RA No.

6552 (Maceda Law)

1. MANUEL C. PAGTALUNAN, petitioner vs. RUFINA DELA CRUZ VDA. DE MANZANO

FACTS

Patricio Pagtalunan (Patricio), petitioner’s stepfather and predecessor-in-interest, entered into a

Contract to Sell with respondent, wife of Patricio’s former mechanic, Teodoro Manzano, whereby
the former agreed to sell, and the latter to buy, a house and lot which formed half of a parcel of
land. The consideration of P17,800 was agreed to be paid in the following manner: P1,500 as
down payment upon execution of the Contract to Sell, and the balance to be paid in equal
monthly installments of P150 on or before the last day of each month until fully paid.

It was alleged that respondent did not paid the monthly installment as what they have agreed
upon. On the other hand, it was denied by the respondent that she is religiously paying her
balance but the petitioner changes its mind and want to refund all the payments she gave,
however, she refused. She admittedly, that she had failed to pay some installments but she
continued paying later on.

Patricio and his wife died. Petitioner became their sole successor-in-interest pursuant to a waiver
by the other heirs. He eventually filed before the MTC unlawful detainer case and it was ruled in
favor of him. However, on appeal to RTC, it ruled to dismiss the complaint for lack of merit. The
Court of Appeals affirmed the decision of the RTC to dismiss the case. The CA found that the
parties, as well as the MTC and RTC failed to advert to and to apply Republic Act (R.A.) No. 6552,
more commonly referred to as the Maceda Law, which is a special law enacted in 1972 to protect
buyers of real estate on installment payments against onerous and oppressive conditions.The CA
held that the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No.
6552, and recognized respondent’s right to continue occupying unmolested the property subject
of the contract to sell.

ISSUE

Whether or not the Maceda Law (RA 6552) is applicable to this case

RULING

Yes, it is applicable.

The CA correctly ruled that R.A No. 6552, which governs sales of real estate on installment, is
applicable in the resolution of this case.
This case originated as an action for unlawful detainer. Respondent is alleged to be illegally
withholding possession of the subject property after the termination of the Contract to Sell
between Patricio and respondent. It is, therefore, incumbent upon petitioner to prove that the
Contract to Sell had been cancelled in accordance with R.A. No. 6552.

The pertinent provision of R.A. No. 6552 reads:

Sec. 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him, which is hereby fixed at the rate of one month grace period for
every one year of installment payments made: Provided, That this right shall be exercised
by the buyer only once in every five years of the life of the contract and its extensions, if
any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty percent of the total payments
made and, after five years of installments, an additional five percent every year but not
to exceed ninety percent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by a notarial act
and upon full payment of the cash surrender value to the buyer.9

R.A. No. 6552, otherwise known as the "Realty Installment Buyer Protection Act," recognizes in
conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the
seller to cancel the contract upon non-payment of an installment by the buyer, which is simply
an event that prevents the obligation of the vendor to convey title from acquiring binding
force.10 The Court agrees with petitioner that the cancellation of the Contract to Sell may be done
outside the court particularly when the buyer agrees to such cancellation.

However, the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of
R.A. No. 6552, which requires a notarial act of rescission and the refund to the buyer of the full
payment of the cash surrender value of the payments on the property. Actual cancellation of the
contract takes place after 30 days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
 2. LUISA F. MCLAUGHLIN vs THE COURT OF APPEALS AND RAMON FLORES

FACTS

Petitioner Luisa F. McLaughlin and private respondent Ramon Flores entered into a contract of
conditional sale of real property. Petitioner filed a complaint in the then Court of First Instance
of Rizal (Civil Case No. 33573) for the rescission of the deed of conditional sale due to the failure
of private respondent to pay the balance.

The parties entered into Compromise Agreement in which the court rendered into a decision. In
said compromise agreement, private respondent acknowledged his indebtedness to petitioner
under the deed of conditional sale in the amount of P119,050.71, and the parties agreed that
said amount would be payable as follows: a) P50,000.00 upon signing of the agreement; and b)
the balance of P69,059.71 in two equal installments.

On October 30, 1980, private respondent sent a letter to petitioner signifying his willingness and
intention to pay the full balance of P69,059.71, and at the same time demanding to see the
certificate of title of the property and the tax payment receipts. Private respondent contended
that on the first working day of said month, he tendered payment to petitioner but this was
refused acceptance by petitioner.

Petitioner filed a Motion for Writ of Execution alleging that private respondent failed to pay the
installment due and he had failed to pay the monthly rental of P l,000.00. Petitioner prayed that
a) the deed of conditional sale of real property be declared rescinded with forfeiture of all
payments as liquidated damages; and b) the court order the payment of Pl,000.00 back rentals
since June 1980 and the eviction of private respondent. The RTC ruled in favor of petitioners but
the RTC nullified and set aside the orders of the RTC.

ISSUE

Whether or not the respondent court committed grave abuse of discretion

RULING

NO. The general rule is that rescission will not be permitted for a slight or casual breach of the
contract, but only for such breaches as are substantial and fundamental as to defeat the object
of the parties in making the agreement. (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil. 821)

In aforesaid case, it was held that a delay in payment for a small quantity of molasses, for some
twenty days is not such a violation of an essential condition of the contract as warrants rescission
for non-performance.
Private respondent also invokes said law as an expression of public policy to protect buyers of
real estate on installments against onerous and oppressive conditions (Section 2 of Republic Act
No. 6552).

Section 4 of Republic Act No. 6552 which took effect on September 14, 1972 provides as follows:

In case where less than two years of installments were paid, the seller shall give
the buyer a grace period of not less than sixty days from the date the installment
became due. If the buyer fails to pay the installments due at the expiration of the
grace period, the seller may cancel the contract after thirty days from receipt by
the buyer of the notice of the cancellation or the demand for rescission of the
contract by a notarial act.

Section 7 of said law provides as follows:

Any stipulation in any contract hereafter entered into contrary to the provisions
of Sections 3, 4, 5 and 6, shall be null and void

3. ACTIVE REALTY & DEVELOPMENT CORPORATION vs. NECITA G. DAROYA

FACTS

Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner and developer of Town
& Country Hills Executive Village. It entered into a Contract to Sell1 with respondent NECITA
DAROYA, a contract worker in the Middle East, whereby the latter agreed to buy a 515 sq. m. lot
forP224,025.00 in petitioner’s subdivision.

The contract to sell stipulated that the respondent shall pay the initial amount upon execution of
the contract and the balance in monthly installments. The respondent was in default in three
amortizations and by this petitioner sent respondent a notice of cancellation2 of their contract to
sell, to take effect thirty (30) days from receipt of the letter. It does not appear from the records,
however, when respondent received the letter. Nonetheless, when respondent offered to pay
for the balance of the contract price, petitioner refused as it has allegedly sold the lot to another
buyer.

The respondent filed before Arbitration Branch of the Housing and Land Use Regulatory Board
(HLURB) a complaint for damages and specific performance. The HLURB ruled in favor of the
respondents and declared that the cancellation of the contract to sell is void. On appeal, the
HLURB Board of Commissioners set aside the Arbiter’s Decision. The Board refused to apply the
remedies provided under the Maceda Law and instead deemed it fit to formulate an "equitable"
solution to the case. Respondent appealed to the Office of the President. On June 2, 1998, then
Chief Presidential Counsel Renato C. Corona, acting by authority of the President, modified the
Decision of the HLURB as he found that it was not in accord with the provisions of the Maceda
Law.
ISSUE

Whether or not the petitioner can be compelled to refund to the respondent the value of the lot
or to deliver a substitute lot at respondent’s option.

RULING

Yes. The contract to sell in the case at bar is governed by Republic Act No. 6552 -- "The Realty
Installment Buyer Protection Act," or more popularly known as the Maceda Law -- which came
into effect in September 1972. Its declared public policy is to protect buyers of real estate on
installment basis against onerous and oppressive conditions.16 The law seeks to address the acute
housing shortage problem in our country that has prompted thousands of middle and lower class
buyers of houses, lots and condominium units to enter into all sorts of contracts with private
housing developers involving installment schemes. Lot buyers, mostly low income earners eager
to acquire a lot upon which to build their homes, readily affix their signatures on these contracts,
without an opportunity to question the onerous provisions therein as the contract is offered to
them on a "take it or leave it" basis.17 Most of these contracts of adhesion, drawn exclusively by
the developers, entrap innocent buyers by requiring cash deposits for reservation agreements
which oftentimes include, in fine print, onerous default clauses where all the installment
payments made will be forfeited upon failure to pay any installment due even if the buyers had
made payments for several years.18 Real estate developers thus enjoy an unnecessary advantage
over lot buyers who they often exploit with iniquitous results. They get to forfeit all the
installment payments of defaulting buyers and resell the same lot to another buyer with the same
exigent conditions. To help especially the low income lot buyers, the legislature enacted R.A. No.
6552 delineating the rights and remedies of lot buyers and protect them from one-sided and
pernicious contract stipulations.

More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default
in the payment of succeeding installments, where he has already paid at least two (2) years of
installments, thus:

"(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him, which is hereby fixed at the rate of one month grace period for
every one year of installment payments made; x x x

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty per cent of the total payments made;
provided, that the actualcancellation of the contract shall take place after thirty days from
receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of the cash surrender value to the buyer."

Thus, for failure to cancel the contract in accordance with the procedure provided by law, we
hold that the contract to sell between the parties remains valid and subsisting. Following Section
3(a) of R.A. No. 6552, respondent has the right to offer to pay for the balance of the purchase
price, without interest, which she did in this case.

4. JESTRA DEVELOPMENT AND MANAGEMENT CORPORATION vs. DANIEL PONCE PACIFICO

FACTS

Daniel Ponce Pacifico (Pacifico) signed a Reservation Application1 with Fil-Estate Marketing
Association for the purchase of a house and lot. Under the Reservation Application, the total
purchase price of the property was P2,500,000, and the down payment equivalent to 30% of the
purchase price. Based on the application, upon the fulfillment of the 30% down payment by
pacific, he will sign a contract to sell with the owner and developer of the property which is the
JESTRA Development and Management Corporation.

Pacifico run out funds to pay for the property and he requested to JESTRA to suspend the
payment in which the latter denied his request. Pacifico filed a complaint before the HLURB
against JESTRA claiming that despite the full payment of his down payment, JESTRA failed to
deliver to him the property within 90 days as provided in the contract to sell and instead JESTRA
sold the property to another buyer.

ISSUE

Whether or not the act of JESTRA in cancelling the contract to sell with Pacifico is valid

RULING

Yes. RA No. 6552 was enacted to protect buyers of real estate on installment against onerous
and oppressive conditions. While the seller has under the Act the option to cancel the contract
due to non-payment of installments, he must afford the buyer a grace period to pay them and, if
at least two years installments have already been paid, to refund the cash surrender value of the
payments. Thus Section of the Act provides:

SECTION 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding industrial
lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight
hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine,
where the buyer has paid at least two years of installments, the buyer is entitled to the following
rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him which is hereby fixed at the rate of one month grace period for
every one year of installment payments made: Provided, That this right shall be exercised
 by the buyer only once in every five years of the life of the contract and its extensions, if
any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty per cent of the total payments made,
and, after five years of installments, an additional five per cent every year but not to
exceed ninety per cent of the total payments made: Provided, That the actual cancellation
of the contract shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the
total number of installment payments made.

As respondent failed to pay at least two years of installments, he is not, under above-quoted
Section 3 of RA No. 6552, entitled to a refund of the cash surrender value of his payments. What
applies to the case instead is Section 4 of the same law, viz:

SECTION 4. In case where less than two years of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.

5. OLYMPIA HOUSING, INC PANASIATIC TRAVEL CORPORATION and MA. NELIDA GALVEZ-vs
YCASIANO

FACTS

The object in litigation is a condominium unit sold at the price of P2,340,000.00 payable on
installments at the rate of P33,657.40 per month. On August 8, 1984, plaintiff Olympia Housing,
Inc. and defendant Ma. NelidaGalvez-Ycasiano entered into a Contract to Sell, whereby the
former agreed to sell to the latter condominium unit. Pursuant to the Contract to Sell, defendant
Ma. Nelida Galvez-Ycasiano made a reservation/deposit in the amount of P100,000.00 on July
17, 1984and 50% down payment in the amount of P1,070,000.00 on July 19, 1984.Defendants
made several payments in cash and thru credit memos issued by plaintiff representing plane
tickets bought by plaintiff from defendant Panasiatic Travel Corp., which is owned by defendant
Ma. Nelida Galvez-Ycasiano, who credited/offset the amount of the said plane tickets to
defendant’s account due to plaintiff.

Plaintiff alleged that far from complying with the terms and conditions of said Contract to Sell,
defendants failed to pay the corresponding monthly installments which as of June 2,
1988 amounted to P1,924,345.52. Demand to pay the same was sent to defendant Ma. Nelida
Galvez-Ycasiano, but the latter failed to settle her obligation. For failure of defendant to pay her
obligation plaintiff allegedly rescinded the contract by a Notarial Act of Rescission. At present,
the subject condominium unit is being occupied by defendant Panasiatic Travel Corp., hence the
suit for Recovery of Possession (Accion Publiciana) with prayer for attorney’s fees, exemplary
damages and reasonable rentals for the unit from July 28,1988 at the rate of P32,100.00per
month until the condominium unit is finally vacated. Defendant Ma. Nelida Galvez-Ycasiano,
while admitting the existence of the contract to sell, interposed the defense that she has made
substantialpayments of the purchase price of the subject condominium unit amountingto
P1,964,452.82 in accordance with the provisions of the contract to sell;that she decided to stop
payment of the purchase price in the meantimebecause of substantial differences between her
and the plaintiff in thecomputation of the balance of the purchase price. The Regional Trial Court
dismissed the complaint, having been prematurelyfiled without complying with
RA6552.Respondents tendered the amount of P4,304,026.53 to petitioner via Metrobank
Cashier’s Check. Petitioner refused to accept the payment,constraining respondents to consign
at the disposal of the court.

Both parties appealed the judgment of the trial court. In its now questioneddecision of 11 June
1999, the appellate court sustained the trial court

ISSUES:

Effect of the filing of the complaint and the notarial act of rescission attached thereto vis-à-vis
the requirements of r.a. 6552

RULING

The notarial act of rescission must be accompanied by the refund of the cash surrender value.

x x x The actual cancellation of the contract can only be deemed to take place upon the expiry of
a 30-day period following the receipt by the buyer of the notice of cancellation or demand for
rescission by a notarial act and the full payment of the cash surrender value.

CAPACITY TO BUY OR SELL (Article 1489-1492)

Article 1490

6. EDUARDO FELIPE, HERMOGENA V. FELIPE AND VICENTE V. FELIPE vs.

HEIRS OF MAXIMO ALDON, NAMELY: GIMENA ALMOSARA, SOFIA ALDON, SALVADOR ALDON,
AND THE HONORABLE COURT OF APPEALS

FACTS
Maximo Aldon married Gimena Almosara in 1936. The spouses bought several pieces of land
and the lands were divided into three lots. Afterwards, Gimena Almosara sold the lots to the
spouses Eduardo Felipe and Hermogena V. Felipe. The sale was made without the consent of
her husband, Maximo. Later on, the heirs of Maximo Aldon, namely his widow Gimena and
their children Sofia and Salvador Aldon, filed a complaint in the Court of First Instance of
Masbate against the Felipes. The respondents asserted that they had orally mortgaged the
same to the defendants; and an offer to redeem the mortgage had been refused so they filed
the complaint in order to recover the three parcels of land. On the other hand, the defendants
asserted that they had acquired the lots from the plaintiffs by purchase and subsequent
delivery to them. The RTC ruled in favor of the defendants but the Court of Appeals set aside
the decision of the lower court contending that the defendants should surrender the lot to the
plaintiffs.

ISSUE

Whether or not sale made by Gimena is a defective contract but of what category?

RULING

It is voidable. The voidable contracts are "[T]hose where one of the parties is incapable of giving
consent to the contract." In the instant case-Gimena had no capacity to give consent to the
contract of sale. The capacity to give consent belonged not even to the husband alone but to
both spouses.

The view that the contract made by Gimena is a voidable contract is supported by the legal
provision that contracts entered by the husband without the consent of the wife when such
consent is required, are annullable at her instance during the marriage and within ten years
from the transaction questioned. (Art. 173, Civil Code.)

Gimena's contract is not rescissible for in such contract all the essential elements are untainted
but Gimena's consent was tainted. Neither can the contract be classified as unenforceable
because it does not fit any of those described in Art. 1403 of the Civil Code. And finally, the
contract cannot be void or inexistent because it is not one of those mentioned in Art. 1409 of
the Civil Code. By process of elimination, it must perforce be a voidable contract.

The voidable contract of Gimena was subject to annulment by her husband only during the
marriage because he was the victim who had an interest in the contract. Gimena, who was the
party responsible for the defect, could not ask for its annulment. Their children could not
likewise seek the annulment of the contract while the marriage subsisted because they merely
had an inchoate right to the lands sold.

7. CASTILLO VS CASTILLO GR NO. L-18238 JANUARY 22, 1980

FACTS:
Ysidro C. Castillo died on October 15, 1947 leaving as his heirs his wife Enriqueta Katigbak and
their nine children Intestate proceedings for the settlement of the deceased's estate were
instituted and in January, 1948, Enriqueta was appointed administratrix. On June 21, 1948, she
filed an inventory of the properties as well as the obligations left by the deceased. However, on
November 11, 1948, Enriquetta submitted a project of partition, stating that the properties
which constituted the residuary hereditary estate of the deceased Ysidro are: (1) 38 parcels of
land which are properties brought to the marriage by the deceased Ysidro and (2) 19 parcels of
land which are conjugal properties of the spouses. Under said project of partition, all the 38
parcels of land brought by the deceased into the marriage and 4 parcels of the conjugal
properties were adjudicated to all the nine children in equal shares, pro-indiviso; 8 parcels of the
conjugal properties were adjudicated to the widow as her share in the conjugal partnership and
the remaining 7 parcels given in usufruct to the widow. Despite approval of the project of
partition and the closing of the intestate proceedings, the properties remained under the
administration of Enriqueta.

On February 4, 1960, after an extrajudicial demand for partition failed, herein plaintiff-appellant
Zenaida K. Castillo, filed an action for partition with accounting and receivership against her
mother Enriqueta and siblings alleging that the project of partition omitted to include certain
properties acquired by the defendants using community funds in their acquisition, she prayed
that said properties be divided and partitioned accordingly.

ISSUE:

Whether or not lower court erred when it held that the money used in the purchase of 1/2 of the
land covered by Exhibit Plaintiff 2 below to the spouses Ysidro C. Castillo and Enriqueta Katigbak
and therefore, erred when it ordered that the same be partitioned as a conjugal partnership
property

HELD:

We find no error in the lower court's ruling that the money used in the purchase of ½ of the land
covered by Exhibit Plaintiff 2 belonged to the spouses Ysidro C. Castillo and Enriqueta Katigbak
and ordering that such land be partitioned as conjugal partnership property. We must here
underscore the specific rule in our civil law that all properties of the marriage shall be presumed
conjugal unless it be proved that they belong exclusively to either of the spouses. To rebut or
overcome this presumption, there must be clear, convincing and satisfactory proof that this
consideration of the sale was paid by only one of the spouses and from her exclusive or separate
property. The document in question, Exhibit Plaintiff 2, is a public instrument valid and binding
even as against third parties, the said deed of sale having been duly registered in the Register of
Deeds on June 23, 1947. The Register of Deeds has duly certified that said deed of sale was duly
recorded in the Registration Book under Act 3344. It needs no further argumentation to hold that
the defendants-appellants' gratuitous testimony cannot prevail over the recitals in said public
instrument, for it must be here reiterated that: A recital in a public instrument celebrated with
all the legal formalities under the safeguard of a notarial certificate is evidence against the parties
and a high degree of proof is necessary to overcome the legal presumption that such recital is
true. (Valencia v. Tantoco, et al., 99 Phil. 824).

8. UY SIU PIN VS CANTOLLAS 70 PHIL. 55 JUNE 20, 1940

FACTS:

Sps. Pedro Velegaño and Casimira Cantollas were indebted to El Hogar Filipino in the sum of
P2,000 secured by a mortgage on certain land. Upon the death of Pedro Velegaño in the same
year, there remained an unpaid balance of P1,300. Thus, Cantollas entered into a contract with
the petitioner wherein the latter will possess and enjoy the land in exchange of paying the
former’s debt to El Hogar. The payments thus made amounted to P600 up to July, 1933, when
Uy Siu Pin ceased to make further payments to El Hogar Filipino , as a result of which the latter
foreclosed the mortgage which it held on the land in question which was then in the possession
of Uy Siu Pin by reason of the agreement between him and Casimira and Blas already above
referred to. In the foreclosure sale, the land was bought by El Hogar Filipino for P1,062.66. The
mortgage debtors, Casimira and Blas, having failed to redeem the land within the statutory
period, a final deed of sale was issued in favor of El Hogar Filipino on December 24, 1934. On
December 26, 1934 the latter sold the aforesaid land to Uy Siu Pin for P1,198.17. On December
28, 1934 Uy Siu Pin in turn sold the land to his wife Chua Hue in consideration of P4,000. Transfer
certificate of title No. 8446 was issued in favor of Uy Siu Pin but it was later cancelled by a new
transfer certificate of title No. 8447, issued in the name of Chua Hue.

ISSUE:

Whether or not Court of Appeals erred in declaring null and void the sale of the land in question
in favor of the petitioner Chua Hue

HELD:
it cannot be contended with fairness that Uy Siu Pin acquired the land in his own right from El
Hogar Filipino after the latter had foreclosure the mortgage thereon, because the foreclosure
was brought about by his own failure to pay, as stipulated in the contract Exhibit A, the
indebtedness of Casimira and Blas. Neither could the latter be blamed for their failure to redeem
the land from El Hogar Filipino after the foreclosure sale, for the reason that they had the perfect
right to rely on their contract with Uy Siu Pin. In any event, whether we consider Uy Siu Pin as
having purchased the land from El Hogar Filipino in his own right, and not on behalf of Casimira
Cantollas and Blas Velegaño, he is still bound, under the circumstances of this case, to reconvey
the same to Casimira and Blas after the expiration of the period stipulated in the existing contract
Exhibit A. It is pretended, however, that the obligations assumed by Uy Siu Pin under Exhibit A
have been validly extinguished when "he returned the possession of the property in question to
the debtors Casimira Cantollas and Blas Velegaño." Against this pretension there is the finding of
fact of the Court of Appeals, not capable of review by us in the present proceedings, that Uy Siu
Pin has remained in possession of the land since April 2, 1932.

The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because the former had
no right to dispose of the land in controversy in view of the existence of the contract but because
such sale comes within the prohibition of article 1458 of the Civil Code. It is not necessary to
dwell upon the sale from Chua Hue to the intervenor Juan Magbajos, as the latter has not
appealed from the decision complained of by the petitioners.

9. COOK VS MCMICKING 27 PHIL 10 MARCH 3, 1914

FACTS:

The complaint alleges that the plaintiff is the wife of Edward Cook; that she is the absolute owner
of a piece of square meters in area, and that the same is registered in her name under the Torrens
Law by certificate No. 130; that on the 15th of June 1912, a judgment was entered against Edward
Cook, plaintiff's husband, for the sum of P10,000 in the CFI; that by virtue of said judgment an
execution was issued on the 10th of July of that year and levied upon the land described in the
complaint as belonging to the plaintiff and that the same was advertised for sale on the 8th of
August at 9 o' clock in the morning. After other allegations appropriate to an action of this kind,
plaintiff prays from an junction permanently prohibiting the defendants from selling the said
land.

It is claimed by the appellants that the so-called transfer from plaintiff's husband to her was
completely void under article 1458 of the Civil Code and that, therefore, the property still remains
the property of Edward Cook and subject to levy under execution against him.

ISSUE:
Whether or not the contention of the petitioner is tenable

HELD:

In our opinion the position taken by appellants is untenable. They are not in the position the
challenge the validity of the transfer, if it may be called such. They bore absolutely no relation to
the parties to the transfer at the time it occurred and had no rights or interest inchoate, present,
remote, or otherwise, in the property in question at the time the transfer occurred. Although
certain transfers from husband to wife or from wife to husband are prohibited in the article
referred to, such prohibition can be taken advantage of only two person who bear such a relation
to the parties making the transfer with their rights or interest. Unless such a relationship appears
the transfer cannot be attacked.

10. MEDINA VS CIR 1 SCRA 302 JANUARY 28, 1961

FACTS:

On 20 May 1944, Antonio Medina married Antonia Rodriguez. Before 1946, the spouses had
neither property nor business of their own. Later, however, Antonio acquired forest concessions
in the municipalities of San Mariano and Palanan, Isabela. In 1949, Antonia started to engage in
business as a lumber dealer, and up to around1952, Antonio sold to her almost all the logs
produced in his San Mariano concession. Antonia, in turn, sold in Manila the logs bought from
her husband through the same agent, Mariano Osorio. The proceeds were either received by
Osorio for Antonio or deposited by said agent in Antonio‟s current account with the PNB. On the
thesis that the sales made by Antonio to his wife were null and void pursuant to the provisions
of Article 1490 of the Civil Code of the Philippines, the Collector considered the sales made by
Antonia as Antonio‟s original sales taxable under Section 186 of the National Internal Revenue
Code and, therefore, imposed a tax assessment on Antonio. On 30 November 1963,Antonio
protested the assessment; however, the Collector insisted on his demand. On 9 July 1954,
Antonio filed a petition for reconsideration, revealing for the first time the existence of an alleged
premarital agreement of complete separation of properties between him and his wife, and
contending that the assessment for the years 1946 to 1952 had already prescribed. After one
hearing, the Conference Staff of the Bureau of Internal Revenue eliminated the 50% fraud penalty
and held that the taxes assessed against him before 1948 had already prescribed. Based on these
findings, the Collector issued a modified assessment, demanding the payment of only P3,325.68.
Thus, this review.

ISSUE:

Whether or not the sales in question made by petitioner to his wife were fictitious, simulated,
and not bona fide
HELD:

The petitioner argues that the prohibition to sell expressed under Article 1490 of the Civil Code
has no application to the sales made by said petitioner to his wife, because said transactions are
contemplated and allowed by the provisions of Articles 7 and 10 of the Code of Commerce. But
said provisions merely state, under certain conditions, a presumption that the wife is authorized
to engage in business and for the incidents that flow therefrom when she so engages therein.
But the transactions permitted are those entered into with strangers, and do not constitute
exceptions to the prohibitory provisions of Article 1490 against sales between spouses. Contracts
violative of the provisions of Article 1490 of the Civil Code are null and void Being void
transactions, the sales made by the petitioner to his wife were correctly disregarded by the
Collector in his tax assessments that considered as the taxable sales those made by the wife
through the spouses' common agent, Mariano Osorio.

11. MANONSONG VS ESTIMO 404 SCRA 683 GR NO. 136773 JUNE 25, 2003

FACTS:

Allegedly, Guevarra inherited a property from Justina Navarro, which is now under possession of
the heirs of Guevarra. Guevarra had six children, one of them is Vicente Lopez, the father of
petitioner Manongson. The respondents, the Jumaquio sisters and Leoncia Lopez claimed that
the property was actually sold to them by Justina Navarro prior to her death. The respondents
presented the deed of sale. The petitioners filed a complaint praying for the partition and award
to them of an area equivalent to 1/5 by right of representation. RTC ruled that the conveyance
made by Justina Navarro is subject to nullity because the property conveyed had a conjugal
character and that Guevarra as her compulsory heir should have the legal right to participate
with the distribution of the estate under question to the exclusion of others. The deed of sale did
not at all provide for the reserved legitime or the heirs, and, therefore it has no force and effect
against Guevarra and should 'e declared a nullity ab initio.

ISSUE:

Whether petitioners were able to prove that Manongsong is a co-owner of the Property and
therefore entitled to demand for its partition

HELD:

There was no evidence presented to establish that Navarro acquired the Property during her
marriage. There is no basis for applying the presumption under Article 160 of the Civil Code to
the present case. On the contrary, Tax Declaration No. 911 showed that, as far back as in 1949,
the Property was declared solely in Navarro’s name.This tends to support the argument that the
Property was not conjugal.

We likewise find no basis for the trial court’s declaration that the sale embodied in the Kasulatan
deprived the compulsory heirs of Guevarra of their legitimes. As opposed to a disposition inter
vivos by lucrative or gratuitous title, a valid sale for valuable consideration does not diminish the
estate of the seller. When the disposition is for valuable consideration, there is no diminution of
the estate but merely a substitution of values, that is, the property sold is replaced by the
equivalent monetary consideration.

Under Article 1458 of the Civil Code, the elements of a valid contract of sale are: (1) consent or
meeting of the minds; (2) determinate subject matter and (3) price certain in money or its
equivalent. The presence of these elements is apparent on the face of the Kasulatan itself. The
Property was sold in 1957 for P250.00

Articles 1491 & 1492

12. GODINEZ VS FONG GR NO. L-36731 JANUARY 27, 1983

FACTS:

The petitioner’s parents acquired a parcel land which was sold, for valuable consideration, to the
respondent who is a Chinese citizen. The respondent executed a power of attorney to another
Chinese citizen who conveyed such land to Navata who, with full knowledge that Fong is Chinese
citizen and under the law is prohibited and disqualified to acquire a real property. The petitioners
filed a complaint before CFI praying to be adjudged as owners of the land. The petitioner
contends that the TCT issued to Fong was null and void because the transaction constitutes a
non-existent contract since it violates applicable provisions of the Constitution and the Civil Code.

ISSUE:

Whether or not the heirs of a person who sold a parcel of land to an alien in violation of a
constitutional prohibition may recover the property if it had, in the meantime, been conveyed to
a Filipino citizen qualified to own and possess it

HELD:

he Krivenko ruling that "under the Constitution aliens may not acquire private or agricultural
lands, including residential lands" is a declaration of an imperative constitutional policy.
Consequently, prescription may never be invoked to defend that which the Constitution
prohibits. However, we see no necessity from the facts of this case to pass upon the nature of
the contract of sale executed by Jose Godinez and Fong Pak Luen whether void ab initio, illegal
per se or merely pro-exhibited.** It is enough to stress that insofar as the vendee is
concerned, prescription is unavailing. But neither can the vendor or his heirs rely on an argument
based on imprescriptibility because the land sold in 1941 is now in the hands of a Filipino citizen
against whom the constitutional prescription was never intended to apply. The lower court erred
in treating the case as one involving simply the application of the statute of limitations.

From the fact that prescription may not be used to defend a contract which the Constitution
prohibits, it does not necessarily follow that the appellants may be allowed to recover the
property sold to an alien. As earlier mentioned, Fong Pak Luen, the disqualified alien vendee later
sold the same property to Trinidad S. Navata, a Filipino citizen qualified to acquire real property.

Herrera v. Luy Kim Guan (SCRA 406) reiterated the above ruling by declaring that where land is
sold to a Chinese citizen, who later sold it to a Filipino, the sale to the latter cannot be impugned.

In the light of the above considerations, we find the second and third assignments of errors
without merit. Respondent Navata, the titled owner of the property is declared the rightful
owner.

13. GAN TINGCO VS PABINGUIT GR NO. 10439 OCTOBER 17, 1916

FACTS:

Acabo sold parcels of land to the petitioner. However, the land was in possession of the
respondent alleges certain rights therein. Her claims o have purchased them from Faustino Abad;
that Abad had become their owner through purchase from Henry Gardner; that the latter, in
turn, had owned them by reason of having purchased them for P555 at a public auction. Gardner
was a justice of peace at that time. CFI declared the petitioners as the owner of such lands and
ordered the respondents to restore the former its possession. The respondent, however,
appealed contending that notwithstanding the sale of the land at the public auction, Acabo did
not ceased to be the owner of the properties because of the irregularities and defect in the
auction.

ISSUE:

Whether or not the respondent’s contention is correct

HELD:

If under the law Gardner was prohibited from acquiring the ownership of Acabo's lands, then he
could not have transmitted to Faustino Abad the right of ownership that he did not possess; nor
could Abad, to whom this alleged ownership had not been transmitte, have conveyed the same
to Pabinguit. What Gardner should have done in view of the fact that the sale, as he finally
acknowledged, was void, was to claim the price that had been deposited in court, and the justice
of the peace of Guijulngan should have declared the auction void and have ordered a new sale
to be held, besides correcting the errors that had been committed in the proceedings. To the
reasons already stated, there is to be added the additional one, with respect to the sale made by
Faustino Abad to Silvino Pabinguit, that Abad was a minor at the time — a circumstance that
deprived him of capacity to sell (Civil Code, art. 1263). Abad had no ownership to transmit to
anyone and, besides, he had no personality to enable him to contract by himself, on account of
his lack of legal age.

Sanchez, the sheriff, the sole notary who certified all these deeds of conveyance in order that
Pabinguit might become owner of those coconut lands with which his own lands adjoined, was
in such a hurry that, as he testified at the trial, on the very same day of the auction he had already
executed in behalf of Henry Gardner the final deed of sale of the said lands, without allowing
time for their possible redemption. Section 466 of Act No. 190 prescribes that if redemption has
not been requested, this deed is to be executed within the twelve months subsequent to the
sale.

This court finds no reason whatever why it should not affirm the judgment appealed from. It is
therefore hereby affirmed with the costs of this instance against the appellant.

14. DISTAJO VS CA GR NO. 112954 AUGUST 25, 2000

FACTS:

Abiertas designated one of her sons, Rufu, to be the administrator of the parcels of land that she
owned. She, then, sold portions of her lot to her children, one of which was sold to Rufu. Likewise,
Abiertra’s brother sold some lot to Rufu. Upon Abietra’s death, the latter’s siblings demanded
possession of the land owned by Rufu. Upon his refusal, they filed before RTC a complaint for
recovery of possession and partition. RTC dismissed the complaint. But the petitioners allege that
Rufu cannot acquire the parcels of land because the Civil Code prohibits the administrator from
acquiring the same.

ISSUE:

Whether or not the contention of the petitioners are correct

HELD:

Under paragraph (2) of 1491, the prohibition against agents purchasing property in their hands
for sale or management is not absolute. It does not apply if the principal consents to the sale of
the property in the hands of the agent or administrator. In this case, the deeds of sale signed by
Iluminada Abiertas shows that she gave consent to the sale of the properties in favor of her son,
Rufo, who was the administrator of the properties. Thus, the consent of the principal Iluminada
Abiertas removes the transaction out of the prohibition contained in Article 1491(2).

Petitioner also alleges that Rufo Distajo employed fraudulent machinations to obtain the consent
of Iluminada Abiertas to the sale of the parcels of land. However, petitioner failed to adduce
convincing evidence to substantiate his allegations.

15. FEDERICO N. RAMOS VS PATRICIO A. NGASEO

FACTS:

Ramos engaged the respondet’s services as a counsel in a case involving a piece of land. After the
CA rendered a favorable judgment ordering the land to be returned to Ramos, the respondent
sent a demand letter asking for the delivery of such land which the former has allegedly promised
as payment for her services. As a result, Ramos filed before IBP for violation the Code for
Professional Responsibility for demanding the delivery of such land. Respondent argues that he
did not violate Article 1491 of the Civil Code because when he demanded the delivery of the land
which was offered and promised to him in lieu of the appearance fees, the case has been
terminated, when the appellate court ordered the return of the 2-hectare parcel of land to the
family of the complainant. Respondent further contends that he can collect the unpaid
appearance fee even without a written contract on the basis of the principle of quantum meruit.

ISSUE:

Whether or not the contention of the respondent is correct

HELD:

Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by purchase
or assignment the property or rights involved which are the object of the litigation in which they
intervene by virtue of their profession.[7] The prohibition on purchase is all embracing to include
not only sales to private individuals but also public or judicial sales. The rationale advanced for
the prohibition is that public policy disallows the transactions in view of the fiduciary relationship
involved, i.e., the relation of trust and confidence and the peculiar control exercised by these
persons.[8] It is founded on public policy because, by virtue of his office, an attorney may easily
take advantage of the credulity and ignorance of his client and unduly enrich himself at the
expense of his client.[9] However, the said prohibition applies only if the sale or assignment of the
property takes place during the pendency of the litigation involving the client’s property.
Consequently, where the property is acquired after the termination of the case, no violation of
paragraph 5, Article 1491 of the Civil Code attaches.

Invariably, in all cases where Article 1491 was violated, the illegal transaction was consummated
with the actual transfer of the litigated property either by purchase or assignment in favor of the
prohibited individual. In the instant case, there was no actual acquisition of the property in
litigation since the respondent only made a written demand for its delivery which the
complainant refused to comply. Mere demand for delivery of the litigated property does not
cause the transfer of ownership, hence, not a prohibited transaction within the contemplation of
Article 1491. Even assuming arguendo that such demand for delivery is unethical, respondent’s
act does not fall within the purview of Article 1491. The letter of demand dated January 29, 2003
was made long after the judgment in Civil Case No. SCC-2128 became final and executory on
January 18, 2002.

16. WOLFSON VS ESTATE OF MARTINEZ 20 PHIL. 340 OCTOBER 13, 1911

FACTS:

On the 29th day of January, 1906, a judgment was entered in this court by Hon. John C. Sweeney,
one of the judges thereof, in favor of Mariano Yap-Tuangco against the deceased Francisco
Martinez for the sum of twelve thousand pesos;

That there was a contract agreement between the plaintiff in that judgment and the above
mentioned Joseph N. Wolfson and one Basilio Regalado y Mapa should have as their fees for
prosecuting the case fifty per cent of whatever amount might be obtained;

That subsequently said Mapa assigned his interest in said contract to the said Wolfson; That
subsequently and on the 18th day of June, 1907, the plaintiff Mariano Yap-Tuangco, for value
received, sold and transferred and delivered to said Wolfson all his right, title and interest in and
on the aforementioned judgment

ISSUE:

Whether or not under the provisions of article 1459 of the Civil Code the plaintiff, Joseph N.
Wolfson, was prohibited from purchasing the judgment of his client in such manner and to such
extent that the contract of which such purchase was a part was absolutely null and void and could
be attacked by a person not a party to the transaction.
HELD:

The judgment appealed from in so far as it declares that the instrument of dissolution of the
partnership between A and B was null and void for the reason that the plaintiff was not bound,
either principally or subsidiarily, by the said instrument, is contrary to the provisions of article
1302 of the Civil Code.

Even if the sale of the judgment in question is found comprehended within the prohibition of
article 1459, a question which we do not now decide, still the defendant is not entitled to invoke
the terms of said article for the reason, above stated, that such prohibition is personal to the
parties to the contract, being available only to them or their representatives

17. OLAGUER VS PURUNGGANAN JR.

FACTS:

The respondent was the owner of shares of stocks of Business Day Corp. He was active in the
political opposition against Marcos dictatorship. Anticipating the possibility of his arrest and
detention by the military, he executed a SPS appointing his attorneys-in-fact Locsin, Joaquin and
Hofileña for the purpose of selling or transferring his shares of stocks with Business day. During
the trial, petitioner testified that he agreed to execute the SPA in order to cancel his shares of
stock, even before they are sold, for the purpose of concealing that he was a stockholder of
Businessday, in the event of a military crackdown against the opposition. The parties
acknowledge the SPA before Emilio Purugganan, the corporate Secretary and the notary public.
Then, he was arrested. When he was released from detention, he discovered that he was no
longer registered as stockholder. He demanded that respondents restore to him full ownership ,
but they refused to do so. He filed a complaint before RTC against Purugganan and Locsin to
declare as illegal the sale of the shares of stock. He alleged that respondent exceeded his
authority under the SPA. SPA only applied in absence and incapacity .RTC dismissed and found
the sale of shares between him and respondent Locsin was valid.

ISSUE:

Whether or not the CA erred in ruling that there was perfected sale

HELD:

Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word
ABSENCE to a condition wherein a person disappears from his domicile, his whereabouts being
unknown without leaving an agent to administer his property. Incapacity for the petitioner would
be limited to mean “minority, insanity, imbecility, the state of being deaf-mute, prodigality and
civil interdiction. He claims that his arrest and subsequent detention are not among the instances
covered by the terms absence and incapacity as provided in the SPA in favor of Locsin. It is a
general rule the SPA must be strictly construed, however, the rule is not absolute and should not
be applied to the extent of destroying the very purpose of the power. He already authorized
agents to do specific acts of administration and no longer necessitated the appointment of one
by the court.

18. MAHARLIKA PUBLISHING CORP VS TAGLE GR NO. 65594 JULY 9, 1986

FACTS

GSIS owned a parcel of land with a building and printing equipment in Paco, Manila. It was sold
to Maharlika in a Conditional Contract of Sale with the stipulation that if Maharlika failed to pay
monthly installments in 90 days, the GSIS would automatically cancel the contract. Because
Maharlika failed to pay several monthly installments, GSIS demanded that Maharlika vacate the
premises. Even though Maharlika refused to do so, the GSIS published an advertisement inviting
the public to bid in a public auction. A day before the scheduled bidding, Adolfo Calica, the
President of Maharlika, gave the GSIS head office 2 checks worth 11,000 and a proposal for a
compromise agreement. The GSIS General Manager Roman Cruz gave a not to Maharlika saying
“Hold Bidding. Discuss with me.” However, the public bidding took place as scheduled and the
property was subsequently awarded to Luz Tagle, the wife of the GSIS Retirement Division Chief.
Maharlika demanded that the sale be considered null and void, as Mrs. Tagle should have been
disqualified from bidding for the GSIS property. RTC and CA both ruled that the Tagles were
entitled to the property and Maharlika should vacate the premises.

ISSUE

Whether or not the respondents are entitled to the property

HELD

NO. The sale to them was against public policy. First of all, the GSIS head office was stopped from
claiming that they did not give the impression to Maharlika that they were accepting the proposal
for a compromise agreement. The act of the general manager is binding on GSIS. Second, Article
1491 (4) of the CC provides that public officers and employees are prohibited from purchasing
the property of the state or any GOCC or institution, the administration of which has been
entrusted to them cannot purchase, even at public or judicial auction, either in person or through
the mediation of another. The SC held that as an employee of the GSIS, Edilberto Tagle and his
wife are disqualified from bidding on the property belonging to the GSIS because it gives the
impression that there was politics involved in the sale. It is not necessary that actual fraud be
shown, for a contract which tends to injure the public service is void although the parties entered
into it honestly and proceeded under it in good faith.

19. Oscar C. Fernandez vs Sps. Carlos and Narcisa Tarun GR No. 143868 November 14, 2002

Facts:
Brothers Antonio, Santiago, Demetria and Angel and their uncle Armando owned 1/6 of
the fishpond. When Armando died, his share was distributed to others. Antonion sold his share
to Tarun and the sales were registered and annotated. The co-owners of the fishpond executed
an Extrajudicial deed of partition in exchange of the shares. The deed stipulated that the sale of
the shares of demetria and antonio be recognised. When Tarun was already paying her realty
taxes on their share of the fishpond, Angel and others were still in possession of the entire
fishpond. Angel refused to the partition of the property.

Issue:
Whether or not the petitioners are entitled to exercise their right of legal redemption

Ruling:

No, the petitioners are not entitled to exercise their right of legal redemption. The right to
redeemonly applies when a portion is sold to a non-co-owner. Tarun became a co owner of the
fishpond because they were sold shares of it by Demetria and Antionio before Tarun succeeded
angel. Legal redemption is in the nature of a privilege created by law partly for reasons of public
policy and partly for the benefit and convenience of the redemptioner, to afford him a way out
of what might be a disagreeable or inconvenient association into which he has beenthrust. The
petitioner’s contention that the sales of the shares in the disputed fishpond to the respondents
are void because a notice in writing to the other co-owners wasnot sent as required under
Article 1625 of the Civil Code is not meritorious. The provision only states that thedeed of sale
shall not be recorded in the registry of property without such notice but it does not make the
sale void.

20. TUPAS vs. DAMASCO

FACTS:

The subject matter of this case is a parcel of land, situated in the City of General Santos
in South Cotabato. The aforesaid parcel was acquired by spouses Benjamin Tupas and Leonor
Baldonado (now plaintiffs-appellees) Plaintiffs-spouses sold the said land to Juanita Bulaong,
then still a minor being only eleven (11) years old, but was represented by her father Eusebio
Bulaong, now one of the defendants-appellants. Since 1951 to the present, Juanita Bulaong and
her father, defendant-appellant Eusebio Bulaong, have been actually occupying the said parcel
and later caused the construction of a residential building thereon Benjamin Tupas had obtained
a special crop loan, for failure to pay the said loan, the bank instituted a Civil Case against him.
Pursuant to a writ of execution issued by the CFI, the Provincial Sheriff of Cotabato sold the land
in question at public auction to the Philippine National Bank being the sole bidder.

Juanita Bulaong, then already married to Daniel Damasco, instituted before the same court an
action against the Philippine National Bank for "Recovery of Ownership of the same parcel of
land. Judgment was rendered in the said case in favor of the Philippine National Bank, nullifying
the sale by spouses Tupas in favor of Juanita Bulaong. Appeal was taken to the then Court of
Appeals. Juanita Bulaong and Daniel Damasco, was presented for registration and Transfer
Certificate of Title was issued, this time, in the name of the said spouses.

Appellant Eusebio Bulaong filed a Civil Case against spouses Daniel Damasco and Juanita Bulaong
for "Recovery of Real Property”. Court dismissed the complaint.

ISSUE:

Whether or not the 5-year period to the right to repurchase had already expired

HELD:

No. The five-year period should be counted from the date of the consolidation of the ownership
and the issuance of the transfer certificate of title in the name of the purchaser at public auction
not only because under Act 496 the act of registration of the deed is the operative act which
binds the land and vests title in the transferee and from such time is the land deemed conveyed,
within the meaning of Section 119, but also because of the far more important reason for public
policy conceived in this right to repurchase to enable the family of the applicant or grantee to
keep that homestead thus, the law must be liberally construed in order to carry out the purpose.
Homestead law should be interpreted in favor of the homesteader and that the underlying
purpose of said Section 119 is to give the homesteader every chance to preserve for himself and
his family the land that the State had gratuitously given him.

21. NYCO SALES CORP VS BA FINANCE CORP GR NO. 71694 AUGUST 16, 1991

FACTS:

NYCO Sales Corp extended a credit accommodation to the Fernandez Brothers. The brothers,
acting in behalf of Sanshell Corp, discounted a BPI check for P60,000 with NYCO, which then
indorsed the said check to BA Finance accompanied by a Deed of Assignment. BA Finance, in turn,
released the funds, which were used by the brothers. The BPI check was dishonored. The
brothers issued a substitute check, which was also dishonored. Now BA Finance goes after NYCO,
which disclaims liability
ISSUE:

Whether or not the assignor is liable to its assignee for its dishonored checks

HELD:

An assignment of credit is the process of transferring the right of the assignor to the assignee,
who would then be allowed to proceed against the debtor. It may be done either gratuitously or
generously, in which case, the assignment has an effect similar to that of a sale.

According to Article 1628 of the Civil Code, the assignor-vendor warrants both the credit itself
(its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the
case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor
should be held answerable therefor. There is no question then that the assignor-vendor is indeed
liable for the invalidity of whatever he assigned to the assignee-vendee.

Considering now the facts of the case at bar, it is beyond dispute that Nyco executed a deed of
assignment in favor of BA Finance with Sanshell Corporation as the debtor-obligor. BA Finance is
actually enforcing said deed and the check covered thereby is merely an incidental or collateral
matter. This particular check merely evidenced the credit which was actually assigned to BA
Finance. Thus, the designation is immaterial as it could be any other check. Both the lower and
the appellate courts recognized this and so it is utterly misplaced to say that Nyco is being held
liable for both the BPI and the SBTC checks. It is only what is represented by the said checks that
Nyco is being asked to pay. Indeed, nowhere in the dispositive parts of the decisions of the courts
can it be gleaned that BA Finance may recover from the two checks.

Nyco's pretension that it had not been notified of the fact of dishonor is belied not only by the
formal demand letter but also by the findings of the trial court that Rufino Yao of Nyco and the
Fernandez Brothers of Sanshell had frequent contacts before, during and after the dishonor
(Rollo, p. 40). More importantly, it fails to realize that for as long as the credit remains
outstanding, it shall continue to be liable to BA Finance as its assignor. The dishonor of an
assigned check simply stresses its liability and the failure to give a notice of dishonor will not
discharge it from such liability. This is because the cause of action stems from the breach of the
warranties embodied in the Deed of Assignment, and not from the dishonoring of the check alone
(See Art. 1628, Civil Code).