot, including
herein respondents’ house. On September 27, 1985, David Formilda petitioned to the Supreme
Court for a TRO for the suspension of the demolition, which was granted, but the houses have
already been demolished. A complaint for damages was filed by respondents, which was denied
by RTC but granted by CA, thus this case.

Issue: Whether or not the CA erred in ruling that Amonoy was liable for damages to respondents.

Ruling: Petitioner invokes that it is well-settled that the maxim of damage resulting from the
legitimate exercise of a person’s rights is a loss without injury — damnum absque injuria — for
which the law gives no remedy, saying he is not liable for damages. The precept of Damnum
Absque Injuria has no application is this case. Petitioner did not heed the TRO suspending
the demolition of structures. Although the acts of petitioner may have been legally justified at
the outset, their continuation after the issuance of the TRO amounted to an insidious abuse of
his right. Indubitably, his actions were tainted with bad faith.

Article 19, known to contain what is commonly referred to as the principle of abuse of rights, sets
certain standards which may be observed not only in the exercise of one’s rights but also in the
performance of one’s duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. This must be observed. Clearly then,
the demolition of respondents’ house by petitioner, despite his receipt of the TRO, was not only
an abuse but also an unlawful exercise of such right. The petition is denied. The decision of CA is
affirmed.
JACOBUS BERNARD HULST VS. PR BUILDERS

FACTS:
a) Jacobus Bernhard and his wife, both Dutch nationals entered into a contract to sell with PR Builders
for the purchase of 210 sq m residential unit in Laurel, Batangas. b) PR Builders failed to comply with
their verbal promise to complete the project by June, and the petitioner filed before the Housing and
Land Use Regulatory Board (HLURB), a complaint for rescission of contract with interest, damages, and
attorney's fees. c) The HLURB Arbiter issued a Writ of Execution addressed to Ex-Officio Sheriff of
Batangas to execute his judgment. d) They require the Sheriff to levy first on respondents personal
property but unsatisfied so the Sheriff levied on respondent's 15 parcel of land. e) The respondent filed
an urgent motion to Quash the Writ of levy on the ground that the Sheriff made an overlevy since the
aggregate value of the property at 6500/sqm is P83,616,000 which was over and above the judgment
award. f) The Sheriff continue the auction and the 15 parcel of land was sold to Holly Properties Realty
Corporation for the amount of 5,450,653. g) The sum 5,313,040 was turned to petitioner in satisfaction
of his judgment award after deducting all the legal fees. h) The HLURB Arbiter and Director authorized
the Sheriff to set aside the levy of the said property because of its inadequacy of the price.

ISSUES:
1) Whether or not the contract to sell between Hulst and PR Builders is valid. 2) Whether or not the
Sheriff made a mistake in valuing the said properties in a public auction. 3) Whether or not the Court of
Appeals seriously erred in affirming the HLURB order in setting aside the levy made by Sheriff on the
said property.

RULING OF SUPREME COURT:

1) No. The contract to sell between Hulst and PR Builders is NULL and VOID. According to Sec.7 Art. XII of
1987 Constitution, "no private lands shall be transferred or conveyed except to individuals,corporations,
or associations qualified to acquire or hold lands of public domain". Since the petitioner and his wife are
Dutch nationals, they are disqualified to acquire private lands. The petitioner is entitled only to recover
what he has paid so he must return to respondent the amount P2,125,540 without interest in excess to
the proceeds of the auction sale. A void contract is equivalent to nothing, it produces no civil effect.

2) No. The Sheriff was left to his own judgment. Art.1470 states that, "Gross inadequacy of price does
not affect a contract of sale", but where the price is so low as to be shocking to the conscience of man,
the levy on said property made by Sheriff was hereby set aside by the Court.

3) Yes. Gross inadequacy of price does not nullify an execution sale 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. Thus, the respondent stood to gain rather than to be
harmed by the low sale of property. Also the Sheriff complied with the requisites given by the court to
"sell only a sufficient portion of levied properties as is sufficient to satisfy the judgment and the lawful
fees" which was satisfied in the auction. The HLURB had no factual basis to determine the value of levied
property and the Sheriff was left to his own judgment. He exercise it with care to satisfy the purposes of
writ. The Court of Appeals decided that the petition against the setting aside of Sheriff's levy by HLURB
Arbiter and Director was NULL and VOID and they are directed to issue the certificates of sale in favor
with the winning bidder, Holly Properties Realty Corporation.