HERNAEZ vs.

HERNAEZ

The spouses Hernaez died, leaving several legitimate descendants. Neither of their estates had
been divided up to the date of the institution of this action, but were both under administration.
Their son, Domingo Hernaez y Espinosa, sold all his interest in both his father's and mother's
estate to his son, Vicente Hernaez y Tuason. Domingo had thus parted with all his interest in
the estates of his two parents, he executed a document of sale in favor of Alejandro
Montelibano y Ramos in February 27, 1907 .
On the same date he executed another document of sale in which he purported to convey to
Jose Montelibano Uy-Cana four-eighteenths of his interest in his mother's estate. Both of these
sales were made with the connivance of his son, Vicente Hernaez y Tuason. On August 19,
1912, Jose Montelibano then sold his interest in the estate to Alejandro Montelibano y Ramos.
By this transfer, Alejandro stood owner of all the interest of Domingo in the estate of Pedro
Hernaez, and five-eighteenths of his interest in the estate of Juana Espinosa as against Vicente
Hernaez y Espinosa.
Rosendo Hernaez (Another son of the deceased spouses-administrator), was notified of the
said sale on Jan. 8, 1913. He then asks to be substituted as assignee of the interests of various
heirs of the estate which he had acquired by purchase. He then bought all of Vicente’s shares
ISSUE

Whether Rosendo is estopped from seeking to subrogate himself in the rights acquired
by Montelibano in the estate.

RULING
Yes. The rule is that the holder of a prior equitable right has priority over the purchaser
of a subsequent estate without value, or with notice of the equitable right, but not as
against a subsequent purchaser for value and without notice.
In this case, Rosendo is estopped from claiming the entire estates of his father and
mother because he had full knowledge of the prior sale to Alejandro. He is only entitled
to the remaining 13/18 shares of his mother’s estate which remain unsold. Alejandro
Montelibano is the rightful owner because he paid a valuable consideration and in good
faith.

a well-established principle that where the true owner of property, for however
short a time, holds out another, or, with knowledge of his own right, allows
another to appear as the owner of or as having full power of disposition over the
property, the same being in the latter's actual possession, and innocent third
parties are thus led into dealing with such apparent owner, they will be protected.

Dispositive
It is urged that the prices in some of the deeds of sale by which Alejandro Montelibano y Ramos purchased the interest of various
heirs in the estates are fictitious. This is a question of fact upon which both parties adduced evidence, and we concur in the
opinion of the trial court that there is no basis to the charge. For the foregoing reasons, the judgment of the court is modified by
substituting, as the price of subrogation of the interest originally purchased by Jose Montelibano Uy-Cana, the sum of P4,500, as
set out in Exhibit 7, for the sum of P10,000, the consideration expressed in Exhibit 10. As modified, the judgment appealed from
is affirmed, without costs. So ordered.

AMIGO V. TEVES
(1954|Bautista Angelo)

In 1937, Macario Amigo and Anacleto Cagalitan executed in favor of their son, Marcelio, a
power of attorney granting him the power to “The power to enter into any contract concerning
the land, or can sell the land under any term or condition and covenant he may think fit,.
Marcelino, as attorney-in-fact, executed a deed of sale of a parcel of land for P3,000 in favor of
Serafin Teves, stipulating that vendors could repurchase the land within a period of 18 months
from date of sale. It also said that the vendors would remain in land as lessees for 18 months:
with the following conditions

 Lessees shall pay P180 as rent every 6 months from date of agreement
 Period of the lease shall terminate on April 30, 1940
 In case of litigation, lessees shall pay P100 as attorney’s fees
 In case of failure to pay any rental as agreed upon, the lease auto terminate and
right of ownership of Teves shall become absolute

In 1939, Spouses Amigo donated to their sons Pastor and Justino (petitioners) several
parcels of land including their right to repurchase the land in litigation . Deed made on public
instrument, accepted and registered in Office of the Register of Deeds.

Vendor-lessees paid the rental for the 1st 6 months but not for the next ones. Teves, the
vendee-lessor, executed an “Affidavit of Consolidation of Title” due to the failure of the lessees
to pay the rent and registered the affidavit in the Office of the Register of Deeds who then
issued to Teves the corresponding transfer of title over the land in question.

 Justino and Pastor, as donees of the right to repurchase, offered to repurchase the
land from Teves by tendering the redemption price; but Teves refused saying the
ownership had already been consolidated to him as purchaser a retro.
 Thus, before the expiration of the 18th month period for the redemption of the land,
donees instituted the present action.

Arguments:
1. Lease covenant in the deed of sale w/ pacto de retro by Marcelino to Teves is not germane to
nor within the power of the attorney-in-fact, thus ultra vires and null and void,
2. Penal clause in the lease covenant re the auto termination of the period of redemption upon
nonpayment is null & void
3. Pet allowed to repurchase the land on equitable grounds cus great disproportion between the
redemption price and market value of the land on the date of the period of redemption is
supposed to expire

CA: Granted that MArcelino had the power to execute a deed of sale with right to repurchase.

ISSUE: W/N the contract of sale with pacto de retro was valid

HELD:
Yes, the power of attorney had the power to execute such a deed. Cursory reading showed
that the power granted is so broad it covers the celebration of any contract or covenant. The
fact that the agent has acted in accordance with the wish of his principals can be inferred from
their attitude in donating to the herein petitioners the right to redeem the land under the terms
and conditions appearing in the deed of sale executed by their agent.

The lease covenant is a common provision in contracts of sales of land with pacto
de retro. The lease that a vendor executes on the property may be considered as a
means of delivery or tradition by constitutum possessorium. Where the vendor a continues
to occupy the land as lessee, by fiction of law, the possession is deemed to be constituted in the
vendee by this mode of delivery. While the lease covenant may be hard on the vendor
because of the clause for automatic termination of the period of redemption, it is not
contrary to law, morals, or public order, which may void it.
Hanggang ditto nalang
Petitioners also contend that as the assessed value of the land in 1938, when the contract was
celebrated, was P4,280, the selling price of P3,000 agreed upon is considered as not written, and
petitioners should be allowed to exercise the right to repurchase on equitable considerations

Vitug Dimatulac vs. Coronel: Dimatulac sold land to Coronel for P9,000, reserving the
privilege to repurchase for 5 years. Converted vendor to lessee, automatic loss of right to
repurchase if the vendor would not pay the rental fee anytime during the 5 years. Later, the
vendor offered to redeem the property. The vendee refused the offer on the ground that her title
to the property had already been consolidated. This Court declared the lease covenant
contained in the contract as lawful, although it found that the act of the vendee in taking
possession of the land by way of compromise constituted a waiver of the penal provision
relative to the acceleration of the period of redemption. The parties to a contract of this
character may legitimately fix any period to please, not in excess of ten years, for the
redemption of the property by the vendor; and the determination of the right of redemption may
be made validly to depend on the delinquency of the vendor-lessee.

CASE AT BAR: It is not the same as in the Dimatulac case because Teves had been quick
enough to assert his right by consolidating his ownership when the first chance to do so
has presented itself. He offered no compromise or act that may be deemed as a waiver of
the penal provision forfeiting the privilege given him under the penal clause.
SIDE TOPIC:
2. Petitioners also contend that as the assessed value of the land in 1938, when the contract
was celebrated, was P4,280, the selling price of P3,000 agreed upon is considered as not
written, and petitioners should be allowed to exercise the right to repurchase on equitable
considerations. The market price of the land in 1940, the year the period of redemption was
supposed to expire was fourteen times more than the money paid for it by respondent such that,
if that should be taken as basis, the value of the land would be P43,004.50.

While this contention may be meritorious in an absolute contract of sale, it does not
apply to a contract of sale with pacto de retro, where the price is usually less than in absolute
sale for the reason that in a sale with pacto de retro, the vendor expects to re-acquire or redeem
the property sold. In addition, the evidence presented refer to sales in 1940 and 1941, while
none were presented for 1938 when the contract was entered into. Finally, the CA found that
the price paid for the land is not unreasonable as to justify the nullification of the sale.
The essence of a pacto de retro sale is that title and ownership of the property sold is immediately vested
in the vendee a retro, subject to the restrictive condition of repurchase by the vendor a retro within the
period provided in Article 1606 of the New Civil Code, to wit:

The failure of the vendee a retro to repurchase the property vests upon the latter by operation of law the
absolute title and ownership over the property sold. 

Constitutum possesorium
where an item is sold by a seller to a purchaser, but before it can be transferred to the
new owner (purchaser), the item is kept or stored by the former owner (seller). Thus, the
parties� rights over the object have changed despite physical delivery to the new
owner not having taken place.