PINEDA VS. VDA.

DE VEGA [DEMAND LETTER] o Petitioner admitted that the original loan which respondent obtained in 2000
G.R. NO. 233774, APRIL 10, 2019 was only P200,000.00 with an undertaking to pay 3% interest per month.
• In the written interrogatories addressed to petitioner, she admitted that the
P500,000.00 indicated in the 2003 Agreement referred to a previously executed
DOCTRINE:
undated real estate mortgage (undated Agreement) between the parties which
The registry return card is the best evidence of actual receipt of demand letter. secured respondent's loan of P200,000.00 from her.
• After the parties underwent mediation proceedings, which turned out to be
Demand may be judicial — if the creditor files a complaint against the debtor for the
unsuccessful, the case was set for hearing.
fulfillment of the obligation — or extrajudicial — if the creditor demands from the debtor the
• RTC favored petitioner ordering respondent to pay the loaned amount of P200,000
fulfillment of the obligation either orally or in writing.
plus the interest of 12% per annum.
The remedies of collection and foreclosure are mutually exclusive. • CA reversed.
o Petitioner failed to prove that prior demand had been made upon respondent
FACTS:
for the full payment of the latter's obligation.
• Petitioner, Ma. Luisa A. Pineda, alleged that, on March 25, 2003, respondent Virginia o The registry return card evidencing such receipt [by respondent] was not
Zuñiga Vda. De Vega borrowed from her P500,000.00 payable within one year with specifically and formally offered in evidence.
an interest rate of 8% per month. • Hence, this appeal.
• To secure the loan, respondent executed a real estate mortgage (2003 Agreement) ISSUE:
over a parcel of land, together with all the buildings and improvements existing
thereon (Property). • Was a demand letter sent by petitioner to respondent and was it received by the
• On the loan's maturity, respondent failed to pay her loan despite demand. latter? (NO)
• As of May 2005, the unpaid accumulated interest amounted to P232,000.00.
RULING:
• Petitioner [on June 10, 2005] then filed a complaint against respondent, praying for
the payment of the latter's principal obligation and the interest thereon or, in default • NO. The registry return card is the best evidence of actual receipt of [respondent], to
of such payment, the foreclosure of the property subject of a real estate mortgage. which in this case, is not presented.
• Respondent’s Answer: • It was, indeed, alleged in the complaint, as well as in her testimony, that demand was
o The complaint was dismissible for lack of prior barangay conciliation sent to [respondent] by registered mail and was received on September 7, 2004.
proceeding and for failure to join her husband as a party; • However, the registry return card evidencing such receipt was not specifically and
o The interest rate agreed upon was excessive and unconscionable, thus illegal; formally offered in evidence.
o She also denied receiving P500,000.00 from petitioner and claimed that the • What she presented, instead, was a copy of the said demand letter with only a
said amount was the accumulated amount of another obligation she earlier photocopy of the face of a registry return card claimed to refer to the said letter.
secured from petitioner. • The Court have thoroughly reviewed petitioner’s formal offer as well and found no
• Petitioner’s reply: reference to the registry receipt card or any other competent proof i.e., postman
o Respondent's husband did not need to be joined because the transaction did certificate or the testimony of the postman, that [respondent] actually received the
not involve him; said demand letter.
o Although the agreement was to charge an interest rate of 8% per month, • [Petitioner] could have simply presented and offered in evidence the registry receipt
what was actually charged was just 4% per month. or the registry return card accompanying the demand letter.
 • However, she offered no explanation why she failed to do so. There is, thus, no • Both demands arise from the same cause, the non-payment of the debt, and, for that
satisfactory proof that the letter was received by [respondent]. reason, they constitute a single cause of action.
• Since petitioner failed to prove that extrajudicial demand was made upon respondent • Though the debt and the mortgage constitute separate agreements, the latter is
as required by law and petitioner had not asserted any of the exceptions to the subsidiary to the former, and both refer to one and the same obligation.
requisite demand under Article 1169 of the Civil Code, respondent could not be • Consequently, there exists only one cause of action for a single breach of that
considered in default. obligation.
• Creditor cannot split up his single cause of action by filing a complaint for payment of
Other Notes:
the debt, and thereafter another complaint for foreclosure of the mortgage.
• Delay or mora is governed by Article 1169 of the Civil Code. • Given the foregoing, the Court sustains the RTC's ruling which orders respondent to
• Default or mora, which is a kind of voluntary breach of an obligation, signifies the idea pay petitioner the loaned amount of P200,000.00.
of delay in the fulfillment of an obligation with respect to time. • However, the RTC's ruling that in default of respondent's payment, petitioner can
• In positive obligations, like an obligation to give, the obligor or debtor incurs in delay foreclose on the mortgage is erroneous.
from the time the obligee or creditor demands from him the fulfillment of the • RTC erred on the rate of interest that it imposed. The 12% per annum rate of interest
obligation. should be revised in the light of Nacar v. Gallery Frames.
• Demand may be judicial — if the creditor files a complaint against the debtor for the • Since the RTC found that the undated Agreement contained no stipulation on interest
fulfillment of the obligation — or extrajudicial — if the creditor demands from the and the 2003 Agreement's interest rate was unconscionable, the rate of interest on
debtor the fulfillment of the obligation either orally or in writing. the loan of respondent should be 12% per annum from judicial demand or filing of
• Whether the demand is judicial or extrajudicial, if the obligor or debtor fails to fulfill the original complaint with the RTC until June 30, 2013 and 6% per annum from July
or perform his obligations, like payment of a loan, as in this case, he is in mora 1, 2013 until finality of this Decision.
solvendi, and, thus, liable for damages. • RTC erred in reckoning the imposition of interest from extrajudicial demand because
• While delay on the part of respondent was not triggered by an extrajudicial demand the filing of the complaint constituted the judicial demand upon respondent to pay
because petitioner had failed to so establish receipt of her demand letter, this delay the latter's principal obligation and the interest thereon.
was triggered when petitioner judicially demanded the payment of respondent's loan
from petitioner.
• When petitioner filed her complaint dated June 10, 2005, such filing constituted the WHEREFORE, the Petition is hereby PARTLY GRANTED.
judicial demand upon respondent to pay the latter's principal obligation and the
interest thereon.
• Respondent, having thus incurred in delay (counted from the filing of the complaint),
is liable for damages pursuant to Article 1170 of the Civil Code.

• The remedies of collection and foreclosure are mutually exclusive.

• The RTC erred in granting petitioner's remedies or demands of collection and
foreclosure of mortgage successively.
• A mortgage creditor may institute against the mortgage debtor either a personal
action for debt or a real action to foreclose the mortgage. In other words, he may
pursue either of the two remedies, but not both.
SPS. BELTRAN VS. SPS. CANGAYDA [Contract of Sale] • Hence, this appeal.
G.R. NO. 225033, AUGUST 15, 2018
ISSUE:
DOCTRINE:
• WON the oral agreement between the parties is a contract to sell (NO)
In a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas
in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass RULING:
until the full payment of the price (reciprocal obligation). • NO. The agreement between the parties is an oral contract of sale.
FACTS: • As a consequence, ownership of the disputed property passed to petitioners upon its
delivery.
• In August 1989, the Spouses Apolonio Cangayda, Jr. and Loreta E. Cangayda, • Neither respondent Loreta's testimony nor clause 6 of the Amicable Settlement
respondents, verbally agreed to sell a 300-square-meter residential lot in Tagum City, supports the conclusion that the parties' agreement is not a contract of sale, but only
Davao del Norte, to Spouses Antonio Beltran And Felisa Beltran, petitioners, for a contract to sell — the reason being that it is not evident from said testimony and
PHP35,000.00. clause 6 that there was an express agreement to reserve ownership despite delivery
• The spouses Beltran made an initial payment, took possession of the property, and of the disputed property.
constructed their home. • The parties' oral agreement constitutes a meeting of the minds as to the sale of the
• They made additional payments totaling PHP 29,690.00 but failed to settle the disputed property and its purchase price.
remaining balance of PHP 5,310.00 despite the Cangaydas’ repeated demands. • Respondent Loreta's statements do not in any way suggest that the parties intended
• This issue led to an Amicable Settlement through the barangay’s intervention, to enter into a contract of sale at a later time.
wherein the Beltrans (petitioners) promised to settle the balance within a specified o Our [oral] agreement with [petitioner Antonio] that about 300 square meters
period and cover all expenses for the property’s titling. lot (sic) that they will pay P35,000.00 to us but [petitioner Antonio] told us
o Clause 6 of the Amicable Settlement: That herein [respondent Apolonio, Jr.] that they will pay the amount of P35,000.00 when [their] house will be sold,
is also willing to signed (sic) a deed of sale agreement after [petitioner then they will pay us.
Antonio] were (sic) able to pay the remaining balance x x x. • Such statements only pertain to the time at which petitioners expected, or at least
• However, they failed to comply, and nearly 17 years later, the Cangaydas demanded hoped, to acquire the sufficient means to pay the purchase price agreed upon.
the Beltrans vacate the property, leading to legal actions initiated by the Cangaydas • Also, clause 6 of the Amicable Settlement simply states that respondent Apolonio,
in 2009 for recovery of possession and damages. Jr. agreed to put the oral agreement in writing as a public document once the
• The Regional Trial Court (RTC) ruled in favor of the Cangaydas, ordering the Beltrans petitioners pay their remaining balance.
to vacate and directing the Cangaydas to refund the payments received. • It bears emphasizing that a formal document is not necessary for the sale
• The Beltrans appealed to the Court of Appeals (CA), arguing the agreement was a transaction to acquire binding effect.
sale that transferred ownership upon delivery, not a contract to sell. • Hence, the subsequent execution of a formal deed of sale does not negate the
• They also raised the issue of the applicability of the Maceda Law and argued the perfection of the parties' oral contract of sale which had already taken place upon
complaint was barred by prescription and laches. the meeting of the parties' minds as to the subject of the transaction and its purchase
• The CA affirmed the RTC’s decision anent the nature of the contract entered into by price.
the parties. • In a contract of sale, ownership of a thing sold shall pass to the buyer upon actual or
• CA also rejected petitioners' invocation of the Maceda Law for raising it for the first constructive delivery thereof in the absence of any stipulation to the contrary.
time on appeal would violate the tenets of due process and fair play.
 • Here, ownership of the disputed property passed to petitioners when its possession the parties to the status quo ante which
was transferred in their favor, as no reservation to the contrary had been made. means that the parties will be restored to
their original position as if the conditional
Contract of sale Contract to sell obligation never existed.
Ownership is reserved in the vendor and is Kasi Na transfer mo na yung ownership or So if there's no fulfillment of the suspensive
Title passes to the vendee upon the
not to pass until the full payment of the property by delivery in a contract of sale, condition, obligation is not born. It will not
delivery of the thing sold
price you cannot recover the property unless the give rise on the part of the seller.
The vendor has lost and cannot recover sale itself or the contract itself is first
Title is retained by the vendor until the full
ownership until and unless the contract is rescinded.
payment of the price
resolved or rescinded The failure of the buyer to pay the price in
The non-payment is not a breach of a contract to sell is not considered a breach
The non-payment of the purchase price is a
contract but "an event that prevents the of the obligation but the failure to perform
resolutory condition that entitles the seller
obligation of the vendor to convey title a positive suspensive condition which will
to rescind the sale.
from becoming effective” prevent the obligation of the seller from
The payment of the purchase price is a arising.
positive suspensive condition that gives rise If you are the seller, do not allow the buyer
to the prospective seller's obligation to the possession of the property kasi mahirap
convey title magpaalis kapag andun na si buyer sa
Obligation of the seller is to deliver the If the buyer fails to pay the price, that is property.
property and the obligation of the buyer is deemed by law as failure of the buyer to
to pay the purchase price. comply with the suspensive condition • A contract of sale is consensual in nature, and is perfected upon the concurrence of
which will now prevent the obligation of its essential requisites [COC].
the seller to transfer the title from
• Once perfected, they bind other contracting parties and the obligations arising
acquiring obligatory force. This means the
therefrom have the force of law between the parties and should be complied with in
nonpayment of the buyer to the contract to
sell that means he did not comply with the good faith.
suspensive condition which is full payment • A perfected contract of sale imposes reciprocal obligations on the parties whereby
of the price. the vendor obligates himself to transfer the ownership of and to deliver a
There is already an obligation on the part of The seller does not yet agree to transfer determinate thing to the buyer who, in turn, is obligated to pay a price certain in
the seller to transfer the title to the buyer the title to the buyer. The seller only agrees money or its equivalent.
once the buyer pays the purchase price. to transfer the title upon the fulfillment by • Failure of either party to comply with his obligation entitles the other to rescission as
(Reciprocal) the buyer of the positive suspensive the power to rescind is implied in reciprocal obligations.
condition which is the full payment of the
purchase price Other rulings:
If there is a contract of sale and there is For a contract to sell, and the “would-be”
• Slight delay is not sufficient to justify rescission.
breach on the part of the buyer and that he buyer did not pay the price, rescission is
• A reading of Article 1592 in conjunction with Article 1191 suggests that in the absence
did not pay the price, rescission is not available as a remedy.
appropriate. of any stipulation to the contrary, the vendor's failure to pay within the period agreed
Kasi rescission is a very technical term upon shall not constitute a breach of faith, so long as payment is made before the
which refers to resolution or restoration of vendor demands for rescission, either judicially, or by notarial act.
 • Here, petitioners acknowledge that they failed to settle the purchase price of the MANAS VS. NICOLASORA [CONTRACT OF LEASE]
disputed property in full within the deadline set by the Amicable Settlement. G.R. NO. 208845, FEBRUARY 03, 2020
• Nevertheless, the Court does not lose sight of the fact that petitioners have already DOCTRINE:
paid more than three-fourths of the purchase price agreed upon.
A lease contract's implied renewal does not mean that all the terms in the original contract
• Further, petitioners have constituted their family home on the disputed property in
are deemed revived. Only the terms that affect the lessee's continued use and enjoyment of
good faith, and have lived thereon for 17 years without protest.
the property would be considered part of the implied renewal. Indeed, the right of first
• In addition, respondents do not dispute that petitioners offered to settle their
refusal has nothing to do with the use and enjoyment of property. [Dizon v. Court of Appeals]
outstanding balance of P5,310.00 "two (2) days after the deadline [set by the
Amicable Settlement] and a few times thereafter," which offers respondents refused FACTS:
to accept.
• On April 18, 2005, the Mañas Spouses (Petitioner) entered into a Lease Contract with
• Respondents also do not claim to have made a demand for rescission at any time
Rosalina Roca Nicolasora (Rosalina), Respondent over a property in Tacloban City that
before petitioners made such offers to pay, either through judicial or extra-judicial
was owned by Rosalina's husband, Chy Tong Sy Yu (now deceased).
means, such as through a notarial act.
• The Lease Contract partly stated:
• Thus, pursuant to Article 1592, and consistent with jurisprudence, the Court deems
o That the duration of this Agreement is for one (1) year from the date of
it proper to grant petitioners a period of 30 days from notice of this Decision to
execution hereof, unless sooner revoked or cancelled by either party upon
settle their outstanding balance.
serious violation of any of the terms and conditions hereof; Provided, that
this lease may be renewed for like period at the option of the LESSEE
• Assuming that petitioners' failure to pay constitutes breach, respondents' cause of
(tenant);
action is already barred by prescription.
o Finally, should the LESSOR desire to sell the subject real property, he shall
• Respondents hinge their cause of action on petitioners' failure to pay within the
notify first the LESSEE about such intent, and the latter (lessee) is given Thirty
period set by the Amicable Settlement.
(30) days within which to accept the offer, or make a [counter]-offer, in
• Hence, this would mean that respondents' action is one that proceeds from a breach writing;
of a written agreement, which, under Article 1144 of the Civil Code, prescribes in 10
• It appears that the Lease Contract lapsed in 2006, with no express renewal.
years.
• However, the Mañas Spouses continued using the premises and paying the rentals,
• Respondents' Complaint was filed 17 years after the expiration of the payment period
without any objections from Rosalina and her children, Janet and Anthony.
stipulated in the Amicable Settlement.
• On February 14, 2008, Chy Tong Sy Yu (husband of petitioner) sold several parcels
• Assuming that petitioners' failure to pay within said period constitutes sufficient
of land, including the property being leased to the Mañas Spouses, to Ma. Therese
breach which gives rise to a cause of action, such action has clearly prescribed.
Roselle Uy-Cua (Roselle).
• The sale was made "with the conformity" of Rosalina, Janet, and Anthony. The titles
WHEREFORE, the Petition is GRANTED.
to the properties were subsequently transferred to Roselle.
• However, the Mañas Spouses claimed that they were neither informed of the sale nor
offered to purchase the property.
• They said that only upon receiving a letter dated June 2, 2008 from RMC Trading did
they learn of the sale of the property.
• According to the Mañas Spouses, their right of first refusal embodied in the Lease
Contract was violated.
 • Due to this, Mañas Spouses filed a Complaint in RTC praying that the contract of sale • But if there is no notice to vacate and the lessee remains in possession of the property
be rescinded, the relevant title be canceled, and their right of first refusal or option leased, it would only be proper that the lessor is still paid for the use and enjoyment
to buy be enforced. of the property.
• To this, Roselle filed a Motion to Dismiss on the ground that:
o the Complaint stated no cause of action and that the Mañas Spouses failed • NO. Implied renewals do not include the option to buy, as it is not germane to the
to comply with a condition precedent, specifically, barangay conciliation; and lessee's continued use of the property.
o that because the contract was only impliedly renewed, the spouses' right of • An implied new lease does not ipso facto carry with it any implied revival of option
first refusal was not renewed. to purchase (as lessee thereof) the leased premises.
• Meanwhile, Rosalina, Janet, and Anthony filed an Answer with Counterclaim. Akin to • The provision entitling the lessee the option to purchase the leased premises is not
Roselle, they argued that the right of first refusal was "granted only during the original deemed incorporated in the impliedly renewed contract because it is alien to the
term of the contract of lease," and that the Complaint was prematurely filed. possession of the lessee.
• RTC favored Roselle and dismissed Mañas Spouses complaint. • Spouses Mañas’ right to exercise the option to purchase expired with the
• CA affirmed the Regional Trial Court's rulings. termination of the original contract of lease for one year.
• Hence, this appeal. • Petitioners Mañas can only invoke the right to ask for the rescission of the contract if
their right to first refusal, as embodied in the original Lease Contract, is included in
ISSUE:
the implied renewal. To which, in this case, is not.
• WON the lease was impliedly renewed (YES) • Based on Article 1643, the lessor's main obligation is to allow the lessee to enjoy the
• WON the renewal includes the right of first refusal (NO) use of the thing leased.
• Other contract stipulations unrelated to this—or instance, the right of first refusal—
RULING: cannot be presumed included in the implied contract renewal.
• YES. Based on the terms of the Lease Contract, renewal would be at the option of • The law itself limits the terms that are included in implied renewals. One cannot
the lessee. simply presume that all conditions in the original contract are also revived; after all,
• However, petitioners [as lessee] did not appear to have expressly informed the a contract is based on the meeting of the minds between parties.
lessor of their intent to renew. • Thus, implied renewal does not extend to all stipulations.
• Instead, after the original Lease Contract had expired, they continued to pay rentals Other issues:
to the lessor, which clearly constitutes an implied lease contract renewal.
o ARTICLE 1670. If at the end of the contract the lessee should continue • As to petitioner’s claim on respondent Roselle's alleged incapacity due to her age [14
enjoying the thing leased for fifteen days with the acquiescence of the lessor, y/o at the time of the sale].
and unless a notice to the contrary by either party has previously been given, • Petitioners are not the proper parties to raise it. Article 1397 of the Civil Code
it is understood that there is an implied new lease, not for the period of the provides that "persons who are capable cannot allege the incapacity of those with
original contract, but for the time established in Articles 1682 and 1687. The whom they contracted[.]"
other terms of the original contract shall be revived. • Even if they were, they still filed the wrong action. The contracting party's incapacity
• The concept of implied renewal is a matter of equity recognized by law. is a ground for annulment of contract, not rescission.
• Technically, no contract between a lessor and a lessee exists from the end date of a
lease contract to its renewal.
 • Petitioners also failed to comply with a condition precedent under Section 412 of RACELIS VS. SPS. JAVIER [Contract of Lease]
Republic Act No. 7160 on conciliation as a pre-condition to Filing of Complaint in G.R. NO. 189609, JANUARY 29, 2018
Court.
DOCTRINE:
• Generally, all parties must first undergo barangay conciliation proceedings before
filing a complaint in court. Lessees are entitled to suspend the payment of rent under Article 1658 of the Civil Code if
their legal possession is disturbed. Acts of physical disturbance that do not affect legal
WHEREFORE, the Petition is DENIED.
possession is beyond the scope of this rule.

In a contract to sell, the payment of earnest money represents the seller's opportunity cost
of holding in abeyance the search for other buyers or better deals. Absent proof of a clear
agreement to the contrary, it should be forfeited if the sale does not happen without the
seller's fault.

FACTS:

• Before his death, Pedro Nacu Sr. appointed his daughter, Victoria N. Racelis
(petitioner), to administer his properties, including a residential house and lot in
Marikina City.
• He requested his heirs to sell the property, which led Racelis to advertise it for sale.
• On August 2001, spouses Germil Javier and Rebecca Javier (respondents) offered to
purchase the property but could not afford to pay the price of ₱3.5 M. They then
proposed leasing it to raise the money.
• Following initial hesitation, Racelis agreed to a month-to-month lease at P10,000 per
month, later increased to P11,000.
• The Spouses Javier used the property as their residence and as the site of their tutorial
school, the Niño Good Shepherd Tutorial Center.
• On July 2002, Racelis inquired about the spouses’ interest in purchasing the property,
leading them to pay an initial amount of P65,000 and several smaller sums,
amounting to P78,000 by the end of 2003.
• The spouses, however, failed to meet the P100,000 commitment and continued to
rent the property while falling behind on the rent payments by February 2004.
• Racelis, realizing the lack of genuine purchase intent, informed the spouses of the
family’s decision to terminate the lease and their forfeiture of the P78,000 earnest
money.
• The spouses insisted that the sum of ₱78,000.00 was advanced rent and proposed
that this amount be applied to their outstanding liability until they vacate the
premises.
 • Upon failure to reach a barangay-level settlement, Racelis disconnected the • At that point, petitioner was no longer obligated to maintain respondents in the
property’s electricity on May 12, 2004 forcing the Spouses Javier to purchase a "peaceful and adequate enjoyment of the lease for the entire duration of the
generator, it also prompted the spouses in filing a complaint for damages against contract."
Racelis but the latter was absolved from liability. • Generally, the disconnection of electrical service over the leased premises was not
• Meanwhile, Racelis filed a complaint for ejectment against the Spouses Javier before just an act of physical disturbance but one that is meant to remove respondents from
the Metropolitan Trial Court in Marikina City. the leased premises and disturb their legal possession as lessees.
• MeTC dismissed Racelis’ complaint and ruled that the spouses could suspend rent • However, since the lease had already expired when petitioner requested for the
payments under Article 1658 due to the electrical disconnection and ordered the temporary disconnection of electrical service, they cannot already avail of Article
return of the P78,000. 1658.
• RTC reversed MTC, indicating the absence of justification to suspend rent payments • Therefore, respondents cannot use the disconnection of electrical service as
and stating that P78,000 was earnest money and ordered the spouses to pay P54,000 justification to suspend the payment of rent.
in accrued rent. • Assuming that respondents were entitled to invoke their right under Article 1658 of
• The Regional Trial Court also explained that the parties entered into two (2) separate the Civil Code, this does exonerate them from their obligation under Article 1657 of
and distinct contracts-a lease contract and a contract of sale. the Civil Code "to pay the price of the lease according to the terms stipulated."
• CA affirmed the RTC’s ruling and declared that the Spouses Javier justified in • Lessees who exercise their right under Article 1658 of the Civil Code are not freed
withholding rental payments due to the disconnection of electrical service over the from the obligations imposed by law or contract.
property. It ordered compensation, reducing the spouses’ liability by P78,000 and • Moreover, respondents' obligation to pay rent was not extinguished when they
instructing Racelis to reimburse P24,000. transferred to their new residence.
• Hence, this appeal by Racelis. • Respondents are liable for a reasonable amount of rent for the use and continued
occupation of the property upon the expiration of the lease. To hold otherwise would
ISSUE:
unjustly enrich respondents at petitioner's expense.
• WON respondents Spouses Germil and Rebecca Javier can invoke their right to
suspend the payment of rent under Article 1658 of the Civil Code (NO) • A contract of lease is a "consensual, bilateral, onerous and commutative contract
• WON the ₱78,000.00 initial payment can be used to offset Spouses Germil and by which the owner temporarily grants the use of his property to another who
Rebecca Javier's accrued rent (NO) undertakes to pay rent therefor."
• The failure to maintain the lessee in the peaceful and adequate enjoyment of the
RULING:
property leased does not contemplate all acts of disturbance.
• NO. The lease had already expired when petitioner requested for the temporary • Lessees may suspend the payment of rent under Article 1658 of the Civil Code only if
disconnection of electrical service. Petitioner demanded respondents to vacate the their legal possession is disrupted.
premises by May 30, 2004. • Article 1658 of the Civil Code allows a lessee to postpone the payment of rent if the
• Instead of surrendering the premises to petitioner, respondents unlawfully withheld lessor fails to either:
possession of the property. o (1) "make the necessary repairs" on the property or
• Respondents continued to stay in the premises until they moved to their new o (2) "maintain the lessee in peaceful and adequate enjoyment of the property
residence on September 26, 2004. leased."

• NO. The ₱78,000.00 initial payment cannot be characterized as advanced rent.

• First, records show that respondents continued to pay monthly rent until February WHEREFORE, the Petition for Review is GRANTED.
2004 despite having delivered the ₱78,000.00 to petitioner on separate dates in 2003.
Difference between earnest money to option money
• Second, respondents indicated in the receipt that the ₱78,000.00 was initial payment
Earnest Money - Deducted to the purchase price
or goodwill money. Option Money - Separate from the purchase price
• They could have easily stated in the receipt that the ₱78,000.00 was advanced rent
instead of denominating it as "initial payment or goodwill money." An option contract is a preparatory contract. If you enter such contract, you are not buying
• Additionally, based on the evidence on record, petitioner and respondents executed anything yet but you are just buying your security to buy.
a contract to sell, not a contract of sale.
• Petitioner reserved ownership of the property and deferred the execution of a deed The option contract pursuant to Art 1479, para 2, must be supported by a consideration
of sale until receipt of the full purchase price. distinct from the price of the property in order that it may be binding upon the one who made
• Since respondents failed to deliver the purchase price at the end of 2003, the contract the promise.
to sell was deemed cancelled.
• The contract's cancellation entitles petitioner to retain the earnest money given by
respondents.
• Earnest money, under Article 1482 of the Civil Code, is ordinarily given in a perfected
contract of sale. However, earnest money may also be given in a contract to sell.
• In a contract to sell, earnest money is generally intended to compensate the seller
for the opportunity cost of not looking for any other buyers.
• It is a show of commitment on the part of the party who intimates his or her
willingness to go through with the sale after a specified period or upon compliance
with the conditions stated in the contract to sell.
• Opportunity cost is defined as "the cost of the foregone alternative." In a potential
sale, the seller reserves the property for a potential buyer and foregoes the
alternative of searching for other offers.
• Earnest money, therefore, is paid for the seller's benefit. Absent proof of a clear
agreement to the contrary, it is intended to be forfeited if the sale does not happen
without the seller's fault.
• The potential buyer bears the burden of proving that the earnest money was
intended other than as part of the purchase price and to be forfeited if the sale does
not occur without the fault of the seller. Respondents were unable to discharge this
burden.
• There is no unjust enrichment on the part of the seller should the initial payment be
deemed forfeited. After all, the owner could have found other offers or a better deal.
The earnest money given by respondents is the cost of holding this search in
abeyance.
SOUTH PACHEM DEVELOPMENT, INC. VS. CA [Contract of Lease and Sale] • In its answer, petitioner admitted that it was aware of the provisions in the deed
G.R. NO. 126260, DEC. 16, 2004 restrictions, but questioned its legality for being contrary to morals, public policy,
good customs, and the Constitution, as these constituted a perpetual burden on the
DOCTRINE:
property and the purchaser.
Contracts or deeds voluntarily entered into are considered valid and enforceable. • RTC rendered a decision in favor of the private respondent [Makati Commercial
Estate Association, Inc.]
FACTS:
• Court of Appeals affirmed the decision of the trial court.
• Private respondent Makati Commercial Estate Association, Inc. (formerly Ayala • Hence, this petition.
Commercial Estate Association) is an association of all real estate owners and long- o Petitioner maintains that the period of 47 years constitutes a restriction on
term lessees of parcels of land located in the Makati commercial area. its right to enjoy and dispose of the property under Article 428 of the Civil
• Pursuant to its AOI, the members of private respondent are assessed association Code as the non-payment of the association dues would constitute a lien on
dues annually, subject to penalty and interest in case of default. the subject property.
• On July 25, 1973, petitioner South Pachem Development, Inc. purchased from Ayala o Petitioner also mentions that under paragraph (D) of the deed restrictions, in
Corporation two adjoining parcels of land. the event of a breach of any of the special conditions, private respondent
• The deed restrictions provides that: shall have the right to rescind the sale without the necessity of giving notice
o A buyer or his successor-in interest automatically becomes a member of the to the petitioner; return the payments it received less whatever expenses
private respondent as an association and enjoined compliance with its rules incurred; and dispose of the property to any other person.
and regulations for the security, maintenance, beautification, and general ISSUE:
welfare of the landowners.
o Assessments collected by the private respondent would constitute a lien on • WON the deed restrictions requiring petitioner to pay association dues for 47 years
the subject property. are valid and enforceable (YES)
o The deed restrictions is a valid agreement freely and voluntarily agreed upon
between the petitioner and private respondent.
• In 1984, petitioner stopped paying its association dues, including the interest and
penalty, to private respondent.
RULING:
• According to petitioner, it realized that private respondent was not really performing
the services it promised to perform, e.g., collection of garbage and the maintenance • YES. The deed of restrictions are valid and enforceable because the petitioner
of roads and ensuring the peace and order situation of the area, which are being voluntarily entered into said deed.
undertaken by the city government of Makati. • Petitioner’s failure to challenge the restrictions for 11 years estopped it from
• It claimed that the payment of association fees for forty-seven (47) years amounts to denying their validity.
a perpetual imposition upon a member of private respondent (as an association) • The stipulation in the deed restrictions, with regard to the membership of a lot owner
which therefore makes it illegal. to the association and the payment of the fees, is valid and binding between the
• Due to this, private respondent filed a complaint against petitioner in the Regional petitioner and respondent for the following reasons:
Trial Court of Makati for collection of a sum of money arising from the latter’s non- o First. The provision in the deed restrictions which required a purchaser of a
payment of association dues. parcel of land located in the Makati area to pay association fees is a valid
stipulation.
 o Second. The imposition of the association fees in the deed restrictions • In this regard, petitioner’s acceptance of the terms of the contract without any
cannot be regarded as a stipulation pour autrui clearly and deliberately dissent raises the presumption that all the terms therein were brought to its
conferred upon private respondent. knowledge and duly agreed upon. It is thus estopped from later denying that it had
▪ What was clearly stated in the contract of sale between them is that assented to the terms.
upon purchase by the petitioner of the two parcels of land, it • In view of its acquiescence, the petitioner is now barred from challenging the same
automatically becomes a member of private respondent and is thus under the principle that “one who sleeps on his rights shall not be heard to
bound to comply with the rules and regulations thereof. complain.”
Additionally, the assessments collected by the private respondent
would constitute a lien on the properties of the petitioner. WHEREFORE, the petition is DENIED.
o Third. The deed of restriction albeit being a contract of adhesion is valid.
▪ When petitioner purchased the subject properties in Makati, the
deed restrictions were made an addendum or supplement to the two Stipulation pour autrui requisites:
deeds of absolute sale. (1) There is a stipulation in favor of a third person;
(2) The stipulation is a part, not the whole, of the contract;
▪ The deed restrictions were pre-printed and duly annotated on the
(3) The contracting parties clearly and deliberately conferred a favor to the third person –
titles corresponding to the parcels of land purchased and petitioner,
the favor is not merely incidental;
through its duly authorized representative, affixed its signature (4) The favor is unconditional and uncompensated;
thereto. (5) The third person communicated his or her acceptance of the favor before its revocation;
▪ The stipulations were plain and unambiguous which leave no room and
for interpretation.
▪ As such, petitioner was presumed to have full knowledge and to have (6) The contracting parties do not represent, or are not authorized, by the third party.⁠
acted with due care or, at the very least, to have been aware of the
terms and conditions of the contract and that it had actually assented
to the stipulations as there was never any objection interposed prior
to the actual purchase of the subject property.

• The petitioner was also held in estoppel and is precluded from denying the validity of
the transaction it had earlier freely and voluntarily entered into with private
respondent.
• It shall not be allowed to disavow or repudiate a valid agreement at this late stage
with regard to the provisions of the deed restrictions after having paid its association
dues from 1973 to 1984 [11 years].
• As the Court of Appeals rightly stated, the petitioner is guilty of “estoppel by
acquiescence.” (consent)
• Petitioner’s inaction for the past 11 years effectively forecloses its right to question
the perceived infirmity in an agreement which it had mutually entered into with the
private respondent.