CATUNGAL VS.
RODRIGUEZ
GR 146839, March 23, 2011
FACTS:
Catungal owned a registered parcel of land. The said property was allegedly the exclusive paraphernal
property of Catungal.
On April 23, 1990, with the consent of her husband Jose, Catungal entered into a Contract to Sell with
respondent Rodriguez. Subsequently, the Contract to Sell was purportedly “upgraded” into a Conditional
Deed of Sale between the same parties where it was stipulated that the sum of P25 million will be
payable as follows:
a. P500,000 down payment upon signing of the agreement;
b. The balance of P24,500,000 will be payable in five separate checks; first check shall be for
P4,500,000 while the remaining balance to be paid in four checks in the amount of P5 million
each will be payable only after Rodriguez has successfully negotiated, secured, and provided a
Road Right of Way. If however the Road Right of Way could not be negotiated, Rodriguez shall
notify the Catungals for them to reassess and solve the problem by taking other options and
should the situation ultimately prove futile, he shall take steps to rescind or cancel herein
Conditional Deed of Sale.
It was also stipulated that the access road or Road Right of Way leading to the lot shall be the
responsibility of the VENDEE to secure and any or all cost relative to the acquisition thereof shall be
borne solely by the VENDEE. He shall, however, be accorded with enough time necessary for the success
of his endeavor, granting him a free hand in negotiating for the passage.
Spouses Catungal requested an advance of P5 million on the purchase price for personal reasons.
However, Rodriguez refused on the ground that the amount was not due under the terms of their
agreement. Further, he learned that the Catungals were offering the property for sale to third parties
who are willing to pay a higher amount of money for a Road Right of Way than what Rodriguez has
initially negotiated. In other words, instead of assisting Rodriguez in successfully negotiation, the
Catungals allegedly maliciously defeated his efforts so to justify the rescission. Rodriguez then received
letters signed by Atty. Catungal demanding him to make up his mind about buying the land or exercising
his option to buy because they needed money to pay personal obligations or else the Catungals warned
that they would consider the contract cancelled.
RTC ruled in favor of Rodriguez finding that his obligation to pay the balance arises only after
successfully negotiating a Road Right of Way. CA affirmed the RTC’s decision.
ISSUE:
Whether or not the stipulations of their Conditional Deed of Sale constitute a potestative condition.
RULING:
No.
The Court has distinguished between a condition imposed on the perfection of a contract and a
condition imposed merely on the performance of an obligation. While failure to comply with the first
condition results in the failure of a contract, failure to comply with the second merely gives the other
party the option to either refuse to proceed with the sale or to waive the condition. This principle is
evident in Article 1545 of the Civil Code on sales, which provides in part:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is
not performed, such party may refuse to proceed with the contract or he may waive performance of the
The condition in the Condition Deed of Sale stating that respondent shall pay the balance of the
purchase price when he has successfully negotiated and secured a road right of way, is not a condition
on the perfection of the contract nor on the validity of the entire contract or its compliance as
contemplated in Article 1308. It is a condition imposed only on respondent’s obligation to pay the
remainder of the purchase price.
In the Supreme Court’s view and applying Article 1182, such a condition is not purely potestative as
petitioners contend. It is not dependent on the sole will of the debtor but also on the will of third
persons who own the adjacent land and from whom the road right of way shall be negotiated. In a
manner of speaking, such a condition is likewise dependent on chance as there is no guarantee that
respondent and the third party-landowners would come to an agreement regarding the road right of
way. This type of mixed condition is expressly allowed under Article 1182 of the Civil Code.
BRIONES VS. MACABAGDAL
GR 150666, Aug. 3, 2010
FACTS:
Respondent-spouses Macabagdal purchased a property from Vergon Realty Investments Corporation.
The property was adjacent to petitioner-spouses Briones’ property.
Petitioners constructed a house on respondent’s property which they thought was theirs. After being
informed of the mix up, the respondents immediately demanded petitioners to demolish the house and
vacate the property. The petitioners refused to vacate so the respondents filed an action to recover
ownership and possession of said property.
Petitioners insisted that the lot on which they constructed their house was the lot which was
consistently pointed to them as theirs by Vergon’s agents over the seven-year period they were paying
for the lot. They interposed the defense of being buyers in good faith and impleaded Vergon as third-
party defendant claiming that because of the warranty against eviction, they were entitled to indemnity
from Vergon in case the suit is decided against them.
ISSUE:
Whether or not the warranty against eviction is applicable.
RULING:
No. The Supreme Court affirmed the decision of the RTC and the CA.
Article 1548 of the Civil Code provides that eviction shall take place whenever by a final judgment based
on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a
part of the thing purchased.
Here, the lot upon which petitioners built their house was not the one which Vergon sold to them. There
was no basis to presume that the error was Vergon’s fault. Based on the documentary evidence, such as
the titles of the two (2) lots, the contracts to sell, and the survey report made by the geodetic engineer,
petitioners’ house was built on the lot of the respondent-spouses. Also, the warranty against eviction
under Article 1548 of the Civil Code was not applicable as there was no deprivation of property: the lot
on which petitioners built their house was not the lot sold to them by Vegon, which remainded vacant
and ready for occupation.
GOODYEAR PHILIPPINES, INC. VS. SY
GR 154554, Nov. 9, 2005
FACTS:
Goodyear’s vehicle was stolen. The PNP issued an alert alarm on the said stolen vehicle. It was
recovered and sold to Sy. Sy, in turn, sold the same to Lee but the latter filed an action for rescission of
contract with damages against Sy because he could not register the vehicle in his name due to the
certification from PNP that it was a stolen vehicle and the alarm covering the same was not lifted.
Instead, the PNP impounded the vehicle and charged Lee criminally.
Upon being informed by Sy of the denial of the registration of the vehicle in Lee’s name, Goodyear
requested the PNP to lift the stolen vehicle alarm status. This notwithstanding, Goodyear was impleaded
as third-party defendant in the third-party complaint filed by Sy.
Goodyear filed a motion to dismiss on the ground that the petitioner has no cause of action. The RTC
granted Goodyear’s motion and dismissed the case. The CA reversed the RTC’s decision and found
Goodyear to have breached its warranty.
ISSUE:
Whether Goodyear has breached any warranty.
RULING:
No.
A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. As
such, a warranty has a natural tendency to induce the vendee - relying on that affirmation or promise -
to purchase the thing. The vendor impliedly warrants that that which is being sold is free from any
charge or encumbrance not declared or known to the vendee. The decisive test is whether the vendor
assumes to assert a fact of which the vendee is ignorant.
Here, the petitioner did not breach the implied warranty against hidden encumbrances. The subject
vehicle that had earlier been stolen by a third party was subsequently recovered by the authorities and
restored to petitioner, its rightful owner. Whether Sy had knowledge of the loss and subsequent
recovery, the fact remained that the vehicle continued to be owned by petitioner, free from any charge
or encumbrance whatsoever.
A lien is "a legal right or interest that a creditor has in another’s property, lasting usually until a debt or
duty that it secures is satisfied." An encumbrance is "a claim or liability that is attached to property or
some other right and that may lessen its value, such as a lien or mortgage." A legal impediment is a legal
"hindrance or obstruction."
The Third-Party Complaint did not allege that petitioner had a creditor with a legal right to or interest in
the subject vehicle. There was no indication either of any debt that was secured by the vehicle. In fact,
there was not even any claim, liability or some other right attached to the vehicle that would lessen its
value. Its impoundment, as well as the refusal of its registration, was not the hindrance or obstruction in
the contemplation of law that the vendor warranted against. Neither of those instances arose from any
liability or obligation that could be satisfied by a legal claim or charge on, or property right to - other
than an ownership interest in - the subject vehicle.
For the sake of the argument that there was a breach of the implied warranty against hidden
encumbrances, notice of the breach was not given to petitioner within a reasonable time. Article 1586 of
the Civil Code requires that notice be given after the breach, of which Sy ought to have known. In his
Third-Party Complaint against petitioner, there was no allegation at all that respondent had given
petitioner the requisite notice.
More important, an action for damages for a breach of implied warranties must be brought within six
months from the delivery of the thing sold. The vehicle was understood to have been delivered to Sy
when it was placed in his control or possession. Upon execution of the Deed of Sale on September 12,
1996, control and possession of the vehicle was transferred to respondent. That the vehicle had been
delivered is bolstered by the fact that no contrary allegation was raised in the Third-Party Complaint.
Whether the period should be reckoned from the actual or from the constructive delivery through a
public instrument, more than six months had lapsed before the filing of the Third-Party Complaint.
Finally, the argument that there was a breach of the implied warranty against eviction does not hold
water, for there was never any final judgment based on either a right prior to the sale; or an act that
could be imputed to petitioner and deprive Sy of ownership or possession of the vehicle purchased.
UY VS. ARIZA
GR 158370, Aug. 17, 2006
FACTS:
Spouses Uy purchased 200 square meters of the parcel of land from respondents. That contract
stipulated that petitioners had the right of choice to designate which portion of said property would be
the subject of sale.
Petitioners exercised their right to choose within two to three months from the sale, informing
respondents that they have selected and in fact occupied around 200 square meters of a portion of land.
It appears that the parcels of land petitioners had chosen and occupied were already titled in the names
of others.
Petitioners were sued for unlawful detainer by the other owners. The petitioners entered into a
compromise agreement with the other owners and surrendered possession of the subject parcels of
land. Petitioners compromised the case without giving notice to respondents.
Thereafter, petitioners demanded from respondents that they be allowed to choose again. When
respondents refused, petitioners filed a case for specific performance with delivery of possession of real
property and damages.
Respondents alleged that they had already complied with their obligation to deliver.
ISSUE:
Whether the action for specific performance was proper.
RULING:
No. This is a clear case of eviction. Thus, the action for specific performance filed by petitioners against
respondents must necessarily fail. If at all, petitioners may file an action for the enforcement of warranty
in case of eviction which every vendor of a parcel of land is enjoined by law to guarantee as provided
under Article 1548 of the New Civil Code which states that eviction shall take place whenever by a final
judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of
the whole or part of the thing purchased. The vendor shall answer for the eviction even though nothing
has been said in the contract on the subject.
But even if petitioners would file an action for the enforcement of warranty in case of eviction against
respondents, the same will not prosper. The records of the case reveal that the unlawful detainer case
filed by third persons against petitioners, which led to the ouster of the latter from the subject lots, was
decided by compromise agreement without impleading respondents as third-party defendants. It should
be stressed that in order for the case to prosper, it is a precondition that the seller must have been
summoned in the suit for the eviction of the buyer. This rule is provided under the provisions of Articles
1558 and 1559 of the New Civil Code, to wit:
Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in
the suit for eviction at the instance of the vendee.
Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the
complaint, that the vendor be made a co-defendant.
In order that a vendor’s liability for eviction may be enforced, the following requisites must concur – a)
there must be a final judgment; b) the purchaser has been deprived of the whole or part of the thing
sold; c) said deprivation was by virtue of a right prior to the sale made by the vendor; and d) the vendor
has been summoned and made co-defendant in the suit for eviction at the instance of the vendee.
In the case at bar, the fourth requisite – that of being summoned in the suit for eviction at the instance
of the vendee – is not present.
CABILING VS. LUMAPAS
GR 196950, June 18, 2014
FACTS:
The petitioner was the highest bidder in an extrajudicial foreclosure sale of a property situated in
Olongapo. The Final Deed of Sale was issued by the Sheriff and the title to the property was duly
transferred to petitioner.
Petitioner then filed an Application for the Issuance of a Writ of Possession with the RTC. The RTC
granted the petition and issued the Writ of Possession and Notice to Vacate.
Respondent filed an Intervention as a third party in actual possession of the foreclosed property. She
claimed that the property had previously been sold to her by the property’s registered owner and the
judgment debtor/mortgagor in the extrajudicial foreclosure sale, pursuant to a Deed of Conditional Sale.
The RTC recalled the Writ of Possession on the ground that the respondent cannot be ousted of her
possession by a mere ex-parte motion for the issuance of a possessory writ considering that the
respondent was not a party to the extrajudicial foreclosure. The CA affirmed the RTC’s decision.
ISSUE:
Whether or not the respondent possesses the subject property by adverse title or right.
RULING:
No.
The exception provided under Section 33, Rule 39 of the Rules of Court contemplates a situation in
which a third party holds the property by adverse title or right, such as that of a co-owner, tenant or
usufructuary, who possesses the property in his own right, and is not merely the successor or transferee
of the right of possession of another co-owner or the owner of the property.
In the present case, the respondent cannot be said to possess the subject property by adverse title or
right as her possession is merely premised on the alleged conditional sale of the property to her by the
judgment debtor/mortgagor.
The execution of a contract of conditional sale does not immediately transfer title to the property to be
sold from seller to buyer. In such contract, ownership or title to the property is retained by the seller
until the fulfillment of a positive suspensive condition which is normally the payment of the purchase
price in the manner agreed upon.
In the present case, the Deed of Conditional Sale between the respondent (buyer) and the subject
property’s registered owner (seller) expressly reserved to the latter ownership over the property until
full payment of the purchase price, despite the delivery of the subject property to the respondent. It is
provided in paragraph 6 of the parties’ contract that only upon full payment of the total sale value of
P2.2 million that the seller shall execute a deed of absolute sale in favor of the respondent.
It likewise appears from the records that no deed of absolute sale over the subject property has been
executed in the respondent's favor. Thus, the respondent's possession from the time the subject
property was "delivered" to her by the seller cannot be claimed as possession in the concept of an
owner, as the ownership and title to the subject property still then remained with the seller until the
title to the property was transferred to the petitioner in March 2009. In order for the respondent not to
be ousted by the ex parte issuance of a writ of possession, her possession of the property must be
adverse in that she must prove a right independent of and even superior to that of the judgment
debtor/mortgagor.
Under these circumstances, the general rule, and not the exception, applies.
BIGNAY EX-IM PHILIPPINES, INC. VS. UNION BANK OF THE PHILIPPINES
GR 171591, Feb. 12, 2014
FACTS:
Alfonso de Leon (Alfonso) mortgaged in favor of Union Bank of the Philippines (Union Bank) real
property situated in Quezon City, which was registered in his and his wife Rosario’s name.
The property was foreclosed and sold at auction to Union Bank. After the redemption period expired,
the bank consolidated its ownership, whereupon a Transfer Certificate of Title was issued in its name.
Rosario filed against Alfonso and Union Bank for annulment of the mortgage, claiming that Alfonso
mortgaged the property without her consent, and for reconveyance.
In a Letter-Proposal, Bignay, through its President, Siy, offered to purchase the property. The written
offer stated, among others, that: The property is the subject of a pending litigation between Rosario de
Leon and Union Bank for nullification of the foreclosure before the Regional Trial Court of Quezon City.
Should this offer be approved by your management, we suggest that instead of the usual conditional
sale, a deed of absolute sale be executed to document the transaction in our favor subject to a
mortgage in favor of the bank to secure the balance.
A Deed of Absolute Sale was executed by and between Union Bank and Bignay whereby the property
was conveyed to Bignay for P4 million. The deed of sale was executed by the parties through Bignay’s Siy
and Union Bank’s Senior Vice President Robles.
One of the terms of the deed of sale is quoted below:
Section 1. The VENDEE hereby recognizes that the Parcel/s of Land with improvements thereon is
acquired through foreclosure proceedings and agrees to buy the Parcel/s of Land with improvement[s]
thereon in its present state and condition. The VENDOR therefore does not make any representations or
warranty with respect to the Parcel/s of Land but that it will defend its title to the Parcel/s of Land with
improvement[s] thereon against the claims of any person whomsoever.
The RTC ruled in favor of Rosario. As a result of the court’s decision, Bignay was evicted from the
property. Bignay filed an action for breach of warranty against eviction with damages against Union
Bank and Robles.
The RTC declared that Union Bank acted in bad faith in selling the subject property to Bignay.
ISSUE:
Whether or not Union Bank is liable for eviction.
RULING:
Yes.
Under Article 1553 of the Civil Code, any stipulation exempting the vendor from the obligation to
answer for eviction shall be void, if he acted in bad faith.
An examination of the evidence and by the concurring opinions of the courts below that Bignay
purchased the property without knowledge of the pending civil case, Union Bank is therefore
answerable for its express undertaking under the deed of sale to "defend its title to the Parcel/s of Land
with improvement thereon against the claims of any person whatsoever." By this warranty, Union Bank
represented to Bignay that it had title to the property, and by assuming the obligation to defend such
title, it promised to do so at least in good faith and with sufficient prudence, if not to the best of its
abilities.
The record reveals, however, that Union Bank was grossly negligent in the handling and prosecution of
the civil case. Its appeal of the December 12, 1991 decision in said case was dismissed by the CA for
failure to file the required appellant's brief. Next, the ensuing Petition for Review on Certiorari filed with
this Court was likewise denied due to late filing and payment of legal fees. Finally, the bank sought the
annulment of the December 12, 1991 judgment, yet again, the CA dismissed the petition for its failure to
comply with Supreme Court Circular. As a result, the December 12, 1991 Decision became final and
executory, and Bignay was evicted from the property. Such negligence in the handling of the case is far
from coincidental; it is decidedly glaring, and amounts to bad faith.
C. MCCULLOUGH VS. R. AENLLE AND CO.
GR 1300, Feb. 3, 1904
FACTS:
In August 1901, Petitioner and respondent entered into a contract of sale involving respondent’s
tobacco and cigarette factory known as “La Maria Cristina” including the trademark, stock of tobacco in
leaf and manufacture, machinery and other fixtures belonging to the factory. The inventory of the things
in the factory included two lots: one composed of 221 bales of fourth-class superior tobacco from
Angadan and of crop 1899 and the second lot composed of 76 bales of first, second and third class crops
from Isabela of crop of 1899.
In December 1901, the plaintiff with others, organized a company to which the plaintiff sold all the
tobacco bought by him from the defendant. The purchaser, the new company, on examining the
tobacco on the two lots said that they were not of the quality indicated in the inventory. Thereupon,
the plaintiff, claiming the tobacco in these two lots were worthless, brought this action against the
defendant to recover what he paid therefor.
ISSUE:
Whether or not plaintiff can recover the amount he paid for the subject two lots of tobacco.
RULING:
No, he cannot recover. At the time of the sale, the plaintiff was the owner of a printing establishment
and he testified that he desired to move it to the building in which the defendant had its cigar factory;
that it was impossible for him to get the building without buying the tobacco factory and for that reason
bought it, intending to sell as soon as he could without loss.
The document of August 1901 was a completed contract of sale. The plaintiff agreed to buy, among
other things, all of the leaf tobacco in the factory. By its terms, the plaintiff was bound to take all the leaf
tobacco then belonging to the factory and to pay therefor the prices in the invoices. This obligation was
absolute and did not depend at all upon the quality of the tobacco or its value. He did not, in this
contract, reserve the right to reject the tobacco were it not of a specific crop. He did not buy tobacco of
a particular kind, class or quality.
There is no evidence to show that any representations as to the quality of the tobacco were made by to
the plaintiff by the defendant prior to the contract, nor that there was any agreement prior to that time
as to an exhibition of samples nor that the plaintiff prior to that time made any examination or inquiry
as to the quality of the tobacco. The fact is that the plaintiff, in order to get the building has to buy the
factory and everything that went with it.
Plaintiff could relieve himself from this obligation only by showing either the tobacco in the inventory
were not owned by the defendant when it was delivered to him.
