276078805-Sales-Case-Digest-Compilation-2015-pdf.pdf

SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever PART I: CONCEPT OF SALE 1. BASIC CONCEPTS 1. Contract of Sale Sale (Article 1458) 1458) TEODORO ACAP vs. CA G.R. No. 118114. December 7, 1995. Padilla, J. Doctrine: Ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question. FACTS: Teodoro Acap has been a tenant of a portion of land of Lot No. 1130 Hinigaran Cadastre since 1960. Said lot was formerly owned by Spouses Vasquez and Lorenza Oruma, which upon their death was inherited by Felixberto. In 1975, Felixberto sold the lot to Cosme Pido. Acap remained to be a registered tenant of the said land and religiously paid his leasehold rentals to Pido and thereafter, upon his death, to his widow Laurenciana. On 1981, Pido’s wife and children executed a notarized document denominated “Declaration of Heirship and Waiver of Rights” of the land in favor Edy delos Reyes. Delos Reyes alleged that he and Acap entered into an oral lease agreement whereby Acap undertook to pay him 10 cavans of rice per year as lease rental. From 1983 onwards Acap refused to pay further lease rentals. In defense, Acap denied having entered in an oral lease agreement with delos Reyes and that he did not recognize his ownership over the land. As a matter of fact he alleged that he continued to pay Laurenciana, Pido’s wife. Delos Reyes filed a suit of recovery of possession against Acap and for the payment of rentals accruing to him as owner of the said lot. Trial court rendered decision in favor of delos Reyes ruling that there was a perfected sale between heirs of Pido and delos Reyes over the said lot and ordered Acap to deliver possession of the same to delos Reyes. Upon appeal, CA affirmed the lower court’s decision. Hence, this petition. ISSUE: Whether delos Reyes acquired ownership over the lot in question. HELD: NO. The Court noted that an asserted right or claim to ownership or a real right over a thing arising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question. Under Article 712 of the Civil Code, modes of acquisition may either be original or derivative. Original modes of acquisition include occupation, acquisitive prescription, law or intellectual creation. Derivative modes of acquisition on the other hand include succession mortis causa and tradition as a result of certain contracts such as sale, barter, donation, assignment or mutuum. In the instant case, the Court determined whether delos Reyes acquired ownership over the lot in question through any of the modes mentioned. It was ruled that he had not acquired

ownership by virtue of sale, as opposed to the ruling of both RTC and CA. The execution of the heirs of Pido the Declaration of Heirship and Waiver of Rights was held to be not tantamount to sale. Such declaration is only one whereby heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. The Court further noted that waiver of hereditary rights is different from sale of hereditary rights. Sale of hereditary rights presupposes an existence of a contract of sale whereas waiver of hereditary rights is an abdication or intentional relinquishment of a known right with a knowledge of its existence and intention to relinquish it in favor of other persons who are co-heirs in the succession. As delos Reyes is a stranger to the succession of Cosme Pido, he cannot claim ownership over the lot on the sole basis of the document executed. Hence, private respondent delos Reyes had not acquired ownership over Lot 1130 and consequently had no right to exact lease rentals from petitioner Acap.

Toyota Shaw Inc. vs. Court of Appeals, and Sosa 244 SCRA 320 May 1995 FACTS: Luna L. Sosa and his son, Gilbert, went to purchase a yellow Toyota Lite Ace from the Toyota Toyota office at Shaw Boulevard, Pasig (petitioner Toyota) Toyota) on June 14, 1989 where they met Popong Bernardo who was a sales representative of said branch. Sosa emphasized that he needed the car not later than June 17, 1989 because he, his f amily, amily, and a balikbayan guest would be using it on June 18 to go home to Marinduque where he will celebrate his birthday on June 19. Bernardo assured Sosa that a unit would be ready for pick up on June 17 at 10:00 in the morning, and signed the "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.,” a document which did not mention anything about the full purchase price and the manner the installments were to be paid. Sosa and Gilbert delivered the down payment of P100,000.00 on June 15, 1989 and Bernardo accomplished a printed Vehicle Sales Proposal (VSP) No. 928 which showed Sosa’s full name and home address, that payment is by "installment," to be financed by "B.A.," and that the "BALANCE TO BE FINANCED" is "P274,137.00", but the spaces provided for "Delivery Terms" Terms" were not f illed-up. When June 17 came, however, petitioner Toyota Toyota did not deliver the Lite Ace. Hence, Sosa asked that his down payment be refunded and petitioner Toyota Toyota issued also on J une 17 a Far East Bank check for the full amount of P100,000.00, the receipt of which was s hown by a check voucher of Toyota, Toyota, which Sosa signed with the reservation, "without prejudice to our future claims for dam ages." Petitioner Toyota Toyota contended that tthe he B.A. Finance disapproved Sosa’s the credit financing application and further alleged that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. Toyota then gave Sos a the option to purchase t he unit by paying the full purchase price in cash but Sosa refused. The trial court found that there was a valid perfected contract of sale between Sosa and Toyota Toyota which bound the latter to deliver the vehicle and t hat Toyota Toyota acted in bad f aith in selling to another the unit already reserved for Sosa, and the Court of Appeals

COMPILED BY: WIGMORE #WIGMOREFORE #WIGMOREFOREVER VER

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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever affirmed the said decision.

NDC to sell the leased property in its favor.

ISSUE:

Issue: 1. Whether or not there is a valid s ale between NDC and PUP.

Was there a perfected contract of sale between respondent Sosa and petitioner petit ioner Toyota? Toyota? COURT RULING: The Supreme Court granted Toyota’s Toyota’s petition and dismissed Sosa’s complaint for damages because the document entitled “Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.,” was not a perfec ted contract of sale, but merely an agreement between Mr. Sosa and Bernardo as private individuals and not between Mr. Sosa and Toyota Toyota as parties to a contract.

There was no indication in t he said document of any obligation on the part of Toyota Toyota to transf er ownership of a determinate t hing to Sosa and neither was there a correlative obligation on the part of the latter to pay therefor a price certain. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as VSP No.928 executed on June 15, 1989 confirmed. The VSP also created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury. injury.

Polytechnic University of the Philippines vs Court of Appeals and Firestone Ceramics National Development Corporation vs Firestone Ceramics Inc. [GR No. 143513 and 143590. November 14, 2001] Bellosilo, J.: Facts: Petitioner National Development Corp., a government owned and controlled corporation, had in its disposal a 10 hectares property. Sometime in May 1965, private respondent Firestone Corporation manifested its desire to lease a portion of it for ceramic manufacturing business. On August 24, 1965, both parties entered into a contract of lease for a term of 10 years renewable for another 10 years. Prior to the expiration of the aforementioned contract, Firestone wrote NDC requesting for an extension of their lease agreement. It was renewed with an express grant to Firestone of the first option to purchase the leased premise in the event that it was decided "to dispose and sell the properties including the lot..." Cognizant of the impending expiration of the leased agreement, Firestone informed NDC through letters and calls that it was renewing its lease. No answer was given. Firestone's predicament worsened when it learned of NDC's supposed plans to dispose the subject property in favor of petitioner Polytechnic University of the Philippines. PUP referred to Memorandum Order No. 214 issued by then President Aquino ordering the transfer of the whole NDC compound to the National Government. The order of conveyance would automatically result in the cancellation of NDC's total obligation in favor of the National Government. Firestone instituted an action for specific performance to compel

Ruling A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its equivalent. It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. The Civil Code provision provision is, in effect, effect, a "catch-all" provision which effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject matter, and consideration therefor. Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which explicitly states the acquiescence of the parties to the sale of the property. Furthermore, the cancellation of NDC's liabilities in favor of the National Government constituted the "consideration" for the sale.

Manila Metal Container Corporation vs Philippine National Bank [GR No. 166862, December 20, 2006] Callejo, Sr., J.: Facts: Petitioner was the owner of 8,015 square meters of parcel of land located in Mandaluyong City, Metro Manila. To secure a P900,000.00 loan it had obtained from respondent Philippine National Bank, petitioner executed a real estate mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation. On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction. After due notice and publication, the property was sold at public action where respondent PNB was declared the winning bidder. Petitioner sent a letter to PNB, requesting it to be granted an extension of time to redeem/repurchase the property. Some PNB personnel informed that as a matter of policy, the bank does not accept “partial redemption”. Since petit ioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 and issued a new title in favor of PNB. Meanwhile, the Special Asset Management Department (SAMD) had prepared a statement of account of petitioner’s obligation. It also recommended the management of PNB to allow petitioner to repurchase the property for P1,574,560.oo. PNB rejected the offer and recommendation of SAMD. It instead suggested to petitioner to purchase the property for P2,660,000.00, in its minimum market value. Petitioner declared that it had already agreed to SAMD’s offer to purchase for P1,574,560.47 and deposited a P725,000.00.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Issue: Whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property for respondent.

1. 2. 3.

Ruling: The SC affirmed the ruling of the appellate court that there was no perfected contact of sale between the parties. A contract is meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Under 1818 of the Civil Code, there is no contract unless the following requisites concur: Consent of the contracting parties; Objection certain which is the subject matter of the contract; Cause of the obligation which is established. Contract is perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and causes which are to constitute the contract. Once perfected, the bind between other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied in good faith. The absence of any essential element will negate the existence of a perfected contract of sale. The court ruled in Boston Bank of the Philippines vs Manalo: “A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.” In the case at bar, the parties to the contract is between Manila Metal Container Corporation and Philippine National Bank and not to Special Asset Management Department. Since the price offered by PNB was not accepted, there is no contract. Hence it cannot serve as a binding juridical relation between the parties.

Spouses Cruz vs Fernando 477 SCRA 173 – 173 – Civil Civil Law – Law – Law Law on Sale – Sale – Manner Manner of Payment Essential in a Contract of Sale In 1983, Cruz executed a Kasunduan with the Gloriosos for the consideration of the rear portion of a 223 sq m lot. The Kasunduan provides that the lot will be sold at a P40 per sq m. That the portion of the lot to be sold is the rear portion of it. That upon selling, the Cruz will transfer their house from the front portion to the rear portion of the land once it is bought. That they will have a right of way from the front portion going to the back end of the lot. The Cruz never gave anything to the Gloriosos for there was an alleged failure to have the land surveyed. Due to non payment, the Gloriosos instead sold the whole lot (back and rear portion) to the Fernandos. In 1994, after repeated demands, the Fernandos filed a case in court for accion publiciana demanding the Cruz to vacate the lot and to pay a rental of P500.00. The RTC ruled in favor of the Fernandos. The CA affirmed the RTC ruling.

ISSUE: Whether or not what transpired between the Cruzes and the Gloriosos was a contract of sale.

HELD: No. The absence of a specific manner of payment in the terms and conditions of the contract makes it a contract to sell. Ownership was never transferred to the Cruzes. This is because the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly st ate that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. Also, the Cruzes never transferred their house from the front portion to the rear portion of the lot. It was evident in the contract that they will transfer the house to the rear portion once they were able to buy it. The SC also ruled that the Fernandos were not buyers in bad faith. There was no consummated sale between the Cruzes and the Gloriosos. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the intending buyer.

Velarde vs CA Facts: David Raymundo (private respondent) is the absolute and registered owner of a parcel of land, located at 1918 Kamias St., Dasmariñas Village Makati, together with the house and other improvements, which was under lease. It was negotiated by David’s father with plaintiffs Avelina and Mariano Velarde (petitioners). A Deed of Sale with Assumption of Mortgage was executed in favor of the plaintiffs. Part of the consideration of the sale was the vendee’s assumption to pay the mortgage obligations of the property sold in the amount of P 1,800,000.00 in favor of the Bank of the Philippine Islands. And while their application for the assumption of the mortgage obligations is not yet approved by the mortgagee bank, they have agreed to pay the mortgage obligations on the property with the bank in the name of Mr. David Raymundo. It was further stated that “in the event Velardes violate any of the terms and conditions of the said Deed of Real Estate Mortgage, they agree that the down payment P800,000.00, plus all the payments made with the BPI on the mortgage loan, shall be forfeited in Favor of Mr. Raymundo, as and by way of liquidated damages, w/out necessity of notice or any judicial declaration to that effect, and Mr. Raymundo shall resume total and complete ownership and possession of the property, and the same shall be deemed automatically cancelled”, signed by the Velardes. Velardes. Pursuant to said agreements, plaintiffs paid BPI the monthly interest loan for three months but stopped in paying the mortgage when informed that their application for the assumption of mortgage was not approved. The defendants through a counsel, wrote plaintiffs informing the latter that their nonpayment to the mortgagee bank constituted non-performance of their obligation and the cancellation and rescission of the intended sale. And after two days, the plaintiffs responded and advised the vendor that he is willing to pay provided that Mr.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Raymundo: (1) delivers actual possession of the property to them not later than January 15, 1987 for their occupancy (2) causes the release of title and mortgage from the BPI and make the title available and free from any liens and encumbrances (3) executes an absolute deed of sale in their favor free from any liens and encumbrances not later than Jan. 21, 1987. The RTC of Makati dismissed the complaint of the petitioners against Mr. Raymundo for specific performance, nullity of cancellation, writ of possession and damages. However, their Motion for Reconsideration was granted and the Court instructed petitioners to pay the balance of P 1.8 million to private respondent who, in turn were ordered to execute a deed of absolute sale and to surrender possession of the disputed property to petitioners. Upon the appeal of the private respondent to the CA, the court upheld the earlier decision of the RTC regarding the validity of the rescission made by private respondents.

Issue: Whether the rescission of contract made by the private respondent is valid.

Held: There is a breach of contract because the petitioners did not merely stopped paying the mortgage obligations but they also failed to pay the balance purchase price. Their conditional offer to Mr. Raymundo cannot take the place of actual payment as would discharge the obligation of the buyer under contract of sale. Mr. Raymundo’s source of right to rescind the contract is Art. 1191 of the Civil Code predicated on a breach of faith by the other party who violates the reciprocity between them. Moreover, the new obligations as preconditions to the performance of the petitioners’ own obligation were repudiation of an existing obligation, which was legally due and demandable under the contract of sale.

The breach committed by the petitioners was the nonperformance of a reciprocal obligation. The mutual restitution is required to bring back the parties to their original situation prior to the inception of the contract. The initial payment and the mortgage payments advanced by petitioners should be returned by private respondents, lest the latter unjustly enriched at the expense of the other. Rescission creates the obligation to return the obligation of contract. To rescind, is to declare a contract void at its inception and to put an end to it as though it never was. The decision of the CA is affirmed with modification that private respondents are ordered to return to petitioners, the amount they have received in advanced payment.

2. Stages in the life of Contract of Sale SAN MIGUEL PROPERTIES v SPS HUANG [G.R. No. 137290. July 31, 2000] FACTS: San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are two parcels of land totalling 1, 738

square meters at the corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City. On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. Atty. Dauz signified her clients’ interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counter-offer. On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the purchase of the properties, viz: Enclosing herewith the sum of P1,000,000.00 representing earnest-deposit money, subject to the following conditions. 1. We will be given the exclusive option to purchase the property within the 30 days from date of your acceptance of this offer. 2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the necessary Management and Board approvals; and we initiate the documentation if there is mutual agreementbetween us. 3. In the event that we do not come to an agreement on this transaction, the said amount of P1,000,000.00 shall be refundable to us in full upon demand. Isidro A. Sobrecarey, San Miguel’s vice -president and operations manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties. Atty. Dauz and Sobrecarey then commenced negotiations.

Sobrecarey informed Atty. Dauz that San Miguel was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of 6 months within which to pay.The parties again met during which Sobrecarey informed Atty. Dauz that San Miguel had not yet acted on her counter-offer. Atty. Dauz proposed a 4-month period of amortization. On April 25, 1994, Atty. Dauz asked for an extension of 45 days within which to exercise her option to purchase the property, adding that within that period to finalize the agreement." Her request was granted. On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount of P1 million given as "earnest-deposit." Sps Huang demanded the execution within 5 days of a deed of sale covering the properties. Sps Huang attempted to return the "earnest-deposit" but San Miguel refused on the ground that respondents’ option to purchase had already expired. On August 16, 1994, spouses Huang filed a complaint for specific performance against San Miguel. SAN MIGUEL (1) the alleged "exclusive option" of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable and (2) the complaint did not allege a cause of action because there was no "meeting of the minds" between the parties and,

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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever therefore, no perfected contract of sale. TC Dismissed. CA REVERSED: held that all the requisites of a perfected contract of sale had been complied with as the offer made on March 29, 1994, in connection with which the earnest money in the amount of P1 million was tendered by respondents, had already been accepted by petitioner. The fact the parties had not agreed on the mode of payment did not affect the contract as such is not an essential element for its validity. CA also ruled that Sobrecarey had no authority to sell the subject real properties

ISSUE WON there was a perfected contract of sale between the parties

RULING: No. On alleged payment and acceptance Earnest money, Sps Huang did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents’ offer of March 29, 1994, their contract had not yet been perfected. The first condition: option period of 30 days sufficiently shows that a sale was never perfected. Acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise. Art. 1479(2) states that an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option isunenforceable. Second condition: that, during the option period, the parties would negotiate the terms and conditions of the purchase. In the present case, the parties never got past the negotiation stage. Nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner. Also, the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. An agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. The fact, therefore, that the petitioners delivered to the respondent the sum as part of the DP that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under Art. 1482 of the new Civil Code, as some essential matter - the terms of the payment - still had to be mutually covenanted Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the

existence of a perfected sale. In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner.

2. ESSENTIAL CHARACTERISTICS OF A CONTRACT OF SALE 1. Nominate and Principal 2. Consensual QUIJADA vs. COURT OF APPEALS G.R. No. 126444 December 4, 1998 FACTS: Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private respondents for quieting of title, recovery of possession and ownership of parcels of land with claim for attorney's fees and damages. Petitioners are the children of the late Trinidad Corvera Vda, de Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from Pedro the 2-hectare parcel of land subject of the case, situated in the barrio of San Agustin, Talacogon, Agusan del Sur. On April 5, 1956, Trinidad together with her sisters Leonila Corvera and Paz and brother Epapiadito executed a conditional deed of donation of subject land in favor of the Municipality of Talacogon, the condition being that the parcel of land shall be used solely and exclusively as part of the campus of the proposed provincial high school in Talacogon. Apparently, Trinidad remained in possession of the parcel of land despite the donation. On July 29, 1962, Trinidad sold (1) hectare of the subject parcel of land to defendant-appellant Regalado Mondejar and verbally sold the remaining (1) hectare also to defendant-appellant without the benefit of a written deed of sale and evidenced solely by receipts of payment. In 1980, the heirs of Trinidad (deceased) filed a complaint for forcible entry against Mondejar, which complaint was, however, dismissed for failure to prosecute. In 1987, the proposed provincial high school having failed to materialize, the Sangguniang Bayan of the municipality of Talacogon enacted a resolution reverting the (2) hectares of land donated back to the donors. In the meantime, Regalado Mondejar sold portions of the land to (respondents) Fernando, Rodolfo Goloran , Efren Guden and Ernesto Goloran. On July 5, 1988, Heirs of Trinidad filed this action alleging that their deceased mother never sold, conveyed, transferred or disposed of the property in question to any person or entity much less to Regalado Mondejar save the donation made to the Municipality of Talacogon in 1956 and that at the time of the alleged sale to Regalado Mondejar by Trinidad Quijada, the land still belongs to the Municipality of Talacogon, hence, the supposed sale is null and void. Respondents alleged that the land in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29, 1962, and the remaining one (1) hectare on installment basis until fully paid.

ISSUE: WON the sale to Mondejar was valid RULING: YES. The donation made by Trinidad Quijada and her COMPILED BY: WIGMORE #WIGMOREFOREVER 5

SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever brother and sisters was subject to the condition that the donated property shall be "used solely and exclusively as a part of the campus of the proposed Provincial High School in Talacogon. It further provides that should "the proposed PHS be discontinued or if the same shall be opened but for some reason or another, the same may in the future be closed" the donated property shall automatically revert to the donor. When the Municipality's acceptance of the donation was made known to the donor, the former became the new owner of the donated property — donation being a mode of acquiring and transmitting ownership — notwithstanding the condition imposed by the donee. Accordingly, ownership is immediately transferred to the donee and that ownership will only revert to the donor if the resolutory condition is not fulfilled (construction of the school). Thus, at the time of the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not have sold the lots since she had earlier transferred ownership thereof by virtue of the deed of donation. So long as the resolutory condition subsists and is capable of fulfillment, the donation remains effective and the donee continues to be the owner subject only to the rights of the donor or his successors-in-interest under the deed of donation. Since no period was imposed by the donor on when must the donee comply with the condition, the latter remains the owner so long as he has tried to comply with the condition within a reasonable period. Such period, however, became irrelevant herein when the donee-Municipality manifested through a resolution that it cannot comply with the condition of building a school and the same was made known to the donor. What the donor sold was the land itself which she no longer owns. It would have been different if the donor-seller sold her interests over the property under the deed of donation which is subject to the possibility of reversion of ownership arising from the non-fulfillment of the resolutory condition. There is one thing which militates against the claim of Quijadas. Sale, being a consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of the minds as to the offer and acceptance thereof on three (3) elements: subject matter, price and terms of payment of the price. Ownership by the seller on the thing sold at the time of the perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered. A perfected contract of sale cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection; hence, the sale is still valid. Trinidad Quijada's heirs and successors-in-interest became the owners of the subject property upon the reversion of the ownership of the land to them. Consequently, ownership is transferred to respondent Mondejar and those who claim their right from him.

G.R. No. 137552 June 16, 2000 ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z. LAFORTEZA, DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA vs. ALONZO MACHUCA PARTIES: HEIRS OF FRANCISCO LAFORTEZA – SELLER ALONZO MACHUCA – BUYER

SUBJECT: A house and lot located at No. 7757 Sherwood Street, Marcelo Green Village, Parañaque, Metro Manila worth P630 000.00.

FACTS: In the exercise of the authority of Special Power Of Attorney, on January 20, 1989, the heirs of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff over the subject property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS (P630,000.00) payable as follows: (a) P30,000.00 as earnest money, to be forfeited in favor of the defendants if the sale is not effected due to the fault of the plaintiff; (b) P600,000.00 upon issuance of the new certificate of title in the name of the late Francisco Q. Laforteza and upon execution of an extra-judicial settlement of the decedent's estate with sale in favor of the plaintiff (Par. 2, Exh. "E", record, pp. 335-336).

Significantly, the fourth paragraph of the Memorandum of Agreement (Contract to Sell) dated January 20, 1989 (Exh. "E", supra.) contained a provision as follows: . . . . Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified in writing and said BUYERLESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale.

On January 20, 1989, plaintiff paid the earnest money of THIRTY THOUSAND PESOS (P30,000.00), plus rentals for the subject property . On September 18, 1998 3, defendant heirs, through their counsel wrote a letter to the plaintiff furnishing the latter a copy of the reconstituted title to the subject property, advising him that he had thirty (3) days to produce the balance of P600,000.00 under the Memorandum of Agreement which plaintiff received on the same date. On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an extension of the THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the balance of P600,000.00. Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiff's letter request. The extension, however, does not appear to have been approved by Gonzalo Z. Laforteza, the second attorney-in-fact as his conformity does not appear to have been secured. On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z. Laforteza, that he already had the balance of P600,000.00 covered by United Coconut Planters Bank Manager's Check dated November 15, 1989 . However, the defendants, refused to accept the balance .Defendant Roberto Z. Laforteza had told him that the subject property was no longer for sale . On November 20, defendants informed plaintiff that they were canceling the Memorandum of Agreement (Contract to Sell) in view of the plaintiff's failure to comply with his contractual obligations .


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever

Thereafter, plaintiff reiterated his request to tender payment of the balance of P600,000.00. Defendants, however, insisted on the rescission of the Memorandum of Agreement. Thereafter, plaintiff filed the instant action for specific performance.

LOWER COURT: The lower court rendered judgment in favor of the Alonzo Machuca and against the defendant heirs of the late Francisco Q. Laforteza,. Petitioners appealed to the Court of Appeals, CA: This affirmed with the decision of the lower court.

determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. In the present case, the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale.

VDA. DE APE VS CA

Hence this petition wherein the petitioners raise the issues:

FACTS: Cleopas Ape died in 1950 and left a parcel of land (Lot ISSUES: (1) Whether or not the MOA is an OPTION CONTRACT, CONTRACT TO SELL or a CONTRACT OF SALE. 2) WON the six-month period during which the respondent would be in possession of the property as lessee was a period within which to exercise an option. HELD: In the case at bench, there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house and lot located at 7757 Sherwood St., Marcelo Green Village, Parañaque and the respondent to pay the price amounting to six hundred thousand pesos (P600,000.00). All the elements of a contract of sale were thus present. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain money or its equivalent. Even assuming for the sake of argument that the petitioners were ready to comply with their obligation (and Machuca cannot), we find that rescission of the contract will still not prosper. The rescission of a sale of an immovable property is specifically governed by Article 1592 of the New Civil Code, which reads: In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term .

It is not disputed that the petitioners did not make a judicial or notarial demand for rescission.

2) WON the six-month period during which the respondent would be in possession of the property as lessee was a period within which to exercise an option. The six-month period, during which the respondent would be in possession of the property as lessee, was clearly not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. An option must be supported by consideration. An option contract is governed by the second paragraph of Article 1479 of the Civil Code, which reads: Art. 1479. An accepted unilateral promise to buy or to sell a

2319) to his 11 children. The children never formally divided the property amongst themselves except through hantal-hantal whereby each just occupied a certain portion and developed each. On the other hand, the spouses Lumayno were interested in the land so they started buying the portion of land that each of the heirs occupied. On 11 Apr 1973, one of the children, Fortunato, entered into a contract of sale with Lumayno. In exchange of his lot, Lumayno agreed to pay P5,000.00. She paid in advance P30.00. Fortunato was given a receipt prepared by Lumayno’s son in law (Andres Flores). Flores also acted as witness. Lumayno also executed sales transactions with Fortunato’s siblings separately. In 1973, Lumayno compelled Fortunato to make the the delivery to her of the registrable deed of sale over Fortunato’s portion of the Lot No. 2319. Fortunato assailed the validity of the contract of sale. He also invoked his right to redeem (as a co-owner) the portions of land sold by his siblings to Lumayno. Fortunato died during the pendency of the case.

ISSUE: Whether or not there was a valid contract of sale? HELD: No. Fortunato was a “no read no write” person. It was incumbent for the the other party to prove that details of the contract was fully explained to Fortunato before Fortunato signed the receipt. A contract of sale is a consensual contract, thus, it is perfected by mere consent of the parties. It is born from the moment there is a meeting of minds upon the thing which is the object of the sale and upon the price. Upon its perfection, the parties may reciprocally demand performance, that is, the vendee may compel the transfer of the ownership and to deliver the object of the sale while the vendor may demand the vendee to pay the thing sold. For there to be a perfected contract of sale, however, the following elements must be present: consent, object, and

price in money or its equivalent. For consent to be valid, it must meet the following requisites: (a) it should be intelligent, or with an exact notion of the matter to which it refers; (b) it should be free and (c) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; spontaneity by fraud. Lumayno claimed that she explained fully the receipt to Fortunato, but Flores’ testimony belies it. Flores said there was


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever another witness but the other was a maid who also lacked education. Further, Flores himself was not aware that the receipt was “to transfer the ownership of Fortunato’s land to her mom -inlaw”. It merely occurred to him to explain the details of the receipt but he never did.

VILLANUEVA VS. PNB G.R. NO. 154493, DECEMBER 6, 2006 FACTS: The Special Assets Management Department (SAMD) of the Philippine National Bank (PNB) issued an advertisement for the sale of certain PNB properties in Calumpang, General Santos City, including Lots 17 and 19 with advertised floor prices of P1,409,000.00 and P2,268,000.00 respectively. Villanueva offered to purchase the lots for P3,677,000.00. He also manifested that he was depositing P400,000.00 to show his good faith but with the understanding that said amount may be treated as part of the payment of the purchase price only when his offer is accepted by PNB. At the bottom of said letter there appears an unsigned marginal note stating that P400,000.00 was deposited into Villanueva's account with PNB-General Santos Branch. PNB forwarded the letter of Villanueva to Ramon Guevara, Vice President, SAMD. Guevara informed Villanueva that only Lot No. 19 is available and that the asking price therefor is P2,883,300.00. Guevara further wrote: If our quoted price is acceptable to you, please submit a revised offer to purchase. Sale shall be subject to our Board of Director's approval and to other terms and conditions imposed by the Bank on sale of acquired assets. Instead of submitting a revised offer, Villanueva merely inserted at the bottom of Guevara's letter a marginal note, which reads: CONFORME: PRICE OF P2,883,300.00 (downpayment of P600,000.00 and the balance payable in two (2) years at quarterly amortizations.) Villanueva paid P200,000.00 to PNB which the latter issued a receipt to acknowledge receipt of the "partial payment deposit on offer to purchase." On the dorsal portion of Official Receipt No. 16997, Villanueva signed a typewritten note, stating: This is a deposit made to show the sincerity of my purchase offer with the understanding that it shall be returned without interest if my offer is not favorably considered or be forfeited if my offer is approved but I fail/refuse to push through the purchase. Thereafter, however, Guevara wrote Villanueva that SAMD is deferring negotiations with him over said property and returning his deposit of P580,000.00. Undaunted, Villanueva attempted to deliver postdated checks covering the balance of the purchase price but PNB refused the same.

Thus Villanueva filed a Complaint for specific performance which the RTC granted anchoring its judgment on the finding that there existed a perfected contract of sae between PNB and Villanueva. PNB appealed to the CA which reversed and set aside the decision, stating that in the case at bench, consent, in respect to the price and manner of its payment, is lacking. The record shows that appellant, thru Guevara's July 6, 1990 letter, made a qualified acceptance of appellee's letter-offer dated June 28, 1990 by imposing an asking price of P2,883,300.00 in cash for Lot 19. The letter dated July 6, 1990 constituted a counter-offer (Art. 1319, Civil Code), to which appellee made a new proposal, i.e., to pay the amount of P2,883,300.00 in staggered amounts, that is, P600,000.00 as downpayment and the balance within two years in quarterly amortizations. CA held that a qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and a rejection of the original offer (Art. 1319). Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer.

ISSUE: W/N there was a perfected Contract of Sale between respondents PNB and herein petitioner Villanueva. NO HELD: Contracts of sale are perfected by mutual consent whereby the seller obligates himself, for a price certain, to deliver and transfer ownership of a specified thing or right to the buyer over which the latter agrees. Mutual consent being a state of mind, its existence may only be inferred from the confluence of two acts of the parties: an offer certain as to the object of the contract and its consideration, and an acceptance of the offer which is absolute in that it refers to the exact object and consideration embodied in said offer. While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those points in the offer which, under the operative facts of each contract, are not only material but motivating as well. Anything short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer and its acceptance must be unanimous both on the rate of the payment and on its term. An acceptance of an offer which agrees to the rate but varies the term is ineffective. Tracing the transactions and letters between Villanueva and PNB, it can be said that there was no perfected contract of sale between the parties. The first letter of PNB stating that only Lot 19 was available was certainly not an acceptance but a mere counter-offer. Further, such counter-offer imposed two more conditions that Villanueva submit a revised offer to purchase based on the new price and that such sae of property be approved by the Board of Directors. However, Villanueva’s reply to said counter-offer was not an acceptance but a further counter-offer since he qualified his acceptance proposing a twoyear payment Moreover, Villanueva’s contention that the repudiation was belated since PNB already agreed to his counter-offer when it


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever accepted his downpayment, the Court ruled that acceptance of Villanueva’s payments did not amount to an implied acceptance of his last counter-offer. PNB-GenSan Branch had no authority to bind PNB to a contract of Sale with Villanueva. Neither did SAMD have authority to bind PNB. Both clearly stated that whatever is offered will be subject to approval of PNB’s higher authorities. In sum, the amounts paid by petitioner were not in the nature of downpayment or earnest money but were mere deposits or proof of his interest in the purchase of Lot No. 19. Acceptance of said amounts by respondent does not presuppose perfection of any contract.

3. Bilateral and Reciprocal CORTES VS CA G.R. NO. 126083, JULY 12, 2006 FACTS: For the purchase price of 3.7M, Villa Esperanza Development Corporation and Antonio Cortes entered into a contract of sale over the lots located at Baclaran, Parañaque, Metro Manila. The Corporation advanced to Cortes the total sum of P1,213,000.00. Later, in September 1983, the parties executed a deed of absolute sale on the following terms: The Corporation shall advance 2.2 M as downpayment, and Cortes shall likewise deliver the TCT for the 3 lots. The balance of 1.5M shall be payable within a year from the date of the execution. The Corporation filed the instant case for specific performance seeking to compel Cortes to deliver the TCTs and the original copy of the Deed of Absolute Sale. According to the Corporation, despite its readiness and ability to pay the purchase price, Cortes refused delivery of the sought documents. Cortes claimed that the owner’s duplicate copy of the three TCTs were surrendered to the Corporation and it is the latter which refused to pay in full the agreed down payment. RTC rendered a decision rescinding the sale and directed Cortes to return to the Corporation the amount of P1,213,000.00, plus interest. CA reversed the decision and directed Cortes to execute a Deed of Absolute Sale conveying the properties and to deliver the same to the Corporation together with the TCTs, simultaneous with the Corporation’s payment of the balance of the purchase price of P2,487,000.00.

ISSUE: W/N there is delay in the performance of the parties’ obligations that would justify the rescission of the contract of sale. HELD: There is no doubt that the contract of sale in question gave rise to a reciprocal obligation of the parties. Reciprocal obligations are those which arise from the same cause, and which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other.

They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. In the present case, the Deed of Sale contained a stipulation that the Corporation shall pay in full the downpayment upon execution of the contract. However, based on Cortes’ admission, he agreed that the Corporation’s full payment of the downpayment would depend upon the delivery of the TCTs of the three subject lots. As such, the corresponding reciprocal obligation of the Corporation’s payment was the transfer of titles by Cortes. His obligation is not only to affix the signature in the Deed, but to set into motion the process that would facilitate transfer of title of the lots. As correctly found by the CA, Cortes never surrendered said documents to the Corporation. Cortes avers that he delivered the TCT’s through the broker’s son. He further avers that the broker’s son delivered it to the broker, who in turn delivered them to the Corporation. However, Marcosa Sanchez’s unrebutted testimony is that, she did not receive the TCTs. She also denied knowledge of delivery t hereof to her son, Manny. What further strengthened the findings of the Court of Appeals that Cortes did not surrender the subject documents was the offer of Cortes’ counsel at the pre -trial to deliver the TCTs and the Deed of Absolute Sale if the Corporation will pay the balance of the down payment. Indeed, if the said documents were already in the hands of the Corporation, there was no need for Cortes’ counsel to make such offer. Considering that their obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the Corporation therefore gave rise to a compensation morae or default on the part of both parties because neither has completed their part in their reciprocal obligation. Cortes is yet to deliver the original copy of the notarized Deed and the TCTs, while the Corporation is yet to pay in full the agreed down payment of P2,200,000.00. This mutual delay of the parties cancels out the effects of default, such that it is as if no one is guilty of delay. Additionally, under Article 1169 of the Civil Code, from the moment one of the parties fulfills his obligation, delay by the other begins. Since Cortes did not perform his part, the provision of the contract requiring the Corporation to pay in full the down payment never acquired obligatory force.

ALMOCERA VS. ONG 546 SCRA 164 G.R. NO. 170479 FEBRUARY 18, 2008 FACTS: Johnny Ong tried to acquire from Andre T. Almocera and First Builder Multi-Purpose Cooperative (FBMC) a "townhome" in Cebu City. As reflected in a Contract to Sell, the selling price of the unit was P3,400,000.00 pesos. Out of the purchase price, he was able to pay the amount of P1,060,000.00.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Prior to the full payment of this amount, Ong claims that defendants Andre Almocera and First Builders fraudulently concealed the fact that before and at the time of the perfection of the aforesaid contract to sell, the property was already mortgaged to and encumbered with the Land Bank of the Philippines (LBP). In addition, the construction of the house has long been delayed and remains unfinished. On March 13, 1999, Lot 4-a covering the unit was advertised in a local tabloid for public auction for foreclosure of mortgage. It is the assertion of Ong that had it not for the fraudulent concealment of the mortgage and encumbrance by defendants, he would have not entered into the contract to sell. On the other hand, defendants assert that on March 20, 1995, First Builders Multi-purpose Coop. Inc., borrowed money in the amount of P500,000.00 from T ommy Ong, plaintiff’s brother. This amount was used to finance the documentation requirements of the LBP for the funding of the Atrium Town Homes. This loan will be applied in payment of one (1) town house unit which Tommy Ong may eventually purchase from the project. When the project was under way, Tommy Ong wanted to buy another townhouse for his brother, Johnny Ong, plaintiff herein, which then, the amount of P150,000.00 was given as additional partial payment. However, the particular unit was not yet identified. It was only on January 10, 1997 that Tommy Ong identified Unit No. 4 plaintiff’s chosen unit and again tendered P350,000.00 as his third partial payment. When the contract to sell for Unit 4 was being drafted, Tommy Ong requested that another contract to sell covering Unit 5 be made so as to give Johnny Ong another option to choose whichever unit he might decide to have. When the construction was already in full blast, defendants were informed by Tommy Ong that their final choice was Unit 5. It was only upon knowing that the defendants will be selling Unit 4 to some other persons for P4million that plaintiff changed his choice from Unit 5 to Unit 4. In trying to recover the amount he paid as down payment for the townhouse unit, Johnny Ong filed a complaint for Damages against Andre T. Almocera and FBMC alleging that they were guilty of fraudulent concealment and breach of contract when they sold to him a townhouse unit without divulging that the same, at the time of the perfection of their contract, was already mortgaged with the Land Bank of the Philippines (LBP), with the latter causing the foreclosure of the mortgage and the eventual sale of the townhouse unit to a third person. In their Answer, Almocera and FBMC denied liability claiming that the foreclosure of the mortgage on the townhouse unit was caused by the failure of Johnny Ong to pay the balance of the price of said townhouse unit.

ISSUES: I.

WON it was a contract to sell or a contract of sale. WON the respondent’s refusal to pay the balance of the purchase price is justified. - YES

II.

The contract was denominated as such and it contained the provision that the unit shall be conveyed by way of an Absolute Deed of Sale, together with the attendant documents of Ownership – the Transfer Certificate of Title and Certificate of Occupancy – and that the balance of the contract price shall be paid upon the completion and delivery of the unit, as well as the acceptance thereof by respondent. All these clearly indicate that ownership of the townhouse has not passed to respondent. The unit shall be completed and conveyed by way of an Absolute Deed of Sale together with the attendant documents of Ownership in the name of the BUYER – the Transfer Certificate of Title and Certificate of Occupancy within a period of six (6) months from the signing of Contract to Sell. II.

The respondent is justified in refusing to pay the balance of the contract price.

From the terms of the contract, it is clear that petitioner and FBMC had the obligation to complete the townhouse unit within six months from the signing of the contract. Upon compliance therewith, the obligation of respondent to pay the balance of P2,400,000.00 arises. Upon payment thereof, the townhouse shall be delivered and conveyed to respondent upon the execution of the Absolute Deed of Sale and other relevant documents. The evidence adduced shows that petitioner and FBMC failed to fulfill their obligation -- to complete and deliver the townhouse within the six-month period. With petitioner and FBMC’s non-fulfillment of their obligation, respondent refused to pay the balance of the contract price. Respondent does not ask that ownership of the townhouse be transferred to him, but merely asks that the amount or down payment he had made be returned to him. The contract subject of this case contains reciprocal obligations which were to be fulfilled by the parties, i.e., to complete and deliver the townhouse within six months from the execution of the contract to sell on the part of petitioner and FBMC, and to pay the balance of the contract price upon completion and delivery of the townhouse on the part of the respondent. In the case at bar, the obligation of petitioner and FBMC which is to complete and deliver the townhouse unit within the prescribed period, is determinative of the respondent’s obligation to pay the balance of the contract price. With their failure to fulfill their obligation as stipulated in the contract, they incurred delay and are liable for damages. They cannot insist that respondent comply with his obligation. Where one of the parties to a contract did not perform the undertaking to which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the other party.

HELD: I.

It cannot be disputed that the contract entered into by the parties was a contract to sell. In a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price.

Petitioner insists there was no delay when the townhouse unit was not completed within six months from the signing of the contract inasmuch as the mere lapse of the stipulated six (6) month period is not by itself enough to constitute delay on his part and that of FBMC, since the law requires that there must either be judicial or extrajudicial demand to fulfill


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever an obligation so that the obligor may be declared in default. He argues there was no evidence introduced showing that a prior demand was made by respondent before the original action was instituted in the trial court.

sale did not occur within a period of one year did not extinguish the obligation of Fonacier to pay Gaite the balance of P65,000 because it does not seem to be the intention of the parties to the contract.

We do not agree.

The Court looked into several circumstances which lead them to conclude that the sale of the iron ore is but a suspensive term. First, the words of the contract express no contingency in the buyer's obligation to pay.

Demand is not necessary in the instant case. Demand by the respondent would be useless because the impossibility of complying with their (petitioner and FBMC) obligation was due to their fault. If only they paid their loans with the LBP, the mortgage on the subject townhouse would not have been foreclosed and thereafter sold to a third person.

4. Onerous GAITE VS. FONACIER 2 SCRA 831 G.R. NO. L-11827 JULY 31, 1961

Second, in the usual course of business, an onerous contract is most likely preferred by the parties in a sale. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one by a surety company; and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000.00.

FACTS: Isabelo Fonacier executed a ‘Deed of Assignment’ in favor of Fernando Gaite as his true and lawful attorney-in-fact so that the latter may enter into a contract for the exploration and development of the mining claims owned by Fonacier. Gaite executed a general assignment conveying the development and exploitation of said mining claims to Larap Iron Mines owned by him.

Assuming that there could be doubt whether by the wording of the contract the parties indented a suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules of interpretation would incline the scales in favor of "the greater reciprocity of interests", since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides:

Fonacier decided to revoke the ‘Deed of Assignment’ to which Gaite assented on the condition that Fonacier is to pay him P75,000 for the 24,000 metric tons of iron lodes already extracted and to retain the company name Larap Iron MInes. Fonacier already paid P10,000 leaving a balance of P65,000 which, as agreed by them, is to be derived from the local sale of Iron ore made by Larap Iron Mines. On December 8, 1954, Fonacier issued a security bond to secure payment of balance with Far Eastern Surety and Insurance Co. but the surety provided that liability to the company will only attach when there had been actual sale of iron ore by Larap Iron Mines for an amount of not less than P65,000 and that the bond will automatically expire on December 8, 1955.

“If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.”

No sale of the iron ore was made thereafter. Gaite failed to pay Fonacier the balance and the surety company refused to pay contending that the bond expired automatically.

There can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, that if such obligation were viewed as nonexistent or not binding until the ore was sold. The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment.

5. Commutative Gaite instituted the present case. Fonacier argued that the payment of the P65,000 balance was subject to the condition that it would be paid out of the first sale of the iron ore by Larap Mines which did not happen.

ISSUE: WON the obligation of Fonacier to pay Gaite the balance of P65,000 was extinguished because the iron ore was not sold within a year.

HELD: The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a suspensive period or term. That the

BUENAVENTURA VS CA (Nov. 20, 2003) FACTS: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective spouses. Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever The petitioners argue that the deeds of sale are simulated as they are null and void ab initio because: 1. 2.

3. 4.

There was no actual valid consideration for the deeds of sale over the properties in litis; Assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein; The deeds of sale do not reflect and express the true intent of the parties (vendors and vendees); and The purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs of their legitime.

The trial court ruled in favor of the defendants. The Court of Appeals affirmed the trial court’s decision.

ISSUE: (I) WON petitioners have a legal interest over the properties subject of the Deeds of Sale (II) WON the Deeds of Sale are void for lack of consideration (III) WON the Deeds of Sale are void for gross inadequacy of price

RULING: I. No, petitioners do not have a legal interest over the properties subject of the Deeds of Sale. Petitioners failed to show any legal right to the properties. In actions for the annulment of contracts, such as this action, the real parties are those who are parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the contracting parties and can show the detriment which would positively result to them from the contract even though they did not intervene in it. Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated, petitioners’ right to their parents properties is merely inchoate and vests only upon their parents death. While still living, the parents of petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value of their parents’ estate. While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.

II. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of

payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reform. Petitioners’ failure to prove abso lute simulation of price is magnified by their lack of knowledge of their respondent siblings’ financial capacity to buy the questioned lots. On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents’ minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father.

III. Article 1355: Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it.

6. Sale is Title and Not Mode SAN LORENZO DEVELOPMENT CORP. VS CA (Jan 21, 2005) FACTS: Respondents Miguel Lu and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square meters or a total of 3.1616 hectares. According to Pablo Babasanta, Spouses Lu sold the two parcels of land to him, for the price of P15.00 per square meter. Babasanta made a downpayment of P50,000.00 as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling P200,000.00 were made by Babasanta. Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor so that he could effect full payment of the purchase price. Babasanta notified the spouses about having received information that the spouses sold the same property to another without his knowledge and consent. The Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances of Pacita reached P50,000.00, the latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to transform the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever transaction into a contract to sell the two parcels of land to Babasanta with the P50,000.00 to be considered as the downpayment for the property and the balance to be paid on or before 31 December 1987. Respondents Lu added that as of November 1987, total payments made by Babasanta amounted to only P 200,000.00 and the latter allegedly failed to pay the balance of P260,000.00 despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price from P15.00 to P12.00 per square meter and when the Spouses Lu refused to grant Babasantas request, the latter rescinded the contract to sell and declared that the original loan transaction just be carried out in that the spouses would be indebted to him in the amount of P200,000.00 SLDC (San Lorenzo Development Corporation) filed a Motion to Intervene and alleged that it had legal interest in the subject matter under litigation because the two parcels of land involved had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in litigation. RTC rendered a decision upholding the sale made to SLDC and ordered Spouses Lu to pay Babasanta the sum of P200,000. CA reversed the decision declaring the sale between Babasanta and Spouses Lu valid and the sale to SLDC null and void on the ground that it was a purchaser in bad faith.

ISSUE: 1. 2.

WON the agreement between Babasanta and Spouses Lu was a contract to sell and not a contract of sale WON the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and possession in good faith which admittedly had occurred prior to SLDCs knowledge of the transaction in favor of Babasanta

RULING: 1.

The agreement between Babasanta and Spouses Lu was a contract to sell and not a contract of sale.

A document was presented showing that Pacita Lu acknowledged receipt of P50,000 and that she agreed to sell the 3.6 hectares at P15 per square meter. The receipt signed by Pacita Lu merely states that she accepted the sum of P50,000.00 from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price. Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they could have easily executed the document of sale in its required form simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a

perfected contract to sell. The distinction between a contract to sell and a contract of sale is quite germane. 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 until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. The perfection of a contract of sale should not be confused with its consummation. In relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership. Under Article 712 of the Civil Code, ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same. Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership. Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Article 1497 to 1501. The word delivered should not be taken restrictively to mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery. Actual delivery consists in placing the thing sold in the control and possession of the vendee. Legal or constructive delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument evidencing the sale; symbolical tradition such as the delivery of the keys of the place where the movable sold is being kept; traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the possession of the buyer at the time of the sale; traditio brevi manu if the buyer already had possession of the object even before the sale; and traditio constitutum possessorium, where the seller remains in possession of the property in a different c apacity. Respondent Babasanta did not acquire ownership by the mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could have been effected. For another, Babasanta had not taken possession of the property at any time after the perfection of the sale in his favor or exercised acts of dominion over it despite his assertions that he was the rightful owner of the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever lands. Simply stated, there was no delivery to Babasanta, whether actual or constructive, which is essential to transfer ownership of the property. Thus, even on the assumption that the perfected contract between the parties was a sale, ownership could not have passed to Babasanta in the absence of delivery, since in a contract of sale ownership is transferred to the vendee only upon the delivery of the thing sold. 2.

No, it did not obliterate the delivery and possession in good faith.

It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at all on the consummated sale between SLDC and the Spouses Lu. Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus: Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing, or entering. However, the constructive notice operates as such by the express wording of Section 52from the time of the registration of the notice of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned. More fundamentally, a notice of lis pendens only serves as a warning to a prospective purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same, unless he intends to gamble on the results of the litigation. Precisely, in this case SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated with the Courts present decision which is the ultimate denouement on the controversy.

NORKIS DISTRIBUTOR VS. CA G.R. NO. 91029, FEBRUARY 7,1991; 193 SCRA 694 FACTS: Petitioner Norkis Distributors, Inc. is the distributor of Yamaha motorcycles in Negros Occidental. On September 20, 1979, private respondent Alberto Nepales bought from the Norkis Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX. The price of P7,500.00 was payable

by means of a Letter of Guaranty from the DBP, which Norkis agreed to accept. Credit was extended to Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Petitioner issued a sales invoice which Nepales signed in conformity with the terms of the sale. In the meantime, however, the motorcycle remained in Norkis’ possession. On January 22, 1980, the motorcycle was delivered ¬to a certain Julian Nepales, allegedly the agent of Alberto Nepales. The motorcycle met an accident on February 3, 1980 at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that the unit was being driven by a certain Zacarias Payba at the time of the accident. The unit was a total wreck was returned. On March 20, 1980, DBP released the proceeds of private respondent’s motorcycle loan to Norkis in the total sum of P7,500. As the price of the motorcycle later increased t o P7,828 in March, 1980, Nepales paid the difference of P328 and demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with damages against Norkis in the RTC of Negros Occidental. He alleged that Norkis failed to deliver the motorcycle which he purchased, thereby causing him damages. Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit.

ISSUE: Whether or not there has been a transfer of ownership of the motorcycle to Alberto Nepales.

HELD: No.The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of delivering the thing. The act, without the intention, is insufficient. When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the buyer’s motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would not approve private respondent's loan application and, consequently, there would be no sale Article 1496 of the Civil Code which provides that “in the absence of an express assumption of risk by the buyer, the things sold remain at seller’s risk until the ownership thereof is transferred to the buyer,” is applicable to this case, for there was neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well- known doctrine of res perit domino.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever AZNAR V.YAPDIANGCO 13 SCRA 486 FACTS: Theodoro Santos advertised in the newspapers the sale of his Ford Fairlane 500. After the advertisement, a certain de Dios, claiming to be the nephew of Marella, went to the residence of Santos and expressing his uncle’s intent to purchase the car. Since Santos wasn't around, it was Irineo who talked with de Dios. On being informed, Santos advised his son to see Marella, which the son did. Marella expressed his intention to purchase the car. A deed of sale was prepared and Irineo was instructed by his father not to part with the deed and the car without receiving the purchase price from Marella. When irineo and de Dios arrived at the residence of Marella, the latter averred that his money was short and had to borrow from his sister. He then instructed de Dios and Irineo to go the supposed house of the sister to obtain the money with an unidentified person. He also asked Irineo to leave the deed to have his lawyer see it. Relying on the good faith of Marella, Irineo did as requested. Upon arriving at thehouse of Marella’s supposed to be sister, de Dios and the unidentified person then disappeared together with the car. This prompted Santos to report the incident to the authorities. Thereafter, Marella was able to sell the car to Aznar. And while in possession of the car, police authorities confiscated the same. This prompted Aznar to file an action for replevin.

ISSUE: W Aznar has the better title to the car. No HELD: Vicente Marella did not have any title to the property under litigation because the same was never delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of the car to him. Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." As interpreted by this Court in a host of cases, by this provision, ownership is not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same. For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be delivered, inasmuch as, according to settled jurisprudence, the tradition of the thing is a necessary and indispensable requisite in the acquisition of said ownership by virtue of contract. So long as property is not delivered, the ownership over it is not transferred by contract merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same, the title and the method of acquiring it being different in our law. In the case on hand, the car in question was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by virtue of the contract. It should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took possession of the subject matter

thereof by stealing the same while it was in the custody of the latter's son. There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to the car to the unidentified person who went with him and L. De Dios to the place on Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery contemplated by Article 712 of the Civil Code. For then, it would be indisputable that he turned it over to the unidentified companion only so that he may drive Irineo Santos and De Dios to the said place on Azcarraga and not to vest the title to the said vehicle to him as agent of Vicente Marella. Article 712 above contemplates that the act be coupled with the intent of delivering the thing. The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from third persons who may have acquired it in good faith from such finder, thief or robber. The said article establishes 2 exceptions to the general rule of irrevindicabilty—to wit, the owner has lost the thing or has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the owner who may recover it without paying any indemnity, except when the possessor acquired it in a public sale. Furthermore, the common law principle that where one of two innocent persons must suffer a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enable the fraud to be committed, cannot be applied in this case, which is covered by an express provision of law.

EQUATORIAL REALTY DEVELOPMENT, INC., vs. MAYFAIR THEATER, INC., G.R. No. 133879 November 21, 2001 FACTS: This case stemmed from a Civil Case entitled " Mayfair" Theater, Inc. v. Carmelo and Bauermann, Inc., et al.," where Carmelo & Bauermann, Inc entered into a Contract of Lease with Mayfair Theater Inc. ("Mayfair") for a period of 20 years. The lease covered a portion of the second floor and mezzanine of a two-storey building it owned which respondent used as a movie house known as Maxim Theater.

Two years later,Mayfair entered into a second Contract of Lease with Carmelo for the lease of another portion of the latter's property .In that space, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was likewise for a period of 20 years. Both leases contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30, 1978 — within the 20-year-lease term — the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. ("Equatorial"), without their first being offered to Mayfair. As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c) damages. After trial on the merits, the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever lower court rendered a Decision in favor of Carmelo and Equatorial.

the part of the vendor, and the assumption of the same by the vendee."

The Supreme Court made the following pronouncement for this case: The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc.is deemed rescinded; Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty Development the purchase price. The latter is directed to execute the deeds and documents necessary to return ownership to Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots.

It is clear that petitioner never took actual control and possession of the property sold, in view of respondent's timely objection to the sale and the continued actual possession of the property. The objection took the form of a court action impugning the sale which, as we know, was rescinded by a judgment rendered by this Court in the mother case. It has been held that the execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds true only when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. When there is such impediment, "fiction yields to reality — the delivery has not been effected."

The foregoing Decision of this Court became final and executory. Subsequently, Mayfair filed a Motion for Execution, which the trial court granted. However, Carmelo could no longer be located. Thus, following the order of execution of the trial court, Mayfair deposited with the clerk of court. The lower court issued a Deed of Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of these documents, the Registry of Deeds of Manila canceled Equatorial's titles and issued new Certificates of Title in the name of Mayfair. Meanwhile, barely five months after Mayfair had submitted its Motion for Execution before the RTC of Manila, Equatorial filed action for the collection of a sum of money against Mayfair, claiming payment of rentals or reasonable compensation for the defendant's use of the subject premises after its lease contracts had expired.

ISSUE: Whether or not Equatorial is entitled to back rentals RULING: No. Equatorial is not entitled to back rentals. No right of ownership was transferred from Carmelo to Equatorial in view of a patent failure to deliver the property to the buyer. Rent is a civil fruit that belongs to the owner of the property producing it by right of accession. Consequently and ordinarily, the rentals that fell due from the time of the perfection of the sale to petitioner until its rescission by final judgment should belong to the owner of the property during that period. By a contract of sale, "one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent." Ownership of the thing sold is a real right, which the buyer acquires only upon delivery of the thing to him "in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." This right is transferred, not merely by contract, but also by tradition or delivery. And there is said to be delivery if and when the thing sold "is placed in the control and possession of the vendee." Thus, it has been held that while the execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold, such constructive or symbolic delivery, being merely presumptive, is deemed negated by the failure of the vendee to take actual possession of the land sold . In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery contemplate "the absolute giving up of the control and custody of the property on

Hence, respondent's opposition to the transfer of the property by way of sale to Equatorial was a legally sufficient impediment that effectively prevented the passing of the property into the latter's hands. The execution of a public instrument gives rise, therefore, only to a prima facie presumption of delivery. Such presumption is destroyed when the instrument itself expresses or implies that delivery was not intended; or when by other means it is shown that such delivery was not effected, because a third person was actually in possession of the thing . In the latter case, the sale cannot be considered consummated. Ownership is acquired, not by mere agreement, but by tradition or delivery. Under the factual environment of this controversy as found by this Court in the mother case, Equatorial was never put in actual and effective control or possession of the property because of Mayfair's timely objection. In short, the sale to Equatorial may have been valid from inception, but it was judicially rescinded before it could be consummated. Petitioner never acquired ownership, not because the sale was void, as erroneously claimed by the trial court, but because the sale was not consummated by a legally effective delivery of the property sold.

III. DISTINGUISHED FROM OTHER TRANSACTIONS/CONTRACT 1.

Distinguished from Barter

2.

Distinguished from Donation

3.

Distinguished from Contract for Piece of Work INCHAUSTI AND CO. vs. ELLIS CROMWELL, Collector of Internal Revenue G.R. No. L-6584

October 16, 1911

FACTS: Inchausti is engaged in the business of buying and selling at wholesale hemp. It is customary to sell hemp in bales. The operation of bailing hemp is designated among merchants by the word "prensaje." In all sales of hemp by the plaintiff firm, the price is quoted to the buyer at so much per picul, no mention being made of bailing; but with the tacit understanding, unless otherwise expressly


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever agreed, that the hemp will be delivered in bales and that, according to the custom prevailing among hemp merchants and dealers in the Philippine Islands, a charge, is to be made against the buyer under the denomination of "prensaje." This charge is made in the same manner in all cases, even when the operation of bailing was performed by the plaintiff or by its principal long before the contract of sale was made. Plaintiff Inchausti has always paid to the defendant Collector of Internal Revenue or to his predecessor in the office of the Collector of Internal Revenue the tax collectible upon the selling price expressly agreed upon for all hemp sold by the plaintiff firm, but has not, until compelled to do so paid the said tax upon sums received from the purchaser of such hemp under the denomination of "prensaje." Subsequently, the defendant, acting in his official capacity as Collector of Internal Revenue of the Philippine Islands, made demand in writing upon the plaintiff firm for the payment as tax on the sums of money collected from purchasers of hemp under the denomination of "prensaje." The plaintiff firm paid to the defendant under protest that the tax for the collected money under the denomination of "prensaje" is illegal upon the ground that the said charge does not constitute a part of the selling price of the hemp, but is a charge made for the service of baling the hemp. It is the contention of the defendant that the said charge made under the denomination of "prensaje" is in truth and in fact a part of the gross value of the hemp sold and of its actual selling price.

ISSUE: Whether or not the amount collected under the denomination “pensaje” is part of the selling price of the hemp.

RULING: Yes. It is considered part of the selling price and the tax was properly imposed. The distinction between a contract of sale and one for work, labor, and materials is tested by the inquiry whether the thing transferred is one no in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been the subject of sale to some other person, even if the order had not been given. It is clear that in the case at bar the hemp was in existence in baled form before the agreements of sale were made, or, at least, would have been in existence even if none of the individual sales here in question had been consummated. It would have been baled, nevertheless, for sale to someone else, since, according to the agreed statement of facts, it is customary to sell hemp in bales. When a person stipulates for the future sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor. It is otherwise when the article is made pursuant to agreement. Where labor is employed on the materials of the seller he cannot maintain an action for work and labor. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at the defendant's request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendant's order for it. A contract to make is a contract of sale if the article ordered is already substantially in existence at the time of the order and merely requires some alteration, modification, or adoption to the buyer's wishes or purposes. It is also held in that state that a contract for the sale of an article which the vendor in the ordinary

course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract for the sale of goods to which the statute of frauds applies. But if the goods are to be manufactured especially for the purchaser and upon his special order, and not for the general market, the case is not within the statute. It is clear to our minds that in the case at bar the baling was performed for the general market and was not something done by plaintiff which was a result of any peculiar wording of the particular contract between him and his vendee. It is undoubted that the plaintiff prepared his hemp for the general market.

CELESTINO CO VS CIR (G.R. NO. L-8506) FACTS: Celestino Co & Company is a duly registered general co-partnership doing business under the trade name of “Oriental Sash Factory”. From 1946 to 1951 it paid percentage taxes of 7% on the gross receipts of its sash, door and window factory, in accordance with sec. 186 of the National Internal Revenue Code which is a tax on the original sales of articles by manufacturer, producer or importer. However, in 1952 it began to claim only 3% tax under Sec. 191, which is a tax on sales of services. Petitioner claims that it does not manufacture ready-made doors, sash and windows for the public, but only upon special orders from the customers, hence, it is not engaged in manufacturing under sec 186, but only in sales of services covered by sec 191. Having failed to convince BIR, petitioner went to the Court of Tax Appeal where it also failed. CTA, in its decision, holds that the “petitioner has chosen for its tradename and has offered itself to the public as a “Factory”, which means it is out to do business, in its chosen lines on a big scale. As a general rule, sash factories receive orders for doors and windows of special design only in particular cases but the bulk of their sales is derived from a ready-made doors and windows of standard sizes for the average home.. Even if we were to believe petitioner’s claim that it does not manufacture ready -made sash, doors and windows for the public and that it makes these articles only special order of its customers that does not make it a contractor within the purview of section 191 of the national Internal Revenue Code. There are no less than fifty occupations enumerated in the aforesaid section and after reading carefully each and every one of them, we cannot find under which the business of manufacturing sash, doors and windows upon special order of customers fall under the category” mentioned under Sec 191.

ISSUE: Whether the petitioner company provides special services or is engaged in manufacturing.

HELD: The important thing to remember is that Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it “manufactures” the same is practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the employment of such material-moulding,


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever frames, panels-as it ordinarily manufactured or was in a position habitually to manufacture. The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its customers may desire. Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filing orders for windows and doors according to specifications, it did not sell, but merely contracted for particular pieces of work or “merely sold its services”. Said article reads as follows: Article 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is contract for a piece of work.

In our opinion when this Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it-it thereby contracts for a piece of work — filing special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work — nothing is shown to call them special requiring extraordinary service of the factory. The thought occurs to us that if, as alleged-all the work of appellant is only to fill orders previously made, such orders should not be called special work, but regular work. The Supreme Court affirms the assailed decision by the CTA.

CIR VS ARNOLDUS CARPENTRY SHOP GR NO. 71122 FACTS: Arnoldus Carpentry Shop, Inc. is a domestic corporation which has been in existence since 1960 which has for its purpose the “preparing, processing, buying, selling, exporting, importing, manufacturing, trading and dealing in cabinet shop products, wood and metal home and office furniture, cabinets, doors, windows, etc., including their component parts and materials, of any and all nature and description”. The company kept samples or models of its woodwork on display from where its customers may refer to when placing their orders. On March 1979, the examiners from BIR who conducted an investigation on the company’s tax liabilities reported t hat subject corporation should be considered a contractor and not a manufacturer since the corporation renders service in the course of an independent occupation representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished. Hence, in the computation of the percentage tax, the 3% contractor’s tax should be imposed instead of the 7% manufacturer’s tax. However, responded company holds that the carpentry shop is a manufacturer and therefore entitled to tax exemption on its gross export sales under Section 202 (e) of the National Internal Revenue Code. CIR rendered its decision classifying the respondent as contractor which was in turn reversed by the CTA.

ISSUE: Whether or not the Court of Tax Appeals erred in holding that private respondent is a manufacturer and not a contractor.

HELD: No. The Supreme Court holds that the private respondent is a “manufacturer” as defined in the Tax Code and not a “contractor” under Section 205(e) of the Tax Code.

Petitioner CIR wants to impress upon this Court that under Article 1467, the true test of whether or not the contract is a piece of work (and thus classifying private respondent as a contractor) or a contract of sale (which would classify private respondent as a manufacturer) is the mere existence of the product at the time of the perfection of the contract such that if the thing already exists, the contract is of sale, if not, it is work. This is not the test followed in this jurisdiction. Based on Art. 1467, what determines whether the contract is one of work or of sale is whether the thing has been manufactured specially for the customer and “upon his special order.” Thus, if the thing is specially done at the order of another, this is a contract for a piece of work. If, on the other hand, the thing is manufactured or procured for the general market in the ordinary course of one’s business, it is a contract of sale. The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given. The one who has ready for the sale to the general public finished furniture is a manufacturer, and the mere fact that he did not have on hand a particular piece or pieces of furniture ordered does not make him a contractor only. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the – general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. The facts show that the company had a ready stock of its shop products for sale to its foreign and local buyers. As a matter of fact, the purchase orders from its foreign buyers showed that they ordered by referring to the models designated by petitioner. Even purchases by local buyers for television cabinets were by orders for existing models except only for some adjustments in sizes and accessories utilized. The Court finds itself in agreement with CTA and as the CTA did not err in holding that private respondent is a “manufacturer,” then private respondent is entitled to the tax exemption under See. 202 (d) and (e) now Sec. 167 (d) and (e)] of the Tax Code.

ENGINEERING & MACHINERY CORPORATION, petitioner, vs. COURT OF APPEALS and PONCIANO L. ALMEDA, r e s p o n d e n t s . FACTS: Almeda and Engineering signed a contract, wherein Engineering undertook to fabricate, furnish and install the air-conditioning system in the latter’s building along Buendia Avenue, Makati in consideration of P210,000.00. Petitioner was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The system was completed in 1963 and accepted by private respondent, who paid in full the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever contract price.

the complaint was filed on May 8, 1971, it is clear that the action has not prescribed.

Almeda learned from the employees of NIDC of the defects of the air-conditioning system of the building. Almeda spent for the repair of the air-conditioning system. He now sues Engineering for the refund of the repair. Engineering contends that the contract was of sale and the claim is barred by prescription since the responsibility of a vendor for any hidden faults or defects in the thing sold runs only for 6 months (Arts 1566, 1567, 1571). Almeda contends that since it was a contract for a piece of work, hence the prescription period was ten years (Hence Art 1144 should apply on written contracts). RTC found that Engineering failed to install certain parts and accessories called for by the contract, and deviated from the plans of the system, thus reducing its operational effectiveness to achieve a fairly desirable room temperature.

ISSUE: Whether the contract for the fabrication and installation of a central air-conditioning system in a building, one of “sale” or “for a piece of work”?

RULING: CONTRACT

FOR

PIECE

OF

WORK

A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work . The contract in question is one for a piece of work. It is not petitioner’s line of business to manufacture air -conditioning systems to be sold “off -the-shelf.” Its b usiness and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers. 2)The original complaint is one for damages arising from breach of a written contract – and not a suit to enforce warranties against hidden defects – we here – with declare that the governing law is Article 1715 (supra). However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions “upon a written contract” prescribe in ten (10) years. Since the governing contract was executed on September 10, 1962 and

INOCENCIA YU DINO and her HUSBAND doing business under the trade name "CANDY CLAIRE FASHION GARMENTS", petitioners, vs. COURT OF APPEALS and ROMAN SIO, doing business under the name "UNIVERSAL TOY MASTER MANUFACTURING", r e s p o n d e n t s . FACTS: Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion Garment" are engaged in the business of manufacturing and selling shirts. Respondent Sio is part owner and general manager of a manufacturing corporation doing business under the trade name "Universal Toy Master Manufacturing." Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads with the sample approved by the petitioners. Respondent Sio delivered the 40,000 pieces of frogs and mooseheads. Subsequently, petitioners returned to respondent 29,772 pieces of frogs and mooseheads for failing to comply with the approved sample. Petitioners then demanded from the respondent a refund of the purchase price of the returned goods in the amount of P208,404.00. As respondent Sio refused to pay, petitioners filed on July 24, 1989 an action for collection of a sum of money in the Regional Trial Court of Manila, Branch 38.The trial court ruled in favor of the petitioners. Respondent Sio sought recourse in the Court of Appeals. On January 24, 1994, the respondent court reversed its decision and dismissed petitioners' Complaint for having been filed beyond the prescriptive period.

ISSUE: Whether or not the contract between the petitioner and the respondent was a contract for a piece of work.

RULING: CONTRACT OF PIECE OF WORK Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. "Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material." It was stipulated in the contract that respondent would manufacture upon order of the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads according to the samples specified and approved by the petitioners. Respondent Sio did not ordinarily manufacture these products, but only upon order of the petitioners and at the price agreed upon. Clearly, the contract executed by and between the petitioners and the respondent was a contract for a piece of work. At any rate, whether the agreement between the parties was one of a contract of sale or a piece of work, the provisions on warranty of


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever title against hidden defects in a contract of sale apply to the case at bar. Article 1567 provides for the remedies available to the vendee in case of hidden defects: "Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case." By returning the 29,772 pieces of vinyl products to respondent and asking for a return of their purchase price, petitioners were in effect "withdrawing from the contract" as provided in Art. 1567. The prescriptive period for this kind of action is provided in Art. 1571 of the New Civil Code which provides that the action shall be barred after six months from the delivery of the thing sold. Respondent made the last delivery of the vinyl products to petitioners on September 28,1988 and the action to recover the purchase price of the goods was filed on July 24, 1989, more than nine months from the date of last delivery. Clearly, Petitioners are barred from claiming a sum of money from respondent.

CIR VS CA AND ATENEO (GR NO 115349 APRIL 18, 1997) FACTS: ADMU Institute of Philippine Culture is engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies. On July 1983, CIR sent a demand letter assessing the sum of P174,043.97 for alleged deficiency contractor‘s tax. Accdg to CIR, ADMU falls under the purview of independent contractor pursuant to Sec 205 of Tax Code and is also subject to 3% contractor‘s tax under Sec 205 of the same code. (Independent Contractor means any person whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractors or their employees.) ISSUE: WON the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a piece of work? NEITHER. Transactions of Ateneo‘s Institute of Philippine Culture cannot be deemed either as a contract of sale or a contract of a piece of work.

HELD: Records do not show that Ateneo‘s IPC in fact contracted to sell its research services for a fee. In the first place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts for sale of services were ever entered into by the private respondent. Funds received by the Ateneo de Manila University are technically not a fee. They may however fall as gifts or donations which are tax-exempt. Another fact that supports this contention is that for about 30 years, IPC had continuously operated at a loss, which means that sponsored funds are less than actual expenses for its research projects. In fact, private respondent is mandated by law to undertake research activities to maintain its university status. In fact, the research activities being carried out by the IPC is focused not on business or profit but on social sciences studies of Philippine society and culture. Since it can only finance a limited number of IPC‘s research projects, private respondent occasionally accepts

sponsorship for unfunded IPC research projects from international organizations, private foundations and governmental agencies. However, such sponsorships are subject to private respondent‘s terms and conditions, among which are, that the research is confined to topics consistent with the private respondent‘s academic agenda; that no proprietary or commercial purpose research is done; and that private respondent retains not only the absolute right to publish but also the ownership of the results of the research conducted by the IPC.

4.

Distinguished from Agency to Sell ANDRES QUIROGA vs PARSONS HARDWARE CO., G.R. L-11491 August 23, 1918

FACTS: On January 24, 1911, a contract was entered into by and between Andres Quiroga and J. Parsons, to whose rights and obligations the present defendant later subrogated itself. The contract stipulated that Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons. Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, byreason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.

ISSUE: Whether the contract is a contract of agency or of sale. RULING: In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features

exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, COMPILED BY: WIGMORE #WIGMOREFOREVER

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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale.

PUYAT & SONS, INC. V. ARCO AMUSEMENT CO. FACTS Arco Amusement was engaged in the business of operating cinematographs. Gonzalo Puyat & Sons Inc. (GPS) was the exclusive agent in the Philippines for the Starr Piano Company. Desiring to equip its cinematograph with sound reproducing devices, Arco approached GPS, through its president, GIl Puyat, and an employee named Santos. After some negotiations, it was agreed between the parties that GPS would order sound reproducing equipment from Starr Piano Company and that Arco would pay GPS, in addition to the price of the equipment, a 10% commission, plus all expenses such as freight, insurance, etc. When GPS inquired Starr Piano the price (without discount) of the equipment, the latter quoted such at $1,700 FOB Indiana. Being agreeable to the price (plus 10%commission plus all other expenses), Arco formally authorized the order. The following year, both parties agreed for another order of sound reproducing equipment on the same terms as the first at $1,600 plus 10% plus all other expenses. Three years later, Arco discovered that the prices quoted to them by GPS with regard to their first 2 orders mentioned were not the net prices, but rather the list price, and that it had obtained a discount from Starr Piano. Moreover, Arco alleged that the equipment were overpriced. Thus, being its agent, GPS had to reimburse the excess amount it received from Arco.

ISSUE W/N there was a contract of agency, not of sale

HELD NO. The letters containing Arco's acceptance of the prices for the equipment are clear in their terms and admit no other interpretation that the prices are fixed and determinate. While the letters state that GPS was to receive a 10% commission, this does not necessarily mean that it is an agent of Arco, as this provision is only an additional price which it bound itself to pay, and which stipulation is not incompatible with the contract of sale. It is GPS

that is the exclusive agent of Starr Piano in the Philippines, not the agent of Arco. It is out of the ordinary for one to be the agent of both the seller and the buyer. The facts and circumstances show that Arco entered into a contract of sale with GPS, the exclusive agent of Starr Piano. As such, it is not duty bound to reveal the private arrangement it had with Starr Piano relative to the 25% discount. Thus, GPS is not bound to reimburse Arco for any difference between the cost price and the sales price, which represents the profit realized by GPS out of the transaction.

KER & CO, LTD. LINGAD FACTS Ker and Co, Ltd. was assessed by then Commissioner of Internal Revenue Domingo the sum of P 20,272.33 as the commercial broker’s percentage tax surcharge and compromise penalty. There was a request on the part of Ker for the cancellation of such assessment which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. The CTA held that Ker is taxable except as to the compromise penalty of P 500, the amount due from it being fixed at P 19, 772.33. Such liability arose from a contract of Ker with the United States Rubber International (USRI). The former being referred to as the distributor and the latter specifically designated as the company. The contract was to apply to transactions between the former and Ker, as distributor from July 1, 1948 to continue in force until terminated by either party giving to the other 60 days’ notice. The shipments would cover products for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental and Mindanao except the province of Davao, Ker as distributor being precluded from disposing such products elsewhere than in the above places unless written consent be obtained from the company. Ker as distributor is required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. (Crucial stipulation: The company shall form time to time consign to Ker and Ker will receive, accept and/or hold upon consignment the products specified under the terms of this agreement in such quantities as in the judgment of company may be necessary. It is further agreed that this agreement does not constitute Ker the agent or legal representative of the company for any purpose whatsoever.)

ISSUE W/N the contract between Ker and the USRI is a contract of sale.

HELD No. By taking the contractual stipulations as a whole and not just the disclaimer, it would seem that the contract between them is a contract of agency. That the petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber International is borne out by the facts that: 1. petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber Company; 2. it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company;


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3. every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); that sales made by petitioner are subject to approval by the company; 4. on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the month; 5. the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss; 6. upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former 7. upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter The National Internal Revenue Code defined “Commercial broker” as “all persons, other than importer, manufacturers, producers or bona fide employees who, for compensation or profit, sell or bring about sales or purchase of merchandise for other persons or being proposed buyers and sellers together” and also includes commission merchants such as Ker in this case.

The mere disclaimer in a contract that an entity like Ker is not “the agent or legal representative for any purpose whatsoever” does not suffice to yield the conclusion that it is an independent merchant if the control over the goods for resale of goods consigned is pervasive in charact er.

SCHMID & OBERLY, INC. vs. RJL MARTINEZ G.R. No. 75198 October 18, 1988 FACTS: RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the course of its business, it needed electrical generators for the operation of its business. Schmid and Oberly sells electrical generators with the brand of “Nagata”, a Japanese product. D. Nagata Co. Ltd. of Japan was Schmid’s supplier. Schmid advertised the 12 Nagata generators for sale and RJL purchased 12 brand new generators. Through an irrevocable line of credit, Nagata shipped to the Schmid the generators and RJL paid the amount of the purchase price. (First sale = 3 generators; Second sale = 12 generators). Later, the generators were found to be factory defective. RJL informed the Schmid that it shall return the 12 generators. 3 were returned. Schmid replaced the 3 generators subject of the first sale with generators of a different brand. As to the second sale, 3 were shipped to Japan and the remaining 9 were not replaced. RJL sued the defendant on the warranty, asking for rescission of the contract and that Schmid be ordered to accept the generators and be ordered to pay back the purchase money as well as be liable for damages. Schmid opposes such liability averring that it was merely the indentor in the sale between Nagata Co., the exporter and RJL Martinez, the importer. As

mere indentor, it avers t hat is not liable for the seller’s implied warranty against hidden defects, Schmid not having personally assumed any such warrant y.

ISSUE: 1) WON the second transaction between the parties was a sale or an indent transaction? INDENT TRANSACTION 2) Even is Schmid is merely an indentor, may it still be liable for the warranty? YES, under its contractual obligations it may be liable. But in this case, Schmid did not warrant the products.

HELD: An indentor is a middlemen in the same class as commercial brokers and commission merchants. A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties. There are 3 parties to an indent transaction, (1) buyer, (2) indentor, and (3) supplier who is usually a non-resident manufacturer residing in the country where the goods are to be bought. The chief feature of a commercial broker and a commercial merchant is that in effecting a sale, they are merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to the transaction. RJL MARTINEZ admitted that the generators were purchased “through indent order.” RJL admitted in its demand letter previously sent to SCHMID that 12 of 15 generators “were purchased through your company, by indent order and three (3) by direct purchase.” The evidence also show that RJL MARTINEZ paid directly NAGATA CO, for the generators, and that the latter company itself invoiced the sale and shipped the generators directly to the former. The only participation of Schmid was to act as an intermediary or middleman between Nagata and RJL, by procuring an order from RJL and forwarding the same to Nagata for which the company received a commission from Nagata. Sale vs. Indent Transaction: The essence of the contract of sale is transfer of title or agreement to transfer it for a price paid or promised. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is, a sale. 3 evidences pointing to fact that Schmid is merely an indentor: a. the Quotation and the General Conditions of Sale on the dorsal side thereof do not necessarily lead to the conclusion that NAGATA CO., was the real seller of the 12 generators. b. When RJL complained to SCHMID, it immediately asked RJL to send the defective generators to its shop to determine what was wrong. SCHMID informed NAGATA about the complaint of RJL. After the generators were found to have factory defects, SCHMID facilitated the shipment of three (3) generators to Japan and, after their repair, back to the Philippines. c. the letter from NAGATA CO. to SCHMID regarding the repair of the generators indicated that the latter was “within the purview of a seller.” 2) Even as SCHMID was merely an indentor, there was nothing to prevent it from voluntarily warranting that twelve (12) generators subject of the second transaction are free from any


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever hidden defects. In other words, SCHMID may be held answerable for some other contractual obligation, if indeed it had so bound itself. As stated above, an indentor is to some extent an agent of both the vendor and the vendee. As such agent, therefore, he may expressly obligate himself to undertake the obligations of his principal. Notably, nowhere in the Quotation is it stated therein that SCHMID did bind itself to answer for the defects of the things sold. Balagtas testified initially that the warranty was in the receipts covering the sale. Nowhere is it stated in the invoice that SCHMID warranted the generators against defects. He again changed his mind and asserted that the warranty was given verbally. Hence, RJL has failed to prove that SCHMID had given a warranty on the 12 generators subject of the second transaction.

appointment and act on it, and in the absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under the control or direction of another - the principal. Indeed, the very word "agency" has come to connote control by the principal. The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category.

5.

Distinguished from Dacion En Pago PNB vs. PINEDA G.R. No. L-46658, May 13, 1991

FACTS: In 1963, Ignacio and Lourdes Arroyo (spouses Arroyo) VICTORIAS MILLING CO. vs CA and CONSOLIDATED SUGAR CO. [G.R. No. 117356. June 19, 2000] FACTS: St. Therese Merchandising (STM), who regularly bought sugar from Victorias Milling Co. (VMC), was issued Shipping List/Delivery Receipts (SLDRs) by the latter as proof of purchases for bags of sugar. Thereafter, STM sold to Consolidated Sugar Co. (CSC) its rights in one of the SLDRs. CSC communicated to VMC that it had been authorized by STM to withdraw the sugar covered by SLDR. Enclosed in the letter were a copy of SLDR and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by SLDR”. CSC surrendered the SLDR to VMC’s warehouse and was allowed to withdraw sugar but after several bags were released, it was later on refused to allow further withdrawals of sugar. CSC communicated to VMC to allow it to withdraw sugar because the SLDR had been “sold and endorsed” to it by STM. VMC contended that it could not allow any further withdrawals of sugar against SLDR because STM had already withdrawn sugar covered by cleared checks. CSC filed complaint against VMC. VMC contended that it had no privity of contract with CSC, the dealings between it and STM were part of a series of transactions involving only one account or one general contract of sale because CSC was an agent of STM. CSC countered that the sugar purchases involving SLDR were separate and independent transactions.

ISSUE: Whether or not CSC was an agent of STM. HELD: No. CSC was a buyer of the SLDR form, and not an agent of STM. CSC was not subject to STM's control. The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency. CSC communicated to VMC that the SLDR had been “sold and endorsed” to it by STM. The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an agency. The basis of agency is representation. On the part of the principal, there must be an actual intention to appointor an intention naturally inferable from his words or actions; and on the part of the agent, there must be an intention to accept the

obtained a loan of P580,000.00 from PNB to purchase 60% of the subscribed capital stock, and thereby acquire the controlling interest of private respondent Tayabas Cement Company, Inc. (TCC). Spouses Arroyo executed a real estate mortgage over a parcel of land (La Vista property) as security for the said loan. Thereafter, TCC filed with PNB an application and agreement for the establishment of an 8 year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan, to cover the importation of a cement plant machinery and equipment. Upon approval of said application and opening of an L/C by PNB in favor of Toyo Menka Kaisha, Ltd. for the account of TCC, the Arroyo spouses executed documents (Surety Agreement and Covenant) to secure the loan accommodation. The imported cement plant machinery and equipment arrived from Japan and were released to TCC under a trust receipt agreement. Toyo Menka Kaisha made the corresponding drawings against the L/C as scheduled. TCC, however, failed to remit and/or pay the amount covered by the drawings. Thus, PNB notified TCC of its intention to repossess the imported machinery and equipment for failure of TCC to settle its obligations under the L/C. In the meantime, the personal accounts of the spouses Arroyo, which included another loan of P160,000.00 secured by a real estate mortgage over Hacienda Bacon located in Isabela, Negros Occidental, had likewise become due. The spouses Arroyo failed to satisfy their obligations with PNB and the latter decided to foreclose the real estate mortgages. At the auction sale of the La Vista Property, PNB was the highest bidder with a bid price of P1,000,001.00. However, when said property was about to be awarded to PNB, the representative of the mortgagor-spouses objected and demanded from the PNB the difference between the bid price of P1,000,001.00 and the indebtedness of P499,060.25 of the Arroyo spouses on their personal account. It was the contention of the spouses Arroyo's representative that the foreclosure proceedings referred only to the personal account of the mortgagor spouses without reference to the account of TCC. To remedy the situation, PNB filed a supplemental petition requesting the Sheriff's Office to proceed with the sale of the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever subject real properties to satisfy not only the amount of P499,060.25 owed by the spouses Arroyos on their personal account but also the amount of P35,019,901.49 owed by said spouses as sureties of TCC. Said petition was opposed by the spouses Arroyo and the other bidder Araneta. PNB filed a petition for mandamus to compel the sheriff to proceed with the foreclosure sale of the mortgaged properties and the petition was granted. However, TCC filed a complaint against PNB to restrain the foreclosure of the mortgages over the said properties as well as a declaration that its obligation with PNB had been fully paid by reason of the latter's repossession of the imported machinery and equipment.

ISSUE: Whether or not TCC's liability has been extinguished by the repossession of PNB of the imported cement plant machinery and equipment and whether or not the repossession amounts to dacion en pago.

LO VS. KJS G.R. No. 149420, October 8, 2003 FACTS: Respondent KJS ECO-FORMWORK System Phil., Inc. is a corporation engaged in the sale of steel scaffoldings, while petitioner Sonny L. Lo, doing business under Sans Enterprises, is a building contractor. Lo ordered scaffolding equipment from KJS worth P540,425.80. He paid a down payment in the amount of P150,000.00. The balance was made payable in ten monthly instalments. KJS delivered the scaffoldings to Lo. Lo was able to pay the first two monthly instalments. His business, however, encountered financial difficulties and he was unable to settle his obligation to KJS despite oral and written demands made against him. Lo and KJS executed a Deed of Assignment whereby Lo assigned to KJS his receivables in the amount of P335,462.14 from Jomero Realty Corporation.

HELD: No. It must be remembered that PNB took possession of the imported cement plant machinery and equipment pursuant to the trust receipt agreement executed by PNB and TCC giving the former the unqualified right to the possession and disposal of all property shipped under the Letter of Credit until such time as all the liabilities and obligations under said letter had been discharged.

However, when KJS tried to collect the said credit from Jomero Realty Corporation, the latter refused to honor the Deed of Assignment because it claimed that Lo was also indebted to it. Subsequently, KJS sent a letter to Lo demanding payment of his obligation, but he refused to pay claiming that his obligation had been extinguished when they executed the Deed of Assignment.

PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be considered payment of the loan secured thereby. Payment would legally result only after PNB had foreclosed on said securities, sold the same and applied the proceeds thereof to TCC's loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.

Consequently, KJS filed an action for recovery of a sum of money against Lo before the RTC. Lo argued that his obligation was extinguished with the execution of the Deed of Assignment of credit. KJS, for its part, presented the testimony of its employee, Almeda Baaga, who testified that Jomero Realty refused to honor the assignment of credit because it claimed that Lo had an outstanding indebtedness to it.

Neither can said repossession amount to dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the machinery and equipment in question was merely to secure the payment of TCC's loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished. Proceeding from this finding, PNB has the right to foreclose the mortgages executed by the spouses Arroyo as sureties of TCC. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. As sureties, the Arroyo spouses are primarily liable as original promissors and are bound immediately to pay the creditor the amount outstanding.

RTC dismissed the complaint on the ground that the assignment of credit extinguished the obligation. CA reversed the decision. In finding that the Deed of Assignment did not extinguish the obligation of the petitioner to the respondent, the CA held that (1) petitioner failed to comply with his warranty under the Deed; (2) the object of the Deed did not exist at the time of the transaction, rendering it void pursuant to Article 1409 of the Civil Code; and (3) petitioner violated the terms of the Deed of Assignment when he failed to execute and do all acts and deeds as shall be necessary to effectually enable the respondent to recover the collectibles.

ISSUE: Whether or not the deed of assignment extinguished Lo’s obligations.

HELD: No. An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. Corollary thereto, in dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. In order that there be a valid dation in payment, the following are the requisites:


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 1.) There must be the performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; 2.) There must be some difference between the prestation due and that which is given in substitution (aliud pro alio) 3.) There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor’s debt. As such, th e vendor in good faith shall be responsible, for the existence and legality of the credit at the time of the sale but not for the solvency of the debtor, in specified circumstances. Hence, it may well be that the assignment of credit, which is in the nature of a sale of personal property, produced the effects of a dation in payment which may extinguish the obligation. However, as in any other contract of sale, the vendor or assignor is bound by certain warranties. More specifically, the first paragraph of Article 1628 of the Civil Code provides: The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge. From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence and legality of the credit at the time of the sale or assignment. When Jomero Realty claimed that it was no longer indebted to Lo since the latter also had an unpaid obligation to it, it essentially meant that its obligation to Lo has been extinguished by compensation. In other words, KJS alleged the non-existence of the credit and asserted its claim to Lo’s warranty under the assignment. Therefore, it behooved on Lo to make good its warranty and paid the obligation. Furthermore, we find that Lo breached his obligation under the Deed of Assignment. Indeed, by warranting the existence of the credit, petitioner should be deemed to have ensured the performance thereof in case the same is later found to be inexistent. He should be held liable to pay to respondent the amount of his indebtedness. Hence, we affirm the decision of the Court of Appeals ordering petitioner to pay respondent the sum of P335,462.14 with legal interest thereon.

AQUINTEY V. SPOUSES TIBONG G.R. NO. 166704,DECEMBER 20, 2006 FACTS: On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum of money and damages against respondents. Agrifina alleged that Felicidad secured loans from her on several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong failed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses Tiong alleged that they had executed deeds of assignment in

favor of Agrifina amounting to P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses insisted that by virtue of these documents, Agrifina became the new collector of their debts. Agrifina was able to collect the total amount of P301,000 from Felicdad’s debtors. She tried to collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a complaint in the office of the barangay for the collection of P773,000.00. There was no settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6% per month.

ISSUE: Whether or not the deeds of assignment in favor of petitioner has the effect of payment of the original obligation that would partially extinguish the same

RULING: YES. Substitution of the person of the debtor may be affected by delegacion. Meaning, the debtor offers, the creditor accepts a third person who consent of the substitution and assumes the obligation. It is necessary that the old debtor be released fro the obligation and the third person or new debtor takes his place in the relation . Without such release, there is no novation. Court of Appeals correctly found that the respondent’s obligation to pay the balance of their account

with petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed with the modification that the principal amount of the respondents is P33,841. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price.

SSS V CA, 553 SCRA 677 (2008) FACTS: AG&P and Semirara Coal Company proposed to pay its arrears of premiums and loan amortization delinquencies through dacion en pago which was subsequently accepted by SSS. Thereafter, SSS directed herein defendant to submit certain documents necessary for the agreement which AG&P immediately complied with. SSS finally approved the dacion en pago which as of March 2001 amounted to P29, 261,902.45. To effect said transfer, a Deed of Assignment had to be executed between the two parties which SSS failed to come up. On the other hand, defendant continuously submitted drafts to SSS of the needed Deed of Assignment. ON 2003, SSS sent to AG&P a revised copy of the Deed of Assignment, however, the amount went from P29, 261,902.45 to P40, 846,610.64 allegedly because of the additional interest and penalties. AG&P requested for the deduction of these interests and penalties for the delay of the Deed of Assignment was the fault of SSS. Thus, AG&P filed a complaint for the specific performance and damages against SSS. SSS contended that the court has no jurisdiction over the case in accordance with R.A. 8282 which provides that any dispute should be filed in the Commission. RTC ruled in favor of AG&P. upon appeal, the CA held that the court has jurisdiction and that the case be reverted back to the Trial Court for actual proceedings. Thus, SSS appealed to the Court.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever ISSUE: A. WON dacion en pago should be implemented B. Which body has jurisdiction over non-implementation of a dacion en pago agreed by the parties?

HELD: 1. Yes. The Supreme Court absolutely adopted the CA decision. Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor’s debt. As such, th e essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation. From the averments in their complaint, the appellate court observed that private respondents are seeking to implement the Deed of Assignment which they had drafted and submitted to SSS pursuant to the approval by SSS. The appellate court thus held that the subject of the complaint is no longer the payment of the premium and loan amortization delinquencies, as well as the penalties appurtenant thereto, but the enforcement of the dacion en pago. Thus, the trial court was ordered to settle the controversy. From the allegations of respondents’ complaint, it readily appears that there is no longer any dispute with respect to respondents’ accountability to the SSS. Respondents had, in fact admitted their delinquency and offered to settle them by way of dacion en pago subsequently approved by the SSS in Resolution No. 270s. 2001. SSS stated in said resolution that “the dacion en pago proposal of AG&P Co. of Manila and Semirara Coals Corporation to pay their liabilities in the total amount ofP30,652,710.71 as of 31 March 2001 by offering their 5.8 ha. property located in San Pascual, Batangas, be, as it is hereby, approved..” This statement unequivocally evinces its consent to the dacion en pago.

2. The controversy, instead, lies in the non-implementation of the approved and agreed dacion en pago on the part of the SSS. As such, respondents filed a suit to obtain its enforcement which is, doubtless, a suit for specific performance and one incapable of pecuniary estimation beyond the competence of the Commission. Pertinently, the Court ruled in Singson v. Isabela Sawmill, as follows: In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction in the municipal courts or in the courts of first instance

would depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).

MAR YUSON vs ATTY. JEREMIAS R. VITAN A.C. No. 6955, July 27, 2006 FACTS: In October 2002, Mar Yuson who was a taxi driver and had 8 children, received a sum of money by way of inheritance. He and his wife intended to use the money for several purposes. When they were able to purchase a secondhand taxi, and Atty. Vitan helped him with legal matters regarding the purchase. Unfortunately, Yuson’s other plans were put on hold when Atty. Vitan borrowed P100, 000 from them in December 2002. To guarantee payment, Atty. Vitan executed in favor of Yuson several postdated checks to over the loaned amount, but however, these turned out to be worthless. Yuson maintained that he had repeatedly tried to recover the debt, but was unsuccessful every time. When no payment was still made pursuant to the administrative case against Atty. Vitan, Yuson demanded a collateral to secure the loan. Thus, in his favor, Atty. Vitan executed a document denominated as a Deed of Absolute Sale, covering Atty. Vitan’s parcel of land located in Sta. Maria, Bulacan. According to Yuson, their intention was to transfer the title of the property to him temporarily, so that he could either sell or mortgage the said land. Further, if it was mortgaged, Atty. Vitan would redeem it as partial or full payment of the loan. Allegedly, the parties executed another Deed of Absolute Sale in favor of Atty. Vitan wherein Yuson was vendor. The purpose for this was not explained by either party. Yuson was able to mortgage the property for P30,000 but contrary to their earlier agreement, Atty. Vita did not redeem it from the mortgage, sent a letter instead, promising Yuson to pay on or before July 12, 2004. In the IBP-NCLA, Atty. Vitan averred that he had settled his obligation through a Deed of Absolute Sale over his residential property. The purpose of such was for Yuson to use, mortgage, or sell the property and return to him the excess of the proceeds after obtaining his money. Additionally, he called the second document as a Counter Deed of Sale, executed to be sort of a collateral/security for the account of his liaison officer Estur, whom he alleged that she was the one who incurred said debts. ISSUE: W/N Atty. Vitan’s obligation was extinguished by

virtue of the first Deed of Absolute Sale HELD: NO. Atty. Vitan contends that his obligation was already extinguished, because he had allegedly sold his Bulacan property to complainant. Basically, he is asserting that what had transpired was a dation in payment. Governed by the law on sales, it is a transaction that takes place when a piece of property is alienated to the creditor in satisfaction of a debt in money. It involves delivery and transmission of ownership of a thing -- by the debtor to the creditor -- as an accepted equivalent of the performance of the obligation.


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However, the records reveal that he did not really intend to sell and relinquish ownership over his property in Sta. Maria, Bulacan, notwithstanding the execution of a Deed of Absolute Sale in favor of Yuson. The second Deed of Absolute Sale, which reconveyed the property to respondent, is proof that he had no such intention. This second Deed, which he referred to as his "safety net," betrays his intention to counteract the effects of the first one. Ergo, Atty. Vitan was taking back with his right hand what he had given with his left. The second Deed of Absolute Sale returned the parties right back where they started, as if there were no sale in favor of complainant to begin with. In effect, on the basis of the second Deed of Sale, respondent took back and asserted his ownership over the property despite having allegedly sold it. Thus, he fails to convince us that there was a bona fide dation in payment or sale that took place between the parties; that is, that there was an extinguishment of obligation. It appears that the true intention of the parties was to use the Bulacan property to facilitate payment. They only made it appear that the title had been transferred to complainant to authorize him to sell or mortgage the property.Atty. Vitan himself admitted in his letter dated July 30, 2004, that their intention was to convert the property into cash, so that payment could be obtained by complainant and the excess returned to respondent. The records, however, do not show that the proceeds derived were sufficient to discharge the obligation of the lawyer fully; thus, he is still liable to the extent of the deficiency.

FILINVEST CREDIT CORPORATION VS. PHILIPPINE ACETYLENE, CO., INC. G.R. No. L-50449, January 30, 1982 FACTS: On October 30, 1971, the Philippine Acetylene Co., Inc., purchased from Alexander Lim, as evidenced by a Deed of Sale, a Chevrolet 1969 model motor vehicle payable under the terms and conditions of the promissory note provided by PhilAcetylene. As security for the payment, PhilAcetylene executed a chattel mortgage over the same vehicle in favor of Lim. Subsequently, Lim assigned to Filinvest Finance all his rights, title, and interests in the promissory note and the chattel mortgage which subsequently assigned it to Filinvest Credit. PhilAcetylene failed to comply with the terms in the promissory note and chattel mortgage. With the choice of paying the full amount plus interest and charges or returning the mortgaged property, PhilAcetylene informed Filinvest Credit that it was returning the mortgaged property in full satisfaction of its indebtedness pursuant to Art. 1484 of the New Civil Code. When it was returned to Filinvest, it had with it a document denominated as “Voluntary Surrender with Special Power of Attorney to Sell.” Filinvest could not however sell the vehicle since there were unpaid taxes on said vehicle. Upon Filinvest’s offer to return the vehicle to PhilAcetylene, the latter refused to accept it. PhilAectylene contends that Filinvest has no cause of action since its obligation was extinguished when it returned the mortgaged property to Filinvest and assuming however that the return of the property did not extinguish its obligation, it was

nonetheless justified in refusing payment since Filinvest is not entitled to recover the same due to the breach of warranty committed by the original vendor-assignor Alexander Lim. Additionally, it argues that by virtue of the return, it extinguished their obligation through dation in payment.

ISSUE: W/N the return of the mortgaged motor vehicle to Filinvest by virtue of its voluntary surrender by Philippine Acetylene totally extinguished and/or cancelled its obligation to Filinvest HELD: NO. The mere return of the mortgaged motor vehicle by the mortgagor, PhilAcetylene, to the mortgagee, Filinvest, does not constitute dation in payment or dacion en pago in the absence, express or implied of the true intention of the parties. Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of obligation. The evidence on the record fails to show that the mortgagee, consented, or at least intended, that the mere delivery to, and acceptance by him, of the mortgaged motor vehicle be construed as actual payment, more specifically dation in payment or dacion en pago. The fact that the mortgaged motor vehicle was delivered to him does not necessarily mean that ownership thereof, as juridically contemplated by dacion en pago, was transferred from PhilAcetylene to Filinvest. In the absence of clear consent of Filinvest, there can be no transfer of ownership of the mortgaged motor vehicle from appellant to appellee. Only transfer of possession of the mortgaged motor vehicle took place, for it is quite possible that Filinvest merely wanted to secure possession to forestall the loss, destruction, fraudulent transfer of the vehicle to third persons, or its being rendered valueless if left in the hands of PhilAcetylene. The true intention of the parties is furnished by the document executed by appellant captioned "Voluntary Surrender with Special Power of Attorney To Sell". The document reveals that the possession of the mortgaged motor vehicle was voluntarily surrendered by PhilAcetylene to Filinvest authorizing the latter to look for a buyer and sell the vehicle in behalf of PhilAcetylene who retains ownership thereof, and to apply the proceeds of the sale to the mortgage indebtedness, with the undertaking of the appellant to pay the difference, if any, between the selling price and the mortgage obligation. With the stipulated conditions as stated, Filinvest in essence was constituted as a mere agent to sell the motor vehicle which was delivered to it, not as its property, for if it were, he would have full power of disposition of the property, not only to sell it as is the limited authority given him in the special power of attorney. Had Filinvest intended to completely release PhilAcetylene of its mortgage obligation, there would be no necessity of executing the document. Nowhere in the said document where it states, that the mere surrender of the mortgaged motor vehicle to the appellee extinguished appellant’s obligation for the unpaid price. On PhilAcetylene’s argument that by accepting the delivery of the mortgaged motor vehicle, Filinvest is estopped from demanding payment of the unpaid obligation, the same is without merit. As clearly set forth above, Filinvest never accepted the mortgaged motor vehicle in full satisfaction of the mortgaged debt.

Under the law, the delivery of possession of the mortgaged


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever property to the mortgagee, can only operate to extinguish PhilAcetylene liability if Filinvest had actually caused the foreclosure sale of the mortgaged property when it recovered possession thereof.

6.

Distinguished from Payment by Cession

7.

Distinguished from Lease FILINVEST CREDIT COROPORATION VS CA, JOSE SY BANG and ILUMINADA TAN SY BANG G.R. No. 82508, September 29, 1989

property of the private respondents. This form of agreement has been criticized as a lease only in name. Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee.

FACTS: Spouses Jose and Iluminada Sy Bang were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. They engaged the serviced of Mr. Ruben Mercurio of Gemini Motor Sales, to look for a rock crusher. Mr. Mercurio then referred them to Rizal Consolidated who had said machinery for sale. They applied for financial assistance with Filinvest Credit regarding their purchase of the machine. Fiinvest agreed to extend to the Spouses Sy Bang financial aid on the following conditions: that the machinery be purchased in the Filinvest's name; that it be leased (with option to purchase upon the termination of the lease period) to the Spouses Sy Bang; and that Spouses Sy Bang execute a real estate mortgage as security for the amount advanced by Filinvest. Accordingly, on May 18,1981, a contract of lease of machinery (with option to purchase) was entered into by the parties whereby the spouses agreed to lease from Filinvest the rock crusher for two years starting from July 5, 1981 payable as follows: P10,000.00 – first 3 months, P23,000.00 – next 6 months, P24,800.00 – next 15 months. It was likewise stipulated that at the end of the two-year period, the machine would be owned by the spouses.

2.) NO. They are alternative. The seller of movable in installments, in case the buyer fails to pay 2 or more installments, may elect to pursue either of the following remedies: (1) exact fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the purchased property if one was constituted thereon. It is now settled that the said remedies are alternative and not cumulative, and therefore, the exercise of one bars the exercise of the others. Indubitably, the device – contract of lease with option to buy – is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise the right to repossess the same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid.

The spouses then issued a check for P150,550 as initial rental, and 24 postdated checks corresponding to 24 monthly rentals in favor of Filinvest. They likewise executed a real estate mortgage over two parcels of land to guarantee their compliance with the lease contract. The rock crusher was then delivered to the spouses. However, 3 months later, the souses stopped payment when petitioner had not acted on the complaints of the spouses about the machine. As a consequence, petitioner extra-judicially foreclosed the real estate mortgage. To thwart the impending auction, the spouses filed a complaint for rescission of the contract of lease and annulment of the real estate mortgage.

8.

ISSUE:

On July 5, 1984, the heirs of Julio Garcia and Federico Briones entered into a Kasunduan ng Pagbibilhan over the 21,460 sq. m portion for the sum of P150,000--- P65,000 was paid at the execution of the contract and the P85,000 was made payable within 6 months from the date of the execution of the instrument. At the time of the execution of the document, Briones was informed that the title over the property is with their cousin Conchalina who owns the bigger portion of the land. This notwithstanding, respondent willingly entered into the Kasunduan provided that the full payment of the purchase price will be made upon delivery to him of the title.

W/N the nature of the contract is one of a contract of sale. 2) W/N the remedies of the seller provided for in Article 1484 are cumulative. 1)

HELD: 1.) YES. It is apparent here that the intent of the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject matter of the contract, would become the

Distinguished from Contract to Sell JUANA ALMIRA ET AL vs CA and FEDERICO BRIONES G.R. No. 115966, March 20, 2003

FACTS: Almira Et al are the wife and children of the late Julio Garcia who inherited from his mother, Maria Alibudbud, a portion of a Lot 1642 in Sta. Rosa, Laguna. Lot 1642 was co-owned and registered in the names of Vicente de Guzman, Enrique Hemedes and Francsisco Alibudbud.

Briones took possession of the subject property and made


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever various payments amounting to P58,500.00 but because of the failure of the heirs of Garcia to deliver to him a separate title to the property, he refused to make further payments. This prompted the heirs to file a case for rescission of the Kasunduan and the return of the possession of the subject land. The heirs alleged that they approached Briones several times to deliver the required title but the latter refused saying that he did not have the money to pay the balance of the purchase price. The RTC decreed the rescission prayed for and the return of the possession of the subject property. The CA however reversed the lower court’s decision.

ISSUES: (1) W/N payment of the balance of the purchase price is conditioned upon delivery of a separate title in the name of Julio Garcia; (2) W/N the heirs are entitled to rescind the Kasunduan for failure of Briones to complete payment. HELD: (1) YES. The tenor of the correspondence between the heirs and Briones shows that the parties intended that a separate title to the property in the name of Julio Garcia shall be delivered to Briones as a condition for the latter’s payment of the balance of the purchase price. As such, Briones signified his willingness to pay but reminded the heirs of their obligation to deliver title to the property. If the parties intended that the heirs deliver TCT No. RT-1076 instead of a separate title in the name of Julio Garcia to Briones, then there would have been no need for the heirs to ask for partial sums on the ground that this would be used to pay for the processing fee of the title to the property. The heirs only had to present the existing title to Briones and demand the balance of the purchase price, but this they did not do. There is likewise no basis to conclude that insufficiency of funds rather than failure of the heirs to deliver a separate title in the name of Julio Garcia prevented Briones from completing payment of the purchase price. That the parties agreed on delivery of a separate title in the name of Julio Garcia as a condition for respondent’s payment of the balance of the purchase price is bolstered by the fact that there was already an approved subdivision plan of the 21,460 square-meter lot years before petitioners filed an action in court for rescission. Unfortunately, the heirs were not able to secure a separate title in the name of Julio Garcia. (2) NO In order to determine if rescission is proper, the Court needed to ascertain whether the Kasunduan was a Contract to Sell or a Contract of Sale. In a contract to sell, ownership is, by agreement, reserved to the vendor and is not to pass until full payment of the purchase price; whereas, in contract of sale, title to the property passes to the vendee upon delivery of the thing sold. Non-payment by the vendee in a contract of sale entitles the vendor to demand specific performance or rescission of the contract, with damages, under Article 1191 of the Civil Code.

A careful reading of t he Kasunduan reveals that it is a contract of sale. There was a perfected contract of sale in this case. The parties agreed on the sale of a determinate object which is the subject property in this case in the name of Julio Garcia, and also the price certain therefor, without any reservation of title on the part of the heirs. Ownership was effectively conveyed by petitioners to respondent, who was given possession of the property. The delivery of a separate title in the name of Julio Garcia was a condition imposed on respondent’s obligation to pay the balance of the purchase price. It was not a condition imposed on the perfection of the contract of sale. As to the rescission prayed for, the Court rules in the negative. The power to rescind is only given to the injured party. The injured party is the party who has faithfully fulfilled his obligation or is ready and willing to perform with his obligation. In the case at bar, petitioners were not ready, willing and able to comply with their obligation to deliver a separate title in the name of Julio Garcia to respondent. Therefore, they are not in a position to ask for rescission of the Kasunduan. Moreover, respondent’s obligation to pay the balance of the purchase price was made subject to delivery by petitioners of a separate title in the name of Julio Garcia within six (6) months from the time of the execution of the Kasunduan, a condition with which petitioners failed to comply. Failure to comply with a condition imposed on the performance of an obligation gives the other party the option either to refuse to proceed with the sale or to waive that condition under Article 1545 of the Civil Code. Hence, it is the respondent who has the option either to refuse to proceed with the sale or to waive the performance of the condition imposed on his obligation to pay the balance of the purchase price.

SPOUSES SERRANO VS. CAGUIAT 517 SCRA 57 G.R. NO. 139173 FEBRUARY 28, 2007 FACTS: Spouses Serrano are registered owners of a lot located in Las Pinas. On March 23, 1990, Caguiat offered to buy the lot and the Serranos agreed to sell it at 1,500.00/sqm. Caguiat then paid them a partial payment of 100,000.00 as evidenced by a receipt indicating therein Caguiat’s promise to pay the remaining balance. Respondent, after making known his readiness to pay the balance, requested from petitioners the preparation of the necessary Deed of Sale. Petitioners informed respondent in a letter that Amparo Herrera would be leaving for abroad on or before April 15, 1990 and they are canceling the transaction and that respondent may recover the earnest money (100,000) anytime. Petitioners also wrote him stating that they already delivered a manager’s check to his counsel in said amount. Respondent thus filed a complaint for specific performance and damages with the RTC of Makati. The trial court relying on Article 1482 of the Civil Code ruled that the payment of 100,000.00 being an earnest money signified perfection of the contract of sale and ordered the petitioners to


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever documents shall be executed by the Nabuses. The Pacsons thereafter occupied the land and built an auto shop thereon.

execute a final deed of sale in favor of respondent. The Court of Appeals denied petitioners’ motion reconsideration in affirmation of the lower court’s decision.

for

ISSUE: WON there was a contract of sale. NO. HELD: T h e

transaction was a con tract to sell.

When petitioners declared in the Receipt of Partial Payment” that they – “Received from Mr. Godofredo Cagu iat the amount of one hundred thousand pesos as Partial payment of our lot situated in Las Pinas…Mr. Caguiat promised to pay the balance of the purchase price on or before March 23, 1990… And that we will execute and sign the final deed of sale on this date,”

-- there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price.

In 1977, Bate Nabus died,leaving Julie Nabus and her daughter Michelle to execute a Deed of Extrajudicial Settlement over the property. Anew TCT was issued in their nam es in 1984. By 1984, the Pacsons have made 364 payments, leaving a balance of57k. Sometime later, Julie Nabus approached Joaquin Pacson for the remaining balance. While the Pacsons claimed they were ready to pay the balance, they asked Nabus to return in 4 days as they wanted to make sure of the remaining balance; wanted to see the new deeds issued in the Nabuses’ name; wanted to see the guardianship papers of the Nabus child. However, Julie Nabus did not return. The Pacsons later discovered that the entire lothad been sold to a Betty Tolero, and that a new title had been issued in Tolero’s name.

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price.

Aggrieved they prayed to annul Tolero’s title, as well as of the other documents issued to the Nabuses.

In this case, the “Receipt of Partial Payment” shows that the true agreement between the parties is a contract to sell.

They also claimed that Pacson’s signature in apage of the contract was absent.

First, ownership of the parcel of land was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price. Third, petitioners retained possession of the certificate of the lot.

The RTC and the CA both ruled in favor of the Pacsons and ordered the execution of a Deed of Absolute Sale in favor of the Pacsons, upon their payment of the full purchase price.

It is true that Article 1482 provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

NABUS VS.PACSON G.R. NO. 161318 NOVEMBER 25, 2009 FACTS: In 1977, the spouses Nabus executed a Deed of Conditional Sale (DOCS) in favor of the Spouses Pacson. This deed covered 1,000sqm out of the 1,665sqm land owned by the Nabuses. The deed states that after the Pacsons have paid the full consideration of 170k, the corresponding transfer

Intheir defense, the Nabuses claimed that their DoCS was converted in a contract of lease, as Joaquin Pacson had misgivings about buying the land after knowing that it was in dispute.

The Nabuses appealed.

ISSUES: 1. WON the DOCS was converted to a Contract of Lease? NO. 2. What is the nature of the contract between the Nabuses and the Pacsons? CONTRACT TO SELL HELD: 1. The DOCS was not converted to a Contract of Lease. The receipts issued to the Pacsons contained the phrase “as partial payment to lot” evidencing the intentof sale, rather t han of lease. Further, as found by the trial court, Joaquin Pacson’s non -signing of the second page of a carbon copy of the Deed of Conditional Sale was through sheer inadvertence, since the original contract and the other copies of the contract were all signed by Joaquin Pacson and the other parties to the contract.

2.

The DOCS was a contract to sell, and because the Pacsons failed to pay the full price, no obligation arose on the part of the Nabuses.

It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into by the parties. In this case, the contract entitled "Deed of


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Conditional Sale" is actually a contract to sell. The contract stipulated that "as soon as the full consideration of the sale has been paid by the vendee, the corresponding transfer documents shall be executed by the vendor to the vendee for the portion sold." Where the vendor promises to execute a deed of absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell." The aforecited stipulation shows that the vendors reserved title to the subject property until full payment of the purchase price. Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition . The full payment of the purchase price is the positive suspensive condition, the failure of which is not a breach of contract, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Thus, for its non-fulfillment, there is no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a juridical relation. With this circumstance, there can be no rescission or fulfillment of an obligation that is still nonexistent, the suspensive condition not having occurred as yet. Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation.

Petitioner now is seeking the rescission of her contract with respondent for the breach of nonpayment. RTC: the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission could not apply because the respondent’s failure to pay the petitioner the balance of the purchase price in the total amount of ₱805,000. 00 was not a breach of contract, but merely an event that prevented the seller (petitioner) from conveying title to the purchaser (respondent). CA: Affirmed.

ISSUE: W/N the contract entered into by the parties is a contract to sell? YES. HELD: The subject Deed of Conditional Sale with Assumption of Mortgage entered into by and among the two parties and FSL Bank is a contract to sell and not a contract of sale. The nonpayment of the full purchase price cannot give the petitioner the remedy for rescission since the obligation did not yet exist since the suspensive condition of payment of the full purchase price had not taken place. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

Therefore, since the Pacsons failed to fulfill the suspensive condition, the obligation on the part of the Nabuses to sell them the land never arose, and the Nabuses were well within their rights when they sold the land to Tolero. The Pacsons, of course, are entitled to reimbursement.

Based on their contract, the title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the respondent.

REYES VS.TUPARAN G.R. NO. 188064 JUNE 1, 2011

Accordingly, the petitioner’s obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive condition, which is the respondent’s full payment of the purchase price.

FACTS: Petitioner Mila Reyes owns a building which the respondent Victoria Tuparan was leasing a space for her pawnshop business. Thereafter, petitioner mortgaged the building to Farmer Savings and Loan Bank for P2M. However, the loan reached P2,278,078.13. Petitioner then decided to sell her real properties for P6.5M in order to pay the bank. As a gesture of friendship, respondent verbally offered to conditionally buy the building for P4.2M and to assume the bank loan.

Without respondent’s full payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title. Respondent’ s failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent.

It was stipulated however that title to the ownership of the subject real properties shall remain with the petitioner until full payment of respondent. And only upon payment of full balance will the bank issue the Deed of Cancellation of Mortgage and the petitioner to execute the corresponding Deed of Absolute Sale. Respondent however defaulted, revealing a balance of P805,000. She was already able to pay the amountP3.4M and the bank loan.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever PART II: ELEMENTS OF A CONTRACT OF SALE 2. CONSENT: PARTIES 1)

Minors, Insane or Demented Persons, Deaf-Mutes LABAGALA VS. SANTIAGO 371 SCRA 360 G.R. NO. 132305 DECEMBER 4, 2001

since 2/3 belonged to his sisters. Petitioner could not have given her consent to the contract, being a minor at the time .

Consent of the contracting parties is among the essential requisites of a contract, including one of sale, absent which there can be no valid contract . Moreover, petitioner admittedly did not pay any centavo for the property, which makes the sale void. Art 1471: If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.

64729. Alleging that Jose had fraudulently registered it in his name alone, his sisters (Nicolasa and Amanda, herein respondents) sued Jose for the recovery of 2/3 share of the property. RTC ruled in favor of the sisters and their names were included in the certificate of title. Jose died intestate.

Even assuming that the deed is genuine, it cannot be a valid donation. It lacks the acceptance of the donee required by Art 725 of the Civil Code. Being a minor, the acceptance of the donation should have been made by her father (Leon Labagala) or mother, or legal representative. No one of those mentioned in the law accepted the “donation” for Ida.

Respondents filed a complaint for the recovery of title, ownership and possession against petitioner Labagala to recover from her the 1/3 portion of the said property pertaining to Jose, but which came into petitioner’s sole possession upon his de ath.

The Court also ruled that petitioner is not the child of Jose Santiago, and cannot inherit from him through succession. No birth certificate was shown, only a baptismal certificate, which is not conclusive proof of filiation.

FACTS: Jose Santiago owned a parcel of land covered by TCT

Respondents alleged that Jose’s share in the property belongs to them by operation of law since they are the only legal heirs of their brother. Respondents’ contentions: The deed of sale was a forgery. The deed showed that Jose affixed his thumb mark, but respondents averred that, having been able to graduate from college, Jose never put his thumb mark on documents and always signed his name in full.

Respondents also pointed out that it is highly improbable for petitioner to have paid the supposed consideration of P150,000 for the sale of the property because petitioner was unemployed and without any visible means of livelihood at the time of the alleged sale. It was quite unusual and questionable that petitioner registered the deed of sale almost 8 years after the execution of the sale. Petitioner claimed to be the daughter of Jose, and thus entitled to his share in the property. She argued that the sale was in fact a donation to her, and that nothing could have precluded Jose from putting his thumb mark on the deed of sale instead of his signature.

ISSUE: WON there was a valid sale. NO HELD: The Court agreed with CA that: This deed is shot through and through with so many intrinsic defects that a reasonable mind is inevitably led to the conclusion that it is fake. Why hide the nature of the contract in the façade of a sale? Why did Santiago (fully aware that he owned only 1/3) sell or donate the whole property to Ida? Why did Santiago affix only his thumb mark to a deed that falsely stated that … xxx Ida was of legal age when she was then only 15 years old? Etc…

Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the entire property to petitioner

PARAGAS v s . HEIRS OF DOMINADOR BALACANO FACTS: Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and Lot 1175-F of the Subd. Plan Psd-38042. Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed Balacano. Lorenza died on December 11, 1991. Gregorio, on the other hand, died on July 28, 1996. Prior to his death, Gregorio was admitted on June 28, 1996, transferred hospital in the afternoon of July 19, 1996 until his death. Gregorio purportedly sold on July 22, 1996, or barely a week prior to his death, a portion of Lot 1175-E (15,925 square meters out of total area of 22,341 square meters) and the whole Lot 1175-F to Spouses Paragas for the total consideration of P500,000.00. This sale appeared in a deed of absolute sale and was notarized by Atty. De Guzman. Gregorios certificates of title were consequently cancelled and new certificates of title were issued in favor of the Spouses Paragas. The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E consisting of 6,416 square meters to Catalino for the total consideration of P60,000.00. Domingo’s children filed on October 22, 1996 a complaint for annulment of sale and partition against Catalino and the Spouses Paragas. They essentially alleged in asking for the nullification of the deed of sale that:

(1) their grandfather Gregorio could not have appeared before the notary public on July 22, 1996 at Santiago City because he was then confined at the Veterans Memorial Hospital in Quezon City; (2) at the time of the alleged execution of the deed of sale, Gregorio was seriously ill, in fact dying at that time, which vitiated his consent to the disposal of the property; and (3) Catalino manipulated the execution of the deed and prevailed upon the dying Gregorio to sign his name on a paper the contents of which he never understood because of his serious


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever condition. Alternatively, they alleged that assuming Gregorio was of sound and disposing mind, he could only transfer a half portion of Lots 1175-E and 1175-F as the other half belongs to their grandmother Lorenza who predeceased Gregorio they claimed that Lots 1175-E and 1175-F form part of the conjugal partnership properties of Gregorio and Lorenza. Finally, they alleged that the sale to the Spouses Paragas covers only a 5hectare portion of Lots 1175-E and 1175-F leaving a portion of 6,416 square meters that Catalino is threatening to dispose. They asked for the nullification of the deed of sale executed by Gregorio and the partition of Lots 1175-E and 1175-F. They likewise asked for damages. Plaintiff-appellant Nanette Balacano testified to prove the material allegations of their complaint. On Gregorios medical condition, she declared that: (1) Gregorio, who was then 81 years old, weak and sick, was brought to the hospital in Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until the afternoon on July 19, 1996; (2) thereafter, Gregorio, who by then was weak and could no longer talk and whose condition had worsened, was transferred in the afternoon of July 19, 1996 to the Veterans Memorial Hospital in Quezon City where Gregorio died. She claimed that Gregorio could not have signed a deed of sale on July 19, 1996 because she stayed at the hospital the whole of that day and saw no visitors. She likewise testified on their agreement for attorneys fees with their counsel and the litigation expenses they incurred. Defendants posit that Gregorio’s consent to the sale should be determined, not at the time Gregorio signed the deed of sale on July 18, 1996, but at the time when he agreed to sell the property in June 1996 or a month prior to the deeds signing; and in June 1996, Gregorio was of sound and disposing mind and his consent to the sale was in no wise vitiated at that time. They presented as witnesses Notary Public de Guzman and instrumental witness Antonio to prove Gregorios execution of the sale and the circumstances under the deed was executed. They uniformly declared that:

(1) on July 18, 1996, they went to the hospital in Bayombong, Nueva Vizcaya where Gregorio was c onfined with Rudy; (2) Atty. De Guzman read and explained the contents of the deed to Gregorio; (3) Gregorio signed the deed after receiving the money from Rudy; (4) Julia and Antonio signed the deed as witnesses. Additionally, Atty. De Guzman explained that the execution of the deed was merely a confirmation of a previous agreement between the Spouses Paragas and Gregorio that was concluded at least a month prior to Gregorios death; that, in fact, Gregorio had previously asked him to prepare a deed that Gregorio eventually signed on July 18, 1996. He also explained that the deed, which appeared to have been executed on July 22, 1996, was actually executed on July 18, 1996; he notarized the deed and entered it in his register only on July 22, 1996. He claimed that he did not find it necessary to state the precise date and place of execution (Bayombong, Nueva Vizcaya, instead of Santiago City) of the deed of sale because the deed is merely a confirmation of a previously agreed contract between Gregorio

and the Spouses Paragas. He likewise stated that of the stated P500,000.00 consideration in the deed, Rudy paid Gregorio P450,000.00 in the hospital because Rudy had previously paid Gregorio P50,000.00. For his part, Antonio added that he was asked by Rudy to take pictures of Gregorio signing the deed. He also claimed that there was no entry on the date when he signed; nor did he remember reading Santiago City as the place of execution of the deed. He described Gregorio as still strong but sickly, who got up from the bed with Julias help. The lower court, after trial, rendered the decision declaring null and void the deed of sale purportedly executed by Gregorio Balacano in favor of the spouses Paragas, noting that at the time Gregorio executed the deed, Gregorio was ill. Because of the

seriousness of his illness, it is not expected that Gregorio Balacano would be negotiating a contract of sale. The lower court also ruled that Lots 1175-E and 1175-F were Gregorios and Lorenzas conjugal partnership properties. The Court of Appeals affirmed the Decision of the trial court, with the modification that Lots 1175-E and 1175-F were adjudged as belonging to the estate of Gregorio Balacano.

ISSUE: 



WON Gregorio give an intelligent consent to the sale of Lots 1175-E and 1175-F when he signed the deed of sale? WON Deed of Sale purportedly executed between petitioners and the late Gregorio Balacano was null and void

RULING: It is not disputed that when Gregorio signed the deed of sale, Gregorio was seriously ill, as he in fact died a week after the deeds signing. Gregorio died of complications caused by cirrhosis of the liver. Gregorios death was neither sudden nor immediate; he fought at least a month-long battle against the disease until he succumbed to death on July 22, 1996. Given that Gregorio purportedly executed a deed during the last stages of his battle against his disease, the Court seriously doubt whether Gregorio could have read, or fully understood, the contents of the documents he signed or of the consequences of his act. There was no conclusive evidence that the contents of the deed were sufficiently explained to Gregorio before he affixed his signature. The evidence the defendants-appellants offered to prove Gregorios consent to the sale consists of the testimonies of Atty. de Guzman and Antonio which the Court did not find credible. Additionally, the irregular and invalid notarization of the deed is a falsity that raises doubts on the regularity of the transaction itself. While the deed was indeed signed on July 18, 1996 at Bayombong, Nueva Vizcaya, the deed states otherwise, as it shows that the deed was executed on July 22, 1996 at Santiago City. Article 24 of the Civil Code tells us t hat in all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. Gregorio’s consent to the sale of the lots was absent, making the contract null and void. Consequently, the spouses Paragas could not have made a subsequent transfer of the property to Catalino Balacano.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever time or by ratification. There are two types of void contracts: In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the hospital. Gregorio was an octogenarian at the time of the alleged execution of the contract and suffering from liver cirrhosis at that circumstances which raise grave doubts on his physical and mental capacity to freely consent to the contract. Adding to the dubiety of the purported sale and further bolstering respondents claim that their uncle Catalino, one of the children of the decedent, had a hand in the execution of the deed is the fact that on 17 October 1996, petitioners sold a portion of Lot 1175-E consisting of 6,416 square meters to Catalino for P60,000.00. One need not stretch his imagination to surmise that Catalino was in cahoots with petitioners in maneuvering the alleged sale.

FRANCISCO VS HERRERA FACTS: Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land, one consisting of 500 sq. m. and another consisting of 451 sq. m. On January 3, 1991, petitioner bought from said landowner the first parcel, for the price of P1,000,000, paid in installments from November 30, 1990 to August 10, 1991.On March 12, 1991, petitioner bought the second parcel, for P750,000. Contending that the contract price for the two parcels of land was grossly inadequate, the children of Eligio, Sr., namely, Josefina Cavestany, Eligio Herrera, Jr., and respondent Pastor Herrera, tried to negotiate with petitioner to increase the purchase price. When petitioner refused, herein respondent then filed a complaint for annulment of sale. In his complaint, respondent claimed ownership over the second parcel, allegedly by virtue of a sale in his favor since 1973. He likewise claimed that the first parcel was subject to the co-ownership of the surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering that she died intestate on April 2, 1990, before the alleged sale to petitioner. Finally, respondent also alleged that the sale of the two lots was null and void on the ground that at the time of sale, Eligio, Sr. was already incapacitated to give consent to a contract because he was already afflicted with senile dementia, characterized by deteriorating mental and physical condition including loss of memory. The Regional Trial Court declared the deed of s ale null and void. CA affirmed trial court’s decision.

I. Those where one of the essential requisites of a valid contract as provided for by Art 1318(10) of the NCC is totally wanting; and II. Those declared to be so under Art 14092 (11) of the NCC. By contrast, a voidable or annullable contract is one in which the essential requisites for validity under Art 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue influence or deceit. Article 1318 of the Civil Code states that no contract exists unless there is a concurrence of consent of the parties, object certain as subject matter, and cause of the obligation established. Article 1327 provides that insane or demented persons cannot give consent to a contract. But, if an insane or demented person does enter into a contract, the legal effect is that the contract is voidable or annullable as specifically provided in Article 1390. An annullable contract may be rendered perfectly valid by ratification, which can be express or implied. Implied ratification may take the form of accepting and retaining the benefits of a contract. This is what happened in this case. Respondents contention that he merely received payments on behalf of his father merely to avoid their misuse and that he did not intend to concur with the contracts is unconvincing. If he was not agreeable with the contracts, he could have prevented petitioner from delivering the payments, or if this was impossible, he could have immediately instituted the action for reconveyance and have the payments consigned with the court. None of these happened. As found by the trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the increase of the purchase price while receiving the installment payments. It was only when respondent failed to convince petitioner to increase the price that the former instituted the complaint for reconveyance of the properties. Clearly, respondent was agreeable to the contracts, only he wanted to get more. Further, there is no showing that respondent returned the payments or made an offer to do so. This bolsters the view that indeed there was ratification. One cannot negotiate for an increase in the price in one breath and in the same breath contend that the contract of sale is void.

2)

Sale by and Between Spouses GUIANG VS CA

ISSUE: WON the assailed contracts of sale void or merely

FACTS: Plaintiff Gilda Corpuz and defendant Judie Corpuz are

voidable and hence capable of being ratified.

legally married spouses. The couple have three children, namely: Junie 18 years old, Harriet 17 years of age, and Jodie or Joji, the youngest, who was 15 years of age at the time their mother testified in court.

HELD: It was established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the formers capacity to consent was vitiated by senile dementia. Hence, the Court must rule that the assailed contracts are not void or inexistent p e r

rather, these are contracts that are valid and binding unless annulled through a proper action filed in court seasonably.

Over the objection of private respondent and while she was in Manila seeking employment, her husband sold to the petitionersspouses one half of their conjugal property, consisting of their residence and the lot on which it stood.

A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be validated either by the passage of

Sometime on February 14, 1983, the couple Gilda and Judie Corpuz, with plaintiff-wife Gilda Corpuz as vendee, bought a 421

se ;


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever sq. meter lot from Manuel Callejo who signed as vendor through a conditional deed of sale for a total consideration of P14,735.00. The consideration was payable in installment, with right of cancellation in favor of vendor should vendee fail to pay three successive installments. Sometime on April 22, 1988, the couple Gilda and Judie Corpuz sold one-half portion of their Lot No. 9, Block 8, to the defendants spouses Guiang. The latter have since then occupied the one-half portion and built their house thereon. They are thus adjoining neighbors of the Corpuzes. Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to look for work abroad, in the Middle East. Unfortunately, she became a victim of an unscrupulous illegal recruiter. She was not able to go abroad. She stayed for sometime in Manila. After his wifes departure for Manila, defendant Judie Corpuz seldom went home to the conjugal dwelling. Sometime in January 1990, Harriet Corpuz learned that her father intended to sell the remaining one-half portion including their house, of their home lot to defendants Guiangs. She wrote a letter to her mother informing her. Gilda replied that she was objecting to the sale. Harriet, however, did not inform her father about this; but instead gave the letter to Mrs. Luzviminda Guiang so that she Guiang would advise her father. However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed through the sale of the remaining one-half portion of Lot 9, Block 8. On March 1, 1990, he sold to defendant Luzviminda Guiang thru a document known as Deed of Transfer of Rights the remaining one-half portion of their lot and the house standing thereon for a total consideration of P30,000.00 of which P5,000.00 was to be paid in June , 1990. Sometime on March 11, 1990, plaintiff returned home. She found her children staying with other households. Only Junie was staying in their house. Harriet and Joji were with Mr. Panes. Gilda gathered her children together and stayed at their house. Her husband was nowhere to be found. She was informed by her children that their father had a wife already. For staying in their house sold by her husband, plaintiff was complained against by Guiang spouses before the Barangay authorities for trespassing. On March 16, 1990, the parties thereat signed a document known as amicable settlement. Believing that she had received the shorter end of the bargain, plaintiff went to the Barangay Captain for the annulment of the settlement. Defendant-spouses Guiang followed thru the amicable settlement with a motion for the execution of the amicable settlement, filing the same with the Municipal Trial Court. The judgment was rendered for the plaintiff and against the defendants. CA affirmed the trial court’s decision.

ISSUE: I.

WON the contract of sale (Deed of Transfer of Rights) was merely voidable, and II. WON such contract was ratified by private respondent when she entered into an amicable settlement with them

RULING: (1) The Contract of Sale was not merely voidable but void. The error in petitioners contention is evident. Article 1390, par. 2, refers to contracts visited by vices of consent, i.e., contracts which were entered into by a person whose consent was

obtained and vitiated through mistake, violence, intimidation, undue influence or fraud. In this instance, private respondents consent to the contract of sale of their conjugal property was totally inexistent or absent. Gilda Corpuz, on direct examination, testified thus: ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. The legal provision is clear. The disposition or encumbrance is void. It becomes still clearer if we compare the same with the equivalent provision of the Civil Code of the Philippines. Under Article 166 of the Civil Code, the husband cannot generally alienate or encumber any real property of the conjugal partnership without the wife’s consent. The alienation or encumbrance if so made however is not null and void. It is merely voidable. The offended wife may bring an action to annul the said alienation or encumbrance. Thus, the provision of Article 173 of the Civil Code of the Philippines, to wit: Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband.(n)

This particular provision giving the wife ten (10) years during the marriage to annul the alienation or encumbrance was not carried over to the Family Code. It is thus clear that any alienation or encumbrance made after August 3, 1988 when the Family Code took effect by the husband of the conjugal partnership property without the consent of the wife is null and void. In sum, the nullity of the contract of sale is premised on the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever absence of private respondents consent. To constitute a valid contract, the Civil Code requires the concurrence of the following elements: (1) cause, (2) object, and (3) consent, the last element being indubitably absent in the case at bar.

(2) The amicable settlement did not ratify the contract. Both the Deed of Transfer of Rights and the amicable settlement are null and void. Art. 1422. A contract which is the direct result of a previous illegal contract, is also void and inexistent. (Civil Code of the Philippines). The sale of a conjugal property requires the consent of both the husband and the wife. The absence of the consent of one renders the sale null and void, while the vitiation thereof makes it merely voidable. Only in the latter case can ratification cure the defect.

Pending the appeal, Ignacia died and she was substituted by her compulsory heirs. Petitioners contended that they are entitled to reimbursement of the rentals collected on the apartment built on Lot No. 4349-B-2, while respondent spouses claimed that they are buyers in good faith. Court of Appeals reversed and set aside the decision of the trial court. It ruled that notwithstanding the absence of Ignacia’s consent to the sale, the same must be held valid in favor of respondents because they were innocent purchasers for value.

ISSUE: (1) What is the status of the sale of Lot No. 4349-B-2 to respondent spouses? (2) Assuming that the sale is annullable, should it be annulled in its entirety or only with respect to the share of Ignacia? (3) Are respondent spouses purchasers in good faith?

RULING: (1) The sale was voidable. HEIRS OF REYES vs MIJARES FACTS: The controversy stemmed from a dispute over Lot No. 4349-B-2, approximately 396 square meters and registered in the name of Spouses Vicente Reyes and Ignacia Aguilar-Reyes. Said lot and the apartments built thereon were part of the spouses’ conjugal properties having been purchased using conjugal funds from their garments business. Vicente and Ignacia were married in 1960, but had been separated de facto since 1974. Sometime in 1984, Ignacia learned that on March 1, 1983, Vicente sold Lot No. 4349-B-2 to respondent Spouses Mijares for P40,000.00. She likewise found out that Vicente filed a petition for administration and appointment of guardian.Vicente misrepresented therein that his wife, Ignacia, died on March 22, 1982, and that he and their 5 minor children were her only heirs. On September 29, 1983, the court appointed Vicente as the guardian of their minor children. Subsequently, in its Order dated October 14, 1983, the court authorized Vicente to sell the estate of Ignacia. On August 9, 1984, Ignacia, through her counsel, sent a letter to respondent spouses demanding the return of her ½ share in the lot. Failing to settle the matter amicably, Ignacia filed on June 4, 1996 a complaint for annulment of sale against respondent spouses. The complaint was thereafter amended to include Vicente Reyes as one of the defendants. The court rendered a decision declaring the sale of Lot No. 4349B-2 void with respect to the share of Ignacia. It held that the purchase price of the lot was P110,000.00 and ordered Vicente to return ½ thereof or P55,000.00 to respondent spouses. Ignacia filed a motion for modification of the decision praying that the sale be declared void in its entirety and that the respondents be ordered to reimburse to her the rentals they collected on the apartments built on Lot No. 4349-B-2 computed from March 1, 1983. On May 31, 1990, the trial court modified its decision by declaring the sale void in its entirety and ordering Vicente Reyes to reimburse respondent spouses the purchase price of P110,000.

Under the regime of the Civil Code, the alienation or encumbrance of a conjugal real property requires the consent of the wife. The absence of such consent renders the entire transaction merely voidable and not void. The wife may, during the marriage and within ten years from the transaction questioned, bring an action for the annulment of the contract entered into by her husband without her consent. Articles 166 and 173 of the Civil Code, the governing laws at the time the assailed sale was contracted, provide: Art.166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife’s consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same… Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband. Pursuant to the foregoing provisions, the husband could not alienate or encumber any conjugal real property without the consent, express or implied, of the wife otherwise, the contract is voidable. This is consistent with Article 173 of the Civil Code pursuant to which the wife could, during the marriage and within 10 years from the questioned transaction, seek its annulment. In the case at bar, there is no dispute that Lot No. 4349-B-2, is a conjugal property having been purchased using the conjugal funds of the spouses during the subsistence of their marriage. It is beyond cavil therefore that the sale of said lot to respondent spouses without the knowledge and consent of Ignacia is voidable. Her action to annul the March 1, 1983 sale which was filed on June 4, 1986, before her demise is perfectly within the 10


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever year prescriptive period under Article 173 of the Civil Code. Even if we reckon the period from November 25, 1978 which was the date when Vicente and the respondent spouses entered into a contract concerning Lot No. 4349-B-2, Ignacia’s action would still be within the prescribed period. (2) The trial court correctly annulled the voidable sale of Lot

No. 4349-B-2 in its entirety. The plain meaning attached to the plain language of the law is that the contract, in its entirety, executed by the husband without the wife's consent, may be annulled by the wife. Had Congress intended to limit such annulment in so far as the contract shall "prejudice" the wife, such limitation should have been spelled out in the statute. To be underscored here is that upon the provisions of Articles 161, 162 and 163 of the Civil Code, the conjugal partnership is liable for many obligations while the conjugal partnership exists. Not only that. The conjugal property is even subject to the payment of debts contracted by either spouse before the marriage, as those for the payment of fines and indemnities imposed upon them after the responsibilities in Article 161 have been covered (Article 163, par. 3), if it turns out that the spouse who is bound thereby, "should have no exclusive property or if it should be insufficient." These are considerations that go beyond the mere equitable share of the wife in the property. (3) Spouses Mijares are not purchasers in good faith. In the instant case, there existed circumstances that should have placed respondent spouses on guard. The death certificate of Ignacia, shows that she died on March 22, 1982. The same death certificate, however, reveals that – (1) it was issued by the Office of the Civil Registrar of Lubao Pampanga on March 10, 1982; (2) the alleged death of Ignacia was reported to the Office of the Civil Registrar on March 4, 1982; and (3) her burial or cremation would be on March 8, 1982. These obvious flaws in the death certificate should have prompted respondents to investigate further, especially so that respondent Florentina Mijares admitted on cross examination that she asked for the death certificate of Ignacia because she was suspicious that Ignacia was still alive.

CONCEPCION AINZA ET AL V. ANTONIO AND EUGENIA PADUA JUNE 30, 2005 FACTS: In April 1987, Ainza and her daughter Eugenia orally agreed that Ainza pay P100k in exchange for half of the portion of Eugenia’s undivided conjugal property (a lot located in QC). No Deed of Absolute Sale was executed. There was physical delivery of the land through Concepcion’s other daughter (Natividad) acting as atty-in-fact. Concepcion thereafter allowed Natividad and her husband occupy the purchased portion of the land. In 1994, Antonio caused the division of the lot into three (two were occupied by the spouses), necessarily displacing Natividad. He also had each subdivision titled. Antonio requested Natividad to vacate the premises. Antonio averred that his wife only admitted of selling 1/3 of the property to Concepcion for which a receipt was issued signed by Concepcion. The RTC ruled in favor of Concepcion. The CA reversed the RTC ruling. CA explained that the property is conjugal hence the sale should have been with Antonio’s consent.

ISSUE: Whether or not the contract of sale between Ainza and Eugenia is valid.

RULING: Yes it is valid until annulled (voidable). There was a perfected contract of sale between Eugenia and Concepcion. The records show that Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer and agreed to pay P100,000.00 as consideration. The contract of sale was consummated when both parties fully complied with their respective obligations. Eugenia delivered the property to Concepcion, who in turn, paid Eugenia the price of P100,000.00, as evidenced by the receipt. Since the land was undivided when it was sold, Concepcion is entitled to have half of it. Antonio cannot, however, attack the validity of the sale b/n his wife and his mom-in-law, either under the Family Code or the Old Civil Code due to prescription. The sale came to his knowledge in 1987. He only filed the case is 1999. His right prescribed in 1993 (under the FC [5 years]) and 1997 (under OCC [10 years]).

FUENTES VS ROCA Respondent spouses cannot deny knowledge that at the time of the sale in 1978, Vicente was married to Ignacia and that the latter did not give her conformity to the sale. This is so because the 1978 "Agreement" described Vicente as "married" but the conformity of his wife to the sale did not appear in the deed. Obviously, the execution of another deed of sale in 1983 over the same Lot No. 4349-B-2, after the alleged death of Ignacia on March 22, 1982, as well as the institution of the special proceedings were, intended to correct the absence of Ignacia’s consent to the sale. Even assuming that respondent spouses believed in good faith that Ignacia really died on March 22, 1982, after they purchased the lot, the fact remains that the sale of Lot No. 4349-B-2 prior to Ignacia’s alleged demise was without her consent and therefore subject to annulment. The October 14, 1983 order authorizing the sale of the estate of Ignacia, could not have validated the sale of Lot No. 4349-B-2 because said order was issued on the assumption that Ignacia was already dead and that the sale dated March 1, 1983 was never categorically approved in the said order.

FACTS: Sabina Tarroza owned a titled 358-square meter lot. She sold it to her son, Tarciano Roca. Tarciano did not meantime have the registered title to his name. Six years later, Tarciano offered to sell the lot to petitioners spouses Fuentes. They arranged to meet at the office of Atty. Romulo Plagata whom they asked to prepare the documents of sale. They later signed an agreement to sell which agreement stated that it was to take effect in six months. The agreement required the Fuentes spouses to pay Tarciano a downpayment of P60K for the transfer of the lot’s titl e to him. Within six months, Tarciano was to secure the consent of his estranged wife Rosario to the sale. In working with the other requirements, Atty. Plagata said that he went to see Rosario in one of his trips in Manila and had her sign the affidavit of consent. As soon as Tarciano met the other conditions, Atty. Plagata notarized Rosario’s affidavit. A new title was issued to the Fuentes spouses and the remaining payment was given to Tarciano. Tarciano passed away, followed by his wife.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Eight years later, in 1997, the children of Tarciano and Rosario filed an action for annulment of sale and reconveyance on the ground that it is void since Rosario did not give her consent to it and her signature has been forged. The Fuentes spouses presented Atty. Plagata who testified that he personally saw Rosario sign the document although he admitted otarizing it only 4 months after. Besides , the 4-year prescription period for annulling sale due to fraud or forgery already lapsed.

of Spouses Parulan, who have been estranged from one another. Real estate broker Atanacio offered the property to Spouses Aggabao who upon Atanacio’s insistence prevailed upon them, so that they and Atanacio met with Ma. Elena (Parulan’s wife) at the site of the property. During their meeting, Spouses Aggabao paid Ma. Elena earnest money amounting to P20,000 which she acknowledged with a handwritten receipt. Then and there, they agreed on the terms of how the buyers will pay the price of the property.

ISSUE: 1. 2. 3.

Whether Rosario’s signatur e on the document of consent to her husband Tarciano’s sale of their conjugal land to Fuentes spouses were forged? Yes Whether Rocas’ action for the declaration of nullity of that sale to the spouses already prescribed? No, an action to annul a void contract is imprescriptible Whether only Rosario, the wife, whose consent was not had, could bring the action to annul that sale? No

Spouses Aggabao complied with all the terms with regard to the payment of the properties, but when Ma. Elena already needed to turn over the owner’s duplicate copies for both lands, she was able to turn over only one (which was successfully transferred to the name of spouses Aggabao). For the other one, she said that it is with a relative in HongKong but she promised to deliver it to the spouses in a week. Needless to say, she failed to do so and by doing their own verification, the spouses found out that said copy of title was in the hands of Dionisio’s brother.

RULING: 1. Atty. Palagata admittedly falsified the jurat of the affidavit of consent. That jurat declared that Rosario swore to the document signed in Zamboanga City in Jan 11, 1989 when, as he testified, he swore she supposedly signed it about 4 months earlier at her residence in Manila on Sept 15, 1988. While a defective notarization will merely strip the document of its public character and reduce it into a private instrument, that falsified jurat, taken together with the marks of forgery in the signature, dooms the document as proof of Rosario’s consent to the sale of the land. That the Fuentes spouses honestly relied on the notar ized affidavit as proof of Rosario’s consent does not matter. The sale is still void without an authentic consent. 2.) The law that applies to this case is the Family Code, not the Civil Code. Although Tarciano and Rosario got married in 1950, Tarciano sold the property in 1989, a few months after the Family Code took effect. Art 124. FC: …In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void.

Art 1410, Civil Code: The action or defense for the declaration of the inexistence of a contract does not prescribe. Hence, in case at bar, the passage of time did not erode the right to bring such an action. 3.) No, the sale was void from the beginning. Consequently, the land remained the property of Tarciano’s heirs, namely, the Rocas.

SPOUSES REX AND CONCEPCION AGGABAO versus DIONISIO Z. PARULAN, JR. and MA. ELENA PARULAN G.R. No. 165803 FACTS: Involved in this action are two parcels of land and their improvements in Parañaque City and registered under the name

The spouses met with Dionisio’s brother, Atty. Parulan, who told them that he is the one with the power to sell the property. He demanded P800,000 for said property and gave the spouses several days to decide. When Atty. Parulan did not hear back from the spouses, he gave them a call, and was then informed that they have already paid the full amount to Ma. Elena.

Subsequently, Dionisio, through Atty. Parulan, commenced an action praying for the declaration of the nullity of the deed of absolute sale executed by Ma. Elena, and the cancellation of the title issued to the petitioners by virtue thereof.

ISSUE: Whether or not the sale of conjugal property made by Ma. Elena, by presenting a special power of attorney to sell (SPA) purportedly executed by respondent husband in her favor was validly made to the vendees

RULING: No, the Court ruled that the sale of conjugal property without the consent of the husband was not merely voidable but void; hence, it could not be ratified. Spouses Aggabao also cannot use the defense that they are buyers in good faith because they did not exercise the necessary prudence to inquire into the wife’s authority to sell. The relevant part of Article 124 of the Family Code provides that: xxx In the event that one spouse is incapacitated or

otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. xxx Spouses Aggabao also failed to substantiate their contention that Dionisio, while holding the administration over the property, had delegated to his brother, Atty. Parulan, the administration of the property, considering that they did not present in court the SPA granting to Atty. Parulan the authority for the administration. Nonetheless, the Court would like to stress that the power of administration does not include acts of disposition or encumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever administer, and vice versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code (from Article 1876 to Article 1878). Specifically, the apparent authority of Atty. Parulan, being a special agency, was limited to the sale of the property in question, and did not include or extend to the power to administer the property. On the other hand, we agree with Dionisio that the void sale was a continuing offer from the petitioners and Ma. Elena that Dionisio had the option of accepting or rejecting before the offer was withdrawn by either or both Ma. Elena and the petitioners. The last sentence of the second paragraph of Article 124 of the Family Code makes this clear, stating that in the absence of the other spouse’s consent, the transaction should be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or upon authorization by the court before the offer is withdrawn by either or both offerors.

PELAYO VS PEREZ JUNE 8, 2005 FACTS: David Pelayo husband of Lorenza Pelayo executed on Jan. 11, 1988 conveyed to Melki Perez two parcels of agricultural rd land. Lorenza howeer signed only on the 3 page in the space provided for the witness on which, Perez failed to register the deed on the registry of deeds. Perez there upon filed a case asking specific performance of the spouse. Spouses Pelayo responded that the cause of action of Perez is unenforceable pursuant to RA 6656 which provides in Sec. 6 that contracts executed prior to its effectivity shall “ be valid only when registered with the Registry of Deeds within a period of 3 months. Being that Perez was unable to do the same then there should not be any cause of action. They also said that the said contract of sale was only to simulate a sale just so they can intimidate the illegal occupants of the land since Perez is feared by many. However, Perez replied that the lot was given to him by spouses in consideration of his services as his attorney-in-fact to make necessary representation. David Pelayo claimed as well that the contract of sale was without his wife’s consent. RTC rendered the deed of sale null and void on the account that there was no consent by the wife and that Perez did not possess nor pay taxes on the lots and that defendant Pelayo was indedted to Perez for services rendered.

contract void ab initio but merely voidable. Said provisions of law provide: Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal property without the wife’s consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same.

ABALOS vs. MACATANGAY (September 30, 2004) FACTS: Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with improvements. Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of respondent, binding himself to sell to respondent the subject property and not to offer the same to any other party within thirty (30) days from date. Arturo acknowledged receipt of a check from respondent in the amount of Five Thousand Pesos (P5,000.00), representing earnest money for the subject property, the amount of which would be deducted from the purchase price of One Million Three Hundred Three Hundred Thousand Pesos (P1,300,000.00). Further, the RMOA stated that full payment would be effected as soon as possession of the property shall have been turned over to respondent. Subsequently, Arturo’s wife, Esther, executed a Special Power of Attorney dated October 25, 1989, appointing her sister, Bernadette Ramos, to act for and in her behalf relative to the transfer of the property to respondent. Ostensibly, a marital squabble was brewing between Arturo and Esther at the time and to protect his interest, respondent caused the annotation of his adverse claim on the title of the spouses to the property on November 14, 1989.

Respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price. The letter contained a demand upon the spouses to comply with their obligation to turn over possession of the property to him. On the same date, Esther, through her attorneyin-fact, executed in favor of respondent, a Contract to Sell the property to the extent of her conjugal interest therein.

ISSUE: Whether or not the deed of sale was null and void on the ground for lack of marital consent.

RULING: Petitioners not having questioned the Decision of the CA dated November 24, 1994 which then attained finality, the ruling that the deed of sale subject of this case is not among the transactions deemed as invalid under R.A. No. 6657, is now immutable. We agree with the CA ruling that petitioner Lorenza, by affixing her signature to the Deed of Sale on the space provided for witnesses, is deemed to have given her implied consent to the contract of sale. Moreover, under Article 173, in relation to Article 166, both of the New Civil Code, which was still in effect on January 11, 1988 when the deed in question was executed, the lack of marital consent to the disposition of conjugal property does not make the

He reiterated his demand upon them to comply with their obligation to turn over possession of the property. Arturo and Esther failed to deliver the property which prompted respondent to cause the respondent to file a complaint for specific performance with damages against petitioners. The court declared that the RMOA is a contract to sell because it signifies a unilateral offer of Arturo to sell the property to respondent for a price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to buy petitioner’s property, as in fact it does not even bear his signature thereon. It is quite clear that after the lapse of the thirty-day period, without respondent having exercised his option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege to buy the property within the period therein stated. There is nothing in the RMOA which indicates that Arturo agreed therein to transfer


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever ownership of the land which is an essential element in a contract of sale.

husband or the wife to one-half of the conjugal assets does not vest until the liquidation of the conjugal partnership.

ISSUE: Can the sale be declared valid based on the RMOA?

prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy. The right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.

HELD: No. The sale would is not valid. Granting for the sake of argument that the RMOA is a contract of sale, the same would still be void. Quite glaring is the absence of the signature of Esther in the RMOA, which proves that she did not give her consent to the transaction initiated by Arturo. The husband cannot alienate any real property of the conjugal partnership without the wife’s consent. However, it was the Contract to Sell executed by Esther through her attorney-in-fact which the Court of Appeals made full use of. Holding that the contract is valid, the appellate court explained that while Esther did not authorize Arturo to sell the property, her execution of the SPA authorizing her sister to sell the land to respondent clearly shows her intention to convey her interest in favor of respondent. In effect, the court declared that the lack of Esther’s consent to the sale made by Arturo was cured by her subsequent conveyance of her interest in the property through her attorney-in-fact. This ruling is erroneous. The nullity of the RMOA as a contract of sale emanates not only from lack of Esther’s consent thereto but also from want of consideration and absence of respondent’s signature t hereon. Such nullity cannot be obliterated by Esther’s subsequent confirmation of the putative transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be ratified and the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract produces no effect either against or in favor of anyone –it cannot create, modify or extinguish the juridical relation to which it refers. True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in favor of respondent. However, the RMOA which Arturo signed is different from the deed which Esther executed through her attorney-in-fact. For one, the first is sought to be enforced as a contract of sale while the second is purportedly a contract to sell only. For another, the terms and conditions as to the issuance of title and delivery of possession are divergent. The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. Where the conveyance is contained in the same document which bears the conformity of both husband and wife, there could be no question on the validity of the transaction. But when there are two (2) documents on which the signatures of the spouses separately appear, textual concordance of the documents is indispensable. Hence, in this case where the wife’s putative consent to the sale of conjugal property appears in a separate document which does not, however, contain the same terms and conditions as in the first document signed by the husband, a valid transaction could not have arisen. Even on the supposition that the parties only disposed of their respective shares in the property, the sale, assuming that it exists, is still void for as previously stated, the right of the

CALIMLIM- CANULLAS vs. FORTUN (June 22, 1984) FACTS:

Petitioner MERCEDES Calimlim-Canullas and FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small house on the residential land in question located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land. In 1978, FERNANDO abandoned his family and was living with private respondent Corazon DAGUINES. During the pendency of this appeal, they were convicted of concubinage. On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited by me from my deceased parents." Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980 for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house in dispute where she and her children were residing, including the coconut trees on the land, were built and planted with conjugal funds and through her industry; that the sale of the land together with the house and improvements to DAGUINES was null and void because they are conjugal properties and she had not given her consent to the sale.

ISSUE: whether or not the sale of the lot together with the house and improvements thereon was valid.

HELD: No. Not Valid. Second paragraph of Article 158 of the Civil Code, provides: xxx xxx xxx Buildings constructed at the expense of the partnership during the marriage on land belonging to one of the spouses also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same. We hold that pursuant to the foregoing provision both the land and the building belong to the conjugal partnership but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation of the conjugal partnership. The foregoing premises considered, it follows that FERNANDO could not have alienated the house and lot to DAGUINES since 4 MERCEDES had not given her consent to said sale.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Further, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. That sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects.

3) Others Relatively Disqualified (Article 1491) a. Guardians, Agents and Administrators THE PHILIPPINE TRUST COMPANY vs. ROLDAN (May 31, 1956) FACTS: These 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father, Marcelo Bernardo, deceased. In view of his minority, guardianship proceedings were instituted, wherein Socorro Roldan was appointed his guardian. Socorro Roldan filed in said guardianship proceedings a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest the money in a residential house, which the minor desired to have on Tindalo Street, Manila. The motion was granted. As guardian, Roldan executed the proper deed of sale in favor of her brother-in-law Dr. Fidel C. Ramos, and on August 12, 1947 she asked for, and obtained, judicial confirmation of the sale. On August 13, 1947, Dr. Fidel C. Ramos executed in favor of Socorro Roldan, personally, a deed of conveyance covering the same seventeen parcels, for the sum of P15,000. And on October 21, 1947 Socorro Roldan sold four parcels out of the seventeen to another party, reserving to herself the right to repurchase. The Philippine Trust Company replaced Socorro Roldan as guardian and seeks to undo what the previous guardian had done. The step-mother in effect, sold to herself, the properties of her ward, contends the Plaintiff , and the sale should be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian from purchasing “either in person or through the mediation of another” the property of her ward.

ISSUE: Whether or not the sale should be annulled. HELD: At first glance the resolutions of both courts accomplished substantial justice the minor recovers his properties. But if the conveyances are annulled as prayed for, the minor will obtain a better deal he receives all the fruits of the lands from the year 1947 (Article 1303 Civil Code) and will return P14,700, not P15,000. To our minds the first two transactions herein described couldn’t be in a better juridical situation than if this guardian had purchased the seventeen parcels on the day following the sale to Dr. Ramos. Now, if she was willing to pay P15,000 why did she sell the parcels for less? In one day (or actually one week) the price could not have risen so suddenly. Obviously when, seeking

approval of the sale she represented the price to be the best obtainable in the market, she was not entirely truthful. This is one phase to consider. Again, supposing she knew the parcels were actually worth P17,000 then she agreed to sell them to Dr. Ramos at P14,700 and knowing the realty’s value she offered him the next day P15,000 or P15,500, and got it. Will there be any doubt that she was recreant to her guardianship, and that her acquisition should be nullified? Even without proof that she had connived with Dr. Ramos. Remembering the general doctrine that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his ward’s interest and in line with the court’s suspicion whenever the guardian acquires the ward’s property 1 we have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward’s parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies. She acted it may be true without malice there may have been no previous agreement between her and Dr. Ramos to the effect that the latter would buy the lands for her. But the stubborn fact remains that she acquired her protege’s properties, through her brother-in-law. That she planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced from the very short time between the two sales (one week). The temptation which naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no actual collusion is proved (so hard to prove) between such guardian and the intermediate purchaser. This would uphold a sound principle of equity and justice. Hence, from both the legal and equitable standpoints these three sales should not be sustained the first two for violation of article 1459 of the Civil Code and the third because Socorro Roldan could pass no title to the third buyer.

DISTAJO vs. COURT OF APPEALS (August 25, 2000) FACTS: During the lifetime of Iluminada Abiertas, she designated one of her sons, Rufo Distajo, to be the administrator of her parcels of land denoted as Lot Nos. 1018, 1046, 1047, and 1057. Iluminada Abiertas certified to the sale of Lot Nos. 1018, 1046 and 1047 in favor of Rufo Distajo and other parcels of land to her other kins. After purchasing the above-mentioned parcels of land, Rufo Distajo, together with his wife, Lagrimas, took possession of the property and paid the corresponding real estate taxes thereon. Consequently, on June 5, 1986, Ricardo Distajo, with the other heirs of Iluminada Abiertas, filed a complaint for recovery of possession and ownership of those lands sold alleging that Rufo Distajo cannot acquire the subject parcels of land owned by Iluminada Abiertas because the Civil Code prohibits the administrator from acquiring properties under his administration. Rufo Distajo merely employed fraudulent machinations in order to obtain the consent of his mother to the sale, and may have even forged her signature on the deeds of sale of the parcels of land.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever ISSUE: Whether or not the sale transactions are void for having been entered into by the administrator of the properties. 1âwphi1

HELD: The sale is valid. The pertinent Civil Code provision provides: "Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: xxx (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; xxx Under the above article, 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.

JESUS MA. CUI, ET AL., Plaintiff-Appellant , v. ANTONIO MA. CUI, ET AL., Defendants-Appellees . [G.R. No. L-7041. February 21, 1957.]

Don Mariano in favor of Antonio Cui on March 2,1946, wherein the former has constituted the latter as his "true and lawful attorney" to perform in his name and that of the intestate heirs of Doña Antonia Perales.

ISSUE: WON the sale of the property to Antonio was valid. HELD: YES. While under article 1459 of the old Civil Code an agent or administrator is disqualified from purchasing property in his hands for sale or management, and, in this case, the property in question was sold to Antonio Cui while he was already the agent or administrator of the properties of Don Mariano Cui, we however believe that this question cannot now be raised or invoked.

The prohibition of the law is contained in article 1459 of the old Civil Code, but this prohibition has already been removed. Under the provisions of article 1491, section 2, of the new Civil Code, an agent may now buy property placed in his hands for sale or administration, provided that the principal gives his consent thereto. While the new Code came into effect only on August 30, 1950, however, since this is a right that is declared for the first time, the same may be given retroactive effect if no vested or acquired right is impaired (Article 2253, new Civil Code). During the lifetime Don Mariano,and particularly on March 8, 1946, the herein appellants could not claim any vested or acquired right in these properties, for,as heirs, the most they had was a mere expentancy. We may, therefore, invoke now this practical and liberal provision of our new Civil Code even if the sale had taken place before its effectivity.

b. Attorneys FACTS: Jesus and Antonio are the legitimate children of Don Mariano Cui and Doña Antonia Perales who died intestate in1939. Jesus alleged that during the marriage of Don Mariano and Dona Antonia, their parents acquired certain properties in the City of Cebu, namely, Lots Nos. 2312, 2313 and 2319. Upon the death of their mother, the properties were placed under the administration of their dad.that while the latter was 84 years of age, Antonio by means of deceit, secured the transfer to themselves the said lots without any pecuniary consideration; that in the deed of sale executed on March 8, 1946, Rosario Cui appeared as one of the vendees, but on learning of this fact she subsequently renounced her rights under the sale and returned her portion to Don Mariano Cui by executing a deed of resale in his favor on October 11, 1946; that defendants, fraudulently and with the desire of enriching themselves unjustly at the expense of their father, Don Mariano Cui, and of their brothers and coheirs,secured a loan of P130,000 from the Rehabilitation properties, and with the loan thus obtained, defendants constructed thereon an apartment building of strong materials consisting of 14 doors, valued at approximately P130,000 and another building on the same parcels of land, which buildings were leased to some Chinese commercial firms a monthly rental of P7,600, which defendants have collected and will continue to collect to the prejudice of the plaintiffs;Jesus alleged that the sale should be invalidated so far as the portion of the property sold to Antonio Cui is concerned, for the reason that when that sale was effected, Antonio was then acting as the agent or administrator of the properties of Don Mariano Cui.Jesus lays stress on the power of attorney Exhibit L which was executed by

THE DIRECTOR OF LANDS, petitioner, vs. SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE LARRAZABAL, MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO FERNANDEZ, adverse claimant-appellee. claimant-appellee. G.R. No. L-26096 February 27, 1979 FACTS: The adverse claimant Atty. Fernandez was retained as counsel by petitioner (Abarquez) in a civil a case for the annulment of a contract of sale with right of repurchase and for the recovery of the land which was the subject matter thereof. Unable to compensate his lawyer whom he also retained for his appeal, the petitioner executed a document whereby he obliged himself to give to his lawyer ½ of whatever he might recover from Lots 5600 and 5602 should the appeal prosper. The real property sought to be recovered was actually the share of petitioner in Lots 5600 and 5602 which were part of the estate of his deceased parents and which were partitioned among the heirs, which included petitioner and his sister. The case having been resolved and title having been issued to petitioner, adverse claimant waited for petitioner to comply with his obligation under the document executed by him by delivering the ½ portion of the said parcels of land. Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land to spouses Larrazabal. Then, adverse claimant


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever immediately took steps to protect his interest by filing a motion to annotate his attorney’s lien and by notifying the prospective buyers of his claim over the ½ portion of the parcels of land. The motion was granted. The annotation of adverse claim appeared on the new transfer certificate of title. This adverse claim became the subject of cancellation proceedings filed by petitioner-spouses. The trial court resolved the case in favor of the adverse claimant. On appeal, petitioners contended that a contract for a contingent fee violates Article 1491 because it involves an assignment of a property subject of litigation.

ISSUE: WON the contract for a contingent fee as basis of the interest of Atty. Fernandez is prohibited by Article 1491 of the Civil Code.

HELD: NO. The contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer and his client of property which is the subject of litigation. For the prohibition to

operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property. Likewise, under American Law, the prohibition does not apply to “cases where after completion of litigation the lawyer accepts on account of his fee and interest in the assets realized by the litigation. There is clear distinction between such cases and one in which the lawyer speculates on the outcome of the matter in which he is employed. Further, a contract for a contingent fee is not covered by Article 1491 because the transfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney’s attorney’s fees of Atty. Atty. Fernandez, consisting of ½ of whatever the petitioner might recover from his share in the lots in question is contingent upon the success of the appeal. Hence, the payment of the attorney’s fees, that is, the transfer or assignment of ½ of the property in litigation will take place only if the appeal prospers. Therefore, the transfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of litigation involving the property in question. Consequently, the contract for a contingent fee is not covered by Article 1491 of the Civil Code.

PAULINO VALENCIA vs. ATTY. ARSENIO FER CABANTING; CONSTANCIA L. VALENCIA vs. ATTY. ATTY. DIONISIO C. ANTINIW, ATTY. EDUARDO U. JOVELLANOS and ATTY. ARSENIO FER. CABANTING A.M. Nos. 1302, 1391 and 1543 April 26, 1991 FACTS: In 1933, complainant Paulino Valencia and his wife allegedly bought a parcel of land, where they built their house, from a certain Serapia Raymundo, an heir of Pedro Raymundo the original owner. However, they failed to register the sale or secure a transfer certificate of title in their names. A conference was held in the house of Atty. Eduardo Jovellanos to settle the land dispute between Serapia and the Valencia spouses. Serapia was willing to relinquish ownership if the Valencias could show documents evidencing ownership. Paulino exhibited a deed of sale written in the Ilocano dialect. However, Serapia claimed that the deed covered a different property. property. Serapia,

assisted by Atty. Arsenio Fer. Cabanting, filed a complaint against Paulino for the recovery of possession with damages. The Valencias engaged the services of Atty. Dionisio Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the private document written in Ilocano. For this purpose, Paulino gave Atty. Antiniw an amount of P200.00 to pay the person who would falsify the signature of the alleged vendor. A "Compraventa Definitiva" as a result thereof. The Court of First Instance of Pangasinan, rendered a decision in favor of Serapia. Paulino filed a Petition for Certiorari with Preliminary Injunction before the CA. While the petition was pending, the TC issued an order of execution stating that "the decision in this case has already become final and executory". On March 20, 1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the remaining portion she sold to her counsel, Atty. Arsenio Fer. Cabanting, on April 25, 1973. Paulino filed a disbarment proceeding against Atty. Cabanting on the ground that said counsel allegedly violated Article 1491 of the New Civil Code as well as Article II of the Canons of Professional Ethics, prohibiting the purchase of property under litigation by a counsel. The appellate court dismissed the petition of Paulino. Constancia Valencia, daughter of Paulino, also filed a disbarment proceeding against Atty. Dionisio Antiniw for his participation in the forgery and its subsequent introduction as evidence for his client; and also, against Attys. Eduardo Jovellanos and Arsenio Cabanting for purchasing a litigated property allegedly in violation of Article 1491 of the New Civil Code; and against the three lawyers, for allegedly rigging the case against her parents.

ISSUES: Whether or not Atty. Att y. Cabanting purchased the subject property in violation of Art. 1491 of the New Civil Code. Whether or not Attys. Antiniw and Jovellanos are guilty of malpractice in falsifying notarial documents. Whether or not the three lawyers connived in rigging the case against spouses Valencia. 





HELD: Under Article 1491 of the New Civil Code: The following persons cannot acquire by purchase, even at a public of judicial auction, either in person or through the mediation of another: (5) . . . this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they make take part by virtue of their profession. Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice and is a ground for suspension. Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending. In the case at bar, while it is true that Atty. Arsenio Fer. Cabanting purchased the lot after finality finality of judgment , there was still a pending certiorari proceeding. A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. Logic indicates,


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever in certiorari proceedings, that the appellate court may either grant or dismiss the petition. Hence, it is not safe to conclude, for purposes under Article 1491 that the litigation has terminated when the judgment of the trial court become final while a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of Professional Ethics. Clearly, this malpractice is a ground for suspension. The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-client relationship between Serapia and Atty. Jovellanos, considering that the latter did not take part as her counsel. The transaction is not covered by Art. 1491 nor by the Canons adverted to.

property to Atty. Abecia a violation of the prohibition set forth in Art. 1491 of the NCC.

II It is asserted by Paulino that Atty. Antiniw asked for and received the sum of P200.00 in consideration of his executing the document "Compraventa Definitiva". This charge, Atty. Antiniw simply denied. It is settled jurisprudence that affirmative testimony is given greater weight than negative testimony. When an individual's integrity is challenged by evidence, it is not enough that he deny the charges against him; he must meet the issue and overcome the evidence for the relator and show proofs that he still maintains the highest degree of morality and integrity which at all time is expected of him. There is a clear preponderant evidence that Atty. Antiniw committed falsification of a deed of sale, and its subsequent introduction in court prejudices his prime duty in the administration of justice as an officer of the court.

prohibition in Art. 1491 does not apply to the sale of a parcel of land, acquired by a client to satisfy a judgment in his favor, to his attorney as long as the property was not the subject of the litigation. For indeed, while judges, prosecuting

III There is no evidence on record that the three lawyers involved in these administrative cases conspired in executing the falsified "Compraventa Definitiva" and rigged the case against spouses Valencia. Besides, the camaraderie among lawyers is not proof of conspiracy, but a sign of brotherhood among them.

HELD: Evidence that Daroy has known of such transfer since 1971: 1. In the report of the sheriff who placed them in the actual possession of the land he had acquired through action, the sheriff referred to Nena Abecia as ass ignee of Daroy. Daroy. In a criminal action filed by the oppositors of Daroy in the ejectment case, Nena Abecia was impleaded as co-defendant on her capacity as assignee of Daroy. All these fact were never rebutted by Daroy. The parties were mistaken in thinking that respondent could not validly acquire the land. In Guevara v. Calalang, on facts similar to those in this case, we held that the

attorneys, and others connected with the administration of justice are prohibited from acquiring “property or rights in litigation or levied upon in execution,” the prohibition with respect to attorneys in the case extends only to “property and rights which may be the object of any litigation in which they may take part by virtue of their profession.” The point is, the parties in this case thought the transfer of the land to respondent Abecia was prohibited and so they contrived a way whereby the land would be sold to Jose Gangay, whose wife Anita is the sister of Mrs. Nena Abecia, and then Gangay would sell the land to Mrs. Abecia. As Jose Gangay stated in his affidavit of March 6, 1985. The sale of the land to Gangay may be fictitious and, therefore, void, but that complainant Regalado Daroy intended to convey the land ultimately to respondent Esteban Abecia appears to be the case.

FEDERICO N. RAMOS VS PATRICIO A. NGASEO FACTS: Ramos went to Atty. Ngaseo to engage his services as

WHEREFORE, judgment is hereby rendered declaring: 1. Dionisio Antiniw DISBARRED from the practice of law, and his name is ordered stricken off from the roll of attorneys; 2. Arsenio Fer. Cabanting SUSPENDED; and 3. Admin case against Attorney Eduardo Jovellanos DISMISSED.

counsel in a case involving a piece of land. After the Court of Appeals rendered a favorable judgment ordering the land to be returned to Ramos and his siblings (such decision having been final and executor), Atty. Ngaseo sent a demand letter to Ramos asking for the delivery of a piece of land which the complainant allegedly promised as payment for respondent’s appearance fee.

REGALADO DAROY, co m p l a i n a n t , v s . ATTY. ESTEBAN ABECIA, r e s p o n d e n t . [A.C. No. 3046. October 26, 1998]

As a result, Ramos filed before the IBP a com plaint charging Atty. Atty. Ngaseo of violation of the CPR for demanding the delivery of a parcel of land, which was the subject of litigation. The IBP found Atty. Ngaseo guilty. guilty. Atty. Ngaseo argues that he did not violate Article 1491 CC because when he demanded the delivery of the t he piece of land, the case has been terminated, when the appellate court ordered the return of the land to the family of Ramos.

FACTS: (1971) Atty. Abecia was the counsel of Daroy in an ejectment case in which they won. To satisfy the judgement of damages, one of the properties of their opposition was sold by the sheriff at an auction to Daroy as the highest bidder. (1984) Daroy filed a complaint against Atty. Abecia for falsification for allagedly forging his signature in order to transfer title to said property first to Jose Gangay and subsequently to Atty. Abcia’s wife, Nena Abecia. He contended that he only knew of such transfer on that year. Moreover, he filed a disbarment proceeding against Atty. Abecia for unethical conduct.

ISSUE: WON the transfer was valid. WON the transfer of the

ISSUE: Whether or not Atty. Ngaseo violated Art. 1491 CC. HELD: NO. Under Par. (5), Art. 1491 of the Civil Code, lawyers are prohibited from acquiring either by purchase or assignment the property or rights involved which are the object of litigation in which they intervene by virtue of their public/judicial sales. The article provides: Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in person or through the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever mediation of another: xxx xxx xxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

31, 1966, spouses Asuncion and spouses Galapon conveyed their respective shares and interest in Lot 1184-E to "The Traders Manufacturing and Fishing Industries Inc." with Judge Asuncion as the President and Mrs. Asuncion as the secretary. Macariola filed on August 9, 1968 the instant complaint dated August 6, 1968 alleging that respondent Judge Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010 decided by him.

ISSUE: Whether or not the actuation of Judge Asuncion in The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of litigation to the persons disqualified therein. WE have already ruled that "... for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property." Since such 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, as in the instant case, no violation of paragraph 5, article 1491 of Civil Code attatches. 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 com ply. 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. Note: (Rationale for prohibition: Public policy disallows the transactions in view of the fiduciary relationship involved)

c. Judges BERNARDITA R. MACARIOLA vs. HONORABLE ELIAS B. ASUNCION FACTS: Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for partition filed by Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs, against Bernardita R. Macariola, defendant, concerning the properties left by the deceased Francisco Reyes, the common father of the plaintiff and defendant. On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil Case 3010 which became final for lack of an appeal, and on October 16, 1963, a project of partition was submitted to Judge Asuncion. One of the properties mentioned in the project of partition was Lot 1184 and when the project of partition was approved by the trial court the adjudicatees caused Lot 1184 to be subdivided into five lots denominated as Lot 1184-A to 1184-E. Lot 1184-E was sold on July 31, 1964 to Dr. Arcadio Galapon. On March 6, 1965, Dr. Arcadio Galapon and his wife Sold a portion of Lot 1184-E to Judge Asuncion and his wife, Victoria S. Asuncion. On August

acquiring by purchase a portion of property in a Civil Case previously handled by him violated the prohibition under the Civil Code?

HELD: NO. There is no merit in the contention of Macariola that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010. 'That Article provides: Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in person or through the mediation of another: xxx xxx xxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of litigation to the persons disqualified therein. WE have already ruled that "... for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property." In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010 which he rendered on June 8, 1963 was already final because none of the parties therein filed an appeal within the reglementary period; hence, the lot in question was no longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965, respondent's order dated October 23, 1963 and the amended order dated November 11, 1963 approving the October 16, 1963 project of partition made pursuant to the June 8, 1963 decision, had long become final for there was no appeal from said orders. Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31, 1964 Lot 1184-E from three of the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa after the finality of the decision in Civil Case No. 3010. It may be recalled that Lot 1184 or more specifically one-half thereof was adjudicated in equal shares to Priscilla Reyes,


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Adela Reyes, Luz Bakunawa, Ruperto Reyes and Anacorita Reyes in the project of partition, and the same was subdivided into five lots denominated as Lot 1184-A to 1184-E. As aforestated, Lot 1184-E was sold on July 31, 1964 to Dr. Galapon for which he was issued TCT No. 2338 by the Register of Deeds of Tacloban City, and on March 6, 1965 he sold a portion of said lot to respondent Judge and his wife who declared the same for taxation purposes only. The subsequent sale on August 31, 1966 by spouses Asuncion and spouses Galapon of their respective shares and interest in said Lot 1184-E to the Traders Manufacturing and Fishing Industries, Inc., in which respondent was the president and his wife was the secretary, took place long after thefinality of the decision in Civil Case No. 3010 and of the subsequent two aforesaid orders therein approving the project of partition. The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from Dr. Arcadio Galapon; hence, after the finality of the decision which he rendered on June 8, 1963 in Civil Case No. 3010 and his two questioned orders dated October 23, 1963 and November 11, 1963. Therefore, the property was no longer subject of litigation. Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one year after the finality of the decision in Civil Case No. 3010 as well as the two orders approving the project of partition, and not during the pendency of the litigation, there was no violation of paragraph 5, Article 1491 of the New Civil Code. Finally, while it is true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however, improper for him to have acquired the same. In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did not violate any law in acquiring by purchase a parcel of land which was in litigation in his court and in engaging in business by joining a private corporation during his incumbency as judge of the Court of First Instance of Leyte, he should be reminded to be more discreet in his private and business activities, because his conduct as a member of the Judiciary must not only be characterized with propriety but must always be above suspicion.

GAN TINGCO vs PABINGUIT FACTS: Candida Acabo was the owner of six parcels of land, all situated in the municipality of Jimalalud, Oriental Negros. These lands were sold on June 12, 1911 by Candida Acabo, to one Gan Tingco. But the purchaser Gan Tingco was unable to take possession of the six parcels of land sold him by Acabo, for they were in the possession of Silvino Pabinguit, who alleges certain rights therein. He claims to have purchased them from Faustino Abad. Abad had become the owner through purchase from Henry Gardner. Prior to the purchase made by Garnder, a judgment has been rendered against Ancabo as a result of the complaint filed by Silvestre Basaltos. Because of Ancabo‘s failure to comply, her fixtures and other chattels were levied upon the order of Gardner being the justice of peace.

Public auction sale was executed and Gardner appeared to be the highest bidder and was the purchaser of Candida Acabo's lands and carabaos sold at public auction held in the barrio of Martelo, Municipality of Tayasan on March 20, 1907. As Gardner subsequently learned that he was forbidden to purchase, he sold what he had purchased to Faustino Abad, Candida Acabo's son. On June 19, 1907, Faustino Abad, for the sum of P375 sold to Silvino Pabinguit six parcels of land. The Court of First Instance of Oriental NEgros rendered judgment in behalf of the plaintiff, Gan Tingco, declaring him the owner of the lands described in the complaint, and ordered the defendant, Silvino Pabinguit, to restore the plaintiff to their possession. The defendant appealed, with the right to a review of the evidence. The appeal was heard by this court, it having been brought it by bill of exceptions. The appellant alleges that the trial court erred in holding that, notwithstanding the sale of the lands in question at public auction. Candida Acabo did not cease to be the owner of these properties, because there were certain irregularities and defects in the said auction.

ISSUE: WON Candida Acabo did not cease to be the owner of the properties despite certain irregularities and defects in the said auction.

HELD: The trial court was impressed by the circumstance that in the public auction the purchaser was the justice of the peace himself. This, in the judge's opinion, was unauthorized, because article 1459, No. 5, of the Civil Code, prohibits judges from acquring by purchase, even at pub;ic or judicial sale, either in person or by an agent, any property or rights litigated in the court in the jurisdiction or territory within which they exercise their respective duties; this prohibition includes taking of property by assignment. The appellant alleges that the property purchased by justice of the peace Gardner was not the subject of litigation in the justice court; that the action was to recover a certain sum of money, and that he had ordered the property sold on execution. This raises, therefore, a question as to the true meaning of paragraph 5 of article 1459 of the Civil Code. The Ley de Bases, in accordance with which the Civil Code was enacted, provides as follows, in Base No. 26: The forms, requirements and conditions of each particular contract shall be determined and defined subject to the general list of obligations and their effects, with the understanding that the legislation in force and the legal principles evolved therefrom by judicial decisions, etc., etc., shall serve as basis. One of the bodies of law which conastitute the legislation now in force in the Novisima Recopilacion. In Law 4, Title 14, Book 5 of the same is found the following provision: "We order that in


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever public auctions held by direction of our alcaldes, neither the latter nor any person whomsoever in their name shall bid in anything sold at such public auctions." The word alcaldes means judges. The caption of Title 14 is " Alcaldes or Provincial Judges," and the entire title deals with the exercise of judicial jurisdiction. Prior to the enactment of the Civil Code, the Penal Code was also in force. Article 400 of the latter prohibits, under penalty, any judge from taking part, either directly, or indirectly, in any operation of exchange, trade or porfit with respect to things not the product of his own property, within the territory over which he exercises jurisdiction. Judging from the legal precedents on which the Civil Code is based, it would not seem too much to conclude that the said article of the Civil Code does not make any distinction between property in litigation. In effect, it appears to be as delicate a matter for a judge to take part in the sale of property that had been the subject of ligitgation in his court, as to intervene in auction of property which, though not directly litigated in his court, is nevertheless levied upon and sold as the result of a writ of execution issued by him. What the law intends to avoid is the improper interference with an interest of a judge in a thing levied upon and sold by his order. 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 haveordered 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. This court finds no reason whatever why it should not affirm the judgment appealed from.

2. SUBJECT MATTER 4. Existing, Future and Contingent LEON SIBAL vs. EMILIANO J. VALDEZ FACTS: As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land described in the complaint in the third paragraph of the first cause of action; that within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the

money and to return the sugar cane to the plaintiff. Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys and agents. The preliminary injunction was granted The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation of the complaint and step up the following defenses: (a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption; The defendant Emiliano J. Valdez filed a counter -claim.

ISSUE: Whether or not the sugar cane in question had the nature of personal propert y.

HELD: The sugar cane in question had the nature of personal property. CIVIL CODE, JURISPRUDENCE The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent years an interpretation by the Tribunal Supremo de España, which holds that, under certain conditions, growing crops may be considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.) However, from the discussion of Manresa it appears (1) that, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the products corresponding to the agricultural year, because said fruits did not go with the land but belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products existing thereon, unless the contract expressly provides otherwise. An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of our Civil Code, provides: "Standing crops and the fruits of trees not gathered, and trees before they are cut down, are likewise immovable, and are considered as part of the land to which they are attached." The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever are cut down . . . are considered as part of the land to which they are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop." From an examination of the reports and codes of the State of California and other states we find that the settle doctrine followed in said states in connection with the attachment of property and execution of judgment is, that growing crops raised by yearly labor and cultivation are considered personal property. Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and then title will vest in the buyer the moment the thing comes into existence. Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He may make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].) It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of a judgment debtor which may be subjected to execution. The pertinent portion of said section reads as follows: "All goods, chattels, moneys, and other property, both real and personal, * * * shall be liable to execution. Said section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of judgment were taken from the Code of Civil Procedure of California. The Supreme Court of California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held, without variation, that growing crops were personal property and subject to execution. CHATTEL MORTGAGE Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the

mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while growing. It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal property. This consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal property. In other words, the phrase "personal property" should be understood to include "ungathered products.” We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore, committed no error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption. NOTA BENE: In Sibal v. Valdez , the Court held that pending crops which have potential existence may be the valid subject matter of sale, and may be dealt with separately from the land on which they grow.

LUIS PICHEL VS PRUDENCIO ALONZO (G.R. No. L-36902 Jan. 30, 1982) FACTS: Alonzo was awarded by the Government a parcel of land in Basilan City in accordance with RA 477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that, previous thereto, plaintiff was proved to have alienated the land to another, in violation of law. In 1972, plaintiff's rights to the land were reinstated. On August 14, 1968, Alonzo and his wife sold to Luis Pichel all the fruits of the coconut trees which may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by Pichel directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment Alonzo refused to allow the Pichel to make any harvest. Later, Pichel for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land. Pichel filed for the annulment of the contract on the ground that it violated the provisions of R.A. 477, which states that lands awarded under the said law shall not be subject to encumbrance or alienation, otherwise the awardee shall no longer be entitled to apply for another piece of land. RTC ruled that although the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, a contract of lease of the land itself


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever ISSUE: 1. WON the subject matter of the sale is valid. (YES) 2. WON the sale of the coconut fruits violated RA 477. (NO)

HELD:

severed from the trees, to be used, enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from the Government, had the right and prerogative to sell the coconut fruits of the trees growing on the property.

st

1 i s s u e : The Deed of Sale is precisely what it purports to be. It

is a document evidencing the agreement of herein parties for the sale of coconut fruits of the lot, and not for the lease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.A contract of sale may be absolute or conditional. The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the sale. According to Mechem, a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. nd

2 i s s u e : The contract was clearly a "sale of the coconut fruits."

The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the sevenyear period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself. The grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent improvements thereon. While coconut trees are permanent improvements of a land, their nuts are natural or industrial fruits which are meant to be gathered or

4. Licit BELINDA TANEDO vs CA AND SPOUSES RICARDO AND TERESITA TANEDO (G.R. No. 104482 January 22, 1996) FACTS: On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute sale in favor of his eldest brother, Ricardo Taedo, and the latter's wife, Teresita Barera, private respondents herein, whereby he conveyed to the latter in consideration of P1,500.00, "1 hectare of whatever share I shall have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by Title T-13829 of the Register of Deeds of Tarlac", the said property being his "future inheritance" from his parents. Upon the death of his father Matias, Lazaro executed an "Affidavit of Conformity" dated Feb 28, 1980 to "re-affirm, respect, acknowledge and validate the sale I made in 1962."

On January 13, 1981, Lazaro executed another notarized deed of sale in favor of private respondents covering his "undivided 1/12 of a parcel of land known as Lot 191". He acknowledged therein his receipt of P10,000.00 as consideration therefor. In Feb 1981, Ricardo learned that Lazaro sold the same property to his children, petitioners herein, through a deed of sale dated Dec 29, 1980. Then, private respondents recorded the Deed of Sale in their favor in the Registry of Deeds and the corresponding entry was made in TCT No. 166451. Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from his father. Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" conveying to his 10 children his allotted portion tinder the extrajudicial partition executed by the heirs of Matias, which deed included the land in litigation (Lot 191). Petitioners also presented in evidence: (1) a private writing purportedly prepared and signed by Matias stating that it was his desire that whatever inheritance Lazaro would receive from him should be given to his (Lazaro's) children; (2) a typewritten document signed by Lazaro in the presence of 2 witnesses, wherein he confirmed that he would voluntarily abide by the wishes of his father, Matias, to give to his (Lazaro's) children all the property he would inherit from the latter; and (3) a letter of Lazaro to his daughter, Carmela, stating that his share in the extrajudicial settlement of the estate of his father was intended for his children, petitioners herein. Private respondents presented in evidence a "Deed of Revocation of a Deed of Sale", wherein Lazaro revoked the sale in favor of petitioners for the reason that it was "simulated or fictitious without any consideration whatsoever". Lazaro executed a sworn statement which virtually repudiated


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever the contents of the Deed of Revocation of a Deed of Sale and the Deed of Sale in favor of private respondents. However, Lazaro testified that he sold the property to Ricardo, and that it was a lawyer who induced him to execute a deed of sale in favor of his children after giving him P5.00 to buy a "drink". The trial court decided in favor of private respondents, holding that petitioners failed "to adduce a preponderance of evidence to support (their) claim." On appeal, the CA affirmed the decision of the trial court, ruling that the Deed of Sale was valid and that its registration in good faith vested title in said respondents.

ISSUE: Is the sale of a future inheritance valid? NO.

one in favor of petitioners, ownership would vest in the former because of the undisputed fact of registration. On the other hand, petitioners have not registered the sale to them at all. Petitioners contend that they were in possession of the property and that private respondents never took possession thereof. As between two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable property.

MARTINEZ VS CA (G.R. L-31271 April 29, 1974)

HELD: The Court ruled that pursuant to Article 1347 of the Civil

FACTS: The spouses Romeo Martinez and Leonor Suarez, are

Code, "no contract may be entered into upon a future inheritance except in cases expressly authorized by law." Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the creator of any obligation between the parties.

the registered owners of two (2) parcels of land located in Lubao, Pampanga. Both parcels of land are fishponds and the property nd involved in this case is the 2 parcel of land.

Hence, the "affidavit of conformity" dated Feb 28, 1980, insofar as it sought to validate or ratify the 1962 sale, is also useless and, in the words of the respondent Court, "suffers from the same infirmity." Even private respondents in their memorandum concede this. However, the documents that are critical to the resolution of this case are: (a) the deed of sale of January 13, 1981 in favor of private respondents covering Lazaro's undivided inheritance of (1/12) share in Lot No. 191, which was subsequently registered on June 7, 1982; and (b) the deed of sale dated Dec 29, 1980 in favor of petitioners covering the same property. These two documents were executed after the death of Matias and after a deed of extra-judicial settlement of his (Matias') estate was executed, thus vesting in Lazaro actual title over said property. In other words, these dispositions, though conflicting, were no longer infected with the infirmities of the 1962 sale. Petitioners contend that what was sold on Jan 13, 1981 was only one- half hectare out of Lot No. 191, citing as authority the trial court's decision. As earlier pointed out, what is on review in these proceedings by this Court is the CA's decision — which correctly identified the subject matter of the Jan 13, 1981 sale to be the entire undivided 1/12 share of Lazaro in Lot No. 191 and which is the same property disposed of on Dec 29, 1980 in favor of petitioners. Article 1544 of the CC governs the preferential rights of vendees in cases of multiple sales, as follows: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The property in question is land, an immovable, and following the law, ownership shall belong to the buyer who in good faith registers it first in the registry of property. Thus, although the deed of sale in favor of private respondents was later than the

The disputed property was originally owned by one Paulino Montemayor, who secured a "titulo real" over it way back in 1883. After the death of Paulino Montemayor the said property passed to his successors-in-interest, Maria Montemayor and Donata Montemayor, who in turn, sold it, as well as the first parcel, to a certain Potenciano Garcia. Because Potenciano Garcia was prevented by the then municipal president of Lubao from restoring the dikes constructed on the contested property, the former, filed with the CFI against municipal president to restrain the latter in his official capacity from molesting him in the possession of the lot. The Court, by decision promulgated the preliminary injunction and the dikes around the property in question remained closed until a portion thereof was again opened just before the outbreak of the Pacific War. On April 17, 1925. Potenciano Garcia applied for the registration of both parcels of land in his name and the CFI granted the registration. Thereafter, the ownership of these properties changed hands until eventually they were acquired by the herein appellee spouses. To avoid any untoward incident, the petitioners agreed to refer the matter to the Committee on Rivers and Streams. Said SubCommittee submitted its report, which said that the subject property was not a public river but a private fishpond owned by the herein spouses.

ISSUE: W/N the subject property belongs to the petitioners. (NO) HELD: IT IS A PROPERTY OF PUBLIC DOMINION The ruling of the Court of Appeals that the lot of the petitionersappellants is a public stream and that said title should be cancelled and the river covered reverted to public domain, is assailed by the petitioners-appellants as being a collateral attack on the indefeasibility of the torrens title originally issued in 1925 in favor of the petitioners-appellants' predecessor-in-interest, Potenciano Garcia, which is violative of the rule of res judicata. It is argued that as the decree of registration issued by the Land Registration Court was not re-opened through a petition for review filed within one (1) year from the entry of the decree of title, the certificate of title issued pursuant thereto in favor of the appellants for the land covered thereby is no longer open to attack under Section 38 of the Land Registration Act (Act 496) and the jurisprudence on the matter established by this Tribunal.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Section 38 of the Land Registration Act cited by appellants expressly makes a decree of registration, which ordinarily makes the title absolute and indefeasible. At the time of the enactment of Section 496, one right recognized or existing under the law is that provided for in Article 339 of the old Civil Code which reads as follows: Property of public ownership is: 1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, and banks shores, roadsteads, and that of a similar character. (Par. 1) The above-mentioned properties are parts of the public domain intended for public use, are outside the commerce of men and, therefore, not subject to private appropriation. A simple possession of a certificate of title under the Torrens system does not necessarily make the possessor a true owner of all the property described therein. If a person obtains title under the Torrens system which includes by mistake or oversight, lands which cannot be registered under the Torrens system, he does not by virtue of said certificate alone become the owner of the land illegally included. It is useless for the appellant now to allege that she has obtained certificate of title No. 329 in her favor because the said certificate does not confer upon her any right to the creek in question, inasmuch as the said creek, being of the public domain, is included among the various exceptions enumerated in Section 39 of Act 496 to which the said certificate is subject by express provision of the law. Torrens certificate of title does not operate when the land covered thereby is not capable of registration. It is, therefore, clear that the authorities cited by the appellants as to the conclusiveness and incontestability of a Torrens certificate of title do not apply here. The Land Registration Court has no jurisdiction over non-registerable properties, such as public navigable rivers which are parts of the public domain, and cannot validly adjudge the registration of title in favor of a private applicant.

HEIRS OF ARTURO REYES VS SOCCO-BELTRAN (G.R. No. 176474 November 27, 2008) FACTS: The subject property in this case is a parcel of land originally identified as Lot No. 6-B (with an area of 360 square meters). It was originally part of a larger parcel of land, measuring 1,022 square metersallocated to the Spouses Marcelo Laquian and ConstanciaSocco (Spouses Laquian). Upon their death, they left the original parcel of landto Constancia‘ssiblings (Filomena, Isabel, Miguel R. Socco, and Elena Socco-Beltran). Pursuant to an unnotarized document entitled ―Extrajudicial Settlement of the Estate of the Deceased Constancia R. Socco,‖ executed by Constancia‘s heirs sometime in 1965, the parcel of land was partitioned into three lots —Lot No. 6-A, Lot No.6-B, and Lot No. 6-C. The subject property, Lot No. 6-B, was adjudicated to respondent Elena Socco-Beltran, but no title had been issued in her name.

So respondent Socco-Beltran filed an application for the purchase of Lot No. 6-B before the DAR, alleging that it was adjudicated in her favor in the extra-judicial settlement of ConstanciaSocco‘s estate. Now, petitioners, the heirs of the late Arturo Reyes, filed their protest to respondent‘s petition before the DAR on the ground that the subject property was sold by respondent‘s brother, Miguel R. Socco, in favor of their father, Arturo Reyes, as evidenced by the Contract to Sell, dated 5 September 1954. Petitioners averred that they took physical possession of the subject property in 1954 and had been uninterrupted in their possession of the said property since then. Investigation was conducted by the legal officer Pinlac, and in the end, the legal officer recommended the approval of respondent‘s petition for issuance of title over the subject property, ruling that respondent was qualified to own the subject property pursuant to Article 1091 of the New Civil Code. However, DAR Regional Director Mr. Acosta, dismissed respondent‘s petition for issuance of title over the s ubject property on the ground that respondent was not an actual tiller and had abandoned the said property for 40 years. It went up to the Department Secretary, then to the OP. Aggrieved, the petitioners went the to the Court of Appeals but it promulgated its decision, affirming the that of the Office of the President. It held that petitioners could not have been actual occupants of the subject property, since actual occupancy requires the positive act of occupying and tilling the land, not just the introduction of an unfinished skeletal structure thereon. The Contract to Sell on which petitioners based their claim over the subject property was executed by Miguel Socco, who was not the owner of the said property and, therefore, had no right to transfer the same.

ISSUES: 1. WON title to the property was transferred to petitioners by virtue of the Contract to Sell executed by Miguel Socco. (NO) 2. WON petitioners are in OCEAN possession of the property since 1954 (more than 30 years). (NO)

HELD: Petitioner‘s claim over the subject property is anchored on the Contract to Sell executed between Miguel Socco and Arturo Reyes. Petitioners additionally allege that they and their predecessor-in- interest, Arturo Reyes, have been in possession of the subject lot since 1954 for an uninterrupted period of more than 40 years. Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was unmistakably stated in the Contract and made clear to both parties thereto that the vendor, Miguel R. Socco, was not yet the owner of the subject property and was merely expecting to inherit the same as his share as a co-heir of Constancia‘s estate. It was also declared in the Contract itself that Miguel R. Socco‘s conveyance of the subject to the buyer , Arturo Reyes, was a conditional sale. It is, therefore, apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that Miguel Socco would actually inherit and become the owner of the said property. Absent such occurrence, Miguel R. Socco never acquired ownership of the subject property which he could validly transfer to Arturo Reyes. Under Article 1459 of the Civil Code on contracts of sale, ―The


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever thing must be licit and the vendor must have a right to transfer ownership thereof at the time it is delivered.‖ The law specifically requires that the vendor must have ownership of the property at the time it is delivered.

Ederlina went to Germany to file a divorce however Ederlina had not been able to secure a divorce from Klaus. The latter could charge her for bigamy and could even involve Alfred, who himself was still married.

Petitioners claim that the property was constructively delivered to them in 1954 by virtue of the Contract to Sell. However, as already pointed out by this Court, it was explicit in the Contract itself that, at the time it was executed, Miguel R. Socco was not yet the owner of the property and was only expecting to inherit it. Hence, there was no valid sale from which ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein petitioners.

Alfred and Ederlina’s relationship started deteriorating. They lived separately.

Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30 years and, thus, they gained ownership of the property through acquisitive prescription.

In the meantime, on November 7, 1985, Alfred also filed a complaint against Ederlina with the Regional Trial Court, Davao City, for specific performance, declaration of ownership of real and personal properties, sum of money, and damages.

In the case of San Miguel Corporation it was underscored that open, continuous, exclusive, and notorious occupation of property for more than 30 years must be no less than conclusive, such quantum of proof being necessary to avoid the erroneous validation of actual fictitious claims of possession over the property that is being claimed. In the present case, the evidence presented by the petitioners falls short of being conclusive. Apart from their self-serving statement that they took possession of the subject property, the only proof offered to support their claim was a general statement made Barangay Captain Carlos Gapero, certifying that Arturo Reyes was the occupant of the subject property ―since peace time and at present. In contrast, respondent‘s claim over the subject propert y is backed by sufficient evidence. Her predecessors-in-interest, the spouses Laquian, have been identified as the original allocatees who have fully paid for the subject property. The subject property was allocated to respondent in the extrajudicial settlement by the heirs of Constancia‘s estate which its authenticity or legality was never put into question. Moreover, respondent has continuously paid for the realty tax due on the subject property, a fact which, though not conclusive, served to strengthen her claim over the property.

Alfred filed a Complaint dated October 28, 1985, against Ederlina, with the Regional Trial Court of Quezon City, for recovery of real and personal properties located in Quezon City and Manila. Alfred alleged, inter alia, that Ederlina, without his knowledge and consent, managed to transfer funds from their joint account in HSBC Hong Kong, to her own account with the same bank.

Quezon City Trial Court decided in favor of Alfred but the Davao Trial Court is in favor of Ederlina. The trial court ruled that based on documentary evidence, the purchaser of the three parcels of land subject of the complaint was Ederlina. The court further stated that even if Alfred was the buyer of the properties, he had no cause of action against Ederlina for the recovery of the same because as an alien, he was disqualified from acquiring and owning lands in the Philippines. The sale of the three parcels of land to the petitioner was null and void ab initio. Applying the pari delicto doctrine, the petitioner was precluded from recovering the properties from the respondent. CA affirmed the decision of Davao City Court.

ISSUE: W/n the lower court erred in applying the in pari delicto rule in the case at bar.

HELD: No. Section 14, Article XIV of the 1973 Constitution provides, as follows: Save in cases of hereditary succession, no private land shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands in the public domain.

FRENZEL V. CATITO FACTS: Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He arrived in the Philippines and engaged in businesses. After two years, he married Teresita Santos, a Filipino citizen. In 1981, Alfred and Teresita separated from bed and board without obtaining a divorce. Sometime in 1983 he arrived in Sydney and met Ederlina Catito, a Filipina and a native of Bajada, Davao City. Unknown to Alfred, she was married to Klaus Muller when she was in Germany. Alfred was so enamored with Ederlina that he persuaded her to stop working, move to the Philippines and get married. They bought several properties in Manila and Davao using the money of Alfred. He also sold all his properties in Australia before moving in the country. They also opened an HSBC Savings Account in Hong Kong in the name of Ederlina.

Lands of the public domain, which include private lands, may be transferred or conveyed only to individuals or entities qualified to acquire or hold private lands or lands of the public domain. Aliens, whether individuals or corporations, have been disqualified from acquiring lands of the public domain. Hence, they have also been disqualified from acquiring private lands. Even if, as claimed by the petitioner, the sales in question were entered into by him as the real vendee, the said transactions are in violation of the Constitution; hence, are null and void ab initio. A contract that violates the Constitution and the law, is null and void and vests no rights and creates no obligations. It produces no legal effect at all. The petitioner, being a party to an illegal contract, cannot come into a court of law and ask to have his illegal objective carried out. One who loses his money or property by knowingly engaging in a contract or transaction which involves his own moral turpitude may not maintain an action for his losses. To him who moves in deliberation and


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever premeditation, the law is unyielding. The law will not aid either party to an illegal contract or agreement; it leaves the parties where it finds them. Under Article 1412 of the New Civil Code, the petitioner cannot have the subject properties deeded to him or allow him to recover the money he had spent for the purchase thereof. Equity as a rule will follow the law and will not permit that to be done indirectly which, because of public policy, cannot be done directly. Where the wrong of one party equals that of the other, the defendant is in the stronger position … it signifies that in such a situation, neither a court of equity nor a court of law will administer a remedy. The rule is expressed in the maxims: EX DOLO MALO NON ORITUR ACTIO and IN PARI DELICTO POTIOR EST CONDITIO DEFENDENTIS.

3. Determinate or At Least Determinable HEIRS OF JUAN SAN ANDRES V. RODRIGUEZ FACTS: Juan San Andres was the owner of the lot situated in Liboton, Naga city. The sale was evidenced by a deed of sale. Upon the death of Juan Andres, Ramon San Andres was appointed as administrator of the estate, and hired geodetic engineer. Jose Panero prepared a consolidated plan of the estate and also prepared a sketch plan of the lot sold to respondent. It was found out that respondent had enlarged the area which he purchased from Juan. The administrator sent a letter to the respondent to vacate the said portion in which the latter refused to do. Respondent alleged that apart from the original lot, which had been sold to him, the latter likewise sold to him the following day the remaining portion of the lot. He alleged that the payment for such would be affected in 5 years from the execution of the formal deed of sale after a survey is conducted. He also alleged that under the consent of Juan, he took possession of the same and introduced improvements thereon. Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot. On September 20, 1994, the trial court rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication to identify the property subject of the sale, hence, the need to execute a new contract. Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale.

ISSUE: Whether or not there was a valid sale. HELD: YES. The Civil Code provides that By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional. As thus defined, the essential elements of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent. As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale. Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals explained: Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate without necessity of a new or further agreement between the parties. Here, this definition finds realization. Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides: The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. . . .That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals observed: Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez for the sale. Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the pre-requisite elements for a valid purchase transaction are present. There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be due and payable within five (5) years from the execution of a


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition. A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent. Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

deed of sale was lot No. 353-A and not lot 535-E, while the land which remained in the possession of Eulogio I, and which was passed to Ladislao was lot No. 353-E and not lot No. 535-A. On 1960, the heirs of Eulogio II alleging, inter alia, that they offered to surrender to the possession of lot No. 535-A and demanded in return the possession of lot No. 535-E, but the defendants refused to accept the exchange. The plaintiffs' insistence is quite understandable, since lot No. 535-E has an area of 2,612 square meters as compared to the 1,808 squaremeter area of lot No. 535-A. In their answer to the complaint, the defendants alleged that the reference to lot No. 535-E in the deed of sale was an involuntary error; that the intention of the parties to that sale was to convey the lot correctly identified as lot No. 535-A. On the basis of the foregoing allegations the defendants interposed a counterclaim, praying that the plaintiffs be ordered to execute in their favor the corresponding deed of transfer with respect to Lot No. 535-E. The trial court rendered judgment in favor of the plaintiffs.

ISSUE: Whether or not there has been a valid sale in view of the The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or public policy. Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions of the parties.

ATILANO V. ATILANO FACTS: In 1916, Eulogio Atilano I acquired lot No. 535 by purchase. In 1920, he had the land subdivided into five parts, identified as lots Nos. 535-A, 535-B, 535-C, 535-D and 535-E, respectively. After the subdivision had been effected, Eulogio I executed a deed of sale covering lot No. 535-E in favor of his brother Eulogio II. Three other portions, namely, lots Nos. 535-B, 535-C, and 535-D, were likewise sold to other persons. Eulogio I retained for himself the remaining portions of the land, presumably covered by the title to lot No. 535-A. upon his death, the title to this lot passed to Ladislao, in whose name the corresponding certificate was issued.

real intention of the parties.

HELD: YES. When one sells or buys real property — a piece of land, for example — one sells or buys the property as he sees it, in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title. In the instant case, the portion correctly referred to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II, who had constructed his residence therein, even before the sale in his favor even before the subdivision of the entire lot No. 535 at the instance of its owner, Eulogio Atillano I. In like manner the latter had his house on the portion correctly identified, after the subdivision, as lot No. 535-E, even adding to the area thereof by purchasing a portion of an adjoining property belonging to a different owner. The two brothers continued in possession of the respective portions the rest of their lives, obviously ignorant of the initial mistake in the designation of the lot subject of the 1920 until 1959, when the mistake was discovered for the first time. From the facts and circumstances, the object is lot No. 535-A and its designation as lot No. 535-E in the deed of sale was a simple mistake in the drafting of the document. The mistake did not vitiate the consent of the parties, or affect the validity and binding effect of the contract between them. The new Civil Code provides a remedy by means of reformation of the instrument. This remedy is available when, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct or accident In this case, the deed of sale executed in 1920 need no longer be reformed. The parties have retained possession of their respective properties conformably to the real intention of the parties to that sale, and all they should do is to execute mutual deed of conveyance.

On 1959, Eulogio II and his children had the land resurveyed so that it could be properly subdivided. However, they discovered that the land they were actually occupying on the strength of the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever MELLIZA V. CITY OF ILOILO FACTS: Juliana Melliza during her lifetime owned, among other properties, 3 parcels of residential land in Iloilo City (OCT 3462). Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot 1214 was 29,073 sq. m. On 27 November 1931 she donated to the then Municipality of Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal hall. The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the municipality, the socalled “Arellano Plan.” Subsequently, Lot 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B3. As approved by the Bureau of Lands, Lot 1214-B-1, with 4,562 sq. m., became known as Lot 1214-B; Lot 1214-B-2, with 6,653 sq. m., was designated as Lot 1214-C; and Lot 1214-B-3, with 4,135 sq. m., became Lot 1214-D.

Pio Sian Melliza appealed to the Court of Appeals. On 19 May 1965, the CA affirmed the interpretation of the CFI that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of avenues, parks and for city hall site. In the present petition, Melliza maintains that only Lots No. 1214C and 1214-D were included in the sale, and that the purpose of the second paragraph of the deed of sale was only to better identify the lots. Melliza also argues that the interpretation given by the lower courts would render the sale invalid for it lacks an essential element of a sale, a “determinate (or determinable)” object. Respondents, however, maintain that the object of the sale remains determinate, as it could be ascertained what lots were needed by the Municipality of Iloilo for the “Arellano Plan” at the time of the execution of the sale.

ISSUE: W/n there was a determinate object of the sale, On 15 November 1932, Juliana Melliza executed an instrument without any caption providing for the absolute sale involving all of lot 5, 7669 sq. m. of Lot 2 (sublots 2-B and 2-C), and a portion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and 1214-B3) in favor of the Municipal Government of Iloilo for the sum of P6,422; these lots and portions being the ones needed by the municipal government for the construction of avenues, parks and City hall site according the “Arellano plan.” On 14 January 1938, Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva (thereafter TCT 18178). Remedios in turn on 4 November 1946 transferred her rights to said portion of land to Pio Sian Melliza (thereafter TCT 2492). Annotated at the back of Pio Sian Melliza’s title certificate w as the following “that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots 1412-B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument dated 15 November 1932.” On 24 August 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots 1214-B, 1214-C and 1214-D, with a total area of 15,350 sq. m., more or less. Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by Pio Sian Melliza, the City did not have funds. The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. On 10 December 1955 Pio Sian Melliza filed an action in the CFI Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value. After stipulation of facts and trial, the CFI rendered its decision on 15 August 1957, dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B, and thus it held that Iloilo City had the right to donate Lot 1214-B to UP.

rendering the sale valid.

HELD: YES. The paramount intention of the parties was to provide Iloilo municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for this purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated. Said instrument described 4 parcels of land by their lot numbers and area; and then it goes on to further describe, not only those lots already mentioned, but the lots object of the sale, by stating that said lots were the ones needed for the construction of the city hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lots (Lots 2, 5, 1214-C and 1214-D), there would scarcely have been any need for the next paragraph, since these lots were already plainly and very clearly described by their respective lot number and areas. Said next paragraph does not really add to the clear description that was already given to them in the previous one. It is therefore the more reasonable interpretation to view it as describing those other portions of land contiguous to the lots that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall site. The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site; avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties.

NATIONAL GRAINS AUTHORITY V. IAC FACTS: On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to NFA through William Cabal, the provincial manager in Tuguegarao. The documents submitted


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever were processed, and he was given a quota of 2,640 cavans, which is the maximum number of cavans he may sell to NFA. On the same day and on the following day, Soriano delivered 630 cavans, which were no rebagged, classified and weighed. When he demanded payment, he was told that payment will be held in abeyance since Mr. Cabal was still investigating on an information received that Soriano was not a bona fide farmer. Instead of withdrawing the palay, Soriano insisted that the palay grains be delivered and paid. He filed a complaint for specific performance. Petitioners contend that the delivery was merely made for the purpose of offering it for sale because until the grains were rebagged, classified and weighed, they are not considered sold.

ISSUE: Whether there was a perfected sale. HELD: Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with their mutual obligations or "the parties may reciprocally demand performance" thereof.

SCHUBACK & SONS VS. CA FACTS: On October 16, 1981, defendant submitted to plaintiff the list of bus spare parts he wanted to purchase to its counterpart in Hamburg. Plaintiff sent an offer on the items listed. On December 4, 1981, defendant informed plaintiff that he preferred genuine to replacement parts, and requested a 15% discount. On December 17, plaintiff submitted its formal offer. On December 24, defendant submitted a purchase order, and submitted the quantity on December 29. Plaintiff immediately ordered the items from Schuback Hamburg, which thereafter ordered the same f rom NDK, a supplier in Germany. Plaintiff sent a pro-forma invoice to be used in applying for letter of credit. On February 16, 1982, plaintiff reminded defendant to open a letter of credit to avoid delay in shipment. Defendant mentioned the difficulty he was encountering in procuring the same. Plaintiff continued receiving invoices and partial deliveries from NDK. On October 18, 1982, plaintiff again reminded the defendant to open a letter of credit. Defendant replied that he did not make a valid purchase order and that there was no definite contract between him and the plaintiff. Plaintiff sent a rejoinder explaining that there is a valid Purchase Order and suggesting that defendant either proceed with the order and open a letter of credit or cancel the order and pay the

cancellation fee of 30% of F.O.B. value, or plaintiff will endorse the case to its lawyers. Demand letters sent to defendant by plaintiff's counsel dated March 22, 1983 and June 9, 1983 were to no avail. Consequently, petitioner filed a complaint for recovery of actual or compensatory damages, unearned profits, interest, attorney's fees and costs against private respondent.

ISSUE: Whether or not a contract of sale has been perfected between the parties

HELD: Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter offer." The facts presented to us indicate that consent on both sides has been manifested. The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal containing the item number, quantity, part number, description, the unit price and total to private respondent. On December 24, 1981, private respondent informed petitioner of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the contract: being the spare parts and the consideration, the price stated in petitioner's offer dated December 17, 1981 and accepted by the respondent on December 24, 1981.

4. Obligation to Transfer Ownership ALCANTARA-DAUS v. SPOUSES DE LEON FACTS: Spouses De Leon are the owners of a parcel of land situated in the Municipality of San Manuel, Pangasinan with an area of Four Thousand Two Hundred Twelve square meters more or less. Respondent Hermoso De Leon inherited the said lot from his father Marcelino De Leon by virtue of a Deed of Extra-Judicial Partition. Said lot is covered by Original Certificate of Title No. 22134 of the Land Records of Pangasinan. Sometime 1960s, Spouses De Leon engaged the services of the late Atty. Florencio Juan to take care of the documents of their properties. They were asked to sign voluminous documents by the latter. After the death of Atty. Juan, some documents surfaced and most revealed that their properties had been conveyed by sale or quitclaim to Hermoso’s brothers and sisters, to Atty. Juan and his sisters, when in truth and in fact, no such conveyances were ever intended by them. Furthermore, respondent found out that his signature in the Deed of Extra judicial Partition with Quitclaim made in favor of Rodolfo de Leon was forged. They discovered that the land in question was sold by Rodolfo de Leon to Aurora Alcantara. Spouses De Leon demanded the annulment of the document and re-conveyance but defendants refused. Petitioner, Aurora Alcantara-Daus averred that she bought the land in question in good faith and for value on December 1975 and that she has been in continuous, public, peaceful, open possession over the same and has been appropriating the produce thereof without objection from anyone.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever The RTC of Urdaneta, Pangasinan rendered its Decision in favor of herein petitioner. It ruled that respondents’ claim was bar red by laches, because more than 18 years had passed since the land was sold. It further ruled that since it was a notarial document, the Deed of Extrajudicial Partition in favor of Rodolfo de Leon was presumptively authentic.

ISSUES: 



Whether or not the Deed of Absolute executed by Rodolfo De Leon over the land in question in favor of petitioner was perfected and binding upon the parties therein? Whether or not the evidentiary weight of the Deed of Extrajudicial Partition with Quitclaim, executed by respondent Hermoso de Leon, Perlita de Leon and Carlota de Leon in favor of Rodolfo de Leon was overcome by more than a preponderance of evidence of respondents?

HELD: First Issue: NO. It is during the delivery that the law requires the seller to have the right to transfer ownership of the thing sold. In general, a perfected contract of sale cannot be challenged on the ground of the seller’s non -ownership of the thing sold at the time of the perfection of the contract. Further, even after the contract of sale has been perfected between the parties, its consummation by delivery is yet another matter. It is through tradition or delivery that the buyer acquires the real right of ownership over the thing sold. Undisputed is the fact that at the time of the sale, Rodolfo De Leon was not the owner of the land he delivered to petitioner. Thus, the consummation of the contract and the consequent transfer of ownership would depend on whether he subsequently acquired ownership of the land in accordance with Article 1434 of the Civil Code. Therefore, we need to resolve the issue of the authenticity and the due execution of the Extrajudicial Partition and Quitclaim in his favor. Second Issue: NO. As a general rule, the due execution and authenticity of a document must be reasonably established before it may be admitted in evidence. Notarial documents, however, may be presented in evidence without further proof of their authenticity, since the certificate of acknowledgment is prima facie evidence of the execution of the instrument or document involved. To contradict facts in a notarial document and the presumption of regularity in its favor, the evidence must be clear, convincing and more than merely preponderant. The CA ruled that the signature of Hermoso De Leon on the Extrajudicial Partition and Quitclaim was forged. However, this factual finding is in conflict with that of the RTC. While normally this Court does not review factual issues, this rule does not apply when there is a conflict between the holdings of the CA and those of the trial court, as in the present case. After poring over the records, the SC finds no reason to reverse the factual finding of the appellate court. A comparison of the genuine signatures of Hermoso De Leon with his purported signature on the Deed of Extrajudicial Partition with Quitclaim will readily reveal that the latter is a forgery. As aptly held by the CA, such variance cannot be attributed to the age or the mechanical

acts of the person signing.

CONCHITA NOOL and GAUDENCIO ALMOJERA vs. CA FACTS: One lot formerly owned by Victorio Nool has an area of 1 hectare. Another lot previously owned by Francisco Nool has an area of 3.0880 hectares. Spouses (plaintiffs) Conchita Nool and Gaudencio Almojera alleged that they are the owners of the subject lands. They are in dire need of money, they obtained a loan DBP , secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino and Francisco Nool, at the time, Since the plaintiffs failed to pay the said loan, the mortgage was foreclosed; that within the period of redemption, the plaintiffs contacted Anacleto Nool for the latter to redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of the 2 parcels of land in question were transferred to Anacleto; that as part of their arrangement or understanding, Anacleto agreed to buy from Conchita the 2 parcels of land , for a total price of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon payment of the balance of P14,000.00, the plaintiffs were to regain possession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emilia Nebre failed to pay. Anacleto Nool signed the private writing, agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto having been made to believe, then, that his sister, Conchita, still had the right to redeem the said properties.

ISSUE: Is the purchase of the subject lands to Anacleto valid? HELD: Nono dat quod non habet, No one can give what he does not have; Contract of repurchase inoperative thus void. Article 1505 of the Civil Code provides that “where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.” Jurisprudence, on the other hand, teaches us that “a pers on can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than what the seller can legally transfer.” No one can give what he does not have — nono dat quod non habet. In the present case, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents.

Further, the contract of repurchase that the parties entered into presupposes that petitioners could repurchase the property that they “sold” to private respondents. As petitioners “sold” nothing, it follows that they can also “repurchase” nothing. In this light, the contract of repurchase is also inoperative and by the same analogy, void.

HEIRS OF SEVERINA SAN MIGUEL VS. CA FACTS: This case involves a parcel of land originally claimed by Severina San Miguel (petitioners predecessor-in-interest, hereafter, Severina). The land is situated in Panapan, Bacoor, Cavite with an area of 632 sq. m., more or less. Without Severina's knowledge, Dominador managed to cause the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever subdivision of the land into three (3) lots, to wit: LRC Psu 1312 - with an area of 108 square meters; LRC Psu -1313 - Lot 1, with an area of 299 square meters; LRC Psu -1313 - Lot 2, with an area of 225 square meters. On September 25, 1974, Dominador, et al. filed a petition with the CFI as a land registration court, to issue title over Lots 1 and 2 of LRC Psu-1313, in their names. On July 19, 1977, the Land Registration Commission (hereafter LRC) rendered a decision directing the issuance of OCT in the names of Dominador, et al. Subsequently, Severina filed with the CFI a petition for review of the decision alleging that the land registration proceedings were fraudulently concealed by Dominador from her., and the court declared the OCT as null and void. The Register of Deeds of Cavite issued a TCT in the names of Severina and her heirs. The trial court issued an order in favor of Severinas heirs and ordered that the writ of possession previously issued in favor of Severina be implemented. However, the writ was returned unsatisfied. Subsequently, the trial court ordered that an alias writ of demolition be issued in favor of petitioners, Severina San Miguel. Again, the writ was not satisfied. Severinas heirs, decided not to pursue the writs of possession and demolition and entered into a compromise (kasunduan) with Dominador, et al. According to the compromise, Severinas heirs were to sell the subject lots to Dominador, et al. for P1.5 M with the delivery of TCT conditioned upon the purchase of another lot which was not yet titled at an additional sum of P300k. On the same day, on August 9, 1993 pursuant to the kasunduan, Severinas heirs and Dominador, et al. executed a deed of sale designated as kasulatan sa bilihan ng lupa. Dominador, et al. filed with the trial court a motion praying that Severinas heirs deliver the owners copy of the certificate of title to them. Severinas heirs opposed the motion stressing that under the kasunduan, the certificate of title would only be surrendered upon Dominador, et al's payment of the amount of P300k within two months from August 6, 1993, which was not complied with. Dominador, et al. admitted non-payment of P300k for the reason that Severinas heirs have not presented any proof of ownership over the untitled parcel of land. Apparently, the parcel of land is declared in the name of a third party, a certain Emiliano Eugenio.

ISSUE: Whether Dominador, et al. may be compelled to pay the P300k as agreed upon in the kasunduan (as a pre-requisite for the release of the certificate of title), despite Severinas heirs lack of evidence of ownership over the parcel of land.

Although a contract is t he law between the parties, the prov isions of positive law which regulate contracts are deemed written therein and shall limit and govern the relations between the parties. The Civil Code provisions on sales state: Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay a price certain in money or its equivalent. xxx Article 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of sale (underscoring ours).

True, in contracts of sale, the vendor need not possess title to the thing sold at the perfection of the contract. However, the vendor must possess title and must be able to transfer title at the time of delivery. In a contract of sale, title only passes to the vendee upon full payment of the stipulated consideration, or upon delivery of the thing sold. Severinas heirs are not in a position to transfer title. SC noted that there is no proof of ownership in favor of Severinas heirs. In fact, it is a certain Emiliano Eugenio who holds a tax declaration over the said land in his name. Though tax declarations do not prove ownership of the property, tax declarations and receipts can be strong evidence of ownership of land when accompanied by possession for a period sufficient for prescription. Severinas heirs have nothing to counter this document. Therefore, to insist that Dominador, et al. pay the price under such circumstances would result in Severinas heirs unjust enrichment. The essence of a sale is the transfer of title or an agreement to transfer it for a price actually paid or promised. Severinas heirs insist that delivery of the certificate of title is predicated on a condition - payment of P300k to cover the sale of Lot 3. The condition cannot be honored. Article 1183 of the Civil Code provides that, Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation, which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. xxx

Hence, the non-payment of the P300k is not a valid justification for refusal to deliver the certificate of title. Besides, the certificate of title that covers Lots 1 and 2 were fully paid for by Dominador, et al. Therefore, Severinas heirs are bound to deliver the certificate of title covering the lots.

HELD: No. Severinas heirs anchor their claim on the kasunduan, stressing on their freedom to stipulate and the binding effect of contracts. This argument is misplaced. The Civil Code provides: Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient provided they are not contrary to law, morals, good customs, public order or public policy.

It is basic that the law is deemed written into every contract.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 2. PRICE 1)

Price must be Real a.

Price Simulated MAPALO VS. MAPALO

FACTS: The spouses Miguel Mapalo and Candida Quiba were the registered owners of a residential land located in Pangasinan. (1,635 sq. m.) The spouses donated the eastern half of the land to Miguel’s brother – Maximo Mapalo who was about to get married. However, they were deceived into signing, on October 15, 1936, a deed of absolute sale over the entire land in Maximo’s favor. Their signatures were procured by fraud because they were made to believe by Maximo and the lawyer who acted as notary public who "translated" the document, that the same was a deed of donation in Maximo's favor covering one-half of their land. (It must be noted that the spouses are illiterate farmers). Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses did not receive anything of value for the land. In 1938, Maximo Mapalo, without the consent of the spouse, registered the sale in his favor. After thirteen years (1951), he sold the land to the Narcisos. (Evaristo, Petronila Pacifico and Miguel) who thereafter registered the sale and obtained a title in their favor. In 1952, the Narcisos filed a complaint with the CFI to be declared owners of the entire land, for possession of its western portion; for damages; and for rentals. The Mapalo spouses filed a counterclaim seeking cancellation of the Narcisos’ titles as to the western half of the land. They said that their signatures to the deed of sale of 1936 was procured by fraud and that the Narcisos were buyers in bad faith. They also filed another complaint wherein they asked the court to declare deeds of sale of 1936 and of 1951 over the land in question be declared null and void as to the western half of said land. CFI ruled in favor of the Mapalo spouses. Upon appeal filed by Narcisos, CA reversed the lower court’s ruling solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the same, within four years from notice of the fraud, had long prescribed. (From March 15, 1938). Hence, this appeal.

ISSUES: 1. Whether or not the deed of sale executed in 1936 was null and void. YES 2. Whether or not the Narcisos were purchasers in good faith. NO

HELD: 1.) YES, the sale was void. The Civil Code governs the transaction because it was executed in 1936. Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it

should be asked whether its case is one wherein there is no consideration, or one with a statement of a false consideration. If the former, it is void and inexistent; if the latter, only voidable, under the Old Civil Code. There is lack of consideration As observed earlier, the deed of sale of 1936 stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however, said consideration was totally absent. The problem, therefore, is whether a deed which states a consideration that in fact did not exist, is a contract without consideration, and therefore void ab initio, or a contract with a false consideration, and therefore, at least under the Old Civil Code, voidable. When there is no consideration, the contract is null and void According to Manresa, what is meant by a contract that states a false consideration is one that has in fact a real consideration but the same is not the one stated in the document. In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case we ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. 2.) No, they were no purchasers in good faith. Aside from the fact that all the parties in these cases are neighbors, except Maximo Mapalo the foregoing facts are explicit enough and sufficiently reveal that the Narcisos were aware of the nature and extent of the interest of Maximo Mapalo their vendor, over the abovedescribed land before and at the time the deed of sale in their favor was executed. The Narcisos were purchaser-in-value but not purchasers in good faith What was the necessity, purpose and reason of Pacifico Narciso in still going to the spouses Mapalo and asked them to permit their brother Maximo to dispose of the above-described land? To this question it is safe to state that this act of Pacifico Narciso is a conclusive manifestation that they (the Narcisos) did not only have prior knowledge of the ownership of said spouses over the western half portion in question but that they also have recognized said ownership. It also conclusively shows their prior knowledge of the want of dominion on the part of their vendor Maximo Mapalo over the whole land and also of the flaw of his title thereto. Under this situation, the Narcisos may be considered purchasers in value but certainly not as purchasers in good faith.

MODINA VS. CA FACTS: This case involves parcels of land registered under the name of Ramon Chiang. Chiang theorized that the subject properties were sold to him by his wife, Merlinda Plana Chiang as evidenced by a Deed of Sale and were subsequently sold by Chiang to the petitioner Serafin Modina. (Dates of sale: August 3, 1979 and August 24, 1979, respectiv ely.) Modina brought a Complaint for Recovery of Possession with Damages against the private respondents before the RTC. Upon learning the institution of the said case, Merlinda presented a


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Complaint-in-intervention, seeking the declaration of nullity of the Deed of Sale between her husband and MODINA on the ground that the titles of the parcels of land in dispute were never legally transferred to her husband. She contended that fraudulent acts were allegedly employed by her husband to obtain a Torrens Title in his favor. However, she confirmed the validity of the lease contracts with the other private respondents. MERLINDA also admitted that the said parcels of land were those ordered sold by the CFI of Iloilo in “Intestate Estate of Nelson Plana” where she was appointed as the administratix, being the widow of the deceased, her first husband. An Authority to Sell was issued by the said Probate Court for the sale of the same properties.

Since one of the characteristics of a void or inexistent contract is that it does not produce any effect, MERLINDA can recover the property from petitioner who never acquired title thereover. Records show that in the complaint-in-intervention of MERLINDA, she did not aver the same as a ground to nullify subject Deed of Sale. In fact, she denied the existence of the Deed of Sale in favor of her husband. In the said Complaint, her allegations referred to the want of consideration of such Deed of Sale. She did not put up the defense under Article 1490, to nullify her sale to her husband CHIANG because such a defense would be inconsistent with her claim that the same sale was inexistent. 2.) Modina was not a purchaser in good faith

RTC ruled in favor of the wife Merlinda declaring the two sales in August 1979 as void and inexistent. Upon appeal, the CA affirmed in toto the RTC ruling.

ISSUES: 1. Whether or not the sale of subject lots should be nullified. YES 2. Whether or not petitioner Modina was a purchaser in good faith. NO

HELD: 1.)The sale of the subject lots should be nullified. Prohibition of sale between spouses Art. 1490. The husband and the wife cannot sell property to each other, except: (1) when a separation of property was agreed upon in the marriage settlements; or (2) when there has been a judicial separation of property under Art. 191. The sale between Chiang spouses was null and void. The ownership of the lot did not transfer to Ramon Chiang. Hence, the sale to Modina was null and void. The exception to the rule laid down in Art. 1490 of the New Civil Code not having existed with respect to the property relations of Ramon Chiang and Merlinda Plana Chiang, the sale by the latter in favor of the former of the properties in question is invalid for being prohibited by law. Not being the owner of subject properties, Ramon Chiang could not have validly sold the same to plaintiff Serafin Modina. The sale by Ramon Chiang in favor of Serafin Modina is, likewise, void and inexistent. Serafin Modina is, likewise, void and inexistent. A contract of sale without consideration is a void contract Under Article 1409 of the New Civil Code, enumerating void contracts, a contract without consideration is one such void contract. One of the characteristics of a void or inexistent contract is that it produces no effect. So also, inexistent contracts can be invoked by any person whenever juridical effects founded thereon are asserted against him. A transferor can recover the object of such contract by accion reivindicatoria and any possessor may refuse to deliver it to the transferee, who cannot enforce the transfer. Thus, Modina’s insistence that Merlinda cannot attack subject contract of sale as she was a guilty party thereto is equally unavailing.

Merlinda can recover the property

There are circumstances which are indicia of bad faith on Mondina’s part: (1) He asked his nephew, Placido Matta, to investigate the origin of the property and the latter learned that the same formed part of the pr operties of MERLINDA’s first husband; (2) that the said sale was between the spouses; (3) that when the property was inspected, MODINA met all the lessees who informed that subject lands belong to MERLINDA and they had no knowledge that the same lots were sold to the husband. It is a well-settled rule that a purchaser cannot close his eyes to facts which would put a reasonable man upon his guard to make the necessary inquiries, and then claim that he acted in good faith. His mere refusal to believe that such defect exists, or his wilful closing of his eyes to the possibility of the existence of a defect in his vendor’s title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.

VDA. DE CATINDIG VS. HEIRS OF ROQUE FACTS: The subject property in this case is a fishpond which was part of the Malolos Cadastre and has an area of more than thirteen hectares. As shown in Original Certificate of Title, it is coowned or registered in the names of the different persons. (note: there are 16/16 shares) The co-owners of the fishpond leased it to Mrs. Catindig for a term of ten years counted from October 1, 1941 for a total rental of six thousand pesos. After the termination of the lease on September 30, 1951, Mrs. Catindig remained in possession of the fishpond because she was negotiating with the co-owners for the purchase thereof. She wanted to buy it for P52,000. On October 18, 1960 German Ramirez, one of the co-owners, executed a deed wherein he sold his 2/16 share to Mrs. Catindig for P6,500 The sale was annotated on the title on October 19, 1960. Two weeks later, Pedro Villanueva, one of the co-owners, learned of the sale executed by German Ramirez. That sale retroacted to April 13, 1950. In 1960 the respondents filed this action against Mrs. Catindig to compel her to allow them to redeem the portion sold by German Ramirez. The respondents


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever amended their complaint by including a prayer for the recovery of the possession of the fishpond. The RTC declared void certain documents of sale regarding portions of the fishpond in litigation. It ordered Mrs. Catindig to deliver to the respondents (except German Ramirez) the possession of the said fishpond and to allow the respondents to redeem from Mrs. Catindig the 2/16 portion of the fishpond which German Ramirez had sold to her. CA affirmed in toto the RTC ruling. CA said that Mrs. Catindig did not pay P52,000 (the projected sale) and that it the contract was simulated. Hence, this appeal.

the receiver until the said share is redeemed by the respondents. Ruling by the Supreme Court: - The receiver (not Asuncion Meneses Vda. de Catindig) should deliver the possession of the fishpond to the respondents or their duly authorized representative, together with 14/16 of the net earnings of the fishpond from January 15, 1964 up to the time the possession is delivered to the respondents. - The receiver should deliver to Mrs. Catindig a 2/16 share of the net earnings of the fishpond, corresponding to the share of German Ramirez, from January 15, 1964 up to the time the said share is redeemed from her.

ISSUE: Whether or not the sale by German Ramizer to Mrs. Catindig was null and void.

SPOUSES LEQUIN VS. SPS. VIZCONDE SUNDAY, AUGUST 24, 2014

HELD: YES. The alleged sales were null and void. The conclusive factual finding of the Appellate Court that the alleged sales on April 13 or 14, 1950 of respondents' shares are simulated and void ab initio renders untenable appellant Catindig's contentions that the remedies available to the respondents, such as an action for annulment, rescission or reformation, are barred by prescription or laches. The alleged sales were absolutely simulated, fictitious or inexistent contracts (Arts. 1346 and 1409(2)). "The action or defense for the declaration of the inexistence of a contract does not prescribe" (Art. 1410). Mere lapse of time cannot give efficacy to a void contract. The CA’s finding that the price was not paid or that the statement in the supposed contracts of sale as to the payment of the price was simulated fortifies the view that the alleged sales were void. "If the price is simulated, the sale is void..." (Art. 1471, Civil Code).

A contract of sale with no consideration is void A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the purchaser to the vendor. Such a sale is non-existent or cannot be considered consummated. Mrs. Catindig cannot demand Mrs. Catindig is not entitled to demand the execution of a notarized deed of sale for the 14/16 pro indiviso portion of the fishpond. She is not entitled because, as already held, the alleged sales in her favor are void. Reasonable value of the use and occupation of the fishpond should be limited We hold that, as a matter of fairness and equity or to avoid unjust enrichment, the liability of Mrs. Catindig for the reasonable value of the use and occupation of the fishpond should be limited to the period from October 1, 1951 up to the time in January, 1964 when she turned over the fishpond to the receiver, namely, the deputy clerk of court of the Court of First Instance of Bulacan, Malolos Branch I. From the compensation of P6,000 per annum which Mrs. Catindig is obligated to pay to the respondents, should be deducted the 2/16 portion of said compensation, corresponding to the share of German Ramirez, from October 1, 1951 to January, 1964. Thereafter, Mrs. Catindig is entitled to demand the 2/16 share in the net fruits or earnings of the fishpond from

FACTS: In 1995, spouses Ramon and Virginia Lequin, residents bought the subject lot consisting of 10,115 sq. m. from one Carlito de Leon. The sale was negotiated by respondent Raymundo Vizconde. In 1997, spouses Vizconde represented to spouses Lequin that they had also bought from Carlito de Leon a 1,012 sq. m. lot adjacent to the Lequins and built a house thereon. As later confirmed by de Leon, however, the 1,012 sq. m. lot claimed by the Vizcondes is part of the 10,115 sq. m. lot Lequin bought from him. With the consent of the Vizcondes, spouses Lequin then constructed their house on the 500-square meter half-portion of the lot claimed by respondents, as this was near the road. Given this situation where the house of Lequins stood on a portion of the lot allegedly owned by Vizcondes, the former consulted a lawyer, who advised them that the 1,012 sq. m. lot be segregated from the subject lot whose title they own and to make it appear that they are selling to respondents 512 square meters thereof. This sale was embodied in the February 12, 2000 Kasulatan where it was made to appear that the Vizcondes paid PhP 15,000 for the purchase of the 512-square meter portion of the subject lot. In July 2000, petitioners tried to develop the dried up canal located between their 500-square meter lot and the public road. However, the respondents objected, claiming ownership of said dried up canal or sapang patay. This prompted the Liquins to look into the ownership of the dried up canal and the lot claimed by the respondents Carlito de Leon told petitioners that what he had sold to respondents was the dried up canal or sapang patay and that the 1,012-square meter lot claimed by respondents really belongs to petitioners. In 2001, petitioners filed a complaint praying for the Kasulatan to be declared as null and void ab initio. The RTC found the Kasulatan allegedly conveying 512 square meters to respondents to be null and void due to: (1) the vitiated consent of petitioners in the execution of the simulated contract of sale; and (2) lack of consideration, since it was shown that while petitioners were ostensibly conveying to respondents 512


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever square meters of their property, yet the consideration of PhP 15,000 was not paid to them and, in fact,they were the ones who paid respondents PhP 50,000.

a loan nor a forbearance of credit. After finality of decision, the amount of PhP 50,000 shall earn interest of 12% per annum until fully paid.

Upon appeal by the respondent-spouses, CA reversed the ruling.

There was vitiated consent on the part of Spouses Lequin. There was fraud in the execution of the contract used on petitioners which affected their consent. Petitioners’ reliance and belief on the wrongful claim by respondents operated as a concealment of a material fact in their agreeing to and in readily executing the contract of sale, as advised and proposed by a notary public.

ISSUE: WON the Kasulatan was null and void. But take note, on the issue of consent, the SC said that the Kasulatan was merely voidable. But on the issue of consideration, it was void. Final ruling - void.

HELD: YES Re: Lack of Consideration The contract of sale or Kasulatan states that respondents paid petitioners PhP 15,000 for the 512-square meter portion. On its face, the above contract of sale appears to be supported by a valuable consider ation. We, however, agree with the trial court’s finding that this is a simulated sale and unsupported by any consideration, for respondents never paid the PhP 15,000 purported purchase price. The kasulatan did not express the true intent of the parties Lack of consideration was proved by petitioners’ evidence aliunde showing that the Kasulatan did not express the true intent and agreement of the parties. As explained above, said sale contract was fraudulently entered into through the misrepresentations of respondents causing petitioners’ vitiated consent. There can be no doubt that the contract of sale or Kasulatan lacked the essential element of consideration. It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of consideration. Moreover, Art. 1471 of the Civil Code, which provides that “if the price is simulated, the sale is void,” also applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made. The contract is void ab intio Consideration and consent are essential elements in a contract of sale. Where a party’s consent to a contr act of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null and void ab initio. The PhP 50,000 paid by petitioners to respondents as consideration for the transfer of the 500-square meter lot to petitioners must be restored to the latter. Otherwise, an unjust enrichment situation ensues. The facts clearly show that the 500-square meter lot is legally owned by petitioners as shown by the testimony of de Leon; therefore, they have no legal obligation to pay PhP 50,000 therefor. Considering that the 512 square-meter lot on which respondents’ house is located is clearly owned by petitioners, then the Court declares petitioners’ legal ownership over said 512 square -meter lot. The amount of PhP 50,000 should only earn interest at the legal rate of 6% per annum from the date of filing of complaint up to finality of judgment and not 12% since such payment is neither

Believing that Carlito de Leon indeed sold a 1,012-square meter portion of the subject property to respondents, petitioners signed the contract of sale based on respondents’ representations. Had petitioners known, as they eventually would sometime in late 2000 or early 2001 when they made the necessary inquiry from Carlito de Leon, they would not have entered or signed the contract of sale, much less pay PhP 50,000 for a portion of the subject lot which they fully own. Thus, petitioners’ consent was vitiated by fraud or fraudulent machinations of Raymundo. In the eyes of the law, petitioners are the rightful and legal owners of the subject 512 square-meter lot anchored on their purchase thereof from de Leon. This right must be upheld and protected.

HEIRS OF INTAC VS. CA TUESDAY, AUGUST 19, 2014 FACTS: Ireneo Mendoza, married to Salvacion Fermin, was the owner of the subject property located in Quezon city which he purchased in 1954. (TCT No. 242655). Ireneo had two children: respondents Josefina and Martina (respondents), Salvacion being their stepmother. When he was still alive, Ireneo, also took care of his niece, Angelina, since she was three years old until she got married. On October 25, 1977, Ireneo, with the consent of Salvacion, executed a deed of absolute sale of the property in favor of Angelina and her husband, Mario (Spouses Intac). Despite the sale, Ireneo and his family, including the respondents, continued staying in the premises and paying the realty taxes. After Ireneo died intestate in 1982, his widow and the respondents remained in the premises. After Salvacion died, respondents still maintained their residence there. Up to the present, they are in the premises, paying the real estate taxes thereon, leasing out portions of the property, and collecting the rentals. The controversy arose when respondents sought the cancellation of TCT No. 242655, claiming that the sale was only simulated and, therefore, void. The heirs of Ireneo, the respondents in this case, alleged that: 1. When Ireneo was still alive, Spouses Intac borrowed the title of the property (TCT No. 106530) from him to be used as collateral for a loan from a financing institution; 2. They objected because the title would be placed in the names of said spouses and it would then appear that the couple owned the property; that Ireneo, however, tried to appease them, telling them not to worry because Angelina would not take advantage of the situation considering that he took care of her for a very long time; that during his lifetime, he informed them that the subject property would be equally divided among them after his death; and


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 3. That respondents were the ones paying the real estate taxes over said property.

vendees, Spouses Intac. There was simply no consideration and no intent to sell it.

Spouses Intac countered, among others, that the subject property had been transferred to them based on a valid deed of absolute sale and for a valuable consideration; that the action to annul the deed of absolute sale had already prescribed; that the stay of respondents in the subject premises was only by tolerance during Ireneo’s lifetime because they were not yet in need of it at that time; and that despite respondents’ knowledge about the sale that took place on October 25, 1977, respondents still filed an action against them.

Evidences to prove that there was no absolute deed of sale between the parties Critical is the testimony of Marietto, a witness to the execution of the subject absolute deed of sale. He testified that Ireneo personally told him that he was going to execute a document of sale because Spouses Intac needed to borrow the title to the property and use it as collateral for their loan application. Ireneo and Salvacion never intended to sell or permanently transfer the full ownership of the subject property to Spouses Intac. Marietto was characterized by the RTC as a credible witness.

RTC ruled in favor of the respondents saying that the sale to the spouses Intac was null and void. The CA also ruled that there was no consideration in the sale to the spouses Intac and that the contract was one for equitable mortgage.

ISSUES: WON the Deed of Absolute Sale was a simulated contract or a valid agreement. WON the Deed of Absolute Sale, dated October 25, 1977, involving the subject real property in Pagasa, Quezon City, was a simulated contract or a valid agreement.

HELD: The deed of sale executed by Ireneo and Salvacion was absolutely simulated for lack of consideration and cause and, therefore, void. Articles 1345 and 1346 of the Civil Code provide: Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. Relatively simulated agreement vs. Absolute simulation If the parties state a false cause in the contract to conceal their real agreement, the contract is only relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. "The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties." "As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract." No valid sale took place between Ireneo and Spouses Intac In the case at bench, the Court is one with the courts below that no valid sale of the subject property actually took place between the alleged vendors, Ireneo and Salvacion; and the alleged

Aside from their plain denial, t he heirs of Intac failed to present any concrete evidence to disprove Marietto’s testimony. They claimed that they actually paid P150,000.00 for the subject property. They, however, failed to adduce proof, even by circumstantial evidence, that they did, in fact, pay it. Even for the consideration of P60,000.00 as stated in the contract, petitioners could not show any tangible evidence of any payment therefor. Their failure to prove their payment only strengthened Marietto’s story that there was no payment made because Ireneo had no intention to sell the subject property. Angelina’s story, except on the co nsideration, was consistent with that of Marietto. Angelina testified that she and her husband mortgaged the subject property sometime in July 1978 to finance the construction of a small hospital in Sta. Cruz, Laguna. Angelina claimed that Ireneo offered the property as he was in deep financial need.

The contract of sale was only for the purpose of lending the title of the property to Spouses Intac to enable them to secure a loan. Their arrangement was only temporary and could not give rise to a valid sale. Where there is no consideration, the sale is null and void ab initio. The case of Lequin vs. VIzconde was cited in this case. The fact that Ireneo was still in physical possession of the subject property after the sale is a strong evidence to prove that there was no valid sale between the parties. More importantly, Ireneo and his family continued to be in physical possession of the subject property after the sale in 1977 and up to the present. They even went as far as leasing the same and collecting rentals. If Spouses Intac really purchased the subject property and claimed to be its true owners, why did they not assert their ownership immediately after the alleged sale took place? Why did they have to assert their ownership of it only after the death of Ireneo and Salvacion? One of the most striking badges of absolute simulation is the complete absence of any attempt on the part of a vendee to assert his right of dominion over the property. As heretofore shown, the contemporaneous and subsequent acts of both parties in this case, point to the fact that the intention of Ireneo was just to lend the title to the Spouses Intac to enable them to borrow money and put up a hospital in Sta. Cruz, Laguna. Clearly, the subject contract was absolutely simulated and, therefore, void. The Spouses Intac never became the owners of the property despite its registration in their names.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever It is also of no moment that TCT No. 106530 covering the subject property was cancelled and a new TCT (TCT No. 242655)21 was issued in their names. After all, registration does not vest title. As a logical consequence, petitioners did not become the owners of the subject property even after a TCT had been issued in their names.

BUENAVENTURA VS. CA TUESDAY, JULY 1, 2014 FACTS: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. (Note: So there are two sets of children here.) Sought to be declared null and void ab initio are certain deeds of sale of real property executed by Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names. The plaintiffs in this case sought for the declaration of nullity of the six deeds of sale and certificates of title in favor of the defendants. They alleged that certain deed of sale were null and void ab initio because they are simulated. They said that: a. Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis; b. Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein; c. Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and vendees); and d. Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Defendants, on the other hand aver: (1) That plaintiffs do not have a cause of action against them as well as the requisite standing and interest to assail their titles over the properties in litis; (2) That the sales were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) That the certificates of title were issued with sufficient factual and legal basis. RTC ruled in favor of the defendants (respondents in this case) and dismissed the complaint. Upon appeal, the CA upheld RTC’s ruling.

ISSUES: 1. Whether the Deeds of Sale are void for lack of consideration. NO 2. Whether the Deeds of Sale are void for gross inadequacy of price. NO

HELD: 1st issue: There was a consideration.

If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void. Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented Emma Joaquin Valdoz’s testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price. The trial court did not find the allegation of absolute simulation of price credible. Petitioners’ failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings’ financial capacity to buy the questioned lots. On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents’ minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father.

2nd issue: The general rule is that inadequacy of consideration shall not invalidate a contract. Articles 1355 of the Civil Code states: Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied) Article 1470 of the Civil Code further provides: Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (Emphasis supplied) Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. Ruling: In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant children actually paid the purchase price stipulated in their respective


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us. WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.

b.

Price is “False”

MACAPAGAL v s . CATALINA O. REMORIN, CORAZON CALUZA BAMRUNGCHEEP, and LAURELIA CALUZAVALENCIANO FACTS: Lots 24 and 25 were registered in the name of Candido Caluza under Transfer Certificate of Title (TCT) No. 160544. Purificacion Arce-Caluza (Purificacion) is his second wife. Corazon Caluza-Bamrungcheep (Corazon) is his legally adopted daughter during his first marriage. After Candido died in 1981, Corazon and Purificacion executed a Deed of Extrajudicial Settlement adjudicating between themselves the properties of Candido, as the latter's surviving heirs. Lots 24 and 25, together with Lot 23, which was registered in Candido's name, were adjudicated to Corazon. Purificacion got Candido's land in Bulacan. However, administration of Lots 23, 24 and 25 were entrusted to Purificacion by Corazon as she had to leave for Thailand after her marriage to a Thai. Unknown to Corazon, Purificacion executed an Affidavit of Loss alleging that the TCTs of Lots No 23, 24 and 25 were lost and could no longer be found. She filed a petition for the issuance of new owner's duplicates of title alleging that she was her deceased husband's sole heir. The petition was granted and new TCTs were issued in Purificacion's name. Purificacion then sold the lots to Catalina Remorin (Catalina) and Catalina mortgaged Lots 24 and 25 to L & R Lending Corp. Corazon filed a complaint for reconveyance and damages against Purificacion and Catalina upon discovery of sale. Plaintiff alleged that the two defendants connived with each other in transferring the three lots in their names through simulated sales. Corazon likewise filed a criminal complaint for falsification and perjury against the two. Catalina executed a Deed of Transfer, signed by Purificacion as witness, admitting the wrong they did in illegally transferring the lots in their names and acknowledging Corazon to be the rightful owner under the Deed of Extrajudicial Settlement. Corazon presented the Deed of Transfer before the Register of Deeds of Quezon City and Catalina's TCT over Lots 24 and 25 was cancelled and a TCT was issued in Corazon's name. Prior thereto, however, Catalina mortgaged Lots 24 and 25 to respondent Laurelia Caluza-Valenciano (Laurelia) to pay off her mortgage indebtedness to L & R Lending Corporation. The inscription of the mortgage in favor of Laurelia was carried over to Corazon's TCT. -Corazon, Purificacion, Catalina, and Laurelia executed a Memorandum of Agreement to settle Civil Case. It stipulated that Corazon cedes and grants unto and in favor of Purificacion full ownership and other real rights over the southernmost apartment as well as the portion of the lot occupied thereby subject to the condition that Purificacion shall assume satisfaction of the

mortgage debt contracted by Catalina in favor of Laurelia and shall cause transfer of said annotation to the title to be issued in her (Purificacion's) name; and furthermore that any and all expenses for segregation survey, re-titling and annotation of said mortgage shall be shouldered by said Purificacion Arce-Caluza; Before the agreement could be implemented, Purificacion died. Consequently, another compromise agreement was executed stating that Corazon and Catalina agreed that title to the southernmost apartment as well as the portion of the lot occupied thereby shall be transferred direct to its interested buyer with defendant Catalina assuming and paying (from the proceeds of the sale) her mortgage obligation with Laurelia; any and all expenses for segregation survey, re-titling, capital gains taxes and those connected with the annotation and/or release of said mortgage should now be shouldered by defendant Catalina O. Remorin. Corazon then sold the subject Lot to Laurelia by virtue of a deed entitled "Sale of Unsegregated Portion of Land." However, Catalina also sold the same lot to Macapagal claiming to be authorized under the Compromise Agreement. Macapagal sought to nullify the sale executed by Corazon in favor of Laurelia and to declare valid the one executed by Catalina in her favor. RTC rendered judgment in favor of petitioner. Corazon and Laurelia appealed to the Court of Appeals which reversed the decision of the trial court. Macapagal’s contention: the sale executed by Catalina in her favor should prevail over the one executed by Corazon in favor of Laurelia, as Catalina was the one authorized to sell the disputed property under the Compromise Agreement Respondent’s contention: Corazon, the registered owner of the disputed property, did not give Catalina authority to sell the lot. It was provided in the Agreement that Catalina shall pay off her mortgage obligation and incidental expenses from the proceeds of the sale only to reassure Catalina that her obligation would be paid in the event that Corazon sells the property.

ISSUE: WON Catalina was authorized to sell the land as provided by their Comprom ise Agreement.

RULING: The Compromise Agreement dated September 9, 1988 cannot be taken as a waiver of Corazon's authority to sell and grant thereof to Catalina considering that the Agreement merely provided that Catalina pay off her mortgage obligation and incidental expenses from the proceeds of the sale. Although it was imperative, as part of the compromise, that the money come from the proceeds of the sale, it was not expressly stated, nor did it necessarily mean, that Catalina herself be the one to directly sell the property. Authority to sell must be couched in clear and unmistakable language. Moreover, intent to give Catalina authority to sell may not be easily attributed to Corazon considering that the latter had to file the reconveyance case as a result of Purificacion's and Catalina's acts of transferring the disputed lot in their names. In contract interpretation, analysis is not to be limited to the words used in the contract, as they may not accurately reflect the parties' true intent. If the words of the contract appear to be contrary to the evident intention as revealed by the circumstances, the latter shall prevail over the former.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever The fact that the deed of sale between respondents Corazon and Laurelia did not accurately reflect the true consideration thereof is not cause for declaration of its nullity. When the parties intended to be bound by the contract except that it did not reflect the actual purchase price of the property, there is only a relative simulation of the contract which remains valid and enforceable. It cannot be declared null and void since it does not fall under the category of an absolutely simulated or fictitious contract. The contract of sale is valid but subject to reformation. Petition denied.

c.

Non-Payment of Price CLARA M. BALATBAT vs CA, SPS. REPUYAN G.R. No. 109410, August 28, 1996

FACTS: A parcel of land was acquired by plaintiff Aurelio Roque

deed of sale and declared that the Sale dated April 1, 1980, as valid and enforceable. No appeal having been made, the decision became final and executory. Examining the terms and conditions of the "Deed of Sale" dated April 1, 1980, the P45,000.00 balance is payable only "after the property covered by T.C.T. No. 135671 has been partitioned and subdivided, and title issued in the name of the BUYER" hence, vendor Roque cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of private respondents. Devoid of any stipulation that “ownership in the thing shall not pass to the purchaser until he has fully paid the price,” ownership of the thing shall pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price has not yet been fully paid. The failure of the buyer to make good the price does not, in law, cause ownership to evert to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code.

and Maria Mesina during their conjugal union. Maria died on August 28, 1966.

Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract.

On June 15, 1977, Aurelio filed a case for partition. The trial court in that case for partition, held that Aurelio is entitled to the ½ portion of his share in the conjugal property, and the other half which formed part of the estate of Maria Mesina, will be divided equally between him and their 4 children receiving 1/5 each. The decision having become final and executory, the Register of Deeds of Manila issued a transfer certificate of title on October 5, 1979 according to the ruling of the court.

With respect to the non-delivery of the possession of the subject property to the private respondent, suffice it to say that ownership of the thing sold is acquired only from the time of delivery thereof, actual or constructive.

On April 1, 1980, Aurelio sold his 6/10 shares to spouses Aurora Tuazon-Repuyan and Jose Repuyan, as evidenced by a deed of absolute sale. On June 21, 1980, Aurora caused the annotation of her affidavit of adverse claim. However, on August 20, 1980, Aurelio filed a complaint for rescission of contract grounded on the buyers’ failure to pay the balance of the purchase price. Subsequently, on February 4, 1982, another deed of absolute sale was executed between Aurelio and his children, and herein petitioner Clara Balatbat, involving the entire lot. Balatbat filed a motion for the issuance of writ of possession, which was granted by the court on September 20, 1982, subject to valid rights and interests of third persons. Balatbat filed a motion to intervene in the rescission case, but did not file her complaint in intervention. The court ruled that the sale between Aurelio and Aurora is valid. On March 3, 1987 however, Balatbat filed a notice of lis pendens before the Register of Deeds regarding the subject property.

ISSUES: W/N the alleged sale to Spouses Repuyan was merely executor

A contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract; and failure of the vendee to pay to price after the execution of the contract does not make the sale null and void for lack of consideration but results at most in default on the part of the vendee, for which the vendor may exercise his legal remedies.

2) Must be in Money or its Equivalent IMELDA ONG, ET AL. vs ALFREDO ON ET AL. G.R. No. L-67888, October 8, 1985 FACTS: On February 25, 1976, Imelda Ong for and in consideration of One (1.00) Peso and other valuable considerations, executed in favor of Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, and assigned all her rights and title over a parcel of land in Makati. However, on November 19, 1980, Imelda Ong revoked the aforesaid Quitclaim and donated the property to her son Rex.

No. The sale was consummated, hence, valid and enforceable.

Subsequently, Sandra Maruzzo on June 20, 1983, through here guardian ad litem Alfredo Ong, filed with the RTC an action for the recovery of ownership/possession and nullification of the Deed of Donation in favor of Rex.

Contrary to petitioner's contention that the sale dated April 1, 1980 in favor of Spouses Repuyan was merely executory for the reason that there was no delivery of the subject property and that consideration/price was not fully paid, the Court finds the sale as consummated, hence, valid and enforceable. The Court dismissed vendor's Aurelio Roque complaint for rescission of the

Petitioners claimed that the Quitclaim Deed is null and void inasmuch as it is equivalent to a Deed of Donation, acceptance of which by the donee is necessary to give it validity. Further, it is averred that the donee, Sandra Maruzzo, being a minor, had no legal personality and therefore incapable of accepting the donation.

HELD:


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The trial court ruled in favor of Maruzzo and held that the Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter. Appealing to the IAC, petitioners additionally contends that the One (1.00) Peso consideration is not a consideration at all to sustain the ruling that the Quitclaim Deed is equivalent to a sale. The IAC however affirmed the TC.

estate of Hilarion which they contend were sold by Hilario through two deeds of sale where the consideration for the lands was one (1.00) Peso and services rendered, being rendered and to be rendered.

ISSUE: W/N the quitclaim is equivalent to a deed of sale or to a deed of donation

Bagnas et al. filed a case against respondents seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or alternatively, as donations void for want of acceptance embodied in a public instrument. In answer to the complaint, the respondents denied the alleged fictitious or fraudulent character of the sales in their favor, asserting that the said sales were made for good and valuable consideration.

HELD: The Quitclaim Deed is equivalent to a deed of sale. A

ISSUE: W/N the said consideration is valid.

careful perusal of the subject deed reveals that the conveyance of the one- half (½) undivided portion of the above-described property was for and in consideration of the One (P 1.00) Peso and the other valuable considerations (emphasis supplied) paid by private respondent Sandra Maruzzo through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or consideration is not the One (P1.00) Peso alone but also the other valuable considerations. Although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a sufficient cause of the contract. It is a legal presumption of sufficient cause or consideration supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code of the Philippines.) This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation. Even granting that the Quitclaim deed in question is a donation, Article 741 of the Civil Code provides that the requirement of the acceptance of the donation in favor of minor by parents of legal representatives applies only to onerous and conditional donations where the donation may have to assume certain charges or burdens. Donation to an incapacitated donee does not need the acceptance by the lawful representative if said donation does not contain any condition. In simple and pure donation, the formal acceptance is not important for the donor requires no right to be protected and the donee neither undertakes to do anything nor assumes any obligation. The Quitclaim now in question does not impose any condition.

ISAAC BAGNAS ET AL. vs. CA G.R. No. L-38498, August 10, 1989 FACTS: Hilario Mateum died without a will and was survived only by collateral relatives. Bagnas et al., the petitioners, were his nearest kin. The respondents Retonil et al. on the other hand were relatives to a farther extent. Retonil et al. claims ownership of 10 parcels of land from the

HELD: The Court ruled that the deeds of sale are void and are of no force and effect. Upon the consideration alone that the apparent gross, not to say enormous, disproportion between the stipulated price (in each deed) of P l.00 plus unspecified and unquantified services and the undisputably valuable real estate allegedly sold worth at least P10,500.00 going only by assessments for tax purposes which, it is well-known, are notoriously low indicators of actual value plainly and unquestionably demonstrates that they state a false and fictitious consideration, and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio. The transfers in question being void, it follows as a necessary consequence that the properties purportedly conveyed remained part of the estate of Hilario Mateum, said transfers notwithstanding, recoverable by his intestate heirs, the petitioners herein, whose status as such is not challenged. Even if the “contract of sale” would be shown as a donation (apparently, this was the intent of the donor), failure to conform to the requirements would not make it a valid donation.

There is no Contract of Sale for lack of consideration. Likewise, there is also no valid deed of donation for failure to conform to the requirements of donation.

REPUBLIC vs PRDC and CA G.R. No. L-10141, January 31, 1958 FACTS: The Republic brought an action against Apostol for the collection of sums owing to it for his purchase of Palawan Almaciga and other logs. His total debt amounted to some P34,000. PRDC intervened claiming that Apostol, as President of the company, without prior authority, took goods (steel sheets, pipes, bars, etc) from PRDC warehouse and appropriated them to settle his personal debts in favor of the government. The Republic opposed the intervention of PRDC, arguing that price is always paid in money and that payment in kind is no payment at all; hence, money and not the goods of PRDC are under dispute.

ISSUE: W/N payment in kind is equivalent to price paid in money. HELD: Yes. The Government argues that "Price . . . is always paid in terms of money and the supposed payment being in kind, it is no payment at all, "citing Article 1458 of the new Civil Code.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever However, the same Article provides that the purchaser may pay "a price certain in money or its equivalent ," which means that they meant of the price need not be in money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau of Prison by Macario Apostol in payment of his account is sufficient payment therefore, is for the court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the herein respondent corporation would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true.

3)

Must be Certain or Ascertainable at Perfection VILLANUEVA VS. CA 267 SCRA 89 G.R. NO. 107624 JANUARY 28, 1997

FACTS: Petitioner Gamaliel Villanueva has been a tenantoccupant of a unit in an apartment building erected on a parcel of land owned by private respondents dela Cruz. In 1986, Jose dela Cruz offered said land with the apartment building for sale and petitioners (Gamaliel and Irene) showed interest in the property. As initial step, Jose gave Irene a letter of authority for her to inspect the property. Since the property was in arrears for payment of realty taxes, Jose approached Irene and asked for a certain amount to pay for the taxes so that the property would be cleared of any encumbrance. Irene gave 10k (5k on 2 occasions). It was agreed by them that the 10k would form part of the sale price of 550k. Thereafter, Jose went to Irene, bringing with him Mr. Sabio, requesting her to allow Sabio to purchase ½ of the property, to which they consented, so they would just purchase the other half (265k, having paid the 10k). Dela Cruz executed in favor of their co-defendants (Guido and Felicitas Pile) a Deed of Assignment of the other ½ portion of the land, wherein Gamaliel’s apartment unit is situated. This was purportedly as full payment and satisfaction of an indebtedness obtained from the Piles. TCT was later issued in the name of the Piles. Soon, Gamaliel learned about the assignment and issuance of new TCT. Petitioners elevated their complaint to the Court (specific performance). They contend that a contract of sale has been perfected and that the 10k formed part of the purchase price (necessarily then, there must have been an agreement as to the price). They cite Art 1482: Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of perfection of the contract. On the other hand, private respondents claim that what was agreed upon was that the 10k be primarily intended as payment for realty tax, and was going to for part of the consideration of the sale if the transaction would finally be consummated. They insist that there was no clear agreement as to the true amount of consideration.

ISSUE: Was there a perfected contract of sale? NO HELD: After a review of the evidence, SC found that there was

settle the conflicting claims, petitioners could have presented the contract of sale. However, it was not presented in evidence. Petitioners aver that even if the (unsigned) deed was not produced, Jose “admitted preparing said deed in accordance with their agreement”. We do not agree with petitioners. Assuming arguendo that such draft deed existed, it does not necessarily follow that there was already a definite agreement as to the price. If there was, why then did private respondent Jose de la Cruz not sign it? If indeed the draft deed of sale was that important to petitioners' cause, they should have shown some effort to procure it. They could have secured it through a subpoena ducestecum or thru the use of one of the modes of discovery. But petitioners made no such effort. And even if produced, it would not have commanded any probative value as it was not signed. The price of the leased land not having been fixed, the essential elements which give life to the contract were lacking. It follows that the lessee cannot compel the lessor to sell the leased land to him. The price must be certain; it must be real, not fictitious. It is not necessary that the certainty of the price be actual or determined at the time of executing the contract. The fact that the exact amount to be paid therefor is not precisely fixed, is no bar to an action to recover such compensation, provided the contract, by its terms, furnishes a basis or measure for ascertaining the amount agreed upon. The price could be made certain by the application of known factors. A contract of sale is not void for uncertainty when the price, though not directly stated in terms of pesos and centavos, can be made certain by reference to existing invoices identified in the agreement. In the instant case, however, what is dramatically clear from the evidence is that there was no meeting of mind as to the price, expressly or impliedly, directly or indirectly.

MORENO, JR. VS. PRIVATE MANAGEMENT OFFICE 507 SCRA 63 G.R. NO. 159373 NOVEMBER 16, 2006 FACTS: The subject-matter in the civil case is the J. Moreno Building (formerly known as the North Davao Mining Building) – or more specifically, the 2nd, 3rd, 4th, 5th and 6th floors of the building. Moreno is the owner of the Ground Floor, the 7th Floor and the Penthouse of the J. Moreno Building and the lot on which it stands. Private Management Office (formerly, Asset Privatization Trust or APT) on the other hand, is the owner of the 2nd, 3rd, 4th, 5th and 6th floors of the building, the subject-matter of this suit. On February 13, 1993, APT called for a conference for the purpose of discussing Moreno’s right of first refusal over the floors of the building owned by APT. At said meeting, APT informed Moreno that the proposed purchase price for said floors was P21 Million.

no agreement as to the price (based on the testimonies). To


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever In a letter dated February 22, 1993, APT, informed Moreno that the Board of Trustees (BOT) of APT "is in agreement that Mr. Jose Moreno, Jr. has the right of first refusal" and requested Moreno to deposit 10% of the "suggested indicative price" of P21 million on or before February 26, 1993. Moreno paid the P21 million on February 26, 1993. APT issued an OR for the said payment. But later, APT wrote Moreno that its Legal Department has questioned the basis for the computation of the indicative price for the said floors. Thus, on April 2, 1993, APT wrote Moreno that the APT BOT has "tentatively agreed on a settlement price of P42,274,702.17" for the said floors. RTC ruled in favor of Moreno, declared that there was a perfected contract of sale and ordered APT to sell the subject floors at P21M. CA reversed, hence the petition.

ISSUE: WON there was a perfected contract of sale over the subject floors at the price of 21 Million. NO HELD: A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. To reach that moment of perfection, the parties must agree on the same thing in the same sense, so that their minds meet as to all the terms. They must have a distinct intention common to both and without doubt or difference; until all understand alike, there can be no assent, and therefore no contract. The minds of parties must meet at every point; nothing can be left open for further arrangement So long as there is any uncertainty or indefiniteness, or future negotiations or considerations to be had between the parties, there is not a completed contract, and in fact, there is no contract at all. Once there is concurrence of the offer and acceptance of the object and cause, the stage of negotiation is finished. This situation does not obtain in the case at bar. The letter of February 22, 1993 and the surrounding circumstances clearly show that the parties are not past the stage of negotiation, hence there could not have been a perfected contract of sale. The letter is clear evidence that APT did not intend to sell the subject floors at the price certainofP21M, viz.: (This letter was addressed to Moreno’s Atty.) xxx We are pleased to inform you that the Board is in agreement that Mr. Jose Moreno, Jr. has the right of first refusal. This will be confirmed by our Board during the next board meeting on February 26, 1993. In the meantime, please advise Mr. Moreno that the suggested indicative price for APT’s five (5) floors of the building i n question is P21 Million.

If Mr. Moreno is in agreement, he should deposit with APT the amount of P2.1 Million equivalent to 10% of the

price on or before February 26, 1993. The balance will be due within fifteen (15) days after Mr. Moreno receives the formal notice of approval of the indicative price. xxx The letter clearly states that P21M is merely a "suggested indicative price" of the subject floors as it was yet to be approved by the BOT. Before the Board could confirm the suggested indicative price, the Committee on Privatization must first approve the terms of the sale or disposition. The imposition of this suspensive condition finds basis under Proclamation No. 5022 which vests in the Committee the power to approve the sale of government assets, including the price of the asset to be sold (apparently government pala itong APT, and may procedure na sinusunod sa law). Other discussions that may be relevant: On Moreno’s argument that the "suggested indicative price" of P21M is not a proposed price, but the selling price indicative of the value at which APT was willing to sell. The trial court relied upon the definition of the word "indicative" under the Webster Comprehensive Dictionary, International Edition. According to Webster, "to indicate" is to point out; direct attention; to indicate the correct page. "Indicative" is merely the adjective of the verb to indicate. xxx Under the Rules of Court, the terms are presumed to have been used in their primary and general acceptation, but evidence is admissible to show that they have a local, technical, or otherwise peculiar signification, and were so used and understood in the particular instance, in which case the agreement must be construed accordingly. The reliance of the trial court in the Webster definition of the term "indicative," as also adopted by Moreno, is misplaced. The transaction at bar involves the sale of an asset under a privatization scheme which attaches a peculiar meaning or signification to the term "indicative price." Under No. 6.1 of the General Bidding Procedures and Rules of respondent, "an indicative price is a ballpark figure and [respondent] supplies such a figure purely to define the ball-park." The plain contention of Moreno that the transaction involves an "ordinary arms-length sale of property" is unsubstantiated and leaves much to be desired. This case sprung from a case of specific performance initiated by Moreno who has the burden to prove that the case should be spared from the application of the technical terms in the sale and disposition of assets under privatization. He failed to discharge the burden. It appears in the case at bar that Moreno’s construction of the letter of February 22, 1993 – that his assent to the "suggested indicative price" of P21M converted it as the price certain, thus giving rise to a perfected contract of sale – is his own subjective understanding. As such, it is not shared by APT. Under American jurisprudence, mutual assent is judged by an objective standard, looking to the express words the parties used in the contract. Under the objective theory of contract, understandings and beliefs are effective only if shared. Based on the objective manifestations of the parties in the case at bar, there was no meeting of the minds.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 4.

Manner of Payment of Price ESSENTIAL NAVARRA VS. PLANTERS 527 SCRA 561 G.R. NO. 172674 JULY 12, 2007

FACTS: The Navarras obtained a loan of P1,200,000.00 from Planters Bank and, by way of security therefor, executed a deed of mortgage over their five (5) parcels of land. Unfortunately, the couple failed to pay their loan obligation. Hence, Planters Bank foreclosed on the mortgage. The one year redemption period expired without the Navarras having redeemed the foreclosed properties. On the other hand, co-petitioner RRRC Development Corporation (RRRC) is a real estate company owned by the parents of Carmelita Bernardo Navarra. RRRC itself obtained a loan from Planters Bank secured by a mortgage over another set of properties owned by RRRC. The loan having been likewise unpaid, Planters Bank similarly foreclosed the mortgaged assets of RRRC. Unlike the Navarras, however, RRRC was able to negotiate with the Bank for the redemption of its foreclosed properties by way of a concession whereby the Bank allowed RRRC to refer to it would-be buyers of the foreclosed RRRC properties who would remit their payments directly to the Bank, which payments would then be considered as redemption price for RRRC. Eventually, the foreclosed properties of RRRC were sold to third persons whose payments therefor, directly made to the Bank, were in excess by P300,000.00 for the redemption price. In the meantime, Jorge Navarra sent a letter {*contents of the letters are found in the ruling*} to Planters Bank, proposing to repurchase the five (5) lots earlier auctioned to the Bank, with a request that he be given until August 31, 1985 to pay the down payment of P300,000.00. In response, Planters Bank, thru its Vice-President Ma. Flordeliza Aguenza, wrote back Navarra via a letter dated August 16, 1985. Then, on January 21, 1987, Planters Bank sent a letter to Jorge Navarra informing him that it could not proceed with the documentation of the proposed repurchase of the foreclosed properties on account of his non-compliance with the Bank’s request for the submission of the needed board resolution of RRRC, thus, demanding that they surrender and vacate the properties in question for their failure to exercise their right of redemption. The Navarras filed their complaint for Specific Performance with Injunction against Planters Bank, alleging that a perfected contract of sale was made between them and Planters Bank whereby they would repurchase the subject properties for P1,800,000.00 with a down payment of P300,000.00. In its Answer, Planters Bank asserted that there was no perfected contract of sale because the terms and conditions for the repurchase have not yet been agreed upon. The RTC ruled that there was a perfected contract of sale between the Navarras and Planters Bank. The CA reversed the decision citing Article 1319 as basis, declaring that the acceptance of the offer was not absolute.

ISSUES: WON there was a perfected contract to repurchase the foreclosed properties between the petitioners and the private respondent Planters Development Bank. NO WON the parties never got past the negotiation stage. YES

HELD: In general, contracts undergo three distinct stages: negotiation, perfection or birth, and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract, i.e., consent, object and price. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof. A negotiation is formally initiated by an offer which should be certain with respect to both the object and the cause or consideration of the envisioned contract. In order to produce a contract, here must be acceptance, which may be express or implied, but it must not qualify the terms of the offer. In other words, it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. Here, the Navarras assert that the following exchange of correspondence between them and Planters Bank constitutes the offer and acceptance, thus: Letter dated July 18, 1985 of Jorge Navarra: This will formalize my request for your kind consideration in allowing my brother and me to buy back my house and lot and my restaurant building and lot together with the adjacent road lot. Since my brother, who is working in Saudi Arabia, has accepted this arrangement only recently as a result of my urgent offer to him, perhaps it will be safe for us to set August 31, 1985 as the last day for the payment of a P300,000.00 down payment. I hope you will grant us the opportunity to raise the funds within this period, which includes an allowance for delays. The purchase price, I understand, will be based on the redemption value plus accrued interest at the prevailing rate up to the date of our sales contract. Maybe you can give us a long term payment scheme on the basis of my brother’s annu al savings of roughly US$30,000.00 everytime he comes home for his home leave. I realize that this is not a regular transaction but I am seeking your favor to give me a chance to reserve whatever values I can still recover from the properties and to avoid any legal complications that may arise as a consequence of the total loss of the Balangay lot. I hope that you will extend to me your favorable action on this grave matter. Letter dated August 16, 1985 of Planters Bank: Regarding your letter dated July 18, 1985, requesting that we give up to August 31, 1985 to buy back your house and lot and restaurant and building subject to a P300,000.00 downpayment on the purchase price, please be advised that the Collection Committee has agreed to your request.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon as possible for the details of the transaction so that they may work on the necessary documentation. Given the above, the basic question that comes to mind is: Was the offer certain and the acceptance absolute enough so as to engender a meeting of the minds between the parties? Definitely not. While the foregoing letters indicate the amount of P300,000.00 as down payment, they are, however, completely silent as to how the succeeding instalment payments shall be made. At most, the letters merely acknowledge that the down payment of P300,000.00 was agreed upon by the parties. However, this fact cannot lead to the conclusion that a contract of sale had been perfected. Quite recently, this Court held that before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established since the agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. The Navarras’ letter/offer failed to specify a definite amount of the purchase price for the sale/repurchase of the subject properties. It merely stated that the "purchase price will be based on the redemption value plus accrued interest at the prevailing rate up to the date of the sales contract."

The ambiguity of this statement only bolsters the uncertainty of the Navarras’ so-called "offer" for it leaves much rooms for such questions, as: what is the redemption value? What prevailing rate of interest shall be followed: is it the rate stipulated in the loan agreement or the legal rate? When will the date of the contract of sale be based, shall it be upon the time of the execution of the deed of sale or upon the time when the last instalment payment shall have been made? To our mind, these questions need first to be addressed, discussed and negotiated upon by the parties before a definite purchase price can be arrived at. Significantly, the Navarras wrote in the same letter the following: Maybe you can give us a long-term payment scheme on the basis of my brother’s annual savings of roughly US$30,000.00 every time he comes home for his home leave. Again, the offer was not clear insofar as concerned the exact number of years that will comprise the long-term payment scheme. As we see it, the absence of a stipulated period within which the repurchase price shall be paid all the more adds to the indefiniteness of the Navarras’ offer. Clearly, then, the lack of a definite offer on the part of the spouses could not possibly serve as the basis of their claim that the sale/repurchase of their foreclosed properties was perfected. The reason is obvious: one essential element of a contract of sale is wanting: the price certain. Here, what is dramatically clear is that there was no meeting of minds vis-a-vis the price, expressly or impliedly, directly or indirect ly. Further, the tenor of Planters Bank’s letter reply negates the contention of the Navarras that the Bank fully accepted their offer. The letter specifically stated that there is a need to negotiate on the other details of the transaction before the sale

may be formalized. Such statement in the Bank’s letter clearly manifests lack of agreement between the parties as to the terms of the purported contract of sale/repurchase, particularly the mode of payment of the purchase price and the period for its payment. The law requires acceptance to be absolute and unqualified. As it is, the Bank’s letter is not the kind which would constitute acceptance as contemplated by law for it does not evince any categorical and unequivocal undertaking on the part of the Bank to sell the subject properties to the Navarras. The Navarras’ attempt to prove the existence of a perfected contract of sale all the more becomes futile in the light of the evidence that there was in the first place no acceptance of their offer. It should be noted that aside from their first letter dated July 18, 1985, the Navarras wrote another letter dated August 20, 1985, this time requesting the Bank that the down payment of P300,000.00 be instead taken from the excess payment made by the RRRC in redeeming its own foreclosed properties.

The very circumstance that the Navarras had to make this new request is a clear indication that no definite agreement has yet been reached at that point. As we see it, this request constitutes a new offer on the part of the Navarras, which offer was again conditionally accepted by the Bank as in fact it even required the Navarras to submit a board resolution of RRRC before it could proceed with the proposed sale/repurchase. The eventual failure of the spouses to submit the required board resolution precludes the perfection of a contract of sale/repurchase between the parties. Evidently, what transpired between the parties was only a prolonged negotiation to buy and to sell, and, at the most, an offer and a counter offer with no definite agreement having been reached by them. With the hard reality that no perfected contract of sale/repurchase exists in this case, any independent transaction between the Planters Bank and a thirdparty, like the one involving the Gatchalian Realty, cannot be affected.

AMADO VS. SALVADOR G.R. NO. 171401 DECEMBER 13, 2007 FACTS: Judge Amado is the owner of a lot, a portion of which is the subject of the present litigation. It was alleged that sometime in 1979, Judge Amado and Salvador agreed that the latter would sell the lot in favor of Salvador at P60/sqm. The payment was to be made in cash or construction material, whichever the Judge preferred and to whomever the latter wished during his lifetime. The terms of payment, though, were not stipulated. Thereafter, Salvador undertook and the location of the squatters in said land and eventually built several structures thereon for his business. Salvador claims that by October 1980, he had already given Judge Amado total cash advances of P30,310.93 and delivered construction materials amounting to P36,904.45, the total of which exceeded the agreed price for the subject property.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Petitioner heirs averred that Judge Amado and Salvador were co-borrowers from a bank. A loan agreement was executed by them with Capitol City Dev’t bank as lender and the Lot of Judge Amado was used as collateral. The loaned amount was released to Salvador and Judge Amado’s share was paid to him in several instalments. Salvador failed to pay his share in the amortization of the lot so that Judge Amado had to pay the loan to avoid foreclosure. Thereafter, Judge Amado demanded Salvador to leave the premises and an ejectment case was filed to that effect. Salvador filed a case for specific performance contending that a balance of P4,040.62 was not paid to Judge Amado because of the latter’s failure to execute the deed of sale. Salvador presented several documentary evidence. RTC dismissed the complaint because Salvador’s evid ence does not show that the money and construction materials were intended as payment for the subject property. CA reversed the decision on the finding that the construction materials delivered were not paid for.

ISSUE: WON there was a perfected contract of sale. NO HELD: No Convincing Proof as to Manner of Payment In the present case, Salvador fails to allege the manner of payment of the purchase price on which the parties should have agreed. No period was set within which the payment must be made. Of the purchase price of P66,360.00, which the parties purportedly agreed upon, the amount which should be paid in cash and the amount for construction materials was not determined. This means that the parties had no exact notion of the consideration for the contract to which they supposedly gave their consent. Thus, such failure is fatal to Salvador’s claim that a sale had been agreed upon by the parties. Furthermore, after carefully examining the records, serious doubts became apparent as to whether cash advances and deliveries of construction materials evidenced by numerous statements of accounts and delivery receipts were actually intended as payment for the land. First of all, the statements of accounts and the delivery receipts do not indicate that the construction materials or the cash advances were made in connection with the sale of the subject property. Any doubt as to the real meaning of the contract must be resolved against the person who drafted the instrument and is responsible for the ambiguity thereof. Since Salvador prepared these statements of accounts and therefore caused the ambiguity, he cannot benefit from the resulting ambiguity. Salvador is hardly an ignorant and illiterate person; rather, he is a businessman engaged in manufacturing and distributing construction materials and operates no less than two branches. It should have been noted in the statement of accounts, or even in another document, that the cash advances and deliveries of construction materials were made in connection with a transaction as important as a sale of land. As they are, the statements of accounts and especially the straightforward delivery receipts are insufficient proof that Judge Amado sold his property to Salvador. Secondly, one of the delivery receipts presented by Salvador was partially paid. If Judge Amado had already agreed that the

construction materials were payment for the subject property, the act of partially paying for construction materials would be incongruous to such intention. Thirdly, Salvador himself gave conflicting statements on whether he has completed payment. Other proofs presented gave no weight to respondent’s allegations. The testimony of the witness presented by Salvador was not given credence. Finally, the act of Salvador in relocating the squatters is not substantial proof of ownership.

BANK OF COMMERCE VS MANALO FACTS: The Xavierville Estate, Inc. was the owner of parcels of land in Quezon City, known as the Xavierville Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the property into residential lots, which was then offered for sale to individual lot buyers. Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos Manalo, Jr. who was in business of drilling deep water wells and installing pumps under the business name Hurricane Commercial, Inc. For P34,887.66, Manalo, Jr. installed a water pump at Ramos residence at the corner of Aurora Boulevard and Katipunan Avenue, Quezon City. Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the downpayment the P34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested Manalo, Jr. to choose which lots he wanted to buy so that the price of the lots and the terms of payment could be fixed and incorporated in the conditional sale. Manalo, Jr. met with Ramos and informed him that he and his wife Perla had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square meters. In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. He also pegged the price of the lots at P200.00 per square meter, or a total of P348,060.00, with a 20% down payment of the purchase price amounting to P69,612.00 less the P34,887.66 owing from Ramos, payable on or before December 31, 1972; the corresponding Contract of Conditional Sale would then be signed on or before the same date, but if the selling operations of XEI resumed after December 31, 1972, the balance of the downpayment would fall due then, and the spouses would sign the aforesaid contract within 5 days from receipt of the notice of resumption of such selling operations. It was also stated in the letter that, in the meantime, the spouses may introduce improvements thereon subject to the rules and regulations imposed by XEI in the subdivision. Perla Manalo conformed to the letter agreement. The spouses Manalo took possession of the property on September 2, 1972, constructed a house thereon, and installed a fence around the perimeter of the lots. The spouses Manalo were notified of the resumption of the selling operations of XEI. However, they did not pay the balance of the downpayment on the lots because Ramos failed to prepare a contract of conditional sale and transmit the same to Manalo for their signature. On August 14, 1973, Perla Manalo went to the XEI office and requested that the payment of the amount representing the balance of the downpayment be


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever deferred, which, however, XEI rejected. On August 10, 1973, XEI furnished her with a statement of their account as of July 31, 1973, showing that they had a balance of P34,724.34 on the downpayment of the two lots after deducting the account of Ramos, plus P3,819.68 interest thereon from September 1, 1972 to July 31, 1973, and that the interests on the unpaid balance of the purchase price of P278,448.00 from September 1, 1972 to July 31, 1973 amounted to P30,629.28. The spouses were informed that they were being billed for said unpaid interests. Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots already contracted and those yet to be sold. Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM. In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going construction on the property since it (CBM) was the owner of the lot and she had no permission for such construction. She agreed to have a conference meeting with CBM officers where she informed them that her husband had a contract with OBM, through XEI, to purchase the property. When asked to prove her claim, she promised to send the documents to CBM. However, she failed to do so. On September 5, 1986, CBM reiterated its demand that it be furnished with the documents promised, but Perla Manalo did not respond. On July 27, 1987, CBM filed a complaint for unlawful detainer against the spouses with the MTC Court of Quezon City. In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its complaint against the spouses Manalo, the latter filed a complaint for specific performance and damages against the bank before the RTC of Quezon City. Boston Bank, now petitioner, maintains that, as held by the CA, the records do not reflect any schedule of payment of the 80% balance of the purchase price, or P278,448.00. Petitioner insists that unless the parties had agreed on the manner of payment of the principal amount, including the other terms and conditions of the contract, there would be no existing contract of sale or contract to sell.

ISSUE: WON the manner of payment has been agreed upon and WON it is essential for there to be an existing contract of sale or contract to sell

RULING: No, it was not agreed upon thus, there was no contract to sell. The Court agrees with petitioners contention that, for a perfected contract of sale or contract to sell to exist in law, there must be an agreement of the parties, not only on the price of the property sold, but also on the manner the price is to be paid by the vendee. Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the contracting parties obliges himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and the price. From the averment of perfection, the parties are bound, not only to the fulfillment of what has been expressly stipulated, but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. On the other hand, when

the contract of sale or to sell is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. It is not enough for the parties to agree on the price of the property. The parties must also agree on the manner of payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. This is so because the agreement as to the manner of payment goes into the price, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the amount of downpayment. The parties must, likewise, agree on the manner of payment of the balance of the purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a downpayment or portion thereof, such payment cannot be considered as sufficient proof of the perfection of any purchase and sale between the parties. There is no showing, in the records, of the schedule of payment of the balance of the purchase price on the property amounting to P278,448.00. The said parties confined themselves to agreeing on the price of the property (P348,060.00), the 20% downpayment of the purchase price (P69,612.00), and credited respondents for the P34,887.00 owing from Ramos as part of the 20% downpayment. The determination of the terms of payment of the P278,448.00 had yet to be agreed upon on or before December 31, 1972, or even afterwards, when the parties sign the corresponding contract of conditional sale. Jurisprudence is that if a material element of a contemplated contract is left for future negotiations, the same is too indefinite to be enforceable. And when an essential element of a contract is reserved for future agreement of the parties, no legal obligation arises until such future agreement is concluded. Indeed, the parties are in agreement that there had been no contract of conditional sale ever executed by XEI, OBM or petitioner, as vendor, and the respondents, as vendees. Respondents failed to allege and prove, in the trial court, that, as a matter of business usage, habit or pattern of conduct, XEI granted all lot buyers the right to pay the balance of the purchase price in installments of 120 months of fixed amounts with precomputed interests, and that XEI and the respondents had intended to adopt such terms of payment relative to the sale of the two lots in question. Habit, custom, usage or pattern of conduct must be proved like any other facts. As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected contract to sell the two lots; hence, respondents have no cause of action for specific performance against petitioner.


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Inadequacy of Price Does Not Affect Ordinary Sale THE DIRECTOR OF LANDS, vs. ABARCA, ET AL

FACTS: About fourteen years, the lot now in question was the subject of litigation between Datu Bualan and his co-claimants, on the one hand, and Ciriaco Lizada, on the other. Juan A. Sarenas and Domingo Braganza were the attorneys for Datu Bualan and his co-claimants in that suit, wherein a judgment was rendered declaring Datu Bualan and his co-claimants the owners of the land involved in the litigation. Subsequently, a controversy arose between the Bagobos and their attorneys as to the amount of fees due the latter, whereupon the attorneys took possession of the property now in question. Action was brought by the Bagobos against their former attorneys for the recovery of the land. In this action judgment was rendered ordering the attorneys to return the property seized by them, and requiring the Bagobos to pay their former attorneys the sum of P6,000 as fees. As a result of this judgment Datu Bualan and his co-claimants paid Sarenas and Braganza the sum of P5,126.13. They also paid to the municipal treasurer of Davao in the name of Sarenas and Braganza, for taxes and penalties due on the property in the year 1926, while the same was in the possession of the latter, the sum of P1,035.87. The Bagobos assumed that, by these payments which amounted in all to P6,162, the judgment rendered against them for P6,000 together with interests due thereon, was fully satisfied. Claiming that the sum paid to the municipal treasurer of Davao should not be credited on the amount of the judgment obtained by them, Sarenas and Braganza caused the clerk of the court to issue a writ of execution on the said judgment. By reason of the writ of execution so issued, the sheriff levied on the property here in question and sold it to Sarenas and Braganza for the sum of P877.25. Upon the failure of the Bagobos to redeem the property, they filed their claim in the present cadastral case, alleging that they were the absolute owners of the lot in question. In view of the evidence presented by the parties, the lower court dismissed the claim of Sarenas and Braganza, and ordered the registration of the lot now in question in the names of Datu Bualan and his co-claimants, subject, however, to a lien in favor of Sarenas and Braganza for the sum of P877.25, with interest at the rate of 12 per cent per annum from April 27, 1927. In dismissing the claim of Sarenas and Braganza, the lower court held that the sale by the sheriff of the property in question in favor of said claimants was null and void, because the amount of P877.25 paid by Sarenas and Braganza was absolutely inadequate.

ISSUE: WON a judicial sale of real property will be set aside when price is adequate

RULING: Yes if the price is so inadequate as to shock the conscience of the court. The lower court was right in declaring the sheriff's sale null and void on the ground of the inadequacy of the price paid. It appears that in 1927 the assessed value of the contested property was

more than P60,000. A judicial sale of real property will be set aside when the price is so inadequate as to shock the conscience of the court. (National Bank vs. Gonzalez, 45 Phil., 693.) In the instant case there is another important consideration. In fairness and equity, which after all are the true aims of the law, the amount paid by Datu Bualan and his co-claimants for taxes and penalties due on the contested property should be credited on the judgment obtained by Sarenas and Braganza. Such taxes and penalties accrued while the property was in that possession under a claim of ownership. It follows that the error assigned by Datu Bualan and his co-claimants against the judgment below, to the effect that the lower court erred in subjecting the property sought to be registered to a lien in favor of Sarenas and Braganza for P877.25 with interests, must be sustained.

BRAVO-GUERRERO vs. EDWARD P. BRAVO FACTS: Spouses Mauricio and Simona Bravo owned 2 parcels of land measuring 287 and 291 square meters and located in Makati City, Metro Manila. The Properties are registered under TCT Nos. 58999 and 59000 issued by the Register of Deeds of Rizal on 23 May 1958. The Properties contain a large residential dwelling, a smaller house and other improvements. Mauricio and Simona had three children - Roland, Cesar and Lily, all surnamed Bravo. Cesar died without issue. Lily Bravo married David Diaz, and had a son, David B. Diaz, Jr. ("David Jr."). Roland had six children, namely, Elizabeth Bravo-Guerrero, Edward, Roland, Senia, Benjamin, and their half-sister, Ofelia. Simona executed a General Power of Attorney ("GPA") on 17 June 1966 appointing Mauricio as her attorney-in-fact. In the GPA, Simona authorized Mauricio to "mortgage or otherwise hypothecate, sell, assign and dispose of any and all of my property, real, personal or mixed, of any kind whatsoever and wheresoever situated, or any interest therein." Mauricio subsequently mortgaged the Properties to the PNB and DBP for P10,000 and P5,000, respectively. On 25 October 1970, Mauricio executed a Deed of Sale with Assumption of Real Estate Mortgage conveying the Properties t o vendees Roland A. Bravo, Ofelia A. Bravo and Elizabeth BravoGuerrero.” The sale was conditioned on the payment of P1,000 and on the assumption by the vendees of the PNB and DBP mortgages over the Properties. As certified by the Clerk of Court of the Regional Trial Court of Manila, the Deed of Sale was notarized by Atty. Victorio Q. Guzman on 28 October 1970 and entered in his Notarial Register. However, the Deed of Sale was not annotated on TCT Nos. 58999 and 59000. Neither was it presented to PNB and DBP. The mortage loans and the receipts for loan payments issued by PNB and DBP continued to be in Mauricio’s name even after his death on 20 November 1973. Simona died in 1977. On 23 June 1997, Edward, represented by his wife, Fatima Bravo, filed an action for the judicial partition of the Properties. Edward claimed that he and the other grandchildren of Mauricio and Simona are co-owners of the Properties by succession. Despite this, petitioners refused to share with him the possession


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever and rental income of the Properties. Edward later amended his complaint to include a prayer to annul the Deed of Sale, which he claimed was merely simulated to prejudice the other heirs. The trial court upheld Mauricio’s sale of the Properties to the vendees. The trial court ruled that the sale did not prejudice the compulsory heirs, as the Properties were conveyed for valuable consideration.

Citing Article 166 of the Civil Code, the Court of Appeals reversed trial court’s decision and declared the Deed of Sale void for lack of Simona’s consent. It also found that there was insufficient proof that the vendees made the mortgage payments on the Properties, since the PNB and DBP receipts were issued in Mauricio’s name. The appellate court opined that the rental income of the Properties, which the vendees never shared with respondents, was sufficient to cover the mortgage payments to PNB and DBP.

ISSUE: WON the sale of the properties was simulated or void for gross inadequacy of price

RULING: No, the sale of the properties is not void either for being simulated or for inadequacy of price. Respondents, however, contend that the sale of the Properties was merely simulated. As proof, respondents point to the consideration of P1,000 in the Deed of Sale, which respondents claim is grossly inadequate compared to the actual value of the Properties. Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects. When the parties to an alleged contract do not really intend to be bound by it, the contract is simulated and void. A simulated or fictitious contract has no legal effect whatsoever because there is no real agreement between the parties. In contrast, a contract with inadequate consideration may nevertheless embody a true agreement between the parties. A contract of sale is a consensual contract, which becomes valid and binding upon the meeting of minds of the parties on the price and the object of the sale. The concept of a simulated sale is thus incompatible with inadequacy of price. When the parties agree on a price as the actual consideration, the sale is not simulated despite the inadequacy of the price. Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue influence. In this case, respondents have not proved any of the instances that would invalidate the Deed of Sale. Respondents even failed to establish that the consideration paid by the vendees for the Properties was grossly inadequate. As the trial court pointed out, the Deed of Sale stipulates that, in addition to the payment of P1,000, the vendees should assume the mortgage loans from PNB and DBP. The consideration for the sale of the Properties was thus P1,000 in cash and the assumption of the P15,000 mortgage.

Respondents argue that P16,000 is still far below the actual value of the Properties The tax declarations placed the assessed value of both Properties at P16,160. Compared to this, the price of P16,000 cannot be considered grossly inadequate, much less so shocking to the conscience as to justify the setting aside of the Deed of Sale.

PART III: FORMATION OF CONTRACT OF SALE I. POLICITATION 1. Option Contract TAYAG vs. LACSON FACTS: Respondents Angelica Tiotuyco Vda. de Lacson, and her children were the registered owners of three parcels of land located in Mabalacat, Pampanga. The properties were tenanted agricultural lands. On March 17, 1996, a group of original farmers/tillers, Tiamson, et al., individually executed in favor of the petitioner separate Deeds of Assignment in which the assignees assigned to the petitioner their respective rights as tenants/tillers of the landholdings possessed and tilled by them for and in consideration of P50.00 per square meter. The said amount was made payable "when the legal impediments to the sale of the property to the petitioner no longer existed." The petitioner was also granted the exclusive right to buy the property if and when the respondents, with the concurrence of the defendants-tenants, agreed to sell the property. In the interim, the petitioner gave varied sums of money to the tenants as partial payments, and the latter issued receipts for the said amounts. On July 24, 1996, the petitioner called a meeting of the defendants-tenants to work out the implementation of the terms of their separate agreements. However, on August 8, 1996, the defendants-tenants, through Joven Mariano, wrote the petitioner stating that they were not attending the meeting and instead gave notice of their collective decision to sell all their rights and interests, as tenants/lessees, over the landholding to the respondents Lacson. On August 19, 1996, the petitioner filed a complaint against the defendants-tenants, as well as the respondents, for the court to fix a period within which to pay the agreed purchase price of P50.00 per square meter to the defendants, as provided for in the Deeds of Assignment. Respondents as defendants asserted that they never induced the defendants Tiamson to violate their contracts with the petitioner; and, being merely tenants-tillers, the defendantstenants had no right to enter into any transactions involving their properties without their knowledge and consent. They also averred that the transfers or assignments of leasehold rights made by the defendants-tenants to the petitioner is contrary to Presidential Decree (P.D.) No. 27 and Republic Act No. 6657, the Comprehensive Agrarian Reform Program (CARP). The defendants-tenants Tiamson, et al., alleged in their answer


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever with counterclaim for damages, that the money each of them received from the petitioner were in the form of loans, and that they were deceived into signing the deeds of assignment. What they knew was that they were made to sign a document that will serve as a receipt for the loan granted to them by the plaintiff.

ISSUE: WON the Deeds of Assignment are perfected option contracts

RULING: No, there is no perfected option contract. The Court does not agree with the contention of the petitioner that the deeds of assignment executed by the defendantstenants are perfected option contracts. An option is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Until accepted, it is not, properly speaking, treated as a contract. The second party gets not lands, not an agreement that he shall have the lands, but the right to call for and receive lands if he elects. An option contract is a separate and distinct contract from which the parties may enter into upon the conjunction of the option. In this case, the defendants-tenants-subtenants, under the deeds of assignment, granted to the petitioner not only an option but the exclusive right to buy the landholding. But the grantors were merely the defendants-tenants, and not the respondents, the registered owners of the property. Not being the registered owners of the property, the defendants-tenants could not legally grant to the petitioner the option, much less the "exclusive right" to buy the property. As the Latin saying goes, "NEMO DAT QUOD NON HABET."

ADELFA PROPERTIES VS. CA [G.R. NO. 111238. JANUARY 25, 1995.] PARTIES: Roasrio and Salud Jimenez – Seller Adelfa Properties – Buyer Subject:: western portion of a parcel of land 8855 sq. ms. Covered by TCT 309773 situated in Barrio Culasi, Las Pinas, Metro Manila FACTS: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose and Dominador Jimenez, were the registered coowners of a parcel of land consisting of 17,710 sq. ms (TCT 309773) situated in Barrio Culasi, Las Piñas, Metro Manila. On 28 July 1988, Jose and Dominador Jimenez sold their share consisting of 1/2 of said parcel of land, specifically the eastern portion thereof, to Adelfa Properties pursuant to a “Kasulatan sa Bilihan ng Lupa.” Subsequently, a “Confirmatory Extrajudicial Partition Agreement” was executed by the Jimenezes, wherein the eastern portion of the subject lot, with an area of 8,855 sq. ms. was ADJUDICATED TO JOSE AND

DOMINADOR JIMENEZ, WHILE THE WESTERN PORTION WAS ALLOCATED TO ROSARIO AND SALUD Jimenez.

Thereafter, Adelfa Properties expressed interest in buying the western portion of the property from Rosario and Salud. Accordingly, on 25 November 1989, an “Exclusive Option to Purchase” was executed between the parties, with the condition that the selling price shall be P2,856,150, that the option money of P50,000 shall be credited as partial payment upon the consummation of sale, that the balance is to be paid on or before 30 November 1989, and that in case of default by Adelfa Properties to pay the balance, the option is cancelled and 50% of the option money shall be forfeited and the other 50% refunded upon the sale of the property to a third party. Before Adelfa Properties could make payment, it received summons on 29 November 1989, together with a copy of a complaint filed by the nephews and nieces of Rosario and Salud against the latter, Jose and Dominador Jimenez, and Adelfa Properties in the RTC Makati (Civil Case 89-5541), for annulment of the deed of sale in favor of Household Corporation and recovery of ownership of the property covered by TCT 309773. As a consequence, in a letter dated 29 November 1989, Adelfa Properties informed Rosario and Salud that it would hold payment of the full purchase price and suggested that the latter settle the case with their nephews and nieces. . Salud Jimenez refused to heed the suggestion of Adelfa Properties and attributed the suspension of payment of the purchase price to “lack of word of honor.” On 14 December 1989, Rosario and Salud sent Francisca Jimenez to see Atty. Bernardo, in his capacity as Adelfa Properties’ counsel, and to inform the latter that they were cancelling the transaction. In turn, Atty. Bernardo offered to pay the purchase price provided that P500,000.00 be deducted therefrom for the settlement of the civil case. This was rejected by Rosario and Salud. On 22 December 1989, Atty. Bernardo wrote Rosario and Salud on the same matter but this time reducing the amount from P500,000.00 to P300,000.00, and this was also rejected by the latter. On 23 February 1990, the RTC dismissed Civil Case 89-5541. On 16 April 1990, Atty. Bernardo wrote Rosario and Salud informing the latter that in view of the dismissal of the case against them, Adelfa Properties was willing to pay the purchase price, and he requested that the corresponding deed of absolute sale be executed. This was ignored by Rosario and Salud. On 27 July 1990, Jimenez’ couns el sent a letter to Adelfa Properties enclosing therein a check for P25,000.00 representing the refund of 50% of the option money paid under the exclusive option to purchase. Rosario and Salud then requested Adelfa Properties to return the owner’s duplicat e copy of the certificate of title of Salud Jimenez. Adelfa Properties failed to surrender the certificate of title. Rosario and Salud Jimenez filed Civil Case 7532 in the RTC Pasay City (Branch 113) for annulment of contract with damages, praying, among others, that the exclusive option to purchase be declared null and void; that Adelfa Properties be ordered to return the owner’s duplicate certificate of title; and that the annotation of the option contract on TCT 309773 be cancelled.

RTC: On 5 September 1991, the trial court rendered judgment holding that the agreement entered into by the parties was


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever merely an option contract, and declaring that the suspension of payment by Adelfa Properties constituted a counter-offer which, therefore, was tantamount to a rejection of the option. It likewise ruled that Adelfa Properties could not validly suspend payment in favor of Rosario and Salud on the ground that the vindicatory action filed by the latter’s kin did not involve the western portion of the land covered by the contract between the parties, but the eastern portion thereof which was the subject of the sale between Adelfa Properties and the brothers Jose and Dominador Jimenez. The trial court then directed the cancellation of the exclusive option to purchase. On appeal, RTC: the Court of appeals affirmed in toto the decision of the court a quo. That Article 1590 of the Civil Code on suspension of payments applies only to a contract of sale or a contract to sell, but not to an option contract which it opined was the nature of the document subject of the case at bar. Hence, the petition for review on certiorari. Adelfa properties posits that the contract is a Contract of Sale and not an Option Contract or Contract to Sell, making the suspension of payment applicable in the case.

ISSUE: Whether or not the contract is a Contract of Sale , Option Contract or Contract to Sell.

SC: The Supreme Court affirmed the assailed judgment of the Court of Appeals in CA-GR CV 34767, with modificatory premises.

Agreement between parties a contract to sell and not an option contract or a contract of sale The alleged option contract is a contract to sell, rather than a contract of sale. The distinction between the two is important for in contract of sale, the 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 until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. That the parties really intended to execute a contract to sell is bolstered by the fact that the deed of absolute sale would have been issued only upon the payment of the balance of the purchase price, as may be gleaned from Adelfa Properties’ letter dated 16 April 1990 wherein it informed the vendors that it “is now ready and willing to pay you simultaneously with the execution of the corresponding deed of absolute sale.”

Contract interpreted to ascertain intent of parties; Title not controlling if text shows otherwise . The important task in contract interpretation is always the ascertainment of the intention of the contracting parties and that task is to be discharged by looking to the words they used to project that intention in their contract, all the words not just a particular word

or two, and words in context not words standing alone. Moreover, judging from the subsequent acts of the parties which will hereinafter be discussed, it is undeniable that the intention of the parties was to enter into a contract to sell. In addition, the title of a contract does not necessarily determine its true nature. Hence, the fact that the document under discussion is entitled “Exclusive Option to Purchase” is not controlling where the text thereof shows that it is a contract to sell.

Test to determine contract as a “contract of sale or purchase” or mere “option”. The test in determining whether a contract is a “contract of sale or purchase” or a mere “option” is whether or not the agreement could be specifically enforced. There is no doubt that Adelfa’s obligation to pay the purchase price is specific, definite and certain, and consequently binding and enforceable. Had the Jimenezes chosen to enforce the contract, they could have specifically compelled Adelfa to pay the balance of P2,806,150.00. This is distinctly made manifest in the contract itself as an integral stipulation, compliance with which could legally and definitely be demanded from petitioner as a consequence.

Adelfa Properties justified in suspending payment of balance by reason of vindicatory action filed against it . In Civil Case 89-5541, it is easily discernible that, although the complaint prayed for the annulment only of the contract of sale executed between Adelfa Properties and the Jimenez brothers, the same likewise pr ayed for the recovery of therein Jimenez’ share in that parcel of land specifically covered by TCT 309773. In other words, the Jimenezes were claiming to be co-owners of the entire parcel of land described in TCT 309773, and not only of a portion thereof nor did their claim pertain exclusively to the eastern half adjudicated to the Jimenez brothers. Therefore, Adelfa Properties was justified in suspending payment of the balance of the purchase price by reason of the aforesaid vindicatory action filed against it. The assurance made by the Jimenezes that Adelfa Properties did not have to worry about the case because it was pure and simple harassment is not the kind of guaranty contemplated under the exceptive clause in Article 1590 wherein the vendor is bound to make payment even with the existence of a vindicatory action if the vendee should give a security for the return of the price.

Jimenezes may no longer be compelled to sell and deliver subject property. Be that as it may, and the validity of the suspension of payment notwithstanding, the Jimenezes may no longer be compelled to sell and deliver the subject property to Adelfa Properties for two reasons, that is, Adelfa’s failure to duly effect the consignation of the purchase price after the disturbance had ceased; and, secondarily, the fact that the contract to sell had been validly rescinded by the Jimenezes.

Rescission in a contract to sell . Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable to a contract to sell. Furthermore, judicial action for rescission of a contract is not necessary where the contract provides for automatic rescission in case of breach, as in the contract involved in the present controversy. By Adelfa’s failure to comply with its obligation, the Jimenezes elected to resort to and did announce the rescission of the contract through its letter to Adelfa dated 27 July 1990. That written notice of rescission is deemed sufficient under the circumstances. WHEREFORE, on the foregoing modificatory premises, and


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever considering that the same result has been reached by respondent Court of Appeals with respect to the relief awarded to private respondents by the court a quo which we find to be correct, its assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED.

i.

Meaning of Separate Consideration

SPOUSES JULIO D. VILLAMOR AND MARINA VILLAMOR vs THE HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND ROBERTO REYES G.R. No. 97332 October 10, 1991 FACTS: Macaria sold 300 square meters from her 600 square meter lot to the spouses Villamor which is located at Baesa, Caloocan City, for the total amount of P21,000.00. Earlier, Macaria borrowed P2,000.00 from the spouses which amount was deducted from the total purchase price of the 300 square meter lot sold. Macaria executed a "Deed of Option" in favor of Villamor in which the remaining 300 square meter portion (TCT No. 39934) of the lot would be sold to Villamor under the conditions stated therein. Included in the Deed of Option is: That the only reason why the Spouses-vendees Julio Villamor and Marina V. Villamor, agreed to buy the said one-half portion at the above-stated price of about P70.00 per square meter, is because I, and my husband Roberto Reyes, have agreed to sell and convey to them the remaining one-half portion still owned by me and now covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan, whenever the need of such sale arises, either on our part or on the part of the spouses (Julio) Villamor and Marina V. Villamor, at the same price of P70.00 per square meter, excluding whatever improvement may be found the thereon; In 1984, when the husband of Macaria retired, wanted to repurchased the said 300 square meter of lot from the petitioners. However, petitioners rejected the said offer and expresses their desire to purchase the remaining half of the lot. Trial Court rendered judgment in favor of Villamor. Court of Appeals reversed the decision premised on the finding of respondent court that the Deed of Option is void for lack of consideration.

ISSUE: Whether there is a Separate Consideration for the Option Contract? YES

RULING: As expressed in Gonzales v. Trinidad, 67 Phil. 682, consideration is "the why of the contracts, the essential reason which moves the contracting parties to enter into the contract." The cause or the impelling reason on the part of private respondent executing the deed of option as appearing in the deed itself is the petitioner's having agreed to buy the 300 square meter portion of private respondents' land at P70.00 per square meter "which was greatly higher than the actual reasonable prevailing price."

The respondent appellate court failed to give due consideration to petitioners' evidence which shows that in 1969 the Villamor spouses bough an adjacent lot from the brother of Macaria Labing-isa for only P18.00 per square meter which the private respondents did not rebut. Thus, expressed in terms of money,

the consideration for the deed of option is the difference between the purchase price of the 300 square meter portion of the lot in 1971 (P70.00 per sq.m.) and the prevailing reasonable price of the same lot in 1971. Whatever it is, (P25.00 or P18.00) though not specifically stated in the deed of option, was ascertainable. Petitioner's allegedly paying P52.00 per square meter for the option may, as opined by the appellate court, be improbable but improbabilities does not invalidate a contract freely entered into by the parties. The "deed of option" entered into by the parties in this case had unique features. Ordinarily, an optional contract is a privilege existing in one person, for which he had paid a consideration and which gives him the right to buy, for example, certain merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fixed price (Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look closely at the "deed of option" signed by the parties, We will notice that the first part covered the statement on the sale of the 300 square meter portion of the lot to Spouses Villamor at the price of P70.00 per square meter "which was higher than the actual reasonable prevailing value of the lands in that place at that time (of sale)." The second part stated that the only reason why the Villamor spouses agreed to buy the said lot at a much higher price is because the vendor (Reyeses) also agreed to sell to the Villamors the other half-portion of 300 square meters of the land. Had the deed stopped there, there would be no dispute that the deed is really an ordinary deed of option granting the Villamors the option to buy the remaining 300 square meter-half portion of the lot in consideration for their having agreed to buy the other half of the land for a much higher price. But, the "deed of option" went on and stated that the sale of the other half would be made "whenever the need of such sale arises, either on our (Reyeses) part or on the part of the Spouses Julio Villamor and Marina V. Villamor. It appears that while the option to buy was granted to the Villamors, the Reyeses were likewise granted an option to sell. In other words, it was not only the Villamors who were granted an option to buy for which they paid a consideration. The Reyeses as well were granted an option to sell should the need for such sale on their part arise. A contract of sale is, under Article 1475 of the Civil Code, "perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand perform of contracts." Since there was, between the parties, a meeting of minds upon the object and the price, there was already a perfected contract of sale. What was, however, left to be done was for either party to demand from the other their respective undertakings under the contract. It may be demanded at any time either by the private respondents, who may compel the petitioners to pay for the property or the petitioners, who may compel the private respondents to deliver the property. However, the Deed of Option did not provide for the period within which the parties may demand the performance of their respective undertakings in the instrument. The parties could not


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever have contemplated that the delivery of the property and the payment thereof could be made indefinitely and render uncertain the status of the land. The failure of either parties to demand performance of the obligation of the other for an unreasonable length of time renders the contract ineffective. Under Article 1144 (1) of the Civil Code, actions upon written contract must be brought within ten (10) years. The Deed of Option was executed on November 11, 1971. The acceptance, as already mentioned, was also accepted in the same instrument. The complaint in this case was filed by the petitioners on July 13, 1987, seventeen (17) years from the time of the execution of the contract. Hence, the right of action had prescribed. There were allegations by the petitioners that they demanded from the private respondents as early as 1984 the enforcement of their rights under the contract. Still, it was beyond the ten (10) years period prescribed by the Civil Code.

ii.

No Separate Consideration NICOLAS SANCHEZ VS. SEVERINA RIGOS 45 SCRA 368 JUNE 1972

FACTS:

In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date, a parcel of land situated in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be deemed "terminated and elapsed, " if “Sanchez shall fail to exercise his right to buy the property" within the stipulated period. On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an action for specific performance and damages against Rigos f or the latter’s refusal to accept several tenders of payment that Sanchez made to purchase the subject land. Defendant Rigos contended that the contract between them was only “a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option. The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of conveyance. The Court of Appeals certified the case at bar to the Supreme Court for it involves a question purely of law.

ISSUE: Was there a contract to buy and sell between the parties or only a unilateral promise to sell?

RULING: The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument. Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to

indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land. There is no question that under article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a binding effect if supported by a consideration which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. It is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance of it by appellee. In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., holding that Art. 1324 is modified by Art. 1479 of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the two (2) provisions intended to enforce or implement the same principle. In the present case the trial court found that the "Plaintiff (Nicolas Sanchez) had offered the sum of Pl,510.00 before any withdrawal from the contract has been made by the Defendant (Severina Rigos)." Since Rigos' offer sell was accepted by Sanchez, before she could withdraw her offer, a bilateral reciprocal contract — to sell and to buy — was generated.

PERCELINO DIAMANTE vs. HON. COURT OF APPEALS and GERARDO DEYPALUBUS FACTS: A fishery lot, encompassing an area of 9.4 hectares and designated as Lot No. 518-A of the Cadastral Survey of Dumangas, Iloilo, was previously covered by Fishpond Permit No. F-2021 issued in the name of Anecita Dionio. Upon Anecita's death, her heirs, petitioner Diamante and Primitivo Dafeliz, inherited the property which they later divided between themselves; petitioner got 4.4. hectares while Dafeliz got 5 hectares. It is the petitioner's share that is the subject of the present controversy. Primitivo Dafeliz later sold his share to private respondent. On 21 May 1959, petitioner sold to private respondent his leasehold rights over the property in question for P8,000.00 with the right to repurchase the same within three (3) years from said date.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever On 16 August 1960, private respondent filed an application with the Bureau of Fisheries, dated 12 July 1960, for a fishpond permit and a fishpond lease agreement over the entire lot, submitting therewith the deeds of sale executed by Dafeliz and the petitioner. Pressed by urgent financial needs, petitioner, on 17 October 1960, sold all his remaining rights over the property in question to the private respondent for P4,000.00. On 25 October 1960, private respondent, with his wife's consent, executed in favor of the petitioner an Option to Repurchase the property in question within ten (10) years from said date, with a ten-year grace period. Private respondent submitted to the Bureau of Fisheries the definite deed of sale; he did not, however, submit the Option to Repurchase.

contract to sell and to buy is created, and the offeree ipso facto assumes the obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails to deliver the thing he had offered for sale. The contract of option is a separate and distinct contract from the contract which the parties may enter into upon the consummation of the option, and a consideration for an optional contract is just as important as the consideration for any other kind of contract. Thus, a distinction should be drawn between

the consideration for the option to repurchase, and the consideration for the contract of repurchase itself. Even if the promise was accepted, private respondent was not bound thereby in the absence of a distinct consideration.

BIBLE BAPTIST CHURCH and PASTOR REUBEN BELMONTE vs CA and SPOUSES VILLANUEVA

Thereafter, on 2 August 1961, the Bureau of Fisheries issued to private respondent Fishpond Permit On 11 December 1963, petitioner, contending that he has a valid twenty-year option to repurchase the subject property, requested the Bureau of Fisheries to respondent’s permit insofar as the said property is concerned. On 18 December 1964, his lettercomplaint was dismissed. Petitioner then sought a reconsideration of the dismissal; the same was denied on 29 April 1965. His appeal to the Secretary of the DANR was likewise dismissed on 30 October 1968. Again, on 20 November 1968, petitioner sought for a reconsideration; this time, however, he was successful.

G.R. No. 126454 November 26, 2004

FACTS: On June 7, 1985, the Bible Baptist Church entered into a contract of lease with Spouses Villanueva over a property located in Malate, Manila. The pertinent portions of the contract are: xxx 2. That lease shall take effect on June 7, 1985 and shall be for a period of 15 years. xxx

ISSUE: Was there a valid Option? No RULING: It is settled by this Court that "an agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is made without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the purchaser, as absolute owner already of the object. In that case the vendor has not reserved to himself the right to repurchase." Hence, the Option to Repurchase executed by private respondent in the present case, was merely a promise to sell , which must be governed by Article 1479 of the Civil Code. A copy of the so-called Option to Repurchase is neither attached to the records nor quoted in any of the pleadings of the parties. This Court cannot, therefore, properly rule on whether the promise was accepted and a consideration distinct from the price, supports the option. Undoubtedly, in the absence of either or both acceptance and separate consideration, the promise to sell is not binding upon the promissor (private respondent).

4. That upon signing of the LEASE AGREEMENT, the Baptist Church shall pay the sum of P 84,000.00. Said sum shall be paid directly to the Rural Bank of Bulacan for the purpose of redemption of said property, which was mortgaged by the Spouses. xxx 8. That Bible Baptist has the option to buy the leased property during the 15 years of the lease. If Baptist Church decides to purchase the premises the terms will be: 1. A selling price of 1.8 M; 2. A down payment agreed upon by both parties; 3. The balance may be paid at the rate of P 120T per year. These stipulations of the lease contract are the subject of the present controversy for it is now the contention of Baptist Church that the option contract is founded upon a separate consideration that is the P 84 T paid by them upon the signing of the lease agreement.

ISSUE: Whether or not the option to buy given to the Baptist Church is founded upon a consideration.

A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at the moment it is accepted. Acceptance is the act that gives life to a juridical obligation, because, before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance, however, a bilateral

HELD: No. Article 1479 of the Civil Code provides: “A promise to buy and sell a det erminate thing for a price certain is reciprocally demandable.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.”

Baptist Church cannot insist that the 84 T they paid in order to release the Spouses’ property from the mortgage should be deemed a separate consideration to support the option contract. It must be pointed out that the said amount was in fact apportioned into monthly rentals spread over a period of one year, at 7 T per month. Thus for the entire period of June 1985 to May 1986, Baptist Church’s monthly rent had already been paid for, such that it only commenced paying rentals in June 1986. Therefore, the amount of 84 T has been fully exhausted and utilized by their occupation of the premises and there is no separate consideration to speak of which could support the option. Baptist Church insists that a consideration need not be a separate sum of money. They posit that their act of advancing the money to “rescue” the property from the mortgage and impending foreclosure should be enough consideration to support the option. In Villamor vs CA the court defined consideration as “the why of the contracts, the esse ntial reason which moves the contracting parties to enter into a contract.” This would illustrate that the consideration need not be monetary. Actual cash need not be exchanged for the prion. However, by the very nature of an option contract the same is an onerous contract for which the consideration must be something of value, although its kind may vary. The Villamor case is distinct from this case because: The Court cannot find that the Baptist Church parted with anything of value aside from the 84 T; There is no document that contains an agreement between the parties that Baptist Church’s supposed rescue of the mortgaged property was the consideration which the parties contemplated in support of the option clause in the contract; To summarize the rules, an option contract needs to be supported by a separate consideration. The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause.

two slipways within the first 10 years of the lease with a total value of not less than 450 T. On March 14, 1973 the property was mortgaged to China Banking Corporation (CBC) as a security for a loan availed by two of Carmen’s children, Mariano and Gabriel. The owner’s duplicate copy was now with CBC. On December 31, 1974 Carmen executed a Deed of Absolute Sale with Assumption of Mortgage in which she as the vendor conveyed the property to her children Serafin, Mariano, Rogelio, Carmencita and Mary Carmela for the purchase price of 350 T. Mariano wrote a letter to CBC requesting them to conform to the sale however CBC refused. On June 27, 1977 Mariano presented the deed to the ROD for registration purposes. They requested the ROD to compel CBC to transmit the owner’s duplicate copy of the title for annotation. CBC informed them that they were just following the instruction of Carmen not to surrender the owner ’s duplicate. In the meantime the balance of the loan was fully paid and on June 29, 1977 CBC executed a Cancellation of Real Estate Mortgage however the deed was not presented to the ROD for registration. On the same date Mariano, on behalf of his siblings, executed an Affidavit of Adverse claim asserting their rights as vendees of the property. On June 30, 1977 Carmen and NIC executed a Supplementary Lease Agreement extending the lease period to October 2005.

NIC was also granted the option to buy the property for 1.6 M. Mariano et. al. was able to have the sale registered and a new title was issued in their name. Thereafter, they have informed NIC to vacate the property, as they are now its new owners, however, NIC refused. Meanwhile, Carmen filed a case against NIC anent the Supplementary Lease Agreement purportedly executed by her as lessor and NIC as lessee. She averred that NIC took advantage of the animosity between her and her children by inserting therein blatantly unfair provisions. On June 30, 1990 Mariano et. al informed NIC that they will be no longer renew the contract and that as far as they were concerned the Supplementary Lease Agreement was null and void.

ISSUE: Whether or not there is a perfected option contract. NAVOTAS INDUSTRIAL CORPORATION, represented by DANIEL BAUTISTA vs GERMAN CRUZ, et. al. G.R. No. 159212 September 12, 2005

FACTS: Carmen Vda. De Cruz (Carmen) was the owner of a parcel of land in Navotas with an area of 13999 square meters. On October 5, 1966, Carmen and Navotas Industrial Corporation (NIC) entered into a contract of lease covering one half portion of the property. The lease was for October 1, 1966 to October 1, 1990. The property was to be used for shipyard slipways and NIC’s other allied businesses. The NIC obliged itself to construct

HELD: No. Article 1479, paragraph 1, provides that, “A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.” NIC relies on this provision contending that what was entered between them and Carmen was a mutual promise to buy and sell. However, be it noted, that as early as 1977 they were already informed of the sale made by Carmen in favor of her children and that by virtue of the annotation made by Mariano on June 30, 1977 NIC was constructively notified thereof. There is therefore a presumption of knowledge of the sale between Carmen and her children.

Considering that Carmen was no longer the owner when the Supplementary Lease Agreement was executed NIC’s claim that


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever it had the option to buy the property or to compel the heirs to sell the property to it has no legal and factual basis. Paragraphs 4 and o 5 of the Supplementary Lease Agreement provides: 4. The LESSEE is hereby granted an exclusive option to buy the property including all improvements already made by the LESSEE (slipways and camarines) subject matter of this contract comprising SIX THOUSAND NINE HUNDRED FORTY-NINE Point FIVE Square Meters (6,949.5) which is one-half portion of the area covered by TCT No. 81574 and same property subject matter of this contract should also be equally divided with onehalf frontage along M. Naval Street and along the Navotas River Bank shoreline during the period of the lease. T h e p r i c e o f t h e property is agreed to be fixed for the dur ation of the Option to Buy at a flat sum of ONE MILLION SIX HUNDRED THOUSAND PESOS (P1,600,000.00), Philippine Currency, p a y a b l e o v e r a p e r i o d t o b e m u t u a l l y a g r e e d u p o n . Should

the LESSEE exercise the option to buy during the lifetime of the LESSOR, the LESSEE will continue to pay the monthly rental to the LESSOR during her lifetime. 5. The LESSEE shall pay to the LESSOR the sum of FORTYTWO THOUSAND (P42,000.00) PESOS upon signing of this contract as consideration thereof, to be applied as against the rental for the period from October 1, 1990 to September 30, 1991.

It must be stressed that an option contract is a contract granting a privilege to buy and sell within an agreed time and at a determined price. Such contract is a separate and distinct contract from the time the parties may enter into upon the construction of the option. An option contract is a preparatory contract in which one party grants to the other for a fixed period and under specified conditions the power to decide, whether or not to enter into a principal contract. Therefore, it is only when the option is exercised may a sale be perfected. An option NEEDS TO BE SUPPORTED by a separate consideration. In the present case, there was no given period for the petitioner to exercise its option; it had yet to be determined and fixed at a future time by the parties, subsequent to the execution of the Supplementary Lease Agreement. There was, likewise, no consideration for the option. The amount of P42,000.00 paid by the petitioner to Carmen Cruz on July 30, 1977 was payment for rentals from October 1, 1990 to September 30, 1991, and not as a consideration for the option granted to the petitioner.

iii.

There Must be Acceptance of Option Offer

SPOUSES CIPRIANO VASQUEZ and VALERIANA GAYANELO vs CA and SPOUSES MARTIN VALLEJERA G.R. No. 83759 JULY 12, 1991

FACTS: A certain property in Himamaylan, Negros Occidental was registered in the name of Spouse Vallejera. On October 1959, they leased the property to the Spouses Vasquez. After the execution of the lease, the Vasquez’ took possession of the lot and devoted the same to the cultivation of sugar.

On September 21, 1964, the spouses Vallejera sold the lot the spouses Vasquez for the amount of 9 T. On the same day and along with the execution of the Deed of Sale, a separate instrument, denominated as “Right to Repurchase” was executed by the parties granting the Vallejeras the right to repurchase the lot for 12 T. By virtue of the Deed of Sale the spouses Vasquez secured a title in their name. However, on January 2, 1969, the Vallejeras sold the lot to Benito Derrama after securing the spouse Vasquez’ title for 12 T. Upon the protestation of the sp ouses Vasquez the sale was cancelled after payment of 12 T to Derrama. The spouses Vasquez resisted the action for redemption on the premise that the deed of “Right to Repurchase” is just an option to buy since it is not embodied in the same document of sale but in a separate document and since such option is not supported by a consideration distinct from the price, said deed is not binding upon them. The spouses Vazquez insist that they can not be compelled to resell the subject property for the nature of the sale over the said lot between them and the Vallejeras can only be either an option to buy or a mere promise on their part to resell the property. Spouses Vasquez opined that since the “Right to Repurchase” was not supported by any consideration distinct from the purchase price it is not valid and binding upon the spouses Vasquez pursuant to Article 1479.

ISSUE: Whether or not the spouse Vallejera has a right to repurchase under the contract.

HELD: No. The Court made reference to the earlier case of Sanchez vs. Rigos (Sanchez doctrine), stating that an option contract without a separate consideration from the purchase price is void, as a contract, but would still constitute as a valid offer; so that if the option is exercised prior to its withdrawal, that is equivalent to an offer being accepted prior to withdrawal and would give rise to a valid and binding sale. The Sanchez doctrine also dictates that the burden of proof to show that the option contract was supported by a separate consideration is with the party seeking to show it. No reliance can be placed upon the provisions of Article 1354 which presumes the existence of a consideration in every contract, since in the case of an option contract, Article 1479 being the specific provision, requires such separate consideration for an option to be valid. In an option contract, the offeree has the burden of proving that the option is supported by a separate consideration, it also held that the Sanchez doctrine (That upon the option contract not supported by a separate consideration; is void as contract, but valid as an offer), can only apply if the option has been accepted and such acceptance is communicated to the offeror. It held that not even the annotation of the option contract on the title of the property can be considered a proper acceptance of the option. Neither can the signature of the spouses Vasquez in the document called "right to repurchase" signify acceptance of the right to repurchase. The Vallejeras did not sign the offer. Acceptance should be made by the promisee, in this case, the Vallejeras and not the promises, spouses Vasquez herein. It


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever would be absurd to require the promisor of an option to buy to accept his own offer instead of the promisee to whom the option to buy is given.

iv.

2.

Proper Exercise of Option Contract

Right of First Refusal POLYTECHNIC UNIVERSITY OF THE PHILIPPINES vs GOLDEN HORIZON REALTY CORP. x-----------------------------------------------x

NATIONAL DEVELOPMENT AUTHORITY vs GOLDEN HORIZON REALTY CORP. G.R. No. 183612; G.R. No. 184260 MARCH 15, 2010 (This is case related to the case of PUP vs. CA and Firestone Ceramics)

FACTS: National Development Corp. (NDC) had in its disposal a 10-hectare property located at Sta. Mesa, Manila. The estate was popularly known as NDC Compound. On September 7, 1977 NDC entered into a Contract of Lease with Golden Horizon Realty Corp. (GHRC) over a portion of the property with an area of 2,407 sq. m. for a period of 10 years, renewable for another 10 years with mutual consent of the parties. On May 4, 1978, a second Contract of Lease was executed by NDC and GHRC covering 3,222 sq. m., also renewable upon the mutual consent after the expiration of the 10-year lease period. In addition, GHRC was granted the “option to purchase the are a leased, the price to be negotiated and determined at the time the option to purchase is exercised. On June 13, 1988, before the expiration of the 10-year period under the second contract, GHRC wrote a letter to NDC indicating its exercise of the option to renew the lease for another 10 years. NDC gave no response to the said letter. In September of the same year, GHRC discovered that NDC had decided to secretly dispose the property to a third party, PUP. This led to the filing of cases before the trial court. In the meantime President Aquino issued Memo. Order No. 214 dated January 6, 1989 ordering the transfer of the whole NDC Compound to the National Government, which in turn would convey the said property in favor of PUP at acquisition cost. PUP then contended that GHRC’s right to exercise the option to purchase had expired with the termination of the original contract of lease and was not carried over to the subsequent implied new lease between GHRC and NDC. Moreover, the contracts clearly state that GHRC is granted the option to “renew for another 10 years with mutual consent of both parties.” As regards the continued receipt of rentals by NDC and possession by GHRC of the leased premises, the impliedly renewed lease was only month-to-month and not 10 years since the rentals are being paid on monthly basis.

ISSUE: Whether or not GHRC’s right of first refusal was violated. HELD: Yes. The pertinent portion of the second contract of lease provides that: Lessee shall also have the option to purchase the area leased, the price to be negotiated and determined at the time the option to purchase is exercised. An option is a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the former’s property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the owner of the property the right to sell or demand a sale. It binds the party, who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. Upon the other hand, a right of first refusal is a contractual grant, not of the sale of a property, but of the first priority to buy the property in the event the owner sells the same. As distinguished from an option contract, in a right of first refusal, while the object might be made determinate, the exercise of the right of first refusal would be dependent not only on the owner’s eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up. When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until after the lessor has made an offer to sell the property to the lessee and the lessee had failed to accept it. Only after the lessee has failed to exercise his right of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee, or under terms and conditions more favorable to the lessor. NDC contended that the ruling of the Court in PUP vs CA and Firestone cannot be applied in this case because the lease contract of firestone had not yet expired while in this case GHRC’s lease contract have already expired. This is untenable. The reckoning point of the offer of sale to a third party was not the issuance of Memorandum Order No. 214 on January 6, 1989 but the commencement of such negotiations as early as July 1988 when GHRC’s right of first refusal was still subsisting and the lease contracts still in force. NDC did not bother to respond to GHRC’s letter of June 13, 1988 informing it of GHRC’s exercise of the option to renew and requesting to discuss further the matter with NDC, nor to the subsequent letter of August 12, 1988 reiterating the request for renewing the lease for another ten (10) years and also the exercise of the option to purchase under the lease contract. NDC had dismissed these letters as "mere informative in nature, and a request at its best." GHRC is similarly situated with Firestone such that it was also prejudiced by NDC’s sale to PUP. Therefore, GHRC is entitled to exercise its option to purchase until October 1988 in as much as the May 4, 1978 contract embodied the option to renew the lease contract for another 10 years upon mutual consent and giving GHRC the option to purchase the leased premises for a price to


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever be negotiated and determined at the time such option was exercised by GHRC. It to be noted that MO 214 itself declared that the transfer is “subject to such liens/leases existing on the subject property.”

ANG YU ASUNCION vs. THE HON. COURT OF APPEALS G.R. No. 109125 December 2, 1994 FACTS: Ang Yu Asuncion and Keh Tiong, et al., are tenants or lessees of residential and commercial spaces owned by Cu Unjieng, Rose Cu Unjieng and Jose Tan. They have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract. On several occasions before October 9, 1986, the owners informed Ang Yu’s party that they are offering to sell the premises and are giving them priority to acquire the same. During the negotiations, Bobby Cu Unjieng offered a price of P6million while Asuncion and Keh Tiong made a counter offer of P5-million. They thereafter asked the owners to put their offer in writing to which request they acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when Asuncion did not receive any reply, they sent another letter dated January 28, 1987 with the same request. Since the owners failed to specify the terms and conditions of the offer to sell and because of information received that the owners were about to sell the property, Ang Yu Asuncion and Keh Tiong were compelled to file the complaint to compel defendants to sell the property to them. The trial court found that Cu Unjieng, Rose Cu Unjieng and Jose Tan offer to sell was never accepted by the Ang Yu Asuncion and Keh Tiong, et al., for the reason that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Aggrieved by the decision that there was no contract of sale at all, the lessees brought a petition for review on certiorari to the Supreme Court. The Supreme Court denied the appeal on May 6, 1991. On November 15, 1990, while the case filed by the lessees was pending consideration, the Cu Unjieng spouses executed a Deed of Sale, transferring the property in question to Buen Realty and Development Corporation for 15M. As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990. On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises. The decision that should the the owners decide to offer the property for sale for a price of P11 Million or lower, and

considering the mercurial and uncertain forces in our market economy today, the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more had become final to the effect The owners were ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith. A writ of execution was subsequently issued.

ISSUE: Whether or not a Writ of Execution may be decreed on a judgment recognizing the right of first refusal.

HELD: NO. Writ of Execution is not a remedy. In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer 9 under Article 1319 of the same Code. 10

An option or an offer would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct. Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the 11 perfection of contracts. It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for 12 instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a recovery for damages. The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose. Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.

PARAÑAQUE KINGS ENTERPRISES, INC. vs. COURT OF APPEALS G.R. No. 111538 February 26, 1997 Catalina L. Santos is the owner of eight (8) parcels of land located at Parañaque, Metro Manila. On November 28, 1977, a certain Frederick Chua leased the property from defendant Catalina L. Santos. Subsequently, Chua assigned all his rights and interest and participation in the leased property to Lee Ching Bing, by virtue of a deed of assignment and with the conformity of defendant Santos, the said assignment was also registered. Ching Bing also assigned all his rights and interest in the leased property to Parañaque Kings Enterprises, Incorporated by virtue of a deed of assignment and with the conformity of defendant Santos. Paragraph 9 of the assigned leased contract provides among others that: "9. That in case the properties subject of the lease agreement are sold or encumbered, Lessors shall impose as a condition that the buyer or mortgagee thereof shall recognize and be bound by all the terms and conditions of this lease agreement and shall respect this Contract of Lease as if they are the LESSORS thereof and in case of sale, LESSEE shall have the first option or priority to buy the properties subject of the lease;" On September 21, 1988, defendant Santos sold the eight parcels of land subject of the lease to defendant David Raymundo for a consideration of FIVE MILLION PESOS. The said sale was in contravention of the contract of lease, for the first option or priority to buy was not offered by defendant Santos to Parañaque Kings Enterprises, Incorporated (plaintiff). Upon learning of this fact plaintiff's representative wrote a letter to defendant Santos, requesting her to rectify the error and consequently realizing the error, she had it reconveyed to her for the same consideration of FIVE MILLION (P5,000,000.00) PESOS.

Subsequently the property was offered for sale to plaintiff by the defendant for the sum of FIFTEEN MILLION (P15,000,000.00) PESOS. Plaintiff was given ten (10) days to make good of the offer. On May 8, 1989, before the period given in the letter offering the properties for sale expired, plaintiff's counsel wrote counsel of defendant Santos offering to buy the properties for FIVE MILLION PESOS. On May 15, 1989, before they replied to the offer to purchase, another deed of sale was executed by defendant Santos (in favor of) defendant Raymundo for a consideration of NINE MILLION PESOS. Defendant Santos violated again paragraph 9 of the contract of lease by executing a second deed of sale to defendant Raymundo.

ISSUE: Whether or not there is a violation on the right of first refusal.

HELD. Yes. In order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of the properties for the amount of P9 million, the price for which they were finally sold to respondent Raymundo, should have likewise been first offered to petitioner. The basis of the right of first refusal* must be the current offer to sell of the seller or offer to purchase of any prospective buyer. Only after the optionee fails to exercise its right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the optionee. Deed of Assignment include the option to purchase

On the contention of respondent Santos that the assignment of the lease contract to petitioner did not include the option to purchase. The provisions of the deeds of assignment with regard to matters assigned were very clear. Under the first assignment between Frederick Chua as assignor and Lee Ching Bing as assignee, it was expressly stated that: . . . . the ASSIGNOR hereby CEDES, TRANSFERS and ASSIGNS to herein ASSIGNEE, all his rights, interest and participation over said premises afore-described, . . . . And under the subsequent assignment executed between Lee Ching Bing as assignor and the petitioner, represented by its Vice President Vicenta Lo Chiong, as assignee, it was likewise expressly stipulated that; . . . . the ASSIGNOR hereby sells, transfers and assigns all his rights, interest and participation over said leased premises, . . . . One of such rights included in the contract of lease and, therefore, in the assignments of rights was the lessee's right of first option or priority to buy the properties subject of the lease,


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever as provided in paragraph 9 of the assigned lease contract. The deed of assignment need not be very specific as to which rights and obligations were passed on to the assignee. It is understood in the general provision aforequoted that all specific rights and obligations contained in the contract of lease are those referred to as being assigned. Needless to state, respondent Santos gave her unqualified conformity to both assignments of rights.

ROSENCOR DEVELOPMENT CORPORATION vs. PATERNO INQUING G.R. No. 140479 March 8, 2001 FACTS: This is a petition for review on certiorari under Rule 45 1

of the Rules of Court seeking reversal of the Decision of the Court of Appeals dated June 25, 1999 in CA-G.R. CV No. 53963. The Court of Appeals decision reversed and set aside the 2 Decision dated May 13, 1996 of Branch 217 of the Regional Trial Court of Quezon City in Civil Case No. Q-93-18582. The case was originally filed on December 10, 1993 by Paterno Inquing, Irene Guillermo and Federico Bantugan, herein respondents, against Rosencor Development Corporation (hereinafter "Rosencor"), Rene Joaquin, and Eufrocina de Leon. Originally, the complaint was one for annulment of absolute deed of sale but was later amended to one for rescission of absolute deed of sale. A complaint-for intervention was thereafter filed by respondents Fernando Magbanua and Danna Lizza Tiangco. The complaint-in-intervention was admitted by the trial court in an Order dated May 4, 1994.3 The facts of the case, as stated by the trial court and adopted by the appellate court, are as follows: "This action was originally for the annulment of the Deed of Absolute Sale dated September 4, 1990 between defendants Rosencor and Eufrocina de Leon but later amended (sic) praying for the rescission of the deed of sale. Paterno Inquing, Irene Guillermo and Federico Bantugan averred that they are the lessees since 1971 of a two-story residential apartment owned by spouses Faustino and Cresencia Tiangco. The lease was not covered by any contract. The lessees were renting the premises then for P150.00 a month and were allegedly verbally granted by the lessors the pre-emptive right to purchase the property if ever they decide to sell the same. Upon the death of the spouses Tiangcos in 1975, the management of the property was adjudicated to their heirs who were represented by Eufrocina de Leon. The lessees were allegedly promised the same pre-emptive right by the heirs of Tiangcos since the latter had knowledge that this right was extended to the former by the late spouses Tiangcos.

the payments. Thereafter, they received a letter from Eufrocina de Leon offering to sell to them the property they were leasing for P2,000,000.00. xxx. The lessees offered to buy the property from de Leon for the amount of P1,000,000.00. De Leon told them that she will be submitting the offer to the other heirs. Since then, no answer was given by de Leon as to their offer to buy the property. However, in November 1990, Rene Joaquin came to the leased premises introducing himself as its new owner. In January 1991, the lessees again received another letter from Atty. Aguila demanding that they vacate the premises. A month thereafter, the lessees received a letter from de Leon advising them that the heirs of the late spouses Tiangcos have already sold the property to Rosencor. The following month Atty. Aguila wrote them another letter demanding the rental payment and introducing herself as counsel for Rosencor/Rene Joaquin, the new owners of the premises. The lessees requested from de Leon why she had disregarded the pre-emptive right she and the late Tiangcos have promised them. They also asked for a copy of the deed of sale between her and the new owners thereof but she refused to heed their request. In the same manner, when they asked Rene Joaquin a copy of the deed of sale, the latter turned down their request and instead Atty. Aguila wrote them several letters demanding that they vacate the premises. The lessees offered to tender their rental payment to de Leon but she refused to accept the same. In April 1992 before the demolition can be undertaken by the Building Official. It was at this instance that the lessees were furnished with a copy of the Deed of Sale and discovered that they were deceived by de Leon since the sale between her and Rene Joaquin/Rosencor took place in September 4, 1990 while de Leon made the offer to them only in October 1990 or after the sale with Rosencor had been consummated. The lessees also noted that the property was sold only for P726,000.00. The lessees offered to reimburse de Leon the selling price of P726,000.00 plus an additional P274,000.00 to complete their P1,000.000.00 earlier offer. When their offer was refused, they filed the present action praying for the following: a) rescission of the Deed of Absolute Sale between de Leon and Rosencor dated September 4, 1990; b) the defendants Rosencor/Rene Joaquin be ordered to reconvey the property to de Leon; and c) de Leon be ordered to reimburse the plaintiffs for the repairs of the property, or apply the said amount as part of the price for the 4 purchase of the property in the sum of P100,000.00." The trial court held that the right of redemption on which the complaint was based was merely an oral one and as such, is unenforceable under the law.

ISSUE: Whether or not a right of first refusal is indeed covered In June 1990, the lessees received a letter from Atty. Erlinda Aguila demanding that they vacate the premises so that the demolition of the building be undertaken. They refused to leave the premises. In that same month, de Leon refused to accept the lessees’ rental payment claiming that they have run out of receipts and that a new collector has been assigned to receive

by the provisions of the New Civil Code on the statute of frauds.

RULING: NO. It is not covered by the statute of frauds.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the New Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involved, but of the right of first refusal over the property sought to be sold. It is thus evident that the statute of frauds does not contemplate cases involving a right of first refusal. As such, a right of first refusal need not be written to be enforceable and may be proven by oral evidence. The next question to be ascertained is whether or not respondents have satisfactorily proven their right of first refusal over the property subject of the Deed of Absolute Sale dated September 4, 1990 between petitioner Rosencor and Eufrocina de Leon. Respondents have adequately proven the existence of their right of first refusal. Federico Bantugan, Irene Guillermo, and Paterno Inquing uniformly testified that they were promised by the late spouses Faustino and Crescencia Tiangco and, later on, by their heirs a right of first refusal over the property they were currently leasing should they decide to sell the same. Moreover, respondents presented a letter20 dated October 9, 1990 where Eufrocina de Leon, the representative of the heirs of the spouses Tiangco, informed them that they had received an offer to buy the disputed property for P2,000,000.00 and offered to sell the same to the respondents at the same price if they were interested. Verily, if Eufrocina de Leon did not recognize respondents’ right of first refusal over the property they were leasing, then she would not have bothered to offer the property for sale to the respondents. It must be noted that petitioners did not present evidence before the trial court contradicting the existence of the right of first refusal of respondents over the disputed property. The final question to be resolved is May a contract of sale entered into in violation of a third party’s right of first refusal be rescinded in order that such third party can exercise said right? The prevailing doctrine, as enunciated in some cited cases, is that a contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible. There is, however, a circumstance which prevents the application of this doctrine in the case at bench. In some cases, the Court ordered the rescission of sales made in violation of a right of first refusal precisely because the vendees therein did not act in good faith as they were aware or should have been aware of the right of first refusal granted to another person by the vendors therein. In the instant case was an oral one given to respondents by the deceased spouses Tiangco and subsequently recognized by their heirs. As such, in order to hold that petitioners were in bad faith, there must be clear and convincing proof that petitioners were made aware of the said right of first refusal either by the

respondents or by the heirs of the spouses Tiangco. It is axiomatic that good faith is always presumed unless contrary evidence is adduced. On this point, we hold that the evidence on record fails to show that petitioners acted in bad faith in entering into the deed of sale over the disputed property with the heirs of the spouses Tiangco. Respondents failed to present any evidence that prior to the sale of the property on September 4, 1990, petitioners were aware or had notice of the oral right of first refusal.

VAZQUEZ vs. AYALA CORPORATION G.R. No. 149734 November 19, 2004 FACTS: On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa M. Vasquez (hereafter, Vasquez spouses) entered into a Memorandum of Agreement (MOA) with Ayala Corporation (hereafter, AYALA) with AYALA buying from the Vazquez spouses, all of the latter's shares of stock in Conduit Development, Inc. (hereafter, Conduit). The main asset of Conduit was a 49.9 hectare property in Ayala Alabang, Muntinlupa, which was then being developed by Conduit under a development plan where the land was divided into Villages 1, 2 and 3 of the "Don Vicente Village." The development was then being undertaken for Conduit by G.P. Construction and Development Corp. Under the MOA, Ayala was to develop the entire property, less what was defined as the "Retained Area" consisting of 18,736 square meters. This "Retained Area" was to be retained by the Vazquez spouses. The area to be developed by Ayala was called the "Remaining Area". In this "Remaining Area" were 4 lots adjacent to the "Retained Area" and Ayala agreed to offer these lots for sale to the Vazquez spouses at the prevailing price at the time of purchase. Among the relevant provisions of the MOA on this point is: 5.15. The BUYER agrees to give the SELLERS a first option to purchase four developed lots next to the "Retained Area" at the prevailing market price at the time of the purchase." Taking the position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area" within 3 years from the date of the MOA, the Vasquez spouses sent several "reminder" letters of the approaching so-called deadline. However, no demand after April 23, 1984, was ever m ade by the Vasquez spouses for Ayala to sell the 4 lots. On the contrary, one of the letters signed by their authorized agent, Engr. Eduardo Turla, categorically stated that they expected "development of Phase 1 to be completed by February 19, 1990, three years from the settlement of the legal problems with the previous contractor." By early 1990 Ayala finished the development of the vicinity of the 4 lots to be offered for sale. The four lots were then offered to be sold to the Vasquez spouses at the prevailing price in 1990. This was rejected by the Vasquez spouses who wanted to pay at 1984 prices, thereby leading to a suit. The court ordered Ayala to sell to the Vazquez the relevant lots described in the Complaint in the Ayala Alabang Village at the price of P460.00 per square meter amounting to P1,349,540.00


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever In its decision, the court a quo concluded that the option to purchase the 4 lots is valid because it was supported by consideration as the option is incorporated in the MOA where the parties had prestations to each other.

ISSUE: whether or not paragraph 5.15 of the MOA can properly be construed as an option contract or a right of first refusal.

HELD: Paragraph 5.15 of the MOA is a mere right of first refusal. The Court has clearly distinguished between an option contract and a right of first refusal. An option is a preparatory contract in which one party grants to another, for a fixed period and at a determined price, the privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration. In a right of first refusal, on the other hand, while the object might be made determinate, the exercise of the right would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up. Applied to the instant case, paragraph 5.15 is obviously a mere right of first refusal and not an option contract. Although the paragraph has a definite object, i.e., the sale of subject lots, the period within which they will be offered for sale to petitioners and, necessarily, the price for which the subject lots will be sold are not specified. The phrase "at the prevailing market price at the time of the purchase" connotes that there is no definite period within which Ayala Corporation is bound to reserve the subject lots for petitioners to exercise their privilege to purchase. Neither is there a fixed or determinable price at which the subject lots will be offered for sale. The price is considered certain if it may be determined with reference to another thing certain or if the determination thereof is left to the judgment of a specified person or persons. Further, paragraph 5.15 was inserted into the MOA to give petitioners the first crack to buy the subject lots at the price which Ayala Corporation would be willing to accept when it offers the subject lots for sale. It is not supported by an independent consideration. As such it is not governed by Articles 1324 and 1479 of the Civil Code, viz: Art. 1324. When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

Consequently, the "offer" may be withdrawn anytime by communicating the withdrawal t o the other party. In this case, Ayala Corporation offered the subject lots for sale to petitioners at the price of P6,500.00/square meter, the prevailing market price for the property when the offer was made on June 18, 1990. Insisting on paying for the lots at the prevailing market price in 1984 of P460.00/square meter, petitioners rejected the offer. Ayala Corporation reduced the price to P5,000.00/square meter but again, petitioners rejected the offer and instead made a counter-offer in the amount of P2,000.00/square meter. Ayala Corporation rejected petitioners' counter-offer. With this rejection, petitioners lost their right to purchase the subject lots. It cannot, therefore, be said that Ayala Corporation breached petitioners' right of first refusal and should be compelled by an action for specific performance to sell the subject lots to petitioners at the prevailing market price in 1984.

TANAY RECREATION CENT ER AND DEVELOPMENT CORP. vs. CATALINA MATIENZO FAUSTO G.R. No. 140182. April 12, 2005 FACTS: Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo Fausto, under a Contract of Lease. On this property stands the Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20-year term, subject to renewal within sixty days prior to its expiration. The contract also provided that should Fausto decide to sell the property, petitioner shall have the “priority right” to purchase the same. On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease. However, it was Fausto’s daughter, respondent Anunciacion F. Pacunayen, who replied, asking that petitioner remove the improvements built thereon, as she is now the absolute owner of the property. It appears that Fausto had earlier sold the property to Pacunayen and title has already been transferred in her name. Petitioner filed an Amended Complaint for Annulment of Deed of Sale, Specific Performance with Damages, and Injunction. In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the deed of sale as the latter acknowledged her ownership when it merely asked for a renewal of the lease. According to respondent, when they met to discuss the matter, petitioner did not demand for the exercise of its option to purchase the property, and it even asked for grace period to vacate the premises.

ISSUE: The contention in this case refers to petitioner’s priority right to purchase, also referred to as the right of first refusal.

HELD: When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that the lessor's first offer shall be in his favor. Petitioner’s right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the lease includes the consideration for the right of first refusal and is built into the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever ISSUE: Whether or not the sale of the subject lot by Cornelio to

reciprocal obligations of the parties. It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to Fausto’s relative. When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. As such, there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement, except when it fails to express the true intent and agreement of the parties. In this case, the wording of the stipulation giving petitioner the right of first refusal is plain and unambiguous, and leaves no room for interpretation. It simply means that should Fausto decide to sell the leased property during the term of the lease, such sale should first be offered to petitioner. The stipulation does not provide for the qualification that such right may be exercised only when the sale is made to strangers or persons other than Fausto’s kin. Thus, under the terms of petitioner’s right of fir st refusal, Fausto has the legal duty to petitioner not to sell the property to anybody, even her relatives, at any price until after she has made an offer to sell to petitioner at a certain price and said offer was rejected by petitioner.

ESTATE OF LLENADO VS EDUARDO LLENADO ET AL MARCH 4, 2009 G.R. No. 145736 FACTS: The subject of this controversy is a parcel of land

his sons is invalid for (1) violating the prohibitory clause in the lease agreement between Cornelio, as lessor-owner, and Orlando, as lessee; and (2) contravening the right of first refusal of Orlando over the subject lot.

HELD: No. Sale was valid. Under Article 1311 of the Civil Code, the heirs are bound by the contracts entered into by their predecessors-in-interest except when the rights and obligations therein are not transmissible by their nature, by stipulation or by provision of law. A contract of lease is generally transmissible to the heirs of the lessor or lessee. It involves a property right and the death of a party does not excuse non-performance of the contract. The rights and obligations pass to the heirs of the deceased and the heir is bound to respect the period of the lease. The parties expressly stipulated in the March 31, 1978 Agreement that Romeo, as lessee, shall transfer all his rights and interests under the lease contract with option to renew “in favor of the party of Orlando, the latter’s heirs, successors and assigns” indicating the clear intent to allow th e transmissibility of all the rights and interests of Orlando under the lease contract unto his heirs, successors or assigns. The rights and obligations under the lease contract with option to renew were transmitted from Orlando to his heirs upon his death. It does not follow, however, that the lease subsisted at the time of the sale of the subject.

denominated as Lot 249-D-1 (subject lot) registered in the names of Eduardo and Jorge Llenado. The subject lot once formed part of Lot 249-D owned by and registered in the name of their father, Cornelio Llenado.

The election of the option to renew the lease in this case cannot be inferred from petitioner Wenifreda’s continued possession of the subject lot. It was incumbent upon Wenifreda with the burden of proof during the trial below to establish by some positive act that Orlando or his heirs exercised the option to renew the lease. SC held that there was no evidence presented before the trial court to prove that Orlando or his heirs exercised the option to renew prior to or at the time of the expiration of the lease. As a result, there was no obstacle to the sale of the subject lot by Cornelio to respondents Eduardo and Jorge as the prohibitory clause under the lease contract was no longer in force.

Cornelio leased Lot 249-D-1 to his nephew, Romeo. On March 31, 1978, Cornelio, Romeo and the latter’s cousin Orlando executed an Agreement whereby Romeo assigned all his rights to Orlando. The parties further agreed that Orlando shall have the option to renew the lease contract and that during the period that the agreement is enforced, the property cannot be sold, transferred, alienated or conveyed in whatever manner to any third party. Orlando died and his wife, Wenifreda, took over the operation of the gasoline station. Cornelio sold Lot 249-D to his children through a deed of sale, denominated as “Kasulatan sa Ganap Na Bilihan,” for the sum of P160k. Lot 249 -D-1 was sold to Eduardo and Jorge. Eduardo informed Wenifreda of his desire to take over the subject lot, but the latter refused to vacate the premises despite repeated demands. Thus, Eduardo filed a complaint for unlawful detainer against Wenifreda. After Eduardo instituted the unlawful detainer case, Wenifreda instituted a complaint for annulment of deed of conveyance, title and damages against Eduardo and Jorge. Petitioner alleged that the transfer and conveyance of the subject lot was fraudulent and in bad faith considering that the subject lot was transferred and conveyed to his sons when the lease was in full force and effect making the sale null and void; that Cornelio verbally promised Orlando that Orlando or his heirs shall have first priority or option to buy the subject lot. Respondents claimed that they bought the subject lot from their father for value and in good faith.

On the issue on the right of first refusal of Orlando and his heirs, SC held that no testimonial evidence was presented to prove the existence of said right. The claims based on this alleged right of first refusal cannot be sustained for its existence has not been duly established.

II.

PERFECTION STAGE

1.

Absolute Acceptance of a Certain Offer HEIRS OF IGNACIO VS. HOME BANKERS SAVINGS AND TRUST CO. G.R. NO. 177783 , JANUARY 23, 2013

FACTS: The case sprang from a real estate mortgage of two parcels of land in August 1981. Fausto C. Ignacio mortgaged the properties to Home Bankers Savings and Trust Company (Bank) as security for a loan extended by the Bank. After Ignacio defaulted in the payment of the loan, the property was foreclosed and subsequently sold to the Bank in a public auction.Ignacio offered to repurchase the property. Universal Properties Inc.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever (UPI), the bank’s collecting agent sent Ignacio a letter on March 22, 1984 which contained the terms of the repurchase. However, Ignacio annotated in the letter new terms and conditions. He claimed that these were verbal agreements between himself and the Bank’s collection agent, UPI.No repurchase agreement was finalized between Ignacio and the Bank. Thereafter the Bank sold the property to third parties. Ignacio then filed an action for specific performance against the Bank for the reconveyance of the properties after payment of the balance of the purchase price. He argued that there was implied acceptance of the counter-offer of the sale through the receipt of the terms by representatives of UPI. The Bank denied that it gave its consent to the counter-offer of Ignacio. It countered that it did not approve the unilateral amendments placed by Ignacio.

Cervantes entered into several negotiations with Villonco for sale of the Buendia property. Cervantes made a written offer of P400/sqm with a downpayment of P100,000 to serve as earnest money. The offer also made the consummation of the sale dependent upon the acquisition by Bormaheco of a Sta. Ana property. Villonco made a counter-offer stating that the earnest money was to earn 10% interest p.a. The check was enclosed with the reply letter. Cervantes accepted and cashed the check. The Sta. Ana Property was awarded to Bormaheco; the transfer was also duly approved. However, Cervantes sent the check back to Villonco with the interest thereon —stating that he was no longer interested in selling the property. He also claims that no contract was perfected; Villonco sues for specific performance.

ISSUE: W/N there was a perfected contract of sale ISSUE: Whether or not the negotiations between Ignacio and UPI is binding on the Bank.

HELD: A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. A contract of sale is perfected only when there is consent validly given. There is no consent when a party merely negotiates a qualified acceptance or a counter-offer. An acceptance must reflect all aspects of the offer to amount to a meeting of the minds between the parties.In this case, while it is apparent that Ignacio proposed new terms and conditions to the repurchase agreement, there was no showing that the Bank approved the modified offer. In the absence of conformity or acceptance by properly authorized bank officers of petitioner's counter-proposal, no perfected repurchase contract was born out of the talks or negotiations between petitioner and Mr. Lazaro and Mr. Fajardo. Petitioner therefore had no legal right to compel respondent bank to accept the P600,000 being tendered by him as payment for the supposed balance of repurchase price.

HELD: YES. There was a perfected contract of sale. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.” (Art. 1475 Ibid). Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer” (Art. 1319, Civil Code). “An acceptance may be express or implied” (Art. 1320, Civil Code). A contract is formed if offer is accepted, whether request for changes in terms is granted or not; Change does not amount to rejection of offer or a counter-offer. An acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not, a contract is formed.

A corporation may onl y give valid acceptance of an offer of sale through its authorized officers or agents. Specifically, a counteroffer to repurchase a property will not bind a corporation by mere acceptance of an agent in the absence of evidence of authority from the corpor ation’s board of directors.

The vendor’s change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender or a counteroffer.” (The alleged changes made in the counter -offer are immaterial and are mere clarifications. The changes of the words “Sta. Ana property” to another property as well as the insertion of the number “12” in the date, and the words “per annum” in the interest are trivial. There is no incompatibility in the offer and counter-offer. Cervantes assented to the interest and he, in fact, paid the same. Also, earnest money constitutes prood of the perfection of the contract of sale and forms part of the consideration. The condition regarding the acquisition of the Sta. Ana property was likewise fulfilled; there is thus no ground for the refusal of Cervantes to consummate the sale.

2. When “Deviation” Allowed:

3. Sale by Auction

The negotiations between Ignacio and UPI, the collection agent, were merely preparatory to the repurchase agreement and, therefore, was not binding on the Bank. Ignacio could not compel the Bank to accede to the repurchase of the property.

VILLONCO REALTY COMPANY vs BORMAHECO, INC., FRANCISCO N. CERVANTES and ROSARIO N. CERVANTES G.R. No. L-26872July 25, 1975

4. Earnest Money

FACTS: Cervantes and his wife owned 3 parcels of land along Buendia where he buildings of Bormaheco Inc were situated. Beside their property were lots owned by Villonco Realty.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 5. Difference Between Earnest Money and Option Money OESMER VS. PARAISO

terms of the contract. Doubtless, the agreement is not a mere unilateral promise to sell, but, indeed, it is a Contract to Sell as both the trial court and the appellate court declared in their Decisions.

FACTS: Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, Enriqueta, Adolfo, and Jesus, all surnamed Oesmer together with Adolfo Oesmer (Adolfo) and Jesus Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided shares of two parcels of agricultural and tenanted land. Both lots are unregistered and originally owned by their parents, Bibiano Oesmer and Encarnacion Durumpili. When the spouses Oesmer died, petitioners, together with Adolfo and Jesus, acquired the lots as heirs of the former by right of succession. Respondent Paraiso Development Corporation is engaged in the real estate business. In March 1989, one Rogelio Paular, brought along petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation. The said meeting was for the purpose of brokering the sale of petitioners’ properties to Respondent Corporation. Pursuant to the said meeting, a Contract to Sell was drafted by the Executive Assistant of Lee. On 1 April 1989, petitioners Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the amount of P100,000.00, payable to Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the document. Petitioners, through a letter, informed the respondent company of their intention to rescind the Contract to Sell and to return the amount of P100,000.00 given by respondent as option money. Respondent did not respond to the aforesaid letter. Subsequently, the petitioners, together with Adolfo and Jesus, filed a Complaint for Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with Damages.

ISSUE:

6. Sale Deemed Perfected Where Offer Was Made FORMAL REQUIREMENTS OF SALE 1. Form not Important for Validity of Sale NARANJA VS. CA FACTS: Roque Naranja was the registered owner of a parcel of land, Bacolod. Roque was also a co-owner of an adjacent lot (Lot No. 2) which he co-owned with his brothers, Gabino and Placido Naranja. When Placido died, his one-third share was inherited by his children, Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja, herein petitioners. The adjacent lot is covered by TCT No. T-18762 in the names of Roque, Gabino and the said children of Placido. TCT No. T-18762 remained even after Gabino died. The other petitioners — Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos — are the children of Gabino. The two lots were being leased by Esso Standard Eastern, Inc. for 30 years from 1962-1992. For his properties, Roque was being paid P200.00 per month by the company. Roque had no other source of income except for the P200.00 monthly rental of his two properties. To show his gratitude to Belardo, Roque sold Lot No. 4 and his one-third share in Lot No. 2 to Belardo on August 21, 1981, through a Deed of Sale of Real Property which was duly notarized by Atty. Eugenio Sanicas.

(1) WON the supposed Contract to Sell is really a unilateral promise to sell without consideration distinct from the price, and hence, void. (NO, it is indeed a Contract to Sell.) (2) WON the consideration of P100K paid is an option money. (It is an earnest money.)

Roque’s copies of TCT No. T -18764 and TCT No. T-18762 were entrusted to Atty. Sanicas for registration of the deed of sale and transfer of the titles to Belardo. But the deed of sale could not be registered because Belardo did not have the money to pay for the registration fees.

HELD: In the instant case, the consideration of P100,000.00 paid

Belardo’s only source of income was her store an d coffee shop. Sometimes, her children would give her money to help with the household expenses, including the expenses incurred for Roque’s support. At times, she would also borrow money from Margarita Dema-ala, a neighbor. When the amount of her loan reached P15,000.00, Dema-ala required a security.

by respondent to petitioners was referred to as "option money." However, a careful examination of the words used in the contract indicates that the money is not option money but earnest money. "Earnest money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option. The sum of P100,000.00 was part of the purchase price. Although the same was denominated as "option money," it is actually in the nature of earnest money or down payment when considered with the other

Roque executed a deed of sale in favor of Dema-ala, covering his two properties in consideration of the P15,000.00 outstanding loan and an additional P15,000.00, for a total ofP30,000.00. Dema-ala explained that she wanted Roque to execute the deed of sale himself since the properties were still in his name. Belardo merely acted as a witness. The titles to the properties were given to Dema-ala for safekeeping. Three days later, Roque died of influenza. The proceeds of the loan were used for his treatment while the rest was spent for his


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever burial.

are now the registered owners of the parcels of land

In 1985, Belardo fully paid the loan secured by the second deed of sale. Dema-ala returned the certificates of title to Belardo, who, in turn, gave them back to Atty. Sanicas.

The CA reversed the RTC Decision. The CA held that the unregisterability of a deed of sale will not undermine its validity and efficacy in transferring ownership of the properties to private respondent. The CA noted that the records were devoid of any proof evidencing the alleged vitiation of Roque’s consent to the sale; hence, there is no reason to invalidate the sale. Registration is only necessary to bind third parties, which petitioners, being the heirs of Roque Naranja, are not. The trial court erred in applying Article 1544 of the Civil Code to the case at bar since petitioners are not purchasers of the said properties. Hence, it is not significant that private respondent failed to register the deed of sale before the extrajudicial settlement among the heir.

Unknown to Belardo, petitioners, the children of Placido and Gabino Naranja, executed an Extrajudicial Settlement Among Heirs on October 11, 1985, adjudicating among themselves Lot No. 4. On February 19, 1986, petitioner Amelia Naranja-Rubinos, accompanied by Belardo, borrowed the two TCTs, together with the lease agreement with Esso Standard Eastern, Inc., from Atty. Sanicas on account of the loan being proposed by Belardo to her. Thereafter, petitioners had the Extrajudicial Settlement Among Heirs notarized on February 25, 1986. With Roque’s copy of TCT No. T-18764 in their possession, they succeeded in having it cancelled and a new certificate of title, TCT No. T140184, issued in their names. In 1987, Belardo decided to register the Deed of Sale dated August 21, 1981. With no title in hand, she was compelled to file a petition with the RTC to direct the Register of Deeds to annotate the deed of sale even without a copy of the TCTs. In an Order dated June 18, 1987, the RTC granted the petition. But she only succeeded in registering the deed of sale in TCT No. T18762 because TCT No. T-18764 had already been cancelled. On December 11, 1989, Atty. Sanicas prepared a certificate of authorization, giving Belardo’s daughter, Jennelyn P. Vargas, the authority to collect the payments from Esso Standard Eastern, Inc. But it appeared from the company’s Advice of Fixed Payment that payment of the lease rental had already been transferred from Belardo to Amelia Naranja-Rubinos because of the Extrajudicial Settlement Among Heirs. On June 23, 1992, Belardo, through her daughter and attorneyin-fact, Rebecca Cordero, instituted a suit for reconveyance with damages. The complaint prayed that judgment be rendered declaring Belardo as the sole legal owner of Lot No. 4, declaring null and void the Extrajudicial Settlement Among Heirs, and TCT No. T-140184, and ordering petitioners to reconvey to her the subject property and to pay damages. Subsequently, petitioners also filed a case against respondent for annulment of sale and quieting of title with damages, praying, among others, that judgment be rendered nullifying the Deed of Sale, and ordering the Register of Deeds of Bacolod City to cancel the annotation of the Deed of Sale on TCT No. T-18762. The RTC rendered a Decision in the consolidated cases in favor of petitioners. The trial court noted that the Deed of Sale was defective in form since it did not contain a technical description of the subject properties but merely indicated that they were Lot No. 4, covered by TCT No. T-18764 consisting of 136 square meters, and one-third portion of Lot No. 2 covered by TCT No. T-18762. The trial court held that, being defective in form, the Deed of Sale did not vest title in private respondent. Full and absolute ownership did not pass to private respondent because she failed to register the Deed of Sale. She was not a purchaser in good faith since she acted as a witness to the second sale of the property knowing that she had already purchased the property from Roque. Whatever rights private respondent had over the properties could not be superior to the rights of petitioners, who

ISSUE: Whether or not the deed of sale must contain a technical description of the subject property in order to be valid

HELD: The Court does not agree w ith petitioners’ contention that a deed of sale must contain a technical description of the subject property in order to be valid. Petitioners anchor their theory on Section 127 of Act No. 496, which provides a sample form of a deed of sale that includes, in particular, a technical description of the subject property. To be valid, a contract of sale need not contain a technical description of the subject property. Contracts of sale of real property have no prescribed form for their validity; they follow the general rule on contracts that they may be entered into in whatever form, provided all the essential requisites for their validity are present. The requisites of a valid contract of sale under Article 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. The failure of the parties to specify with absolute clarity the object of a contract by including its technical description is of no moment. What is important is that there is, in fact, an object that is determinate or at least determinable, as subject of the contract of sale. The form of a deed of sale provided in Section 127 of Act No. 496 is only a suggested form. It is not a mandatory form that must be strictly followed by the parties to a contract. In the instant case, the deed of sale clearly identifies the subject properties by indicating their respective lot numbers, lot areas, and the certificate of title covering them. Resort can always be made to the technical description as stated in the certificates of title covering the two properties.

DALION VS. CA FACTS: This is a petition to annul and set aside the decision of the Court of Appeals rendered on May 26, 1987, upholding the validity of the sale of a parcel of land by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private respondent Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"). On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, dated July 1, 1965, allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery, and that subject land


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever is conjugal property, which he and his wife acquired in 1960 from Saturnina Sabesaje as evidenced by the "Escritura de Venta Absoluta". The spouses denied claims of Sabesaje that after executing a deed of sale over the parcel of land, they had pleaded with Sabesaje, their relative, to be allowed to administer the land because Dalion did not have any means of livelihood. They admitted, however, administering since 1958, five (5) parcels of land in Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They never received their agreed 10% and 15% commission on the sales of copra and abaca, respectively. Sabesaje's suit, they countered, was intended merely to harass, preempt and forestall Dalion's threat to sue for these unpaid commissions. Dalion nonetheless still impugns the validity of the sale on the ground that the same is embodied in a private document, and did not thus convey title or right to the lot in question since "acts and contracts which have for their object the creation, transmission, modification or extinction of real rights over immovable property must appear in a public instrument."

ISSUE: Whether or not the sale is valid? HELD: Yes. The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument. A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC). The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in a public document. Under Art. 1498, NCC, when the sale is made through a public instrument, the execution thereof is equivalent to the delivery of the thing. Delivery may either be actual (real) or constructive. Thus delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive).

On March 1, 1960, plaintiff-appellee Soledad Biona obtained a loan from defendant-appellant in the amount of P1,000 and as security therefore, the subject property was mortgaged. It was further agreed upon by the contracting parties that for a period of two years until the debt is paid, defendant-appellant shall occupy the land in dispute and enjoy the usufruct thereof. The two-year period elapsed but Soledad Biona was not able to pay her indebtedness. Defendant-appellant continued occupying and cultivating the subject property without protest from plaintiffsappellees. On July 3, 1962, defendant-appellant paid the sum of P1,400.00 to the Development Bank of the Philippines to cancel the mortgage previously constituted by the Biona spouses on June 3, 1953. Thereafter, and for a period of not less than twenty-five years, defendant-appellant continued his peaceful and public occupation of the property, declaring it in his name for taxation purposes, paying real estate property taxes thereon, and causing the same to be tenanted. On June 19, 1985, plaintiffs-appellees, filed a complaint for recovery of ownership, possession, accounting and damages, with a prayer for a writ of preliminary mandatory injunction and/ or restraining order against defendant-appellant alleging, among others, that the latter had unlawfully been depriving them of the use, possession and enjoyment of the subject property; that the entire parcel of land, which was devoted and highly suited to palay and corn, was yielding three harvests annually, with an average of one hundred twenty (120) sacks of corn and eighty cavans of rice per hectare; that plaintiffs-appellees were deprived of its total produce amounting to P150,000.00. One of the claims of defendant-appellant was that by virtue of his continuous and peaceful occupation of the property from the time of its sale and for more than twenty- five years thereafter, defendant possesses a better right thereto subject only to the rights of the tenants whom he had allowed to cultivate the land under the Land Reform Program of the government; and that plaintiffs alleged right, if any, is barred by the statutes of fraud.

ISSUE: Whether or not the deed of sale was valid and if it effectively conveyed to the private respondents the subject property

HELD: YES but with regard only to Soledad’s share (7/12). But HEIRS OF BIONA VS. CA

since the daughters of Biona failed to assert their rights and allowed defendant Hilajos to occupy the land in peace for more than 30 years, they are now stopped due to laches.

FACTS: On October 23, 1953, the late Ernesto Biona, married to plaintiff-appellee Soledad Biona, was awarded Homestead Patent over the property subject of this suit, a parcel of agricultural land, located in Bo. 3, Banga, Cotabato, On June 3, 1954, Ernesto and Soledad Biona obtained a loan from the then Rehabilitation Finance Corporation (now the Development Bank of the Philippines) and put up as collateral the subject property. On June 12, 1956, Ernesto Biona died leaving as his heirs herein plaintiffs-appellees, namely, his wife, Soledad Estrobillo Vda. De Biona, and five daughters, Editha B. Blancaflor, Marianita B. de Jesus, Vilma B. Blancaflor, Elsie B. Ramos and Perlita B. Carmen.

All the requisites for a valid contract of sale are present in the instant case. For a valuable consideration of P4,500.00, Soledad Biona agreed to sell and actually conveyed the subject property to private respondent. The fact that the deed of sale was not notarized does not render the agreement null and void and without any effect. The provision of Article 1358 of the Civil Code9 on the necessity of a public document is only for convenience, and not for validity or enforceability.10 The observance of which is only necessary to insure its efficacy, so that after the existence of said contract had been admitted, the party bound may be compelled to execute the proper document.11 Undeniably, a contract has been entered into by Soledad Biona and the private respondent. Regardless of its


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever form, it was valid, binding and enforceable between the parties. Under Art. 1356 of the Civil Code, contracts shall be obligatory in whatever form they may have been entered into provided all the essential requisites for their necessary elements for a valid contract of sale were met when Soledad Biona agreed to sell and actually conveyed Lot 177 to defendant-appellant who paid the amount of P4,500.00 therefore. The deed of sale (Exh. 2) is not made ineffective merely because it is not notarized or does not appear in a public document.

2. When Form Important in Sale

a. To Bind Third Parties

b. For Enforceability between the Parties: Statute of Frauds

balance of P4,500,000.00 by imposing upon the private respondents to pay same amount within thirty (30) days from execution of the contract instead of the former term of ninety (90) days. Ruling of the lower court and the respondent judge: The statute does not require a formal contract drawn up with technical exactness for the language of Par. 2 of Art. 1403 of the Philippine Civil Code is '... an agreement...or some note or memorandum thereof,' thus recognizing a difference between the contract itself and the written evidence which the statute require. ... The contract of sale sued upon in this case is supported by letters and telegrams annexed to the complaint. The private respondents having alleged that the contract is backed up by letters and telegrams, and the same being sufficient memorandum, the complaint states a cause of action and they should be given their day in court and allowed to substantiate their allegations.

ISSUES: Whether or not there is a perfected contract of sale between the parties. (NO) and

YUVIENGCO VS Hon. DACUYCUY and Dely Rodriguez, Felipe Cruz, Constancia Nogar, et al. (GR No. L -55048 May 27, 1981) FACTS: Petitioners own a property in Tacloban City which they

Whether or not the claim for specific performance of respondents is enforceable under the Statute of Frauds. (NO)

HELD:

intend to sell for 6.5M. They gave the private respondents the right to purchase the property only until July 31, 1978. Private respondents replied that they agree to buy the property and they will negotiate for details. Petitioner sent another telegram informing respondents that their proposal is accepted and a contract will be prepared.

1st issue: There was no perfected contract of sale yet because both parties are still under negotiation and hence, no meeting of the minds. Mr. Gamboa even went to the private respondents to negotiate for the sale. Even though there was an agreement on the terms of payment, there was no absolute acceptance because respondents still insisted on further details.

Lawyer of the petitioners, Mr.Gamboa, arrived bringing a contact with an altered mode of payment which says that the balance payment should be paid within 30 days instead of the former 90 days. The original terms of the parties was: respondents will pay 2M upon execution, and the remaining 4.5m after 90 days.

2 issue: The conclusion is inescapable that the claim of private respondents that petitioners have unjustifiably refused to proceed with the sale to them of the property in question is unenforceable under the Statute of Frauds.

In essence, the theory of petitioners is that while it is true that they did express willingness to sell to private respondents the subject property (land and building) for P6,500,000.00 provided the latter made known their own decision to buy it not later than July 31, 1978, the respondents' reply that they were agreeable was not absolute, so much so that when ultimately petitioners' representative went to Cebu City with a prepared and duly signed contract for the purpose of perfecting and consummating the transaction, respondents and said representative found variance between the terms of payment stipulated in the prepared document and what respondents had in mind, hence the bank draft which respondents were delivering to the representative was returned and the document remained unsigned by respondents. Hence, the action for specific performance filed by the private respondents. However, the respondents, in their complaint, contended ―That on August 1, 1978 Pedro Gamboa arrived Tacloban City bringing with him the prepared contract to purchase and to sell referred to in his telegram dated July 27, 1978 for the purpose of closing the transactions referred to in paragraphs 8 and 9 hereof, however, to the complete surprise of private respondents, the petitioner without giving notice to plaintiffs, changed the mode of payment with respect to the

nd

It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing or memorandum, much less a duly signed agreement to the effect that the price of P6,500,000 fixed by petitioners for the real property herein involved was agreed to be paid not in cash but in installments as alleged by respondents. The only documented indication of the non-wholly-cash payment extant in the record is that stipulated, the deeds already signed by the petitioners and taken to Tacloban by Atty. Gamboa for the signatures of the respondents. In other words, the 90-day term for the balance of P4.5 M insisted upon by respondents choices not appear in any note, writing or memorandum signed by either the petitioners or any of them, not even by Atty. Gamboa. Hence, looking at the pose of private respondents that there was a perfected agreement of purchase and sale between them and petitioners under which they would pay in installments of P2 M down and P4.5 M within 90 days afterwards, it is evident that such oral contract involving the "sale of real property" comes squarely under the Statute of Frauds. Respondent judge assumed that the requirement of perfection of such kind of contract under Article 1475 of the Civil Code which provides that "the contract of sale is perfected at the moment


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever there is a meeting of the minds upon the thing which is the object of the contract and upon the price", the Statute would no longer apply as long as the total price or consideration is mentioned in some note or memorandum and there is no need of any indication of the manner in which such total price is to be paid.

decision of the trial court 7. Hence, this petition

ISSUE: Whether or not a contract of sale of land may be proven orally. (NO)

HELD: The rule of thumb is that a sale of land, once Thus, the SC held that in any sale of real property on installments, the Statute of Frauds read together with the perfection requirements of Article 1475 of the Civil Code must be understood and applied in the sense that the idea of payment on installments must be in the requisite of a note or memorandum therein contemplated. Stated otherwise, the inessential elements" relied upon by respondent judge must be deemed to include the requirement just discussed when it comes to installment sales. For the essence and thrust of the said monograph refers only to the form of the note or memorandum which would comply with the Statute, and no doubt, while such note or memorandum need not be in one single document or writing and it can be in just sufficiently implicit tenor, imperatively the separate notes must, when put together', contain all the requisites of a perfected contract of sale. To put it the other way, under the Statute of Frauds, the contents of the note or memorandum, whether in one writing or in separate ones merely indicative for an adequate understanding of all the essential elements of the entire agreement, may be said to be the contract itself, except as to the form.

CLAUDEL VS CA and HEIRS OF MACARIO (GR No 85240 July 12, 1991) FACTS: As early as December 28, 1922, Basilio also known as "Cecilio" Claudel, acquired from the Bureau of Lands, Lot No. 1230 of the Muntinlupa Estate Subdivision; he secured Transfer Certificate of Title (TCT) No. 7471 issued by the Registry of Deeds for the Province of Rizal in 1923; he also declared the lot in his name. He dutifully paid the real estate taxes thereon until his death in 1937. Thereafter, his widow "Basilia" and later, her son Jose, one of the herein petitioners, paid the taxes. The same piece of land purchased by Cecilio would, however, become the subject of protracted litigation thirty-nine years after his death. Two branches of Cecilio's family contested the ownership over the land-on one hand the children of Cecilio, namely, Modesto, Loreta, Jose, et al. and on the other, the brother and sisters of Cecilio, namely, Macario, Esperidiona, Raymunda, and Celestina et. al. In 1972, the HEIRS OF CECILIO partitioned this lot among themselves. Four years later, on December 7, 1976, private respondents SIBLINGS OF CECILIO, filed Civil Case No. 5276-P as already adverted to at the outset, with the then Court of First Instance of Rizal, a "Complaint for Cancellation of Titles and Reconveyance with Damages," alleging that 46 years earlier, or sometime in 1930, their parents had purchased from the late Cecilio Claudel several portions of Lot No. 1230 for the sum of P30.00. They admitted that the transaction was verbal. However, as proof of the sale, the SIBLINGS OF CECILIO presented a subdivision plan of the said land, dated March 25, 1930, indicating the portions allegedly sold to the SIBLINGS OF CECILIO. The Lower Court dismissed the case. The Court of Appeals reversed the

consummated, is valid regardless of the form it may have been entered into. For nowhere does law or jurisprudence prescribe that the contract of sale be put in writing before such contract can validly cede or transmit rights over a certain real property between the parties themselves. However, in the event that a third party, as in this case, disputes the ownership of the property, the person against whom that claim is brought cannot present any proof of such sale and hence has no means to enforce the contract. Thus the Statute of Frauds was precisely devised to protect the parties in a contract of sale of real property so that no such contract is enforceable unless certain requisites, for purposes of proof, are met. The provisions of the Statute of Frauds pertinent to the present controversy, state: Art. 1403 (Civil Code). The following unenforceable, unless they are ratified:

contracts

are

xxx xxx xxx 2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: xxx xxx xxx e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein; xxx xxx xxx (Emphasis supplied.) The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced in Writing. The provisions of the Statute of Frauds originally appeared under the old Rules of Evidence. However when the Civil Code was rewritten in 1949 (to take effect in 1950), the provisions of the Statute of Frauds were taken out of the Rules of Evidence in order to be included under the title on Unenforceable Contracts in the Civil Code. The transfer was not only a matter of style but to show that the Statute of Frauds is also a substantive law. Therefore, except under the conditions provided by the Statute of Frauds, the existence of the contract of sale made by Cecilio with his siblings 13 cannot be proved.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever SPOUSES ALFREDO vs SPOUSES BORRAS (GR No 144225 June 17, 2003)

c. For Validity: Sale of Realty through Agent, Authority must be in Writing

FACTS: The Alfredo Spouses mortgaged the subject land situated in Brgy. Culis, Mabiga, Hermosa, Bataan, to the DBP for P7,000.00, and in order to pay their debt, the Alfredo Spouses sold the subject land to the Borras Spouses for P15,000.00. The Borras paid the loan and its interest and the balance is to be paid by the Alfredos, and they (Alfredos) delivered the Owner's Duplicate Copy of OCT No. 284 to them (Borras). Later, Borras discovered that the Alfredos had re-sold portiions of the land to several persons. Borras filed an adverse claim with the Register of Deeds of Bataan, and later they found out that the Alfredos had secured a duplicate copy of OCT No. 284, the tax declaration and the receipts of the realty. The Alfredos filed a complaint for Specific Performance, they claimed that the sale, not being in writing, is unenforceable under the Statute of Frauds.

ISSUE: W/N the contract of sale is unenforceable under the Statute of Frauds. (NO)

HELD: NO. The Statute of Frauds provides that a contract for the sale of real property shall be unenforceable unless the contract or some note or memorandum of the sale is in writing and subscribed by the party charged or his agent. The existence of the receipt dated 11 March 1970, which is a memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds. The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed. Thus, where one party has performed one‘s obligation, oral evidence will be admitted to prove the agreement. In the instant case, the parties have consummated the sale of the Subject Land, with both sellers and buyers performing their respective obligations under the contract of sale. In addition, a contract that violates the Statute ofFrauds is ratified by the acceptance of benefits under the contract. Alfredo spouses benefited from the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money given by Borras. Alfredo also accepted payment of the balance of the purchase price. Alfredo spouses cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because they have performed their obligations, and have accepted benefits, under the verbal contract. The Borras spouses have also performed their obligations under the verbal contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent fraud. This law cannot be used to advance the very evil the law seeks to prevent.

III. CONSUMMATION A. Obligations of Seller SANTOS VS SANTOS (GR No 133895 October 2, 2001) FACTS: Petitioner Zenaida M. Santos is the widow of Salvador Santos. Salvador Santos is a brother of private respondents Calixto, Alberto, Antonio, and Rosa Santos-Carreon. The spouses Jesus and Rosalia Santos are the parents of the 5 siblings. They owned a parcel of land registered under TCT No. 27571 with an area of 154 square meters, located at Sta. Cruz Manila. On it was a four-door apartment administered by Rosalia who rented them out. The spouses had five children, Salvador, Calixto, Alberto, Antonio and Rosa. On January 19, 1959 Jesus and Rosalia executed a deed of sale of the properties in favor of their children Salvador and Rosa. TCT No. 27571 became TCT No. 60819. On November 20, 1973 Rosa in turn sold her share to Salvador which resulted in the issuance of a new TCT No. 113221. Despite the transfer of the property to Salvador, Rosalia, their mother, continued to lease and receive rentals from the apartment units. November 1, 1979, Jesus died. January 9, 1985, Salvador died. After a month (Feb 1985), Rosalia died. Shortly after, petitioner Zenaida, claiming to be Salvador's heir (specifically, as Salvador’s widow), demanded the rent from Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida filed and ejectment suit against him with the Metropolitan Trial Court of Manila, Branch 24, which eventually decided in Zenaida's f avor. On January 5, 1989 - private respondents instituted an action for reconveyance of property with preliminary injunction against petitioner in RTC of Manila, where they alleged that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were simulated for lack of consideration. They were executed to accommodate Salvador in generation funds for his business and providing him wit h greater business flexibility. Zenaida argued that Salvador was the registered owner of the property, which could only be subjected to encumbrances or liens annotated on the title; that the respondents' right to reconveyance was already barred by prescription and laches; and that the complaint state no cause of action. Ruling of the lower court: RTC decided in favour of private respondents: a) Declaring the deed of sale executed by Rosalia Santos and Jesus Santos on January 19, 1959, as entirely null and void for being fictitious or stimulated and inexistent b) Declaringthe deed of sale executed by Rosa Santos in favor of


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Salvador Santos on November 20, 1973, also as entirely null and void for being likewise fictitious or stimulated and inexistent c) Directing ROD of Manila to cancel TCT#113221 registered in the name of Salvador Santos, as well as, TCT# 60819 in the names of Salvador Santos, Rosa Santos and the Transfer Certificate of Title No. T-27571 registered in the name of Rosalia A. Santos, married to Jesus Santos, the same to be partitioned by the heirs of the said registered owners in accordance with law. The trial court reasoned that notwithstanding the deeds of sale transferring the property to Salvador, the spouses Rosalia and Jesus continued to possess the property and to exercise rights of ownership not only by receiving the monthly rentals, but also by paying the realty taxes. Also, Rosalia kept the owner's duplicate copy of the title even after it was already in the name of Salvador. Further, the spouses had no compelling reason in 1959 to sell the property and Salvador was not financially capable to purchase it. The deeds of sale were therefore fictitious. Hence, the action to assail the same does not prescribe. The CA affirmed the decision of the RTC. It held that in order for the execution of a public instrument to effect tradition, as provided in Article 1498 of the Civil Code, the vendor shall have had control over the thing sold, at the moment of sale. It was not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. The subject deeds of sale did not confer upon Salvador the ownership over the subject property, because even after the sale, the original vendors remained in dominion, control, and possession thereof.

ISSUE: WON there was DELIVERY by the Seller

Salvador was never placed in control of the property. The original sellers retained their control and possession. Therefore, there was no real transfer of ownership. In Norkis Distributors, Inc. vs. CA, the SC held that the critical factor in the different modes of effecting delivery, which gives legal effect to the act is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition. In the instant case, although the spouses Jesus and Rosalia executed a deed of sale, they did not deliver the possession and ownership of the property to Salvador and Rosa. They agreed to execute a deed of sale merely to accommodate Salvador to enable him to generate funds for his business venture.

DY, JR. V. CA, GELAC TRADING INC., AND ANTONIO V. GONZALES FACTS: Wilfredo Dy purchased a truck and a farm tractor through LIBRA which was also mortgaged with the latter, as a security to the loan. Petitioner, expresses his desire to purchase his brother’s tractor in a letter to LIBRA which also includes his intention to shoulder its mortgaged. LIBRA approved the request. At the time that Wilfredo Dy executed a deed of absolute sale in favor of petitioner, the tractor and truck were in the possession of LIBRA for his failure to pay the amortization.

HELD: There’s CONSTRUCTIVE DELIVERY but it was NOT

EFFECTED. Petitioner in her memorandum invokes Article 1477 of the Civil Code which provides that ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. Article 1498, in turn, prov ides that when the sale is made through a public instrument, its execution is equivalent to the delivery of the thing subject of the contract. Petitioner avers that applying said provisions to the case, Salvador became the owner of the subject property by virtue of the two deeds of sale executed in his favor. Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a conclusive presumption of delivery of possession. The Code merely said that the execution shall be equivalent to delivery. The presumption can be rebutted by clear and convincing evidence. Presumptive delivery can be negated by the failure of the vendee to take actual possession of the land sold.

When petitioner finally fulfilled its obligation to pay the tractor, LIBRA would only release the same only if he would also pay for the truck. In order to fulfill LIBRA’ s condition, petitioner convinced his sister to pay for the remaining truck, to which she released a check amounting to P22, 000. LIBRA however, insisted that the check must be first cleared before it delivers the truck and tractor. Meanwhile, another case penned “Gelac Trading Inc vs. Wilfredo Dy” was pending in Cebu as a case to recover for a sum of money (P12, 269.80). By a writ of execution the court in Cebu ordered to seize and levy the tractor which was in the premise of LIBRA, it was sold in a public auction to which it was purchased by GELAC. The latter then sold the tractor to Antonio Gonzales. RTC rendered in favor of petitioner. CA dismissed the case, alleging that it still belongs to Wilfredo Dy.

ISSUE: Whether or not there was a consummated sale between Petitioner and LIBRA?

In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a public instrument to effect tradition, the purchaser must be placed in control of the thing sold. When there is no impediment to prevent the thing sold from converting to tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy nor make use of it himself or through another in his name, then delivery has not been effected.

HELD: NO. The payment of the check was actually intended to extinguish the mortgage obligation so that the tractor could be released to the petitioner. It was never intended nor could it be considered as payment of the purchase price because the relationship between Libra and the petitioner is not one of sale but still a mortgage. The clearing or encashment of the check which produced the effect of payment determined the full payment of the money obligation and the release of the chattel mortgage. It was not determinative of the consummation of the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever sale. The transaction between the brothers is distinct and apart from the transaction between Libra and the petitioner. The contention, therefore, that the consummation of the sale depended upon the encashment of the check is untenable.

ADDISON V. FELIX FACTS: The defendants-appellees spouses Maciana Felix and Balbino Tioco purchased from plaintiff-appellant A.A. Addison four parcels of land to which Felix paid, at the time of the execution of the deed, the sum of P3,000 on account of the purchase price. She likewise bound herself to the remainder in installments, the first of P,2000 on July 15, 1914, the second of P5,000 thirty days after the issuance to her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title, P10 for each cocoanut tree in bearing and P5 for each such tree not in bearing that might be growing on said parcels of land on the date of the issuance of title to her, with the condition that the total price should not exceed P85,000. It was further stipulated that Felix was to deliver to the Addison 25% of the value of the products that she might obtain from the four parcels "from the moment she takes possession of them until the Torrens certificate of title be issued in her favor," and that within 1 year from the date of the certificate of title in her favor, Marciana Felix may rescind the contract of purchase and sale. In January 1915, Addison, filed suit in the CFI of Manila to compel Felix to pay the first installment of P2,000, demandable, in accordance with the terms of the contract of sale. The defendants Felix and her husband Tioco contended that Addison had absolutely failed to deliver the lands that were the subject matter of the sale, notwithstanding the demands they made upon him for this purpose. The evidence adduced shows Addison was able to designate only two of the four parcels, and more than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts he so occupied. The trial court held the contract of sale to be rescinded and ordered Addison to return to Felix the P3,000 paid on account of the price, together with interest thereon at the rate of 10% per annum.

ISSUE: Was there a delivery made and, therefore, a transfer of ownership of the thing sold?

HELD: The Supreme Court affirmed the decision of the lower court, with modification that the interest thereon will be at the rate of 6% (instead of 10%) per annum from the date of the filing of the complaint until payment. The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. Symbolic delivery through the execution of a public instrument is sufficient when there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy

of the thing and make use of it himself or through another in his name, because such are opposed by a third person’s will, then the delivery has not been effected. In the case at bar, therefore, it is evident, that the mere execution of the instrument was not a fulfillment of the vendor's obligation to deliver the thing sold, and that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price.

SPOUSES SANTOS V. CA FACTS: Spouses Santos owned the house and lot in Better Living Subdivision, Paranaque, Metro Manila. The land together with the house, was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150K. The bank sent Rosalinda Santos a letter demanding payment of P16K in unpaid interest and other charges. Since the Santos couple had no funds, Rosalinda offered to sell the house and lot to Carmen Caseda. After inspecting the real property, Carmen and her husband agreed. Carmen and Rosalinda signed a document, involving the sale of the house – P350K as full amount, P54K as downpayment. Among ot her condition set is that Caseda will pay t he balance of the mortgage in the bank, real estate taxes and the electric and water bills. The Casedas complied with the bank mortgage and the bills. The Santoses, seeing that the Casedas lacked the means to pay the remaining installments and/or amortization of the loan, repossessed the property. The Santoses then collected the rentals from the tenants. Carmen approached petitioners and offered to pay the balance of the purchase price for the house and lot. The parties, however, could not agree, and the deal could not push through because the Santoses wanted a higher price. Carmen is now praying that the Santoses execute the final deed of conveyance over the property.

ISSUE: WON there was a perfected contract of sale? NO HELD: A contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. Article 1458 expressly obliges the vendor to transfer ownership of the thing sold as an essential element of a contract of sale. This is because the transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale. There was no transfer of ownership simultaneously with the delivery of the property purportedly sold. The records clearly show that, notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property has remained always in the name of Rosalinda Santos. Although the parties had agreed that the Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos. The foregoing circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed a contract of sale. It was a contract to sell. Ownership is reserved by the vendor and is not to pass until full payment of the purchase price. This


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever we find fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require notarial and other formalities of law before transfer thereof could be validly effected. The CA cannot order rescission. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and not rescinding it.

SPOUSES SANTIAGO V. VILLAMOR FACTS: Spouses Domingo Villamor, Sr. and Trinidad Villamor (spouses Villamor, Sr.) executed a deed of sale covering a parcel of land in favor of petitioners Spouses Erosto and Nelsie Santiago (spouses Santiago). The land in dispute was occupied by spouses Villamor, Sr.s children, herein respondents Mancer Villamor, Carlos Villamor, and Domingo Villamor, Jr. (Villamor children)

In this case, no constructive delivery of the land transpired upon the execution of the deed of sale since it was not the spouses Villamor, Sr. but the respondents who had actual possession of the land. The presumption of constructive delivery is inapplicable and must yield to the reality that the petitioners were not placed in possession and control of the land. A purchaser in good faith is one who buys property without notice that some other person has a right to or interest in such property and pays its fair price before he has notice of the adverse claims and interest of another person in the same property. However, where the land sold is in the possession of a person other than the vendor, the purchaser must be wary and must investigate the rights of the actual possessor; without such inquiry, the buyer cannot be said to be in good faith and cannot have any right over the property.

LA FUERZA, INC., vs. THE HON. COURT OF APPEALS FACTS: The plaintiff (Associated Engineering, Co., Inc.) is a

Spouses Santiago demanded the Villamor children to vacate the property but the latter refused to do so. Villamor children argued that they are the lawful owners of the land since they acquired the same from San Jacinto Bank. Thus, spouses Santiago filed an action for quieting of title before the RTC. The RTC ruled in favor of spouses Santiago. On appeal, the CA reversed the RTCs decision on the ground that spouses Santiago failed to prove their legal or equitable title to the land.

ISSUE: Whether or not the action to quiet title filed by Spouses Santiago should prosper?

HELD: The petition lacks merit. CIVIL LAW: quieting of title; constructive delivery; buyer in good faith Quieting of title is a common law remedy for the removal of any cloud, doubt or uncertainty affecting title to real property. The plaintiffs must show not only that there is a cloud or contrary interest over the subject real property, but that they have a valid title to it. Article 1477 of the Civil Code recognizes that the "ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof." Related to this article is Article 1497 which provides that "the thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee." With respect to incorporeal property, Article 1498 of the Civil Code lays down the general rule: the execution of a public instrument "shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred." However, the execution of a public instrument gives rise only to a prima facie presumption of delivery, which is negated by the failure of the vendee to take actual possession of the land sold. A person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument.

corporation engaged in the manufacture and installation of flat belt conveyors. The defendant (La Fuerza, Inc.) is also a corporation engaged in the manufacture of wines. Sometime in the month of January, 1960, Antonio Co, the manager of the plaintiff corporation called the office of the defendant and offered his services to manufacture and install a conveyor system which, according to him, would increase production and efficiency of his business. The president of the defendant corporation then expressed his conformity to the offer made in Exhibit A by writing at the foot thereof under the word "confirmation" his signature. He caused, however, to be added to this offer at the foot a note which reads: "All specifications shall be in strict accordance with the approved plan made part of this agreement hereof." A few days later, Antonio Co made the demand for the down payment of P5,000.00 which was readily delivered by the defendant in the form of a check for the said amount. After that agreement, the plaintiff started to prepare the premises for the installations of the conveyor system . It seems that the work was completed during the month of May, 1960. Trial runs were made in the presence of the president and general manager of the defendant corporation, Antonio Co, the technical manager of the plaintiff, and some other people. As a result of this trial or experimental runs, it was discovered, according to the defendant's general manager, that the conveyor system did not function to their satisfaction as represented by the technical manager of the plaintiff Antonio Co for the reason that, when operated several bottles collided with each other, some jumping off the conveyor belt and were broken, causing considerable damage. After the last trial run made in the month of July and defects indicated by the said president and general manager of the defendant had not been remedied with the result that when the plaintiff billed the defendant for the balance of the contract price, the latter refused to pay for the reason that according to the defendant the conveyor system installed by the plaintiff did not


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever serve the purpose for which the same was manufactured and installed at such a heavy expense. On March 22, 1961, the contractor commenced the present action to recover the sums of P8,250, balance of the stipulated price of the aforementioned conveyors, and P2,000, as attorney's fees, in addition to the costs. La Fuerza maintains that plaintiff is deemed not to have delivered the conveyors, within the purview of Art. 1571, until it shall have complied with the conditions or requirements of the contract between them — that is to say, until the conveyors shall meet La Fuerza's "need of a conveyor system that would mechanically transport empty bottles from the storage room to the bottle workers in the production room thus increasing the production and efficiency" of its business-and La Fuerza had accepted said conveyors.

In the exercise of this right of election, La Fuerza had chosen to withdraw from the contract, by praying for its rescission; but the action therefor — in the language of Art. 1571 — "shall be barred after six months, from the delivery of the thing sold." The period of four (4) years, provided in Art. 1389 of said Code, for "the action to claim rescission," applies to contracts, in general , and must yields, in the instant case, to said Art. 1571, which refers to sales in particular. Indeed, in contracts of the latter type, especially when goods, merchandise, machinery or parts or equipment thereof are involved, it is obviously wise to require the parties to define their position, in relation thereto, within the shortest possible time.

ISSUE: WON there was delivery. YES

Public interest demands that the status of the relations between the vendor and the vendee be not left in a condition of uncertainty for an unreasonable length of time, which would be the case, if the lifetime of the vendee's right of rescission were four (4) years.

RULING: Upon the completion of the installation of the

B.

conveyors, in May, 1960, particularly after the last trial run, in July 1960, La Fuerza was in a position to decide whether or not it was satisfied with said conveyors, and, hence, to state whether the same were a accepted or rejected. The failure of La Fuerza to express categorically whether they accepted or rejected the conveyors does not detract from the fact that the same were actually in its possession and control; that, accordingly, the conveyors had already been delivered by the plaintiff; and that, the period prescribed in said Art. 1571 had begun to run. With respect to the second point raised by La Fuerza, Art. 1571 of the Civil Code provides: Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. Xx Among the "ten articles" referred to in this provision, are Articles 1566 and 1567, reading: Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. ."This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. xxx

xxx

xxx

Pursuant to these two (2) articles, if the thing sold has hidden faults or defects — as the conveyors are claimed to have — the vendor — in the case at bar, the plaintiff — shall be responsible therefor and the vendee — or La Fuerza, in the present case — "may elect between withdrawing from the contract and demanding a proportional reduction of the price, with damages in either case."

Delivery/Special Rules DAVID VS MISAMIS OCCIDENTAL

FACTS: Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric Sales, a company engaged in the business of supplying electrical hardware including transformers for rural electric cooperatives like respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI), with principal office located in Ozamis City. To solve its problem of power shortage affecting some areas within its coverage, MOELCI expressed its intention to purchase a 10 MVA power transformer from David. For this reason, its General Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet David in the latter’s office in Quezon City. David agreed to supply the power transformer provided that MOELCI would secure a board resolution because the item would still have to be imported. The board resolution was thereafter attached to the proposal. As stated in the proposal, the subject transformer, together with the basic accessories, was valued at P5,200,000.00. It was also stipulated therein that 50% of the purchase price should be paid as downpayment and the remaining balance to be paid upon delivery. Freight handling, insurance, customs duties, and incidental expenses were for the account of the buyer. The Board Resolution, on the other hand, stated that the purchase of the said transformer was to be financed through a loan from the National Electrification Administration (NEA). As there was no immediate action on the loan application, Engr. Rada returned to Manila in early December 1992 and requested David to deliver the transformer to them even without the required downpayment. David granted the request provided that MOELCI would pay interest at 24% per annum. Engr. Rada acquiesced to the condition. On December 17, 1992, the goods were shipped to Ozamiz City via William Lines. In the Bill of Lading, a sales invoice was included which stated the agreed interest rate of 24% per annum. When no payment was made after several months, Medina was constrained to send a demand letter, dated September 15, 1993,


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever which MOELCI duly received. Engr. Rada replied in writing that the goods were still in the warehouse of William Lines again reiterating that the loan had not been approved by NEA. This prompted Medina to head back to Ozamiz City where he found out that the goods had already been released to MOELCI evidenced by the shipping company’s copy of the Bill of Lading which was stamped "Released," and with the notation that the arrastre charges in the amount of P5,095.60 had been paid. This was supported by a receipt of payment with the corresponding cargo delivery receipt issued by the Integrated Port Services of Ozamiz, Inc. On February 17, 1994, David filed a complaint for specific performance with damages with the RTC. In response, MOECLI moved for its dismissal on the ground that there was lack of cause of action as there was no contract of sale, to begin with, or in the alternative, the said contract was unenforceable under the Statute of Frauds. MOELCI argued that the quotation letter could not be considered a binding contract because there was nothing in the said document from which consent, on its part, to the terms and conditions proposed by David could be inferred. David knew that MOELCI’s assent could only be obtained upon the issuance of a purchase order in favor of the bidder chosen by the Canvass and Awards Committee.

ISSUE: Whether or not there was a perfected contract of sale. Whether or not there was a delivery that consummated the contract.

the purchase. Then, when the loan that MOELCI was relying upon to finance the purchase was not forthcoming, MOELCI, through Engr. Rada, convinced David to do away with the 50% downpayment and deliver the unit so that it could already address its acute power shortage predicament, to which David acceded when it made the delivery, through the carrier William Lines, as evidenced by a bill of lading. Second, the document specified a determinate subject matter which was one (1) Unit of 10 MVA Power Transformer with corresponding KV Line Accessories. And third, the document stated categorically the price certain in money which was P5,200,000.00 for one (1) unit of 10 MVA Power Transformer and P2,169,500.00 for the KV Line Accessories. In sum, since there was a meeting of the minds, there was consent on the part of David to transfer ownership of the power transformer to MOELCI in exchange for the price, thereby complying with the first element. Thus, the said document cannot just be considered a contract to sell but rather a perfected contract of sale.

Second issue: MOELCI, in denying that the power transformer was delivered to it, argued that the Bill of Lading which David was relying upon was not conclusive. It argued that although the bill of lading was stamped "Released," there was nothing in it that indicated that said power transformer was indeed released to it or delivered to its possession. For this reason, it is its position that it is not liable to pay the purchase price of the 10 MVA power transformer.

RULING: The Court finds merit in the petition. First issue: The elements of a contract of sale are, to wit: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent.9 It is the absence of the first element which distinguishes a contract of sale from that of a contract to sell. An examination of the alleged contract to sell, "Exhibit A," despite its unconventional form, would show that said document, with all the stipulations therein and with the attendant circumstances surrounding it, was actually a Contract of Sale. The rule is that it is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into by the parties.12 First, there was meeting of minds as to the transfer of ownership of the subject matter. The letter (Exhibit A), though appearing to be a mere price quotation/proposal, was not what it seemed. It contained terms and conditions, so that, by the fact that Jimenez, Chairman of the Committee on Management, and Engr. Rada, General Manager of MOELCI, had signed their names under the word "CONFORME," they, in effect, agreed with the terms and conditions with respect to the purchase of the subject 10 MVA Power Transformer. As correctly argued by David, if their purpose was merely to acknowledge the receipt of the proposal, they would not have signed their name under the word "CONFORME." Besides, the uncontroverted attending circumstances bolster the fact that there was consent or meeting of minds in the transfer of ownership. To begin with, a board resolution was issued authorizing the purchase of the subject power transformer. Next, armed with the said resolution, top officials of MOELCI visited David’s office in Quezon City three times to discuss the terms of

To begin with, among the terms and conditions of the proposal to which MOELCI agreed stated: 2. Delivery – Ninety (90) working days upon receipt of your purchase order and downpayment. C&F Manila, freight, handling, insurance, custom duties and incidental expenses shall be for the account of MOELCI II. 13 (Emphasis supplied) On this score, it is clear that MOELCI agreed that the power transformer would be delivered and that the freight, handling, insurance, custom duties, and incidental expenses shall be shouldered by it. On the basis of this express agreement, Article 1523 of the Civil Code becomes applicable.1âwphi1 It provides: Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears. (Emphasis supplied) Thus, the delivery made by David to William Lines, Inc., as evidenced by the Bill of Lading, was deemed to be a delivery to MOELCI. David was authorized to send the power transformer to the buyer pursuant to their agreement. When David sent the item through the carrier, it amounted to a delivery to MOELCI. Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever Yangco,14 it was pointed out that a specification in a contract relative to the payment of freight can be taken to indicate the intention of the parties with regard to the place of delivery. So that, if the buyer is to pay the freight, as in this case, it is reasonable to suppose that the subject of the sale is transferred to the buyer at the point of shipment. In other words, the title to the goods transfers to the buyer upon shipment or delivery to the carrier. Of course, Article 1523 provides a mere presumption and in order to overcome said presumption, MOELCI should have presented evidence to the contrary. The burden of proof was shifted to MOELCI, who had to show that the rule under Article 1523 was not applicable. In this regard, however, MOELCI failed. There being delivery and release, said fact constitutes partial performance which takes the case out of the protection of the Statute of Frauds. It is elementary that the partial execution of a contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential requisites of consent of the contracting parties, object and cause of the obligation concur and are clearly established to be present.15

BEHN MEYER VS. YANGCO FACTS: A sale of 80 drums of caustic soda was agreed between Behn, Meyer & Co. and Teodoro Yanco. The merchandise was shipped from New York to Manila.

On the other hand, if the seller is to pay the freight, the inference is equally so strong that the duty of the seller is to have the goods transported to their ultimate destination and that title to property does not pass until the goods have reached their destination. c.i.f. means Cos t, Insur ance and Freig ht = CFI is paid b y the seller.

The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify that the price fixed covers not only the cost of the goods, but the expense of freight and insurance to be paid by the seller. F.O.B. stands fo r Free on B oard = seller bear all exp enses until goo ds are delivered.

In this case, in addition to the letters "c.i.f.," has the word following, "Manila." In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free on Board," are frequently used. The meaning is that the seller shall bear all expenses until the goods are delivered where they are to be "F.O.B." According as to whether t he goods are to be delivered "F.O.B." at the point of shipment or at the point of destination determines the time when property passes. However, both the terms "c.i.f." and "F.O.B." merely make rules of presumption which yield to proof of contrary intention. Delivery w as to be made at Manila.

However, the ship carrying the cargo was detained at Penang and the 71 of the 80 drums were removed. Respondent Yangco also refused to accept the 9 remaining and also refused to accept the offer of Behn Meyer to have the products substituted with other merchandise, which however were different from what was ordered. It must be noted that the contract provided for "c.i.f. Manila, pagadero against delivery of documents."

Hence, we believe that the word Manila in conjunction with the letters "c.i.f." must mean that the contract price, covering costs, insurance, and freight, signifies that delivery was to made at Manila. If petitioner Behn Meyer has seriously thought that the place of delivery was New York and Not Manila, it would not hav e gone to the trouble of making fruitless attempts to substitute goods for the merchandise named in the contract, but would have permitted the entire loss of the shipment to fall upon the defendant.

Yanco filed an action seeking for damages for alleged breach of contract.

Behn Meyer failed to prove that it performed its part in th e contract.

ISSUE: WON Behn, Meyer & Co. should bear the burden of the loss of the merchandise? YES

RULING:

Rule as to delivery of goods by a vendor via a c o m m o n c a r r i e r (If c o n t r a c t i s s i l e n t – d e l i v e r y o f s e l l e r t o c o m m o n c a r r i e r t r a n s f er o w n e r s h i p t o b u y e r ) .

Determination of the place of delivery always resolves itself into a question of act. If the contract be silent as to the person or mode by which the goods are to be sent, delivery by the vendor to a common carrier, in the usual and ordinary course of business, transfers the property to the vendee. Payment of freight by the buyer = acquires ownership at the point of shipment.

A specification in a contact relative to the payment of freight can be taken to indicate the intention of the parties in regard to the place of delivery. If the buyer is to pay the freight, it is reasonable to suppose that he does so because the goods become his at the point of shipment.

In this case, the place of delivery was Manila and plaintiff (Behn Meyer) has not legally excused default in delivery of the specified merchandise at that place. In resume, we find that the plaintiff has not proved the performance on its part of the conditions precedent in the contract. F o r b r e a c h o f w a r r a n t y , t h e b u y e r ( Y an c o ) m a y d e m a n d rescission of the contract of sale.

The warranty — the material promise — of the seller to the buyer has not been complied with. The buyer may therefore rescind the contract of sale because of a breach in substantial particulars going to the essence of the contract. As contemplated by article 1451 of the Civil Code, the vendee can demand fulfillment of the contract, and this being shown to be impossible, is relieved of his obligation. There thus being sufficient ground for rescission, the defendant is not liable.

P a y m e n t o f f r e i g h t b y t h e s e l l e r = t i tl e o f p r o p e r t y d o e s n o t p a s s u n t i l t h e g o o d s h a v e r e a c h e d t h e i r d e s t i n a ti o n .


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever D.

Double Sales CORONEL vs CA

FACTS: The petition involves a complaint for specific performance to compel petitioners to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00. On January 19, 1985, defendants-appellants Romulo Coronel, et al. (Coronels) executed a document entitled "Receipt of Down Payment" in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) Clearly, the conditions appurtenant to the sale are the following: 1. Ramona will make a down payment P50,000.00 upon execution of the document aforestated; 2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the P50,000.00 down payment; 3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of P1,190,000.00. On the same date (January 15, 1985), Concepcion D. Alcaraz (Concepcion), mother of Ramona, paid the down payment of P50,000.00. On February 6, 1985, the property originally registered in the name of the Coronels' father was transferred in their names under TCT No. 327043. On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (Catalina) for P1,580,000.00 after the latter has paid P300,000.00. For this reason, Coronels canceled and rescinded the contract with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz . On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403. On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6"). On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina to which a new title over the subject property was issued in her name.

ISSUE: WON the "Receipt of Down Payment" embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance or signified only a mere executory contract to sell, subject to certain suspensive conditions/ WON double sale applies.

RULING: The parties (Coronel and Alcaraz) had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father, Constancio P. Coronel, to their names.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course, may be used for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land . Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. It just happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment" was


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father, Constancio P. P. Coronel, to t heir names. The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the "Receipt of Down Payment." With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should if be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the person who presents the oldest title, provided there is good faith.

1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property. Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.

SAN LORENZO DEVELOPMENT CORPORATION VS. CA G.R. NO. 124242, January 21, 2005 FACTS: On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta for the price of P15 per square meter. The latter made a downpayment of P50,000.00 as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling P200,000.00 were made by Babasanta. Babasanta demanded the execution of a Final Deed of Sale in his favor so he may effect full payment of the purchase price and notified the spouses about having received information that the spouses sold the same property to another without his knowledge and consent. He demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer.

In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property, but reminded Babasanta that when the balance of the purchase price became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added that she returned P50,000.00 to Babasanta through Eugenio Oya. Thus, Babasanta filed a case for Specific Performance and Damages.

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is buyer in good faith.

On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention and alleged that it had legal interest in the subject matter under litigation because on 3 May 1989, the two parcels of land involved had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in litigation.

We are not persuaded by such argument. In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April,

Respondent Babasanta argued that the latter had no legal interest in the case because the two parcels of land involved had already been conveyed to him by the Spouses Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the intervenor.

ISSUES: 1.

2.

Who between between SLDC and Babasanta Babasanta has a better better right over the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu. - SLDC Whether or not the agreement between between Babasanta Babasanta and Spouses Lu was a contract to sell or a contract of sale. -

Contract to Sell COMPILED BY: WIGMORE #WIGMOREFORE #WIGMOREFOREVER VER

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Whether or not there was a double sale. sale. - No double

sale t he facts obtaining in this case, as well as HELD: An analysis of the the evidence presented by the parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale. The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot. While there is no stipulation that the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price. Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, effect, Babasanta himself himself recognized that ownership of the property would not be transferred to him until such time as he shall have effected full payment of the price. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell. The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the price in court as required by law. law. Glaringly absent from the records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never acquired obligatory force.

There was no double sale in this case because the contract in favor of Babasanta was a mere contract to sell; hence, Art. 1544 is not applicable. There was neither actual nor constructive delivery as his title is based on a mere receipt. Based on this alone, the right of SLDC must be preferred.

PAGADUAN VS. SPOUSES OCUMA G.R. 176308, May 8, 2009 FACTS: The subject lot used to be part of a big parcel of land that originally belonged to Nicolas Cleto. The big parcel of land was the subject of two separate lines of dispositions. The first line of disposition: Cleto sold land to Antonio Cereso on May 11, 1925. Cereso in turn sold the land to the siblings with the surname Antipolo on September 23, 1943. The Antipolos sold the property to Agaton Pagaduan, father of petitioners, on March 24, 1961. All the dispositions in this line were not registered and did not result in the issuance of new certificates of title in the name of the purchasers. The second line of disposition: started on January 30, 1954, after Cleto’s death, when his widow Ruperta Asuncion as his sol e heir and new owner of the entire tract, sold the same to Eugenia Reyes. This resulted in the issuance Transfer Certificate of Title (TCT) No. T-1221 in the name of Eugenia Reyes in lieu of TCT No. T-1220 in the name of Ruperta Asuncion. On November 26, 1961, Eugenia Reyes executed a unilateral

deed of sale where she sold the northern portion with an area of 32,325 square meters to respondents for P1,500.00 and the southern portion consisting of 8,754 square meters to Agaton Pagaduan for P500.00. (FIRST SALE) Later, on June 5, 1962, Eugenia executed another deed of sale, this time conveying the entire parcel of land, including the southern portion, in respondent’s favor (SECOND SALE). Thus, TCT No. T-1221 was cancelled and in lieu thereof TCT No. T5425 was issued in the name of respondents. On June 27, 1989, respondents subdivided the land into two lots. On July 26, 1989, petitioners instituted a complaint for reconveyance of the southern portion with an area of 8,754 square meters, with damages, against respondents before the RTC of Olongapo City. RTC decided in petitioners’ favor; a constructive trust over the property was created in petitioners’ favor.

CA reversed decision; while the registration of the southern portion in the name of respondents had created an implied trust in favor of Agaton Pagaduan, petitioners, however, failed to show that they had taken possession of the said portion.

ISSUE: Whether or not there was a double sale. HELD: In this case, there was a double sale. Article 1544 should apply. ART. ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good faith.

Where it is an immovable property that is the subject of a double sale, ownership shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. The requirement of the law then is two-fold: acquisition in good faith and registration in good faith. DOUBLE SALE: first sale by Eugenia Reyes to Agaton Pagaduan and a second sale by Eugenia Reyes to the respondents. For a second buyer like the respondents to successfully invoke the second paragraph, Article 1544 of the Civil Code, it must possess goodvfaith from the time of the sale in its favor until the registration of the same. Respondents sorely failed to meet this requirement of good faith since they had actual knowledge of Eugenia’s prior sal e of the southern portion property to the petitioners, a fact antithetical to good faith. This cannot be denied by respondents since in the same deed of sale that Eugenia sold


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever them the northern portion to the respondents for P1,500.00, Eugenia also sold the southern portion of the land to Agaton Pagaduan for P500.00. It is to be emphasized that the Agaton Pagaduan never parted with the ownership and possession of that portion of Lot No. 785 which he had purchased from Eugenia Santos. Hence, the registration of the deed of sale by respondents was ineffectual and vested upon them no preferential rights to the property in derogation of the rights of the petitioners. Knowledge gained by respondents of the first sale defeats their rights even if they were first to register the second sale. Knowledge of the first sale blackens this prior registration with bad faith. Good faith must concur with the registration. Therefore, because the registration by the respondents was in bad faith, it amounted to no registration at all. As the respondents gained no rights over the land, it is petitioners who are the rightful owners, having established that their successor-in-interest. Agaton Pagaduan had purchased the property from Eugenia Reyes on November 26, 1961 and in fact took possession of the said property.

February 8, 1995: Knowing that the sale to Infante has not been registered, Carbonell filed an adverse claim. February 12, 1995: The deed of sale was registered but it has an annotation of the adverse claim of Carbonell. Thereafter, Emma Infante took possession of the lot, built a house and introduced some improvements. In June 1995, Carbonell filed a complaint praying that she be declared the lawful owner of the land, that the subsequent sale to spouses Infante be declared null and void, and that Jose Poncio be ordered to execute the corresponding deed of conveyance of said land in her favor. RTC ruled that the sale to spouses Infante was null and void. After re-trial, it reversed its ruling. CA ruled in favor of Carbonell but after a MfR, it reversed its ruling and ruled in favor of the Infantes.

ISSUE: WON Carbonell has a superior right over Emma Infante. YES

HELD: Article 1544 provides that for double sale of an CARBONELL VS. CA TUESDAY, SEPTEMBER 9, 2014

immovable property, the ownership shall belong to the person who first acquired it in good faith and recorded it in the Registry of Property Article 1544, New Civil Code, which is decisive of this case, recites:

FACTS: Respondent Jose Poncio was the owner of the parcel of land located in Rizal. (Area – more or less 195 sq. m.) The said lot was subject to mortgage in favor of the Republic Savings Bank for the sum of P1,500.00. Carbonell and respondent Emma Infante offered to buy the said lot from Poncio. Poncio offered to sell his lot to Carbonell excluding the house on which he and his family stayed. Carbonell accepted the offer and proposed the price of P9.50/sq. m.. Poncio accepted the price on the condition that from the purchase pric would come the money to be paid to the bank. January 27, 1995: The parties executed a document in the Batanes dialect which is translated as: CONTRACT FOR ONE HALF LOT WHICH I (Poncio) BOUGHT FROM. Carbonell asked a lawyer to prepare the deed of sale and delivered the document, together with the balance of P400, to Jose Poncio. (Note: Carbonell already paid P200 for the mortgage debt of Poncio + obligated herself to pay the remaining installments.) However, when she went to Poncio, the latter informed her that he could no longer proceed with the sale as the lot was already sold to Emma Infante and that he could not withdraw with the sale. Poncio admitted that on January 30, 1995, Mrs. Infante improved her offer and he agreed to sell the land and its improvements to her for P3,535.00. In a private memorandum agreement, Poncio bound to sell to Infante the lot for the sum of P2,357.52, with Infante still assuming the mortgage debt of P1,177.48. (Note: The full amount of mortgage debt was already paid by the Infantes) February 2, 1995: A deed of sale was executed between Poncio and Infante.

If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The buyer must act in good faith in registering the deed of sale It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of said Article 1544. Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in good faith of personal or real property, the second paragraph directs that ownership of immovable property should be recognized in favor of one "who in good faith first recorded" his right. Under the first and third paragraph, good faith must characterize the act of anterior registration. Rule when there is inscription or not If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case at bar, prior registration in good faith is a pre-condition to superior title. Carbonell was in good faith when she bought the lot When Carbonell bought the lot from Poncio on January 27, 1955,


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever she was the only buyer thereof and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware — and she could not have been aware — of any sale of Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist when she recorded her adverse claim four (4) days prior to the registration of Infantes's deed of sale. Carbonell’s good faith did not cease when she was informed by Poncio about the sale to Emma Infante After learning about the second sale, Carbonell tried to talk t o the Infantes but the latter refused.

(Exact words of the SC: With an aristocratic disdain unworthy of the good breeding of a good Christian and good neighbor, Infante snubbed Carbonell like a leper and refused to see her.) So Carbonell did the next best thing to protect her right — she registered her adversed claim on February 8, 1955. Under the circumstances, this recording of her adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad faith when she registered her deed of sale four (4) days later on February 12, 1955. The Infantes were in bad faith (5 indications of bad faith listed below) Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts: 1. Mrs. Infante refused to see Carbonell. Her refusal to talk to Carbonell could only mean that she did not want to listen to Carbonell's story that she (Carbonell) had previously bought the lot from Poncio. 2. Carbonell was already in possession of mortgage passbook and copy of the mortgage contract. (Not Poncio’s saving deposit passbook.) Infante naturally must have demanded from Poncio the delivery to her of his mortgage passbook and mortgage contract so that the fact of full payment of his bank mortgage will be entered therein; and Poncio, as well as the bank, must have inevitably informed her that said mortgage passbook could not be given to her because it was already delivered to Carbonell. 3. Emma Infante did not inquire why Poncio was no longer in possession of the mortgage passbook and why it was in Carbonell’s possession. The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage passbook was already in possession of Carbonell, should have compelled Infante to inquire from Poncio why he was no longer in possession of the mortgage passbook and from Carbonell why she was in possession of the same. 4. Emma Infante registered the sale under her name after Carbonell filed an adverse claim 4 days earlier. Here she was again on notice of the prior sale to Carbonell. Such registration of adverse claim is valid and effective. 5. Infante failed to inquire to Poncio WON he had already sold

the property to Carbonell especially that it can be shown that he was aware of the offer made by Carbonell. Poncio alleged in his answer that Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15/sq. m. which offers he rejected as he believed that his lot is worth at least P20.00/sq. m. It is therefore logical to presume that Infante was told by Poncio and consequently knew of the offer of Carbonell which fact likewise should have put her on her guard and should have compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell The existence of prior sale to Carbonell was duly established From the terms of the memorandum, it tends to show that the sale of the property in favor of Carbonell is already an accomplished act. As found by the trial court, to repeat the said memorandum states "that Poncio is allowed to stay in the property which he had sold to the plaintiff ..., it tends to show that the sale of the property in favor of the plaintiff is already an accomplished act..." There was an adequate consideration or price for the sale in favor of Carbonell Poncio agreed to sell the same to Carbonell at P9.50 per square meter, on condition that Carbonell: 1. Should pay (a) the amount of P400.00 to Poncio and the arrears in the amount of P247.26 to the bank 2. Should assume his mortgage indebtedness. The bank president agreed to the said sale with assumption of mortgage in favor of Carbonell an Carbonell accordingly paid the arrears of P247.26. It is evident therefore that there was ample consideration, and not merely the sum of P200.00, for the sale of Poncio to Carbonell of the lot in question. The subject property was identified and described The court has arrived at the conclusion that there is sufficient description of the lot referred to in Exh. As none other than the parcel of lot occupied by the defendant Poncio and where he has his improvements erected. The Identity of the parcel of land involved herein is sufficiently established by the contents of the note Exh. 'A'.

SPOUSES ROQUE vs. AGUADO, et.al. G.R. No. 193787 April 7, 2014 PONENTE: Perlas-Bernabe, J. TOPIC: Contract of conditional sale, contract to sell, double sale FACTS: On July 21, 1977, petitioners-spouses Roque and the original owners of the then unregistered Lot 18089 – namely, Rivero, et al. executed the 1977 Deed of Conditional Sale over a 1,231-sq. m. portion of Lot 18089 for a consideration of P30,775.00. The parties agreed that Sps. Roque shall make an initial payment of P15,387.50 upon signing, while the remaining balance of the purchase price shall be payable upon the registration of Lot 18089, as well as the segregation and the concomitant issuance of a separate title over the subject portion in their names. After the deed’s execution, Sps. Roque took possession and introduced improvements on the subject portion which they utilized as a balut factory.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever HELD: It is a CONTRACT TO SELL. The Court held that where Pertinent provision of the 1977 Deed of Conditional Sale: DEED OF CONDITIONAL SALE OF REAL PROPERTY KNOW ALL MEN BY THESE PRESENTS: xxx That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE PESOS (P30,775.00), Philippine Currency, payable in the manner hereinbelow specified, the VENDORS do hereby sell, transfer and convey unto the VENDEE, or their heirs, executors, administrators, or assignors, that unsegregated portion of the above lot, x x x. That the aforesaid amount shall be paid in two installments, the first installment which is in the amount of __________ (P15,387.50) and the balance in the amount of __________ (P15,387.50), shall be paid as soon as the described portion of the property shall have been registered under the Land Registration Act and a Certificate of Title issued accordingly; That as soon as the total amount of the property has been paid and the Certificate of Title has been issued, an absolute deed of sale shall be executed accordingly; xxx On August 12, 1991, Sabug, Jr, applied for a free patent over the entire Lot 18089 and was eventually issued OCT No. M-59558 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in her personal capacity and in representation of Rivero, et al., executed the 1993 Joint Affidavit, acknowledging that the subject portion belongs to Sps. Roque and expressed their willingness to segregate the same from the entire area of Lot 18089. On December 8, 1999, however, Sabug, Jr., through the 1999 Deed of Absolute Sale, sold Lot 18089 to Aguado for P2,500,000.00, who, in turn, caused the cancellation of OCT No. M-5955 and the issuance of TCT No. M-96692 dated December 17, 199911 in her name. Thereafter, Aguado obtained an P8,000,000.00 loan from the Land Bank secured by a mortgage over Lot 18089. When she failed to pay her loan obligation, Land Bank commenced extra judicial foreclosure proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to redeem the subject property, Land Bank consolidated its ownership, and TCT No. M-11589513 was issued in its name on J uly 21, 2003. On June 16, 2003, Sps. Roque filed a complaint for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure, and certificate of sale, and damages before the RTC. Aguado: innocent purchaser for value

the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the purchase price, the contract is only a contract to sell even if their agreement is denominated as a Deed of Conditional Sale, as in this case. This treatment stems from the legal characterization of a contract to sell, that is, a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as, the full payment of the purchase price. Elsewise stated, in a contract to sell, ownership is retained by the vendor and is not to pass to the vendee until full payment of the purchase price. In contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a contract to sell between them.

Final installment not paid thus no perfected contract of sale Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price. As such, the condition which would have triggered the parties’ obligation to enter into and thereby perfect a contract of sale in order to effectively transfer the ownership of the subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over the subject portion even if they had made an initial payment and even took possession of the same.

Conditional contract of sale and contract to sell in relation to double sale It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. I n a c o n t r a c t t o s e l l , t h e r e b ei n g n o p r e v i o u s s a l e o f t h e property, a third person buyin g such pr operty despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of recon veyance of the prop erty.

There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se, but the latter, of cour se, may be sued for damages by the intending buyer.

Landbank: no knowledge of Sps. Claim. At the time when the loan was taken out, Lot 18089 was registered in Aguado’s name and no lien was annotated on COT. RTC: dismissed complaint of spouses roque and NCCP. CA: affirmed RTC ruling.

On the matter of double sales, suffice it to state that Sps. 64 65 Roque’s reliance on Article 1544 of the Civil Code has been misplaced since the contract they base their claim of ownership on is, as earlier stated, a contract to sell, and not one of sale. In Cheng v. Genato,66 the Court stated the circumstances which must concur in order to determine the applicability of Article 1544, none of which are obtaining in this case, viz.:

ISSUE: Whether or not the 1977 Deed of Conditional Sale is a conditional contract of sale or a contract to sell.

(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever transactions; (b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and (c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the same seller. The action for reconveyance shall fail.

D. Obligations of Buyer PART IV: DOCUMENTS OF TITLE A.

Types of Documents of Title and its Warranties

B.

Delivery through Carrier

PART V: SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE TAGATAC VS JIMENEZ 53 OG 3792 FACTS: Trinidad Tagatac bought a car for $4,500 in the US. After 7 months, she brought the car to the Philippines. Warner Feist, who pretended to be a wealthy man, offered to buy Trinidad’s car for P15,000, and Tagatac was amenable to the idea. Hnece, a deed of sale was exceuted. Feist paid by means of a postdated check, and the car was delivered to Feist. However, PNB refused to honor the checks and told her that Feist had no account in said bank. Tagatac notified the law enforcement agencies of the estafa committed by Feist, but the latter was not apprehended and the car disappeared. Meanwhile, Feist managed succeeded in having the car’s registration certificate (RC) transferred in his name. He sold the car to Sanchez, who was able to transfer the registration certificate to his name. Sanchez then offered to sell the car to defendant Liberato Jimenez, who bought the car for P10,000 after investigating in the Motor Vehicles Office. Tagatac discovered that the car was in California Car Exchange’s (place where Jimenez displayed the car for sale), so she demanded from the manager for the delivery of the car, but the latter refused. Tagatac filed a suit for the recovery of the car’s possession, and the sheriff, pursuant to a warrant of seizure that Tagatac

obtained, seized and impounded the car, but it was delivered back to Jimenez upon his filing of a counter-bond. The lower court held that Jimenez had the right of ownership and possession over the car.

ISSUE: W/N Jimenez was a purchaser in good faith and thus entitled to the ownership and possession of the car. YES

HELD: It must be noted that Tagatac was not unlawfully deprived of his car In this case, there is a valid transmission of ownership from true owner [Tagatac] to the swindler [Feist], considering that they had a contract of sale (note: but such sale is voidable for the fraud and deceit by Feist). The disputable presumption that a person found in possession of a thing taken in the doing of a recent wrongful act is the taker and the doer of the whole act does NOT apply in this case because the car was not stolen from Tagatac, and Jimenez came into possession of the car two months after Feist swindled Tagatac. Jimenez was a purchaser in good faith for he was not aware of any flaw invalidating the title from the seller of the car In addition, when Jimenez acquired the car, he had no knowledge of any flaw in the title of the person from whom he acquired it. It was only later that he became fully aware that there were some questions regarding the car, when he filed a petition to dissolve Tagatac’s search warrant which had as its subject the car in question. The contract between Feist and Tagactac was a voidable contract, it can be annulled or ratified . . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article 1390). Being a voidable contract, it is susceptible of either ratification or annulment. (If the contract is ratified, the action to annul it is extinguished Article 1392) and the contract is cleansed from all its defects (Article 1396); if the contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual restitution follows as a consequence (Article 1398). Being a voidable contract, it remains valid and binding until annulled. However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of sale remains valid and binding. When plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car passed to Feist. Of course, the title that Feist acquired was defective and voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been avoided and he therefore conferred a good title on the latter, provided he bought the car in good faith, for value and without notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith. NB: ART. 1506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods provided he buys


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever them in good faith, for value, and without notice of the seller’s defect of title.

EDCA PUBLISHING VS SPS. SANTOS G.R. No. 80298, April 26, 1990

impair the title acquired by the private respondents to the books. Leonor Santos took care to ascertain first that the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had been paid for on delivery. By contrast, EDCA was less than cautious — in fact, too trusting in dealing with the impostor.

FACTS: On October 5, 1981, a person identifying himself as Prof. Jose Cruz ordered 406 books from EDCA Publishing. EDCA Subsequently prepared the corresponding invoice and delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of said books. Subsequently on October 7, 1981, Cruz sold 120 of the books to Leonor Santos who, after verifying the seller’s ownership from the invoice he showed her, paid him P1,700. Upon verification by EDCA, it was discovered that Cruz was not employed as professor by De La Salle College and that he had no more account or deposit with Phil. Amanah Bank, the bank where he allegedly drawn the payment check. Upon arrest of Cruz by the police, it was revealed that his real name was Tomas dela Pena and that there was a further sale of 120 books to Sps. Santos. EDCA, through the assistance of the police forced their way into the store of Sps. Santos and threatened Leonor with prosecution for buying stolen property. The 120 books were seized and were later turned over to EDCA. This resulted to Sps. Santos filing a case for recovery of the books after their demand for the return of the books was rejected.

ISSUE: W/N EDCA may retrieve the books from Santos. NO (W/N EDCA has been unlawfully deprived of the books because the heck issued by Cruz in payment thereof was dishonored. NO.)

Although it had never transacted with him before, it readily delivered the books he had ordered (by telephone) and as readily accepted his personal check in payment. It did not verify his identity although it was easy enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that the books had been paid for on delivery, thereby vesting ownership in the buyer. Santos did not need to go beyond that invoice to satisfy herself that the books being offered for sale by Cruz actually belonged to him; yet she still did. Although the title of Cruz was presumed under Article 559 by his mere possession of the books, these being movable property, Leonor Santos nevertheless demanded more proof before deciding to buy them. NB: Law on Property Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

AZNAR VS. YAPDIANGCO HELD: EDCA argues that because Cruz, the impostor acquired no title to the books, the latter could not have validly transferred such to Sps. Santos. Its reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz. However, upon perusal of the provisions on the Law on Sales, a contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. As provided in Art. 1478- Ownership in the thing sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid. Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another. Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not

13 SCRA 486 G.R. No. L-18536 March 31, 1965 Remember this case was discussed already before. Yung may nagbenta ng kanyang car tapos inutusan nya ang son nya na sumama dun sa gusting bumili then pumunta sila sa isang house tapos nung paglabas ng anak wala na yung kotse and yung pamangkin ng bibili.

FACTS: Teodoro Santos was selling his FORD FAIRLANE 500. One day, a certain L. De Dios, claiming to be a nephew of Vicente Marella, said that his uncle Vicente wants to buy the car. Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid only after the car had been registered in his name. The DOS for the car was executed in Marella's favor. Afterwhich, the car in was registered Marella's name. Up to this stage of the transaction, the purchased price had not been paid. Teodoro Santos gave the registration papers and a copy of the DOS to his son Irineo and instructed him not to part with them until Marella has given the full payment for the car. Irineo Santos and L. De Dios then proceeded to meet Marella and Ireneo


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever demanded the payment. Marella said that the amount he had on hand then was short by some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly living somewhere on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to the said sister and suggested that Irineo go with him. At the same time, he requested the registration papers and the DOS from Irineo on the pretext that he would like to show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to the latter and thereupon, in the company of L. De Dios and another unidentified person, proceeded to the alleged house of Marella's sister. It was there that the car, L. De Dios and the unidentified companion disappeared. That very same day, Marella was able to sell the car in question Jose B. Aznar, for P15,000.00.

of it, he has a right to recover it, not only from the finder, thief or robber, but also from third persons who may have acquired it in good faith from such finder, thief or robber. The said article establishes two exceptions to the general rule of IRREVINDICABILITY : when the owner (1) has lost the thing,

Aznar claims ownership over the vehicle. Trial court awarded t he vehicle to Santos.

CHRYSLER VS. CA

ISSUE: Between Santos and Aznar, who has a better right to the possession of the disputed automobile? - SANTOS

or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the owner, who may recover it without paying any indemnity, except when the possessor acquired it in a public sale.

PART VI: LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS

133 SCRA 567 G.R. No. 55684 December 19, 1984

FACTS: Petitioner Chrysler is a domestic corporation engaged in HELD: Aznar accepts that the car in question originally belonged to and was owned by Santos, and that the latter was unlawfully deprived of the same by Marella. However, Aznar contends that upon the facts of this case, the applicable provision of the CC is Article 1506 and not Article 559 as was held by the decision under review. Article 1506 provides: ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title.

The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the seller should have a voidable title at least. It is very clearly inapplicable where, as in

this case, the seller had no title at all. Ownership is not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership , while delivery or tradition is the mode of accomplishing the same. For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be delivered, inasmuch as, according to settled jurisprudence, the tradition of the thing is a necessary and indispensable requisite in the acquisition of said ownership by virtue of contract. So long as property is not delivered, the ownership over it is not transferred by contract merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same, the title and the method of acquiring it being different in our law. Vicente Marella did not have any title to the property under litigation because the same was never delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of the car to him. The lower court was correct in applying Article 559 of the CC to the case at bar, for under it, the rule is to the effect that if the

the assembling and sale of motor vehicles and other automotive products. Respondent Sambok is a general partnership and was a dealer for automotive products. Chrysler filed with CFI a complaint for damages against Allied Brokerage Corp, Negros Navigation Co, and Sambok, alleging that: 1. On Oct 2, 1970, Sambok Bacolod ordered from petitioner various automotive products worth P30,909.61 payable in 45 days, 2. That on Nov 25, 1970, Chrysler delivered said products to its forwarding agent Allied Brokerage for delivery to Sambok (Allied loaded the goods through vessel of Negros Nav), 3. That when Chrysler tried to collect from Sambok Bacolod the amount of P31,037.56 (price of spare parts plus handling charges), Sambok refused to pay, claiming that it had not received the merchandise, 4. That Chrysler also demanded the return of the merchandise or their value from Allied and Negros Navigation, but both denied any liability. Sambok Bacolod denied having received the automotive products and professed no knowledge of having ordered from petitioner the said articles. Trial Court dismissed the complaint against Allied and Negros Navigation, but found Sambok liable for damages “ in refusing to take delivery of the shipment for no justifiable reason. The decision was reversed by CA after finding that Chrysler had not performed its part of the obligation under the contract by not delivering the goods at Sambok, Iloilo, the place designated in the Parts Order Form. In other words, CA found that there was misdelivery.

ISSUE: W/N Sambok Bacolod should be liable for damages. NO HELD: To our minds, the matter of misdelivery is not the decisive factor for relieving Sambok, Bacolod, of liability herein. While it may be that the Parts Order Form specifically indicated Iloilo as the destination, as testified to by Ernesto Ordonez, Parts Sales Representative of petitioner, Sambok, Bacolod, and Sambok, Iloilo, are actually one . In fact, admittedly, the order for spare

owner has lost a thing, or if he has been unlawfully deprived COMPILED BY: WIGMORE #WIGMOREFOREVER

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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever parts was made by the President of Sambok, Pepito Ng, through its marketing consultant .

token of goodwill it sent to Tabora free of charge volumes 75, 76, 77 and 78 of the Philippine Reports.

Notwithstanding, upon receipt of the Bill of Lading, Sambok, Bacolod, initiated, but did not pursue, steps to take delivery as

As Tabora failed to pay monthly installments, the company commenced the present action for the recovery of the balance of the obligation.

they were advised by Negros Navigation that because some parts were missing. They would just be informed as soon as the missing parts were located. It was only four years later however, or in 1974, when a warehouseman of Negros Navigation, Severino Aguarte, found in their off-shore bodega, parts of the shipment in question, but already deteriorated and valueless .

It was provided in the contract that "title to and ownership of the books shall remain with the seller until the purchase price shall have been fully paid. Loss or damage to the books after delivery to the buyer shall be borne by the buyer." The total price of the books, including the cost of freight, amounts to P1,682.40. Appellant only made a down payment of P300. 00 thereby leaving a balance of P1,382.40.

Under the circumstances, Sambok, Bacolod, cannot be faulted

for not accepting or refusing to accept the shipment from Negros Navigation four years after shipment. The evidence is clear that Negros Navigation could not produce the merchandise nor ascertain its whereabouts at the time Sambok, Bacolod, was ready to take delivery. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them.

Defendant, in his answer, pleaded force majeure as a defense, saying that since the loss was due to force majeure he cannot be held responsible for the loss.

ISSUE: WON Tabora is absolved from liability on the ground of force majeure

RULING: No. He is liable for the loss. It is true that in the From the evidentiary record, Negros Navigation was the party negligent in failing to deliver the complete shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial Court found, petitioner failed to comply with the conditions precedent to the filing of a judicial action. Thus, in the last analysis, it is

petitioner that must shoulder the resulting loss. The general rule that before, delivery, the risk of loss is home by the seller who is still the owner, under the principle of "res perit domino", is applicable in petitioner's case . In sum, the judgment of respondent Appellate Court, will have to be sustained not on the basis of misdelivery but on non-delivery

since the merchandise was never placed in the control and possession of Sambok , Bacolod, the vendee. Decision of CA affirmed. LAWYER’S COOP VS TABORA

FACTS: Perfecto Tabora bought from the Lawyers Cooperative Publishing Company one complete set of American Jurisprudence consisting of 48 volumes with 1954 pocket parts, plus one set of American Jurisprudence, General Index, consisting of 4 volumes, for a total price of P1,675.50 which, in addition to the cost of freight of P6.90, makes a total of P1,682.40. Tabora made a partial payment of P300.00, leaving a balance of P1,382.40. The books were delivered and receipted by Tabora in his law office.

contract entered into between the parties the seller agreed that the ownership of the books shall remain with it until the purchase price shall have been fully paid, but such stipulation cannot make the seller liable in case of loss not only because such was

agreed merely to secure the performance by the buyer of his obligation but in the very contract it was expressly agreed that the "loss or damage to the books after delivery to the buyer shall be borne by the buyer." Article 1504 of our Civil Code, which in part provides: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery. The rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event should not apply because it only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. Here these qualifications are not present. The obligation does not refer to a determinate thing, but is pecuniary in nature, and the obligor bound himself to assume the loss after the delivery of the goods to him. In other words, the obligor agreed to assume any risk concerning the goods from the time of their delivery, which is an exception to the rule provided for in Article 1262 of our Civil Code.

PART ViI: REMEDIES IN CASE OF BREACH In the midnight of the same date, however, a big fire broke out in that locality which destroyed and burned all the buildings standing on one whole block including at the law office and library of Tabora As a result, the books bought from the company as above stated, together with Tabora's important documents and papers, were burned during the conflagration. This unfortunate event was immediately reported by Tabora to the company by sending a letter. The company replied and as a

A. Ordinary Remedies of Seller

B. Special Remedies of Unpaid Seller of Goods


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 1) Possessory Lien

2) Stoppage in Transitu

3) Special Right of Resale

4) Special Right to Rescind

C. Remedies of Buyer

however, one on installments, but on straight term, in which the balance, after payment of the initial sum, should be paid in its totality at the time specified in the promissory note. The transaction is not, therefore, the one contemplated in Act No. 4122 and accordingly the mortgagee is not bound by the prohibition therein contained as to the right to the recovery of the unpaid balance. The suggestion that the cash payment made in this case should be considered as an installment in order to bring the contract sued upon under the operation of the law, is completely untenable. A cash payment cannot be considered as a payment by installment, and even if it can be so considered, still the law does not apply, for it requires non-payment of two or more installments in order that its provisions may be invoked. Here, only one installment was unpaid.

DELTA MOTOR SALES CORP. v NIU KIM DUAN D. Sale of Movable on Installments – Article 1484 (Recto La) (also 1485, 1486) LEVY VS. GERVACIO FACTS: Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packard car. Defendant, after making the initial payment, executed a promissory note for the balance of P2,400, payable on or before June 15, 1937, with interest at 12 % per annum, to secure the payment of the note, he mortgaged the car to the plaintiff. Defendant failed to pay the note it its maturity. Thus, Levy foreclosed the mortgage and the car was sold at public auction, at which plaintiff was the highest bidder for P1,800. The present action is for the collection of the balance of P1,600 and interest.

ISSUE: WON plaintiff still may collect the balance and interest after it has already foreclosed the mortgage and sold it at public auction

RULING: Yes it can still collect the balance. Article 1454-A of the Civil Code reads as follows: In a contract for the sale of personal property payable in installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage if one has been given on the property, without reimbursement to the purchaser of the installments already paid, if there be an agreement to this effect. However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same and any agreement to the contrary shall be null and void. In Macondray and Co. vs. De Santos , the Court held that "in

order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments." The contract, in the instant case, while a sale of personal property, is not,

FACTS: Niu Kim Duan purchased from Delta Motors 3 air conditioning units. Niu paid the down payment, the balance payable in 24 instalments. Title to the property remained with Delta until the payment of the full purchase price. Under the agreement, failure to pay 2monthly instalments makes the obligation entirely due and demandable. The units were delivered, Niu failed to pay. Thus, Delta filed a complaint for Replevin and applied the installments paid by Niu as rentals. Niu contends unconscionable.

that

the

contractual

stipulations

are

ISSUE: W/N the remedy Delta availed of was unconscionable HELD: NO. A stipulation in the contract treating installments as rentals in case of failure to pay is VALID — so long as they are not unconscionable. The provision in this case is reasonable. An unpaid seller has 3 alternative (not cumulative) remedies: (1) to exact fulfilment of the obligation; (2) to cancel the sale for default in 2 installments; and (3) to foreclose the chattel mortgage. If the creditor chooses one remedy, he cannot avail himself of the other two. It is not disputed that the plaintiff-appellee had taken possession of the three air-conditioners, through a writ of replevin when defendants-appellants refused to extra-judicially surrender the same. This was done pursuant to paragraphs 5 and 7 of its Deed of Conditional Sale when defendants-appellants failed to pay at least two (2) monthly installments, so much so that as of January 6, 1977, the total amount they owed plaintiff-appellee, inclusive of interest, was P12,920.08. 12 The case plaintiff-appellee filed was to seek a judicial declaration that it had validly rescinded the Deed of Conditional Sale. Clearly, plaintiff-appellee chose the second remedy of Article 1484 in seeking enforcement of its contract with defendantsappellants. This is shown from the fact that the computation of the outstanding account of defendants-appellants as of October 3, 1977 took into account "the value of the units repossessed." Having done so, it is barred from exacting payment from


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever defendants-appellants of the balance of the price of the three airconditioning units which it had already repossessed.

TAJANLANGIT v SOUTHERN MOTORS FACTS: Tajanlangit bought 2 tractors and a thresher from Southern Motors. They executed a promissory note in payment thereof; it contained an acceleration clause. Tajanlang it failed to pay any of the stipulated installments. Thus, Southern Motors sued him on the PN. The sheriff levied upon the properties of Tajanlangit (same machineries) and sold them at a public auction to satisfy the debt. Southern Motors now prayed for execution. Tajanlangit sought to annul the writ of execution — claiming that since Southern Motors repossessed the machineries (mortgaged), he was therefore relieved from liability on the balance of the purchase price.

ISSUE: W/N Tajanlangit is relieved from his obligation topay HELD: NO. While it is true that the foreclosure on the chattel mortgage on the thing sold bars further action for the recovery of the balance of the purchase price, this does not apply in this case since Southern did not foreclose on the mortgage but instead sued based on the PNs exclusively. That being the case, it is not limited to the proceeds of the sale on execution of the mortgaged goods and may c laim the balance from Tajanlangit.

ELISCO TOOL MANUFACTURING v s. COURT OF APPEALS, ROLANDO AND RINA LANTAN G.R. No. 109966 May 31, 1999

FACTS: Private respondent Rolando Lantan was employed at the Elisco Tool Mfg. Corp. On Jan. 1980, he entered into a car plan with the company, which constitutes a lease with option to buy for a period of 5 years. The agreement provides that Lantan shall pay a monthly rental of P 1010.65 to be deducted from his salary or a total of P60, 639.00 at the end of 5 years. The agreement provides that at the 60th month of payment he may exercise his option to buy and all monthly rentals shall be applied to the payment of the full purchase price of the car. In 1981 Elisco Tool ceased operations, and Rolando Lantan was laid off. Nonetheless, as of December 4, 1984, private respondent was able to make payments for the car in the total amount of P61, 070.94.

owner of the car and sentencing Elisco to pay for actual damages caused to the private respondents, thus this petition.

ISSUE: WON the lease with option to buy is in reality an installment sale so as to apply the Recto Law under Art. 1484. WON Elisco is entitled to any of the remedies under Art. 1484.

HELD: 1. Yes. The agreement between Elisco and the Lantans is in reality an installment sale of personal property. However, the remedies under Article 1484 are alternative, not cumulative. 2. No. There was already full payment. In the case at bar, although the agreement provides for the payment of monthly rentals, it also provides the option to purchase upon the payment of the 60th monthly rental and that all monthly rentals shall be applied to the payment of the full purchase price of the car. Clearly the transaction is a lease in name only and so Articles 1484 and 1485 apply. It is noteworthy that the remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others. It was held that in choosing to deprive the defendant of possession of the leased vehicles, the plaintiff waived its right to bring an action to recover unpaid rentals on the said vehicles. Furthermore, both the trial court and the CA correctly ruled that Elisco is not entitled to any of the remedies under Art. 1484 as there has already been full payment. The agreement does not provide for the payment of interest on unpaid monthly "rentals" or installments. The 2% surcharge is not provided for in the agreement. Consequently, the total amount of P 61, 070.94 already paid is more than sufficient to cover the full purchase price of the car which only amounts to P 60, 639.

E. Remedies in case of Immovables

On 1986 Elisco filed a complaint for replevin plus sum of money against Rolando Lantan for the latter‘s alleged failure to pay the monthly rentals as of May 1986. Elisco prayed for the following:

F. Sale of Real Estate on Installments – RA 6552 (Maceda Law)

1. The payment of Lantan of the sum of the monthly rentals due as of May 1986 plus legal interest;

ABELARDO VALARAO, GLORIOSA VALARAO, CARLOS VALARAO vs. COURT OF APPEALS AND MEDEN ARELLANO

2. The issuance of writ of replevin to gain possession of the car; and

G.R. No. 130347 March 3, 1999

FACTS: Spouses Valarao, thru their son, Carlos, sold to Arellano 3. On the alternative, should the delivery of the car not be possible, that Lantan be ordered to pay the actual value of the car in the amount of 60,000 plus the accrued monthly rentals thereof with interest until fully paid. Both the trial court and the CA decided in favor of Lantan, declaring the latter the lawful

a parcel of land situated in Diliman, Quezon City for the sum of 3.225 M embodied under a Deed of Conditional Sale. It was further stipulated upon that should Arellano fail to pay three (3) successive monthly installments or any one year-end


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever lump sum payment within the period stipulated, the sale shall be considered automatically rescinded without the necessity of judicial action and all payments made by Arellano shall be forfeited in favor of the spouses by way of rental for the use and occupancy of the property and as liquidated damages. All improvements introduced by Arellano to the property shall belong to the spouses without any right of reimbursement. Arellano alleged that as of September 1990 he was already able to pay the sum of 2.028 M although she admitted that she failed to pay for the installments due in October and November 1990. Arellano tried to pay but was turned down by the spouses thru their maid. Arellano avers that the same maid was the on who received payments tendered by her. It appears that the maid refused to receive the payment allegedly on orders of her employees who were not at home. This prompted Arellano to seek the help of barangay officials. Efforts to settle before the barangay was unavailing, as the spouses never appeared in meetings.

spouses accepted the payment, she would have paid all three monthly installments. In other words, there was no deliberate failure on Arellano’s part to meet her responsibility to pay. 2. Yes. Sec. 3, RA 6552 provides: 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 eightynine, 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:

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 year of installment payments made : Provided , That (a)

Arellano sought judicial action by filing a petition for consignation on January 4, 1991.

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.

Spouses Valarao, thru counsel, sent Arellano a letter dated 4 January 1991 notifying her that they were enforcing the provision on automatic rescission as a consequence of which the Deed of Conditional Sale was deemed null and void, and xxx all payments made, as well as the improvements introduced on the property, were thereby forfeited. The letter also made a formal demand on Arellano to vacate the property should she not heed the demand of the spouses to sign a contract of lease for her continued stay in the property.

(b) If the contract is cancelled, the seller shall refund to the

The RTC ruled against Arellano but the Court of Appeals reversed the decision of the trial court hence this petition.

ISSUE: 1. WON the automatic forfeiture clause is enforceable. 2. WON RA 6552 is applicable.

HELD: 1. Yes. As a general rule, a contract is the law between the parties. Thus, "from the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which, according to their nature, may be in keeping with good faith, usage and law." Also, "the stipulations of the contract being the law between the parties, courts have no alternative but to enforce them as they were agreed [upon] and written, there being no law or public policy against the stipulated forfeiture of payments already made." However, it must be shown that Arellano failed to perform her obligation, thereby giving spouses the right to demand the enforcement of the contract. We concede the validity of the automatic forfeiture clause, which deems any previous payments forfeited and the contract automatically rescinded upon the failure of the vendee to pay three successive monthly installments or any one-yearend lump sum payment. However, the spouses failed to prove the conditions that would warrant the implementation of this clause. Based on the facts of the case, the spouses were not justified in refusing the tender of payment made by Arellano. Had the

buyer the cash surrender value on 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. Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made. Therefore, Arellano is entitled to a one-month grace period for every year of installment paid, which means that she had a total grace period of three months from December 31, 1990. Indeed, to rule in favor of the spouses would result in patent injustice and unjust enrichment.

PAGTALUNAN vs. VDA. DE MANZANO G.R. No. 147695 September 13, 2007 FACTS: On July 19, 1974, Patricio Pagtalunan (Patricio), petitioner’s stepfather and predece ssor-in-interest, entered into a Contract to Sell with respondent Rufina dela Cruz Vda. De Manzano, whereby the former agreed to sell, and the latter to buy, a house and lot which formed half of a parcel of land for a consideration of P17,800. The parties agreed that it shall be paid in the following manner: P1,500 as downpayment 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 also stipulated in the contract that respondent could immediately occupy the house and lot; that in case of default in the payment of any of the installments for 90 days after its due date, the contract would be automatically rescinded without need of judicial declaration, and that all payments made and all


115

SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever improvements done on the premises by respondent would be considered as rentals for the use and occupation of the property or payment for damages suffered, and respondent was obliged to peacefully vacate the premises and deliver the possession thereof to the vendor. Petitioner claimed that respondent paid only P12,950. She allegedly stopped paying after December 1979 without any justification or explanation. Petitioner asserted that when respondent ceased paying her installments, her status of buyer was automatically transformed to that of a lessee. Therefore, she continued to possess the property by mere tolerance of Patricio and, subsequently, of petitioner. Respondent did not deny that she still owed Patricio P5,650, but claimed that she did not resume paying her monthly installment because of the unlawful acts committed by Patricio, as well as the filing of the ejectment case against her. Patricio and his wife died on September 17, 1992 and on October 17, 1994, respectively. Petitioner became their sole successor-in-interest pursuant to a waiver by the other heirs. On March 5, 1997, respondent received a letter from petitioner’s counsel dated February 24, 1997 demanding that she vacate the premises within five days on the ground that her possession had become unlawful. Respondent ignored the demand. The Punong Barangay failed to settle the dispute amicably. On April 8, 1997, petitioner filed a Complaint for unlawful detainer against respondent.

ISSUE: Whether or not the cancellation of the contract complied with what is required under the Maceda law.

Petitioner contends that that his demand letter dated February 24, 1997 should be considered as the notice of cancellation or demand for rescission by notarial act. The Court, however, finds that the letter dated February 24, 1997, which was written by petitioner’s counsel, merely made formal demand upon respondent to vacate the premises in question. Clearly, the demand letter is not the same as the notice of cancellation or demand for rescission by a notarial act required by R.A No. 6552. Petitioner cannot rely on Layug v. Intermediate Appellate Court to support his contention that the demand letter was sufficient compliance since the seller therein filed an action for annulment of contract, which is a kindred concept of rescission by notarial act. Evidently, the case of unlawful detainer filed by petitioner does not exempt him from complying with the said requirement. In addition, Sec. 3 (b) of R.A. No. 6552 requires refund of the cash surrender value of the payments on the property to the buyer before cancellation of the contract. The provision does not provide a different requirement for contracts to sell which allow possession of the property by the buyer upon execution of the contract like the instant case. Hence, petitioner cannot insist on compliance with the requirement by assuming that the cash surrender value payable to the buyer had been applied to rentals of the property after respondent failed to pay the installments due. There being no valid cancellation of the Contract to Sell, the CA correctly recognized respondent’s right to continue occupying the property subject of the Contract to Sell and affirmed the dismissal of the unlawful detainer case by the RTC.

HELD: No.

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. 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. Based on the records of the case, the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552. First, Patricio, the vendor in the Contract to Sell, died on September 17, 1992 without canceling the Contract to Sell. Second, petitioner also failed to cancel the Contract to Sell in accordance with law.

SC DISPOSITION: Considering that the Contract to Sell was not cancelled by the vendor, the Court agrees with the CA that it is only right and just to allow respondent to pay her arrears and settle the balance of the purchase price.

SPOUSES GARCIA, SPOUSES vs. COURT OF APPEALS G.R. No. 172036 April 23, 2010 FACTS: On May 28, 1993, plaintiffs spouses Faustino and Josefina Garcia and spouses Meliton and Helen Galvez (herein appellees) and defendant Emerlita dela Cruz (herein appellant) entered into a Contract to Sell wherein the latter agreed to sell to the former, for P3,170,220.00, five (5) parcels of land. At the time of the execution of the said contract, three of the subject lots, were registered in the name of one Angel Abelida from whom defendant allegedly acquired said properties by virtue of a Deed of Absolute Sale dated March 31, 1989. As agreed upon, plaintiffs shall make a down payment of P500,000.00 upon signing of the contract. The balance of P2,670,220.00 shall be paid in three installments. On its due date, December 31, 1993, plaintiffs failed to pay the last installment in the amount of One P1,670,220.00. Sometime in July 1995, plaintiffs offered to pay the unpaid balance, which had already been delayed by one and a half year, which


116

SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever defendant refused to accept. On September 23, 1995, defendant sold the same parcels of land to intervenor Diogenes G. Bartolome for P7,793,000.00. Plaintiffs filed before the RTC a complaint for specific performance to compel defendant to accept plaintiffs’ payment and, thereafter, execute the necessary document of transfer. In their complaint, plaintiffs alleged that they discovered the infirmity of the Deed of Absolute Sale covering those 3 lots, between their former owner Angel Abelida and defendant, the same being spurious because the signature of Angel Abelida and his wife were falsified. Due to their apprehension regarding the authenticity of the document, they withheld payment of the last installment. They tendered payment of the unpaid balance sometime in July 1995, after Angel Abelida ratified the sale made in favor of defendant, but defendant refused to accept their payment for no jusitifiable reason. In her answer, defendant denied the allegation that the Deed of Absolute Sale was spurious and argued that plaintiffs failed to pay in full the agreed purchase price on its due date despite repeated demands; that the Contract to Sell contains a proviso that failure of plaintiffs to pay the purchase price in full shall cause the rescission of the contract and forfeiture of 1/2 of the total amount paid to defendant; that a notarized letter stating the indended rescission of the contract to sell and forfeiture of payments was sent to plaintiffs at their last known address but it was returned with a notation "insufficient address."

ISSUE: Whether or not Maceda Law is applicable in this case. HELD: No. Not applicable. It is clear from the above-quoted provisions that the parties intended their agreement to be a Contract to Sell: Dela Cruz retains ownership of the subject lands and does not have the obligation to execute a Deed of Absolute Sale until petitioners’ pa yment of the full purchase price.

either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

G.R. NO. 195619, SEPTEMBER 5, 2012 PLANTERS DEVELOPMENT BANK, VS JULIE CHANDUMAL FACTS: BF Homes and Julie Chandumal entered into a contract to sell a parcel of land located in Las Pinas. Later, BF Homes sold to PDB all its rights over the contract. Chandumal paid her monthly amortizations until she defaulted in her payments. So, PDB sent a notice to Chandumal with a demand to vacate the land within 30days, otherwise all of her rights will be extinguished and the contract will be terminated and deemed rescinded. In spite of the demand, Chandumal failed to settle her account. PDB filed an action for judicial confirmation of notarial rescission and delivery of possession but still Chandumal refused to do so. Summons were then issued and served by deputy sheriff Galing but its was unavailing as she was always out of her house on the dates the summons were served. RTC then issued an order granting the motion of PDB. Chandumal filed an urgent motion to set aside order of default and to admit attached answer. Chandumal said that she did not receive the summons and was not notified of the same and her failure to file an answer within the reglementary period was due to fraud. RTC denied Chandumal’s motion to set aside the order of default. Chandumal appealed to the CA. CA nullified the RTC’s decision.

ISSUE: The Maceda Law applies to contracts of sale of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants. The subject lands, comprising five (5) parcels and aggregating 69,028 square meters, do not comprise residential real estate within the contemplation of the Maceda Law. Moreover, even if we apply the Maceda Law to the present case, petitioners’ offer of payment to Dela Cru z was made a year and a half after the stipulated date. This is beyond the sixty-day grace period under Section 4 of the Maceda Law. Petitioners still cannot use the second sentence of Section 4 of the Maceda Law against Dela Cruz for Dela Cruz’s alleged f ailure to give an effective notice of cancellation or demand for rescission because Dela Cruz merely sent the notice to the address supplied by petitioners in the Contract to Sell. The applicable provision of law in instant case is Article 1191 of the New Civil Code which provides as follows: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in

(1) Whether there was valid substituted service of summons? (2) Whether Chandumal voluntarily submitted to the jurisdiction of the RTC? (3) Whether there was proper rescission by notarial act of the contract to sell?

HELD: (1) Correctly ruled that the sheriff’s return failed to justify a resort to substituted service of summons. According to the CA, the Return of Summons does not specifically show or indicate in detail the actual exertion of efforts or any positive step taken by the officer or process server in attempting to serve the summons personally to the defendant.

(2) The Court notes that aside from the allegation that she did not receive any summons, Chandumal’s m otion to set aside order of default and to admit attached answer failed to positively assert the trial court lack of jurisdiction. In fact, what was set forth therein was the substantial claim that PDB failed to comply with the requirements of R.A. No. 6552 on payment of cash surrender value, which already delves into the merits of PDB’s cause of action. In addition, Chandumal even appealed the RTC decision to the CA, an act which demonstrates her recognition of the trial court’s jurisdiction to render said judgment.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever (3) R.A. No. 6552 recognizes the right of the seller to cancel the contract but any such cancellation must be done in conformity with the requirements therein prescribed. In addition to the notarial act of rescission, the seller is required to refund to the buyer the cash surrender value of the payments on the property. The actual cancellation of the contract can only be deemed to take place upon the expiry of a thirty (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. Petition is denied.

OPTIMUM DEVELOPMENT BANK vs. SPOUSES BENIGNO V. JOVELLANOS and LOURDES R. JOVELLANOS G.R. No. 189145 December 4, 2013 FACTS: On April 26, 2005, Sps. Jovellanos entered into a

Contract to Sell6 with Palmera Homes, Inc. (Palmera Homes) for the purchase of a residential house and lot situated in Block 3, Lot 14, Villa Alegria Subdivision, Caloocan City (subject property) for a total consideration of P1,015,000.00. Pursuant to the contract, Sps. Jovellanos took possession of the subject property upon a down payment of P91,500.00, undertaking to pay the remaining balance of the contract price in equal monthly installments of P13,107.00 for a period of 10 years starting June 12, 2005. On August 22, 2006, Palmera Homes assigned all its rights, title and interest in the Contract to Sell in favor of petitioner Optimum Development Bank (Optimum) through a Deed of Assignment of even date. On April 10, 2006, Optimum issued a Notice of Delinquency and Cancellation of Contract to Sell for Sps. Jovellanos’s failure to pay their monthly installments despite several written and verbal notices. In a final Demand Letter dated May 25, 2006, Optimum required Sps. Jovellanos to vacate and deliver possession of the subject property within seven (7) days which, however, remained unheeded. Hence, Optimum filed, on November 3, 2006, a complaint for unlawful detainer before the MeTC, docketed as Civil Case No. 06-28830. Despite having been served with summons, together with a copy of the complaint, Sps. Jovellanos failed to file their answer within the prescribed reglementary period, thus prompting Optimum to move for the rendition of judgment. Thereafter, Sps. Jovellanos filed their opposition with motion to admit answer, questioning the jurisdiction of the court, among others. Further, they filed a Motion to Reopen and Set the Case for Preliminary Conference, which the MeTC denied.

ISSUE: w/n there was a valid and effective cancellation of the Contract to Sell in accordance with Section 4 of RA 6552

RULING: YES. Verily, in a contract to sell, the prospective seller binds himself to sell the property subject of the agreement exclusively to the prospective buyer upon fulfillment of the condition agreed upon which is the full payment of the purchase price but reserving to himself the ownership of the subject property despite delivery thereof to the prospective buyer.The full

payment of the purchase price in a contract to sell is a suspensive condition, the non-fulfillment of which prevents the prospective seller’s obligation to convey title from becoming effective, as in this case. Further, it is significant to note that given that the Contract to Sell in this case is one which has for its object real property to be sold on an installment basis, the said contract is especially governed by — and thus, must be examined under the provisions of — RA 6552, or the “Realty Installment Buyer Protection Act”, which provides for the rights of the buyer in case of his default in the payment of succeeding instalments. Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No. 6552. Known as the Maceda Law, R.A. No. 6552 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. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments, viz.: (1) Where he has paid at least two years of 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 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 installments made. (2) Where he has paid less than two years in installments, Sec. 4. x x x 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. (Emphasis and underscoring supplied) Pertinently, since Sps. Jovellanos failed to pay their stipulated monthly installments as found by the MeTC, the Court examines Optimum’s compliance with Section 4 of RA 6552, as above quoted and highlighted, which is the provision applicable to buyers who have paid less than two (2) years-worth of installments. Essentially, the said provision provides for three (3) requisites before the seller may actually cancel the subject contract: first, the seller shall give the buyer a 60-day grace


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever period to be reckoned from the date the installment became due; second , the seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said grace period; and third , the seller may actually cancel the contract only after thirty (30) days from the buyer’s receipt of the said notice of cancellation/demand for rescission by notarial act. In the present case, the 60-day grace period automatically operated in favor of the buyers, Sps. Jovellanos, and took effect from the time that the maturity dates of the installment payments lapsed. With the said grace period having expired bereft of any installment payment on the part of Sps. Jovellanos, Optimum then issued a notarized Notice of Delinquency and Cancellation of Contract on April 10, 2006. Finally, in proceeding with the actual cancellation of the contract to sell, Optimum gave Sps. Jovellanos an additional thirty (30) days within which to settle their arrears and reinstate the contract, or sell or assign their rights to another. It was only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as effectively cancelled – making as it did a final demand upon Sps. Jovellanos to vacate the subject property only on May 25, 2006. Thus, based on the foregoing, the Court finds that there was a valid and effective cancellation of the Contract to Sell in accordance with Section 4 of RA 6552 and since Sps. Jovellanos had already lost their right to retain possession of the subject property as a consequence of such cancellation, their refusal to vacate and turn over possession to Optimum makes out a valid case for unlawful detainer as properly adjudged by the MeTC.

DIEGO VS. DIEGO FACTS: In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered into an oral contract to sell covering Nicolas’s share, fixed at P500,000.00, as coowner of the family’s Diego Building situated in Dagupan City. Rodolfo made a downpayment of P250,000.00. It was agreed that the deed of sale shall be executed upon payment of the remaining balance of P250,000.00. However, Rodolfo failed to pay the remaining balance. Meanwhile, the building was leased out to third parties, but Nicolas’s share in the rents were not remitted to him by herein respondent Eduardo, another brother of Nicolas and designated administrator of the Diego Building. Instead, Eduardo gave Nicolas’s mont hly share in the rents to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and Eduardo failed to render an accounting and remit his share in the rents and fruits of the building, and Eduardo continued to hand them over to Rodolfo. Thus, on May 17, 1999, Nicolas filed a Complaint against Rodolfo and Eduardo before the RTC of Dagupan CitY. Nicolas prayed that Eduardo be ordered to render an accounting of all the transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the rents; and that Eduardo and Rodolfo be held solidarily liable for attorney’s fees and litigation expenses. Rodolfo and Eduardo filed their Answer with Counterclaim for damages and attorney’s fees. They argued that Nicolas had no more claim in the rents in the Diego Building since he had

already sold his share to Rodolfo. Rodolfo admitted having remitted only P250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas only after the latter shall have executed a deed of absolute sale.

RTC: After trial on the merits, or on April 19, 2005, the trial court rendered its Decision dismissing Civil Case No. 99-02971-D for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment by the latter of the P250,000.00 balance of the agreed purchase price.

CA: Nicolas appealed to the CA which sustained the trial court’s Decision in toto. The CA held that since there was a perfected contract of sale between Nicolas and Rodolfo, the latter may compel the former to execute the proper sale document. Besides, Nicolas’s insistence that he has since rescinded their agreement in 1997 proved the existence of a perfected sale. It added that Nicolas could not validly rescind the contract because: "1) Rodolfo ha[d] already made a partial payment; 2) Nicolas ha[d] already partially performed his part regarding the contract; and 3) Rodolfo opposes the rescission.

The CA then proceeded to rule that since no period was stipulated within which Rodolfo shall deliver the balance of the purchase price, it was incumbent upon Nicolas to have filed a civil case to fix the same. But because he failed to do so, Rodolfo cannot be considered to be in delay or default. Finally, the CA made another interesting pronouncement, that by virtue of the agreement Nicolas entered into with Rodolfo, he had already transferred his ownership over the subject property and as a consequence, Rodolfo is legally entitled to collect the fruits thereof in the form of rentals. Nicolas’ remaining right is to demand payment of the balance of the purchase price, provided that he first executes a deed of absolute sale in favor of Rodolfo.

ISSUE: WON there is a perfected contract of sale between a petitioner and respondent over Nicolas’ share of the building.

HELD:

T h e c o n t r a c t e n t e r ed i n t o b y N i c o l a s a n d R o d o l f o was a contract to sell.

a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title to the property until full payment. There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the Diego Building for the price ofP500,000.00. There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received,P250,000.00. Significantly, it is also not disputed that the parties agreed that the remaining amount of P250,000.00 would be paid after Nicolas shall have executed a deed of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and distinguishing characteristic of a contract to sell. In Reyes v. Tuparan , this Court ruled that a stipulation in the contract, "[w]here the

vendor promises to execute a deed of absolute sale upon COMPILED BY: WIGMORE #WIGMOREFOREVER 119

SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever the completion by the vendee of the payment of the price," indicates that the parties entered into a contract to sell. According to this Court, this particular provision is tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court ruled that the agreement to execute a deed of sale upon full payment of the purchase price"shows that the

vendors reserved title to the subject property until full payment of the purchase price." In the instant case, records show that Nicolas signed a mere receipt acknowledging partial payment ofP250,000.00 from Rodolfo. It states: July 8, 1993 Received the amount of [P250,000.00] for 1 share of Diego Building as partial payment for Nicolas Diego. (signed) Nicolas Diego The parties’ agreement was likewise embodied only in a receipt. Also, Nicolas did not want to sign the deed of sale unless he is fully paid. On the other hand, Rodolfo did not want to pay unless a deed of sale is duly executed in his favor. We thus say, pursuant to our ruling in Chua v. Court of Appeals that the agreement between Nicolas and Rodolfo is a contract to sell. This Court cannot subscribe to the appellate court’s view that Nicolas should first execute a deed of absolute sale in favor of Rodolfo, before the latter can be compelled to pay the balance of the price. This is patently ridiculous, and goes against every rule in the book. This pronouncement virtually places the prospective seller in a contract to sell at the mercy of the prospective buyer, and sustaining this point of view would place all contracts to sell in jeopardy of being rendered ineffective by the act of the prospective buyers, who naturally would demand that the deeds of absolute sale be first executed before they pay the balance of the price. Surely, no prospective seller would accommodat e.

In fine, "the need to execute a deed of absolute sale upon

completion of payment of the price generally indicates that it is a contract to sell, as it implies the reservation of title in the vendor until the vendee has completed the payment of the price." In addition, "[a] stipulation reserving ownership in the vendor until full payment of the price is x x x typical in a contract to sell." Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this case only entered into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the agreed purchase price.

Nicolas did not surrender or deliver title or possession to Rodolfo. Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo. This was made clear by the nature of the agreement, by Nicolas’s repeated demands for the return of all rents unlawfully and unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo’s repeated demands for Nicolas to execute a deed of sale which, as we said before, is a recognition on their part that ownership over the subject property still remains with Nicolas. Significantly, when Eduardo testified, he claimed to be knowledgeable about the terms and conditions of the transaction between Nicolas and Rodolfo. However, aside from stating that

out of the total consideration ofP500,000.00, the amount of P250,000.00 had already been paid while the remaining P250,000.00 would be paid after the execution of the Deed of Sale, he never testified that there was a stipulation as regards delivery of title or possession. It is also quite understandable why Nicolas belatedly demanded the payment of the rentals. Records show that the structural integrity of the Diego Building was severely compromised when an earthquake struck Dagupan City in 1990. In order to rehabilitate the building, the co-owners obtained a loan from a bank. Starting May 1994, the property was leased to third parties and the rentals received were used to pay off the loan. It was only in 1996, or after payment of the loan that the co-owners started receiving their share in the rentals. During this time, Nicolas was in the USA but immediately upon his return, he demanded for the payment of his share in the rentals which Eduardo remitted to Rodolfo. Failing which, he filed the instant Complaint. To us, this bolsters our findings that Nicolas did not intend to immediately transfer title over the property. It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the property to the prospective buyer pending the latter’s payment of the price in full. It certainly is absurd to assume that in the absence of stipulation, a buyer under a contract to sell is granted ownership of the property even when he has not paid the seller in full. If this were the case, then prospective sellers in a contract to sell would in all likelihood not be paid the balance of the price. This ponente has had occasion to rule that "[a] contract to sell is one where the prospective seller reserves the transfer of title to the prospective buyer until the happening of an event, such as full payment of the purchase price. What the seller obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been delivered to him. ‘In other words, the full payment of the purchase price partak es of a suspensive condition, the nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.’ It does not, by itself, transfer ownership to the buyer. ” The contract to sell is terminated or cancelled.

Having established that the transaction was a contract to sell, what happens now to the parties’ agreement? The remedy of rescission is not available in contracts to sell. As explained in Spouses Santos v. Court of Appeals : In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is entirely different from the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it . When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and not rescinding it. As petitioners correctly point out, the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property. Neither provision is applicable in the present case. Similarly, we held in Chua v. Court of Appeals that "Article 1592 of the Civil Code permits the buyer to pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until full payment of the price," as in this case.

for they certainly had free rein over Nicolas’s interest in the Diego Building. Rodolfo put off payment of the balance of the price, yet, with the aid of Eduardo, collected and appropriated for himself the rents which belonged to Nicolas. Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents.

For his complicity, bad faith and abuse of authority as the Diego Building administrator, Eduardo must be held solidarily liable with Rodolfo for all that Nicolas should be entitled to from 1993 up to the present, or in respect of actual damages suffered in relation to his interest in the Diego Building. Eduardo was the primary cause of Nicolas’s loss, being directly responsible for making and causing the wrongful payments to Rodolfo, who received them under obligation to return them to Nicolas, the true recipient. As such, Eduardo should be principally responsible to Nicolas as well. Suffice it to state that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith; and every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

WHEREFORE, premises considered, the Petition is GRANTED. PART VIII: CONDITIONS AND WARRANTIES A.

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price, the contract to sell was deemed terminated or cancelled. As we have held in Chua v. Court of Appeals ,"[s]ince the agreement x x x is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition

prevents the obligation to sell from arising and ownership is retained by the seller without further remedies by the buyer." Similarly, we held in Reyes v. Tuparan that "petitioner’s obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive condition, which is the respondent’s full payment of the purchase price. Without respondent’s full payment, there can be no breach of

contract to speak of because petitioner has no obligation yet to turn over the title.

Conditions CATUNGAL VS. RODRIGUEZ

FACTS: Agapita Catungal owned a parcel of land in Barrio Talamban, Cebu City. On April 232, 1990, Agapita, with the consent of her husband (Atty. Jose Catungal), entered a Contract to Sell with respondent Angel Rodriguez. This Contract to Sell was further upgraded into a Conditional Deed of Sale where it was stipulated that the sum of P25 million will be payable as follows: a) b)

P500, 000 down payment upon signing of the agreement; The balance of P24, 500, 000 will be payable in five separate checks:

Respondent’s failure to pay in full the purchase price in full is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to respondent." Otherwise stated, Rodolfo has no right to compel Nicolas to transfer ownership to him because he failed to pay in full the purchase price. Correlatively, Nicolas has no obligation to transfer his ownership over his share in the Diego Building to Rodolfo.

First check shall be for P4, 500, 000 while the remaining balance to be paid in four checks in the amount of P5 million each will be payable only after Rodriguez (Vendee) has successfully negotiated, secured, and provided a Road Right of Way. If however the Road Right of Way could not be negotiated, Rodriguez shall notify the Catungals for them to reassess and solve the problem by taking other options and should the situation ultimately prove futile, he shall take steps to rescind or cancel the herein Conditional Deed of Sale.

On the other hand, the respondents’ additional submission – that Nicolas cheated them by "vanishing and hibernating" in the USA after receiving Rodolfo’s P250,000.00 downpayment, only to come back later and claim that the amount he received was a mere loan – cannot be believed. How the respondents could have been cheated or disadvantaged by Nicolas’s leaving is beyond comprehension. If there was anybody who benefited from Nicolas’s perceived "hibernation", it was the respondents,

It was also stipulated that the access road or Road Right of Way leading to the lot shall be the responsibility of the VENDEE to secure and any or all cost relative to the acquisition thereof shall be borne solely by the VENDEE. He shall, however, be accorded with enough time necessary for the success of his endeavor, granting him a free hand in negotiating for the passage. Spouses Catungal requested an advance of P5 million on the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever purchase price for personal reasons. However, Rodriguez refused on the ground that the amount was not due under the terms of their agreement. Further, he learned that the Catungals were offering the property for sale to third parties who are willing to pay a higher amount of money for a Road Right of Way than what Rodriguez has initially negotiated. In other words, instead of assisting Rodriguez in successfully negotiating, the Catungals allegedly maliciously defeated his efforts so to justify the rescission. Rodriguez then received letters signed by Atty. Jose Catungal demanding him to make up his mind about buying the land or exercising his option to buy because they needed money to pay personal obligations or else the Catungals warned that they would consider the contract cancelled. RTC ruled in favor of Rodriguez finding that his obligation to pay the balance arises only after successfully negotiating a Road Right of Way. C A affirmed the RTC’s decision but the defendants filed a motion for reconsideration and raised for the first time the contention that the court erred in not finding their stipulations null for violating the principle of mutuality of contracts.

ISSUE: Whether or not the stipulations of their Conditional Deed of Sale constitute a potestative condition (one that is subject to the will of one of the parties – either the debtor or creditor).

HELD: NO. the condition in their Conditional Deed of Sale stating that respondent shall pay the balance of the purchase price when he has successfully negotiated and secured a road right of way, is not a condition on the perfection of the contract nor on the validity of the entire contract or its compliance as contemplated in Article 1308. It is a condition imposed only on respondent's obligation to pay the remainder of the purchase price. In our view and applying Article 1182, such a condition is not purely potestative as petitioners contend. It is not dependent on the sole will of the debtor but also on the will of third persons who own the adjacent land and from whom the road right of way shall be negotiated. Ina manner of speaking, such a condition is likewise dependent on chance as there is no guarantee that respondent and the third party-landowners would come to an agreement regarding the road right of way. This type of mixed condition is expressly allowed under Article 1182 of the Civil Code. IN RELATION TO ARTICLE 1197 – The Catungals also argued that Rodriguez has been given enough time to negotiate for the Road Right of Way. However, no stipulation regarding specific time can be found in their agreement. SC said that Even assuming arguendo that the Catungals were correct that the respondent's obligation to negotiate a road right of way was one with an uncertain period, their rescission of the Conditional Deed of Sale would still be unwarranted. What the Catungals should have done was to first file an action in court to fix the period within which Rodriguez should accomplish the successful negotiation of the road right of way pursuant to the above quoted provision. Thus, the Catungals' demand for Rodriguez to make an additional payment of P5 million was premature and Rodriguez's failure to accede to such demand did not justify the rescission of the contract.

WHEREFORE, the Decision dated August 8, 2000 and the Resolution dated January 30, 2001 of the Court of Appeals are AFFIRMED with the following

MODIFICATION:

If still warranted, respondent Angel S. Rodriguez is given a period of thirty (30) days from the finality of this Decision to negotiate a road right of way. In the event no road right of way is secured by respondent at the end of said period, the parties shall reassess and discuss other options as stipulated in paragraph 1(b) of the Conditional Deed of Sale and, for this purpose, they are given a period of thirty (30) days to agree on a course of action. Should the discussions of the parties prove futile after the said thirty (30)-day period, immediately upon the expiration of said period for discussion, Rodriguez may (a) exercise his option to rescind the contract, subject to the return of his down payment, in accordance with the provisions of paragraphs 1(b) and 5 of the Conditional Deed of Sale or (b) waive the road right of way and pay the balance of the deducted purchase price as determined in the RTC Decision dated May 30, 1992.

B.

Warranties

1. Express Warranties HARRISON MOTORS CORPORATION vs. RACHEL A. NAVARRO FACTS: Sometime in June of 1987 Harrison Motors Corporation through its president, Renato Claros, sold 2 Isuzu Elf trucks to Rachel Navarro, owner of RN Freight Lines. Prior to the sale, Renato Claros represented to Navarro that all the BIR taxes and customs duties for the parts used on the two 2 trucks had been paid for. On 10 September 1987 the Bureau of Internal Revenue (BIR) and the Land Transportation Office (LTO) entered into a Memorandum of Agreement (MOA) which provided that prior to registration in the LTO of any assembled or re-assembled motor vehicle which used imported parts, a Certificate of Payment should first be obtained from the BIR to prove payment of all taxes required under existing laws. On 16 June 1988 the BIR, BOC and LTO entered into a tripartite MOA which provided that prior to the registration in the LTO of any locally assembled motor vehicle using imported component parts, a Certificate of Payment should first be obtained from the BIR and the BOC to prove that all existing taxes and customs duties have been paid. In December of 1988 government agents seized and detained the two (2) Elf trucks of Navarro after discovering that there were still unpaid BIR taxes and customs duties thereon. The BIR and the BOC ordered NAvarro to pay the proper assessments or her trucks would be impounded. Navarro went to Claros to ask for the receipts evidencing payment of BIR taxes and customs duties; however, Claros refused to comply. Navarro then demanded from Claros but her demands were again ignored. But wanting to secure the immediate release of the trucks to comply with her business commitments, Navarro paid the assessed BIR taxes and customs duties amounting to P32,943.00. Consequently, she returned to Harrison‘s office to ask for reimbursement, but it again refused, prompting her to send a demand letter through her lawyer. When Harrison still


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever ignored her letter, she filed a complaint for a sum of money on 24 September 1990 with the Regional Trial Court of Makati. On 5 March 1992 the trial court rendered a decision ordering Harrison to reimburse private respondent in the amount of P32,943.00 for the customs duties and internal revenue taxes the latter had to pay to discharge her 2 Elf trucks from government custody. Harrison argues that it was no longer obliged to pay for the additional taxes and customs duties imposed on the imported component parts by the Memorandum Orders and the two (2) Memoranda of Agreement based on non-impairment clause of the Constitution but also the principle of non-retroactivity of laws provided in Art. 4 of the Civil Code.

would have been avoided had Harrison simply furnished private respondent with the receipts evidencing payment of BIR taxes and customs duties. If only Navarro had the receipts to prove payment of such assessments then she would have easily secured the release of her two (2) Elf trucks. But Harrison arbitrarily and unjustly denied Navarro‘s demands. Instead, Harrison obstinately insisted that it was no longer concerned with the problem involving the two (2) trucks since it no longer owned the vehicles after the consummation of the sale.

The records however reveal that the Memorandum Orders and Memoranda of Agreement do not impose any additional BIR taxes or customs duties. The MOA mandated that prior to registration in the LTO of any assembled automobile using imported parts, a Certificate of Payment should first be obtained from the BIR which would then transmit the Certificate to the LTO to prove that all the BIR taxes required under existing laws have been paid.

It is true that the ownership of the trucks shifted to private respondent after the sale. But petitioner must remember that prior to its consummation it expressly intimated to her that it had already paid the taxes and customs duties. Such representation shall be considered as a seller‘s express warranty under Art. 1546 of the Civil Code which covers any affirmation of fact or any promise by the seller which induces the buyer to purchase the thing and actually purchases it relying on such affirmation or promise. It includes all warranties which are derived from express language, whether the language is in the form of a promise or representation. Presumably, therefore, private respondent would not have purchased the two (2) Elf trucks were it not for petitioner‘s assertion and assurance that all taxes on its imported parts were already settled.

The MOA provided that prior to registration with the LTO of any assembled motor vehicle using imported component parts, a Certificate of Payment should first be secured from the BIR or the BOC which should then be duly forwarded to LTO. The Certificate would serve as proof that all taxes and customs duties required under existing laws, rules and regulations had already been settled.

This express warranty was breached the moment petitioner refused to furnish private respondent with the corresponding receipts since such documents were the best evidence she could present to the government to prove that all BIR taxes and customs duties on the imported component parts were fully paid. Without evidence of payment, she was powerless to prevent the trucks from being impounded.

ISSUE: Who should pay the BIR taxes and customs duties which

Under Art. 1599 of the Civil Code, once an express warranty is breached the buyer can accept or keep the goods and maintain an action against the seller for damages. This was what private respondent did. She opted to keep the two (2) trucks which she apparently needed for her business and filed a complaint for damages, particularly seeking the reimbursement of the amount she paid to secure the release of her vehicles.

the administrative regulations sought to enforce?

HELD: Harrison contends that Navarro should be the one to pay the internal revenue taxes and customs duties. It claims that at the time the Memorandum Orders and the two (2) Memoranda of Agreement took effect the two (2) Elf trucks were already sold to Navarro, thus, it no longer owned the vehicles. Thus, although the Whereas clause in the MOA provides that private respondent is the one required by the administrative regulations to secure the Certificate of Payment for the purpose of registration, petitioner as the importer and the assembler/manufacturer of the two (2) Elf trucks is still the one liable for payment of revenue taxes and customs duties. Harrison‘s obligation to pay does not arise from the administrative regulations but from the tax laws existing at the time of importation. Hence, even if Navarro already owned the two (2) trucks when the Memorandum Orders and Memoranda of Agreement took effect, the fact remains that Harrison was still the one duty-bound to pay for the BIR taxes and customs duties.

It is also quite obvious that as between Harrison, who is the importer- assembler/manufacturer, and Navarro, who is merely the buyer, it is petitioner which has the obligation to pay taxes to the BIR and the BOC. Harrison would be unjustly enriched if private respondent should be denied reimbursement. Besides, Harrison‘s allegation that it already paid the BIR taxes and customs duties is highly doubtful. This entire controversy

MOLES vs IAC FACTS: In 1977, petitioner needed a linotype printing machine for his printing business, The LM Press at Bacolod City, and applied for an industrial loan with the Development Bank of the Philippines. (DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend of petitioner introduced the latter to private respondent, owner of the Diolosa Publishing House in Iloilo City, who had two available machines. Thereafter, petitioner went to Iloilo City to inspect the two machines offered for sale and was informed that the same were secondhand but functional. Sometime between April and May, 1977, the machine was delivered to petitioner's publishing house where it was installed by an employee of Diolosa. Prior to the release of the loan, a representative from the DBP, Bacolod, supposedly inspected the machine but he merely looked at it to see that it was there . The inspector's recommendation was favorable and, thereafter, petitioner's loan of P50,000.00 was granted and released.


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But on November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly as it needed a new distributor bar. Private respondent made no reply to said letter, so petitioner engaged the services of other technicians. Later, after several telephone calls regarding the defects in the machine, private respondent sent two technicians to make the necessary repairs but they failed to put the machine in running condition. In fact, since then petitioner was never able to use the machine. Petitioner again wrote private respondent, this time with the warning that he would be forced to seek legal remedies to protect his interest. Obviously in response to the foregoing letter, private respondent decided to purchase a new distributor bar and private respondent delivered this spare part to petitioner. However, when thereafter petitioner asked private respondent to pay for the price of the distributor bar, the latter asked petitioner to share the cost with him. Petitioner thus finally decided to indorse the matter to his lawyer. An expert witness for the petitioner declared that he inspected the linotype machine involved in this case at the instance of petitioner. In his inspection thereof, he found several defects.

ISSUE/S: W/N private respondent is bound by an express warranty. W/N private respondent’s express warrantly was a mere dealer’s talk. W/N hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties.

HELD: Private respondent is bound by the express warranty which he executed in favor of the petitioners. When an article is sold as a secondhand item, a question arises as to whether there is an implied warranty of its quality or fitness. It is generally held that in the sale of a designated and specific article sold as secondhand, there is no implied warranty as to its quality or fitness for the purpose intended, at least where it is subject to inspection at the time of the sale. On the other hand, there is also authority to the effect that in a sale of a secondhand articles there may be, under some circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or for the particular purpose of the buyer. In a line of decisions rendered by the United States Supreme Court, it had theretofore been held that there is no implied warranty as to the condition, adaptation, fitness, or suitability for the purpose for which made, or the quality, of an article sold as and for a secondhand article. Said general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken from the Uniform Sales Act, provides: Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose;

To repeat, in the case before Us, a certification to the effect that the linotype machine bought by petitioner was in A-1 condition was issued by private respondent in favor of the former. This cannot but be considered as an express warranty. However, it is private respondent's submission, that the same is not binding on him, not being a part of the contract of sale between them. It must be remembered that the certification was a condition sine qua non for the release of petitioner's loan which was to be used as payment for the purchase price of the machine. Private respondent failed to refute this material fact. Neither does he explain why he made that express warranty on the condition of the machine if he had not intended to be bound by it. In fact, the respondent court, in declaring that petitioner should have availed of the remedy of requiring repairs as provided for in said certification, thereby considered the same as part and parcel of the verbal contract between the parties.

Private respondents express warranty as to the A-1 condition of the machine was not merely dealer's talk. Private respondent was not a dealer of printing or linotype machines to whom could be ascribed the supposed resort to the usual exaggerations of trade in said items. His certification as to the condition of the machine was not made to induce petitioner to purchase it but to confirm in writing for purposes of the financing aspect of the transaction his representations thereon. Ordinarily, what does not appear on the face of the written instrument should be regarded as dealer's or trader's talk conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere dealer's talk. On the question as to whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties, we have to consider the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an imperfection or defect of such nature as to engender a certain degree of importance. An imperfection or defect of little consequence does not come within the category of being redhibitory. As already narrated, an expert witness for the petitioner categorically established that the machine required major repairs before it could be used. This, plus the fact that petitioner never made appropriate use of the machine from the time of purchase until an action was filed, attest to the major defects in said machine, by reason of which the rescission of the contract of sale is sought. The factual finding, therefore, of the trial court that the machine is not reasonably fit for the particular purpose for which it was intended must be upheld, there being ample evidence to sustain the same. At a belat ed stage of this appeal, private respondent came up for the first time with the contention that the action for rescission is barred by prescription. While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves one with and express warranty. Consequently, the general rule on 27 rescission of contract, which is four years shall apply. Considering that the original case for rescission was filed only one year after the delivery of the subject machine, the same is well within the prescriptive period.


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 2. Implied Warranties ESCALER V. CA AND SPS. REYNOSO FACTS: On March 7, 1958, the spouses Reynoso sold to petitioners a parcel of land situated in Antipolo, Rizal with an area of 239,479 sqm and covered by TCT No. 57400. However, on April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed a case (Case no. 4252) for the cancellation of OCT No. 1526 issued in the name of Angelina C. Reynoso (the predecessors-in-interest of the spouses Reynoso) on the ground that the subject property is already covered by TCT No. 42999 issued under A. Doronilla. The court favored A. Doronilla in this case. Thereafter, herein petitioners filed the present case against the respondents, for the recovery of the value of the property sold to them plus damages on the ground that the spouses violated the vendors’ “warranty against eviction.” The lower court ruled in favor of the petitioners, which was reversed in the CA. Hence, the present petition.

ISSUE: W/n Articles 1558 and 1559 of the Civil Code are to be strictly applied in this case.

HELD: YES. (See Articles 1548, 1558 and 1559). In order that a vendor’s liability for eviction may be enforced, the followin g requisites must concur:

a. b. c. d.

There must be a final judgment; The purchaser has been been deprived of the whole or or part of the thing sold; Said deprivation was by virtue of a right right prior to the sale made by the vendor; and The vendor has been summoned and made codefendant in the suit for eviction at the instance of the vendee.

In the case at bar, the fourth requisite—that of being summoned in the suit for eviction (Case no. 4252) at the instance of the vendee—is not present. All that petitioners did, per their very admission, was to furnish respondents, by registered mail, with a copy of the opposition they (petitioners) filed in the suit. Decidedly, this is not the kind of notice prescribed by Articles 1558 and 1559 of the Civil Code. The term “unless he is su mmoned in the suit for eviction at the instance of the vendee” means that the respondents as vendor/s should be made parties to the suit at the instance of petitionersvendees, either by way of asking that the former be made a codefendant or by the filing of a third-party complaint against said vendors. Nothing of that sort appeared to have been done by the petitioners in the instant case.

NUTRIMIX FEEDS CORP. V. CA FACTS: In 1993, private respondent spouses Evangelista procured various animal feeds from petitioner Nutrimix Feeds Corp. the petitioner gave the respondents a credit period of 3045 days to postdate checks to be issued as payment for the feeds. The accommodation was made apparently because the

company’s president was a close friend of Evange lista. The various animal feeds were paid and covered by checks with due dates from July 1993-September 1993.

Initially, the spouses were good paying customers. However, there were instances when they failed to issue checks despite the delivery of goods. Consequently, the respondents incurred an aggregate unsettled account with Nutrimix amounting to P766,151 When the checks were deposited by the petitioner, the same were dishonored (closed account). Despite several demands from the petitioner, the spouses refused to pay the remaining balance Thereafter, Nutrimix filed a complaint against Evangelista for collection of money with damages. The respondents admitted their unpaid obligation but impugned their liability. The nine checks issued were made to guarantee the payment of the purchases, which was previously determined to be procured from the expected proceeds in the sale of their broilers and hogs. They contended that inasmuch inasmuch as the sudden and massive death of their animals was caused by the contaminated products of the petitioner, the nonpayment of their obligation was based on a just and legal ground. The respondents also lodged a complaint for damages against the petitioner, for the untimely and unforeseen death of their animals supposedly effected by the adulterated animal feeds the petitioner sold to them. Nutrimix alleged that the death of the respondents’ animals was due to the widespread pestilence in their farm. The petitioner, petitioner, likewise, maintained that it received information that the respondents were in an unstable financial condition and even sold their animals to settle their obligations from other enraged and insistent creditors. It, moreover, moreover, theorized that it was the respondents who mixed poison to its feeds to make it appear that the feeds were contaminated.

The trial court held in favor of petitioner on the ground that it cannot be held liable under Articles 1561 and 1566 of the Civil Code governing “hidden defects” of commodities sold. The trial court is predisposed predisposed to believe that the subject subject feeds were contaminated sometime between their storage at the bodega of the Evangelistas and their consumption by the poultry and hogs fed therewith, and that the contamination was perpetrated by unidentified or unidentifiable ill-meaning mischief-maker(s) over whom Nutrimix had no control in whichever way. CA modified the decision of the trial court, citing that respondents were not obligated to pay their outstanding obligation to the petitioner in view of its breach of warranty against hidden defects. The CA gave much credence to the testimony of Dr. Rodrigo Diaz, who attested that the sample feeds distributed to the various governmental agencies for laboratory examination were taken from a sealed sack bearing the brand name Nutrimix

ISSUE: WON Nutrimix is guilty of breach of warranty due to hidden defects HELD: NO. The provisions on warranty against hidden defects are found in Articles 1561 and 1566 of the New Civil Code of the Philippines. A hidden defect is one which is unknown or could not


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever have been known to the vendee. Under the law, the requisites to recover on account of hidden defects are as follows: a) the defect must must be hidden; hidden; b) the defect must exist at the time the sale was made; c) the defect must ordinarily have been excluded from the contract; d) the defect, must be important (renders thing UNFIT or considerably decreases FITNESS); e) the action must be instituted within the statute of limitations

and peaceful possession in favor of the petitioners. The property is mortgage to PNP and as such, petitioners filed a request to assume responsibility of the mortgage. Because of petitioners failure to produce the required papers, their petition was denied. Petitioners allege that the contract should be rescinded because of failure of delivery. delivery.

ISSUE: WON the contract is recissible due to breach of contract. HELD: There is no breach of contact in this case since there is

In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the purpose which both parties contemplated. To be able to prove liability on the basis of breach of implied warranty, three things must be established by the respondents. The first is that they sustained injury injury because of the product; the second is that the injury occurred because the product was defective or unreasonably unsafe; and finally, the defect existed when the product left the hands of the petitioner. A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the product in the absence of any proof that the product in question was defective. The defect must be present upon the delivery or manufacture of the product; or when the product left the seller’s or manufacturer’s control; or when the product was sold to the purchaser; or the product must have reached the user or consumer without substantial change in the condition it was sold. Tracing the defect defect to the petitioner requires some evidence that there was no tampering with, or changing of the animal feeds. The nature of of the animal feeds makes it necessarily difficult for the respondents to prove that the defect was existing when the product left the premises of the petitioner. A review of the t he facts of the t he case c ase would reveal that t hat the t he petitioner pet itioner delivered the animal feeds, allegedly containing rat poison, on July 26, 1993; but it is astonishing that the respondents had the animal feeds examined only on October 20, 1993, or barely three months after their broilers and hogs had died. A difference of approximately three months enfeebles the respondents’ theory that the petitioner is guilty of breach of warranty by virtue of hidden defects. In a span of three months, the feeds could have already been contaminated by outside factors and subjected to many conditions unquestionably beyond the control of the petitioner. Even more surprising is the fact that during the meeting with Nutrimix President Mr. Bartolome, the respondents claimed that their animals were plagued by disease, and that they needed more time to settle their obligations obligations with the petitioner. It was only after a few months that the respondents changed their justification for not paying their unsettled accounts, claiming anew that their animals were poisoned with the animal feeds supplied by the petitioner.

no provision in the contract that imposes the obligation to the respondents to eject t he people occupying the property. There was also a constructive delivery because the deed of sale was made in a public document. The contention of the petitioners that there could be no constructive delivery because the respondents are not in possession of the property is of no merit. What matters in a constructive delivery is control and not possession. Control was placed in the hands of the petitioners that is why they were able to file an ejectment case. Prior physical delivery or possession is not legally required and the execution of the deed of sale is deemed equivalent to delivery.

SUPERCARS MANAGEMENT AND DEVELOPMENT CORPORATION VS. FLORES FACTS: Respondent Flores bought an Isuzu Carter Crew Cab from petitioner. The RCBC financed the balance of the purchase price. Its payment was secured by a chattel mortgage of the same vehicle. However, defects of the car emerged when respondent was using it. These defects persuaded respondent Flores to rescind the contract with petitioner and stop the payment of the balance for the aforesaid car. As a result, RCBC bank opted to file a petition for Extrajudicial Foreclosure of Chattel Mortgage. The car was then sold at a public auction and RCBC acquired the same. It was later sold to a third person. Petitioner contends that respondent has "no right to rescind the contract of sale" because the motor vehicle in question is already in the hands of a t hird party. Hence, Article 1191 can no longer be availed of by the respondent.

ISSUE: Whether or not Article 1191 can no longer be availed of by respondent Flores. RULING: Article 1191 is applicable. Rescission is proper if one of the parties to a contract commits a substantial breach of its provision. It creates an obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may obliged to restore.

POWER COMMERCIAL V. CA (June 20, 1997) FACTS: Petitioner asbestos manufacturer Power Commercial and industrial corporation bought the property of spouses Reynaldo and Angelita Quiambao located in Makati City.

Rescission abrogates the contract from its inception and requires a mutual restitution of the benefits received. Respondent is not obliged to return the car; while petitioner is obliged to return what has been paid.

Since there are lessees occupying the subject land, part of the deed of sale is a warranty of respondents that will defend its title


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever PART IX: EXTINGUISHMENT OF SALE A. Grounds B. Conventional Redemption KINGS PROPERTIES CORP., VS. CANUTO A. GALIDO FACTS: This case involves an action for cancellation of certificates of title, registration of deed of sale and issuance of certificates of title filed by Canuto A. Galido before the RTC of Antipolo City. On April 18, 1966, the heirs of Eniceo, namely Rufina and Maria Eniceo, were awarded with Homestead Patent consisting of four parcels of land located in San Isidro, Antipolo, Rizal. The Antipolo property with a total area of 14.8882 hectares was registered under OCT No. 535. The issuance of the homestead patent was subject to the following conditions: “To have and to hold the said tract of land, with the appurtenances thereunto of right belonging unto the said Heirs of Domingo Eniceo and to his heir or heirs and assigns forever, subject to the provisions of sections 118, 121, 122 and 124 of Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or any of its branches, units or institutions, the land hereby acquired shall be inalienable and shall not be subject to incumbrance for a period of five (5) years next following the date of this patent, and shall not be liable for the satisfaction of any debt contracted prior to the expiration of that period; that it shall not be alienated, transferred or conveyed after five (5) years and before twenty-five (25) years next following the issuance of title, without the approval of the Secretary of Agriculture and Natural Resources; that it shall not be incumbered, alienated, or transferred to any person, corporation, association, or partnership not qualified to acquire public lands under the said Act and its amendments; x x x”

On September 1973, a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria Eniceo as vendors and respondent as vendee. The property was sold to respondent for P250,000. A certain Carmen Aldana delivered the owner's duplicate copy of OCT No. 535 to respondent. On 1988, the Eniceo heirs registered with the Registry of Deeds a Notice of Loss of the owner's copy of OCT No. 535. RTC rendered a decision finding that the certified true copy of OCT No. 535 contained no annotation in favor of any person, corporation or entity. The RTC ordered the Registry of Deeds to issue a second owner's copy of OCT No. 535 in favor of the Eniceo heirs and declared the original owner's copy of OCT No. 535 canceled and considered no further value. Petitioner states that as early as 1991, respondent knew of the RTC decision because respondent filed a criminal case against Rufina Eniceo and Leonila Bolinas for giving false testimony upon a material fact during the trial. They alleged that sometime in 1995, Bolinas came to the office of Alberto Tronio Jr., petitioner's general manager, and offered to sell the Antipolo property. During an on-site inspection, Tronio saw a house and ascertained that the occupants were Bolina's relatives. Tronio

also went to the Registry of Deeds to verify the records on file and ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessary verification, petitioner decided to buy the Antipolo property. On March 20, 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and 4 of the Antipolo property for P500,000.00. On August 17, 1995, the Secretary of Department of Environment and Natural Resources (DENR Secretary) approved the deed of sale between the Eniceo heirs and respondent. On January 1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner praying for the cancellation of the certificates of title issued in favor of petitioner, and the registration of the deed of sale and issuance of a new transfer certificate of title in favor of respondent. The trial court rendered it's decision dismissing the case for lack of legal and factual basis. However, the CA reversed the trial court's decision.

ISSUE: Whether the deed of sale delivered to respondent should be presumed an equitable mortgage pursuant to Article 1602(2) and 1604 of the Civil Code.

HELD: Validity of the deed of sale to respondent The contract between the Eniceo heirs and respondent executed on 10 September 1973 was a perfected contract of sale. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation. In the present case, the object of the sale is the Antipolo property and the price certain is P250,000. The contract of sale has also been consummated because the vendors and vendee have performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same to the buyer, who obligates himself to pay a price certain to the seller. The execution of the notarized deed of sale and the delivery of the owners duplicate copy of OCT No. 535 to respondent is tantamount to a constructive delivery of the object of the sale. Petitioner invokes the belated approval by the DENR Secretary, made within 25 years from the issuance of the homestead, to nullify the sale of the Antipolo property. The sale of the Antipolo property cannot be annulled on the ground that the DENR Secretary gave his approval after 21 years from the date the deed of sale in favor of respondent was executed. Equitable Mortgage Petitioner contends that the deed of sale in favor of respondent is an equitable mortgage because the Eniceo heirs remained in possession of the Antipolo property despite the execution of the deed of sale. An equitable mortgage is one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. The essential requisites of an equitable mortgage are:


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 1. 2.

The parties entered into a contract denominated as a contract of sale; and Their intention was to secure existing debt by way of a mortgage.

Petitioner claims that an equitable mortgage can be presumed because the Eniceo heirs remained in possession of the Antipolo property. Apart from the fact that the Eniceo heirs remained in possession of the Antipolo property, petitioner has failed to

substantiate its claim that the contract of sale was intended to secure an existing debt by way of mortgage. In fact, mere tolerated possession is not enough to prove that the transaction was an equitable mortgage. Furthermore, petitioner has not shown any proof that the Eniceo heirs were indebted to respondent. On the contrary, the deed of sale executed in favor of respondent was drafted clearly to convey that the Eniceo heirs sold and transferred the Antipolo property to respondent. The deed of sale even inserted a provision about defrayment of registration expenses to effect the transfer of title to respondent. The Court notes that the Eniceo heirs have not appealed the CAs decision, hence, as to the Eniceo heirs, the CAs decision that the contract was a sale and not an equitable mortgage is now final. Since petitioner merely assumed the rights of the Eniceo heirs, petitioner is now estopped from questioning the deed of sale dated 10 September 1973.

HEIRS OF THE LATE SPOUSES BALITE VS. LIM FACTS: Spouses Aurelio and Esperanza Balite were the owners of a parcel of land. When Aurelio died intestate, his wife Esperanza and their children inherited the subject property and became co-owners thereof. Esperanza became ill and was in dire need of money for her hospital expenses. She, through her daughter, Criseta, offered to sell to Rodrigo Lim, her undivided share for the price of P1 mil. Esperanza and Rodrigo agreed that under the Deed of Absolute Sale, it will be made to appear that the purchase price of the property was P150,000 although the actual price agreed upon by them for the property was P1mil. On April 16, 1996, Esperanza executed a Deed of Absolute Sale in favor of Rodrigo. They also executed on the same day a Joint Affidavit under which they declared that the real price of the property was P1mil. payable to Esperanza by installments. Only Esperanza and two of her children Antonio and Criseta knew about the said transaction. When the rest of the children knew of the sale, they wrote to the Register of Deeds saying that their mother did not inform them of the sale of a portion of the said property nor did they give consent thereto. Nonetheless, Rodrigo made partial payments to Antonio who is authorized by his mother through a Special Power of Attorney.

loan from the Rizal commercial Banking Corporation in the amount of P2mil and executed a Real Estate Mortgage over the property as security thereof. On motion of the petitioners, they were granted leave to file an amended complaint impleading the bank as additional party defendant. The court issued an order rejecting the amended complaint of the petitioners. Likewise, the court dismissed the complaint and held that pursuant to Article 493 of the Civil Code, a co-owner is not invalidated by the absence of the consent of the co-owners. Hence, the sale by Esperanza of the property was valid; the excess from her undivided share should be taken from the undivided shares of Criseta and Antonio, who expressly agreed to and benefited from the sale. The CA likewise held that the sale was valid and binding insofar as Esperanza's undivided share of the property was concerned. It affirmed the RTC ruling that the lack of consent of the coowners did not nullify the sale.

ISSUE: Whether or not the Deed of Absolute Sale was valid. Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable. HELD: Validity of the Sale We have before us an example of a simulated contract. Article 1345 of the Civil Code provides that the simulation of a contract may either be absolute or relative. In absolute simulation, there is a colorable contract but without any substance, because the parties have no intention to be bound by it. An absolutely simulated contract is void, and the parties may recover from each other what they may have given under the contract. On the other hand, if the parties state a false cause in the contract to conceal their real agreement, such a contract is relatively simulated. Here, the parties’ real agreement binds them. In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual purchase price of the property. That the parties intended the agreement to produce legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 1996 and petitioners admission that there was a partial payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000 square meters of the property . Clear from the letter is the fact that the objections of her children prompted Esperanza to unilaterally withdraw from the transaction. Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable. All the essential requisites prescribed by law for the validity and perfection of contracts are present. However, the parties shall be bound by their real agreement for a consideration of P1,000,000 as reflected in their Joint Affidavit.

Esperanza signed a letter addressed to Rodrigo informing the latter that her children did not agree to the sale of the property to him and that she was withdrawing all her commitments until the validity of the sale is finally resolved. Then Esperanza died intestate and was survived by her children. Meanwhile, Rodrigo caused to be published the Deed of Absolute Sale.

Deed of Sale not an Equitable Mortgage For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a contract denominated as a contract of sale; and, two, their intention was to secure an existing debt by way of mortgage.

Petitioners filed a complaint against Rodrigo for the annulment of sale, quieting of title, injunction and damages. Rodrigo secured a

In the present case, however, the Contract does not merely purport to be an absolute sale. The records and the documentary


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever evidence introduced by the parties indubitably show that the Contract is, indeed, one of absolute sale. There is no clear and

convincing evidence that the parties agreed upon a mortgage of the subject property. Furthermore, the voluntary, written and unconditional acceptance of contractual commitments negates the theory of equitable mortgage. There is nothing doubtful about the terms of, or the circumstances surrounding, the Deed of Sale that would call for the application of Article 1602. The Joint Affidavit indisputably confirmed that the transaction between the parties was a sale. We find no basis to conclude that the purchase price of the property was grossly inadequate. Petitioners did not present any witness to testify as to the market values of real estate in the subjects locale. They made their claim on the basis alone of the P2,000,000 loan that respondent had been able to obtain from the Rizal Commercial Banking Corporation. This move did not sufficiently show the alleged inadequacy of the purchase price. A mortgage is a mere security for a loan. There was no showing that the property was the only security relied upon by the bank; or that the borrowers had no credit worthiness, other than the property offered as collateral. Co-Ownership The appellate court was correct in affirming the validity of the sale of the property insofar as the pro indiviso share of Esperanza Balite was concerned. Article 493 of the Civil Code gives the owner of an undivided interest in the property the right to freely sell and dispose of such interest. The co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned in common, because such right over the thing is represented by an aliquot or ideal portion without any physical division. Nonetheless, the mere fact that the deed purports to transfer a concrete portion does not per se render the sale void. The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore, the sale is subject to the results of the partition upon the termination of the co-ownership.

Hence, the transaction between Esperanza Balite and respondent could be legally recognized only in respect to the formers pro indiviso share in the co-ownership. As a matter of fact, the Deed of Absolute Sale executed between the parties expressly referred to the 10,000-square-meter portion of the land sold to respondent as the share of Esperanza in the conjugal property. Her clear intention was to sell merely her ideal or undivided share in it. No valid objection can be made against that intent. Clearly then, the sale can be given effect to the extent of 9,751 square meters, her ideal share in the property as found by both the trial and the appellate courts.

On July 9, 1955, Leoncia and her three sons executed a deed denominated Kasulatan ng Biling Mabibiling Muli, whereby they sold the land and its existing improvements to the Spouses Benedicto Francia and Monica Ajoco (Spouses Francia) for P500.00, subject to the vendors right to repurchase for the same amount sa oras na sila'y makinabang. Potencianas heirs did not assent to that deed. Nonetheless, Teofilo and Jose, Jr. and their respective families remained in possession of the property and paid the realty taxes thereon. Leoncia and her children did not repay the amount of P500.00. The Spouses Francia both died intestate. Alejandro, the son of Jose, Sr., first partially paid to the Spouses Francia the amount of P265.00 for the obligation of Leoncia, his uncles and his father. Alejandro later paid the balance of P235.00. Thus, on August 11, 1970, the heirs of Spouses Francia executed a deed entitled Pagsasa-ayos ng Pag-aari at Pagsasalin, whereby they transferred and conveyed to Alejandro all their rights and interests in the property for P500.00. On August 21, 1970, Alejandro executed a Kasulatan ng Pagmeme-ari, wherein he declared that he had acquired all the rights and interests of the heirs of the Spouses Francia, including the ownership of the property, after the vendors had failed to repurchase within the given period. On the basis of the Kasulatan ng Pagmeme-ari, Tax Declaration was issued to Alejandro. From then on, he had paid the realty taxes for the property. Nevertheless, on October 17, 1970, Alejandro, his grandmother (Leoncia), and his father (Jose, Sr.) executed a Magkakalakip na Salaysay, by which Alejandro acknowledged the right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase the property at any time for the same amount of P500.00. On October 22, 1970, Leoncia died intestate. She was survived by Jose, Sr., Teofilo, Jose, Jr. and the heirs of Potenciana. Even after Leonicas death, Teofilo and Jose, Jr., with their respective families, continued to reside in the property. On September 2, 1993, Alejandro also died intestate. Surviving him were his wife, Amanda, and their children. In 1994, respondent Amanda Reyes asked the heirs of Teofilo and Jose, Jr., to vacate the property because she and her children already needed it. After the petitioners refused to comply, she filed a complaint against the petitioners in the barangay, seeking their eviction from the property. When no amicable settlement was reached, the Barangay Lupon issued a certification to file action to the respondents on September 26, 1994. In the interim, petitioner Nenita R. de la Cruz and her brother Romeo Reyes also constructed their respective houses on the property.

HEIRS OF REYES VS. REYES ISSUE: Whether or not the Court of Appeals erred in finding that FACTS: Antonio Reyes and his wife, Leoncia Mag-isa Reyes (Leoncia), were owners of a parcel of residential land located in Pulilan, Bulacan. On that land they constructed their dwelling. The couple had four children, namely: Jose, Sr., Teofilo, Jose, Jr. and Potenciana. Antonio Reyes died intestate, and was survived by Leoncia and their three sons. Potenciana also died intestate, survived by her children.

respondents (were) already barred from claiming that the transaction entered into by their predecessors-in-interest was an equitable mortgage and not a pacto de retro sale.

RULING: The true agreement of the parties vis--vis the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto de retro sale. There was no dispute that the purported vendors had continued in the possession of the


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever property even after the execution of the agreement; and that the property had remained declared for taxation purposes under Leoncias name, with the realty taxes due being paid by Leoncia, despite the execution of the agreement. Such established circumstances are among the badges of an equitable mortgage enumerated in Article 1602, paragraphs 2 and 5 of the Civil Code, to wit: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: x x x (2) When the vendor remains in possession as lessee or otherwise; x x x (5) When the vendor binds himself to pay the taxes on the thing sold; x x x

The existence of any one of the conditions enumerated under Article 1602 of the Civil Code, not a concurrence of all or of a majority thereof, suffices to give rise to the presumption that the contract is an equitable mortgage. Consequently, the contract between the vendors and vendees (Spouses Francia) was an equitable mortgage. Are the petitioners now barred from claiming that the transaction under the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage by their failure to redeem the property for a long period of time?

conceal the true nature of a contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress renders persons hard-pressed to meet even their basic needs or to respond to an emergency, leaving no choice to them but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain the much-needed loan from unscrupulous money lenders.[30] This reality precisely explains why the pertinent provision of the Civil Code includes a peculiar rule concerning the period of redemption, to wit: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: xxx (3)When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; xxx Ostensibly, the law allows a new period of redemption to be agreed upon or granted even after the expiration of the equitable mortgagors right to repurchase, and treats such extension as one of the indicators that the true agreement between the parties is an equitable mortgage, not a sale with right to repurchase. It was indubitable, therefore, that the Magkasanib na Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within which to pay to Alejandro the redemption price of P500.00.

ALUDOS VS SUERTE Considering that sa oras na silay makinabang, the period of redemption stated in the Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been stated, the period to redeem should be ten years from the execution of the contract, pursuant to Articles 1142 and 1144 of the Civil Code. Thus, the full redemption price should have been paid by July 9, 1955; and upon the expiration of said 10-year period, mortgagees Spouses Francia or their heirs should have foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandros payments, until the debt was fully satisfied by August 11, 1970. The acceptance of the payments even beyond the 10-year period of redemption estopped the mortgagees heirs from insisting that the period to redeem the property had already expired. Their actions impliedly recognized the continued existence of the equitable mortgage. The conduct of the original parties as well as of their successors-in-interest manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their transaction to be an equitable mortgage, not a pacto de retro sale. Both the trial court and the CA declared that the Magkasanib na Salaysay, which extended the redemption period of the mortgaged property, was inefficacious, because the period to redeem could no longer be extended after the original redemption period had already expired. The provisions of the Civil Code governing equitable mortgages disguised as sale contracts, like the one herein, are primarily designed to curtail the evils brought about by contracts of sale with right to repurchase, particularly the circumvention of the usury law and pactum commissorium.[29] Courts have taken judicial notice of the well-known fact that contracts of sale with right to repurchase have been frequently resorted to in order to

FACTS: Lomises acquired from Baguio City Government the right to occupy two stalls in the Hangar Market in Baguio City. Lomises entered into an agreement with respondent johnny Suerte for the transfer of all improvements and rights over the two market stalls. Suerte gave down payment and there is a receipt. Suerte gave another payment but before the completion of payment, Lomises backed out of the agreement and returned what was paid and there was a receipt for this. Johnny did not want the return of his money and wanted the continuation and enforcement of his agreement. He filed for specific performance with damages. RTC: nullified the agreement between johnny and Lomises for failure to secure the consent of the baguio city government and held that Lomises are merely lessees and the government was the lessor owner of stalls. Lomises appealed to CA: the real agreement between the parties was merely one of loan and not for sale. The load had been extinguished upon the return of amount to Johnny’s mother Domes. CA: there are two agreements entered into between Johnny and Lomises: one for assignment of leasehold rights and the other was for the sale of the improvements on the market stalls. The assignment of leasehold rights was void for lack of consent of the lessor, Baguio government. The sale of improvements was valid because there were Lomises private properties. Petitioner: agreement was a loan.

ISSUE: W/N the CA was correct in characterizing the agreement between Johnny and Lomises as a sale of improvements and assignment of leasehold rights


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever HELD:

What existed was an equitable mortgage, as contemplated in Article 1602, in relation with Article 1604, of the Civil Code. “An equitable mortgage has been defined ‘as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the

intention of the parties to charge real property as security for a debt, there being no impossibility nor anything contrary to law in this intent. Article 1602 of the Civil Code lists down the circumstances that may indicate that a contract is an equitable mortgage: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases : When the price of a sale with right to repurchase is unusually inadequate; When the vendor remains in possession as lessee or otherwise; When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; When the purchaser retains for himself a part of the purchase price; When the vendor binds himself to pay the taxes on the thing sold;

In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest. Based on Lomises’ allegations in his pleadings, we consider three circumstances to determine whether his claim is well supported. First , Johnny was a mere college student dependent on his parents for support when the agreement was executed, and it was Johnny’s mother, Domes, who was the party actually interested in acquiring the market stalls. Second , Lomises received only P48,000.00 of the P68,000.00 that Johnny claimed he gave as down payment; Lomises said that the P20,000.00 represented interests on the loan. Third , Lomises retained possession of the market stalls even after the execution of the agreement. Whether separately or taken together, these

circumstances do not support a conclusion that the parties only intended to enter into a contract of loan. That Johnny was a mere student when the agreement was executed does not indicate that he had no financial capacity to pay the purchase price. At that time, Johnny was a 26-year old third year engineering student who operated as a businessman as a sideline activity and who helped his family sell goods in the Hangar Market. During trial, Johnny was asked where he was to get the funds to pay the P260,000.00 purchase price, and he said he would get a loan from his grandfather. That he did not have the full amount at the time the agreement was executed does not necessarily negate his capacity to pay the purchase price, since he had 16 months to complete the payment. Apart from Lomises’ bare claim that it was Johnny’s mother, Domes, who was interested in acquiring his market stalls, we find no other evidence supporting the claim that Johnny was merely acting as a dummy for his mother.

Lomises contends that of the P68,000.00 given by Johnny, he only received P48,000.00, with the remaining P20,000.00 retained by Johnny as interest on the loan. However, the testimonies of the witnesses presented during trial, including Lomises himself, negate this claim. Judge Rodolfo Rodrigo (RTC of Baguio City, Branch VII) asked Lomises’ lawyer, Atty. Lockey, if they deny receipt of the P68,000.00; Atty. Lockey said that they were not denying receipt, and added that they had in fact returned the same amount. Judge Rodrigo accurately summarized their point by stating that “there is no need to dispute whether the P68,000.00 was given, because if [Lomises] tried to return that x x x he had received that. Witness Atty. Albert Umaming said he counted the money before he drafted the October 9, 1985 receipt evidencing the return; he said that Lomises returned P68,000.00 in total. Thus, if the transaction was indeed a loan and the P20,000.00 interest was already prepaid by Lomises, the return of the full amount of P68,000.00 by Lomises to Johnny (through his mother, Domes) would not make sense. That Lomises retained possession of the market stalls even after the execution of his agreement with Johnny is also not an indication that the true transaction between them was one of loan. Johnny had yet to complete his payment and, until Lomises decided to forego with their agreement, had four more months to pay; until then, Lomises retained ownership and possession of the market stalls. Lomises cannot feign ignorance of the import of the terms of the receipt of September 8, 1984 by claiming that he was an illiterate old man. A witness (Ana Comnad) testified not only of the fact of the sale, but also that Lomises’ daughter, Dolores, translated the terms of the agreement from English to Ilocano for Lomises’ benefit. Lomises himself admitted this fact. If Lomises believed that the receipt of September 8, 1984 did not express the parties’ true intent, he could have refused to sign it or subsequently requested for a reformation of its terms. Lomises rejected the agreement only after Johnny sought to enforce it. Hence, the CA was correct in characterizing the agreement between Johnny and Lomises as a sale of improvements and assignment of leasehold rights.

C. Legal Redemption PART XI: ASSIGNMENT PART XII: LEASE REGINA DIZON ET AL V. CA AND OVERLAND EXPRESS LINES, INC. G.R. No. 122544 January 28, 1999

FACTS: Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with petitioners involving a 1,755.80 square meter parcel of land situated at Diliman, Quezon City. The term of the lease was for 1 year commencing from May


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SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever 16,1974 up to May 15, 1975. During this period, Overland Express Lines was granted an option to purchase for the amount of P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00. For failure of Overland Express Lines to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed an action for ejectment against it. Overland Express Lines were ordered to vacate the leased premises and to pay the sum of P624,000.00 representing rentals in arrears and/or as damages in the form of reasonable compensation for the use and occupation of the premises during the period of illegal detainer from June 1976 to November 1982. Overland Express Lines Inc. then endorsed P300,000.00 as partial payment for the leased property and as an attempt to resurrect the lapsed option of purchasing the property, which petitioners accepted (through Alice A. Dizon,) with the issuance of an official receipt.

ISSUES: 1. Whether Alice Dizon was authorized to receive the sum of P300,000.00 on behalf of petitioners and validly consider it as the partial payment of the property to be purchased by the respondent(Overland Express Lines, Inc.). 2. Whether there was a perfected contract of sale between the parties.

HELD: 1. Alice Dizon is not authorized to receive the sum of P300,000.00 on behalf of petitioners, therefore will not validly bind the petitioners with the private respondents to a contract of sale. Article 1874 of the Civil Code is explicit that: "When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void." There was no written proof and valid consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners’ alleged agent, and Overland Express Lines. The sum of P300,000.00 received by Alice Dizon cannot be considered as partial payment for the purchase of the property for the reason that the option given to the private respondent in purchasing the property as an added condition in the contract of lease already expired on May 1975. As provided in Art 1670 of the Civil Code, the provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien to the possession of the lessee. Private respondent's right to exercise the option to purchase expired with the termination of the original contract of lease for one year. 2. There was no perfected contract of sale in the first place because Alice Dizon was not an authorized agent of petitioner, therefore she cannot do any legal transactions with the respondent. As enshrined in Art 1868, “By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

VIEGELY SAMELO vs MANOTOK SERVICES, INC. G.R. NO. 170509 – June 27, 2012 FACTS: On January 31, 1997, the respondent entered into a contract with the petitioner for the lease of a portion of the lot for a period of 1 year. Upon the expiration of the lease contract on December 31, 1997, the petitioner continued occupying the subject premises without paying the rent. On August 5, 1998, the respondent sent a letter to the petitioner demanding that she vacate the subject premises and pay compensation for its use and occupancy however, petitioner refused to heed these demands. On November 18, 1998, the respondent filed a complaint for unlawful detainer against the petitioner befor the MeTC praying that the petitioner be ordered to vacate the subject premises and to pay compensation for its use and occupancy. In her answer, the petitioner alleged that the respondent had no right to collect rentals because the subject premises are located inside the property of the Philippine national Railways (PNR). She also added that the petitioner had no certificate of title over the subject premises and further claimed that her signature in the contract of lease was obtained through respondent’s misrepresentation and likewise maintained that she is now the owner of the subject premises as she had been in possession since 1944. The MeTC decided in favor of the respondent and held that the only issue to be resolved in an unlawful detainer case is physical possession or possession de facto, and that the respondent had established its right of possession over the subject premises. It added that the petitioner’s right under the lease contract already ceased upon the expiration of the said contract. It further ruled that the petitioner is already stopped from questioning the right of the respondent over the subject premises when she entered into a contract of lease with the respondent. On appeal, the RTC set aside the decision of the MeTC and dismissed the complaint for unlawful detainer. The RTC held that the respondent had no right to collect rentals as it failed to show that it had authority to administer subject premises and to enter into a contract of lease with the petitioner. Aggrieved by the reversal, the respondent filed a petition for review with the CA which reversed and set aside the RTC decision and reinstated the MeTC judgment. The CA held that the petitioner is now estopped from questioning the right of the respondent over the subject property. It explained that in an action involving the possession of the subject premises, a tenant cannot controvert the title of his landlord or assert any right adverse to that title, without first delivering to the landlord the premises acquired by virtue of the agreement between themselves. It further held that the only issue in an ejectment suit is physical or material possession. The issue of ownership is not required to determine the issue of possession since the petitioner tacitly admitted that she is a lessee of the subject premises. Petitioner moved for reconsideration but the CA denied her in its motion, hence this petition.

ISSUE: The ejectment suit is physical or material possession. COMPILED BY: WIGMORE #WIGMOREFOREVER 132

SALES Case Digest (Atty. Sarona) Compiled by: Wigmore #wigmoreforever (The issue of ownership is not required to determine the issue of possession since the petitioner tacitly admitted that she is a lessee of the subject premises.)

RULING: The SC held that an action for unlawful detainer exists when a person unlawfully withholds possession of any land or building against or from a lessor, vendor, vendee or other persons, after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied. The only issue to be resolved in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the parties involved. Thus, any attempt of the parties to inject the question of ownership into the case is futile, except insofar as it might throw light on the right of possession. In the instant case, the lease contract was for the period of one year with a monthly rental of P3,960 commencing on January 31, 1997 and expiring on December 31, 1997. It bears emphasis that it was only on August 5, 1998 that a notice to vacate was sent and the petitioner continued enjoying the subject premises for more than 15 days, without objection from the respondent. By the inaction of the respondent as lessor, there can be no inference that it intended to discontinue the lease contract, therefore, an implied new lease was therefore created pursuant to Article 1670 of the Civil Code which provides: Article 1670. If at the end of the contract of lease the lessee should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, and unless a contrary by either party has previously been given, it is understood that there is implied new lease, not for the period of the original contract, but for the time established in Articles 1682 and 1687. The other terms of the original contract shall be revived. An implied new lease or tacita reconduccion will set in when the following requisites are found to exist: (a) The term of the original contract of lease has expired; (b) The lessor has not given the lessee a demand to vacate; and (c) The lessee continued enjoying the thing leased for 15 days with the acquiescence of the lessor.

act on the part of the lessor that it no longer consents to the continued occupation by the lessee of its property. After such notice, lessee’s right to continue in possession ceases and her possession becomes one of detainer. Wherefore, petition was denied and the decisions of CA were affirmed with modification on the unpaid rentals due.

SPS. MAMARIL VS. BOY SCOUT OF THE PHILIPPINES G.R. NO. 179382 | JANUARY 14, 2013 FACTS: PUJ operators Sps. Mamaril would park their 6 passenger jeepneys every night at BSP’s compound in Malate, Manila for a fee of P300.00 per month for each unit. One day, one of the vehicles was missing and was never recovered. According to the security guards Peña and Gaddi of AIB Security Agency with whom BSP had contracted for its security and protection, a male person who looked familiar to them took the subject vehicle out of the compound. Sps. Mamaril prayed that Peña and Gaddi, together with AIB and BSP, be held liable for: (a) the value of the subject vehicle; (b) amount representing daily loss of income/boundary reckoned from the day the vehicle was lost; (c) exemplary damages; (d) moral damages; (e) attorney's fees; and (f) cost of suit. BSP denied any liability contending that not only did Sps. Mamaril directly deal with AIB with respect to the manner by which the parked vehicles would be handled, but the parking ticket itself expressly stated that the "Management shall not be responsible for loss of vehicle or any of its accessories or article left therein." It also claimed that Sps. Mamaril erroneously relied on the Guard Service Contract. Apart from not being parties thereto, its provisions cover only the protection of BSP's properties, its officers, and employees.

ISSUE: Whether or not BSP may be held liable for the loss of the vehicle caused by the negligence of its security guards. NO

HELD: The proximate cause of the loss of Sps. Mamaril's vehicle was the negligent act of security guards Peña and Gaddi in allowing an unidentified person to drive out the subject vehicle.

Article 1687 of the CC on implied new lease provides: Article 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent is to be paid annual; from month to month if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent id to be paid daily. However, even though a monthly rent is paid, and no period for the lease has been set, the court may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent id weekly, the court may likewise determine a longer period after the lessee has been in possession for over 6 months. In case of daily rent, the courts may fix a longer period after the lessee has stayed in the place for over one month. Since the rent was paid on a monthly basis, the period of lease is considered to be from month to month. A lease from month to month is considered to be one with a definite period, which expires at the end of each month upon a demand to vacate by the lessor. When the respondent sent a letter to vacate to the petitioner on August 5, 1998, the tacita reconduccion was aborted, and the contract of lease is deemed to have expired at the end of that month. A notice to vacate constitutes an express

The records are bereft of any finding of negligence on the part of BSP. Neither will the vicarious liability of an employer under Article 2180 of the Civil Code apply in this case. Peña and Gaddi were assigned as security guards by AIB to BSP pursuant to the Guard Service Contract. No employer-employee relationship existed between BSP and the security guards assigned in its premises. Sps. Mamaril are not parties to the Guard Service Contract. Guard Service Contract between defendant-appellant BSP and defendant AIB Security Agency is purely between the parties therein. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third


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