Case Notes

Facts:
Petitioners bought a 200 square meter parcel of land covered by TCT # 20007 from respondents. The contract stipulated that petitioners had the right to choose which part of the land they would occupy. Petitioners exercised their right to chose 2-3 months afte the sale. They made their choice, occupied their parcel of choice and informed respondents of their choice.
At a later date, petitioners again bought another 200 square meter parcel of land that was past of the original lot where the previous land subject of the first contract was also a part of. The sale also contemplated a stipulation like in the first contract. Petitioners then chose and occupied the lot adjacent to their lot. However, both lots that petitioners occupied were already registered in the name of the Delgados. Both lots were part of a 3,500 square meter land sold by respondents to the Delgados in 1985. The Delgados acquired a title over the 3,500 square meter land on April 21, 1994. At the time of the sale to petitioners, the Delgados already own the said lots.
Petitioners were sued for unlawful detainer by the Delgados. However, petitioners entered into a compromise agreement with the Delgados and compromised the lots without informing the respondents.
Petitioners now demanded from respondents that they be allowed to choose again from the lot. When respondents refused, petitioners filed an action for specific performance at the trial court. Respondents filed an answer that they had already complied with their obligation to deliver. The trial court dismissed the respondents’ motion to dismiss. Respondents then appealed to the CA which reversed the trial court’s decision. Hence, this appeal.

Issue: W/N petitioners have a cause of action for specific performance against respondents.

Held: No

Ratio: The core of petitioners’ argument to support their action for specific performance was that respondents failed to deliver to them the lots subject matter of the sale, since what was delivered were not owned by respondents but by third persons. They also maintained that they were not able to exercise their choice on which lot to occupy as agreed upon them. We do not find these arguments tenable. The truth of the matter is that respondents were able to deliver said parcels of land to petitioners. It could not be said that petitioners were deprived of their choice on which parcel of land they were to buy and occupy. The fact that they even decided to buy the lot adjacent to the first lot they bought would clearly indicate that the said lots were their choice. Moreover, petitioners had been enjoying possession of the same until an unlawful detainer case was filed against them by third persons. After having enjoyed the property for sometime, petitioners cannot now come to court claiming that respondents failed to deliver the property subject of the sale.

Facts:
Petitioner is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are 2 parcels of land located at Pasig City. The properties were offered for sale for P52,140,000 in cash and was made to Atty. Dauz who was acting for respondent spouses. Atty. Dauz signified her clients’ interest in purchasing the properties for the amount given by petitioner, under the following terms: the sum of P500,000 would be given as earnest money and the balance would be paid in 8 equal monthly installments. However, petitioner refused the counter-offer.
Atty. Dauz wrote another letter amending the earlier proposal and enclosed the amount of one million pesos representing earnest money with the following conditions: that they be given exclusive option to purchase the property within 30 days from the acceptance of the offer; within the said period, both parties will negotiate on the terms and conditions of the purchase and the management secure the necessary Board approvals; and in the event of no agreement on the transaction, the earnest money be refunded to respondents in full upon demand.
Sobrecarey, petitioner’s vice-president, indicated his conformity to the offer by affixing his signature to the letter and accepted the earnest deposit of one million pesos. Upon request of respondents, Sobrecarey ordered the removal of the for sale sign on the properties.
Atty. Dauz and Sobrecarey commenced negotiations. Sobrecarey informed Atty. Dauz that petitioner is willing to sell the properties on a 90-day term. Atty. Dauz countered with an offer of 6 months. Sobrecaray informed Atty. Dauz that petitioner had not yet acted on her counter-offer. Atty. Dauz then proposed a four-month period of amortization. Atty. Dauz asked for an extension of 45 days within which to exercise her option to purchase the property, hoping that both parties reach an agreement on the matter. The request was granted.
Petitioner, thru its president and CEO, informed Atty. Dauz that because the parties failed to reach an agreement on the sale, it was returning the earnest-deposit. Respondents demanded the execution within five days of a deed of sale covering the properties. Respondents attempted to return the earnest-deposit but petitioner refused because respondents’ option to purchase has already expired.
Respondents then filed a complaint for specific performance against the RTC. Petitioner filed a motion to dismiss alleging that there was no cause of action because there was no perfected contract of sale. The RTC granted petitioner’s motion to dismiss. Respondents appealed to the CA which reversed the judgment of the RTC. The CA found that there was a perfected contract of sale as evidenced by the earnest money, with Art. 1482 of the Civil Code as legal basis. Petitioner filed a motion for reconsideration but was denied. Hence, this petition.

Issue: W/N there was a perfected contract of sale.

Held: No.

Ratio:
In the present case, the P1 million earnest-deposit could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the respondents’ term, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter: 1) that they be given exclusive option to purchase the property within 30 days; 2) during the option period, the parties would negotiate the terms and conditions of the purchase; and 3) petitioner would secure the necessary approvals while respondents would handle the documentation. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. Acceptance of the condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of the acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter. All that respondents had was just the option to buy the properties which they were not able to exercise because of a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents.
During the option period, the parties would negotiate the terms and conditions of the purchase. The stages of a contract of sale are negotiation, perfection, and consummation. In this case, the parties never got past the negotiation stage. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, they failed to arrive at a mutually acceptable terms of payment. Failure to agree on the manner of payment is tantamount to a failure to agree on the price. Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.

Facts:
Petitioner and Makati Agro Trading entered into a contract with private respondent for the sale of prilled Urea in bulk. The Sales Contract provided an arbitration clause which provided that any disputes arising under the contract shall be settled in London in accordance with the Arbitration Act 1950. Each party is to appoint an arbitrator and should they be unable to agree, the decision of an umpire appointed by them to be final. The arbitrators and umpire are all to be commercial men and resident in London and that this submission may be made a rule of the High Court of Justice in England by either party.
The vessel M/V Liliana Dimitrova loaded on board a shiopment of15,500 metric tons prilled Urea in bulk complete and in good order and condition for transport to Iloilo and Manila, to be delivered to petitioner. Three bills of lading were issued by the ship-agent in the Philippines, Maritime Factors, Inc. namely: Bill of Lading No. 1 covering 10,000 metric tons for discharge in Manila; Bill of Lading No. 2 covering 4,000 metric tons for unloading in Iloilo City; and Bill of Lading no. 3 covering 1,500 metric tons for discharge in Manila.
The shipment covered by Bill of Lading No. 2 was discharged in Iloilo City complete and in good order and condition. However, the shipments covered by Bill of Lading Nos. 1 and 3 were discharged in bad order and condition. Damages were valued at P683,056.29 including additional discharging expenses.
Consequently, petitioner filed a complaint with the trial courtfor breach of contract of carriage against Maritme Factors, Inc. as ship-agent in the Philippines for the owners of the vessel MV Liliana Dimitrova while privvate respondent was impleaded as charterer of the said vessel and proper pary to accord petitioner complete relief. Maritime Factors, Inc. filed its answer to the complaint while private respondent filed a motion to dismiss on the grounds that the complaint states no cause of action, that it was prematurely filed and that petitioner should comply with the arbitration clause in the sales contract. The motion to dismiss was opposed by petitioner contending that the arbitration clause is inapplicable inasumuch as the cause of action did not arise from a violation of the terms of the sales contract but rather for claims of cargo damages where there is no arbitration agreement.
The trial court ruled in favor of petitioner. The CA, upon appeal, reversed the trial court’s decision, stating that the arbitration provision in the sales contract is applicable in the present case. Hence, this petition.

Issue: W/N the phrase “any dispute arising under this contract” in the arbitration clause of the sales contract covers a cargo claim against the vessel (owners and/or charterers) for breach of contract of carriage.

Held: Yes

Ratio:
The sales contract is comprehensive enough to include claims for damages arising from carriage and delivery of the goods. As a general rule, the seller has the obligation to transmit the goods to the buyer, and concomitant thereto, the contracting of a carrier to deliver the same. Art. 1523 of the CC provides that in pursuance of a contract of sale, the seller is authorized to send the goods to the buyer, delivery of the goods to a carrier whether named by the buyer orn ot, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cses provided for in Article 1503, 1st, 2nd and 3rd paragraphs or unless a contrary intent appears. Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.

Facts:
Petitioner leased in favor of Rufina Morales a 210-square meter lot. Subsequently, petitioner donated several parcels of land to the City of Cebu, which included the land occupied by Morales. Due to the donation effected by petitioner, the City of Cebu obtained title over the lot. Sometime later, the city sold the lot as well as the other donated lots at public auction in order to raise money for infrastructure projects. The highest bidder for the lot was one Hever Bascon but Morales was allowed to match the highest bid since she has a preferential right to the lot as actual occupant. Morales then paid the required deposit and partial payment for the lot.
Petitioner filed an action for reversion of donation against the City of Cebu. However, petitioner and the City of Cebu entered into a compromise agreement which the court approved. The agreement provided for the return of the donated lots to petitioner except those that have been utilized by the city. The lot which Morales occupied was returned to petitioner and was registered in its name.
Morales died during the pendency of the civil case. Apart from the deposit and partial payment, she was not able to make any other payments on the balance of the purchase price for the lot.
Morales’ heirs, herein respondents, wrote to the governor of Cebu asking for the formal conveyance of the lot to Morales’ surviving heirs, in accordance with the award earlier made by the City of Cebu. It was then followed by another letter of the same tenor to the governor. The requests remained unheeded. Respondents then filed an action for specific performance and reconveyance of the property against petitioner in the RTC. At the same time, they also consigned with the court the amount of P13,450 representing the balance of the purchase price which petitioner refused to accept.
Respondents said that the award at public auction of the lot to Morales constitutes a valid and binding contract entered into by the City of Cebu and that the lot was inavertedly returned to petitioner under the compromise judgment. They said that they could not pay the balance of the price due to confusion as to whom and where payment should be made. They prayed that judgment be rendered in their favor and that petitioner be compelled to execute a final deed of absolute sale in their favor.
Petitioner filed its answer but failed to present evidence despite several opportunities given, thus, it was deemed to have waived its right to present evidence.
The RTC ruled in favor of respondents, it having found out that there was a consummated sale between the City of Cebu and Morales. There was an offer to sell at a public auction and Morales, being the highest bidder, accepted the offer and paid the agreed downpayment. Petitioner, being the successor-in-interest of the City of Cebu, must be bound by the contract lawfully entered into by the former. The CA, upon appeal, affirmed in toto the assailed decision. Hence, this appeal.

Issue: W/N there was a perfected contract of sale between Morales and the City of Cebu.

Held: Yes

Ratio:
The appellate court correctly ruled that petitioner, as successor-in-interest of the City of Cebu, is bound to respect the contract of sale entered into by the latter pertaining to the parcel of land. The City of Cebu was the owner of the lot when it awarded the same to respondents’ predecessor-in-interest, Morales, who later became its owner before the same was erroneously returned to petitioner under the compromise judgment. The award is tantamount to a perfected contract of sale between Morales and the City of Cebu, while partial payment of the purchase price and actual occupation of the property by Morales and respondents effectively transferred ownership of the lot to the latter. This is true notwithstanding the failure of Morales and respondents to pay the balance of the purchase price.
A sale by public auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in other customary manner. It does not matter that Morales merely matched the bid of the highest bidder at the said auction sale. The contract of sale was nevertheless perfected as to Morales, since she merely stepped into the shoes of the highest bidder.
Consequently, there was a meeting of minds between the City of Cebu and Morales as to the lot sold and its price, such that each party could reciprocally demand performance of the contract from the other. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. The elements of a valid contract of sale under Art. 1458 of the CC are: 1) consent or meeting of the minds, 2) determinate subject matter and 3) price certain in money or its equivalent. All these elements were present in the transaction between the City of Cebu and Morales.
There is no merit in petitioner’s assertion that there was no perfected contract of sale because no Contract of Purchase and Sale was ever executed by the parties. As previously stated, a contract of sale is a consensual contract that is perfected upon a meeting of minds as to the object of the contract and its price. Subject to the provisions of the Statute of Frauds, a formal document is not necessary for the sale transaction to acquire binding effect. For as long as teh essential elements of a contract of sale are proved to exist in a given transacton, the contract is deemed perfected regardless of the absence of a formal deed evidencing the same.

Facts:
PEtitioner is a private corporation based in Cebu City and the registered owner of a lot with an area of 22,214 square meters situated in Liloan Cebu. Adjacent to the lot of petitioner are 3 parcels of land with a total combined area of P3,751 square meters which was sold by one Hermogenes Mendoza to respondents. Petitioner learned of the sale of the lots 2 years after the sale of the lots to respondents when Mendoza sold to petitioner a parcel also adjacent to the lot owned by petitioner. Petitioner then sent a letter to respondents signifying its intention to redeem the 3 lots. Later, petitioner sent another letter to respondents tendering payment of the price paid to Mendoza by respondents. The respondents informed petitioner that they had no intention of selling the lots. Petitioner, therefore, filed an action against respondents to compel the latter to allow the legal redemption. Petitioner claimed that neither Mendoza nor the respondents gave formal or even a verbal notice of the sale of the lots as required by Article 1623.
The RTC dismissed petitioner’s complaint. Both parties appealed to the CA, which affirmed the assailed decision. Hence, this appeal.

Issue: W/N petitioner, under Articles 1621 and 1623, has the right of redemption over the 3 parcels of land.

Held: Yes

Ratio: Article 1621 grants the owners of adjoining lands the right of redemption when a piece of rural land with an area not exceeding one hectare is alienated unless the grantee (or in this case, the buyer), does not own any rural land while Article 1623 states that the right of legal redemption shall not be exercised within 30 days from the notice in writing by the prosepctive vendor and that the deed of sale shall not be recorded in the Registry of Property unless accompanied by an affidavit of the vendor that he has given written notice to all possible redemtpioners.
The trial court found the lots involved are rural lands. However, Art. 1621 expresses that the right of redemption it grants to an adjoining owner of the property conveyed may be defeated if it can be shown that the buyer or grantee does not own any other rural land. The appellate court has said that there has been no evidence proferred to show that respondents are not themselves owners of rural lands for the exclusionary clause of the law to apply.

Facts:
Respondents obtained a P1,300,000 loan from petitioner which was covered by a real estate mortgage over 8 parcels of land. Respondent was not able to pay the loan installments so their loan was restructured. Respondent later on obtained another loan from petitioner amounting to P1,550,000 and covered by a real estate mortgage over the same 8 parcels of land.
Respondents, with prior consent from petitioner, entered into a deed of sale with assumption of mortgage with Spouses Igmidio and Dolores Galicia involving 3 of the mortgaged properties. It was stated teh vendees shall assume, as part of the purchase price, the amount of P550,000 representing the portion of the mortgaged obligation of the vendors in favor of petitioner.
The 3 parcels of land purchased by the Galicias, together with another property, were mortgaged to petitioner to secure a P2,600,000 loan.
Respondent then paid petitioner P919,698.11 which corresponds to the value of the parcels of land sold to the Spouses Garcia. Respondent executed a partial release of the real estate mortgage covered by the 3 parcels of land.
The spouses Galicia later obtained a second loan from petitioner amounting to P3,250,000 covered by a REM in favor of petitioner covering the same properties.
Since respondent, despite repeated demands, defaulted in the payment of their loan installments, petitioner filed a petition for extrajudicial foreclosure of the 5 remaining mortgaged properties. Despite several postponements of the public auction sale, respondent still failed to pay their mortgage obligation. Thus, the foreclosure sale of the subject real properties proceeded with petitioner being the highest bidder in the amount of P2,185,225.76.
Respondent failed to redeem the properties therefore, titles to the properties were issued in the name of petitioner. After sometime, respondent wrote the Chairman of the Board of petitioner asking information on their request for partial release of the mortgage on the 3 parcels of land owned by the Galicias. Included in their letter is a Cashier’s Check amounting to P1,200,000 to cover payment to effect release of the 3 parcels of land under loan account of the Galicias and under the loan account of the respondents. However, the acting manager of petitioner bank only noted the receipt of the check but the receipt of the check is not a commitment on the part of the bank to release the 4 TCTs requested to be released. Meanwhile, the bank applied P1,000,000 of the P1,200,000 to the loan of the Galicias while the P200,000 was applied to the loan of respondents.
The bank sold one parcel of land to Ester Villanueva, who sold it to respondent. Another parcel of land was sold by the bank to Teresita Jalbuena.
Respondent then instituted an action for damages before the RTC against petitioner and its officers and spouses Alejandro and Teresita Jalbuena. At the same time, petitioner filed a petition for the issuance of a writ of possession against the foreclosed properties and the ejectment of respondents. The RTC consolidated both petitions and issued a decision wherein the certificate of sale was annulled and the contract to sell executed by the bank to the Jalbuenas was also annulled. The court also dismissed the petition for land registration for lack of merit. The CA, upon appeal, affirmed in toto the decision of the RTC. Hence, this appeal.

Issue: W/N there was novation of the previous mortgages of the property.

Held: No.

Ratio:
Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order for novation to take place, the concurrence of the following requisites is indispensable: 1) there must be a previous valid obligation, 2) there must be an agreement of the parties concerned to a new contract, 3) there must be the extinguishment of the old contract and, 4) there must be the validity of the new contract.
The elements of novation are patently lacking in the instant case. Respondent tendered a check for P1,200,000 to petitioner for the release of 4 parcels of land under the loan account of the Galicias and a parcel of land under the loan account of respondent. However, while the bank applied the tendered amount to the accounts, it refused to release the subject properties. Instead, it issued a receipt with a notation that the acceptance of the check is not a commitment on the part of the bank to release the 4 TCTs as requested by respondent.
From the foregoing, it is obvious that there was no agreement to form a new contract by novating the mortgage contracts of the respondents and the Galicias. In accepting the check, the bank only acceded to respondent’s instruction on whose loan accounts the proceeds shall be applied but rejected the other condition that the 4 parcels of land be released from mortgage. Clearly, there is no mutual consent to replace the old mortgage contract with a new obligation. Novation is never presumed, and the animus novandi whether totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unmistakable. THe extinguishment of the old obligation by the new one is a necessary element of novation, which may be effected, either expressly or impliedly. The term expressly means that the contracting parties incontrovertibly disclose that their object in executing the new contract is to extinguish teh old one. No specific form is required for an implied novation, and all that is prescribed by law would be an incompatability between the 2 contracts. While there is really no hard and fast rule to determine what might constitute to be a sufficient change that can bring about novation, the touchstone for contrariety, however, would be an irreconcilable incompatibility between the old and the new obligations.

Additional notes (in case tanungin ni ma’am):
Moral damages was awarded to respondent Rosita Manalac because, the Court ruled that while Metrobank had the legal basis to withhold the release of the mortgaged properties, it was not forthright and was lacking in candor in dealing with Manalac. In accepting the PCIB Check, the bank knew fully well that the payment was conditioned on its commitment to release the specified properties. At the first instance, the bank should not have accepted the check or returned the same had it intended beforehand not to honor the request of Manalac. In accepting the check an applying the proceeds thereof to the loan accounts of Manalac and Galicia, the former were led to believe gthat the bank was favorably acting on their request. In justifying the award of moral damages, the CA correctly observed that there is the unjustified refusal of the bank to make a definite commitment while profiting from the proceeds of the check by applying it to the principal and the interest of the Galicias and respondents.

Facts:
Ylang-Ylang Merchandising Company, a partnership between Angelita Rodriguez and respondent Antonio Tan obtained a loan in the amount of P250,000 from petitioner. To secure payment of the same, respondents spouses Marcial See and Lilian Tan constituted a real estate mortgage in favor of petitioner a property located in Paco, Manila. The mortgage was annotated at the back of the title.
The partnership changed its name to Ajax Marketing Company and obtained another loan with petitioner in the amount of P150,000. To secure the loan, spouses Marcial See and Lilian Tan executed in favor of petitioner a second real estate mortgage over the same property and was annotated at the back of the title.
The partnership was converted into a corporation with additional incorporators: respondent Elisa Tan, Jose San Diego and Tessie San Diego. The corporation obtained from petitioner a loan amounting to P600,000 which was secured by a third mortgage over the same property and was annotated at the back of the title.
The three loans were structured into one loan and the corporation, represented by Antonio Tan and Elisa Tan executed a promissory note. The loan was payable in 8 equal quarterly installments of P125,000. Later on, petitioner filed a collection case before the RTC against Ajax Marketing, Elisa Tan and Antonio Tan for another loan amounting to P970,000 obtained earlier. The RTC decided the case in favor ofpetitioner and was affirmed by the CA.
Ajax Marketing failed to pay its consolidated loan. Petitioner then foreclosed the REM and the property was sold at public auction for P1,775,040 to petitioner. Ajax Marketing later on filed a civil case praying for the cancellation of extra-judicial foreclosure sale against petitioner and the ROD of Manila stating that the real estate mortgages constituted on the said property have been extinguished or novated when the consolidated loan was executed. The trial court upheld the validity of the extra-judicial foreclosure, which was affirmed by the CA. It was then appealed to the SC.
The Spouses Antonio and Elisa Tan wrote petitioner a letter proposing to settle all their obligations of the borrowers in exchange for the release of the real estate mortgage thru the following scheme: P600,000 as downpayment 2 weeks upon approval of the proposal, and the P1.4 million shall no longer be subject to interest and to be liquidated in 24 months to be covered by postdated checks and that attorney’s fees to be separately paid by them.
Meanwhile, the SC rendered its decision stating that there was no novation when the 3 loans were consolidated into one loan because the provisions of the consolidated loan yield no indication of the extinguishment of or incompatibility with the 3 loan agreements secured by the REM. The SC also ruled that the proceeds of the foreclosure sale should be applied to the obligation of the consolidated loan only, plus interests, expenses and other charges. It is petitioner’s duty to return the surplus in the selling price to the mortgagors.
Spouses Elisa and Antonio Tan and Spouses Lilian Tan and Marcial See filed a civil case for SP, injunction and damages before the RTC praying that they be allowed to exercise their right of redemption over the foreclosed property and to accept the amount of P1,609,334.61 as the redemption price and to order Ajax Marketing to reimburse to them the redemption price. However, an amended complaint was filed and included as defendants John and Peter Doe. In the amended complaint, it was stated that the property, though registered in the names of spouses Marcial See and Lilian Tan See is, in reality, co-owned by the respondents and their other siblings and that after the foreclosure sale, they offered to redeem the property within the 1-year period and discovered that petitioner included in the bid price the unsecured loan. They claimed that while tender and offer of the redemption was made, it was made difficult when petitioner was ambivalent with the redemption price and was rendered doubly dificult when petitioner filed a case to collect on the unsecured loan. On their part, they filed a case cancelling the extrajudicial foreclosure of the mortgage. The SC later on declared the extrajudicial foreclosure valid but found the inclusion of the unsecured loan in the bid price improper but the inclusion did not invlidate the foreclosure proceedings. They resumed negotiations for the redemption of the property and tendered P1,609,334.61 which petitioner rejected. Petitioner sold the property to John and Peter Doe for P11,500,000 in complete disregard of their right of redemption. The sale, according to them, was fraudulent and, therefore, void. They prayed that the sale between petitioner and John and Peter Doe be declared null and void and that petitioner be ordered to allow them to exercise their right of redemption by accepting the amount of P1,609,334.61.
Spouses Marcial See and Lilian Tan executed a deed of redemption and reconveyance where the latter paid petitioner the amount of P11,500,000 representing the redemption price for the reconveyance or redemption of the foreclosed property.
Petitioner filed a motion to dismiss on the ground that the claims in the amended complaint have been distinguished. Petitioner disclosed that the property was actually sold to Spouses Marcial See and Lilian Tan and as registered owners of the property, they are allowed to exercise their right of redemption. The motion, however, was denied.
Petitioner then filed its answer. It stated that John and Peter Doe are none other than Spouses Marcial See and Lilian Tan; that neither Ajax Marketing nor respondents were able to redeem the property within one year and that respondents did not even approach petitioner to negotiate the redemption of the property. What they did instead was to file an action to annul the extrajudicial foreclosure which foreclosure was upheld by the SC. It was only in 1997 that Spouses Marcial See and Lilian Tan communicated to petitioner their intention to buy back the property.
The RTC annulled the deed of redemption between petitioner and Spouses Marcial See and Lilian Tan and that Spouses Elisa and Antonio Tan are reinstated as redemptioners of the property and that they be allowed to redeem the property. The trial court ruled that the tender and offer of redemption of Spouses Elisa and Antonio Tan was within the 1 year period and that the redemption period was freezed when respondents filed the annulment and cancellation of extrajudicial foreclosure. Petitioner appealed to the CA, which affirmed the decision of the RTC and also stated that the SC granted to Spouses Elisa and Antonio Tan the right to redeem the property. Petitioner filed a motion for reconsideration but was denied. Hence, this petition.

Issue: W/N the filing of the case for cancellation and annulment of the extrajudicial foreclosure sale with preliminary injunction etc. interrupt the running of the one-year redemption period?
W/N Spouses Elisa and Antonio Tan were able to exercise their right of redemption within the period allowed by law?

Held: NO, on both issues.

Ratio:
The filing of the case of annulment and cancellation of extrajudicial foreclosure sale did not toll the running of the one-year redemption period. Settled is the rule that the period within which to redeem the property sold at a sheriff’s sale is not suspended by the institution of an action to annul the foreclosure sale.
Having ruled that the case of annulment etc. did not toll the running of the one-year redemption period, did Spouses Elisa and Antonio Tan exercise their right of redemption within this period? No.
Section 6 of RA 3135 provides that in all cases in which an extrajudicial sale is made under the special power, the debtor or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale. The court have consistently ruled that the one-year redemption period should be counted not from the date of the foreclosure sale but from the time the certificate of sale is registered with the Register of Deeds.
The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. This constitutes the exercise of the right to repurchase. Bona fide redemption necessarily implies a reasonable and valid tender of the entire purchase price. There is no cogent reason for requiring the vendee to accept payment by installments from the redemptioner. In order to effect a redemption, the judgment debtor must pay the purchaser the redemption price composed of the ff: 1) the price which purchaser paid for the property, 2) interest of 1% per month on the purchase price, 3) amount of any assessment or taxes which purchaser may have paid on the property and 4) interest of 1% per month on such assessment and taxes.
Respondents Spouses Elisa and Antonio Tan were granted by the law the right of redemption which they failed to exercise validly and effectively. Having failed to redeem the foreclosed property in teh manner and within the period prescribed by law, they have lost any right and interest over the subject property. In doing so, Metrobank has the right to dispose of said property as it deems fit.

Facts:
Petitioner alleged that he is the owner of a parcel of land. Petitioner bouhgt the land from Rosauro Breton, heir of the land’s registered owner Alipio Breton cruz. Possession and administration of the said land are claimed to be already in petitioner’s management even though the TCT is not yet in his name. Respondent is a lessee occupying a portion of the subject land.
A formal written notice was given to respondent that petitioner now owns the land. Respondent recognized petitioner’s ownership and paid monthly rentals. However, petitioner later received a letter from respondent’s attorney that since the land was declared under area for priority development, respondent is invoking her right of first refusal and she will temporarily stop paying her monthly rentals. Petitioner then demanded from respondent that she pay the rentals in arrears for five months and to vacate the premises. Respondent failed and refused to heed petitioner’s demands.
Petitioner filed an unlawful detainer case against respondent before the MTC. Respondent, in her answer, asserted that Dona Lourdes Rodriguez Yaneza is the actual owner of the land; that the assignor is the attorney-in-fact of Dona Lourdes Rodriguez Yaneza; that the title of petitioner overlapped the original land title of the assignor; that respondent is recognized by the assignor as co-owner by possession and transferred said parcel of land in respondent’s favor; that respondent discontinued all the obligations imposed by petitioner simply because petitioner is not the owner of the property. Petitioner moved to strike out the answer because the answer was not verified therefore, it was as if no answer was filed.
Respondent filed a motion to amend defendant’s answer and in her amended answer, she stated that petitioner is not the owner of the subject land. She stated that the certificate of title to the land is not even registered under petitioner’s name. She also alleged that she has a right of first refusal in case of sale of the land pursuant to PD Nos. 1517, 1893 and 1968. The area where the land is located was certified as an area under priority development.
The MTC ruled in favor of petitioner. Respondent’s nonpayment of rents rendered her occupation of the land illegal. As owner of the land, petitioner is entitled to its use and enjoyment, as well as to recover its possession from any person unlawfully withholding it. Petitioner filed a motion for execution pending appeal while respondent filed a notice of appeal. The MTC then transmitted the records of the case as well as the motion for execution pending appeal to the RTC. Maria Lourdes Breton-Mendiola, the supposed owner of the land, filed a motion with leave to file intervention before the RTC. The RTC denied Breton-Mendiola’s motion to intervene, while directed petitioner and respondent to file their respective memoranda.
Petitioner emphasized, in his memorandum, that respondent’s assertion of a preferential right of first refusal is a recognition of the sale by Rosauro Breton of the land to him. Respondent is not qualified to claim this preferential right because she is no longer a legitimate tenant. The payment of respondent’s monthly rent was already in arrears at the time petitioner filed the complaint against respondent.
Respondent filed her memorandum, stating, for the first time, that Alipio Breton is the registered owner of the land and that he is her landlord since 1962. When Alipio Breton died, his children, Rosauro Breton and Maria Lourdes Breton-Mendiola inherited the land. She claimed that she has never stopped paying rent to Breton-Mendiola. She also stated that Rosauro could not transfer ownership of the land to petitioner because Rosauro executed a deed of conveyance and waiver in favor of Breton-Mendiola. Thus, petitioner cdannot legally acquire title from Rosauro in view of the waivers. Breton-Mendiola is respondent’s lessor and is the only person who can validly file an ejectment suit against respondent.
The RTC ruled in favor of petitioner. Aggrieved, respondent appealed before the CA ruled in favor of respondent. Hence, this appeal.

Issue: W/N petitioner could eject respondent.

Held: Yes.

Ratio:
Unlawful detainer cases are summary in nature. The elements to be proved and resolved in unlawful detainer cases are the fact of lease and expiration or violation of its terms. The MTC and RTC found that there was an existing lease between petitioner and respondent and that, by nonpayment of rent to petitioner, respondent violated the lease agreement. It has been held that the sale of a leased property places the vendee into the shoes of the original lesssor to whom the lessee bound himself to pay. The vendee acquires the right to evict the lessee from the premises and to recover the unpaid rentals after the vendee had notified the lessee that he had bought the leased property and that the rentals on it should be paid to him, and the lessee refused to comply with the demand. The issue of ownership is not essential to an action for unlawful detainer. The fact of the lease and the expiration of its term are the only elements of the action. The defense of ownership does not change the summary nature of the action. In actions for forcible entry and unlawful detainer, the main issue is possession de facto, independently of any claim of ownership or possession de jure that either party may set forth in his pleadings, and an appeal does not operate to change the nature of the original action.

Facts:
Petitioner and private respondent executed an order agreement whereby private respondent bound itself to deliver to petitioner 3450 reams of printing paper worth P1,040,060.00. In accordance with the standard operating practice of the parties, the materials were to be paid within a minimum of 30 days and a maximum of 90 days from delivery.
Sometime later, petitioner entered into a contract with Philacor to print 3 volumes of Philacor Cultural Books with a minimum of 300,000 copies @ P10 per copy for a total amount of P3,000,000.
Private respondent had delivered to petitioner 1,097 reams of printing paper out of the total 3,450 reams. Petitioner alleged that it wrote private respondent to immediately deliver the balance because further delay would greatly prejudice petitioner. After that, private respondent delivered again to petitioner various quantities of printing paper. However, petitioner encountered difficulties paying private respondent said amount. Accordingly, private respondent made a formal demand upon petitioner to settle the outstanding account. Petitioner made partial payments totalling P97,200. which was applied to its back accounts.

Petitioner entered into an additional printing contract with Philacor. Unfortunately, petitioner failed to fully comply with its contract with Philacor for the printing of the books. Philacor then demanded compensation from petitioner for the delay and damage it suffered on account of petitioner’s failure.

Private respondent then filed with the RTC a collection suit against petitioner for the sum of P766,101.70, representing the unpaid purchase price of printing paper bought by petitioner on credit.

Petitioner denied the material allegations of the complaint. Petitioner alleged that private respondent was able to deliver only 1,097 reams of printing paper which was short of 2,875 reams, in total disregard of their agreement; that private respondent failed to deliver the balance of the printing paper despite demand, hence petitioner suffered actual damages and failed to realize expected profits, and that petitioner’s complaint was prematurely filed.
The trial court rendered judgment declaring that petitioner should pay private respondent the sum of P763,101.70 representing the value of printing paper delivered by private respondent. However, the trial court also found petitioner’s counterclaim meritorious. It ruled that were it not for the failure or delay of private respondent to deliver printing paper, petitioner could have sold books to Philacor and realized profits from the sale. Therefore, the trial court awarded moral damages to respondent.

On appeal, the CA reversed the judgment of the trial court. The CA ordered petitioner to pay private respondent the sum of P763,101.70 representing the amount of unpaid printing paper delivered by private respondent to petitioner. However, the appellate court deleted the award of compensatory damages as well as the award of moral damages and attorney’s fees, for lack of factual and legal basis. Hence, this appeal.

Issue: W/N private respondent violated the order agreement;
w/N private respondent is liable for petitioner’s breach of contract with Philacor.

Held: (on the two issues) No.

Ratio:
The transaction between the parties is a contract of sale whereby private respondent obligates itself to deliver printing paper to petitioner, which in turn, binds itself to pay therefor a sum of money or its equivalent. Both parties concede that the order agreement gives rise to reciprocal obligations such that the obligation of one is dependent upon the obligation of the other. Reciprocal obligations are to be performed simultaneously so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Thus, private respondent undertakes to deliver printing paper of various quantities subject to petitioner’s corresponding obligation to pay, on a maximum 90-day credit, for these materials. In the contract, petitioner is not even required to make any deposit, downpayment or advance payment, hence, the undertaking of private respondent to deliver the materials is conditional upon payment by petitioner within the prescribed period. Clearly, petitioner did not fulfill its side of the contract as its last payment could only cover materials covered by delivery invoices dated September and October 1980.

There is no dispute that the agreement provides for the delivery of printing paper on different dates and a separate price has been agreed upon for each delivery. It is also admitted that it is the standard practice of the parties that the materials be paid within a minimum period of 30 days and a maximum of 90 days from each delivery. Private respondent’s suspension of its deliveries to petitioner whenever the latter failed to pay on time is legally justified under the second paragraph of Article 1583 of the Civil Code which provides that: “When there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments, it depends in each case on the terms of the contract and the circumstances of the case whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken.

In this case, petitioner failed to establish that it had paid for the printing paper covered by the delivery invoices on time. Consequently, private respondent has the right to cease making further delivery, hence, private respondent did not violate the order agreement. On the contrary, it was petitioner which breached the agreement as it failed to pay on time the materials delivered by private respondent.

Private respondent cannot be held liable under the contracts entered into by petitioner with Philacor. Private respondent is not a party to said agreements. It is also not a contract pour autrui. Aforesaid contracts could not affect third persons like private respondent because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof.

Facts:
Respondent obtained a loan of P22,500 from petitioner. To secure the loan, respondent mortgaged his house to petitioner. When respondent defaulted on the loan, petitioner foreclosed the real estate mortgage and obtained title to the property. Meanwhile, petitioner allowed respondent to remain on the property for a monthly rent of P1,200. When respondent accumulated arrears in rent, petitioner sent a letter to respondent advising him to pay in full the arrears plus interest and to vacate said premises. When no payment was made, petitioner sent a letter to respondent inviting him to bid for the said property, which was cancelled when respondent obtained a TRO from the RTC of Pasig.
Respondent offered to repurchase the property from petitioner. Petitioner informed respondent that he may be allowed to repurchase the property subject to the approval of the Board of Trustees and should put up a 105 deposit as earnest money subject to refund or forfeiture. As was determined by petitioner, the current market value of the subject property is P155,000 plus back rentals. Petitioner then required respondent to deposit P15,000 to petitioner within 15 days from receipt of the letter, which respondent did.

However, no contract of sale was executed. Instead, petitioner demanded from respondent payment of arrears in rent. Petitioner then filed an ejectment case against respondent with the MeTC of Marikina. However, the parties entered into a compromise agreement which the MeTC approved in a decision. After the compromise agreement, petitioner informed respondent that his property has already increased in value from P155,000 to P844,000. The letter also stated that petitionet may make an exception for respondent if he is willing to buy it back at its current market value plus pay all rental dues but unpaid. Respondent then sent a letter to petitioner requesting a reduction of the price from P844,000 to P155,000. Petitioner did not act on the request but sent a notice to respondent that the property shall be included in a public auction. Respondent filed with the RTC a complaint for specific performance on the part of petitioner. The RTC, however, ruled in favor of petitioner, contending that there was no perfected contract of sale for lack of consent. The CA ruled that there was a perfected contract of sale since all of the elements of such a contract exist in this case. Petitioner must execute the necessary contract of sale upon full payment in cash by respondent of the purchase price of P155,000. Hence, this appeal.

Issue: W/N there was a perfected contract of sale.

Held: No.

Ratio:
The stages of a contract of sale are: 1) negotiation, starting from the time the prospective contracting parties indicate interest in the contract to the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; 2) perfection which takes place upon the concurrence of the essential elements of the sale; and 3) consummation, which commences when the parties erform their respective undertakings under the contract of sale, culminating in the extinguishment of the contract.

In the present case, the parties never got past the negotiation sale. Nothing shows that the parties had agreed on any final arrangement containing the essential elements of a contract of sale, namely, 1) consent or the meeting of the minds of the parties; 2) object or subject matter of the contract and 3) price or consideration of the sale.
The August 2 letter of petitioner cannot be classified as a perfected contract of sale which binds the parties. The letter was in reply to respondent’s offer to repurchase the property. Both the trial and appellate courts found that respondent’s offer to repurchase the property was subject to approval of the petitioner’s Board of Trustees. No such approval appears in the records. When there is merely an offer by one party without acceptance by the other, there is no contract of sale. Since there was no acceptance by petitioner, which can validly act only through its Board of Trustees, of respondent’s offer to repurchase the property, there was no perfected contract of sale.

Considering that there was no perfected contract of sale, the concept of earnest money is certainly not applicable to this case. Article 1482 of the Civil Code states that: “whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.” The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Hence, there must first be a perfected contract of sale before we can speak of earnest money. As found by the trial court, the P15,500 paid by respondent is merely a deposit for the exclusion of the subject property from the list of the properties to be auctioned off by petitioner.
In principle, petitioner should return the P15,500 deposit by respondent since the Board of Trustees rejected respondent’s offer to repurchase the property. However, respondent admittedly owes petitioner for the accumulated rental arrears in the sum of P16,800. Considering this, partial legal compensation applies. In short, both parties are debtors and creditors of each other. Hence, petitioner is justified in retaining the P15,500 deposit and applying it to respondent’s unpaid rentals totaling P16,800.