Sales Digests for CLV

SALES DIGESTS 2C 2005-2006

Dean Villanueva

1 BUENAVENTURA v CA (Sale is consensual

Beron)

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs as well as the defendants herein 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 in favor of their co-defendant children. Petitioners claim that there was no actual valid consideration for the deeds of sale over the properties in litis, that assuming that there was a 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, that the purported sale of the properties in lites was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs of their legitime. The trial court and the court of appeals ruled in favor of the respondents. The supreme court affirmed the decision of the lower courts. Petitioners failed to show legal right to the properties. Petitioners' right to their parents' properties is merely inchoate or contingent and vests only upon their parents' death. While still living, the parents of the petitioners are free to dispose of their properties. Petitioners also assert that the respondents did not actually paid the prices stated in the deed. The SC found such argument untenable. A contract of sale is not a real contract, but a consensual contract. as a consensual contract, a contract o 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 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, the contract should be reformed. If there is no meeting of minds of the parties as to price, because the price stipulated in the contract is simulated, then the contract is void. 2 ONG v CA (Bilateral and Reciprocal

Calinisan)

Facts: A) B) C) D) E) F) G)

Ong and the Robles spouses entered into an “Agreement of Purchase and Sale” on 2 parcels of land in Quezon for the sum of P2M. The parcels of land included a rice mill and a piggery. A portion of the P2M debt was already paid. To answer for his balance, Ong issued 4 post dates checks. All bounced. A portion of the of the debt was also supposed to be paid directly to BPI, the Robles’ bank, to answer for the Robles’ loan. When the bank threatened to foreclose the mortgage, the Robles’ sold 3 transformers located on the lands. The Robles spouses now want to rescind the contract of sale. RTC and CA set aside the “Agreement of Purchase and Sale” between Ong and the Robles spouses.

Issue: W/N the contract may be rescinded. Held: A) B) C)

D) E) F) G) H)

The contract entered into was a Contract to Sell and not a contract of sale What is applicable is Art 1191 and not 1383. In the former, rescission is a principal action which is based on breach, while in the latter, it is a subsidiary action. Reciprocal obligations are those which arise from the same cause, and in 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 such that the performance of one is conditioned upon the simultaneous fulfillment of the other There was no novation in this case. Novation is not presumed. Ong mere;y sought to be “reimbursed”. NO novation. Payment of the purchase price is a positive suspensive condition Ong’s failure to pay brought about a situation which prevented the obligation of the Robles spouses to convey title from acquiring an obligatory force. Ong was in bad faith when he built the improvements Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


3 BUENAVENTURA v CA (Sale is Onerous

Dean Villanueva

Del Socorro)

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. Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare void certain Deeds of Sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names. Petitioners also ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of Sale. Issues: 1. Whether the Deeds of Sale are void for lack of consideration. 2. Whether the Deeds of Sale are void for gross inadequacy of price. Held: 1. No. The deeds of sale are not void for lack of consideration. 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 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. 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. 2. No. the deeds of sale are not void for gross inadequacy of price. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code w/c would invalidate, or even affect the Deeds of Sale. In this case, the lower 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 Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon the Supreme Court. 4 GAITE v FONACIER (Commutative nature of sale

Delgado)

Facts: Fonacier is the owner of 11 Iron Lode Mineral Claims in Camarines Norte. He appointed Gaite as Attorney-inFact giving him the authority to negotiate and enter into exploration contracts on royalty basis. Gaite assigned his rights to Larap Mining which he also owns. Gaite embarked upon the development and exploitation of the mines and was able to extract 24 metric tons. Fonacier revoked the authority given to Gaite for some reasons not stated. Gaite transferred the rights in the developed area in exchange of the amount 20 thousand pesos. Also, Gaite transferred the rights over the 24 metric tons in exchange of 75 thousand pesos. Fonacier gave 10 thousand pesos upon signing the agreement and the balance of 65 thousand pesos to be paid from the “first letter of covering the first shipment of iron ores and of the first amount derived from the local sale of iron ore made by the Larap Mines.” To secure the payment of the balance, Fonacier delivered surety bond but Gaite intimated that it’s not enough and required another. Fonacier

Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

delivered another bond in the name of Far Eastern Surety. The bonds expired and no sale of ores happened. Gaite filed case for collection. Defense of Fonacier is that obligation is subject to condition. Issue: W/N it is subject to a condition. Held: No. The words express no contingency in the buyer’s obligation to pay. The balance “will be paid” out of the first letter of credit. There is no uncertainty that the payment will have to be made sooner or later. What is undetermined is the exact date at which it will be made. A contract of sale is normally commutative and onerous: not does each one of the parties assume a correlative obligation (the seller to deliver and transfer the ownership of the thing sold and the buyer to pay the price), but each party anticipates performance by the other from the very start. Assumin arguendo that there is doubt whether it is subject to a suspensive condition or a suspensive period, the scales favor of “the greatest reciprocity of interests”, since sale is essentially onerous. That greater reciprocity obtains if the buyer’s obligation is deemed to be actually existing, with only its maturity or demandability suspended. 5 ALCANTARA-DAUS v DE LEON (Sale is title not mode Fernandez) Facts: • Hermoso de Leon inherited from his father a certain piece of land by virtue of a deed of extra-judicial partition. • To arrange the documents for the properties of his parents, Hermoso engaged the services of Atty Juan • After the death of Atty Juan, documents surfaced revealing that the properties has been conveyed to Hermoso’s brothers and sisters and, Juan and his sisters though Hermoso did not intend such. • A deed of extra-judicial partition w/ quitclaim in favor of Rodolfo de Leon surfaced with Hermoso’s signature in it (which was actually forged) • Rodolfo sold the land to Aurora Alcantara. Hermoso questions the sale. • RTC ruled that Hermoso’s claim on the land is barred by laches since 18 years has passed since the land was sold. It also ruled that the deed of extra-judicial partition, being a notarial document, is presumed authentic. CA reversed. Issue: Was the sale of the land to Alcantara valid? Held: No. There was no valid delivery as Rodolfo is not the rightful owner of the land. A contract of sale is perfected by mere consent, upon meeting of the minds, on the offer and acceptance thereof based on subject matter, price and terms of payment. At this stage, seller’s ownership of the land is not an element in the perfection of the contract. However, this contract creates an obligation on the part of the seller to transfer ownership and to deliver the subject matter of the contract. It is during delivery that the law requires the seller to have the right to transfer ownership of the thing sold. It is through delivery or tradition that the buyer acquires the real rights of ownership over the thing sold. At the time of delivery, Rodolfo was not the owner of the land, thus the consummation of the contract and the consequent transfer would, then, depend on whether he subsequently acquired ownership of the land in accordance with Art 1434 of the Civil Code. But the extra-judicial partition was found to be forged hence there was no valid transfer of ownership—Rodolfo never became the owner of the land. Possession in good faith and acquisition by virtue of prescription cannot be sustained if it is in derogation of the rights of the registered owner. 6 CELESTINO CO. & CO. VS. COLLECTOR OF INTERNAL REVENUE (Contract for Piece-of-work Legaspi) Facts • From 1946 to 1951 Celestino Co. (Oriential Sash Factory) paid 7% tax on gross receipts of its sash, door and window factory in accordance with the sec. 186 of the National Revenue Code imposing taxes on sales of manufactured articles. • In 1952, it began to claim liability only to the contractors 3% tax under section 191. To support its contention, it presented duplicate copies of letters sketches of doors and windows and price quotations supposedly sent by the manager of the factory to customers who allegedly made special orders. • Celestino & Co. habitually makes sash, windows and doors as it has represented in its stationery and advertisements Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

to the public. It also manufactures its products on a made to order basis. • The Court of Tax Appeals held that Celestino & Co. is a manufacturer, as such art. 186 should be applies • Celestino & Co. invokes Art. 1467 of NCC: in filling orders for windows and doors according to specifications, it did not sell but merely contracted for particular pieces of work Issue w/n Celestino & Co. is a contractor (sells it services) or a manufacturer (sells its products) Ruling • Celestino & Co. is a manufacturer. He is liable under section 191 of the National Revenue Code • Celestino & Co. does nothing more than sell the goods that it mass produces or habitually makes. • It is not true that Celestino & Co. serves special customers only or confines its services to them alone. It did not merely sell its services but also the materials ordinarily manufactured by it. • A factory which habitually makes sash, windows and doors and sells the goods to the public is a manufacturer. The fact that the windows and doors are made by it only when customers place their orders and according to such form or combination as suit to the fancy of the purchasers does not alther the nature of the establishment. • The orders by the customers were not shown to be special that would require extraordinary service from Celestino & Co. They were merely orders for work done in the ordinary course of the manufacturers business. It then cannot be said that Celestino & Co. contracts for a piece of work. 7 CIR VS. ENGINEERING EQUIPMENT AND SUPPLY COMPANY (Contract of sale distinguished from a contract for a piece of work Facts: Issue: Held: -

-

Lopez)

Engineering Equipment and Supply Company (Engineering) is engaged in the design and installation of central type air conditioning systems. On the complaint of a Juan de la Cruz, CIR investigated Engineering for tax evasion. Engineering is assessed Php 740,587 as deficiency tax liabilities. They appealed to the Court of Tax Appeals. CTA ruled that Engineering is exempt from deficiency manufacturer’s sales tax because they are contractors. They were assessed with Php 174,141 as compensating tax and 25% surcharge. Both Engineering and CIR appealed to the SC. W/n Engineering is a contractor and thus, exempt from paying the deficiency manufacturer’s sales tax. Engineering is a contractor. The company did not manufacture air conditioning units; instead, they imported them and used them in the systems they were installing. The supply of air conditioning units to the company’s various customers was specially made for each customer and installed in his building upon his special order. Without the contract with a particular customer, Engineering won’t be delivering air conditioning units. This is in accord with the test for a contract for a piece of work, which asks whether the thing transferred (in this case, aircons) is one not in existence and which never would have existed but for the order of the party desiring to acquire it. Engineering is a contractor since it renders service 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. Being a contractor, Engineering is only subject to the contractor’s tax and not to the advance sales tax. They should only be taxed for the use of imported goods and not the importation of goods because it has been proven that the air conditioning units were used for its construction business and were never resold.

8 ENGINEERING V CA (Contract for a Piece of Work

Mendiola)

Facts: Pursuant to a contract, Engineering undertook to fabricate, install, and furnish the air-conditioning in Almeda’s building along Makati for 120,000. It was finished in 1963. The building was sold to and was occupied by NIDC. But the sale was rescinded in 1971. It was then when Almeda learned from the NIDC employees that the air-conditioning was defective. Almeda filed a case for damages w/ CFI alleging that the air-con did not comply with the plans and specifications. Engineering contended that the complaint must be dismissed because of the expiration of the 6month prescriptive period set (pursuant to Art. 1566 and 1567) regarding the responsibility of the vendor for any hidden defects of the thing sold. Almeda, on the other hand, contends that it is a contract for a piece of work. Issue: was the complaint barred by prescription on the basis that it is a contract of sale?


SALES DIGESTS 2C 2005-2006 Held:

Dean Villanueva

The contract is a contract for a piece of work because it is not in the usual line of business of Engineering to manufacture air-conditioning systems to be sold off-the-shelf. Its business and field of expertise is the fabrication and installation of such systems as ordered by customers. The 6-month prescriptive period is only applied to implied warranties. If there is an express warranty, the prescriptive period is one specified. In the absence of such period, the 4-year prescriptive period shall apply. Therefore, it would appear that the prescriptive period has lapsed in the case at bar. However, the complaint is not really an enforcement of warranties against hidden defects but is one for breach of contract. There is proof that Engineering had failed to install items and parts and that some of the parts used were not in full accord with the contract specifications. Therefore, the prescriptive period is 10 years because there is a written contract. Since only 8 years has passed, the 10-year prescriptive period has not yet lapsed; therefore, the action is not barred.

9 QUIROGA VS. PARSONS HARDWARE CO. (Contract of Agency vs. Contract of Sale Rivas) FACTS -

-

a contract between Quiroga and Parson was executed wherein Parsons has the exclusive right to sell Quiroga beds in the Visayas Islands with the following stipulations: o Parsons has to pay Quiroga within 60 days from the date of the shipment o A discount of 25% from the invoice price is Parson’s commission on sales o Parsons must order bed in dozens o Parsons may sell or establish branches of his agency for the sale of Quiroga beds upon the approval of Quiroga. According to Quiroga, several provisions of the Contract of Agency was violated by Parsons. RTC: no contract of agency between Quiroga nd Parsons.

ISSUE: W/N Parsons is a purchaser or an agent of Quiroga HELD: purchaser RATIO: since stipulated in the contract that Quiroga was to furnish Parsons with the beds which the latter might order, at the price stipulated, and that Parsons was to pay the price in the manner stipulated, within 60 days from the date of shipment – CONTRACT OF SALE In a Contract of Sale, there was the obligation on the part of Quiroga to supply the beds, and, on the part of Parsons, to pay their price In a CONTRACT OF AGENCY, the 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, and if does not succeed in selling it, he returns it to the principal. There was not a single clause ion the contract which conveys the idea of an agency – ‘commission on sale’ means discount of the prices, ‘agency’ expresses that Parsons was the only one that could sell Quiroga beds in Visayas, the rest of the stipulation are compatible with the contract of sale. 10 PUYAT V ARCO AMUSEMENT (Agency to Sell Sarenas) Facts: • • • •

• •

• •

There was a previous case of Arco vs. Puyat Teatro Arco was engaged in the business of operating cinematographs. It later changed its name to Arco Amusement Co. Puyat is the exclusive agents in the Philippines for the Starr Piano Co. of Richmond, Indiana, USA. Arco wanted to equip its cinematograph with sound reproducing devices, so it approached Puyat. They agreed that Arco will pay Puyat the amount of the equipment, plus 10% commission and all other expenses. The price was $1700 and this was duly paid by Arco plus the commission. Later on another sale was made between the two for another set of equipment for the price of $1600. 3 years later, in connection with a civil case that the Puyat’s were facing, Arco learned that the equipment they purchased from Puyat were overpriced. They sought for reimbursement but failed, and so the case of Arco vs. Puyat TC: contract between Arco and Puyat was one of outright purchase and sale Appelate Court: the relation between them was that of agent and principal, Puyat was sentenced to pay the alleged overpayments in the sum of $1335.52 plus legal interest. Even if it was one of purchase and sale, Puyat is guilty of fraud in concealing the true price


SALES DIGESTS 2C 2005-2006 Issue: • Held: •

Dean Villanueva

W/N the contract between the parties was one of purchase and sale and not one of agency Yes, it is one of purchase and sale because: o The contract is the law between the parties. Arco has accepted the price for the equipment. o The 10% commission that Puyat was to receive does not necessarily make the petitioner an agent as this provision is only an additional price which the respondent bound itself to pay. o Puyat could not be an agent of Arco because it is known that Puyat is the agent of Starr Piano in the Philippines.

11 KER & CO V LINGAD (Agency to Sell Beron) FACTS: Petitioner Ker would have us revers a decision of the CTA, holding it liable as a commercial broker uhder sec 194(t) of the NIRC. It was shown that pettioner was assessed by then Commissioner of Internal Revenue tax as the commercial broker's percentage tax, surhcarge and compromise penalty. There was request on the part of petitioner for the cancellation of such assessment, which request was tunred down. Such liability arose from a contract of petitioner with the United States Rubber Intl. US Rubber shall from time to time consign to the petitioner products under the terms of this agreement in suh quantities as in the judgement of US Rubber. All goods on consignment shall remain the property of US Rubber utntil sold Ker. In the contract it was stipulated that the agreement does not constitute Ker the agent or legal representative of US Rubber for any purpose whatsoever. ISSUE: Whether the relatioship thus created is one of vendor and vendee or of broker and principal... HELD: Though there was a denial in the agreement that the petitioner is in no way an agent nor legal representative of US Rubber, the SC holds that the relationship is one of agency. That the petititoner is by contractual stipulation an agent of US Rubber is borne out by the facts that petititoner can dispose of the products of US Rubber only to certain persons or entities and within stipulated limits, unless excepted by the contract or by US Rubber and that upon termination of the Agreement, all the goods held on consignment shall be held by petititoner for the account of the rubber company. If the transfer of title puts the transferee in the altitude or position of an owner and makes him liable to the trnasferor as a debtor for the agreed price, and not merely as an agent who must account for the prodeeds of the resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal who remains the owner. 12 LO V KJS ECO-FORMWORK SYSTEM PHIL., INC. (Agency to Sell Calinisan) Facts: A) B) C) D) E) F) G)

KJS Eco-Framework (KJS)is engaged in the sale of steel scaffoldings. Sonny Lo, doing business under the name San’s Enterprises, is a building contractor. Lo ordered scaffolding equipment from KJS to be paid on installment. Lo was only able to pay 2 of the 10 installment payments. Lo executed a “Deed of Assignment”, whereby he assigned to respondent his receivables from the Jomero Realty Corporation (JRC). JRC refused to pay KJS since Lo also owed him money. Lo refuses to pay KJS since allegedly, his obligation is already extinguished when they executed the Deed of Assignment.

Issue: W/N Lo’s obligation is already extinguished. Held: Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas

SALES DIGESTS 2C 2005-2006 A)

B) C)

D) E)

Dean Villanueva

No. SC upheld the CA. a. Lo failed to comply with his warranty under the Deed. b. The object of the deed did not exist at the time of the transaction, rendering it void pursuant to Art 1409 c. Lo 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 assignment ≈ sale; dation ≈ sale 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. a. Art 1628: 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. Lo, as vendor or assignor, is bound to warrant the existence and legality of the credit at the time of the sale or assignment. He should make good his warranty. By warranting the existence of the credit, Lo should be deemed to have ensured the performance thereof in case the sake is later found to be inexistent. He should be held liable to pay to KJS the amount of his indebtedness.

13 PHILIPPINE LAWIN BUS, CO. V CA (Dacion en Pago Delgado) Facts: Advance Credit Corporation, a lending investor, extended a loan to Philippine Lawin Bus Company in the amount of P8 million payable within one year evidenced by a promissory note. To secure the loan, Lawin paid P1.8 million so the lender extended another loan worth P2 million evidenced by another PN. Lawin failed to pay the lender prompting for the foreclosure of the buses and proceeds of P2 million credited to the account of Lawin. Since the balance of P16 million is unpaid, lender filed suit in court to compel Lawin to pay. Lawin opposed through an injunction claiming that foreclosure is a violation of its agreement with the lender on how to pay the balance. RTC favored Lawin saying obligation is extinguished. CA reversed. Issue: Whether there was a dacion en pago between the parties pon the surrender of the transfer of the mortgaged buses to the respondent. Held: No. Receipts executed by the respondent’s representative do not indicate that lender adhered and agreed that the delivery of the buses of the petitioner would result in extinguishing the obligation. Aside from that the receipts show that two buses were delivered to the respondents for the purpose of selling it. The petitioner Lawin deemed lender as an agent hence negating the existence of dacion en pago since it requires the transfer of ownership, complete, and absolute. 14 MEDINA v CIR (Sale between spouses

Del Socorro)

Facts:

In 1944, petitioner Antonio Medina married Antonia Rodriguez. Before 1946, the spouses had neither property nor business of their own. Later, however, petitioner, acquired forest concessions. From 1946 to 1948, the logs cut and removed by the petitioner from his concessions were sold to different persons in Manila through his agent, Mariano Osorio. In 1949, Antonia R. Medina, petitioner's wife, started to engage in business as a lumber dealer, and up to around 1952, petitioner sold to her almost all the logs produced in one of his forest concession. Mrs. Medina, in turn, sold in Manila the logs bought from her husband through the same agent, Mariano Osorio. The proceeds were, upon instructions from petitioner, either received by Osorio for petitioner or deposited by said agent in petitioner's current account with the bank. On the thesis that the sales made by petitioner to his wife were null and void pursuant to the provisions of Art. 1490 of the Civil Code, the Collector considered the sales made by Mrs. Medina as the petitioner's original sales taxable under the NIRC and, therefore, imposed a tax assessment on petitioner. Petitioner protested the assessment, and in 1954,revealed for the first time the existence of an alleged premarital agreement of complete separation of properties between him and his wife, and contending that the assessment for the years 1946 to 1952 had already prescribed. Issue: Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

Whether or not the sales by the petitioner to his wife could be considered as his original taxable sales under the NIRC. Held: Yes. They are taxable. Aside from the fact that the record of the alleged pre-nuptial agreement were nonexistent, the SC determined that at the time of their marriage, the spouses had no properties to have warranted them to execute a pre-nuptial agreement for a complete separation of property, the Court considered the sales between the spouses void as to be in violation of Art. 1490, and considered the sales by the wife to the public as the first and original sales subject to the sales tax. 15 CALIMLIM-CANULLAS V FORTUN (Sale between spouses Fernandez) Facts: • • • • • •

Mercedes Calimlim-Canullas and Fernando Canullas are married and lives on the residential land in question. Fernando abandoned his family and lived with Corazon Daguines. Fernando, then, sold subject property with the house to Daguines. Unable to take possession of the lot and house, Daguines filed a complaint for quieting of title and damages against Mercedes. Mercedes claims that the sale of Fernando to Daguines is null and void for said property is built with conjugal funds. CFI declared the sale valid where Daguines is entitled to the land and ½ of the house. Upon reconsideration, the court said the sale of the land is valid but not the house for such is conjugal.

Issue: Whether or not the construction of a conjugal house on the exclusive property of the husband ipso facto gave the land the character of conjugal property. Whether or not the sale of the lot together with the house and improvements thereon was valid under the surrounding circumstances. Held: By virtue of Art 158 of the Civil Code, 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, in this case, Fernando, 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 conversion from paraphernal to conjugal assets should be deemed to retroact to the time the conjugal buildings (the house) were first constructed thereon. The properties being conjugal, the consent of the wife is needed for the validity of the sale. The contract of sale is null and void for being contrary to morals and public policy. 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. That sale was subversive of the stability of the family, a basic social institution that public policy protects. Moreover, the law prohibits the spouses from selling property to each other subject to certain exceptions. And these prohibitions apply to a couple living as husband and wife without the benefit of marriage. 16 RUBIAS v BATILLER (Status of such contracts Legaspi) Case Suit to recover the ownership and possession of certain portions of lots which Rubias bought from his father-in-law Francisco Militante Facts • Before the war with Japan, Militante file with CFI and application for the registration of title of the land, the records of the case were lost so Militante filed a petition for reconstitution which was dismissed • Militante appealed and pending the appeal, Militante sold the subject land to Rubias. This was recorded in the Register of Deeds. However, the application for registration was again dismissed. • According to Batiller, Rubias has no cause of action since they are in actual, open and continuous possession of the lot since time immemorial; Rubias was also the counsel on record of Militante Issue w/n the contract of sale was void because it was made when Rubias was Militante’s counsel in the land registration case Ruling • Rubias cannot have any claim on the land which Militante allegedly owned since the latter’s application was denied by the CA. Militante had no authority to dispose the things sold. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas

SALES DIGESTS 2C 2005-2006 • • • •

Dean Villanueva

Assuming that Militante acquired the property, Rubias claim still fails. The sale between him and Militante was prohibited by law. Purchase by lawyer of property in litigation from his client is void and produces no legal effect. Nullity of such contracts cannot be cured by ratification since the prohibition is grounded in public policy. Nullity of such contracts is differentiated from that purchased by guardians, agents and administrators which can be cured by ratification.

17 PHILIPPINE TRUST COMPANY VS. SOCORRO ROLDAN, ET. AL. (Guardians, Agents & Administrators Lopez) Facts: -

Socorro Roldan becomes guardian of her step-son Mariano Bernardo, who acquired 17 parcels of land from his deceased father, Marcelo. Socorro sells the land to Fidel Ramos who subsequently resells the same lands to Socorro. The latter then sells 4 parcels of the 17 to Emilio Cruz. Phil. Trust Co. questioned the 2 sales in the RTC which rule in favor of Socorro but granted Mariano right to repurchase the land. RTC issued its decision upon a decision of the SC saying that for Art. 1459 to apply, collusion must be established between the guardian and the buyer of the lots. This ruling was affirmed by the CA.

Issue: W/n Socorro had a right to sell the lands. Held: SC reverses the ruling of RTC and CA. Art, 14591 is applicable in this case. Although collusion was not established clearly between Socorro and Fidel Ramos, the circumstances in the case dictate the application of Art. 1459. Fidel Ramos is the brother-in-law of Socorro and the two sales were effected within a week of each other. 18 FABILLO v IAC (Attorneys; Contingency Fee Arrangements Mendiola) Facts:

In her last will, Justina Fabillio bequeathed to her brother, Florencio, a house and lot. Florencio filed for a petition for the probate of the will. The court approved the partition. Two years later, Florencio sought the assistance of Atty. Murillo to recover the property. They agreed that Florencio shall give to Atty. 40% of the money value of the property as a contingent fee in case of success; and that in case the house and lot is just occupied by Florencio, the lawyer shall have the option of either occupying or leasing to any party 40% of the house and lot. The court dismissed the case when Fabillio entered into a compromise agreement wherein Fabillio was declared as the lawful owner of the property. However, Fabillio denied Atty. of benefit over the property. Atty. filed a case for him to be declared owner of 40% of the property. Fabillio averred that the 40% was unconscionable taking into consideration the length of the proceedings. The trial court ruled that the contingent fee is not violative of Art. 1491. It declared Murillo as owner of 40 of the property. Issue: was the contract for services violative of Art 1491 paragraph (5)? Held:

The contract of services did not violate Art. 1491. The payment of the contingent fee is not covered by the provision because the fee is not paid during the pendency of the litigation but only after judgment has been made. No.13 of the Canons of professional ethics impliedly sanctions these contingent fees. Clearly, the 40% pertains to the value of the property. However, as regards the 40% share when Fabillio just occupies the property, it is ambiguous. Ambiguous as it is, it must be ruled against Murillo because he was the one who drafted the contract. Murillo is only entitled to 30k of attorney’s fees (taking into consideration the length of the services.) 19 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES VS. CA (Subject Matter of Sale Rivas) Facts: -

NDC, a GOCC, owns a 10 hectare property in Manila.

Footnote sa Phil Trust case: 1 Hindi ko alam kung ito pa rin yung article sa bagong Civil Code basta it prohibits the guardian from purchasing either in person or through the mediation of another the property of her ward. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas

SALES DIGESTS 2C 2005-2006 -

Issue: Held: -

Dean Villanueva

Lease contract with Firestone covering 2.6 hectares of the land was made o For 10 years renewable for another 10 years o Allowed Firestone to construct warehouse and improvements on plant 2nd contract of lease was entered involving steel warehouse in Davao an extension on both lease was requested by Firestone a 3rd lease contract was executed with an express stipulation granting Firestone the first option to purchase the leased premises in the event that NDC decides to sell land 10 year lease contract was about to expire and Firestone asked NDC for an extension NDC did not acknowledge the request Firestone heard rumors that NDC planned to sell property to PUP Case for an action for specific performance was filed to compel NDC to sell land to Firestone RTC: 2.6 portion of the land belongs to Firestone and the remaining to PUP CA: upheld decision of RTC W/N Firestone can invoke its right of first refusal Yes! NDC cannot unilaterally rescind a right of first refusal that stand upon valuable consideration PUP’s contention that its being a ‘poor mans university’ is untenable. Paramount interest in education does not destroy the sanctity of a binding contract obligation Contract of Sale, as defined in the Civil Code is a ‘catch all provision’ which effectively bring within its grasp a whole gamut of transfers whereby ownership is ceded for a consideration There is a perfected sale of the land between NDC and PUP. But right if first refusal of Firestone must be honored A contract with a right of first refusal, 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 lessee failed to accept it Only if Firestone failed to exercise its right of first refusal will NDC be lawfully allowed to sell land to PUP

20 MELLIZA V. CITY OF ILOILO (Determinate or Determinable Subject Matter Facts: • • • • • • • • • Issue: • Held: • •

•

Sarenas)

Juliana Melliza owned 3 parcels of land in Iloilo. One lot, lot 1214 was 29,073 sq.km She donated to the Municipality of Iloilo 9k sq.km of lot 1214. But the donation was later revoked by the parties because the land was inadequate for the development plan of the municipality, “Arellano Plan”. Lot 1214 was later on divided. Juliana later on sold some of the lots (instrument was in Spanish, que pasa?) to Iloilo for the purpose of the “Arellano Plan”. The remaining were sold to Remedios San Villanueva who transferred it to Pio San Melliza. The TCT that petitioner held had the annotation pertaining to the previous donation made by Juliana to Iloilo (without mention of any revocation) Iloilo City (successor of Municipality of Iloilo) donated the city hall site with the building to UP Iloilo. The donated property included some parts of Lot 1214. UP fenced property. Petitioner asked for payment of the value of the lot but Iloilo did not pay (no money daw). UP acquired TCT over the lots in contention Petitioner filed for recover or compensation for its value against Iloilo City and UP Iloilo CFI: Juliana sold properties to Iloilo which meant that Iloilo was free to give to UP W/N the conveyance of Juliana to Iloilo included the lot being claimed by petitioner The instrument was for the sale of properties to Iloilo for the purpose of the “Arellano Plan” without stating the specific lots to be sold. 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 determinate without the necessity of a new or further agreement between the parties. Sale is valid. Petitioner’s contentions denied.

21 LONDRES VS. CA (Determinate or Determinable

Beron)

Facts: Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

This case involves 2 parcels of land, namely, lots 1320 and 1333. Paulina Arcenas originally owned these parcels of land. After Paulina's death, ownership passed to Filomena Vidal, her daughter. The surivivng children of Filomena now claim ownership over the 2 lots. On the other hand, privare respondent Consolacion Alovera claims that the said lots have been sold to her thru an absolute sale executed by Filomena. Petitioners claim that the absolute sale was tampered. The cadastral lot number of the 2nd lot was altered to read lot 1333 when it was originally written as lot 2034. They further claim that the Records Management and Archives Office kept an unaltered copy which shows that the objects of the sale were lots 1320 and 2034. Issue: Who owns the lots? Held: The SC ruled in favor of Consolacion Alovera and declared that the sale was valid. The SC affirmed the decision of the lower courts finding that it was Filomena who erased "lot 2034" in the deed of sale and changed it to "lot 13333". The copies of the document in cusotdy of the notary public were not correspondingly corrected. Consequently, the copies kept by the records management archives still referred to "lot 2034". The descrition appearing in the absolute sale pertains to lot 1333 and not to lot 2034. The description states that the lot sold is located in Brgy. Baybay, Roxas City. Lot 1333 is situated in Brgy. Baybay while lot 2034 is situated in Brgy. Culasi. Lot 2034 was previously owned by Jose Alatavas and there is no convincing evidence showing that this lot was ever owned by Paulina nor by Filomena, therefore, it can never be a proper subject of the sale. Proof of conveyance of ownership is the fact that form the time of sale, or after more than 30 yrs, private respondents have been in possession of lots 1320 and 1333. 22 YU TEK & CO. V GONZALES (Generic things as object of sale Facts: A) B) C) D) E)

Calinisan)

Gonzales obliged himself, via a contract, to sell 600 piculs of 1st and 2nd class sugar to Yu Tek. Gonzales received payment, in the amount of P3T. Gonzales did not fulfill his obligation to deliver sugar. Yu Tek then sues. Gonzales claims force majeure, since he was not able to produce any sugar at this plantation.

Issue: W/N Gonzales is liable on his obligation. Held: A) B) C) D) E) F)

Gonzales is liable. No specific lot of sugar segregated or designated to make subject matter specific, therefore generic. There was no stipulation that the sugar was to be obtained exclusively from the crop. Since it was generic, there is no risk of it being lost. Contract was NOT A PERFECTED SALE, but a PROMISE TO SELL. A contract of sale is not perfected until the parties have agreed upon the price and the thing sold. A contract whereby a party obligates himself to sell for a price certain specified quantity of sugar of a given quality, without designating any particular lot of sugar, is not perfected until the quantity agreed upon has been selected and is capable of being physically designated and distinguished from all other sugar.

23 NATIONAL GRAINS AUTHORITY VS. IAC (Quantity of Subject Matter not Essential for Perfection

Delgado)

Facts: National Grains Authority (later National Food Authority) is a government agency which buys palay grains from qualified farmer. Leon Soriano offered to sell palay grains to the agency. After undergoing the regular application process, he was given a quota (maximum) of 2,640 cavans of palay. On August 23 and 24, 1979, Soriano delivered Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

630 cavans which were not bagged, classified and weighed. When Soriano demanded payment for the delivered palay, he was informed by the Provincial Manager William Cabal that his payment was held in abeyance because there was an investigation concerning him because of allegations that he is not a bona fide farmer and gets the palay from another person. Soriano filed case for specific performance. RTC favored him and was affirmed by the IAC. Hence, this petition with National Grains Authority arguing that there was no sale but only an offer by Soriano because it was not accepted by the agency as evidenced of not rebagging, classifying and weighing it. Issue: W/N there was a sale? Held: The petition is not impressed with merit. Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay therefore a price certain in money or its equivalent. A contract, on the other hand, is a meeting of minds between two (2) persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code of the Philippines). The essential requisites of contracts are: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established (Art. 1318, Civil Code of the Philippines. In the case at bar, 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. 24 JOHANNES SCHUBACK VS. CA (Quantity of Subject Matter not Essential for Perfection

Del Socorro)

Facts: - respondent Ramos San Jose(buyer), doing business under the name Philippine SJ Industry Trading, wanted to purchase bus spare parts from seller Johannes Schuback (seller) - buyer sent to seller a list of parts he wanted to buy; seller sent a letter to buyer enclosing its offer on the items listed by buyer - Dec. 17, 1981: seller submitted its formal offer containing the item number, quantity, part number, description, unit price and total to buyer - Dec. 24, 1981, buyer informed seller of his desire to avail of the prices of the parts at that time and enclosed its Purchase Order dated Dec 14 1981 w/c contained the item number, part number and description - buyer promised to submit the quantity per unit he wanted to order on December 28 or 29 ( a week after confirming the purchase on the price ) - Dec. 29, buyer submitted the quantities to buyer - buyer purchased the items promising seller to open a letter of credit in favor of the latter - buyer failed to open letter of credit; hence, seller charged buyer for cancellation fees, storage and interest charges - buyer demanded reimbursement from seller - buyer: he did not make any valid Purchase Order and that there was no definite contract between him and seller - RTC: favored seller - CA: reversed RTC; there was no perfection of contract since there was no meeting of the minds as to the price between the last week of December 1981 and the first week of January 1982 Issue: whether or not a contract of sale has been perfected between the parties; if so, when was it perfected? Held: - a binding contract of sale exited between the parties upon the issuance of the purchase order, and not upon the confirmation of the buyer of the quantities covered by the order - the offer by seller was manifested on Dec 17, 1981 when seller submitted its proposal containing the item number, quantity, part number, description, the unit price and total to buyer. On December 24, 1981, buyer informed seller of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order dated Dec 14, 1981



Dean Villanueva

- at this stage, a meeting of the minds between buyer and seller has occurred, the object of the contract being the spare parts and the consideration, the price stated in seller's offer dated Dec 17, 1981 and accepted by the buyer on Dec 24, 1981. - although said purchase order did not contain the quantity he wanted to order, buyer made good his promise to communicate the same on December 29, 1981 - at this stage, buyer was already in the process of executing the agreement previously reached between the parties. - although the SC agrees w/ the RTC that there was a perfected contract of sale, it differs as to the date - perfection took place, not on Dec 29, 1981, but rather on Dec 24, 1981. Although the quantity to be ordered was made determinate only on Dec 29, 1981, quantity is immaterial in the perfection of a sales contract - what is imp’t is the meeting of the minds as to the object and cause - as of December 24, 1981, these essential elements had already concurred - the omission of buyer in opening a letter of credit in favor of seller does not prevent the perfection of the contract between the parties, for the opening of a letter of credit is not to be deemed a suspensive condition - the opening of a letter of credit in favor of a buyer is only a mode of payment - not among the essential requirements of a contract of sale, the absence of any of which will prevent the perfection of the contract from taking place 25 NOEL v CA (Seller’s Obligation to Transfer Ownership at the Time of Delivery Facts: • • • • •

•

Fernandez)

Gregorio and Hilaria Nanaman have a number of properties. One of which is a 34.7 ha land. Virgilio, son of Gregorio by another woman, lived with them. When Gregorio died, Virgilio and Hilaria managed the properties. The 34.7 ha land was later sold to Celeste. This sale was duly registered. When Hilaria died, intestate proceedings concerning the spouses’ estate were instituted. Juan Nanaman, brother of Gregorio, was appointed as special administrator, and was later replaced by Edilberto Noel. Celeste and heirs of spouses executed an amicable settlement where the former agreed to relinquish his rights over ½ of the subject land. But this was later declared void when some of the heirs, who did not sign, questioned the agreement. Noel was then ordered to recover the land from Celeste. An action for reversion for title was made. Trial court declared that action has prescribed. CA ordered Celeste to return ½ of the land to the heirs plus rentals. MRaffirmed trial court decision based on laches

Issue: Can the property be recovered from Celeste? Held: Only ½. The transaction between Celeste and Hilaria (with Vrgilio) was indeed a sale and not just a mortgage. However, Hilaria can only alienate ½ of the land—this being her undivided share of the land. As for the other half, Hilaria was just a trustee for the benefit of who may be legally entitled to it. In sale, it is essential that the seller is the owner of the property he is selling. As to Virgilio, he is not qualified as an heir of Gregorio since he is an illegitimate child (the Civil Code then). The acts of Virgilio can just be considered as acts that helped Hilaria manage the conjugal property. Laches does not apply as the administrator immediately filed an action to recover possession and ownership of the property. The ten-year prescriptive period has not lapse either. Celeste is ordered to return one-half of the land and pay rentals for the occupation of the same portion from the year he occupied such until it is returned. 26 NOOL v CA (Seller’s Obligation to Transfer Ownership at the Time of Delivery

Legaspi)

Facts • Conchita Nool bought from her brothers 2 parcels of land. • When they were in need of money they mortgaged the 2 parcels with The Development Bank of the Phils. • The mortgage was foreclosed • Within the period of redemption, Conchita contracted Anacleto Nool to redeem the parcels of land. Another contract was entered giving Conchita the right to repurchase. • The right to redeem was not exercised by Conchita within the 1 year period. But Anacleto was able to buy from DBP who was then the absolute owner of the lands. • Since Anacleto failed to pay the total of the agreed purchase price, Conchita asked for the parcels of land. • Anacleto refused on the ground that they acquired the lands from DBP and he was misled by Conchita when he signed the contract with the right of repurchase.



Dean Villanueva

Issue w/n the 2 contracts (contract of sale and right to repurchase) are valid Ruling • The contract of sale was void • While the civil code allows a sale of future goods, this is not applicable to the case at bar. • The sellers can no longer deliver the object of the sale to the buyers as the buyers themselves have already acquired title and delivery thereof from the rightful owner. The contract may be deemed inoperative since it contemplated of an impossible service • Since the contract of sale was inoperative, so is the right of repurchase. A void contract cannot give rise to a valid contract. Conchita cannot redeem the lands from Anacleto base on the 2 contracts.

27 MAPALO VS. MAPALO (Price must be real Lopez) Facts: -

-

Issue: Held: -

-

Miguel Mapalo and his wife, Candida Quiba, were illiterate farmers. Out of love and affection, they resolved to donate the eastern half of their land to Miguel’s brother, Maximo, who was about to get married. They were deceived by Maximo and a notary public into signing an absolute deed of sale over the entire lot by pretending that the documents the spouses were signing was a deed of donation. The deed of sale contained a consideration of Php 500, which was never paid. Maximo, after proper registration, sells the entire land to the Narciso’s. The Narciso’s files a suit in CFI to be declared the owners of the entire lot. Miguel files a counterclaim and a separate case to annul the deeds of sale involved in this case. CFI rules for Miguel Mapalo annulling the deeds of sale. The CA, on the other hand, says that the spouses gave their consent to the sale but said consent is defective for being induced by fraud. Because of this, the CA held that the deeds of sale are not void but are merely voidable. They further held that the action to annul the deeds of sale has already prescribed, thus they dismiss the complaint. W/n the deeds of sale are void or voidable. W/n the action of the spouses has already prescribed. SC acknowledged that the object of the contract of sale is present – land. They also acknowledged that there was consent in this case and that it was merely defective. The SC, though, took notice of the fact that there was no consideration in this case. Maximo was alleging that there was merely a fraudulent consideration (because of the stipulation in the first deed of sale) and that the contract was still voidable. The SC, though, pointed out that the stipulated consideration was not actually paid. This brings about a contract of sale where the price is simulated which is considered void by Art. 1471 (hindi na-mention yung article sa case). Since the contract is void ab initio, then the action does not prescribe because the inexistence thereof is permanent and incurable. Judgment of CFI is reinstated.

28 ONG v ONG (Price must be real

Mendiola)

Facts: Imelda Ong, in consideration for Php 1 and other valuable considerations, executed a Quitclaim Deed in favor of Maruzzo who was a minor. In the Quitclaim Deed, Imelda Ong transferred all her rights, title, and interest in the ½ undivided portion of a parcel of land. However, Imelda Ong revoked the Deed and donated the whole property to her son. Maruzzo, through Atty. Alfredo Ong, filed a case for the recovery of the land that she allegedly bought and the nullification of the deed of donation in favor of Imelda’s son. Imelda counters by saying that the Quitclaim deed was void inasmuch as it is equivalent to a deed of donation, acceptance of which is required by Maruzzo, which she could have not given due to her incapacity as a minor. Furthermore, Imelda argues that the consideration of Php 1 is no consideration at all to sustain that the deed of quitclaim is a deed of Sale. The trial court ruled that the Quitclaim deed is a Deed of Sale and that Maruzzo is the rightful owner. The CA affirmed the judgment of the TC by saying that the inadequacy of the consideration is of no moment since it is the usual practice in deeds of conveyance to place a nominal amount although there is more valuable consideration given.



Dean Villanueva

Issue: Was there a contract of sale? Held: Although the cause is not stated in the contract, it is presumed that it exists unless the debtor proves the contrary. To overcome this presumption of consideration, the alleged lack of consideration must be shown by preponderance of evidence. Even granting that the deed is a donation, Art. 741 of the Civil Code provides that the requirement of acceptance applies only to onerous and conditional donations where the donation may have to assume certain charges of burdens. Bad faith and inadequacy of consideration do not render a conveyance inexistent for the conveyor’s liberality may be sufficient cause for a valid contract. 29 BAGNAS VS. CA (Price must be real Facts: Issue: Held: -

-

-

-

Parties to this case are the heirs of Hilario Mateum, single and survived only by collateral relatives Mateum left no will, no debts, and an estate of 25 parcels of land 10 of which are being contested in this case Private respondents registered to the Registry of Deeds 2 deeds of sale said to be executed by Mateum in their favor, transferring 10 parcels of land in their favor The consideration stated in the deeds of sale is “ halagang ISANG PISO, salaping Pilipino, at mga naipaglingkod, ipinaglilingkod sa aking kapanganakan” --- the value of each land was assessed to be 10,500 On the strength of the deeds of sale, respondents were able t secure title over 3 of the 10 parcels of land Bagtas, petitioners, asked the court to cancel the deeds of sale for they are fictitious, fraudulent or falsified or alternatively as donations Respondents denied that sale was fictitious. The main consideration of the sale is the good things done by the respondents in his last illness. RTC and CA: decided in favor of the respondents W/N the deeds of sale were void or inexistent ab initio or merely voidable Void ab initio! Contract that has no causa or consideration, or the causa is false or fictitious, the property allegedly conveyed never really leaves the patrimony of the transferor, and upon the latter’s death without testament, such property would pass to the transferor’s heirs intestate and recoverable by them or by the administrator of the transferor’s estate. Law now no longer deems contracts with a false cause, or which are absolutely simulated or fictitious, merely voidable, but declares them void A price of P1.00 for the sale of thing worth 10,500 is so insignificant as to amount to no price at all. While not requiring that for the validity of a sale that the price be adequate, prescribes that the price must be real, not fictitious. The true price, which is essential to the validity of sale, means existent, real and effective price, that which does not consist in an insignificant amount. Art 1458 states that sale be for a “price certain in money or its equivalent” requires that “equivalent” be something representative of money to the effect that services are not equivalent of money insofar as said requirement is concerned and that a contract is not a true sale where the price consists of services or prestations Services mentioned in the questioned deeds of sale are not only vague and uncertain but are unknown and not susceptible of determination without the necessity of a new agreement between the parties

30 MATE v CA (Price must be real Facts: •

• • •

Rivas)

Sarenas)

Josefina Rey (Josie) and Inocencio Tan went to the house of Fernando Mate, Mate’s wife is the cousin of Josie. The visit was for the purpose of Josie asking the help of Mate. Josie had previously issued BP22 checks to Tan and is now owing him P4,432,067. Josie is requesting that Mate cede to Tan 3 lots in Tacloban to cover the debt. Naturally, Mate did not agree to the request. Josie reassured Mate that what they will be entering into is merely a simulated sale and that Josie will be redeeming the lots with her own money. Mate later on agreed to the fictitious sale. 2 BPI postdated checks were issued by Josie to Mate covering the purchase price of the properties. When Mate deposited said checks, they were dishonored for being withdrawn against a closed account. Mate tried to look for Josie but was unable to locate her. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas

SALES DIGESTS 2C 2005-2006 • • • Issue: • Held: • • • • •

Dean Villanueva

To protect his property, Mate filed a civil case against Josie and Tan for annulment of contract with damages. Josie was declared in default. Tan won. Mate’s contention: sale is null and void for lack of consideration because no money changed hands when he signed the deed and the checks representing payment have been dishonored W/N the deed of sale is valid The deed of sale is valid. There was a consideration. There was a P1.4M check (to buy back the property) and the P420K check representing interest. Although the checks were dishonored, it cannot be invoked as want of consideration. The filing of BP22 cases against Josie and Tan was a tacit admission by Mate that there indeed was consideration When Josie’s checks bounced, what Mate could have done was to redeem his properties with his own money and then go after Josie. Between two innocent parties, the one who made it possible for the wrong to be done should be the one bearing the resulting loss. It was Mate himself who drafted the contracts. Greedy lang daw kasi si Mate. Moral of the story, don’t be greedy to the point of being stupid.

31 REPUBLIC V PHIL RESOURCES DEV (Must be in money or equivalent Beron) Facts: Defendant Apostol submitted the highest bid for purchase of 100 tons of Palawasn Almaciga and logs. Deliveries were made but Apostol failed to pay . Acomplaint then was filed against Apostol. Phil REsources seek to intervene in this civil case claiming that it has some goods deposited in a warehouse which goods were used by Apostol to settle his personal debts to Bureau of Prisons. Phil Resources demanded the return of the goods, but bureau refused. The lower court denied motion for intervention. Issue: W/n respondent Phil Resources can intervene or has legal interest to intervene... Held: YES. It intends to protect its interest and rights over some materials purportedly belonging to it. The assertion that the subject matter of original litigation is a sum of money and not the goods, and therefore respondent has no legal interest to intervene is without merit. The materials have been assessed and they have been assigned by Apostol as payment of his debts with the Bureau of Prisons. Government argues that "price = paid in terms of money and the supposed payment being in kind, it is no payment at all" The law provides for money or its 'equivalent'. Equivalent therefore need not be in money. 32 VELASCO v CA (Manner of Payment Essential

Calinisan)

Facts: A) This case is about a specific performance suit filed by Velasco against the Magdalena Estate, alleging that there had been a perfected contract of sale whereby the defendant agreed to sell a parcel of land for P100T. B) Plaintiff Velasco is the lesee of the parcel of land. C) Velasco claims that they agreed that there was a downpayment of P10T, to be followed by P20T, and that the balance of P70T would be paid in installments, the amortization of which would be agreed upon once the initial P30T was paid. D) He claims that he already gave the P10T, but the defendant refused to accept the P20T.



Dean Villanueva

E) Defendant claimed that Soccoro Velasco offered to buy the property, and the defendant indicated his willingness to sell the lot fpr P30T downpayment, and P70T to be paid on installments for 10 years at 9% interest per annum on June and December of every year until fully paid. F) Velasco only gave him P10T of the agreed downpayment, but since it wasn't enough, it was merely accepted as a deposit, a receipt was made in favor of her brother-in-law, no installments have been paid. Issue: W/N a contract of sale was perfected. Held: A) No contract of sale was perfected since there was no meeting of the minds with respect to the manner of payment. B) The time within which the downpayment and installments were to be completed was not specified C) A definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. D) The fact that P10T had been given does not mean that the contract was perfected, since both parties agreed that there were still essentiual matters that had to be agreed upon.

33 GABELO v CA (Formation of a Contract of Sale Delgado) Facts: Philippine Realty Corporation owns a land in Intramuros with an area of 675 square meters. It was leased to Maglente for 3 years. Lessee was given Right of First Refusal. The lease contract also prohibits encumbrance without the lessor’s assent. Maglente leased it to Gabelo, at. al. without the knowledge of the owner. Maglente was informed that the land will be sold and the latter manifested to exercise his priority to buy the land. Maglente paid downpayment of P100,000 for the entire amount of P1.2M. Petitioners were informed of the sale and that they were advised to vacate the premises. They filed case with the argument that they have a better right to the land because they were occupants. They added that the co-buyers of Maglente never occupied the land. RTC frowned upon their arguments and ordered the execution of the contract to sell/contract of sale. CA affirmed. Issue: W/N the PRC can sell this to non-occupants other than Maglente. Held: Yes. PRC is free to sell the land to whoever is interested. The mere fact that the petitioners are actual occupants cannot compel PRC to enter into a contract with them. The contract of sale having been perfected by the meeting of the minds of the buyers and the sellers binds them and they could no longer assert their claim. The argument that the parties didn’t affix their signature is of no moment since there have been meeting of the minds and that is enough to constitute a valid contract. 34 CARCELLER v CA (option contract

Lloyd)

Facts: - SIHI owned 2 parcels of land in Cebu City - Carceller and SIHI entered into a lease contract w/ option to purchase within the lease period (18 months) - 3 wks before expiration of lease contract (Jan. 30), SIHI notified Carceller of the impending termination of lease, the period wherein the option could be exercised - Jan.15 - Carceller requested for extension of 6 months, as he needed more time to raise the funds - SIHI denied request, but offered to lease the property for a yr - Feb. 18 - Carceller notified SIHI of its decision to exercise the option and made arrangements for downpayment - SIHI denied as period already lapsed; asked Carceller to leave property - Carceller filed complaint for specific performance and damages



Dean Villanueva

Issue: W/N Carceller may still exercise the option to purchase the leased property despite the alleged delay in notifying SIHI Held: YES. 18 delay is reasonable delay. To deny option would cause damage to petitioner. - Option: a preparatory contract in w/c 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. - 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 w/ the one to whom the option was granted, if the latter should decide to use the option. - It is a separate agreement distinct from the contract w/c the parties may enter into upon the consummation of the option. - Carceller’s Jan. 15 letter to SIHI was a notice of buyer’s intent to exercise the option, despite the request for extension of the lease contract - as based upon the subsequent acts of the parties, their intent is ascertained: - SIHI to dispose of the property promptly - shown by SIHI’s agreement to enter first into a lease contract w/ option to repurchase w/ Carceller - Carceller’s determination to buy it, shown by: - introduction of permanent improvements on the leased property - secured 8M loan to increase his chances of acquiring the property 35 TAYAG v LACSON (Option Contract Facts: • •

•

•

•

•

Fernandez)

Lacsons are the owners of 3 parcels of land in Pampanga. The properties were tenanted agricultural lands. Later on, the original farmers/tillers of the land individually executed Deeds of Assignment in which they assigned to Tayag their rights as tenants/tillers in consideration of a certain sum (Php 50/sqm). The amount is payable when the legal impediments to the sale of the property to Tayag no longer existed. When Tayag and the tenants were about to meet regarding the implementation of their agreements, the farmers wrote Tayag and informed him that they no longer wish to sell their rights to him. Instead, the rights to the land were to be sold to the Lacsons. Tayag instituted action against the farmers and Lacsons, alleging primarily that the farmers had no right to deal with the Lacsons while their contract was subsisting, and that the Lacsons induced the farmers to abandon the contract between Tayag and said farmers. More importantly, Tayag claims that the agreement between him and the farmers were perfected option contracts. Trial court ruled that Tayag was entitled to injunctive relief. Lacsons appealed and claimed that the Deeds of Assignment executed between the farmers and Tayag was contrary to PD 27 and RA 6658, hence it is null and void. It was also raised that the deeds were subject to a supervening event—the elimination of any legal impediment—before assignment can take place. CA favored Lacson and said that the Lacsons cannot be enjoined from alienating or encumbering their property especially so that they were not privies to the deeds.

Issue: (yung relevant na lang sa sales) Whether the agreements between Tayag and the farmers were perfected option contracts? Held: No they were not perfected option contracts. Under the deeds of assignment, Tayag was not only granted an option but the exclusive right to buy the landholding. But the grantors were merely defendants-tenants and not the owners of the property. Not being the registered owners, the farmers could not legally grant to Tayag the option, much less the exclusive right to but the property. *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. Until accepted, it is not, properly speaking, treated as a contract. 36 LIMSON v CA (Option Contract Legaspi) 37 VILLAMOR v CA (Meaning of Consideration Lopez) Facts: Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Issue: Held: -

-

-

Dean Villanueva

Macaria Reyes owned a 600 sq. m. lot in Caloocan. She sold half of it to the Villamor spouses for Php70/sq. m. In 1971, Macaria executed a deed of option in favor of the Villamors over the remaining portion of the lot. It said that they (Reyes) sold the lot at a much higher price than the market value and that the only reason why the Villamors agreed to such was because they (Reyes) agreed to sell the land to the Villamors whenever the need arose for either of the parties. 1n 1984, Reyes offered to repurchase the lot which was refused by the Villamors. In 1987, the Villamors filed a case for specific performance to compel the Reyes’ to sell the other portion of the lot to them. RTC rule for Villamors saying that their right to buy is embodied in the written contract. CA reversed saying that there was no consideration for the option to buy and thus, the deed of option was void. W/n the deed of option had a valid consideration. The SC said that consideration is the “why of the contract, the essential reason which moves the contracting parties to enter into the contract.” Here, the deed of option was clear that the consideration for the said deed was the price paid by the Villamors for the lot “which was greatly higher than the actual reasonable prevailing price.” It can be said that the consideration is the difference between the purchase price (70) and the prevailing market price then (25 or 18) of the lots sold. The option offered was accepted by the Villamors in the same instrument. Because of this, it can be said that there is a perfected contract of sale because of the meeting of the minds of the parties as to the subject matter and the price of the sale. What was left to be done was for either party to demand from the other their respective undertakings under the contract. However, the Villamors are precluded from demanding performance of the deed of option because they are bared by prescription. Art. 1144 NCC says that actions upon a written contract must be brought within 10 years. Here, Villamors only demanded their right after 16 years form the execution of the deed of option. (1971 – execution to 1987 – filing of the case).

38 SORIANO v BAUTISTA (Option Contract Mendiola) Facts: Spouses Basilio Bautista and Sofia de Rosas registered owners of a parcel of land. The spouses for and in consideration on the sum of P1,800, signed a document entitled "Kasulatan Ng Sanglaan" in favor of Ruperto Soriano and Olimpia de Jesus, with the pertinent condition: "5. Na, pinagkasunduan din naman na sakaling magkaroon ng kakayahan ang Pinagsanglaan (Soriano) ay maaaring bilhin ng patuluyan ang lupang nasanglang ito kahit anong araw sa loob ng taning na dalawang taon ng sanglaan sa halagang Tatlong Libo at Siyam na Raan Piso (P3, 900.00), salaping Pilipino na pinagkaisahan.” On May 13, 1958, a certain Atty. Angel O. Ver wrote a letter to the spouses Bautista informing the said spouses that his clients Ruperto Soriano and Olimpia de Jesus have decided to buy the parcel of land in question pursuant to paragraph 5 of the document. The spouses in spite of the receipt of the letter refused to comply with the demand contained therein. Issue: W/N Soriano and de Jesus are entitled to specific performance (by executing a deed of sale) considering that they had informed the spouses within the period. Held: While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it carries the added special provision aforequoted, which renders the mortgagors' right to redeem defeasible at the election of the mortgagees. It is simply an option to buy, sanctioned by Article 1479 of the Civil Code. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. In this case the spouses’ promise to sell is supported by the same consideration as that of the mortgage itself, which is distinct from would support the sale (the additional amount of P3,900.00, should the option be exercised.) The mortgagors' promise was in the nature of a continuing offer, non-withdrawable during a period of two years, which upon acceptance by the mortgagees, gave rise to a perfected contract of purchase and sale. 39 SANCHEZ v RIGOS (Option contract Facts: • •

Rivas)

An option to Purchase agreement was entered into by Rigos and Sanchez Rigos agreed, promised and committed to sell to Sanchez for 1,510 a parcel of land in Nueva Ecija within 2 years from the date of the agreement Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

failure to comply with the conditions will automatically terminate the offer Sanchez was able to make several payments amounting to 1,510 within the 2 year period but Rigos refused to execute the contract RTC: Rigos was ordered to enforce the contract Rigos: there is no valid contract of sale for there is no valuable consideration but only a unilateral promise to sell Article 1479 and not 1324 is the controlling doctrine since the case is about sale 1479 states that a promise must be supported by a consideration distinct from price Sachez was never able to establish the existence of a valuable consideration

• • • •

Issue: • Held: • •

•

W/N there is avlid contract of sale Yes! if an option is given without a consideration, it is a mere offer of a contract of sale which is not binding until accepted. if however, acceptance is made before a wothdrawal, it constitutes a binding contract of sale eventhough the option was not supported by a cufficient consideration. the concurrence of the offer and the acceptance generates a contract os sale Provision of the same law must be reconciles. Article 1324 - general principles on contract - is modified by Article 1479 - on sales - which makes the latter the exception to the former. according to statutory construction, exceptions are not favored unless the intention to the contrary is clear.

40 YAO KA SIN v CA (Option Contract Sarenas) Facts: • • •

•

• • • Issue: • Held: •

•

•

Prime White Cement sent a letter to Yao Ka Sin Trading. It was an offer to sell several bags of cement. On the letter, Yao Ka Sin was asked to sign if he agrees with the offer in the letter. Yao Ka Sin signed as acceptance. 23 days after the sigining of Yao Ka Sin of the letter, the Board of Directors of Prime White Cement disapproved the initial offer that was made through the letter. The Board though approved of sale to Yao Ka Sin of less bags of cement than what was initially offered. The letter-offer was disapproved because apparently the person who made the letter-offer was acting without authority. Yao Ka Sin wrote several letters to Prime White for delivery of the number of bags of cement that was in the letter-offer. Prime White replied that it has disapproved the letter offer that it made and will be only delivering less bags. Yao Ka Sin then filed for specific performance and damages against Prime White Cement Trial Court: Prime White should deliver the cement bags agreed upon in the letter offer and to pay damages CA: Trial court decision reversed W/N the letter-offer as accepted by Yao Ka Sin is a contract that binds Prime White Cement Before going to the merits, SC ruled that Yao Ka Sin Trading is not an entity that is capable of bringing suit under Art 44 of the Civil Code because it is of a single proprietorship. The plaintiff should have been Yao Ka Sin himself. Although this is merely of a formal defect and it was too late to rule out the case due to this defect. The person who entered into the contract, Maglana, didn’t have the authority to do so by himself. He had no powers to enter into contracts by himself without the approval of the Board. Therefore the contract is not binding upon the corporation. The offer was disapproved and rejected by the board. The subsequent delivery of less cement bags was accepted by Yao Ka Sin without any protest. This could be seen as a new contract that is different from the one contemplated in the letter offer.

41 VAZQUEZ v CA (Option Contract Beron) 42 NIETES v CA (Option Contract Calinisan) Facts:



Dean Villanueva

A) October 19, 1959: Petititioner Aquilino NIETES and Dr. Pablo GARCIA entered into a Contract of Lease with Option to Buy B) Lease is over the Angeles Educational Institute. Some terms are as follows: a. Lease for 5 years b. Rent per year is P5T c. That the Lessor (Garcia) agrees to give the lessee an option to buy the land and the school building for a price of P100T within the period of the Contract of Lease d. Contract will commence in June 1960 and will TERMINATE in June 1965. e. That the lessee agrees to help the lessor collect the back accounts of students incurred before the execution of the contract. C) July 16, 1961: Garcia wrote Nietes through his lawyer that he was rescinding the contract due to Nietes¯ non performance with the stipulations. (Not an important detail. But for the reasons, see p. 657) D) Nietes informed Garcia that he will exercise the option to buy. E) July 26, 1965: Nietes deposited P84T with the bank, which he also withdrew. F) August 2, 1965: filed a case for specific performance against Garcia G) The CA, upon a Motion for Reconsideration, found for Garcia on the basis that under the lease agreement, the full purchase price must be paid before the option is exercised. Issue: W/N the option price be paid first to exercise the option. Held: A) No need to pay the P100T first. B) Notice of the exercise of the option need not be coupled with actual payment of the price, so long as this is delivered to the owner of the property upon performance of the owner¡¯s part of the agreement. C) Unless Garcia makes available and actually delivered of the corresponding deed of sale, Nietes is not in delay. D) Rule in reciprocal obligations apply.

43 CARCELLER v CA (Rights in an Option

Delgado)

the lapse of 18 days is neither “substantial” nor “fundamental” that would defeat the intention of the parties when they executed the lease contract with option to purchase. SIHI really intended to dispose the properties in a desperate and urgent manner Carceller made considerable improvements and obtained a loan showing his undeniable intention to have accepted the option CLV: there was a substantial acceptance or exercise of the option. The acceptance or the substantial exercise must still be made within the option period to create a valid and binding contract of sale. -

-

the refusal of the offeror to comply with the offeree can be enforced by an action of specific performance

44 ANG YU ASUNCION v CA (Rights in an Option Del Socorro) Facts: - buyer Yu were lessees of residential and commercial spaces owned by seller Bobby Cu Unjieng - seller Unjieng offered to sell the land to buyer Yu, giving them priority to acquire it



Dean Villanueva

- during the negotiations, seller offered 6M whil buyer offered 5M - buyer asked seller to put their offer into writing; seller did - buyer asked seller to specify the terms and conditions of the offer, but didn’t receive an answer from seller - when buyer learned that seller was about to sell the property, buyer filed complaint to compel seller to sell the property to them Issue: W/N buyer Yu may compel by specific performance seller Unjieng to sell the property to them. Held: No. - the breach of an action for the right of first refusal does not justify an action for specific performance or a writ of execution on the judgment, since there is none to execute - proper remedy is an action for damages based upon Art. 19 of the Civil Code - in this case, what was given to buyer Yu was not an option, but a right of first refusal Option - requires the object and consideration to be certain

- governed by Art. 1479

Right of First Refusal - while the object may be made determinate, the exercise of the right is dependent not only the grantor’s eventual intention to enter into a contract but also on the terms, including the price, w/c are yet to be firmed up later - prior to perfection of contract, it merely belongs to a class of preparatory juridical relations not governed by contracts, but laws of general application and the pertinent provisions of the Civil Code on human conduct

- Summary rules when period is granted to offeree (see pp. 169-170 of book) 45 EQUATORIAL REALTY v MAYFAIR THEATER (Distinguishing Option from Right of First Refusal Facts: • • • • • •

•

Fernandez)

Carmelo & Bauermann Inc. owned a land with a building. A portion of said building was leased to Mayfair Theater. A second leased contract covered another portion of the building. The contracts of lease provide that if Carmelo should desire to sell the property, Mayfair is given 30-days exclusive option to purchase the same. Carmelo then informed Mayfair that the property would be sold. Mayfair wrote to Carmelo and said that it has a 30-day exclusive option by virtue of the contract. Mayfair sent another letter informing that it is willing to buy the entire property. 4 years later, Carmelo sold the property to Equatorial Realty. Mayfair instituted an action for specific performance (based on the lease contract). The trial court dismissed the complaint, upheld the validity of the sale, and ordered Mayfair to vacate the property. It reasoned that the option on the contract is not supported by any consideration, thus not binding on Carmelo. The CA reversed and said that the paragraph in the lease contract is a right of first refusal and not an option contract.

Issue: Was the stipulation in the contract an Option or a Right of first refusal? Held: It was a Right of first refusal. An option clause or an option contract to be valid needs a determined or certain price. An accepted unilateral promise which specifies the thing to be sold and the price to be paid when coupled with a valuable consideration distinct and separate from the price is what may properly be termed as a perfected contract of option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. 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. A separate consideration is not needed in a right of first refusal. In this case, the right of first refusal is an integral part of the lease contract—the consideration for the lease includes the consideration for the right of first refusal. Thus, Mayfair’s consent to the lease and to pay the price agreed upon, is consideration of the lessor’s promise that it will give Mayfair the right to match the offered price and to buy the property at that price, in case it desires to sell the same. Carmelo acted in bad faith by violating the right of first refusal—it did not afford Mayfair to negotiate—and by selling the property to Equatorial. Equatorial was also in bad faith since it was aware of the lease contract and the existence of Mayfair’s right. Hence the sale is rescissible. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

As to the claim of impossibility of selling only a portion, common sense and fairness dictate that instead of nullifying the agreement on that basis, the stipulation should be given effect by including the indivisible appurtenances in the sale of the dominant portion under the right of first refusal. Anyway, it was Carmelo who fixed the limits of the property it was leasing out. Justice Vitug dissent: A right of first refusal cannot have the effect of a contract because by its very essence certain basic terms would have yet to be determined and fixed—the offer must be certain and acceptance absolute. 46 PARAÑAQUE KINGS v CA (Distinguishing Option from Right of First Refusal

Legaspi)

Facts  Catalina Santos is the owner of 8 parcels of land in Paranaque  Chua was the first lessor of the property. He then assigned his rights to Bing (2nd lessee) who thereafter assigned his rights to Paranaque Kings  One of the rights assigned was the right of first refusal as embodied in paragraph 9 of the lease contract  Santos sold the land to Raymundo for 5M without offering the property to Paranaque Kings  Realizing her mistake, Santos repurchased the property from Raymundo after 12 days  Santos then offered the property to Paranaque Kings for 15M  Paranaque Kings refused to buy the property at the offered price since it was too high  Santos then sold the property to Raymundo for 9M  The facts show that there was collusion between Santos and Raymundo to make it appear that the value of the lot was higher than 5M Issue w/n a right of first refusal is enforceable in an action for specific performance Ruling  The complaint sufficiently alleges a breach on the part of Santos  Initially, Santos sold the properties to Raymundo without even offering the same to Paranaque  In order to have full compliance with the contractual right granting a party the first option to purchase, there should be identity of terms and conditions to be offered to the buyer holding a right of first refusal  Although the offer involving the 15M price was rejected by Paranaque, the 9M price given to Raymundo should have likewise been offered to Paranaque  Only after the Paranaque fails to exercise its right of first priority under the same terms (9M price) and within the period contemplated could Santos validly offer to sell the property to a third person, again, under the same terms as offered to Paranaque. 47 VAZQUEZ v AYALA CORP (Distinguishing Option from Right of First Refusal Facts: -

-

-

Issue: Held: -

Lopez)

Spouses Vasquez sold their stocks in Conduit Development Inc. to Ayala Corp. Conduit’s main asset is a 49.9 ha. land in Ayala Alabang, which was then being developed into a subdivision by G.P. Construction and Development Corp. through a subcontractor, Lancer General Builder Corp. Ayala agreed to continue the development of the land. It offered a right of first refusal to the Vasquez’s regarding 4 lots adjacent to the “Retained area” of the Vasquez’s. This right was subject to the warranty given by the Vasquez’s that Ayala would be free from any actions, suits or proceedings with respect to the land. After the execution of the MOA (1981), which contained everything above, a suit was instituted by Lancer against Conduit and Ayala for certain sums unpaid. This ended in Ayala paying the said amount. After the completion of the subdivision in 1990, Ayala offered to sell the land to the petitioners at the prevailing prices then. This offer was rejected by the Vasquez’s saying that the price should be at the rate in 1984. This was because of a stipulation in the contract that Ayala intends to finish the project within 3 years. This was interpreted by the Vasquez’s that Ayala was supposed to finish the project after the said amount of time. Vasquez’s file an action for specific performance in the RTC, which ruled in their favor. CA reversed the said ruling. W/n Ayala can be compelled, through specific performance, to sell the land to the Vasquez’s at the rate of prices in 1984. SC says no and affirms the ruling of the CA.



Dean Villanueva

Ayala was not bound by the MOA to finish the project within 3 years. The stipulation in the contract merely says that Ayala “intends” to finish the project in the said amount of time. Because of this, Vasquez’s right of 1 st refusal has already been respected by the offer made by Ayala to the Vasquez’s in 1990. This is in conformity with the stipulation in the contract that the parcels of land should be sold at the “prevailing market price at the time of the purchase.” Ayala could only sell the lands at that time since the subdivision was already finished. Ayala cannot be compelled to sell at 1984 prices because Vasquez’s have already forgone their right of first refusal by rejecting the initial offer of Ayala to sell the land at 1990 prices. My attempt at simplifying the diff. between option contract and right of first refusal (for further info see p. 255 of the case): Option Contract Right of First Refusal Preparatory contract to a contract of sale Not a separate contract, normally included in other contracts Gives the optionee a fixed period to exercise the Also gives a period (I think) option Must be supported by separate consideration No need Object must be determinate Object MIGHT be determinate Consent needed to perfect the contract of sale Same Price is determined Price is still to be fixed Binds party who gave the option to refrain from selling the land to another person before the period has expired -

-

In this case, stipulation was a right of first refusal because the price was not determined or determinate. Even if it says that the lands would be sold at the prevailing market prices, this does not make the price determinable. Price can only be determinable with respect to another object certain or if third persons are appointed to fix the price. Plus, there was no separate consideration for said right.

48 PUP v CA (Distinguishing Option from Right of First Refusal *gagamitin ko na lang yung kay polay dati… -

Issue: Held: -

Mendiola)

NDC, a GOCC, owns a 10 hectare property in Manila. Lease contract with Firestone covering 2.6 hectares of the land was made o For 10 years renewable for another 10 years o Allowed Firestone to construct warehouse and improvements on plant 2nd contract of lease was entered involving steel warehouse in Davao an extension on both lease was requested by Firestone a 3rd lease contract was executed with an express stipulation granting Firestone the first option to purchase the leased premises in the event that NDC decides to sell land 10 year lease contract was about to expire and Firestone asked NDC for an extension NDC did not acknowledge the request Firestone heard rumors that NDC planned to sell property to PUP Case for an action for specific performance was filed to compel NDC to sell land to Firestone RTC: 2.6 portion of the land belongs to Firestone and the remaining to PUP CA: upheld decision of RTC W/N Firestone can invoke its right of first refusal Yes! NDC cannot unilaterally rescind a right of first refusal that stand upon valuable consideration PUP’s contention that its being a ‘poor mans university’ is untenable. Paramount interest in education does not destroy the sanctity of a binding contract obligation Contract of Sale, as defined in the Civil Code is a ‘catch all provision’ which effectively bring within its grasp a whole gamut of transfers whereby ownership is ceded for a consideration There is a perfected sale of the land between NDC and PUP. But right if first refusal of Firestone must be honored A contract with a right of first refusal, 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 lessee failed to accept it Only if Firestone failed to exercise its right of first refusal will NDC be lawfully allowed to sell land to PUP

49 VILLAMOR v CA (mutual promise to buy and sell

Rivas)



Facts: Issue: Held: -

-

Dean Villanueva

Macaria is the owner of a 600 square meter lot in Caloocan In 1971, 300 of which was sold to Villamor for P70 per square meter with an option to buy the remaining lot “whenever the need of such sale arises either on our (Macaria’s) part on the part of Villamor” 1978, Villamor filed a complain for specific performance RTC: ordered Macaria to sell the remaining land to Villamor CA: reversed RTC W/N the deed of option is valid as to the period stated YES! An option to buy and an option to sell was agreed upon Since the contract of sale is consensual and there is already meeting of the minds as to price and object, there is already a perfected contract of sale. What was left to be done was for either party to demand from each other their respective undertaking Failure of the party to demand performance for an unreasonable length of time renders the contract ineffective 17 years is an unreasonable length of time

50 FULE v CA (Perfection Sarenas) Facts: • Fule is the owner of a land in Tanay. • Dr. Cruz was the owner of a pair of emerald-cut diamond earrings. Fule was interested with this jewelry. • Fule offered a barter between the property and the jewelry. • Deeds of sale were executed and ownership of the land and jewelry changed hands. • 2 hours after the changing of hands, Fule goes to the lawyer who assisted in the executing of the deeds and complains that the jewelry is fake. Fule wants land to be returned. Dr. Cruz refuses. • TC: the sale was valid, 2 hours is already considered unreasonable delay, Dr. Cruz and the lawyer are entitled to be paid damages by Fule • CA: TC decision affirmed Issue: • Held: • • •

W/N there was a valid sale between the parties The sale is valid. 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 upon the price. From the facts, there was a meeting of the minds between Dr. Cruz and Fule. They are bound by the contract unless there are reasons that warrant its nullification. Fule is alleging that there was fraud amounting to vitiation of consent. This is untenable. From the facts, it is Fule himself who employed machinations. He misrepresented how much the property actually costs.

51 VILLONCO v BORMAHECO (When Deviation Allowed Beron) Facts: The spouses Cervantes are the owners of lots which were mortgaged to PNB and on which the building, machinery and equipment of Bormaheco, Inc. are situated. Francisco Cervantes is president of Bormaheco, Inc. Adjacent to these lots are the lot of Villonco Realty Company. There were negotiations regarding the sale of the lots of Cervantes. During these negotiations, Villonco assumed that the lots belonged to Bormaheco and that Cervantes was authorized to sell the said land. An offer was made by Cervantes thru Bormaheco, Inc. for the sale of the subject lots for P400 per sq meter. It was stated in the offer that the sale is to be consummated only after Cervantes shall have consummated a purchase of a lot located at Sta. Ana. A couter-offer was made by Villonco. This counter offer was accepted by Cervantes. A check of P100,000 as deposit in accordance with the agreement of the parties was delivered to Bormaheco.



Dean Villanueva

Unexpectedly, 26 days after signing the contract of sale, Cervantes returned the P100,000 with interest. He claimed that despite the lapse of 45 days from the time offer was made, there is no certainty yet for the acquisition of the property in Sta. Ana (eto ung condition dun sa offer ni Cervantes na nasa 3rd par.). Villonco filed a complaint. Issue: Whether or not there was a perfected contract of sale. Held: Yes. Bormaheco’s acceptance of Villonco’s counter offer proves that there was ameeting of the minds upon the subject matter and consideration for the sale. Bormaeco’s acceptance of the part payment of P100,000 shows that the sale was conditionally consummated or partly executed subject to the purchase of the Sta. Ana property. This condition was satisfied as Bormaheco’s bid was accepted and a deed of sale was already signed. The contention of Cervantes that there was no perfection on the ground that there was a qualification on the acceptance of the counter offer of Villonco is without merit. Even assuming that such contention is correct, the fact still remains that Villonco by his act of depositing P100,000 signifies that he accepted this supposed qualifications made by Cervantes. (kneclaim ni Cervantes na nag counter offer sya dun sa counter offer ni Villonco kaya wala daw contranct pero ung counter offer naman nya in-accept ni Villonco as indicated by his act of depositing the P100,000.) The truth is that the alleged changes or qualifications in the revised counter offer are not material or are mere clarifications of what the parties previously agreed upon. For example, Cervantes alleged insertion of the letters PA after the word interest could not be categorized as a major alteration of the counter offer made by Villonco. 52 SPOUSES DOROMAL v CA (Earnest Money Calinisan) Facts: A)

The property in litigation was co-owned by 7 persons.

B)

Six of them decided to sell their shares and executed SPAs to that effect.

C)

Before the 7th co-owner executed a SPA, the prospective buyer, Doromal, paid P5T as “earnest money.” The 7th co-owner decided not to sell and so only 6/7 of the property was sold to buyer, with a simulated price appearing on the deed of sale.

D)

Seven then decided to redeem the property at the simulated price, which of course, buyer did not consent to.

E)

Buyer now claims that 7 failed to exercise the right of redemption within 30 days from notice of the sale.

F)

The notice, buyer claims, is satisfied by the 2 letters sent by another co-owner to 7, the first stating that the price was 5/sq. and that earnest money had been paid and the second stating that the price was 4/sqm.

Issue: Whether the letters were notice of the sale.

Held: A)

Neither of the letters were evidence of a consummated sale.

B)

When they were written, the SPAs hadnot even been received by the representative of the co-ownership.

C)

That P5T had been paid does not signify consummation of the contract. The so called “earnest money” was more in the concept understood under the old code – that the buyer would not back out.

53 DALION v CA (Form of Sales

Delgado)

Facts: Subject of this case is a lot in Sogod, Southern Leyte. The seller is Segundo Dalion and wife and the buyer is Ruperto Sabesaje, Jr. Buyer sued to recover the ownership of the land evidenced by a private document of absolute sale. The seller denies this claiming that it is fictitious and that his signature was forged. Seller denied allegation that



Dean Villanueva

the reason why he is still in possession of the land is because he pleaded to the buyer to cultivate it because he has no other means of livelihood. RTC granted the claim of buyers. CA affirmed. Issue: W/N the case of the private respondent has merit. Held: NO. His defense of forgery was overturned by witnesses and comparisons of his signatures finding out to be his. Assuming authenticity of his signature and the genuineness of the document, 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" (Art. 1358, par 1, NCC). This argument is misplaced. 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). As regards petitioners' contention that the proper action should have been one for specific performance, We believe that the suit for recovery of ownership is proper. As earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected contract of sale the right to reciprocally demand performance, and to observe a particular form, if warranted, (Art. 1357). 54 SECUYA v VDA DE SELMA (Form of sales—non-applicability of rule to 3rd parties

Del Socorro)

Facts: - land dispute between Secuya’s and Selma - Secuya’s allege that the title issued to Selma is a cloud on their titles as owners and possessors of the lot; hence they have a cause of action for quieting title to the land - Secuya’s base their ownership on the agreement of partition and the deed of confirmation of sales (what is relevant to sales) executed by Paciencia Sabellona to their predecessor in interest, Dalmacio Secuya - Secuya’s insist that Sabellona sold the disputed property to Dalmacio and that the sale was embodied in a private document - however, such document, which would have been the best evidence of the transaction, was never presented in court, allegedly because it had been lost Issue: W/N Secuya’s have sufficiently proved that they are the rightful successors-in-interest of Sabellona so that they have the requisite title pursue an action of quieting title Held: NO. Secuya’s have not proven they are Sabellona’s successor-in-interest; they have no title to file an action to quiet title over the land - While a sale of a piece of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons, if it is not embodied in a public instrument and recorded in the Registry of Property (Art. 709, Civil Code). Addendum: - To prove the alleged sale of the disputed property to Dalmacio, petitioners instead presented the testimony of Miguel Secuya, one of the petitioners; and a Deed] confirming the sale executed by Ramon, an alleged heir of Sabellona Held: The testimony of Miguel was a bare assertion that the sale had indeed taken place and that the document evidencing it had been destroyed. - while the Deed executed by Ramon ratified the transaction, its probative value is doubtful. His status as heir of Paciencia was not affirmatively established. Moreover, he was not presented in court. 55 FIRME v BUKAL ENTERPRISES Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas

SALES DIGESTS 2C 2005-2006 (Statute of Frauds Facts: • • •

•

•

•

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Fernandez)

Spouses Firme own a land in which Bukal Enterprises is interested in buying. VP of Bukal (De Castro) authorized Aviles to negotiate with the spouses regarding the purchase. Bukal filed a complaint alleging that the spouses reneged in its promise to sell the property. During the trial, Bukal claims that there was a perfected contract of sale between it and the spouses. It claimed the following: that the spouses agreed to the 2nd draft of the deed of sale made by Aviles; that it already spent for the relocation of the squatters and has introduced improvements on the property; that there were witnesses who attested to the efforts made by Bukal in order to comply with the wishes of the owner. On the other other hand, Firme claimed that it actually refused to sell the property. Firme said that they rejected the 3rd Draft of the deed of sale made by Aviles. That they were surprised to see their property fenced by hollow blocks and that they demanded for the removal of the same. The trial court said that there was no perfected contract as there was no consent of the spouses Firme to the sale. The CA reversed and said that there was a perfected contract. It further said that if there was any defect in the authority of Aviles to negotiate and purchase the property, such defect was ratified already. (this is what’s important under the outline) Note that the CA said that though contract was oral, it was taken out of the Statute of Frauds—there being partial performance—hence it is enforceable.

Issue: Was there a perfected contract of sale between Bukal and the spouses? (what’s important) Is the Statute of Frauds applicable to the alleged contract of sale? Held: None. A review of the evidence presented clearly showed that Firme did not consent to any sale. During trial, De Castro’s testimony (for Bukal) was inconsistent and it appeared that the testimony of Firme was more credible. The drafts (1st and 2nd) of the Deed of Sale contained the same provisions and were left unsigned. It was also shown that Aviles was very much aware that Firme refused to sell the property. Hence, there was no concurrence of the offer and acceptance on subject matter, consideration, and terms of payment. Moreover, there was no approval of the Board of Directors of Bukal on the purchase of the property. Neither was there a Board Resolution authorizing Aviles to negotiate. As the issue on the Statute of Frauds…Statute of Frauds not applicable It was decreed by the CA that since there was partial performance of the contract of sale, the oral contract is out of the scope of the Statue of Frauds already (simply put...Bukal claims that the contract can be enforced even if it is not in writing). HOWEVER, this is erroneous. The conclusion made by the CA was based on the wrong assumption that there was a perfected contract of sale. It is clear that there was no perfected contract of sale, hence there is no application of the principle under the Statute of Frauds. Bukal cannot hide under the benefit afforded by the Statute of Frauds (that when there is partial performance, contract can be enforceable) to have the alleged oral contract of sale be declared enforceable. Despite the improvements introduced by Bukal on the property, it was not a builder in good faith. Hence, it cannot claim reimbursement for such improvements 56 YUVIENGCO v DACUYCUY (Memorandum Legaspi) Facts Yuvienco through Atty Gamboa(seller) offered to sell to Yao King Ong a land and building Yao replied agreeing to buy the property and ordered Yuvienco to proceed to Tacloban to negotiate the details Atty Gamboa wired Yao accepting the proposal and arrived tuesday morning with the contract When Atty Gamboa arrived in Tacloban with the contract, Ong and company were surprised to see that the payment of the balance price is within 30 days instead of 90 days respondents found variance between the terms of payment and what they had in mind Accdo to Yuvienco: there was no absolute acceptance Issue w/n the facts adequately show the existence of a perfected contract of sale thereby giving Yao and company a cause for specific performance Ruling In any sale of real property with installments the Statute of Frauds read together with the perfection requirements of the civil code must be applied such that payment on installments of the sale must be in the requisite note or memorandum



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57 LIMKETKAI SONS v CA (1 and 2) (Statute of Frauds is met when the contract is in a separate written memorandum

Lopez)

Limketkai 1 Facts: Philippine Remnants Co. Inc. constituted BPI as its trustee to manage its properties. BPI then authorizes Pedro Revilla to sell the contested lot at 1,000/sq.m. Revilla contacts Alfonso Lim of Limketkai. The latter agrees to buy the property. Revilla informs BPI, through letter, that he has found a buyer. Lim and Limketkai of the petitioner-company go to the office of BPI to finalize the agreement. They met with Aromin and Albano, officers of BPI. Lim asked that the price be reduced to 900 but Albano stated that the price be 1,100. They finally agreed on 1,000. Despite the agreement, Lim asked if they could pay on terms. BPI said that there was no harm in asking and said proposal of Lim was referred to a trust committee. It was the understanding, however, that should the term payment be disapproved, then the price shall be paid in cash. Petitioner found out that its offer to pay had been frozen. Lim then tenders full payment to Albano. The latter informed the former that he was not anymore authorized to sell the property. Thus, petitioner files a case for specific performance. Here, BPI informed the court that the land has been sold to National Bookstore. Thus, the latter was included in the suit. RTC for Limketkai, CA reversed. Issue: W/n there was a perfected contract of sale between Limketkai and BPI. W/n the sale violates the Statute of Frauds. Held: SC says there was a perfected contract of sale. BPI was authorized to sell the land. Lim’s request is not considered a counter-offer. The Court found that there was a meeting of the minds between the parties as to the subject matter (the land) and as to the price (1,000/sq. m.) Even if Lim proposed to pay in different terms, there was still a meeting of the minds because said proposal was subject to the understanding that if the proposal is rejected, Limketkai would have to pay the full amount in cash. Even if the deed of sale was not signed nor notarized, it does not affect the fact that a contract of sale has already been perfected. A sale is valid regardless of the form it may have been entered into. If the law requires a definite form for a contract, the contracting parties may compel each other to observe that form, once the contract has been perfected. SC held that the Statue of Frauds has been met. Art. 1403 (2e) renders a contract of sale of real property unenforceable if it is not in a written instrument. But, the said provision admits an exception when the agreement is set forth in some written note or memorandum. The memorandum may be found in several writings, not necessarily in one document. SC says that in the instant case, there were separate memorandums where the agreement can be found. There were different letters sent that contain the assent of Limketkai to buy the property in question. Limketkai Sons Milling Inc. vs. CA (Statute of Frauds is met when the contract is in a separate written memorandum

Lopez)

Limketkai 2 Facts: This is the motion for reconsideration of the earlier decision. The Court took notice of certain documents upon which the earlier decision was based: o Exh A – Deed of Trust by Phil. Remnants to BPI o Exh. B – Letter of Authority from BPI to Revilla o Exh. C – Letter allowing Revilla and Lim to inspect the property o Exh. D – Letter of Revilla to BPI informing the latter that he has found a buyer o Exh. E – Written proposal of Lim to buy at 1,000/ sq. m. on terms o Exh. F – BPI’s letter refusing the proposal o Exh. G – Letter of Lim that they are willing to buy in cash o Exh. H – BPI’s rejection of the last letter. o Esh. I – Letter of petitioner to BPI claiming that there is a perfected contract of sale. Issue: Same Held: SC reversed their earlier ruling. They reiterated that the terms of payment is an essential element of the price. There must be a meeting of the minds as to the terms in order to perfect a contract of sale. Here, there was no such meeting of the minds. Lim’s proposal to pay in different terms constituted a counter-offer, which amounts to a rejection of the original offer. SC held that petitioner’s evidence failed to hurdle the requirements of the Statute of Frauds. There is a patent absence of any deed of sale. Plus, Exh. E, G, and I, which were the documents alleged to be the Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

“memorandum” embodying the agreement of sale, were not subscribed by BPI. To consider them sufficient compliance with the Statute of Frauds is to betray the avowed purpose of the law to prevent fraud and perjury in the enforcement of obligations. Melo, Dissent: Basically, reiterates the earlier case, siya kasi yung ponente nun. Reiterates that the oral evidence presented by the petitioners in the lower court can be accepted to prove the contract of sale in contravention of the Statue of Frauds. He says that this is because there was a waiver of the defense of the Statute of Frauds when the counsel of BPI cross-examined the witnesses of the petitioner. 58 ORTEGA v LEONARDO (Partial Execution Mendiola) Facts: Ortega was the owner of a house in manila before it was destroyed in the WW2. She went back to her house after the liberation at the time when the administration of the lots was designated to the Rural Progress Administration. She asserted her right to the lot. Leonardo also claimed ownership of the lot by alleging an agreement with Ortega. In that agreement, according to Leonardo, Ortega will desist on claiming, and that if Leonardo got title to the lot, he would sell a 55 sq. m. portion to Ortega, provided that Ortega caused the survey and subdivision of the lot. Ortega accepted that agreement. Ortega had the lot surveyed and subdivided, built a house. However, Leonardo refused to accept the payment of Ortega. Ortega sued for specific performance. Issue: W/N there was partial performance so as to remove the oral contract form the Statute of Frauds. Held: Ortega wins. Ortega’s act of possession, making improvements, rendition of services, payment of taxes, relinquishment of rights, when taken together, constitute partial performance. (Although each act is not partial performance when taken alone. Not even tender of payment is partial performance.) Only when these acts are taken together can there be partial performance. The existence of partial performance effectively removes the contract form the Statute of Frauds. 59 CLAUDEL v CA (Partial Execution Facts: Issue: Held: -

-

Rivas)

Cecilio was the registered owner of a parcel of land in Rizal until his death 2 branches of Cecilio’s family contested ownership over the land: the children and siblings of Cecilio the children of Cecilio partitioned the land among themselves 4 years later, the siblings appeared questioning the partition claiming that the land was sold by Cecilio to their parents but the transaction was purely verbal RTC: dismissed the complaint of the siblings for they failed to present evidence of the alleged sale CA: reversed the RTC saying that the Statute of Fraud is only applicable on executory contracts and not on partially executed or executed contracts W/N the sale can be proven orally NO! The rule of thumb is that a sale of land, once consummated, is valid regardless of the form it may have been entered. However, in the end that a third party disputes the ownership of the property, the person against whom the claim is sought can not present any proof of such sale and has no means to enforce the contract Under Article1403, the existence of the contract of sale made by Cecilio with his siblings cannot be proved Also, the Torrens Title in the possession of the children of Cecilio carries more weight as proof of ownership than the survey or subdivision plan in the name of the siblings

60 ALFREDO v BORRAS (Acceptance of Benefits under 1405 Facts: • •

Sarenas)

Alfredo spouses owned a land that was mortgaged to DBP in consideration of a loan. To pay for the loan, the land was sold to the Borrases for P15k. The Borrases were to pay the DBP loan and the balance to be paid to the Alfredos.


SALES DIGESTS 2C 2005-2006 • • • • Issue: • Held: • • • •

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After the payment of everything, the OCT was delivered to the Borrases. The Alfredos introduced the Borrases to the tenant of the land. Several years later, the Borrases were surprised when several people came into the property to cut trees. Apparently the Alfredos sold the land to another set of people. Borrases sued Alfredos for specific performance TC and CA sided with the Borrases W/N there was a valid contract of sale between the parties The sale is valid and enforceable. It was a perfected contract because there was consent between the parties on the object certain and on the cause of the obligation. The object of the sale is the land and the price certain is P15k The contract of sale was also consummated because the sellers and buyers have performed their respective obligations Ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery.

61 SOLIVA v ESTATE of VILLALBA (Waiver Beron) Facts: Marcelo Villalba asked Soliva’s permission to occupy her house and then promised to buy the house and lot. Marcelo died without having completely paid the consideration promised. The widow, now defendant, refuses to vacate the house and lot. CA: the incation of Soliva for almost 16 yrs had barred her action to recover the disputed property. Issue: W/n Soliva can still collect from Villalba the consideration for the sale of the house and lot. Held: Yes. The supreme court affirmed the decision of the lower courts that laches has set in. The inaction of Soliva for 16yrs has barred their action for recovery of the said land or the consideration for the properties. However, in the interest of substantial justice, and pursuant to the equitable principle proscribing unjust enrichment, she is entitled to receive the unpaid balance of the purchase price plus legal interest thereon 62 TOYOTA SHAW v CA (Rulings on Receipts and other Documentary evidence of Sale Facts A) B) C) D) E) F)

Calinisan)

Luna SOSA and Popong BERNARDO (Toyota Sales Represenatative) entered into a document (an “Agreement”) signed by Bernardo. It was for the a yellow Lite Ace (dapat Fortuner na lang parang si Ralph). (The complete document is on p322) Sosa wanted to use it for his balikbayan guest. They will go to Marinduque for SOSA’s birthday. After a downpayment of P100T, Toyota and Sosa signed another document, a printed Vehicle Sales Proposal. Sosa waited for his Lite Ace on the agreed date. He failed to get it since “nasulot ang unit ng ibang malakas.” (ah..parang si Ralph talaga…) Sosa first demanded for a refund, then asked for P1M damages.

Issue: W/N a Contract of Sale actually took place. Held: A)

Where the receipt indicated a down payment of P100T but did not indicate what it was for, it cannot be the evidence of a Contract of Sale.


SALES DIGESTS 2C 2005-2006 B)

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The document only had an acknowledgement of receipt of P100T but there was no indication as to an agreement on the manner of payment of the balance. A definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale

63 XENTREX v CA (Ruling on Receipts and other Documentary evidence of Sale

Delgado)

Facts: Subject of the case is the sale of a car Nissan Sentra Super Saloon A/T (dapat nag-Sorento nalang sila tulad ni Bry) executed by the Samsons (buyer) and Xentrex (seller). The amount is P494T and the buyers made a deposit of 50T. The balance is supposed to be paid by financing but because of the slow process, the buyer decided to pay it by issuing a check worth P250T only to find out it was sold to another person. The buyer made several demands to Xentrex to fulfill its obligation but to no avail. RTC favored the buyer affirmed by the CA. Issue: W/N there was a perfected contract of Sale Held: YES. There was a perfected contract of sale evidenced by the acceptance of the P50T initial deposit and by pulling out a unit of the said car. 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). 64 SANTOS v SANTOS (presumption of delivery by public instrument; control

Del Socorro)

Facts: - mother and father Santos owned a parcel of land and on it was an apartment administered by mother Santos (Rosalia) - mother and father sold the land to their 2 children, Salvador and Rosa - Rosa sold her share to Salvador - despite the deed of sale, Rosalia (mother) still continued to lease and receive rentals from the apartment - father, mother and Salvador died - widow of Salvador, petitioner Zenaida Santos demanded the rent from a tenant of Rosalia - because tenant refused to pay, she filed an ejectment suit against him - respondents (the 2 brothers and a sister of Salvador) filed for reconveyance of property - they contend that the alleged deeds of sale were simulated for lack of consideration - such deeds were executed to accommodate Salvador in generating funds for his business ventures and providing him w/ greater business flexibility - widow Zenaida contends that her deceased husband is the owner of the property - applying Arts. 1477 and 1498 to the case, Salvador became the owner of the property by virtue of the 2 deeds of sale executed in his favor Issue: W/N a sale through a public instrument tantamount to delivery of the thing sold. Held: No. Salvador did not become the owner of the land. - the Civil Code does not provide that the execution of a deed of sale is a conclusive presumption of delivery of possession - it is only prima facie proof of delivery, w/c may 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 - applying Danguilan vs. IAC, for the execution of a public instrument to effect delivery, the buyer must be placed in control of the thing sold - in this case, as found by the lower courts, 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 vs. CA, the critical factor w/c gives legal effect to delivery is the actual intention of the vendor to delivery, and its acceptance by the vendee - w/o such intention, there is no delivery - in this case, although mother and father Santos executed a deed of sale, they did not delivery the possession and ownership of the property to their 2 children - such deed of sales was merely to accommodate Salvador in generating funds for his business ventures and providing him w/ greater business flexibility 65 ADDISON v FELIX



Dean Villanueva

(Constructive Delivery as to Immovables through a public instrument Facts: •

• • •

• •

Fernandez)

Through a public instrument, Addison sold 4 parcels of land to Felix. The purchase price was to be paid in installments. The sale agreement also stipulated that the purchaser was to deliver to the vendor 25% of the value of the products that she might obtain from the lands from the moment she takes possession of the same until the Torrens certificate is issued in her favor. Buyer (why not use buyer and seller?! hehe) was also given a right to rescind the contract within one year from the date of the certificate of title, in which case the seller is to return all the sums paid. Later on, the seller filed a suit to compel buyer to pay the 1st installment. As a defense, buyer said that the seller failed to deliver the lands to her. She also sought to rescind the sale. It was stated in the evidence that seller and a representative of the buyer went to the location of the lands for the purpose of designating and delivering the lands sold. But only 2 lands were designated—2/3 of which were found to be in the possession of a certain Villafuerte. Seller filed a suit to obtain possession of the lands but this was dismissed for failure to present the required plans. So walang possession si seller. TC decreed rescission of the sale on the sole ground of the right of the buyer to rescind. Natural, appeal si seller.

Issue: Whether or not rescission was proper? (not on the sole ground of buyer’s right to rescind, but on the question of WHETHER THERE WAS DELIVERY?) Held: Rescission is proper as seller did not deliver the thing sold. The seller has the duty to deliver the thing sold. While it is true that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, such symbolic delivery will only produce the effect of tradition if the seller has CONTROL over the thing, and that at the moment of the sale, material delivery could have been made (ownership and right of possession not enough). Rescission is warranted, not because of the contractual provision, but by virtue of law (if vendor fails to deliver the thing sold, the vendee may elect to rescind the contract) CLV: So, what’s the value of ADDISON again?? You: It provides for the 2nd requisite on how a constructive delivery, by execution of a public document, will produce the same legal effect as actual delivery. That is—the seller, at the time of the execution of the public instrument, must have had the capacity, if he wanted to, and the buyer could have demand, if he wanted to, to get the possession or control of the thing itself. If at the time of constructive delivery, the subject matter is not within the control and possession of the seller, then he deprived the buyer of the ability to take in the same advantage as actual delivery. CLV: Right! 66 DANGUILAN v IAC (Constructive delivery as to immovables

Legaspi)

Facts both Danguilan and Apolonia Melda are claiming for the same parcel of land previously owned by Domingo Melad Apolonia Melad filed a complaint against Danguilan for the recovery of a lot which she claims she purchased from Domingo Melad Apolonia's contentions • Apolonia presented a deed of sale. The property was sold for 80 pesos. She claims that the amount was earned by her mother as a worker at the Tabacalera factory. She also said that she was the illegitimate daughter of Domingo Melad. • Apolonia moved out of the farm only when Danguilan approached her and asked permission to cultivate the land and stay therein. She agreed on the condition that Danguilan would deliver part of the harvest to her. • The delivery of the harvest stopped so she filed a complaint against Danguilan. Danguilan's contentions • Danguilan was the husband of Domingo's neice. Previously, Domingo Melad signed a private instrument which he gave the land to Danguilan on the condition that Danguilang would take care of Domingo and arrange for his burial. Issue w/n Apolonia as "owner" of the property has the right to recover the lot from Danguilan w/n the sale between Apolonia and Melad was consummated Ruling The deed of sale shown by Apolonia was executed when she was only 3 years old and the consideration was supposedly paid by her mother. This itself was a suspicious circumstance. (please see page 30) Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

Even assuming the validity of the sale, the record shows that Melad did not take possession of the properties. She failed to show that she consummated the contract of sale by actual delivery of the properties and her actual possession in the concept of purchase owner. There was no constructive delivery because it is necessary that the vendor should have control of the subject matter at the moment its material delivery could have been made. Both evidences being weak, the decision would be in favor of Danguilan. He who is in possession is presumed to be the owner of the land. In addition, it was shown by evidence that Danguilan did take care of Domingo and arranged for his burial. Hence, the conditions of the donation were fulfilled. 67 PASAGUI v VILLABLANCA (Constructive delivery via deed of sale in a public instrument – Lopez) Facts: Issue: Held: -

-

Calixto Pasagui and Fausta Mosar bought a parcel of agricultural land from the Villablancas. The sale was in a deed of sale that was notarized and registered in the Register of Deeds. 3 mos. after the sale, Bocar’s occupied the land bought by the plaintiffs. And harvested the coconut thereon. Plaintiffs filed a case in CFI against the Bocar’s (for the illegal possession of the land) and the Villablanca’s (for warranty clause in deed of sale). Defendants filed a motion to dismiss which was granted. This was for lack of jurisdiction because the CFI held that the action brought by the plaintiffs is one for forcible entry, which is under the jurisdiction of the Justice of the Peace. W/n the aforesaid action is for forcible entry and therefore not cognizable by the CFI. The action was not for forcible entry. There was no prior possession of the parcel of land by the plaintiffs, which is one of the requisites for an action for forcible entry. Also, there was no allegation that the taking of the property by the Bocar’s was effected through force, intimidation, threat, strategy or stealth. This is also one of the requisites for an action for forcible entry. The case filed by the plaintiffs was for recovery of possession against the Bocar’s and for return of the price paid and damages from the Villablanca’s (by virtue of the latter’s warranty against eviction or loss of ownership) (Sabi sa book ni Sir).In this case, it can be implied that for a deed of sale in a public instrument to be considered as constructive delivery, for the purposes of sale, the property must be under the control of the seller. The case actually says that “The presumptive delivery only holds true when there is no impediment that may prevent the passing of property from the hands of the vendor into those of the vendee.” Sabi ni Sir, implied lang ung doctrine sa case because the case is not actually about constructive delivery, it was about what action was filed, whether it was forcible entry or not.

68 and 70 DY, Jr. v CA (Constructive Delivery

Mendiola)

Facts: A brother bought a tractor from another brother through a deed of absolute sale. This tractor was subject to a mortgage to Libra from whom the brother-seller obtained the funds to but the tractor. At the time of the execution, the tractor was in the possession of Libra. That purchase of the tractor was with the consent of Libra who insisted that the check for the mortgage debt clear first before delivery to the buyer. However, the tractor was executed by Gelac in a separate case involving the brother-seller. Libra insists that at the execution of the deed, there was no constructive delivery, since the consummation of the sale depended upon the clearance of the check issued for the payment of the tractor. Issue: W/N the execution by Gelac is valid, considering that the tractor had been sold to the brother-buyer. Held:

The mortgagor (brother-seller) does not lose ownership of the property that he has given as a chattel mortgage. HE has the right to sell it provided that the consent of the mortgagee (Libra) was acquired (which in fact was given). Mere delivery of movable property may be made by consent or agreement of the parties, if the thing cannot be transferred to the buyer, or if the buyer already had it in his possession. In this case, actual physical delivery cannot be made. However, there was constructive delivery upon the execution of the public instrument and upon the consent or agreement of the parties.

69 POWER COMMERCIAL v CA (When buyer assumes the risk of ownership and possession

Rivas)

Facts: Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

PCIC bought a parcel of land from the spouses Quiambao in their agreement, it is stipulated that 108,000 down payment balance upon the execution of the deed PCIC to assume the mortgage payment a second mortgage was entered into by the spouses which was paid by the spuoses themselves PCIC made several payments of the mortgage to PNB PCIC asked PNB to trasfer the title of the land in their name because they cannot eject the occupants of the land without it PNB refused because the mortgage was not yet paid in full PCIC asked for the rescission of the contract and asked the court to order PNB to return the payment it made for the mortgage of the property RTC: ordered the rescission of the contract and the return of the money CA: reversed the decision of the RTC

• • • • • • • • • • • • Issue: • Held: • • •

• •

W/N the failure of the Quianbaos to eject the occupants of the land is a sufficient groung for the rescission of the contract no! Symbolic delivery as a specie of constructive delivery, effects the transfer of ownership through the execution of a public document if the parties intended to impose on the Quiambaos the obligation to eject the tenants from the lot sold, it should have included in the contract a provision similar to that. absent the stipulation, it is not a sufficient groung to rescind the contract the contention of PCIC that the control of the land was not transferred to them was untenable. the filing of the ejectment suit subsequently done by PCIC signified that it was the new owners of the land. prior physical delivery or possession is not legally required and the execution of the deed of sale is deemed equivalent to delivery

71 BEHN MAYER v YANGCO (FOB sales and CIF sales Sarenas) *weird yung way na sinulat yung kaso Facts: •

•

• Issue: • Held: •

Subject matter & consideration: 80 drums Caustic Soda 76% ‘Carabao’ brank o Merchandise was shipped from New York o Ship was detained in Penang, 71 drums confiscated o Defendant refused to accept the remaining 9 drums o Note: the specific merchandise was never tendered Place of delivery: contract provided for “c.i.f. Manila, pagadero against delivery of documents” o c.i.f. – costs, 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 o delivery was to made at Manila Time of delivery: embarque: March 1916 o It was in fact shipped from New York on April 12,1916 W/N the contract can be rescinded Yes! The warranty 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.

72 GENERAL FOODS v NACOCO (CIF sales Beron) Facts: * NACOCO sold to Gen Foods 1500 long tons of copra at $164 per ton of @000 puonds per ton, CIF, New York. * Upon arrival in NY, the net cargo was reweighed by Gen Foods and was found to weigh only 898.72 short tons. * Gen Foods demanded from NACOCO the refund of $24,154.59(amount withdrawn by NACOCO from Gen Foods' letter of credit). NACOC thru its off0cer-incharge acknowledged the deficiency. * NACOCO was abolished and went into liquidation. * Gen Foods submitted its claim to Board of Liquidators, which refused to pay. Hence, this complaint. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

* Defendant NACOCO, insists that the contract in question was an ordinary CIF agreement wherein delivery to carrier is delivery to buyer, and that the shipment having been delivered to the buyer and the latter having paid its price,the sale was consummated. ISSUE: W/n the delivery by NACOCO to the carrier amounts to delivery to Gen Foods... HELD: NO. There is no question that under an ordinary CIF agreement, delivery to the buyer is complete upon delivery of the goods to the carrier and tender of the shipping and documents required by the contract and the insurance policy taken in the buyer's behalf. Although it is the seller who may make arrangement for the insurance coverage and freightage of the goods, he does this for the benefit of the buyer. However, there is equally no question that the parties may be express stipulation or impliedly (by making the buyer's obligation depend on arrival and inspection of the goods), modify a CIF contract and throw the risk upon the seller until arrival in the port of destination. In the instant case, the court took into consideration that the price agreed upon was to be based on 'net landed weights' (ibig sabihin ung weight pagdating sa port ng NY, so may implied na modification on the CIF agreement, kung ,may mawala during the shipment, it will be for the account of the seller, NACOCO). 73 BEHN MAYER v YANGCO (refer to case 67) 74 PACIFIC VEGETABLES v SINGZON [ CIF Sales (Calinisan) (taken from Commercial Law by Dean Sundiang (San Beda)) ] RC note: I cannot find the case. I have placed this instead, in lieu of the digest. This is better than nothing. Explain the Contract Test of "doing business" in the Philippines. In Pacific Vegetable Oil Corp. vs. Singson (April 1955), the Supreme Court held that a foreign corporation was not doing business in the Philippines when it entered into a contract with a domestic corporation providing for the delivery and payment of copra from the Philippines where the said contract was negotiated, perfected and performed in the United States. Thus, even if the twin characterization tests of Mentholatum obtained in the case, so long as the perfection and consummation of series of transactions are done outside Philippine territorial jurisdiction, the same would not constitute doing business in the Philippines, even if the products themselves should be manufactured or processed in the Philippines. The Pacific Vegetable Oil doctrine had a follow up in Aetna Casualty & Surety Co. vs. Pacific Star Lines [80 SCRA 835 (1970] and in Universal Shipping Lines, Inc. vs. IAC (188 SCRA 170 (1970)] 75 VALLARTA v CA (Sale on Approval, Trial, or Satisfaction

Delgado)

Facts: Rosalinda Cruz, seller (private offended party) is the owner of several jewelries. On November 20, she entrusted her these (7 pieces) to her long time friend Victoria Vallarta, buyer-accused. On December 20, she decided to buy some items, exchanged one item with another, and issued post-dated check in the amount of P5,000. Cruz presented the check to the bank for payment but was dishonored because the accounts of Vallarta already close. Cruz appraised Vallarta of the dishonor and the latter promised to give another check but later would start to avoid seller. Cruz filed estafa case in RTC and buyer was convicted thereof. CA Affirmed. Issue: (buyer Vallarta) I’m not guilty of estafa because it was not issued (December 20) for a pre-existing obligation since on November 20 there was still no “meeting of the minds” being a “sale on acceptance” not a sale on return. Held: Still guilty of estafa because of the presence of intent to defraud and failed to put-up funds 3 days after the notice of dishonor. But the Court discussed the difference between Sale on Return and Sale on Acceptance: “ Note that Vallarta changed the ruby ring because it was not acceptable to her, and chose another ring. Likewise, the price to be paid for the jewelry was finally agreed upon only in December 1968. Thus, there was a meeting of the minds between the parties as to the object of the contract and the consideration therefore only in December 1968, the same time that the check was issued. The delivery made on November 20, 1968 was only for the purpose of enabling Vallarta to select what jewelry she wanted. Properly, then, the transaction entered into by Cruz and Vallarta was not a "sale or return." Rather, it was a "sale on approval" (also called "sale on acceptance," "sale on trial," or "sale on



Dean Villanueva

satisfaction" [CIVIL CODE, art. 1502]). In a "sale or return," the ownership passes to the buyer on delivery (CIVIL CODE, art. 1502). (The subsequent return of the goods reverts ownership in the seller [CIVIL CODE, art. 1502]). Delivery, or tradition, as a mode of acquiring ownership must be in consequence of a contract (CIVIL CODE, art, 712], e.g. sale. If there was no meeting of the minds on November 20, 1968, then, as of that date, there was yet no contract of sale which could be the basis of delivery or tradition. Thus, the delivery made on November 20, 1968 was not a delivery for purposes of transferring ownership — the prestation incumbent on the vendor. If ownership over the jewelry was not transmitted on that date, then it could have been transmitted only in December 1968, the date when the check was issued. In which case, it was a "sale on approval" since ownership passed to the buyer. Vallarta, only when she signified her approval or acceptance to the seller, Cruz, and the price was agreed upon.” 76 MENDOZA v DAVID (Sale by Description

Del Socorro)

Facts: - Mendoza alleged that she ordered three sets of furniture from David and paid an initial deposit - Mendoza and David agreed on the specifications of the dining set, sofa set and tea set including the material and quality - Mendoza cancelled some of the furniture she ordered and David agreed to the cancellation - Mendoza paid an additional deposit - when David delivered the dining set to Mendoza, the latter rejected the set because of inferior material and poor quality. Mendoza likewise rejected the sala set and the tea set for the same reason - when Mendoza requested a refund of her total deposit of P80T, David refused - Mendoza filed a complaint for collection of money with damages - David alleges that the three sets of furniture were “made to order” in accordance with the usual practice of furniture stores - however, Mendoza insists that the transaction was a sale by sample or description which can be rescinded as provided under Article 1481 Issue: Sale by sample or description (as contended by buyer Mendoza) OR made to order sale (as contended by seller David)? Held: The transaction in this case was a “made to order” agreement. Nothing shows that the intent of the parties was for a sale by sample or description. - Whether a sale is by sample or description depends upon the intention of the parties. Other than Mendoza’s bare allegations that the transaction was a sale by sample or description, Mendoza failed to produce evidence to substantiate her claim. - The sale of furniture in this case is not a sale by sample. The term sale by sample does not include an agreement to manufacture goods to correspond with the pattern. - In this case, the three sets of furniture were manufactured according to the specifications provided by the buyer. Mendoza did not order the exact replica of the furniture displayed in David’s shop but made her own specifications on the measurement, material and quality of the furniture she ordered. - Neither is the transaction a sale by description. - Mendoza did not rely on any description made by David when she ordered the furniture. Mendoza inspected the furniture displayed in David’s furniture shop and made her own specifications on the three sets of furniture she ordered. Additional notes: Sale by Sample: when a small quantity is exhibited by the seller as a fair specimen of the bulk, which is not present and there is no opportunity to inspect or examine the same. to constitute a sale by sample, the parties must treat the sample as the standard of quality and that they contracted with reference to the sample with the understanding that the product to be delivered would correspond with the sample. there is an implied warranty that the goods shall be free from any defect which is not apparent on reasonable examination of the sample and which would render the goods unmerchantable Sale by Description: where “a seller sells things as being of a particular kind, the buyer not knowing whether the seller’s representations are true or false, but relying on them as true - where the buyer has not seen the article sold and relies on the description given to him by the seller, or has seen the goods, but the want of identity is not apparent on inspection - a seller’s description of the goods which is made part of the basis of the transaction creates a warranty that the goods will conform to that description; where the goods are bought by description from a seller who deals in the goods of that description, there is an implied warranty that the goods are of merchantable quality 77 and 78 STA ANA v HERNANDEZ (Sale per Unit or Number and Sale for a lump sum

Fernandez) Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Facts: • •

•

•

Dean Villanueva

Sta. Ana spouses sold 2 separate portions (one for 12,500 sqm “more or less” and the other for 26,500 sqm “more or less”) of their land to Hernandez for a sum of 11k. O, mag-seller buyer tayo ulit.. After the sale, the sellers prepared a subdivision plan. But the buyer, and other previouse buyers, did not conform to the plan and refused to execute an agreement of subdivision and partition. The sellers later found that the buyer was occupying an excess of 17,000 sqm in area, of what was bought. So seller filed a suit. Seller claims that the measurement stipulated should be followed. Buyer claims that the boundaries stipulated should prevail. TC ordered buyer to vacate the area. CA reversed on the ground that the boundary stipulated prevails.

Issue: Whether the sale is for two lots without clear boundaries but with exact areas for a certain rate, or for two portions with not definite areas but with definite boundaries for a lump sum? Held: It was for a lump sum, the boundaries prevail. The sale actually involves a definite and identified tract, a corpus certum, that obligated the vendors to deliver to the buyer all the land within the boundaries, irrespective of whether its real area should be greater or smaller than what is recited in the deed. To hold the buyer to no more than the area recited in the deed, it must be made clear that the sale was made by unit of measure at a definite price for each unit. As between the absence of a recital of a given price per unit of measurement and the specification of the total area sold, the former must prevail and determines the applicability of the norms concerning sales for a lump sum. So what’s the value of Santa Mr/Ms. __________? Again, it told us (actually drawn from Supreme Court of Spain) that as between the absence of a recital of a given price per unit of measurement, and the specification of the total area sold, the former must prevail and determines the applicability of the norms concerning sales for a lump sum. In the absence of stipulation on a price per unit/measure, the rules on sale for a lump sum applies. 79 ROBLE v ARBASA (Sale for a lump sum

Legaspi)

Facts • spouses Arbasa purchased from Fidela Roble a unregistered parcel of land • According to the Deed of sale, the land had a total of 240 sqm • However, due to persistent efforts in reclaiming a portion of the sea, the land increased to 884 sqm • since then the spuses were in in continous possession of the entire parcel of land • Adelaida Arbasa tolerated her sister's (Fidela Roble) stay in the house, Veronica and Lilibeth Roble (nieces) stayed with Fidela • Shortly after Fidela's death, Veronica and Lilibeth Roble claimed a portion of the land with an area of 664 sqm • According to the Roble's the two lots located at the southern protion of the lot were owned by Fidela and Gualberto Roble • What was only conveyed to the spouses Arbasa was the 240 sqm stipulated in the deed Issue w/n the deed of sale executed conveyed the entire 884 sqm or it covered only the 240 sqm located at the northern portion of the property Ruling The sale between Arbasa and Roble was a sale for lump sum In the sale of real estate made for a luimp sum, there shall be no increase or decrease of the price although there be a greater of lesser area or number than stated in the contract The obligation of the vendor is to deliver everything within the boundaries However, when the land sold is with the descruption "more or less" with reference to its area, it covers only a reasonable excess or deficiency An area of 644 sqm is not a reasonable excess Also, at the time of the sale, the only existing land was the 240 sqm

Petition granted 80 CARBONELL v CA (Double Sales

Lopez)


SALES DIGESTS 2C 2005-2006 Facts: -

Issue: Held: -

-

Dean Villanueva

Jose Poncio owned a parcel of land in Batanes which he mortgaged to Republic Savings Bank for the sum of 1,500. Poncio was having trouble meeting the installments due on the mortgage so he offered the land for sale to Rosario Carbonell. After negotiations, Carbonell accepted the offer and assumed the mortgage on the land. They executed a document which allows Poncio to stay in the land for 1 year after the sale. Carbonell asked a lawyer to make a deed of sale but when the lawyer went to Poncio, the latter informed the lawyer that the land has already been sold to Emma Infante. Infante started to build a wall around the property. What Carbonell did was to file an adverse claim on the land. This was registered on Feb. 8, 1955. Subsequently, Infante had the deed of sale between her and Poncio registered on Feb. 12, 1955. Who has a better right to the land. Carbonell has a better right. According to the 2nd paragraph of Art. 1544, in double sale, ownership belongs to the first person his claim in good faith. Here, Carbonell was the first to “register” her claim on the lot. An adverse claim is equivalent to registration. Plus, Carbonell registered such claim in good faith. She had no knowledge of the second sale to Poncio. In fact, such second sale cannot affect the fact that she was the first to buy the land (maganda ung analogy ni CLV dito sa book). Despite knowing of the second sale, Carbonell is still deemed to be a buyer in good faith because there was no such second sale at the time of the first sale. The case also discussed how Infante is considered to be in bad faith. The court took note that Infante refused to meet with Carbonell to discuss their adverse claims even though they were just neighbors. Also, Infante failed to inspect the land prior to her registering it. She should have gone beyond the title when she found out that the mortgage passbook of Poncio is already with Carbonell. Thus, even if Infante was the first to actually register her deed of sale, she cannot be considered in good faith so Art. 1544 does not apply.

81 NAAWAN COMMUNITY v CA (Main Rule: Prius Tempore, Potior Jure …wala sa pile… 82 CHENG v GENATO (Requisites for Double Sales Facts: -

-

-

Mendiola)

Rivas)

Genato is the owner of two parcels of land Genato and Da Jose executed a contract to sell for the two parcels of land for the price of P80 per square meter. Contract was in a public document and duly annotated a the back of the title It was stipulated that a down payment of P50,000 be paid at the execution of the contract and the remaining P950,000 after 30 days after Da Jose confirmed the authenticity of the documents. Only after full payment will possession of the property be transferred Da Jose spouses asked for a 30 day extension Pending the effectivity of the extension period, Genato executed an Affidavit to Annul the Contract to Sell but this was not annotated in the title Cheng approached Genato and expressed interest in buying the lands After Genato informed Cheng of the true status of the lands because of his pending agreement with Da Jose, Cheng went ahead with the deal and issued a check for P50,000. Genato assured Cheng that his previous contract with Da Jose will be annulled Genato thereafter went to the Office of the Registry of Dees to register the Affidavit to Annul the Contract to Sell By coincidence, Genato and Da Jose met there and they had an agreement to continue their Contract to Sell. Genato did not register his Affidavit Genato advised Cheng of his decision to continue his contract with Da Jose and returned the check issued by Cheng but Cheng refused to accept that check and insisted that he and Genato had a perfected contract to sell Cheng: asked for Genato’s specific performance and argued that his payment of P50,000 is an earnest money signifying a perfected contract to sell Genato: payment is merely an option payment and that his agreement with Cheng is subject to a suspensive condition that his prior contract with Da Jose be cancelled Da Jose: he has superior right over Cheng and that Cheng is also a buyer in bad faith RTC: ordered Genato to continue the contract to sell with Cheng CA: reversed the decision of the RTC because the first contract with Da Jose was not validly rescinded

Issue: W/N there was a valid subsequent contract to sell with Cheng Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Held: -

-

-

-

None! Since there was a valid contract to sell with Genato and the Da Jose, the latter’s non-payment to the partial amount does not ipso facto avoid the said contract. Also, even if non-payment will be considered a ground for rescission, Genato’s failure to give notice to Da Jose of his descission to annul the contract will render his decision to annul the contract void Cheng’s contention that the contract between him and Genato is a conditional contract to sell is also untenable. Their contract is really a contract to sell. Even assuming that the contract is a conditional contract to sell, it is still void since it is subject to a suspensive condition, it did not take effect because the condition was never met. Article 1544 of the Civil Code on Double Sales is applicable in this case because of the principle of PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). The contract to sell between Genato and Da Jose was not only first in time but it was also registered long before Cheng proposed to buy the lands. Also, Cheng is not a buyer in good faith. He has knowledge of the first transaction between Genato and Da Jose. Even if he was able to register the transaction before Da Jose did, his right is still inferior to that of Da Jose. Registration alone without good faith is not sufficient.

83 MENDOZA v KALAW (Doctrine on Conditional Sales Facts: • • • • • • • • Issue: • Held: • • •

•

Dean Villanueva

Sarenas)

Seller – Federico Cañete 1st buyer – Kalaw / Sept 24, 1919 / conditional sale 2nd buyer – Mendoza / Nov 8, 1919 / absolute sale Nov 12 – Mendoza entered and took actual possession of the land, fenced it and cleaned it (excited siguro) After fencing and cleaning, a representative of Kalaw (malamang goon ni Kalaw ‘to) claimed and attempted to take possession. Siyempre ayaw ni Mendoza, “ako ang owner!” sabi niya Nov 17 – Kalaw tried to register his title. It was denied due to some defect in the description of the property Nov 26 – Si Mendoza nanaman nagregister. This was opposed by Kalaw. Trial Court: Mendoza owns the land Who is the owner in due course Mendoza owns the land kasi ayaw ng SC sa mukha ni Kalaw A conditional sale, before the performance of the condition, can hardly be said to be a sale of property, especially where the condition has not been performed or complied with As to the 30 day preventative precautionary notice, it only protects the interests and rights of the person who secures it against those who acquire an interest in the property subsequent thereto and only for 30 days. It cannot affect the rights or interests of persons who acquired an interest in the property theretofore (before or up to that time) Mendoza acquired the absolute deed and entered into possession before the preventive notice was filed

84 ADALIN v CA (Doctrine on Conditional Sales

Beron)

Facts: Palanca with her brothers/sisters (herein sellers) owned a parcel of land on which a 5-door one-storey builcing is constructed and leased to Adalin (petitioner) and tp 3 other tenants. Sellers commissioned one named Bautista to look for and negotiate with prospective buyers. Bautista offered the property for sale to Faustino Yu (president-manager of Imperial Hotel) and FAustino agreed to buy. Petitioner Adalin also agreed to buy 1-door. Several conferences were conducted with ultimately gave rise to a 'conditional sale' as alleged by parties thereto (seller, Faustino, Adalin), with P300,000 downpayment and the balance payable after ejectment of occupants thereof. Acomplint was then filed against the 3 other tenants for unlawful detainer. The tenants then offered to purchase the commercial building by offering P600k per door. In spite of the prior sale to Faustino and Adalin, sellers decided to back out from said sale and return the downpayment made by the buyers. ISSUE: What is the true nature of the sale? Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

HELD: The contract was a definitive and absolute sale. Palanca clearly showed an intelligent appreciation of the nature of the transaction that she had entered into: that she had already sold the property to Faustino and Adalin and that the payment of balance ios subject to the condition that she would evict tenants. But the sale is conditional only in as much as there remained yet to be fulfilled, the obligaion of sellers to eject and buyers to pay. The choice of whom to sell the property, however had already been made by sellers and is thus no longer subject to any condition. 85 CORONEL v CA (Doctrine on Conditional Sales Facts:

Calinisan)

Coronel and Alcaraz entered into a contract of sale over a house and lot. At the time the contract was entered into, the lot was titled in the name of Coronel’s father, hence, the sale was subject to the condition that Coronel title the lot in his name. A P50T down payment was made with the balance of 1.1m to be made upon delivery of the property. After the condition happened, Coronel, instead of delivering the property, sold the same to Mabanag for 1.5m. The sale was to – conditioned on the cancellation of sale 1. Mabanag registered the purchase (adverse claim), but not before Alcaraz had a notice of lis pendens annotated on the title. Alcaraz then filed for specific performance. Mabanag registered the deed of absolute sale and obtained TCT.

Issue: W/N Alcaraz or Mabanag had the better right.

Held: Alcaraz has a better right. The court, before applying the provision on double sales had to determine whether there were indeed two sales. Was the sale to Alcaraz, despite its being subject to a condition, a contract of sale or a contract to sell? It was a contract of sale, though subject to a condition – that the property be titled in the seller’s name. When the condition happened, its effects retroacted to the date of the constitution of the obligation. The sale is deemed to have been absolute on the date the contract was entered into. Seller cannot claim that even if the condition happened, there was still need for him to make good on his promise to transfer ownership because the contract was one of sale and not to sell. The difference between a TO and an OF is that in a TO, ownership is expressly reserved by the seller until the happening of the condition, upon which, he must make good on his promise to go on with the sale. In an OF, upon the happening of the condition, the sale becomes absolute and the seller can be compelled to execute the relevant documents (or as mentioned in class, the clerk of court can sign for the reneging seller). In this case, the seller has no more title to sell the thing to another buyer. In fact, if there had been previous delivery, ownership is deemed automatically vested in the buyer. Since there were two sales, the provision on double sales can apply. Though MAbanag registered her purchase, she was not in good faith (lis pendens) and her registration has no effect.

86 CHENG v GENATO (Doctrine on Conditional Sales 87 CHENG v GENATO (Meaning of Registration

Delgado) Del Socorro)



Dean Villanueva

Facts: - seller Genato entered into a contract to sell w/ Da Jose spouses for 2 parcels of land - contract was in a public instruments and was dully annotated at the back of the 2 certificates of title - stipulated therein that P50T as downpayment, and 30 days after execution and only after verifying the truth and authenticity of the documents by Da Jose, the P950T balance shall be paid - at the expiration period, the Da Jose requested and was granted an extension of another 30 days - pending expiry of the period and w/o notice to the Da Jose’s, Genato executed an affidavit to annul the contract to sell because the Da Jose’s breached their contract - the affidavit was not annotated on the TCT’s - Cheng was interested in buying the lands; so issued P50T check to Genato upon the assurance of the latter that the previous contract would be annulled; Genato issued a written receipt - when Genato went to the RD to have the affidavit registered, he met the Da Jose’s, whereupon the spouses only came to know what Genato was about to do - both parties decided to continue w/ their contract - Genato then returned the 50T check to Cheng, who refused to receive it - Cheng filed an action for specific performance to compel Genato to consummate their contract w/c was already perfected Issue: Who has a better right to the land? Held: The Da Jose spouses have a better right to the land. There was no valid rescission of the Da Jose’s contract to sell. 1. There can be no rescission of an obligation that is still inexistent, the suspensive condition of full payment not having occurred yet. Moreover, the Da Jose’s did not default as the 30 day extension period had not yet expired. 2. Thus, the subsequent sale to Cheng did not acquired obligatory force, since it also depended on a suspensive condition, that the prior sale to Da Jose’s be rescinded 3. The 2nd contract being a contract to sell, Art. 1544 does not apply w/c has the ff. requisites: a. 2 sales pertaining to the same subject matter b. 2 buyers represent conflicting interests c. same seller - since the transfer of ownership of the sales has not been consummated, 1544 is not applicable - still the governing principle of 1544 should apply in this case, w/c is primus tempore, portior jure (first in time, stronger in right) - this principle only applies when the special rules provided in 1544 do not fit in the specific circumstances - not only was the sale to Da Jose’s first in time, it was also registered long before Cheng’s intrusion as a second buyer - under 1544, requisites for the 2nd buyer to displace the 1st buyer: a. 2nd buyer in good faith (ignorance of 1st sale and of 1st buyer’s rights) from time of acquisition of title is transferred to him by registration, or failing registration, by delivery of possession b. 2nd buyer continues good faith until his contract ripens into full ownership through prior registration - the knowledge gained by the Da Jose’s regarding the subsequent contract does not defeat their rights, except if Cheng registers ahead of them in good faith - Cheng was never in good faith because he knew of the sale  Da Jose’s won not because of 1544, but becase of 1st in time, priority in right - at the time of Cheng’s complaint for specific performance, the Da Jose’s already paid in full, therefore, they have a better right 88 CRUZ v CABANA (Knowledge of the first unregistered sale by the 2nd buyer is equivalent to registration in favor of the 1st buyer Fernandez) Facts: •

•

•

Leodegaria Cabana sold a land, with right to repurchase, to spouses Teofilo Legaspi and Iluminada Cabana. Seller never repurchased the land sold. Registration of the deed of sale was not accomplished because the buyers could not present the owner’s duplicate of title as they were on the bank (subject of a mortgage). The same property was later sold to Cruz by the same Leodegaria. When the former tried to register, he was informed that the same land was sold to Legaspi and Cabana. Nevertheless, Cruz was able to register the land in his name. The first buyers contend that they were the rightful owners of the land. Cruz claims that he was the first one to register it.

Issue: Is Cruz protected by Art 1544 as he was the first one who registered the property? Held:



Dean Villanueva

No, because Cruz was not in good faith. There is no question that the spouses Legaspi and Cabana were the first buyers and the only ones in possession of the subject property. First buyers were not able to present the duplicate certificate because they were still with the bank. And when Cruz was able to register the land in his favor, he had knowledge (as he was informed) of the prior sale in favor of the spouses. Such knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by virtue of the latter instrument of conveyance which creates no right as against the first purchaser. For the second buyer to obtain priority over the first buyer, he must show that he acted in good faith throughout from the time of acquisition until title is transferred to him by registration, or failing registration, by delivery of possession. There being the absence of good faith, the first unregistered sale prevails over the registered second sale. 89 TAÑEDO v CA (Registration in Good Faith always pre-empts possession in GF

Legaspi)

90 LIAO v CA (Registration in Good Faith always pre-empts possession in GF

Lopez)

Facts: -

Estrella Mapa, predecessor-in-interest of Jesus Liao, filed a case in the RTC for the issuance of title over several parcels of land. Mapa alleges that several certificates of sale were issued to one Vicente Salgado and that the latter assigned them to her. The RTC granted Mapa’s action. TCT’s were issued in Mapa’s favor but these were in conflict with other existing certificates of title, resulting in the filing of several actions with the RTC. Meanwhile, Mapa assigned the lands to Palmera Agricultural Realty Development Corporation, which sold the land to Liao the RTC’s all agreed that the TCT’s in favor of Mapa were null and void. This was affirmed by the CA. Issue: W/n the TCT’s were null and void. Held: Yes, they were void. When two certificates of title are issued to different persons covering the sale land, whole or in part, the earlier in date must prevail. The sales to Mapa were considered as having no effect because the lots were owned by the government at that time. Plus, the Court said that the certificates of title have already become stale because 10 years has already lapsed since their issue.

91 AGRICULTURAL and HOME EXTENSION v CA (Who is purchaser in good faith Mendiola) Facts: Spouses Diaz sold a parcel of land to Gundaran. The owner’s duplicate was given to Gundaran, but the sale was unregistered, due to existing notice of lis pendens on the title. Gundaran and Agricultural and Home Extension entered into a JVA for the subdivision and development of the purchased land. This agreement was not also annotated. Again, the spouses sold the property to Cabautan. By the order of the court, a new owner’s copy of the title was issued to Cabautan. Also, all the notices of lis pendens on the title were cancelled and the deed of sale to Cabautan was recorded. Gundaran claims reconveyance.

Issue: W/N Gundaran has a right to the property. W/N Cabautan is in good faith. Held: The second sale to Cabautan prevails over the first sale to Gundaran, because the second was registered. A purchaser in good faith is a person who buys the property without notice that another person has an interest in the property. Such a purchaser pays in full at the time of purchase before he had notice of the claim or interest of some other person in the property. The TCT does not show any annotation of any sale, lien, or encumbrance, or adverse claim on the property. When the property was registered in the Torrens system, the registration is the operative act to



Dean Villanueva

convey the land. A person dealing with a registered land is only charged with notice of the burdens on the prop7erty that are noted in the certificate of title. Significantly, 3 days after the execution of the deed of sale in favor Cabautan, the notices of lis pendens were cancelled by virtue of court orders. Cabautan therefore acquired the land free from any liens or encumbrances. 92 NAAWAN COMMUNITY v CA (When Unregistered Land Rivas) …wala sa pile… 93 DAGUPAN TRADING v MACAM (When Unregistered Land Sarenas) Facts: • •

• Issue: • • Held: • • • •

•

•

Previous Owner of Property – Sammy Maron w/ 7 brothers & sisters 1st Buyer – Rustico Macam o bought land while the application of Maron for registration was still pending o only the 1/8th share of Sammy Maron to the land was bought nd 2 Buyer – Dagupan Trading o by virtue of final judgment and levy upon the share of Sammy Maron to the land Where is the love? Who has better right to the 1/8th share of Sammy Maron Di nga, where is the love? Macam owns the land Tricky ‘tong held ha. Let’s try to draw a picture. Hypothetical situations: “IF” lang (bibo yung SC, gusto lang nila idiscuss) o If property was unregistered land – Macam has better right because his claim is based on a prior sale coupled with public, exclusive and continuous possession thereof as owner o If registered land – Dagupan Trading has better right. Sale to Macam was not registered but levy in execution and provisional certificate of sale to Dagupan was registered. Registration of the deed of sale is the operative act that gives validity to the transfer Real situation – sale to Macam was before the land was registered, while the sale to Dagupan was after land has been registered o Section 35, Rule 39 of the Rules of Court applies o The purchaser of land sold in an execution sale “shall be substituted to and acquire all the right, title, interest and claim of the judgment debtor to the property as of the time of the levy” In other words, at the time of execution Dagupan merely stepped into the shoes of Maron as to the right he has over the property. And what is the right that he has? Nothing. He already sold his ownership over the property to Macam.

94 CARUMBA v CA (When Unregistered Land

Beron)

FACTS: Sposes Canuto and Ibasco sold an unregistered parcel af land to sposes Amado Carumaba and benita Canuto. The deed of sale was never registered in the Office of the Register of Deeds. A complaint for a sum of money was filed by BAlbuena against Amado Canuto (seller) and a decision was rendered in favor of Balbuena. Ex-offico sheriff issued a Definite Deed of Sale of the property in question in favor of Santiago Balbuena, which instrument of sale was registered before the Office of the Register of Deeds. ISSUE: Who has the better title over the land? HELD: Carumba. While under the invoked Art 1544 registration in good faith prevails over possession in event of a double sale by the vendor of th same piece of land to different vendees,said article is of no appliation to the case at bar, even if Balbuena was ignorant of the prior sale made by his judgement debtor in favor of Carumba. The reason is that the purchaser of unregistered land at a sheriff's execution sale only steps into the shoes of the judgement debtor and merely acquires the latter's interest in the property sold as of th time the property was levied upon. (sec 35 of rule 39 of the revised rules of court) Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


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When the levy was made by the Sheriff, therefore, the judgement debtor no longer had dominical interest nor any real right over the land that could pass to the purhcaser at the execution sale. 95 RADIOWEALTH v PALILEO (When Unregistered Land Facts:

Calinisan)

•

Castro sold an unregistered parcel of land to Palileo.

•

This was put in a notarized deed of absolute sale.

•

Palileo took possession and paid taxes.

•

After the sale to Palileo, judgment was rendered against Castro in a proceeding and his property was levied and sold at public auction to Radiowealth.

•

After the redemption period, a deed of final sale was executed and this was registered with the Register of Deeds.

•

Palileo filed an action for quieting of title which was granted and affirmed.

Issue: Who has a better right over the unregistered land: Palileo, a first buyer possessor, or a second buyer, Radiowealth, who registered the sale.

Held: •

Palileo has the better right.

•

The execution was not valid because the property no longer belonged to Castro, the judgment debtor.

•

Article 1544 does not apply to unregistered lands.

•

If the property had been registered land, Radiowealth’s registration of its right would have given it a better right. However, this land is unregistered and under Act. 3344, registration of instruments affecting unregistered lands is without prejudice to a third party with a better right.

•

A purchaser at an execution sale merely steps into the shoes of the judgment debtor and acquires the latter’s interest in the property sold as of the time the property was levied.

96 PAULMITAN v CA (Seller Not Owner at Delivery

Delgado)

Facts: Agatona Sagario Paulmitan, whop died in 1953, owns two parcels of land in Negros Occidental. From her marriage to Ciriaco Paulmitan, she begot two sons, Donato and Pascual (died also in 1953 after her mother's death). Later, Donato extra-judicially adjudicate the said lands to himself without the consent of the heirs of Pascual. He sald the first parcel to her daughter Juliana. The second parcel of land was sold on a public auction for the payment of real estate taxes and was later redeemed by Juliana and declared to her name. Later, the heirs of Pascual filed case in the lower court. RTC and CA for the Pascual heirs. Issue: W/N the sale of Donato to his daughter is valid. Held: Valid as to the 1/2 portion. From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away of her son Pascual in 1953, the estate remained unpartitioned. Article 1078 of the Civil Code provides: "Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased." Donato and Pascual Paulmitan were, therefore, co-owners of the estate left by their mother as no partition was ever made When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P. Fanesa, he was only a co-owner with respondents and as such, he could only sell that portion which may be allotted to him upon termination of the coownership. The sale did not prejudice the rights of respondents to one half (1/2) undivided share of the land which they inherited from their father. It did not vest ownership in the entire land with the buyer but transferred only the seller's pro-indiviso share in the property and consequently made the buyer a co-owner of the land until it is Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


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partitioned. Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the land to his daughter, petitioner Juliana P. Fanesa, did not give to the latter ownership over the entire land but merely transferred to her the one half (1/2) undivided share of her father, thus making her the co-owner of the land in question with the respondents, her first cousins. 97 MINDANAO v YAP (Sale by Co-Owners

Del Socorro)

Facts: - widow Rosenda together w/ her 2 children sold school properties to buyer Yap, together w/ the buildings on the land, laboratory equipt’s books, furniture and fixtures established by Mindanao Academy and Misamis Academy - the other co-owners-children, upon learning the sale, filed for annulment of the sale and for its rescission - the trial court held that the sale was void - Yap appeals the decision of the trial court Issue: W/N the sale to Yap by a co-owner of the property owned in common w/o the consent of the other co-owners is void. Held: Yes, VOID sale. - it was unnecessary for the trial court to rule on the question of rescission since the sale is already void because: a. the contract purported to sell properties of which the sellers were not the only owners - the sellers only owned 7/12 of the lot - the school properties were owned by Mindanao Academy b. the prestation involved in the sale was indivisible, hence, incapable of partial annulment - buyer Yap would not have entered into the contract except to acquire all of the properties purchased by him - since the purported transfer of ownership over the school properties sold to buyer Yap is void, he never became the owner 98 ESTOQUE v PAJIMULA (Sale by Co-Owners Facts: • • • • •

Fernandez)

Crispina, Lorenzo, and Ricardo inherited a piece of land (lot 802) from their parents. Crispina (Seller) sold 1/3 of the lot to Estoque (Buyer 1) as evidenced by a deed of sale. Later on, Seller sold 2/3 of the lot to Pajimula (Buyer 2). Buyer 1 now files an action for legal redemption on the ground that he is a co-owner of the lot sold by Seller to Buyer 2. Buyer 1’s contention: Initially, the deed in her favor was inoperative to convey the 1/3 lot since Seller is only a co-owner with Lorenzo and Ricardo. Hence, only an undivided 1/3 interest was sold. But when Seller acquired the remaining 2/3 interest (prior to the sale to buyer 2), she became a co-owner of the entire lot with Seller. Thus, the 2/3 lot sold to Buyer 2 can be redeemed by her (Buyer 1) as co-owner.

Issue: Can Buyer 1 redeem the 2/3 lot sold to Buyer 2 as a co-owner (with Seller) of the same land? Held: No. The deed of sale to Buyer 1 clearly specified the object sold (southeastern third portion of the lot). Granting that seller could not have sold this particular portion, it does not mean that she intended to sell her 1/3 undivided share. Nothing in the deed proves such. Buyer 1 never acquired an undivided interest in lot 802. Nevertheless, Buyer 1 became the actual owner of the 1/3 (southeastern portion) of the lot by virtue of Art 1434. 99 ALMENDRA v IAC (Sale by Co-Owners

Legaspi)

Facts Aleja Ceno was 1st married to Juanso Book, during said marriage they acquired a parcel of land (Lot 1) After Book's death, there was a civil case that resulted to a partition of the properties. Aleja then married Santiago Almendra. During their marriage they acquired a parcel of land (Lot 2) Aleja inherited land from her father (Lot 3). Santiago also inherited from his mother (Lot 4) Santiago apportioned all of his properties among Aleja's children in the Philippines After Santiago's death, Aleja sold to Angeles Amendra her share in the conjugal property She indicated in the deed of sale that she was selling the hilly portion of lot 2 Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


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Aleja sold to her son Roman Almendra parcels of land When Aleja died, Margarito, Delia and Bernardina dile a complaint against the buyers for the annulment of the deeds of sale, partition of the properties and accounting of the produce Issue w/n the sale between aleha and her children wer valie Ruling The sale to Angeles of the half portion of the conjugal property may only be considered a valid sale of Aleja's interest therein. Prior to partition, Aleja could not claim title to any definite portion of the property. All she has was an ideal proportionate share. She could not have sold the hilly portion specified in the deed of sale. The sale of lot 3 was valid becuase it was Aleja's paraphernal property Regarding the sale of the lot which was subdivided in a civil case, Aleja could not have sold the whole lot because she only has a right to exercise ownership over the portion adjudicated to her. 100 BUCTON v GABAR (Estoppel by True Owner Facts: -

Issue: Held: -

-

Lopez)

Spouses Gabar bought a parcel of land from Villarin. Josefina Gabar orally agreed with Nicanora Bucton that the former would sell half of the land to the latter. Thus, Nicanora paid 1,000 to Josefina as downpayment on Jan. 1946. The Buctons possessed the land from the payment of the 1,000 and has constructed improvements on it (an apartment). In Jan. 1947, Villarin executed a deed of absolute sale to Gabar and a TCT was issued to Gabar. Buctons now want a separate title for their half of the land but Gabars refuse because they say that the whole land is mortgaged to PNB. Thus, they brought the present action. RTC ruled in favor of the Buctons. CA reversed saying that the action of the Buctons have already prescribed. W/n the Buctons have a claim on half of the land owned by the Gabars. SC says yes. There was a contract of sale between Nicanora Bucton and Josefina Gabar where the latter obliged herself to give Bucton half of the land. Although at the time said petitioner paid P1,000 as part payment of the purchase price on January 19, 1946, private respondents were not yet the owners of the lot, they became such owners on January 24, 1947, when a deed of sale was executed in their favor by the Villarin spouses. Thus, Article 1434 of the Civil Code which says that "[w]hen a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee," is applicable. Thus, the payments made by Nicanora (meron pang 400 in 1948 and 100 in 1951) resulted in the full payment of the purchase price and the consequential acquisition by petitioners of ownership over one-half of the lot. Buctons therefore became owners of the one-half portion of the lot in question. The land has already been delivered to the Buctons, thus they are already the owners thereof. Thus, the action they brought against the Gabars was actually one to quiet their title, which does not prescribe.

101 CITY OF MANILA v BUGSUK (Sale in Merchants Stores, Fairs, or Markets

Mendiola)

Facts: Bagsuk Lumber made several sales of lumber to firms. The Office of the Treasurer of the City of Manila sent a demand to the Company for the payment of the amount of P554.50 for license fees, on the ground that the firm was found to be engaged in the sales of timber products without first securing a permit and license mandated by City Ordinances. Despite demands, Bagsuk refused to pay the amount asked by the Treasurer. According to Bagsuk, it was a producer selling unprocessed logs, having no lumber yard nor kept a store where logs could be sold.



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Issue: W/N Bagsuk Lumber is a dealer of timber and, therefore, subject to the payment of the license tax and permit fees in question. Held: Bagsuk is not a dealer of lumber. A dealer is one who buys and sells again. But Bagsuk does not qualify as a dealer for it is undeniable that what Bagsuk sold was its own produce. The City of Manila contends that the term dealer includes one who carries on a business of selling goods at a store or warehouse; hence, the existence of Bagsuk’s office in Binondo is proof that he is a dealer. A store is a place where goods are kept for sale, or where goods are deposited and sold by one engaged in buying and selling them. The making of payment thereto at a principal office does not transform the office into a store. The reason: the element that there must also be goods stored therein or on display is missing. The office of Bagsuk only serves to facilitate the transactions relative to the sale of its produce, but does not act as a dealer. 102 SUN BROS v VELASCO (Sale in Merchants Stores, Fairs, or Markets Facts: -

Rivas)

On July 1, Sun Brother’s Con [SBC] delivered to Lopez 1 Admiral refrigerator under a Conditional Sale Agreement for P1,700 Only P500 was paid balance to be paid in installment. Lopez is also not allowed to remove the refrigerator from his address without the consent of the SBC On July 2, without the knowledge if SBC, Lopez sold the refrigerator JV Trading owned by Velasco for P850 by misrepresenting himself as Lim and the absolute owner of the refrigerator. July 3, still without the knowledge of SBC, Velasco was able to sell the refrigerator to Co Kang Chiu after displaying the refrigerator in his store for P985 SBC filed a petition for replevin against Lopez and Chiu RTC: Chiu is not the owner of the refrigerator but SBC

Issue: W/N SBC or Chiu is the real owner of the refrigerator Held: -

-

Chiu is the real owner General rule that goods sold by a person who is not the real owner thereof and who does not sell them under authority or consent of the owner, buyer acquires no better title to the goods than the seller had Exception is when purchase is made in a merchant’s store or in fairs, or markets, in accordance with the Code of Commerce and special laws JV Trading is a merchant store. Where the rights and interest of a vendor comes into clash with that of an innocent purchaser for value, the latter must be protected SBC’s

recourse to seek damages from Lopez

103 EDCA v SANTOS (Sale by One Having Voidable Title Facts: • • • • Issue: • Held: • • •

Sarenas)

A person who represented himself as one Professor Jose Cruz ordered 406 books from EDCA. Cruz paid P8,995 by issuing a personal check. Cruz later on sold 120 of the books to Leonor Santos for P1,700 EDCA came across information that this Cruz is a con man. Cruz was later on arrested. The books in possession of Santos were seized without warrant. Who owns the books? Art 559 of the CC provides that possession of movable property acquired in good faith is equivalent to title. Santos does not need to establish their ownership by showing a receipt to prove that they bought it. Absent stipulation, ownership shall pass to the buyer upon delivery of the thing sold even if the purchase price has not been paid yet. Although the con man paid through a false check, ownership still passed. Actual delivery being made to Cruz, Cruz acquired ownership over the books which he could then validly transfer to Santos.


SALES DIGESTS 2C 2005-2006 •

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Santos first made sure that Cruz was the owner of the books. Cruz showed her the invoice given by EDCA, which showed that Cruz indeed was the owner. Santos is in good faith.

104 AZNAR VS. YANPDIANCO (Sale by One having Voidable Title

Beron)

Facts: Tedoro Santos advertised in 2 papers the sale of his car. Vicente Merella's nephew, De Dios, went to SAntos who, however was out during that day and only Santos' son was present. The following day, Santos' son went to Merella. Merella agreed to buy the car on the understanding that the price would be paid only after the car had been registered in his name. The sale was registered, and the necessary documents presented to Merella who refused to pay the whole amoount claiming he was short by P2000. De Dios together with Santos' son and an unidentified person went to Merella's sister to get the P2000 balance. Santos' son was made to wait at the sala of the alleged house of Merella's sister while De Dios was to talk to the sister. De Dios never came back. Santos went back to residence of Merella, but the latter is already gone. Merella was able to sell the car to plaintiff Aznar who was in good faith and for value, and wihtout notice of defect appertaining to the vendor's title. ISSUE: Who has a better right over the car? Santos or Aznar? HELD: Teodoro Santos. "When buyer has a voidable title, but this title had not been voided at the time of sale, the buyer acquiers good title..." however, this is not applicable where, as in the present case, seller Merella has no title at all. 105 TAGATAC v JIMENEZ (Sale by One Having Voidable Title Facts:

Calinisan)

•

Tagatac sold her car to Feist, who sold it to Sanchez, who sold it to Jimenez.

•

When the payment check issued to Tagatac by Feist was dishonored, the plaintiff Tagatac sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it by reason of Feist's deception.

•

In ruling for Jimenez, the Court of Appeals held: The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully deprived of her car. At first blush, it would seem that she was unlawfully deprived thereof, considering that she was induced to part with it by reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of deprivation of property. In a manner of speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by which Warner L. Feist induced her to part with it is illegal and is punished by law. But does this "unlawful deprivation" come within the scope of Article 559 of the New Civil Code? xxx

xxx

xxx

. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article 1390 N.C.C.). 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, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); 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, N.C.C.). Issue: W/N Jimenez has a better right to the car.



Dean Villanueva

Held: •

Jimenez has a better right to the car.

•

(RC Note: Referring to the sale between Tagatac and Feist) 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 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.

•

But 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.

•

There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith.

106 ROMAN v GRIMALT (Effect of Loss before perfection

Delgado)

107 LAWYER’s COOP v TABORA (Effect of Loss after delivery Del Socorro) Facts: - buyer Tabora bought from seller Lawyer’s Coop law books - partial payment was paid; balance was still to be paid - stated in the contract of sale that “title to and ownership of the books shall remain w/ 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.” - after the books have already been delivered, a fire broke out and burned the law office of Tabora, including the books - Tabora contends that he is exempted from paying the remaining balance because of force majeure Issue: W/N buyer still had to pay although the books had already been burned. Held: YES. - although the rule that the loss of the object of the contract of sale is borne by the owner, or in case of force majeure the one under obligation to deliver the object is exempt from liability, such rule is not applicable here because the law and the contract entered into on the matter argue against it - although the contract states 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." - such stipulation is sanctioned by Article 1504 of the Civil Code Where delivery of 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 the happening of a fortuitous event exempts the obligor from liability does not apply here because this rule 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 - in this case, 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 - 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 the Civil Code 108 LEVY HERMANOS v GERVACIO (Meaning of Installment Sale Facts: • •

Fernandez)

Hermanos sold to Gervacio a Packard car. After making initial payment, buyer executed a PN for the balance payable on or before June 15, 1937 with interest at 12% per annum. As security, the car was mortgaged. Buyer failed to pay the note at maturity. So seller moved to foreclose the mortgage and the car was sold at a public auction. A balance of 1.6k remained.

Issue:



Dean Villanueva

Can seller move to claim the balance of 1.6k? Held: Yes. It is true that article 1454 of the Civil Code provides that when the vendor exercises his right to foreclose the mortgage, he loses the right to further action against the buyer. However, the provision will only apply if there was a contract for the sale of personal property payable in installments. In this case, the sale was on a straight term, in which the balance, after payment of the initial sum, should be paid I it totality at the time specified in the PN. Sales in installment involve those cases where partial payments consist in relatively small amounts which constitute a great temptation for improvident purchasers to buy beyond their means. Such temptation, however, does not exist in type of sale involved in this case. Theoretically, there may not be a difference between paying the price in 2 installments and paying partly in cash and partly in one installment in so far as the size of each partial payment is concerned; but in the regular course of business a difference exists. For in contracts providing for payment of the price in two installments, there is generally a provision for initial payment. 109 VISAYAN SAWMILL v CA (Contracts to Sell Movable not covered

Legaspi)

Facts There is a sale involving scrap iron The condition was that a letter of credit for 250T will be secured in favor of the seller buyer went to the seller's premises and started digging and gathering the scrap irons Visayan (seller) stopped the gathering because there was no letter or credit yet. According to buyer, they already secured one and the transmittal was merely delayed. Thereafter, seller received notive regarding the letter of credit. At this point, selller refused to comply. It rescinded the arrangement. TC and CA: the agreement was a contract of sale. They opined that there was an implied delivery when the buyer collected the scraps of iron. Although rescission could be done under 1911, it would not hold in the case because the breach was slight and not substantial. Issue w/n seller has a right to rescind the agreement Ruling this is a contract to sell. Permission to collect the iron scraps cannot be construed as delivery failure of buyers to comply with the issuance of the LoC is simply an event that prevented the obligation of seller to acquire binding force. There were also other conditions that were not complied with (please see p390) Although 1191 does not apply, the corporation may rescind the contract on the basis of art. 1597 Dissent From the time the seller gave access to the buyer to enter the premises, he has placed the goods in the possession of the buyer Such action transfers ownership. The opening of a letter of credit is not one of the requisites for the perfection of the sale. That payment was not yet effected is immaterial because the nonpayment of the price is merely a resolutory condition which extinguishes the transaction. This is a contract of sale. Visayan was not justified in rescinding the agreement. 110 DELTA MOTOR SALES CORPORATION VS. NIU KIM DUAN (Remedies available to unpaid seller Lopez) Facts: -

Issue: -

Niu Kim Duan bought 3 Daikin air conditioners from Delta Motor. This was evidenced by a Deed of Conditional Sale. The Deed says that payment would be made with a downpayment and 24 equal monthly installments. It was also stated that title was not to pass to buyers until the full price is paid. Furthermore, the Deed had an acceleration clause if ever the buyers were not able to pay 2 installments. The aircons were delivered. But buyers were not able to pay two monthly installments. So, sellers tried getting the payment but they failed. The sellers instituted this action to reacquire possession of the aircons and ask for balance of purchase price. RTC issued a writ of replevin for the goods and decreed that the sellers are entitled to the installments already paid (as rent for the use of the aircons) plus the balance of the purchase price of the goods. W/n the buyers can get back the installments they already paid. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas

SALES DIGESTS 2C 2005-2006 Held: -

-

Dean Villanueva

W/n the sellers were entitled to the balance of the purchase price. SC says no, the buyers cannot get the installments back. The deed between the buyers and the sellers clearly stipulated that installments paid will be considered as rent for the use of the goods. The Civil Code (Art. 1486) authorizes such a stipulation provided that it is not unconscionable. Here, the buyers allege that it is unconscionable because they already paid 6+k of a 19+k price. Court said that the stipulation is not unconscionable. The fact is that the installments the buyers paid were for 7 months and that kept possession of the aircons for 22 mos. So, they have actually been using the aircons for free for 15 mos. Thus, the 6+k to be kept by the sellers is not unconscionable. SC says no, the sellers cannot claim the balance of the purchase price. Sellers in a sale of personal property have three remedies namely, (1) exact fulfillment of the obligation, should the vendee fail to pay; (2) cancel the sale upon the buyer’s failure to pay 2 or more installments and (3) foreclose the chattel mortgage, if there is one, upon the failure to pay 2 or more installments. These remedies are alternative, not cumulative. In this case, sellers chose no. 2. SC said that the suit was actually to seek a judicial declaration that the sellers have validly rescinded the Deed of Conditional Sale. Thus, the sellers cannot claim the balance of the purchase price of the goods they already possess.

111 TAJANGLANGIT v SOUTHERN MOTORS (Remedy of Specific Performance Mendiola) Facts: Tajanglangit bought a thresher from southern. Tajanglangit executed a PN. The agreement provided that in case of default in the payment of installments, the total sum unpaid will become due. Tajanglangit defaulted. Southern sought to collect the total sum. The machines of Tajanglangit were levied upon by the sheriff and sold at a public auction. Southern was able to purchase the machines. Not, Southern still seeks to attach Tajanglangit’s rights and interests over real properties for another sale on execution.

Issue: W/N a second sale on execution is allowable. Held: Although the subject matter was mortgaged to secure the PN, the seller actually chose to collect on the note and did not seek foreclosure of the mortgage. Although the judgment on the collection led to the sale on execution of the machines, the barring effect of foreclosure cannot be applied. The seller had a right to chose among 3 remedies established in Art. 1484. In choosing to sue on the note, it was not limited to the proceeds of the sale on execution of the mortgaged goods.

112 NONATO v IAC (Nature of Remedy of Rescission Facts: • • • • • • • Issue: •

Rivas)

Nonato purchased 1 volkswagen form People's Car on installment basis Nonato executed a promissory note and a chattel mortgage in favor of People's Car People's Car assigned its right to Investor's Finance Nonato defaulted so Investor's Finanace repossessed the car Investor's Finance is now asking from Nonato that they pay the balance of the price of the car CFI: ordered Nonato to pay the balance IAC: affirmed the decision of CFI W/N a vendor who had cancelled the sale of the motor vehvle has the right to demand payment for the balance of the purchase price

Held:



Dean Villanueva

No! since the vendor has opted to cancel the contract of sale of the vehicle, it is barred form exacting payment from Nonato of the balAnce of the price of the vehicle which it has already repossessed. IT CANNOT HAVE ITS CAKE AND EAT IT TOO

• •

113 RIDAD v FILIPINAS INVESTMENT (3rd Party Mortgage Sarenas) Facts: • • • • • Issue: • Held: • • • • •

Ridad bought from Supreme Sales 2 brand new Ford Consul Sedans for P26,887 payable in 24 monthly installments. A chattel mortgage was executed on the 2 cars plus another Chevrolet and Ridad’s franchise of public convenience to run a taxi fleet. Supreme Sales assigned its rights to Filipinas Investment. Ridad failed to pay. There was a public auction were the objects of the chattel mortgage were sold. But notice was not given to Ridad regarding the public auction. CFI and CA declared the chattel mortgage and the public auction null and void so far as to the Chevrolet and the franchise is concerned. W/N the mortgage and the public auction are null and void Yes it is null and void. The remedies of a vendor should the vendee default in its monthly installments are alternative and not cumulative (Art. 1484 of CC) When Filipinas chose to foreclose on the object of the chattel mortgage (the 2 cars) they are already precluded from selling the other things Vendor can only foreclose on the thing sold As I always say, touch move

114 ZAYAS v LUNETA MOTORS (Assignor-Assignee; Financing Transactions

Beron)

Facts: Zayas purchased on installment basis a motor vehicle from Mr Escano of the Escano Enterprises , dealer of Luneta Motor Company. Zayas paid an initial payment and executed a promissory note to cover 26 installments. Zayas executed a chattel mortgage on the subject motor vehicle in favor of the Luzon. After making partial payments, Zayas defaulted in the payment of the balance and Luneta extrajudicially foreclosed the chattel mortgage. Luneta was the highest bidder. Luneta then filed a complaint for the recovery of the deficiency left unsatisfied despite the application of the proceeds of the foreclosure sale. Issue: W/n a deficiency amount after the motor vehicle has been sold as public auction could still be recovered. Held: NO. According to Luneta, Zayas executed the promissory note and chattel mortgage to secure Luzon's interest for having financed the purchase of the motor vehicle by Zayas from the Escano Enterprises, an entity different and distinct from Luneta, and therefore Art 1484 of the civil code does not apply. Luneta's argument is without merit. Escano Enterprises was an agent of Luneta. Escano a dealer of Luneta was merely a collecting agent as far as the purchase of the subject motor vehicle is concerned.



Dean Villanueva

But even assuming that the distinct and independedt theory of Lunera is valid the nature of the transaction as a sale of personal property on installment basis remains. When, therefore, Excano assigned itws rights vis-a-vis the sale to respondent Luneta, the nature of the transaction did not change at all. 115 CRUZ v FILIPINAS INVESTMENT (Barring Effect of Foreclosure Calinisan) Facts: • • • • • • • •

Ruperto Cruz purchased from Far East Motor Corporation 1 Isuzu Diesel Bus for P44T, payable in installments of P1.5T per month, for 30 months. Cruz executed a CM over it. Since there was no downpayment made by Cruz, Far East wanted a second secutity: a SECOND MORTGAGE on a parcel of land together with a building thereon. Far East endorsed the PNs issued by Cruz, and assigned all his rights and interests to Filipinas Investment. Of course, Cruz defaulted on all payments. Filipinas tried to foreclose. The proceeds of the sale wasn’t enough, so Filipinas wanted to foreclose on the mortgaged lot. He paid of the first mortgage. Mrs Reyes, the person who constituted the first mortgage, wanted to cancel the mortgage of Filipinas. REM was held in abeyance.

Issue: W/N Filipinas can still foreclose on the REM after foreclosing on the CM. Held: • •

No. Should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any of the ff remedies:

• •

o Exact fulfillment o Cancel the sale o Foreclose the mortgage Any of these bars action to recover deficiency The further action being barred under 1484 is not limited to judicial proceddings, but should include extrajudicial proceedings by virtue of which the seller may be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy “Action” is not limited to judicial proceedings.

•

116 BORBON v SERVICEWIDE (Barring Effect of Foreclosure

Delgado)

Facts: Daniel and Francisco Borbon signed a promissory note in favor of Pangasinan Automart worth P122T payablein installments in ten months. The contract includes the payment of liquidated damages and attorney's fees. To secure the PN, Chattel Mortgage was executed for the Isuzu Crew Cab. Pangasinan assigned PN to Filinvest with notice of Borbon and later tpo Servicewide Specialist without the notice of the petitioner. Because the defendants defaulted, Filinvest made several demands from them before it assigned its rights to Servicewide. Now, Servicewide is the one enforcing the claim but their defense is that they are not in default since Pangasinan didn't fulfill their obligation since what they ordered is not the Crew Cab that was delivered instead of a jeepney-type Isuzu. Servicewide files suit to enforce claim. The lower court and appellate court favored Servicewide. Appeal to the SC is to modify ruling by removing liquidated damages and attorney's fees.



Dean Villanueva

Issue: W/N Servicewide can recover deficiency by way of liquidated damages and attorney's fees. Held: The remedies in 1484 is alternative and not commulative. The exercise of one would bar the other.When the seller assigns his credit, the assignee is bound by the same law. Thus, when the assignor chose the third remedy, it is barred from claiming the deficiency. That is the general rule. However, there are instances when the mortgagor refused to surrender the chattel subject of the mortgage upon failure of two or more installments, or he concealed beyond reach the chattel, the mortgagee may be forced to seek the aid of the court to protect his rights incurring expenses therein which by law and justice must be reimbursed. However, in this case, the court held that only attorney's fees is reasonable to be awarded 117 MACONDRAY v EUSTAQUIO (Barring effect of Foreclosure Del Socorro) Facts: - buyer Eustaquio bought a car from seller Macondray - buyer issued a promissory note w/c stated the price was payable in 12 monthly installments, and default in one installment would make the whole obligation due - to guarantee the payment, buyer executed a chattel mortgage on the car - only 1st installment paid - seller called upon the sheriff to possess the car, but the buyer refused; so seller filed for replevin - the car was sold at public auction, but the proceeds of the sale was insufficient to cover the debt (balance still remained) - seller filed to recover the balance - complaint by seller dismissed by the lower court Issues: 1. Seller contends that the lower court incorrectly applied Act. 4122 and dismissed the complaint, although the buyer waived his right under the law by not appearing, having been declared in default, and not interposing any special defense 2. Seller contends that Act. 4122 is unconstitutional because it takes property without due process of law, denies the equal protection of the laws, and impairs the obligations of contracts. 3. (issue related to sales) Seller contends that even granting that Act No. 4122 is valid, the court should have ordered the defendant to pay at least the stipulated interest, attorney's fees, and the costs. Held: 1. Buyer did not waive the application by the court of Act No. 4122. - under the Rules of Court, the judgment by default against a defendant who has neither appeared nor filed his answer does not imply a waiver of rights except that of being heard and of presenting evidence in his favor - it does not imply admission by the defendant of the facts and causes of action of the plaintiff, because the plaintiff is required to adduce his evidence in support of his allegations as an indispensable condition before final judgment could be given in his favor - nor could it be interpreted as an admission by the defendant that the plaintiff's causes of action find support in the law or that the latter is entitled to the relief prayed for 2. Act. 4122 is constitutional. - public purpose of Act No. 4122 is to prevent abuses committed in connection with the foreclosure of chattel mortgages when sales were payable in installments - 3 remedies are available to the vendor who has sold personal property on the installment plan: (a) exact the fulfillment of the obligation (b) if the vendee shall have failed to pay two or more installments, the vendor may cancel the sale (c) if the vendee shall have failed to pay two or more installments, the vendor may foreclose the mortgage, if one has been given on the property - The basis of the first option is the Civil Code. The basis of the last two options is Act No. 4122, amendatory of the Civil Code - the proviso to the right to foreclose is, that if the vendor has chosen this remedy, he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same - the Act merely qualifies the remedy



Dean Villanueva

3. Act 4122 provides: 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. - the words "any unpaid balance" refers to the deficiency judgment to which the mortgagee may be entitled where, after the mortgaged chattel is sold at public auction, the proceeds obtained therefrom are insufficient to cover the full amount of the secured obligations which, in the case at bar as shown by the note and by the mortgage deed, include interest on the principal, attorney's fees, expenses of collection, and the costs 118 FILIPINAS INVESTMENT v RIDAD (Perverse Buyer Fernandez) Facts: • • • •

Spouses Ridad bought a Ford Consul Sedan from Supreme Sales. The price was payable in 24 equal monthly installments with interest. This was secured by a PN and a chattel mortgage on the car. Thereafter, the buyers failed to pay 5 consecutive installments. Seller moved for the seizure of the car. Possession of the car was awarded to the seller. The vehicle was later sold to seller at a public auction. The motion of the buyers arise from the order of the lower courts directing said buyers to pay certain expenses (atty’s fees and actual expenses of suit) incurred by the seller in the seizure of the car. Buyers contend that when the seller moved to foreclose the mortgage, it renounced any and all rights which it might have under the PN as well as the payment of the unpaid balance, and consequently as to payment of attorney’s fees and costs of suit pursuant to Art 1484 of the Civil Code.

Issues: Is the seller precluded from claiming said actual expenses from buyer? Held: No. It is true that the present action governed by the Recto Law where the vendor, in case he exercises the right to foreclose, shall have no further action against the vendee. And such “further action” does not only refer to the recovery of the principal but also other obligations arising from such. Were it the intention of the Legislature to limit its meaning to the unpaid balance of the principal, it would have so stated. However, in as much as the Recto Law protects the mortgagors from the mortgagees, it is NOT true that the mortgagee is not entitled to protection against PERVERSE MORTGAGORS. Where a mortgagor plainly refuses to deliver the chattel subject of the mortgage upon his failure to pay 2 or more installments, or if he conceals the chattel to place it beyond the reach of the mortgagee, the mortgagee may enforce his rights through the means and within the limits delineated by law. And it logically follows, as matter of common sense, that the necessary expenses incurred in the prosecution by the mortgagee of the action, i.e. replevin, so that he can regain possession of the chattel, should be borne by mortgagor. 119 FILINVEST v CA (Purported lease with option to buy

Legaspi)

--was given earlier— 120 ELISCO TOOL MANUFACTURING CORPORATION VS. CA (Purported lease with option to buy Lopez) Facts: -

Issue: Held:

Rolando Lantan was the head of the cash department of Elisco Tool Manufacturing Corp. He entered into an agreement with the company where the company would “lease” him a car (Colt Lancer) for five years with an option to buy at the end of the period. The rents would be applied to the purchase price. The rents were to be deducted from his salary. Lantan executed a Promissory note in favor of Elisco. Elisco delivered the car to Lantan. Elisco then ceased its operations, as a result of which, Lantan was laid off. Nonetheless, Lantan was able to pay the full purchase price of the car. Elisco filed an action for replevin and a sum of money. The RTC issued a writ of replevin upon payment by Elisco of the requisite bond. After trial, the RTC held that the car agreement was one of sale and not of lease. The RTC said that Lantan was the owner of the said car. This was affirmed by the CA. W/n the agreement was one of lease or sale.



-

-

Dean Villanueva

SC says it is one of sale. Jurisprudence holds that oftentimes leases with option to buy are contracts of sale. In the case at bar, the “rents” were to be applied to the full purchase price, indicating that they were monthly amortizations of the purchase price and not real rents. Being a sale on installment, Art. 1484 applies. There are three remedies: (1) exact fulfillment of the obligation, should the vendee fail to pay; (2) cancel the sale upon the buyer’s failure to pay 2 or more installments and (3) foreclose the chattel mortgage, if there is one, upon the failure to pay 2 or more installments. These remedies are alternative, not cumulative. And according to 1485, these apply also to leases with option to buy. In this case, it is impossible for Elisco to exercise any of the remedies. Lantan was not remiss in paying the installments/”rents”. SC held that the case filed by Elisco was actually for specific performance. The car was repossessed by Elisco to secure the payment of the remaining installments. Once Lantan paid the full purchase price, he was deemed the owner of the vehicle.

121 LEGARDA v SALDAÑA (In Case of Immovables Mendiola) Facts: Saldana had entered into 2 written contracts with Legarda Hermanos, wherein Legarda Hermanos agreed to sell to Saldana 2 lots, payable for 10 years divided into 120 installments. Saldana was able to pay for 8 years (95 out of 120). Thereafter, Saldana failed to pay. Saldana wrote to Legarda regarding the building of a house over the land. However, Saldana was prevented by the fact that Legarda had failed to build the roads. Legarda told Saldana that since Saldana had defaulted in the payments, the contract between them was cancelled. Saldana filed for an action to deliver the 2 parcels of land. According to the lower court, Saldana’s payments were enough to cover 1 lot; hence; Legarda should convey to Saldana 1 lot.

Issue: W/N 1 of the lots can be conveyed to Saldana. Held: One of the lots can be conveyed. A buyer of 2 lots who has paid for 8 years is entitled to the conveyance of one fully paid lot of his choice. This is fair and just in accordance with law and equity. Such is the ruling despite the fact that the agreement was that in case of default of Saldana, all amounts paid and improvements on the premises shall be considered as rents and payment of damages. The obligation has been substantially been performed in good faith. Hence, the buyer may recover as though there had been strict and complete fulfillment, less damages suffered by the seller.

122 MCLAUGHLIN v CA (Anticipatory Breach Rivas) Facts: •

• • •

On Feb 27, 1977, Mclaughlin and Flores entered into a conditional contract of sale of real estate property for the price of P140,000 payable as P26,550 upon the execution of the contract and the balce to be paid not later than May 31, 1977 Flores failed to pay so Mclaughlin asked the court for the rescission of the contract A compromise agreement was entered into by the parties wherein they agreed to pay P1,000 monthly rental starting Dec 5, 1979 until the obligation is fuly paid It is also stipulated in the contrac tthat in case Flores failed to pay his obligation, he waives his right to appeal from the order or rescission and all payments made by him is forfeited in favor of Mclaughlin. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

• •

On October 1980, FLores defaulted and when he temdered payments to McLaughlin, the latter refused tha accept the payment McLaughlin asked the court to rescind the conditional contract of sale November 1980, Flores terdered a manager's check payable to McLaughlin covering the entire obligation plus installements due on Dec. 1980. RTC: granted the petition of McLaughlin CA: reversed the decision of the RTC

Issue: •

W/N McLaughlin can refuse to accept the payment made by Flores.

• • •

Held: • • • •

No! According to the Maceda Law, the seller can only cancel the contract after 30 days from the receipt of the buyer of the notice of cancellation Also, the maceda law extends to the buyer grace periods after at least 2 years of regular installment payments The tender made by Flores payable to McLaughlin was a valid tender of payment. tender was made within the 30 day notice period

123 MORTEL v KAASCO (Transactions covered Sarenas) Facts: • • • •

• • • Issue: • Held: • •

KASSCO is the owner of a lot and building in Sta. Cruz Manila The 1 st floor is being rented by PNB. The building and lot is also mortgaged to PNB to secure a loan made by KASSCO. KASSCO applied for its building to be converted to a condominium. One of the conditions for its application to be approved is that the mortgage in favor of PNB be cancelled. That same year, Mortel and KASSCO entered into an agreement regarding the 2nd floor of the building. KASSCO sold some units to Mortel but this had a condition regarding the pending application of KASSCO for condominium conversion. KASSCO never got the consent of PNB to free the building from its mortgage, hence it was not converted. Mortel still held the said units by paying rental fees. KASSCO later on asked and sued Mortel to leave the premises. Morel is now suing for specific peformance regarding the contract of sale between him KASSCO W/N Mortel can ask for specific performance No. The contract of sale was subject to a suspensive condition which is to convert the building into a condominium. This condition never happened. PD 957 and RA 6581 cannot be applied because they presuppose the existence of a valid and effective contract to sell a condominium

124 ACTIVE REALTY v DAROYA (How Cancellation of Contract be Effected

Beron)

Facts: Active Realty is the owner and developer of Town and Country Hills Executive Village. It entered into a Contract to SEll with respondent Daroya whereby Daroya agreed to buy a 515 sq.m. lot for P224,025 in Active REalty's subdivision. The contract stipulated that the Daroya whall pay an initial amount upon execution and the balance in 60 monthly installments. Adding the downpayment and installment payments made by Daroya, it would appear that he has already paid an amount higher than that stated as the contract price. Respondent defaulted representing 3 monthly amortizations. Petitioner sent respondent a notice of cancellation of their contract to sell, to take effect 30 days from receipf of the letter. Daroya offered to pay for the balance of the contract price but Active Realty refused as it has allegedly sold the lot to



Dean Villanueva

another buyer. Daroya then filed a complaint for specific performance. Issue: W/n Active Realty can be compelled to refund to the respondent the value of the lot or to deliver a substitute lot at Daroya's option. Held: The contract to sell in the case at bar is governed by RA 6552 more popularly known as the Maceda Law. Daroya has already paid in 4 years a total amount exceeding the contract price. Active Realty decided to cancel the contract when Daroya defaulted on three monthly amortizations. However the records clearly show that the petitioner failed to comply with the mandatory twin requirements for a valid and effective cancellation under the law, i.e. it failed to send a notarized notice of cancellation and refund the cash surrender value. In fact, the records disclose that it was only during the preliminary hearing of the case before the court tribunal when petitioner offered to pay the cash surrender value. The court finds it illegal that Active REalty whithout complying with the mandatory requirements for cancelling the contract, forfeited bothe Daroya's land and money after Daroya has paid for not just the contract price but more than the consideration stated in the contract to sell. For failure to cancel the contract ina ccordance with the procedure provided by law, the court held that the contract to sell between the parties remained valid and subsiting. Daroya has the right to offer to pay for the balance of the purchase price without interest which Daroya did in this case. However, Daroya can no longer exercise this right as the subject lot was laready sold by th petitioner to another buyer. Petitioner is now ordered to refund to respondent the actual value to the lot resold or deliver a substitute lot at the option of Daroya. 125 and 126 LEAÑO v CA (How Cancellation of Contract be Effected Calinisan) (Compensation Rule on Amortization Payments) Facts: •

•

Carmelita Leano bought from Hermogenes Fernando a piece of land in Bulacan w the ff terms: o Total: P107,750 o Down: P10,775, balance to be paid for 10 years, monthly amortization at P1,747.30 o The contract also provided for a grace period of one month within which to make payments, together with the one corresponding to the month of grace. Should the month of grace expire without the installments for both months having been satisfied, an interest of 18% per annum will be charged on the unpaid installments. o Should a period of ninety (90) days elapse from the expiration of the grace period without the overdue and unpaid installments having been paid with the corresponding interests up to that date, respondent Fernando, as vendor, was authorized to declare the contract cancelled and to dispose of the parcel of land, as if the contract had not been entered into. The payments made, together with all the improvements made on the premises, shall be considered as rents paid for the use and occupation of the premises and as liquidated damages. Leano built a house thereon. Failed to pay Fernando. Fernando wants her out. Filed an ejectment case against her.


SALES DIGESTS 2C 2005-2006 •

Dean Villanueva

Leano filed a complaint for specific performance. She deposited the total balance with the clerk of court.

Issues: • • •

W/N the transaction between the parties is an absolute sale or a conditional sale W/N there was a proper cancellation of the contract to sell W/N petitioner was in delay in the payment of the monthly amortizations

Held: • • •

•

Conditional sale, not an absolute sale. The intention of the parties was to reserve the ownership of the land in the seller until the buyer has paid the total purchase price. What was transferred was possession, not ownership. The ownership of the lot was not transferred to Leano. The land is covered by a Torrens title, the act of registration of the deed of sale was the operative act that could transfer ownership over the lot. There is not even a deed that could be registered since the contract provided that the seller will execute such a deed “upon complete payment by the Vendee of the total purchase price of the property” with the stiupulated interest. In Contracts to Sell: full payament of purchase price is a positive suspensive condition. Failure to pay is not a breach. It is an event that prevented the obligation of the vendor to convey title from acquiring obligatory force.

•

Leano was not given the Cash Surrender Value of the payments that she made, therefore there was still no actual cancellation of the contract.

•

Leano in delay in the payment of the monthly amortizations. Though it is payable in 10 years, the K stipulated that the purchase price is payable in monthly installments. Leano cannot ignore the provision.

127 ADELFA v CA (Contract of Sale vs Contract to Sell

Delgado)

Facts: - the subject matter involved here is a land in Las Piñas owned by the private respondents and their brothers Jose and Dominador Jimenez. - the seller (private respondents) offered to buyer Adelfa the western portion of the lot - “exclusive option to purchase” was executed between seller and buyer - before any payment was made, buyer received summons from the kin of the seller - buyer withheld payment and as a result, seller sold it to another buyer - buyer writes to seller its intention to pay the purchase price but seller refuse - RTC and CA for the sellers Issue: W/N seller was justified in canceling its vinculum juris with buyer. Held: YES. 1)

2) 3) 4) 5)

it is a contract to sell and not a contract of sale a) although provided for remedies, does not mention that buyer will return the possession of the property b) deed of absolute sale only to be issued after full payment as gleaned from the letter request of buyer to allow it to pay the price there was no valid tender of payment by the buyer, it could have consigned the payment the seller validly rescinded the contract since buyer didn’t still pay amidst the resolution of the dispute of the kin letter of cancellation is enough and no need for judicial action since there is a stipulation for automatic rescission took judicial notice of UP vs. De los Angeles but the buyer here didn’t exercise the privilege given by the doctrine

128 CORONEL v CA (Is a Contract to Sell a “Sale” under 1458? Del Socorro) Facts: - Coronels (seller) executed a document entitled Receipt of Down Payment in favor of plaintiff Ramona (buyer) - conditions in the sale:appurtenant to the sale are the following: Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

1. Ramona will make a down payment of 50T; 2. Coronels will transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the 50T downpayment; 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 whole balance of 1.1M. - 50T downpayment was made by buyer - title to the property originally registered under the name of the Coronel’s father was transferred in their names - but the Coronels sold the property to Mabanag (buyer 2) - Coronels rescinded the contract w/ Ramona by depositing the downpayment w in the bank in trust for Ramona - Ramona filed for specific performance against the seller Coronels to compel them to consummate the sale of land Issue: W/N the contract between the Coronels and Ramona was a contract of sale or a contract to sell? Held: contract of SALE - construing the “Receipt of Down payment”, there was a clear intent on the part of the sellers to transfer title to the buyer, but since the transfer certificate of title was still in the name of sellers’ father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price - therefore, sellers undertook upon receipt of the down payment to be issued of a new certificate of title in their names from that of their father, after which, they promised to present said title to the buyer and to execute the deed of absolute sale whereupon, the buyer shall pay the entire balance of the purchase price - not 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 - it may be presumed that, had the certificate of title been in the names 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 - moreover, unlike in a contract to sell, sellers did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition - having already agreed to sell the subject property, they undertook to have the certificate of title change to their names and immediately thereafter, to execute the written deed of absolute sale - hence, 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 buyer *for full discussion on contract of sale and to sell, see case or book - specific performance to consummate sale proper 129 PNB v CA (Is a Contract to Sell a “Sale” under 1458? Fernandez) Facts: •

• •

•

• • •

Ngo made a formal offer to purchase a land owned by PNB. PNB approved of the offer subject to certain terms and conditions (deposit a certain sum and to institute ejectment proceedings against occupants of the land at the expense of buyer among others). Ngo agreed. Re-negotiations on the purchase price occurred but there was a failure on the part of the buyer to pay the balance of the required downpayment. So the sale, in this agreement, never materialized. Later on, Ngo made a request to revive the previously approved offer to purchase the property. This was approved by the PNB (with certain modifications on the terms and conditions, but still containing the clause on the ejectment of occupants at the expense of buyer). Ngo accepted PNB’s terms except the ejectment undertaking because she already defrayed the expenses for the ejectment of the previous occupants and that the occupants were actually lessees of PNB. This was not acceptable to PNB. So Ngo said that she is willing to pay the balance of the downpayment as soon as PNB cleared the occupants. This was not done by PNB (kasi nga gusto ng bangko yung bumibili ang magpa-alis). In the end, the approved sale was cancelled. So Ngo filed an action for Specific Performance arguing, primarily, that there was a perfected contract of sale between him and the bank. TC declared there was. CA also said there was a perfected contract of sale. Both courts banked on the notion that the deposits (1st and 2nd agreement) accepted by PNB were in the form of earnest money.

Issue: Was there a perfected contract of sale between Ngo and PNB? Held:



Dean Villanueva

None. The letter agreements were in the nature of contracts to sell. 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. Commonly, the suspensive condition to transfer ownership is full payment of the purchase price. In this case, Ngo’s obligation was to deposit an initial amount (100k in the first agreement, 200k in the 2nd) and then subsequently to deposit an additional amount representing 20% of the purchase price (in both agreements). And under both letter-agreements, the failure of the buyer to remit the additional deposits, deposits already given shall be forfeited and the bank can sell the property to others. The failure to remit the required amounts gave occasion for PNB to cancel the agreement. This specific right by PNB is in the nature of a stipulation reserving title in the vendor until full payment of the purchase price or giving the vendor the right to unilaterally rescind the contract the moment the buyer fails to pay within a fixed period. The letteragreements were not deeds of sale, no title passes from seller to buyer under such documents. The presumption that earnest money given in a sale transaction is considered as part of the purchase price and is a proof of a perfected contract of sale is rebuttable. Clearly, the letter-agreements show the intention of the parties to enter into negotiations leading to a contract of sale. The initial deposits should be construed as part of the consideration for PNB’s promise to reserve subject property for Ngo. It should be noted that there were two separate transactions—the first was unconditionally cancelled and the effects thereof cannot be deemed applicable to the second transaction. (pero eto lang sa tingin ko mahalaga kya nasa list ang kaso na ‘to) *Interesting enough, 7 days after this decision, Coronel v CA was decided. In that case, the SC said that in a contract to sell, the happening of a suspensive condition does not give rise to an executory contract of sale subject to an action for specific performance, since the obligation of the seller is to enter into a contract of sale (an obligation to do). But in the case above, the SC said that the happening of a condition in a contract to sell converts it to a contract of sell or at the most an executory sale to an executed one. 130 BABASA v CA (Nature of Condition to pay Price

Legaspi)

Facts Spouses Babasa (vendors) and Tabangao realty (vendee) entered into an agreement denominated as Conditional Sale of Registered Lands Subject matter: 3 parcels of land in Batangas City At the time of the sale, the TCTs were in the name of 3rd persons The agreement was as follows: 1. the purchase price of the lots amount to 2.1M 2. 300K downpayment at the signing of the contract 3. 1.8M balance shall be paid after the TCT's have been presented free from all liens, within 20 mos. 4. Vendee has the right to take immediate possession of the lots After the sale, vendee made improvements on the property and also leased it to Shell 2 days prior to expiration of the 20 mos, vendor asked for an indefinite extension of time within which to deliver the clean titles Vendee refused Vendor executed a notarized unilateral rescission. It demanded Shell to vacate the lots. Vendee filed an action for specific performance with damages to compel vendor to delivery clean titles over the properties. They alleged that vendor was already in the position to secure clean titles over the lots. Issue w/n vendor has a right to unilaterally rescind the contract Ruling vedor's act was unwarranted The sale in this case is an absolute sale though it is denominated as conditional. The contract indicates that it is a contract of sale. There was no proviso reserving title with the vendors until full payment of the purchase price. In fact, there was both constructive and actual delivery in this case. There was constructive delivery when the contract was executed and actual delivery when the vendee took possession of the lots. In this case, the condition was on the performance of an obligation. Failure to comply with such merely gives the injured party the option either to refuse to proceed with the sale or waive the condition. Failure to deliver the clean titles merely gave the vendee the abovementioned option. re. contention by vendors that they were forced to enter into the sale under the threat that it would be expropriated contracts are valid even though one of the parties entered into it against his own wish and desire Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


131 ROQUE v LAPUZ (Stipulation on Power to Rescind Facts: -

Issue: Held: -

Dean Villanueva

Lopez)

Felipe Roque sold to Nicanor Lapuz Lots 1, 2 and 9, Block 1 of Rockville Subdivision payable in 120 equal monthly installments. Lapuz paid 150 as deposit and 740.56 as payment of 4 installments. After the approcal of the subd. Plan by the Bureau of Lands, Lapuz wanted to change the lots to Lots 4 and 12, Block 2. This was approved by Roque. They entered into a new agreement for the said parcels of land. On the strength of the agreement, Lapuz occupied Lots 4 & 12 and built his house thereon and enclosed the land with barbed wires and adobe walls. Lapuz failed to make payment. Also, Roque asked Lapuz to sign the contract to sell to which the latter declined saying that he would sign after he has paid his unpaid balance. Roque filed a case against Lapuz for rescission and cancellation of the agreement of sale. CFI ruled in favor of Roque. CA affirmed. But in a motion for reconsideration, CA amended their decision and granted Lapuz a 90-day extension within which to pay the balance of the purchase price. CA said that it was only equitable to grant an extension taking into consideration the improvements brought in by Lapuz. (Based on 3rd paragraph of Art. 1191) W/n Lapuz is entitled to the benefits of the 3rd paragraph of Art. 1191.

SC says no. First, the SC ruled that the contract between the parties was a contract to sell. First, there was no delivery or tradicion even if Lapuz is already in possession of the lot because the property was registered land so it is the act of registration of the Deed of Sale which could legally effect the transfer of title of ownership. Also, the sale was not in any deed. It has been held that absence of a deed of conveyance as indication that parties did not intend immediate transfer of ownership over realty. This further strengthened the ruling that the contract was a contract to sell and not an absolute contract of sale. SC ruled that Art. 1592, which prohibits the extension of a contract when there is a judicial or notarial notice of rescission, does not apply to contracts to sell. This is because there is no obligation yet to rescind in a contract to sell until there is full payment, which serves as a positive suspensive condition. Thus, Art. 1191 should be the provision applied. SC, though, said that there are no circumstances in this case that would merit the time extension allowed by the 3rd paragraph of Art. 1191. Lapuz’s refusal to pay further installments, his dilatory tactic of refusing to sign the necessary contract of sale and his failure to deposit or make available any amount for the 2nd agreement are all unreasonable and unjustified which altogether manifest clear bad faith and malice making inapplicable and unwarranted the benefits of the 3rd par. of 1191. Justice and equity actually call for approval of the rescission asked by Roque because Lapuz has already been occupying the land for a long time without having any right thereto and without paying anything. Possible questions to ponder: 1. Why not apply the Maceda Law? 2. Why can’t Art. 1592 apply to contracts to sell while Art. 1191 can apply? Pareho lang naman silang rescission ah. 132 ANGELES v CALANZ (Stipulation on Power to Rescind

Mendiola)

133 DIGNOS v CA (Stipulation on Power to Rescind

Rivas)

Facts: • • • • •

Dignos is the owner of a parcel of land sold by installment to Jabil as evidenced by a deed of sale Several months thereafter, Dignos sold the same parcel of land to Cabigas evidenced by a registration in the Register if Deeds Jabil discovered the subsequent sale by Dignos and asked the court to cancel the 2nd sale RTC: declared that the 2nd sale to Cabigos is null and void CA: affirmed the decision of the RTC

Issue: • •

W/N the 1st sake between DIgnos and Jabil is a valid contract of sale W/N there was a valid rescission of 1st sale by the subsequents 2nd sale to Cabigos


SALES DIGESTS 2C 2005-2006 Held: • • •

Dean Villanueva

It is valid contract of sale and not a contract to sell Nowhere in the contract did the parties stipulate that the title is reserved in the vendor until full payment There is also no stipulation giving the vendor the right to unilaterally rescind the contract

No rescission of the 1st contract Dignos never notified Jabil by notarial act that they were rescinding the contract neither was there a case filed in court to rescind the contract • The contention of Dignos that there was a certain emissiary of Jabil which informed him Jabil agreed for Dignos to preceed to the 2ns sale is wrong. It is required that acts and contract which have for their object the extinguishment of real rights over an immovable must appear in a public document • Also, a slight delay in the perfomance of the obligation of one party is not a sufficient ground for rescission • It is required by equity and justice that Jabil be given addition extention to pay the P4,000 balance and 1 month delay. • •

134 TOPACIO v CA (Condition on Reservation of Title Facts: • • • • • Issue: • Held: • • • •

Sarenas)

De Villa spouses were the owners of a certain parcel. This parcel of land was foreclosed due to the failure of the spouses to pay certain obligations to which the land was subject to mortgage. BPI Investment acquired the land in public auction. Topacio, son-in-law of the De Villa spouses, offered to purchase the property from BPI. They arrived at the price of P1.25M with 30% as downpayment. Topacio was able to pay the downpayment but failed to pay the remaining balance. BPI wanted Topacio to get back the check because somebody else was willing to buy the property at P1.6M. Topacio does not want to get his money back but insists on buying the land at P1.25M. W/N there is a perfected contract of sale that is enforceable Yes, the contract existing in this case is a contract of sale. The downpayment that Topacio gave is earnest money. Earnest money is considered part of the purchase price. Nowhere in the transaction indicates that BPI reserved its title on the property nor did it provide for any automatic rescission upon default. When Topacio failed to pay the remaining balance, BPI could not validly rescind the contract without complying with the Civil Code provisions on notarial or judicial rescission.

135 LUZON BROKERAGE v MARITIME (Issue of Substantial Breach

Beron)

Facts: Myers Building Co., owner of 3 parcels of land entered into a contract entitled "deed of conditional sale" in favor of Bary Building, later known as Maritime Building, whereby Myers sold the land to Maritime for P1M. P50,000 of this price was paid upon the execution of the said contract and the parties agreed that the balance of P950,000 was to be paid in monthly installments. They further agreed that in case of failure on the part of Maritime to pay any of the installments due, the contract shall be annulled at the option of Myers and all payments already made by vendee shall be forfeited and the Myers shall have the right to reenter the property. Maritime failed to pay the monthly installments corresponding to 3 months of the year 1961. Myers demanded payment but such demands remained unanswered. Myers send a letter to Maritime canceling the Deed of Conditional Sale. In the meantime, Myers demanded upon Luzon Brokerage to whom Maritime leased the properties the payment of monthly rentals. Luzon then filed this action for interpleader. Held: The failure of Maritime to pay the 4 monthly installments constitutes a breach of contract worth Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

Myers. The said failure was not made in good faith. The non-payment of the installments was the result of a deliberate course of action on the part of Maritime, designed to coerce Myers corporation into answering for an alleged promise of the late F.H. Myers to indemnify E.W. Shedler, the controlling stockholder of Maritime, for any payments to be made to the members of the Luzon Labor Union. (W-in-ithold ni Maritime yung payments para dun sa sale para mapilitan si Myers na magbayad dun sa alleged na promise ni Myers na bayaran si Shedler) Therefore, the action of Maritime in suspending payments to Myers was a breach of contract tainted with fraud or malice. Maritime is not entitled to ask the court ot give further time to make paymnet and thereby erase the default or breach that it had deliberately incurred. It is irrelevant whether appellant Maritime' s infringement to its contract was casual or serious. In contracts to sell, where ownership is retained by the seller and is nit to pass until the full payment of the pricem such payment is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. To argue that there was only a casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition. Maritime's contention that rescission cannot be done extra-judicially cannot be done is untenable. Well settled is the rule that judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions. If, however, the other party denies that rescission is justified, it is free to resort to judicial action to bring the matter to court. Maritime invokes art 1592 as entitling Maritime to pay despite its defaults. The court in response to said contention stated: "Assuming arguendo that art 1592 is applicable, the cross claim file by Myers against Maritime in the court below constituted a judicial demand for rescission that satisfies that requirements of said Article." 136 UP v DE LOS ANGELES (Minimum Requirement of Rescission

Calinisan)

Facts: -

Up and associated lumber mfg co inc had logging agreement in the land grants of the former in quezon and

laguna in 1960 to last for 5 years -

Alumco, by 1964 incurred an upaid account of 219362.94

-

Up repeatedly demanded for payment but to no avail worse alumco entered or incurred additional liability

of 60t -

Up, by virtue of the stipulation in the contract, rescinded it without court litigation

-

Up conducted new bidding and awarded the logging right to sta clara lumber company

-

Up filed for the collection of balance and alumco filed for tro and was granted; sta clara prohibited from

operating -

Parties proceded so UP declared by court in contempt

Issue: w/n UP can treat its contract with alumco rescinded, and may disregard the same before any judicial pronouncement to that effect Held: nothing in the law that prohibits party form stipulating that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract -

but in the case of abuse or error by the rescinder, the other party is not barred from questioning in court

such abuse or error, the practical effect of the stipulation being merely to transfer to the defendant/defaulter the initiative of instituting suit, instead of rescinder.



-

Dean Villanueva

It is only the final judgment of the corresponding court that will conclusively and finally settle whether the

action taken was or was not correct in law -

Injunction granted to almuco reversed/lifted in favor of UP

137 CHENG v GENATO (Minimum Requirement of Rescission

Delgado)

138 TORRALBA v DE LOS ANGELES (Minimum Requirement of Rescission Del Socorro) Facts: - PHHC (seller) entered into a conditional contract to sell a parcel of land w/ Torralba (buyer) upon the conditions, that the buyer shall pay to the seller downpayment of P400 and P41 as monthly installment; that should buyer violate, refuse or fail to comply with the terms and conditions of the contract, or default in the payment of three monthly installments, the contract shall be deemed annulled and cancelled and the seller shall be at liberty to dispose of the property to any person, in the same manner as if the contract has never been made, and, the seller shall be entitled to immediate re-possession of the premises and the payments made shall be considered as rentals - buyer paid seller P1,431but failed to make further payments - seller notified the buyer of the cancellation of the conditional contract to sell and gave her 30 days from notice within which to revive the contract by paying in cash all installments and interests due; but buyer still failed to pay - seller again notified the petitioner in writing of the definite annulment and cancellation of the conditional contract to sell and required her to vacate the premises within 15 days from notice; but the buyer did not vacate the premises - seller filed for the recovery of possession of the land Issue: Buyer claims that seller should have resorted to a judicial decree rescinding the contract to sell before awarding the lot in question to buyer 2 in order to avoid unnecessary litigation or conflict Held: - untenable; the contract executed by the buyer and seller expressly provided that the contract shall be deemed annulled and cancelled and the seller shall be at liberty to take possession of said property and dispose the same to any other person upon default of the buyer pay the installments due - hence, there was no contract to rescind in court because from the moment the seller defaulted in the timely payment of the installments, the contract between the parties was deemed ipso facto rescinded 139 ROMERO v CA (Conditions Fernandez) Facts: • •

• • • •

• •

Romero and his foreign partners wanted to put up a warehouse in Manila. Flores and wife, accompanied by a broker, offered a parcel of land in Parañaque. Except for the presence of squatters, Romero liked the land. A Deed of Conditional Sale was executed between Romero (buyer) and Flores (seller). The contract contained a stipulation on: an initial payment of 50k (to be used in the ejectment case against the squatters); the balance being payable 45 days after the removal of all squatters and; upon full payment, the seller shall deliver a deed of absolute sale. The contract also provided that if the seller would not be able to remove the squatters after 60 days from the signing of the deed of conditional sale, the downpayment given shall be returned to the buyer. Seller was able to obtain a favorable judgment against the squatters, but was not able to eject them from the premises (as expressed by seller’s counsel). Since buyer really wanted the land, it proposed to eject the squatters himself. Later on, seller’s counsel wrote to buyer’s counsel and informed him that the deed of conditional sale had been rendered null and void by virtue of seller’s failure to evict the squatters within the 60-day period. Seller also decided to retain the property. Pero ayaw nga pumayag ni buyer na i-cancel ang bentahan..gusto niya talaga yung lupa. TC ruled in favor of buyer and said that seller had no right to rescind the contract since it was the seller who violated her obligation. CA, na pampagulo, ruled in favor of seller and said that since the contract was subject to a resolutory condition, and the same having failed to happen, there was a failure on the object of the contract.

Issue: What was the nature of the condition—eviction of squatters—with respect to the contract between buyer and seller? Considering the first issue, does seller have the right to rescind the contract?



Dean Villanueva

Held: The condition of evicting the squatters from the premises is in the nature of a condition imposed on an obligation of party and not a condition imposed upon the perfection of the contract itself. Failure to comply with the first type of condition gives a right to the other party to either refuse to proceed with the contract or waive said condition. But failure to comply with the second type of condition prevents the creation of a juridical relation between the parties (kasi walang contract). Since the condition (eviction of squatters) is not imposed upon the perfection of the contract, the non-fulfillment of such condition has no effect on the contract’s coming into existence. Pero pano nga, hindi ginawa ni seller yung obligasyon niya? Well the paragraph above said that the other party (in this case si buyer) has the choice—either to refuse proceeding with the contract, or waive the condition and proceed—So anong naging choice ni buyer? E di to waive the condition (remember he offered to undertake the eviction of the squatters himself, notwithstanding seller’s failure). In the end, seller DOES NOT have a right to rescind the contract. Why? Because seller is not the injured party. Remember, 1191 (reciprocal obligations) gives a right to a to party demand rescission upon breach of obligation by the other party. So continue with the sale, buyer to pay balance of the price and seller to execute an absolute deed of sale upon such payment. 140 HEIRS OF ESCANLAR v CA (Conditions Legaspi) Facts spouses Guillermo Nombre and Victoriana Cari-an owned 2 parcels of land After their death, the Cari-an's received Victoriana's 1/2 share The Cari-an's sold their share to Escanlar and Holgado The contract of sale contains a stipulation that the contract shall become effective only upon the approval by the honorable CFI The balance shall be paid on a certain date The vendor received 12 installments but after that the vendee was unable to pay The vendee continued to possess the lot and pay rent Meanwhile, the vendors asked the court to sell their shares to another party Hence, they instituted a case to cancel the sale with vendees The vendees opposed contending that vendors have no right to sell the lots. Vendee2 was also in bad faith. TC and CA ruled that the deed of sale is a contract to sell and it shall become effective only upon approval of the probate court and full payment of the purchase price Issue w/n it is a contract of sale or a contract to sell w/n vendors have a right to rescind the sale on the basis of the stipulation requiring the approval of the court Ruling 1. it is a perfected contract of sale a. vendors did not reserve unto themselves the ownership of the property until full payment b. there is no stipulation giving the sellers the right to unilaterally rescind the contract the moment vendee fails to pay c. there was symbolic delivery in this case in the form of tradition brevi manu 2. vendors have no right to rescind in a contract of sale the non-payment of the price is a resolutory condition the injured party has the option either the rescind or to waive the condition. In this case, the vendee opted to waive the condition. The contract's validity is not affected by the stipulation. Only the effectivity is affected. Vendees are correct in saying that the approval of the probate court exists only where specific property of the estate are sold and not when only the ideal share of an heir is disposed of. Although the stipulation is the law between the parties, the evident intention of the contract is one of a sale. This is revealed by the contemporaneous acts of the parties 141 POWER COMMERCIAL v CA (Conditions versus Warranties Lopez) Facts: -

PCIC bought a parcel of land from Spouses Quiambao for a new office and warehouse. PCIC assumed the mortgages constituted on the lot in favor of PNB. The parties executed a Deed of Absolute Sale with Assumption of Mortgage. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Issue: Held: -

-

Dean Villanueva

Mrs. Constantino, General Manager of PCIC submitted a formal application for the assumption of mortgage with PNH. PCIC was then informed that their application was denied because it lacked certain necessary papers. Still, PCIC paid the mortgage. PCIC sent a letter to PNB pleading that their application be approved so that they may take the necessary procedures to eject the people possessing the lot. PNB sent a letter informing PCIC that the latter have not been paying the mortgage lately. PCIC filed a case against the sellers for rescission and damages, saying that the sellers failed to eject the occupants of the land. While the case was pending, the mortgage was foreclosed so PNB was impleaded. RTC for PCIC. CA reversed saying that the deed of sale did not obligate the sellers to eject the lessees from the land as a condition of a sale nor was the occupation by said lessees a violation of the warranty against eviction. W/n PCIC had a right to rescind the contract with the sellers. W/n PCIC can claim the amounts they paid on the mortgage from PNB. SC says that PCIC cannot rescind. The failure of the sellers to eject the lessees from the land cannot be considered a substantial breach to call for rescission. The ejectment of the lessees was not stipulated as a condition in the contract nor was its effects and consequences specified. The contract merely contained a warranty for the peaceful possession by the buyer of the land (warranty against eviction). Absent a stipulation for the supposed condition, it cannot be said that its non-fulfillment is a ground for rescission. Plus, PCIC was well aware of the lessees when they entered the sale contract. They even filed a suit to eject said occupants. There was no breach of warranty against eviction. The requisites2 needed were not present. PCIC cannot claim the payments they made on the mortgage by virtue of solutio indebiti. The payment they made was under an obligation. PCIC was obliged to pay the amounts to PNB by virtue of their assumption of the mortgage. Even if we consider PCIC that the assumption of mortgage was not approved, PCIC was still liable to pay the mortgage because that was one of the conditions of the sale.

142 NUTRIMIX FEEDS v CA (Warranty against hidden defects

Mendiola)

Facts: The Evangelistas started to directly procure various kinds of animal feeds from Nutrimix. The Evangelistas purchased these feeds by paying them with checks. Eventually, Nutrimix filed a suit against the Evangelistas alleging that the checks issued were dishonored. According to the Evangelistas, their nonpayment was based on a just and legal ground. They assert that they need not pay because the contaminated products of Nutrimix caused the sudden and massive death of their animals. In fact, the Evangelistas filed a claim for damages against Nutrimix for the breach of warranty against hidden defects. After examination of the samples, it was discovered that the feeds contained a COUMATETRALYL compound aka Racumin. Issue: W/N Nutrimix is liable for breach of warranty against hidden defects. Held: Nutrimix is not liable. The elements for there to be a recovery on account of hidden defects are: 1. defect must be hidden, 2. defect must exist at the time sale was made, 3. defect must ordinarily have been excluded from the contract, 3. defect is important, 5. action must be instituted within the statute of limitations. The court finds it difficult to believe that the feeds delivered and fed to the animals were contaminated at the time they reached the respondents. A difference of approximately 3 months enfeebles the theory of Evangelistas that Nutrimix is guilty of breach. In a span of three months, the feeds could have already been contaminated by outside factors. 143 VILLARICA v CA

2

Purchaser has been deprived of the whole or part of the thing, (2) eviction is by final judgment, (3) basis is a right prior to the sale made by a seller, and (4) seller had been summoned and made a defendant in the suit at the instance of the buyer. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas

SALES DIGESTS 2C 2005-2006 (Nature of the Right to repurchase Facts: -

Dean Villanueva

Rivas)

Villarica sold to Consunji a lot in Davao in 1951 as evidenced by a deed of absolute sale Several days later, Consunji granted Villarica an option to buy the same property within the period of 1 year The TCT under the name of Villarica was cancelled and a new TCT was issued in the name of Consunji In 1953, Consunji sold the lot to Francisco and a new TCT was issued in the name of Francisco Villarica is now arguing that the real agreement between him and Consunji was really an equitable mortgage as a security for a usurious loan RTC: held that the agreement was really an equitable mortgage CA: reversed the decision of the RTC and held that the agreement was a sale

Issue: W/N the agreement between the Villarica and Consunji was an equitable mortgage or an absolute sale Held: -

-

An absolute sale An option to buy is different and distinct from right of repurchase which must be reserved by the vendor, by stipulation to that effect in the contract of sale What the Consunji’s granted Villarica was an option to buy the property within the period of 1 year and not a right to repurchase The right to repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed the vendor can no longer reserve the right to repurchase and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy like case The contract is also not an equitable mortgage because the price was not inadequate; the vendor did not remain in possession of the land sold as lessee or otherwise; the vendee as new owner merely granted the vendor on option to buy the property sold; and the taxes paid by the vendor were back taxes up to the time of the sale

144 TORRES v CA (Right to repurchase must be reserved Facts: • • • •

• • Issue: • Held: • •

Sarenas)

The Illuscipideses (spouses) are the owners of 2 lots in Dagupan. The 2 lots are mortgaged to GSIS. In 1965, the spouses contracted Olores for the construction of a 9-door apartment, and later on making it a 10-door apartment. The spouses were not able to pay Olores the full amount for the construction. Olores sued and won. Pending appeal to the CA, the GSIS sent notice to the spouses that they are foreclosing the property. In order to pay, spouses sold to Torres. A right to repurchase was made on a separate agreement (not on the deed of sale) Napraning to si Olores na hindi siya mababayaran, he filed for a rescission of the sale from spouses to Torres. The case did not prosper. Upon appeal, CA ruled that it was not a pacto de retro sale. W/N the spouses can still buy back their property No, the sale is not a pacto de retro sale. The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract.

145 VDA DE ZULUETA v OCTAVIANO (Pactum Commissorium Beron) Facts: Olimpia Fernandez Vda. de Zulueta, the registered owner of a 5.5 hectare rice land, sold said lot to private respondent Aurelio Octaviano for P8,600. The contract stipulated that Octaviano shall pay unto one Maximo Gumayan P5,000 representing redemption price of the land by virtue of a deed of sale with pacto de retro Oimpia has executed in favor of Gumayan. It further stipulated that Octaviano should pay Gumayan an additional P1,600 representing redemption price of the land by virtue of a deed of mortgage executed by Olimpia in favor of Gumayan. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

On the same date of execution of the contract between Olimpia and Aurelio, Aurelio signed another document giving Olimpia, the option to repurchase the property at any time after May 1958 but not later than May 1960. Aurelio took possession of the land after the sale. Aurelio tried to take possession of the certificat of title from Olimpia for the purpose of registering the deed of absolute sale but was told that the same was in possession of Gumayan, who in turn informed him that the title had been deposited with PNB. To avoid further trouble, Aurelio offered Olimpia the option to repurchase the property. Olimpia did not accept the offer. Relying on the express consent of Olimpia, Aurelio negotiated with his own brother for the sale of the property. Aurelio paid the P6,600 representing the obligation of Olimpia that was assumed by Aurelio. Aurelio also paid Gumayan P1486 covering receipts representing additional sums of money borrowed by Olimpia. About 2 years after May 1960, Olimpia desired to repurchase the land and wrote the brother of Aurelio a letter asking him if he was willing to resell the land. Isauro refused. Olimpia then commenced suit to recover ownership and possession of the subject land against the brothers. Issue: W/n Olimpia can validly repurchase the land from Aurelio... Held: NO. The nature of the transaction between Olimpia and Aurelio is not a sale with right to repurchase. Conventional redemption takes place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Art 1616. In this case, there was no reservation made by the vendor in the document representing the contract. The option to repurchase was contained on a subsequent document and was made by the Aurelio, the vendee. Neither is the contract between the parties one of equitable mortgage. There is nothing in the contract which it could be inferred that the property was being utilized as security. Inasmuch as the contract was neither a sale with right of repurchase nor an equitable mortgage, neither can it be alleged that it partook of a pactum commisorium and was therefore void. It bears reiterating that Olimpia was not a debtor but a vendor. Olimpia owed nothing to Aurelio. Even granting arguendo that the sale was a pacto de retro sale, the evidence shows that Olimpia opted to repurchase 2 years after the stipulated date of repurchase. If Olimpia could not locate Aurelio, as she contends, and based on her allegation that the contract between her was one of sale with right to repurhcase, neither howver did she tender the redemption price to Aurelio's brother, but merely wrote him letters 146 GUERRERO v YÑIGA (Additional Period of Redemption

Calinisan)

Facts:

• •

• • • • • •

CATABONA has been mortgaging his parcel of land to YNIGO and his wife BATANGAN, for the sum of P18T for 5 years. The couple lent him money. It has the stipulation that “should he (CATABONA) desire to convey or sell in the future the above described land, he promised to sell the same to the mortgagees for the sum of P18T and that the amount of the mortgage, to wit, P18T shall be treated as payment of one-half xxxand further warrants that he shall sell xxx to no other xxx” A second mortgaged was entered into with the same spouses on the same land for an additional sum. He promised with this mortgage to sell the land at the price of P2t per hectare. Third mortgage was executed dubbed “Mortgage with conditional sale”. It states there that title shall pass to and become vested absolutely in the said spouses, if he fails to repurchase the land. All these were annotated in the TCT. Catabona sold to GUERRERO ½ of the property. Allegedly, Ynigo cannot purchase the property, so he allowed Guerrero to purchase it as long as the obligation to Ynigo was paid. Guerrero was not able to get possession of the land, since Ynigo remained in possession. Ynigo would not surrender the TCTs. Catabona then executed a deed of absolute sale in favor of Ynigo. Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

Issue: W/N there was a pacto de retro in the third mortgage. Held:

• • •

NO PACTO DE RETRO HERE. (RC note: pls explain to me why) See page 41 for the contract. Except as to the period of 5 years from the date of the instrument within which the mortgagor may not redeem the property, the parties did not stipulate on a period after the 5 years within which the mortgagor may redeem it. If the stipulation be construed as giving the mortgagees the right to own the property upon failure of the mortgagor to pay the loan on the stipulated time – which is not provided – that would be pactum commissorium which is unlawful and void.

147 ABILLA v GOBONSENG (Additional Period of Redemption

Delgado)

Facts: Subject in this case is a land in Dumaguete. The seller is Gobenseng and the buyer is Abilla. Buyer instituted against Gobonseng action for specific performance seeking reimbursement of the expenses they incurred in connection with the preparation of the Deed of Sale and Option to Buy which appears to be a Deed of Sale with Right of Repurchase. RTC had it for Abilla declaring it not an equitable mortgage but a sale a retro. SC affirmed it with finality. Seller asserts that since judgment declares it as sale a retro, they have thirty days to repurchase the said land. RTC granted the motion hence this appeal. Issue: W/N Art 1606 applies. Held: NO. At the outset, it must be stressed that it has been respondents’ consistent claim that the transaction subject hereof was an equitable mortgage and not a pacto de retro sale or a sale with option to buy. Even after the Court of Appeals declared the transaction to be a pacto de retro sale, respondents maintained their view that the transaction was an equitable mortgage. Seeing the chance to turn the decision in their favor, however, respondents abandoned their theory that the transaction was an equitable mortgage and adopted the finding of the Court of Appeals that it was in fact a pacto de retro sale. Respondents now insist that they are entitled to exercise the right to repurchase pursuant to the third paragraph of Article 1606 of the Civil Code, which reads: However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase. The application of the third paragraph of Article 1606 is predicated upon the bona fides of the vendor a retro. It must appear that there was a belief on his part, founded on facts attendant upon the execution of the sale with pacto de retro, honestly and sincerely entertained, that the agreement was in reality a mortgage, one not intended to affect the title to the property ostensibly sold, but merely to give it as security for a loan or other obligation. Rationale: If the rule were otherwise, it would be within the power of every vendor a retro to set at naught a pacto de retro, or resurrect an expired right of repurchase, by simply instituting an action to reform the contract — known to him to be in truth a sale with pacto de retro — into an equitable mortgage.

148 ALMEDA v DALURO (Fruits Del Socorro) Facts: - seller Daluro sold a landto buyer Almeda, under a pacto de retro sale - seller redeemed the property from the buyer and entered into an agreement w/c specifically provided that the parties would share equally on the net harvest of the palay planted on the land in question - first harvest was divided equally, but the second harvest was only appropriated by the seller - buyer filed for specific performance for seller to give one-half share; but seller refused - seller contends that Art. 1617 applies to the sharing arrangement of the parties Issue: W/N Art. 1617 is applicable. Held: NO.



Dean Villanueva

- Art. 1617 applies only when the parties did not provide for their sharing arrangement with respect to the fruits existing at the time of redemption - in this case, the Agreement specifically provided that the parties would share equally the net harvest of the palay planted on the land in question - since said Agreement is not contrary to law, morals or public policy, it is binding on the parties solution: - buyer has the right to participate in the harvest made even after the month of September, 1957 - the palay was planted on the land in question in June when vendees a retro were still the owners, since the same was repurchased by defendants-vendors a retro only on August - September was the month which the parties reckoned the palay planted in June would be harvested - the phrase "sometime in September 1957" was not meant to limit the right of the buyer to participate in the harvest of the crop planted in June 149 and 150 FRANCISCO v BOISER (When Period of Redemption Begins (Recent Ruling) Facts: • • • • • •

•

Fernandez)

Francisco and her 3 sisters were co-owners of 4 lands in Caloocan city. The co-owners sold 1/5 of their undivided share to their mother Blas. (So Blas became a co-owner as well) Without the knowledge of the other co-owners, Blas sold her 1/5 share to Boiser. This occurred in Aug 8, 1986 In August 5, 1992, Francisco received summons, with a copy of the complaint filed by Boiser demanding her share in the rentals from the land. Francisco reacted by informing Boiser that she was exercising her right of redemption as co-owner of the property. Francisco deposited amount as redemption price with the Clerk of Court on August 12, 1992. Boiser claims that the period of redemption has lapsed since it should be counted from the time she sent a letter to Francisco asking for a share of the rentals (this was May 30, 1992). Francisco, on the other hand, claims that it should be counted from the receipt of the summons (August 5, 1992) and since the right was exercised in August 12, it was well within the 30-day period for redemption. TC said May 30. CA affirmed. Both court relied on the interpretation that Art 1623 of the Civil Code does not prescribe any particular form of notifying co-owners about the sale of property owned in common. These courts relied on Distrito v CA (1991), De Conejero v CA (1987), Badillo v Ferrer (1987), and Etcuban v CA (1987) among others—so ang doctrine ng mga case na ‘to is walang prescribed form ang notice, as soon as nalaman ng partido na mag-re-redeem ang tungkol sa bentahan, magsimula na ang period for redemption.

Issue: Which date should the period of redemption be counted from? Held: August 5, 1992 and not May 30. Art 1623 is very clear and interpretation is not needed. The said provision states that the notice must be given by the vendor. In this case, the notice should be the given by Blas and not by Boiser. This doctrine is supported by Salatandol v Retes (1988) which affirmed the previous doctrine in Butte v Manuel Uy (1962) – notice to be given by vendor; and upon such proper notice, period for redemption begins. Another rule affirmed in this case is that when the notice was given by the proper party—i.e. vendor/prospective vendor—any form of notice is sufficient. The reason why it the notice should come from the vendor/prospective vendor is that such person is in the best position to know who are his co-owners; or that who, under the law, must be notified of the sale. And notice by the seller removes all doubts as to facts of the sale. Hence, the receipt by Francisco of the summons constitutes actual knowledge on the basis of which the 30-day period for redemption should start. And the deposit of the redemption price on August 12, 1992 was timely and should be given effect. 151 DE GUZMAN v CA (Among Co-Heirs

Legaspi)

Facts Teofila Manimtim sold a piece of land with a right to repurchase within 7 years Teofila died without a will De Guzman redeemed the property in favor of Manimtim and secured a tax declaration in their name The other heir of Manimtim filed an action against the De Guzmans to secure the partition of the land which the latter Beron, Calinisan, Delgado, Del Socorro, Fernandez Legaspi, Lopez, Mendiola, Rivas, Sarenas


Dean Villanueva

redeemed. Issue 1. w/n the repurchase was in favor of the heirs 2. w/n the De Guzmans became the owners of the property through prescription Ruling 1. A sale during the period of redemption to any other person other than the heirs could not have been made by the vendee a retro Hence, the redemption was made in favor of the heirs of Teofila 2. Prescription cannot run against co-heirs The heirs have a right to secure partition of the parcels of land 152 SORIANO v BAUTISTA (Redemption in judicial foreclosure of mortgage Facts: Issue: Held: -

-

-

Lopez)

The parties entered into an agreement of mortgage of a parcel of land. The contract included a clause giving the mortgagees (Soriano) the option to buy the land. The Mortgagors (Bautista) transferred possession of the land to the mortgagees. Sometime in May 1958, the atty. of the mortgagees informed the mortgagors wanted to exercise their option to buy. Mortgagees filed a suit to compel the mortgagors to enter into a contract of sale with them. On the other hand, the mortgagors filed a suit asking the court to order the mortgagees to accept the payment for the obligation and release the mortgage. The two cases were joined. CFI ruled that mortgagors should enter into a deed of sale with the mortgagees. W/n the mortgagees are entitled to specific performance consisting of the execution by the mortgagors of the corresponding deed of sale. SC says yes. Mortgagors argue that they have the right to redeem the property because such right is inherent and inseparable from this kind of contract. SC says that that is correct but the contract also contained a provision giving the mortgagees the option to buy the lot. This provision renders the mortgagor’s right to redeem defeasible at the election of the mortgagees. The provision constituted an “option to buy” which is supported by the same consideration as that of the mortgage. This provision creates a personal obligation on the part of the mortgagor to sell the land once the mortgagees express their interest to buy, which was done in this case. So, in effect, the mortgagees are not enforcing a real right to the land but are rather seeking to obtain specific performance of a personal obligation (hindi ba un involuntary servitude?) to execute the deed of sale. Thus, it can be said that when the mortgagees expressed their interest to buy the land, offer and acceptance converged and gave rise to a perfected and binding contract of purchase and sale.

153 LICAROS v GATMAITAN (Definition and Nature of Assignment

Mendiola)

Facts: Licaros decided to make a fund placement with Anglo-Asean Bank. However, a





Dean Villanueva

other Does not remedy the nullity of the obligation



Cures the nullity of the old obligation

The MOA is a conventional subrogation because it appears in the WJEREAS clauses that they have come into the agreement with the express conformity of the third parties concerned which is Anglo-Asean. Had the intention merely been to confer upon Gatmaitan the status of a mere “assignee,” there is simply no sense in having made that stipulation of express conformity by Anglo-Asean bank. Besides, it appears in the MOA that on the signature page, the written words “WITH OUR CONFORME” under which appears “ANGLO-ASEAN BANK AND TRAUST.”

154 PNB v CA (Definition and Nature of Assignment

Rivas)

155 NYCO SALES v BA FINANCE (Warranties of Assignor Sarenas) Facts: • • • • • Issue: • Held: • • •

Nyco is engaged in selling construction materials. Sanshell Corp was asking Nyco for a credit accommodation. Pumayag si Nyco. So Sanshell gave checks to Nyco. Nyco indorsed the checks to BA Finance. BA Finance gave new checks to Nyco and Nyco indorsed these checks to Sanshell. With the exchange of checks, Nyco executed a Deed of Assignment in favor of BA Finance. At the back of each deed is a continuing surety agreement by Sanshell. Sanshell failed to pay. So BA Finance collected from Nyco. Nyco refuses to pay, kasi kung nagbayad sila eh di wala sanang kaso. W/N the assignor is liable to its assignee for its dishonored checks Yes, Nyco is liable to BA Finance Corp The assignment of credit is the process of transferring the right of the assignor to the assignee, who would then be allowed to proceed against the debtor. The assignor-vendor warrants both the credit itself and the person of the debtor. The assignor-vendor then is liable for the invalidity of whatever he assigned to assignee-vendee.

156 CHIN v UY (Bulk Sales Law Beron) 157 PEOPLE v WONG SZU TUNG (Bulk Sales Law Calinisan) Facts:

• • • • • •

Wong was the owner of the Kim Tay Seng Foundry Shop (a shop that manufactures iron works, or processes or casts metals). It was built on the land of Santiago Ocampo. Wong was indebted to Ocampo for P2T. He failed to pay after demands were made. Because of this, Ocampo’s lawyer, of course through Ocampo’s order, executed a deed of sale of the SHOP. Wong signed. Lim Guan bought it. Apparently, Wong was also indebted to the Shurdust Mills Supply Co., Inc for P1,591. When the Shurdust representative went to Wong’s store to demand payment, it was already a different store: Occidental Foundry Shop Wong was found guilty for violation of the Bulk Sales Law. Allegedly, he willfully sold his shop and that he received the purchase price thereof, without delivering to the vendee Lim Guan a written statemenr containing the names and addresses of his creditors and the amounts of indebtedness due and owing them, as required by law

Issue: W/N Wong was in violation of the Bulk Sales Law.



Dean Villanueva

Held:

• • • •

No. He was merely FORCED to sign the deed of sale. Assuming that he wasn’t forced: What Wong sold is the SHOP itself, and NOT MERCHANDISE. Therefore, there was no violation of the bulk sales law. Merchandise: things usually bought and sold in trade by merchants.

158 KING v HERNAEZ (Scope and Definition of Retail Trade

Delgado)

Facts: Macario King is a naturalized Filipino citizen and became the owner of the business establishment Import Meant and Produce. Of the 15 employees the establishment has, 12 of these are Filipinos and the three are Chinese nationals. After acquiring the business from Philippine Cold Stores, King sought the permission of the President through the Secretary of Commerce and Industry to retain the services of the three Chinese nationals since their job was merely technical positions but his request was disapproved because the work of the Chinese were purchaser and salesmen violating the Retail Trade Law. King files case in court claiming that their employment is not prohibited either by the Retail Trade Law or the AntiDummy Law. The three Chinese petitioners testified that they had nothing to do with the management and control of the business, nor do they participate in its profits outside of their monthly salaries. They had been employed long before the enactment of Republic Act No. 1180. They only wait for customers and sell according to the prices appearing on the tags previously fixed by their manager Macario King. They desire to continue in the employ of Macario King in his business and their job is their only means of earning support for themselves and their families. Lim Pin who is employed as buyer declared that his duties include no more than buying the groceries appearing in a lies prepared and given to him from time to time by Macario King, and at no more than the prices indicted in said list. Held: We agree to this contention of respondent not only because the context of the law seems to be clear on what its extent and scope seem to prohibit but also because the same is in full accord with the main objective that permeates both the Retail Trade Law and the Anti-Dummy Law. The one advocates the complete nationalization of the retail trade by denying its ownership to any alien, while the other limits its management, operation, administration and control to Filipino citizens. The prevailing idea is to secure both ownership and management of the retail business in Filipino hands. It prohibits a person not a Filipino from engaging in retail trade directly or indirectly while it limits the management, operation, administration and control to Filipino citizens. These words may be technically synonymous in the same that they all refer to the exercise for a directing, restraining or governing influence over an affair or business to which they relate, but it cannot be denied that by reading them in connection with the positions therein unumerated one cannot draw any other conclusion than that they cover the entire range of employment regardless of whether they involve control or non-control position is prohibited. The reason is obvious: to plug any loophole or close any avenue that an unscrupulous alien may resort to flout the law or defeat its purpose, for no one can deny that while one may be employed in a non-control position who apparently is harmless he may later turn out to be a mere tool to further the evil designs of the employer. It is imperative that the law be interpreted in a manner that would stave off any attempt at circumvention of this legislative purpose. 159 BALMACEDA v UNION CARBIDE (Consumer Goods Coverage Del Socorro) 160 BF GOODRICH v REYES Sr. (Consumer Goods Coverage Facts: • • • •

•

Fernandez)

BF Goodrich is engaged in the business of manufacturing and selling rubber products, principally automotive tires and tubes, batteries, etc to dealers who in turn sell it to others. Under RA 1180, it cannot engage in retail business, namely to sell direct to the general public, merchandise, commodities or goods for consumption. BF Goodrich admitted that it sold directly to the government and its instrumentalities and to its own employees. BF Goodrich seeks a declaratory relief claiming that it does not fall within the ban. The Office of the Solicitor General said that the company is not exempt as it is not a corporation wholly owned by citizens of the Philippines. The lower court rendered a decision making permanent the temporary restraining order upon the company and held that it is not exempt from RA 1180.

Issue: Is BF Goodrich engaged in the retail business?



Dean Villanueva

Held: No, except as to the sale of its products to its employees. PD 714 which amended RA 1180, clarified that “retail business” covers any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but shall not include: (a) a manufacturer, processor, laborer or worker selling to the general public the products manufactured, processed or produced by him if his capital does not exceed 5k pesos, or (b) a farmer or agriculturist selling the product of his farm”. PD 714 added: “(c) a manufacturer or processor selling to the industrial and commercial users or consumers who use the products bought by them to render service to the general public and/or produce or manufacture goods which are in turn sold to them…” It is clear that proprietary planters and persons engaged in the exploration of natural resources are included within the aforesaid amendment. Insofar as the sales to the employees are concerned, such is covered by the ban. The ruling tells us that the term “consumer goods” did not depend entirely on the nature of the goods themselves, but also required as an element the purpose or use for which the goods are bought. (When the products were sold to industrial or commercial consumers, it would not constitute consumer goods, but when sold to its own employees, it would constitute consumer goods) 161 GOODYEAR TIRES v REYES SR. (Consumer Goods Coverage

Legaspi)

162 MARSMAN v FIRST COCONUT (Consumer Goods Coverage

Lopez)

Facts: Issue: Held: -

-

-

First Coconut Central Company purchased one diesel generating unit from Madrid Trading. The balance (after downpayment) was secured by a chattel mortgage on the same diesel generating unit. Madrid assigned all of its rights in the chattel mortgage to Marsman & Company. First Coconut defaulted in the payments so Marsman filed a case against them. RTC granted Marsman’s claim. CA reversed the ruling. CA held that the sale violated the Retail Trade Nationalization Law (RTNL). W/n the sale violated the RTNL. SC says no. The RTNL calls for the following elements, (1) the seller should be habitually engaged in selling, (2) the sale must be direct to the general public and (3) the object of the sale is limited to merchandise, commodities or goods for consumption. In this case, no. 3 is missing. The diesel generating unit is not a consumer good because it was not bought for use primarily for personal, family or household purposes. It was meant to be a factor of production. It was sold not for consumption but for industry or business. In this case, the diesel generating unit was used by First Coconut in its Coconut Central. Thus, the sale cannot be considered as retail trade but wholesale. Furthermore, PD 714 affirms in its preamble that sales made to industrial or commercial users or consumers are not within the scope of the RTNL.

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Sales Digests for CLV

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