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SALES

CASE DIGESTS
DIGNOS YS. COURT OF APPEALS
158 SCRA 378

FACTS:

The spouses Silvestre and Isabel Dignos were. owners of a parcel of land in Opon, Lapu-Lapu City. On
June 7, 1965, appellants, herein petitioners Dignos spouses sold the said parcel of land to respondent
Atilano J. Jabil for the sum of P28,000.00, payable in two installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of PI 2,000.00, which was paid and
acknowledged by the vendors in the deed of sale executed in favor of plaintiff-appellimt, and the next
installment in the sum of P4,000.00 to be paid on or before September 15, 1965.

On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses, Luciano
Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of
absolute sale was executed by the Dignos spouses in favor of the Cabigas spouses, and which was
registered in the Office of the Register of Deeds pursuant to the provisions of Act No. 3344.

As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price of the
land, and as plaintiff- appellant discovered the second sale made by defendants-appellants to the Cabigas
spouses, plaintiff-appellant brought the present suit.

ISSUE:

1. Whether or not there was an absolute contract of sale.

2. Whether or not the contract of sale was already rescinded when the Digros spouses sold the land to
Cabigas

HELD:
1. Yes. That a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale"
where nowhere in the contract in question is a proviso or stipulation to the effect that title to the
property sold is reserved in the vendor until full payment of the purchase price, nor is there a
stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee
fails to pay within a fixed period.

A careful examination of the contract shows that there is no such stipulation reserving the title of
the property on the vendors nor does it give them the right to unilaterally rescind the contract upon
non-payment of the balance thereof within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are
present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3)
price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that
"The ownership of the thing sold shall be transferred to the vendee upon actual or constructive
delivery thereof." While it may be conceded that there was no constructive delivery of the land sold
in the case at bar, as subject Deed of Sale is a private instrument, it is beyond question that there
was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession
of the land in question to Jabil as early as March 27,1965 so that the latter constructed thereon

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Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort
on January 15, J 966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted
by petitioner spouses.

2. No. The contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. It is
undisputed that petitioners never notified private respondents Jabil by notarial act that they were
rescinding the contract, and neither did they file a suit in court to rescind the sale. There is no
showing that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the
latter who, on the contrary, vigorously denied having sent Amistad to tell petitioners that he was
already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is required
that acts and contracts which have for their object extinguishment of real rights over immovable
property must appear in a public document.

Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on
the stipulated date of payment on September 15,1965 and was able to raise the necessary amount
only by mid-October 1965. It has been ruled, however, that where time is not of the essence of the
agreement, a slight delay on the part of one party in the performance of his obligation is not a
sufficient ground for the rescission of the agreement. Considering that private respondent has only a
balance of P4,OOO.00 and was delayed in payment only for one month, equity and justice mandate
as in the aforecited case that Jabil be given an additional period within which to complete payment
of the purchase price.

ARTATES YS. URBI


37 SCRA 395, No. L-2942I , January 30, 1971

FACTS:
A homestead patent was issued to appellants Lino Artates and Manuela Pojas on September 23, 1952. It
was sold at a public auction to Marcela Soliven by the Provincial Sheriff of Cagayan to satisfy a judgment
against Lino Artates by the Justice of the Peace of Calanlugan, Cagayan for physical inj uries inflicted by
him upon Daniel Urbi on October 21, 1955. The appellants Artates and Pojas alleged that the sale
violated the provision of Public Land Law exempting said property from execution for any "debt
contracted within 5 years from date of the issuance of the patent.

Appellants prayed that the execution sale of the land to the defendant Urbi, as well as the deed of sale
executed by the latter in favor of the defendant Soliven be declared null and void.

ISSUE:

Whether or not the purchaser Marcela Soliven has acquired an absolute ownership or title in fee over the
land.

HELD:

No. The execution sale being null and void, the possession nof the land should be returned to the
owners, the herein appellants. There would even no need to order appellee Urbi to execute a deed of
reconveyance thereof to the owners. It appears that what was issued here to the judgment creditor or
purchaser was only the sheriff's provisional certificate, under which he derived no definite title or right
until the period made, or issuance of a final deed or certificate of sale. In other words, the purchaser
herein has not acquired an absolute ownership or title in fee over the land that would necessitate a deed
of reconveyance to revert ownership back to appellant spouses.

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QUIROGA vs. PARSONS HARDWARE CO.
38 Phil 501, G.R. No. L-11491, August 23, 1918

FACTS:

On January 24, 1911, herein plaintiff-appellant Andress Quiroga and J. Parsons, both merchants, entered
into a contract, for the exclusive sale of "Quiroga" Beds in the Visayan Islands. It was agreed, among
others, that Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J.
Parsons, subject to some conditions provided in the contract. Likewise, it was agreed that. In
compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr.
Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the
preference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not
comprised with the Visayan group; and that, Mr. Parsons may sell, or establish branches of his agency for
the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and
shall immediately report such action to Mr. Quiroga for his approval.

Plaintiff filed a complaint, alleging that the defendant violated the following obligations: not to sell the
beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct
the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other manner. He alleged that the defendant was
his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of
commercial agency.

ISSUE:

Whether or not the defendant, by reason of the contract hereinbefore transcribed, was an agent of the
plaintiff for the sale of his beds.

HELD:

No. In order to classify a contract, due regard must be given to its essential clauses. In the contract in
question, there was the obligation on the part of the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to
the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed
in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on
receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.

In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the
contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the
defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right
and cannot complain for having acted thus at his own free will.

CONCRETE AGGREGATES, INC. vs. COURT OF TAX APPEALS


185 SCRA 416, G.R. No. 55793 May 18, 1990

FACTS:

Petitioner is a domestic corporation, duly organized and existing under the laws of the Philippines. It has
an aggregate plant at Montalban, Rizal which processes rock aggregates mined by it from private lands.
Petitioner also maintains and operates a plant at Longos, Quezon City for the production of ready-mixed
concrete and plant-mixed hot asphalt.

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Sometime in 1968, the agents of Commissioner OF Internal Revenue conducted an investigation of
petitioner's tax liabilities. As a consequence thereof, in a letter dated December 14, 1970 CIR assessed
and demanded payment from petitioner of the amount of P244,002,76 as sales and ad valorem taxes for
the first semester of 1968, inclusive of surcharges. Petitioner disputed the said assessment in its letter
dated February 2, 1971 without, however, contesting the portion pertaining to the ad valorem tax.
Consequently, demand for the payment of the said amount within ten days from receipt of the letter- was
made by respondent on petitioner, otherwise the same would be collected thru the summary remedies
provided for by law. Instead of paying, petitioner appealed to respondent court.

Petitioner disclaims liability on the ground that it is a contractor and advances the theory that it produced
asphalt and concrete mix only upon previous orders, which may be proved by its system of requiring the
filling of job orders where the customers specify the construction requirements, and that without such
order, it would not do so considering the highly perishable nature of the asphalt and concrete mix.

ISSUE:

Whether or not the contract between the parties is a contract for a piece of work.

HELD:

Yes. Petitioner insists that it would produce asphalt or concrete mix only upon previous job orders
otherwise it would not do so. It does not and will not carry in stock cement and asphalt mix. But the
reason is obvious. What practically prevents the petitioner from mass production and storage is the
nature of its products, that is, they easily harden due to temperature change and water and cement
reaction. It is self-evident that it is due to the highly perishable nature of asphalt and concrete mix, as
petitioner itself argues that makes impossible for them to be carried in stock because they cool and
harden with time, and once hardened, they become useless.

Had it not been for this fact, petitioner could easily mass produce the ready-mixed concrete or asphalt
desired and needed by its various customers for which it is mechanically equipped to do. It is clear,
however, that petitioner does nothing more than sell the articles that it habitually manufactures. It stocks
raw materials, ready at any time for the manufacture of asphalt and/or concrete mix. Its marketing
system would readily disclose that its products are available for sale to anyone needing them. The
habituality of the production of goods for the general public characterizes the business of petitioner.

PEOPLE'S HOMESITE & HOUSING CORPORATION vs. CA


133 SCRA 777, G.R. No. L-61623 December 26,1984

FACTS:

The PHHC board of directors passed Resolution No. 513 wherein it stated that subject to the approval of
the Quezon City Council of the above-mentioned Consolidation Subdivision Plan, Lot 4 containing 4,182.2
square meters be awarded to Spouses Rizalino and Adelaida Mendoza, at a price of twenty-one pesos
(P21.00) per square meter and that this award shall be subject to the approval of the OEC (PHHC)
Valuation Committee and higher authorities. However, the city council disapproved the proposed
consolidation subdivision plan of which the spouses were advised. Another subdivision plan was prepared
and submitted to the city council for approval. The revised plan, which included Lot 4, with a reduced
area of 2,608.7, was approved by the city council.

The PHHC board of directors, however, passed a resolution recalling all awards of lots to persons who
failed to pay the deposit or down payment for the lots awarded to them. The Mendozas never paid the
price of the lot nor made the 20% initial deposit. Thereafter, PHHC board of directors passed Resolution

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No. 218, withdrawing the tentative award of Lot 4 to the Mendoza spouses and re-awarding said lot
jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo
and Jose Fernandez. The five awardees made the initial deposit. The corresponding deeds of sale were
executed in their favor. The subdivision of Lot 4 into five lots was approved by the city council and the
Bureau of Lands. The Mendoza spouses asked for reconsideration of the withdrawal of the previous
award to them of Lot 4 and for the cancellation of the re-award of said lot to Sto. Domingo and four
others. Before the request could be acted upon, the spouses filed the instant action for specific
performance and damages.

ISSUE:

Whether or not there was a perfected sale of the Lot 4, with the reduced area, to the Mendozas which
they can enforce against the PHHC by an action for specific performance.

HELD:

No, there was no pertected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas
subject to the approval by the city council of the proposed consolidation subdivision plan and the
approval of the award by the valuation committee and higher authorities. The city council did not approve
the subdivision plan.

The Mendozas were advised in 1961 of the disapproval. In 1964, when the plan with the area of Lot 4
reduced to 2,608.7 square meters was approved, the Mendozas should have manifested in writing their
acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its
purchase although the area was reduced and to obviate ally doubt on the matter. They did not do so.
The PHHC board of directors acted within its rights in withdrawing the tentative award.

The contract of sale is perfect at the moment there is meeting of the minds upon the thing which is the
object of the contract, and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the law governing the form of contracts (Art. 1475, Civil). Under the facts of
this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of 2,608.7
square meters at P21 a square meter.

TOYOTA SHAW, INC. vs. COURT OF APPEALS


244 SCRA 320, G.R. No. L-116650 May 23,1995

FACTS:

Private respondent Luna L. Sosa wanted to purchase a Toyota Lite Ace. With his his son, Gilbert, he went
to the Toyota office at Shaw Boulevard, Pasig and met Popong Bernardo, a sales representative of
Toyota. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989. Bernardo
assured him that a unit would be ready for pick up at 10:00 a.m. on that date. They contracted an
agreement on the delivery of the unit and that the balance of the purchase price would be paid by credit
financing through B.A. Finance. The next day, Sosa and Gilbert delivered the downpayment and met
Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) in which the amount was filled-
up but the spaces provided for "Delivery Terms" were not filled-up. However, on 17 June 1989, at 9:30
am, Bernardo called Gilbert to inform him that the car could not be delivered because "nasulot ang unit
ng ibang malakas."

Toyota contends, on the other hand, that the Lite Ace was not delivered to Sosa because of the
disapproval by B.A. Finance of the credit financing application of Sosa. Toyota then gave Sosa the option
to purchase the unit by paying the full purchase price in cash but Sosa refused. Sosa asked that his down

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payment be refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full
amount, which Sosa signed with the reservation, "without prejudice to our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, he demanded the refund of the down
payment plus interest from the time he paid it. The second, he demanded one million pesos representing
interest and damages, both with a warning that legal action would be taken if payment not paid. Toyota's
refused to accede to the demands of Sosa. The latter filed with RTC a complaint against Toyota for
damages under Articles 19 and 21 of the Civil Code. In its answer to the complaint, Toyota alleged that
no sale was entered into between it and Sosa, that Bernardo had no authority to sign for and in its
behalf. It alleged that the VSP did not state the date of delivery.

ISSUE:

Whether or not there was a perfected contract of sale.

HELD:

There was no perfected contract of sale.

What is clear from the agreement signed by Sosa and Gilbert is not a contract of sale. No obligation on
the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on
the part of the latter to pay therefore a price certain appears therein. The provision on the down
payment of PIOO,OOO.OO made no specific reference to a sale of a vehicle. If it was intended for a
contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day
con finned. Nothing was mentioned about the full purchase price and the manner the installments were
to be paid. 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. This is so because the agreement as to the
manner of payment goes, into the price such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a
binding agreement to sell personal property.

SANCHEZ vs. RlGOS


45 SCRA 368 G.R. No. L-25494

FACTS:

On April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an-instrument
entitled "Option to Purchase," whereby Rigos "agreed, promised _and committed to sell" to Sanchez at
the sum P1,510.00 a parcel of land situated in San Jose, Nueva Ecija, described in TCT No. NT-12528,
within two (2) years from said date with the understanding that said option shall be deemed
"terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the property" within the
stipulated period. Inasmuch as several tenders of payment of the sum of PI,510.00, made by Sanchez
within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount
with the CFI of Nueva Ecija and commenced against the latter the present action, for specific
performance and damages.

After the filing of defendant's answer - admitting some allegations of the complaint, denying other
allegations thereof, and alleging, as special defense, that the contract between the parties ―is a unilateral
promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil
Code, is null and void" - on February 11, 1964, both parties, assisted by their respective counsel, jointly
moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered
judgment for §anchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute,
in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as
attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos.

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ISSUE:

Whether or not Rigos should accept the payment and execute the deed of conveyance.

HELD:

Yes. Article 1479 of the Civil Code provides that a promise to buy and sell a determinate thing for a price
certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing
for a price certain is binding upon the promisor if the promise is supported by a consideration distinct
from the price.

An option is unilateral- a promise to sell at the price fixed whenever the offeree should decide to
exercise his option within the specified time. After accepting the promise and before he exercises his
option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In this
case, however, upon accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and
the respondent ipso facto assumed the obligation of a purchaser. He did not just get the right
subsequently to buy or not to buy. It was not a mere option then; it was a bilateral contract of sale.

"If the 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 withdrawal, it constitutes a binding contract of
sale, even though the option was not supported by a sufficient consideration. Since there may be no valid
contract without a cause or consideration, the promisor is not bound by his promise and may,
accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the
nature or an offer to sell which, if accepted, results in a perfected contract of sale.

SERRA VS. COURT OF APPEALS


229 SCRA 60, G.R. No. 103338 January 4, 1994

FACTS:

Petitioner is the owner of a 374 square meter parcel of land in Masbate, Masbate. Sometime in 1975,
private respondent Rizal Commercial Banking Corp., in its desire to put up a branch in Masbate, Masbate,
negotiated with petitioner for the purchase of the then unregistered property. On May 20, 1975, a
contract of lease with option to buy was contracted by the parties. Pursuant to said contract, a binding
and other improvements were constructed on the land which housed the branch office of RCBC in
Masbate, Masbate. Within three years from the signing of the contract, petitioner complied with his part
of the agreement by having the property registered and placed under the TORRENS SYSTEM, for which
OCT was issued by the Register of Deeds of the Province of Masbate.

Petitioner alleges that as soon as he had the property registered, he kept on pursuing the manager of the
branch to effect the sale of the lot as per their agreement. It was not until September 4, 1984, however,
when the respondent bank decided to exercise its option and informed petitioner, of its intention to buy
the property at the agreed price of not greater than P210.00 per square meter or a total of P78,430.00.
But much to the surprise of the respondent, petitioner replied that he is no longer selling the property.

Hence, a complaint for specific performance and damages were filed by respondent against petitioner. In
the complaint, respondent alleged that during the negotiations it made clear to petitioner that it intends
to stay permanently on property once its branch office is opened unless the exigencies of the business
requires otherwise. Aside from its prayer for specific performance, it likewise asked for an award of
P50,000.00 for attorney's tees PIOO,OOO.OO as exemplary damages and the cost of the suit.

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ISSUE:

I. Whether or not the disputed contract is a contract of adhesion.

2. Whether or not the petitioner may be compelled to exercise the option to buy before the time
expires.

3. Whether or not there was no consideration to support the option, distinct from the price, hence the
option cannot be exercised.

HELD:

1. No. A contract of adhesion is one wherein a party usually a corporation, prepares the stipulations in
the contract while the other party merely affixes his signature or his adhesion thereto. These types
of contract are as binding as ordinary contracts. Because in reality, the party who adheres to the
contract is free to reject it entirely although this Court will not hesitate to rule out blind adherence
to terms where facts and circumstances will show that it is basically one-sided.

We do not find the situation in the present case to be inequitable. Petitioner is a highly educated
man, who, at the time of the trial was already a CPA-Lawyer, and when he entered into the
contract, was already a CPA, holding a respectable position with the Metropolitan Manila
Commission. It is evident that a man of his stature should have been more cautious in transactions
he enters into, particularly where it concerns valuable properties. He is amply equipped to drive a
hard bargain if he would be so minded to.

2. No. In a unilateral promise to sell, where the debtor fails to withdraw the promise before the
acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy, because
upon acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the
minds of the parties as to the thing which is determinate and the price which is certain. In which
case, the parties may then reciprocally demand performance.

Jurisprudence has taught us that an optional contract is a privilege existing only in one party – the
buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a
certain merchandise or properly, at any time within the agreed period, at a fixed price. This being
his prerogative, he may not be compelled to exercise the option to buy before the time expires.

3. Yes. A price is considered certain if it is so with reference to another thing certain or when the
determination thereof is left to the judgment of a specified person or persons. And generally, gross
inadequacy of price does not affect a contract of sale. Contracts are to be construed according to
the sense ai1d meaning of the terms which the parties themselves have used. In the present
dispute, there is evidence to show that the intention of the parties is to peg the price at P210 per
square meter.

ROMAN vs. GRIMALT


6 Phil 96, G.R. No. L-2412, April 11, 1906

FACTS:

Pedro Roman, the owner, and Andres Grimalt, the purchaser, had been for several days negotiating for
the purchase of the schooner Santa Marina - from the 13th to the 23d of June, 1904. They agreed upon
the sale of the vessel for the sum of 1,500 pesos, payable in three installments, provided the title papers
to the vessel were in proper form. It is so stated in the letter written 'by the purchaser to the owner on

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the 23rd of June. The vessel was sunk in the bay on the afternoon of the 25th of June, 1904, during a
severe storm and before the owner had complied with the condition exacted by the proposed purchaser,
to wit, the production of the proper papers showing that the plaintiff was in fact the owner of the vessel
in question. On July 2, 1904, petitioner Roman filed a complaint in the CFI against Andres Grimalt,
praying that judgment be entered in his favor and against the defendant (1) for the purchase price of the
schooner Santa Marina, to wit, 1,500 pesos or its equivalent in Philippine currency, payable by
installments in the manner stipulated; (2) for legal interest on the installments due on the dates set forth
in the complaint; (3) for costs of proceedings; and (4) for such other and further remedy as might be
considered just and equitable.

ISSUE:

Whether or not the defendant is under the obligation to pay the price of the vessel.

HELD:

No. The sale of the schooner was not perfected and the purchaser did not consent to the execution of
the deed of transfer for the reason that the title of the vessel was in the name of one Paulina Giron and
not in the name of Pedro Roman, the alleged owner. If no contract of sale was actually executed by the
parties the loss of the vessel must be borne by its owner and not by a party who only intended to
purchase it and who was unable to do so on account of failure on the part of the owner to show proper
title to the vessel and thus enable them to draw up the contract of sale. The defendant was under no
obligation to pay the price of the vessel, the purchase of which had not been concluded. The
conversations had between the parties and the letter written by defendant to plaintiff did not establish a
contract sufficient in itself to create reciprocal rights between the parties.

NORKIS DISTRIBUTORS, INC. vs. COURT OF APPEALS


193 SCRA 694, G.R. No. 91029 February 7,1991
GRINO-AQUINO, J.:

FACTS:

Petitioner Norkis Distributors, Inc. is the distributor of Yamaha motorcycles in Negros Occidental. On
September 20, 1979, private respondent Alberto Nepales bought trom the Norkis Bacolod branch a
brand new Yamaha Wonderbike motorcycle Model YL2DX. The price of P7,500.00 was payable by
means of a Letter of Guaranty from the DBP, which Norkis agreed to accept. Credit was extended to
Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security
for the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Petitioner
issued a sales invoice which Nepales signed in conformity with the terms of the sale. In the
meantime, however, the motorcycle remained in Norkis' possession. On January 22, 1980, the
motorcycle was delivered to a certain Julian Nepales, allegedly the agent of Alberto Nepales. The
motorcycle met an accident on February 3, 1980 at Binalbagan, Negros Occidental. An investigation
conducted by the DBP revealed that the unit was being driven by a certain Zacarias Payba at the time
of the accident. The unit was a total wreck was returned.

On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis in the
total sum of P7,500. As the price of the motorcycle later increased to P7,828 in March, 1980, Nepales
paid the difference of P328 and demanded the delivery of the motorcycle. When Norkis could not deliver,
he filed an action for specific performance with damages against Norkis in the RTC of Negros Occidental.
He alleged that Norkis failed to deliver the motorcycle which he purchased, thereby causing him
damages. Norkis answered that the motorcycle had already been delivered to private respondent before
the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit.

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ISSUE:

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

HELD:

No.

The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An
invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and
has been considered not a bill of sale. In all forms of delivery, it is necessary that the act of delivery
whether constructive or actual, be coupled with the intention of delivering the thing. The act, without the
intention, is insufficient.When the motorcycle was registered by Norkis in the name of private respondent,
Norkis did not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution
of a chattel mortgage in favor of the DBP for the release of the buyer's motorcycle loan. The Letter of
Guarantee issued by the DBP reveals that the execution in its favor of a chattel mortgage over the
purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to
that arrangement, DBP would not approve private respondent's loan application and, consequently, there
would be no sale.

Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the
buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is
applicable to this case, for there was neither an actual nor constructive delivery of the thing sold, hence,
the risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the
motorcycle when it was wrecked. This is in accordance with the well known doctrine of res perit domino.

SOUTHERN MOTORS, INC. vs. MOSCOSO 2 SCRA 168


G.R. No. L-14475, May 30, 1961

FACTS:

Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on installment basis,
for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the sum of
P4,915.00, representing the unpaid balance of the purchase price to secure the payment of which, a
chattel mortgage was constituted on the truck in favor of the plaintiff. Of said account, the defendant had
paid a total of P550.00, of which P110.00 was applied to the interest and P400.00 to the principal, thus
leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the balance of the
purchase price.

Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note.
Upon plaintiff's petition, a writ of attachment was issued by the lower court on the properties of the
defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to defendant, were
attached by the Sheriff and said truck was brought to the plaintiff's compound for safe keeping. After
attachment and before the trial of the case on the merits, acting upon the plaintiff's motion for the
immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo sold the truck at public auction in
which plaintiff itself was the only bidder for P1,OOO.OO. The trial court condemned the defendant to pay
the plaintiff the amount of P4,475.00 with interest at the rate of 12% per annum from August 16, 1957,
until fully paid, plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.

ISSUE:

Whether or not the attachment caused to be levied on the truck and its immediate sale at public auction,
was tantamount to the foreclosure of the chattel mortgage on said truck.

CASE DIGESTS IN SALES – Leng J. Page 10


HELD:

No.

Article 1484 of the Civil Code provides that in a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise any of the following remedies: (I) Exact fulfillment of
the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover
two or more installments; and (3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have
no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.

The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery of the
remaining unpaid balance due on the promissory note. The plaintiff had not adopted the procedure or
methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions,
under the Rules of Court. Had the plaintiff elected the foreclosure, it would not have instituted this case
in court; it would not have caused the chattel to be attached under Rule 59, and had it sold at public
auction, in the manner prescribed by Rule 39. That the plaintiff did not intend to foreclose the mortgage
truck, is further evinced by the fact that it had also attached the house and lot of the appellant at San
Jose, Antique.

We perceive nothing unlawful or irregular in plaintiff's act of attaching the mortgaged truck itself. Since
the plaintiff has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of
the judgment that may be favorably rendered hereon, on all personal and real properties of the latter not
exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot at San
Jose, Antique were also attached. No one can successfully contest that the attachment was merely an
incident to an ordinary civil action. The mortgage creditor may recover judgment on the mortgage debt
and cause an execution on the mortgaged property and may cause an attachment to be issued and
levied on such property, upon beginning his civil action.

FILINVEST CREDIT CORPORATION YS. COURT OF APPEALS


178 SCRA 188, G.R. No. 82508, September 29, 1989

FACTS:

Herein private respondents spouses Jose Sy Bang and Iluminada Tan were engaged in the sale of gravel
produced from crushed rocks and used for construction purposes. They intended to buy rock crusher
from Rizal Consolidated Corporation which carried a cash price tag of P550,000.00. They applied for
financial assistance from herein petitioner Filinvest Credit Corporation, who agreed to extend financial aid
on the certain conditions.

A contract of lease of machinery (with option to purchase) was entered into by the parties whereby the
private respondents agreed to lease from the petitioner the rock crusher for two years starting from July
5, 1981, payable as follows: P10,000.00 - first 3 months, P23,000.00 - next 6 months, P24,800.00 - next
15 months. It was likewise stipulated that at the end of the two-year period, the machine would be
owned by the private respondents. Thus the private respondent issued in favor of the petitioner a check
for P150,550.00, as initial rental (or guaranty deposit), and 24 postdated checks corresponding to the 24
monthly rentals. In addition, to guarantee their compliance with the lease contract, the private
respondent executed a real estate mortgage over two parcels of land in favor of the petitioner. The rock
crusher was delivered to the spouses.

However, 3 months later, the souses stopped payment when petitioner had not acted on the complaints
of the spouses about the machine. As a consequence, petitioner extrajudicially foreclosed the real estate

CASE DIGESTS IN SALES – Leng J. Page 11


mortgage. The spouses filed a complaint before the RTC. The RTC rendered a decision in favor of private
respondent. The petitioner elevated the case to CA which affirmed the decision in toto. Hence, this
petition.

ISSUE:

1. Whether or not the nature of the contract is one of a contract of sale.\

2. Whether or not the remedies of the seller provided for in Article 1484 are cumulative.

HELD:

1. Yes.

The intent of the parties to the subject contract is for the so-called rentals to be the installment
payments. Upon the completion of the payments, then the rock crusher, subject matter of the
contract, would become the property of the private respondents. This form of agreement has been
criticized as a lease only in name.

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

2. No, it is alternative.

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

ADDISON vs. FELIX and TIOCO


38 SCRA 404, No. 12342, August 3, 1918

FACTS:

By a public instrument, plaintiff Addison sold to the defendant Marciana Felix and husband Balbino Tioco,
4 parcels of land. Defendants paid, at the time of the execution of the deed, the sum of P3,000.00 on
account of the purchase price, and bound herself to pay the remainder in installments. It was further
stipulated that the purchaser was to deliver to the vendor 25 per centum of the value of the products
that she might obtain from the 4 parcels "from the moment she takes possession of them until the

CASE DIGESTS IN SALES – Leng J. Page 12


Torrens certificate of title be issued in her favor." It was likewise covenanted that "within I year from the
date of the certificate of title in favor of Felix, she may rescind the contract of sale in which she shall be
obliged to return to Addison the net value of all the products of the 4 parcels sold, and Addison shall be
obliged to return to her all the sums that she may have paid, together with interest at the rate of I 0
percent per annum.

However, Addison was able to designate only 2 of the 4 parcels and more than two-thirds of these two
were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so
occupied by him.

Addison filed suit in CFI to compel Felix to make payment of the first installment, in accordance with the
terms of the contract and of the interest at the stipulated rate. Defendant answered and alleged that the
plaintiff had failed to deliver the lands that were the subject matter of the sale.

ISSUE:

1. Whether or not the delivery had been effected by reason of the issuance of the Torrens Certificate
of title, notwithstanding the fact that the thing sold was not subject to the control of the vendor.
2. Whether or not the purchaser can rescind the contract.

HELD:

1. No.

The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of
land, he was not even able to show them to the purchaser; and as regards the other two, more than
two-thirds of their area was in the hostile and adverse possession of a third person.

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to
be delivered when it is placed "in the hands and possession of the vendee." It is true that the same
article declares that the execution of a public instrument is equivalent to the delivery of the thing
which is the object of the contract, but, in order that this symbolic delivery may produce the effect of
tradition, I t is necessary that the vendor shall have control over the thing sold that, at the moment
of sale, it its material delivery could have been made.

It is not enough to confer upon the purchaser the ownership and the right of possession. The thing
sold must be placed in his control. When there is no impediment whatever to prevent the thing sold
passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through
the execution of the public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make
use of it himself or through another in his name, because such tenancy and enjoyment are opposed
by the interposition of another will, then fiction yields to reality - the delivery has not been effected.

2. Yes.

It is evident in the case at bar, that the mere execution of the instrument was not a fulfillment of the
vendor's obligation to deliver the thing sold, and that from such non-fulfillment arises the purchaser's
right to demand, as she has demanded, the rescission of the sale and the return of the price.

SAMPAGUITA PICTURES, INC., vs. JALWINDOR MANUFACTURERS, INC.


43 SCRA 420, G.R. No. L-43059 October II, 1979

FACTS:

CASE DIGESTS IN SALES – Leng J. Page 13


Plaintiff-appellant Sampaguita Pictures, Inc. leased to Capitol ―300‖ Inc. the roofdeck of the Sampaguita
Pictures building and all existing improvements. It was agreed, among other things, that any remodelling,
alterations and/or addition to the premises shall be at the expense of the lessee and such improvements
belong to the lessor without any obligation to reimburse the lessee of any sum spent for said
improvements. Capitol "300" purchased on credit from defendant-appellee Jalwindor Manufacturers, Inc.
glass and wooden jalousies which were delivered and installed in the leased premises by Jalwindor
replacing the existing windows. On June I, 1964, Jalwindor filed with the CFI of Rizal, Quezon City, an
action for collection of a sum of money with a petition for preliminary attachment against Capitol for its
failure to pay its purchases. The parties submitted to the trial court a Compromise Agreement wherein
Capitol acknowledged its indebtedness to Jalwindor in the amount of P9,53 1.09, exclusive of attorney's
fees and interest, payable in monthly installments of at least P300.00 a month beginning December 15,
1964; and pending liquidation of the said obligation, all the materials purchased by Capitol will be
considered as security for such undertaking.

In the meantime, Capitol ―300‖ was not able to pay rentals to Sampaguita from March 1964 to April
1965. Sampaguita filed a complaint for ejectment and for collection of a sum of money against Capitol
and on June 8, 1965, the City Court of Quezon City rendered judgment ordering Capitol to vacate the
premises and to pay Sampaguita. On the other hand, Capitol likewise failed to comply with the terms of
the Compromise Agreement, and on July 31, 1965, the Sheriff of Quezon City made levy on the glass
and wooden jalousies in question. Sampaguita filed a third party claim alleging that it is the owner of
said materials and not Capitol. Jalwindor however, field an indemnity bond in favor of the Sheriff and the
items were sold at public auction on August 30, 1965 with Jalwindor as the highest bidder for P6,000.00.

FIESTAN vs. COURT OF APPEALS


G.R. No. 81552 May 28, 1990

FACTS:

Petitioners spouses Dionisio Fiestan and Juanita Arconada were the owners of a parcel of land wituated in
Ilocos Sur which they mortgaged to the DBP as security for their P22,400.00 loan. For failure of
petitioners to pay their mortgage indebtedness, the lot was acquired by the DBP as the highest bidder at
a public auction sale after it was extrajudicially foreclosed by the DBP. A certificate of sale was
subsequently issued by the Provincial Sheriff on the same day and the same was registered in the Office
of the Register of Deeds. Earlier, petitioners executed a Deed of Sale in favor of DBP which was likewise
registered. Upon failure of petitioners to redeem the property within the one-year period, petitioners' TCT
lot was cancelled by the Register of Deeds and in lieu thereof, it was issued to the DBP upon
presentation of a duly executed affidavit of consolidation of ownership. The DBP sold the lot to Francisco
and the same was registered in the Office of the Register of Deeds. Subsequently, the DBP's title over the
lot was cancelled and in lieu thereof, the TCT was issued to Francisco Peria.

Francisco Peria secured a tax declaration for said lot and accordingly paid the taxes due thereon. He
thereafter mortgaged to the PNB as security for his loan of P15,000.00 as required by the bank to
increase his original loan since petitioners were still in possession of the lot, the Provincial Sheriff ordered
them to vacate the premises. On the other hand, petitioners filed on August 23, 1982 a complaint for
annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP, PNB,
Francisco Peria and the Register of Deeds before the RTC.

ISSUE:

Whether or not that the extrajudicial foreclosure sale is null and void by virtue of lack of a valid levy.

CASE DIGESTS IN SALES – Leng J. Page 14


HELD:

No. The formalities of a levy, as an essential requisite of a valid execution sale under Section 15 of Rule
39 and a valid attachment lien under Rule 57 of the Rules of Court, are not basic requirements before an
extrajudicially foreclosed property be sold at public auction. The case at bar, as the facts disclose,
involves an extrajudicial foreclosure sale.

In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not be identified or
set apart by the sheriff from the whole mass of property of the mortgagor for the purpose of satisfying
the mortgage indebtedness. For, the essence of a contract of mortgage indebtedness is that a property
has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the
payment or fulfillment of the obligation to answer the amount of indebtedness, in case of default of
payment. By virtue of the special power inserted or attached to the mortgage contract, the mortgagor
has authorized the mortgagee-creditor or any other person authorized to act for him to sell said property
in accordance with the formalities required under Act No. 3135, as amended. The Court finds that the
formalities prescribed under Sections 2, 3 and 4 of Act No. 3135, as amended, were substantially
complied with in the instant case.

DIZON vs. SUNTAY


47 SCRA 160, G.R. No. L-30817 September 29,1972

FACTS:

Plaintiff is the owner of a three-carat diamond. ring valued at P5,500.00. On June 13, 1962, the plaintiff
and Clarita R. Sison entered into a transaction wherein the plaintiff's ring was delivered to Clarita R. Sison
for sale on commission.

Upon receiving the ring, Clarita R. Sison executed and delivered to the plaintiff the receipt. After the
lapse of a considerable time without Clarita R. Sison having returned to the plaintiff the latter's ring, the
plaintiff made demands on Clarita R. Sison for the return of her ring but the latter could not comply with
the demands because, without the knowledge of the plaintiff, on June 15, 1962 or three days after the
ring above-mentioned was received by Clarita R. Sison from the plaintiff, said ring was pledged by Melia
Sison, niece of the husband of Clarita R. Sison, evidently in connivance with the latter, with the
defendant's pawnshop for P2,600.00. Since the plaintiff insistently demanded from Clarita R. Sison the
return of her ring, the latter finally delivered to the former the pawnshop ticket, which is the receipt of
the pledge with the defendant's pawnshop of the plaintiff's ring. When the plaintiff found out that Clarita
R. Sison pledged, she took steps to file a case of estafa against the latter with the fiscal's office.
Subsequently thereafter, the plaintiff, wrote a letter to the defendant asking for the delivery to the
plaintiff of her ring pledged with defendant's pawnshop.

Since the defendant refused to return the ring, the plaintiff filed the present action with the CFI for the
recovery of said ring. The plaintiff asked for the provisional remedy writ of replevin by the delivery of the
ring to her, upon her filing the requisite bond, pending the final determination of the action. The lower
court issued the writ of replevin prayed for by plaintiff and the latter was able to take possession of the
ring during the pendency of the action upon her filing the requisite bond. The lower cOUl1 rendered
judgment declaring that Suntay had the right to the possession of the ring in question. Petitioner Dizon,
as defendant, sought to have the judgment reversed by the CA, which ruled in favor of Suntay.
ISSUE:

Whether or not Suntay had the right to the possession of the ring.

HELD:

CASE DIGESTS IN SALES – Leng J. Page 15


Yes. The controlling provision is Article 559 of the Civil Code. It reads thus: The possession of movable
property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or
has been unlawfully deprived thereof may recover it from the person in possession of the same. If the
possessor of a movable lost of which the owner has been unlawfully deprived, has/acquired it in good
faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefore. The
only exception the law allows is when there is acquisition in good faith of the possessor at a public sale,
in which case the owner cannot obtain its return without reimbursing the price.

DAGUPAN TRADING COMPANY vs. RUSTICO MACAM


14 SCRA 179, G.R. No. L-18497, May 31, 1965

FACTS:

In the year 1955, Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel
of unregistered land located in Barrio Parayao, Municipality of Binmaley, Pangasinan. While their
application for registration of said land under Act No. 496 was pending, they executed on June 19 and
September 21, 1955, two deeds of sale conveying the property to appellee who thereafter took
possession thereof and proceeded to introduce substantial improvements therein. One month later, that
is, on October 14, 1955, Original Certificate of Title No. 6942 covering the land was issued in the name of
the Marons, free from all liens and encumbrances. On August 4, 1956, by virtue of a final judgment
rendered by the Municipal Court of Manila against Sammy Maron in favor of the Manila Trading and
Supply Company, levy was made upon whatever interest he had in the aforementioned property, and
thereafter said interest was sold at public auction to the judgment creditor. The corresponding notice of
levy, certificate of sale and the Sheriff’s certificate of final sale in favor of the Manila Trading and Supply
Co. because nobody exercised the right of redemption - were duly registered. On March 1, 1958,
latter sold all its rights and title to the property to appellant.

Appellant, filed an action against appellee Rustico Macam, praying that he be declared owner of the one-
eighth portion of the land. Answering the complaint, appellee alleged, in the main, that Sammy Maron's
share in the property described in the complaint, as well as that of all his coheirs, had been acquired by
purchase by appellee since June 19 and September 21, 1955, before the issuance of the original
certificate of title in their name; that at the time the levy in execution was made on Sammy Maron's
share therein, the latter had no longer any right or interest in said property; that appellant and its
predecessor in interest were cognizant of the facts already mentioned; that since the sales made in his
favor, he had enjoyed uninterrupted possession of the property and introduced considerable
improvements thereon. Appellee likewise sought to recover damages by way of counterclaim. After trial
upon the issue thus joined, the court rendered judgment dismissing the complaint, which, on appeal,
was affirmed by the Court of Appeals.

ISSUE:

Whether or not appellant Dagupan Trading Company is the owner of the one-eight portion of the land.

HELD:

No. The sale in favor of appellee was executed before the land subject matter thereof was registered,
while the conflicting of appellant was executed after the same property had been registered.

What should determine the issue are the provisions of the last paragraph of Section 35, Rule 39 of the
Rules of Court, to the effect that upon execution and delivery of the final certificate of sale in favor of the
purchaser of land sold in an execution sale, such purchase "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."

CASE DIGESTS IN SALES – Leng J. Page 16


We ask: What was the interest and claim of Sammy Maron on the one-eighth portion of the property
inherited by him and his co-heirs, at the time of the levy? The answer must necessarily be that he had
none because for a considerable time prior to levy, his interest had already been conveyed to the
appellee ―fully and retrievably‖.

CRUZ vs. CABANA


129 SCRA 656, No. L-56232, June 22, 1984

FACTS:

On June 1, 1965, defendant Leodegaria Cabana sold a parcel of land with right of repurchase to
defendants-spouses Teofilo Legaspi and Iluminada Cabana. A document " Bilihang Muling Mabibili"
stipulated that the land can be repurchased by the vendor within one year from December 31, 1966. Said
land was not repurchased and in the meantime, however, said defendants-spouses took possession of
the land.

Upon request of Leodegaria Cabana, the title of the land was lent to her in order to mortgage the
property to the Philippine National Bank. Said title was forthwith, deposited with the PN8. On October 21,
1968, defendant Leodegaria Cabana sold the land by way of absolute sale to the defendants-spouses.
However, on November 29, 1968, defendant sold the same property to plaintiff Abelardo Cruz and the
latter was able to register it in his name. While the title was registered in plaintiff-appellant Cruz's name
on February 9, 1971, he knew of the sale of the land to defendants spouses Legaspi, as he was inforned
in the Office of the Register of Deed of Quezon.

ISSUE:

Whether or not, the second buyer Cruz, being the first to register the land creates right as against the
first buyer, notwithstanding his knowledge of the previous sale.

HELD:

No. Said respondent spouses were like wise the first to register the sale with the right of repurchase in
their favor on May 13, 1965 under Primary Entry No. 210113 of the Register of Deeds. They could not
register the absolute deed of sale in their favor and obtain the corresponding transfer certificate of title
because at that time the seller's duplicate certificate was still with the bank. But there is no question and
the lower courts so found conclusively as a matter of fact, that when petitioner Cruz succeeded in
registering the later sale in his favor, he knew and he was informed of the prior sale in favor of
respondents spouses., Respondent appellate court correctly held that 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.

NUGUID vs. COURT OF APPEALS


171 SCRA 213, G.R. No. 77423, March 13, 1989

FACTS:

The deceased spouses Victorino and Crisanta dela Rosa were the registered owners of a parcel of land
situated in Bataan, and covered by OCT. Victorino dela Rosa (widowed by then) sold one half of the said
property to Juliana Salazar for P 95.00. This sale was not registered. Immediately after the sale, Juliana
Salazar constructed a house on the lot she purchased. Petitioner spouses caused the registration of a
document entitled "Kasulatan ng Partihan at Bilihan." In this document, Marciana dela Rosa, Victoria

CASE DIGESTS IN SALES – Leng J. Page 17


Buenaventura, Ernesto Buenaventura, Virgilio Buenaventura, and Felicisimo Buenaventura-all heirs of
Victorino and Crisanta dela Rosa- sold to the petitioners the entire area of the property for the sum of
P300.00. Subsequently, the OCT was cancelled by the Register of Deeds, and TCT was issued in the
names of the petitioners.

The private respondents claim that the document is a forged deed. The petitioners assert that the land
subject of this case was offered to them for sale by Nicolas dela Rosa who then claimed that he had
already purchased the shares of the heirs over the subject property as evidenced by a private document
entitled "Kasunduan". The RTC dismissed the complaint filed by the private respondents, but on appeal,
this was reversed by the Court of Appeals. Hence, this petition.

ISSUE:

Whether or not the subsequent sale is valid, the petitioner spouses being purchasers in good faith.

HELD:

Yes. The Original Certificate of Title No. 3778 covering the entire property was clean and free from any
annotation of an encumbrance, and there was nothing whatsoever to indicate on its face any vice or
infirmity in the title of the registered owners-the spouses Victorino and Crisanta dela Rosa. Thus, the
petitioners could not have known of the prior sale to Juliana Salazar as, precjsely, it was not registered.

The general rule is that if the property sold is registered land, the purchaser in good faith has a right to
rely on the certificate of title and is under no duty to go behind it to look for flaws. This notwithstanding,
the petitioners did not rely solely upon the certificate of title. They personally inspected the subject
property. Undeniably, they found the same to be occupied by two houses, one belonging to a certain
Doray dela Rosa and the other to spouses Pedro Guevarra and Pascuala Tolentino, parents of the
respondents Guevarras. Upon being informed of the petitioners' desire to purchase the land, Doray dela
Rosa apparently offered to sell her house, which offer was accepted by the petitioners. As regards the
spouses Guevarra, we find no reason to disturb the trial court's finding that they themselves requested
that they be allowed to refrain on the property until such time that the petitioners would need the entire
premises; and in lieu of rentals to the petitioners, they offered to continue paying the real estate taxes
for one-half of the property as this was their arrangement with the previous owners-to which request the
petitioners acceded.

Evidently, neither Doray dela Rosa nor the spouses Guevarra professed ownership over the portions of
land they were occupying; on the contrary, by their actuations they expressly acknowledged that they
were not the real owners of the said property. The spouses Guevarra, in particular, made no mention of
the prior unregistered sale to their predecessor-in-interest, Juliana Salazar. Thus, when the petitioners
registered the sale in their favor with the Register of Deeds, they did so without any knowledge about the
prior sale in favor of Juliana Salazar. The petitioners, therefore, had acted in good faith.

VILLOSTAS vs. COURT OF APPEALS


G.R. No. 96271 June 26, 1992, 210 SCRA 490,

FACTS:

Petitioner Villostas and her husband placed an order for one unit of water purifier from private
respondent's Electrolux sales agents. Private respondent's sales agents assured petitioner of the very
special features of their brand of water purifier. On September 13, 1986, an Electrolux Aqua Guard Water
purifier was delivered and installed at petitioner's residence. Petitioner signed the Sales Order and the
Contract of Sale with Reservation of Title in October 1986. A warranty certificate was issued by private
respondent which provides that the product will perform efficiently for one full year from date of original

CASE DIGESTS IN SALES – Leng J. Page 18


purchase. The purchase of said unit was on installment basis under which petitioner would pay the
amount of P16,190.00 in 20 monthly installments of P635.00 a month.

However, after two (2) weeks, petitioner verbally complained about the impurities, dirtiness and bad odor
coming out of the unit. Thus, private respondent Electrolux changed the filter of the unit. Petitioner
complained for the second and third time when dirty water still came out of the water purifier after the
replacement of the filter. It was on the third complaint of petitioner when the service technician gave
advise that the filter should be changed every six (6) months costing about P300.00 which was
considered to be uneconomical by the former.

On December 9, 1986, petitioner sent a letter to the private respondent's branch manager stating therein
her complaint that the actual performance of the carbon filter was only for a month instead of the private
respondent's claim that the replacement of such filter will be only once every six (6) months. The
petitioner, citing the above incident as uneconomical, decided to return the unit and demand a refund for
the amount paid. Electrolux's branch manager offered to change the water purifier with another brand or
any of its appliance of the unit in her favor. Petitioner did not accept it as she was disappointed with the
original unit which did not perform as warranted.

ISSUE:

Whether or not the petitioner is entitled to rescind the contract on the basis of a violation of the warranty
of the article delivered by the respondent.

HELD:

Yes. At the time the Electrolux Aqua Guard water puritier was delivered and installed at petitioner
Villostas' residence a Warranty Certificate was issued by private respondent Electrolux which provides
that the product will perform efficiently for one full year from date of original purchase.

It clearly expresses warranty regarding the efficiency of the water purifier. On this regard, while it is true
that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action,
a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied
only in case of implied warranties. The present case involves one with an express warranty.

ETCUBAN vs. COURT OF APPEALS 148


SCRA 507G.R. No. L-45164 March 16, 1987

FACTS:

Plaintiff Dominico Etcuban inherited a piece of land together with his co-heirs from their deceased father.
Said piece of land was declared in their names as heirs of Eleuterio Etcuban and was the subject matter
in dispute in CFI of Cebu. In said case, Dominico Etcuban the spouse of the decease Demetria Initan and
Pedro, Vicente, Felicitas,Anastacio, Froilan, Alfonso, Advincula, Anunciaciori Jesus, Aguinaldo, surnamed
Etcuban were declared as co-owners of the property in question. Thereafter the II co-heirs executed in
favor of herein private respondents Jesus and Guadalupe Songalia II deeds of sale of their respective
shares in the co-ownership.

Plaintiff alleged that his co-owners leased and/or sold their respective shares without giving due notice to
him as a co-owner notwithstanding his intimations to them that he was willing to buy all their respective
shares. He further maintained that even upon inquiry from his co-heirs/co-owners, and also from the
alleged buyers (defendants) he elicited nothing from them. Plaintiff discovered for the first time the
existence of these II deeds of sale during the hearing on January 31, 1972 of Civil Case No. BN-87,
entitled Jesus C. Songalia vs. Dominico ETCUBAN in the CFI of Cebu, When he verified the supposed

CASE DIGESTS IN SALES – Leng J. Page 19


sales with his co-owners only 3 of them admitted their respective sales. Hence, the filing of Civil Case No.
BN-I09 by petitioner for legal redemption. Private respondents, on the other hand, allege that the
provisions of the law pertaining to legal redemption have been fully complied with in respect to the sale
of the disputed land to them.

ISSUE:

Whether or not the plaintiff may exercise his right of redemption over the land in question.

HELD:

No. Article 1623 of the Civil Code provides that the right of legal pre-emption or redemption shall not be
exercised except within thirty (30) days from the notice in writing by the prospective vendor, or by the
vendor, as the Ca5e may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice thereof to all possible
redemptioners. The right of redemption of co-owners excludes that of adjoining owners.

Written notice was given to plaintiff-appellee in the form of an answer with counterclaim to the complaint
in Civil Case No. BN-109. This notice is sufficient to inform the plaintiff about the sale and the reckoning
date for the 30-day period commenced upon receipt thereof. No other notice is needed under the
premises because it is the substance conveyed rather than the form embodying it that counts. The
records reveal that on May 27, 1974, plaintiff-appellee deposited with the lower court the amount of
P26,340.00 the redemption price. Since the answer with counterclaim was filed on March 18, 1972, the
deposit made on May 27, 1974 was clearly outside the 30..day period of legal redemption. The period
within which the right of legal redemption or preemption may be exercised is non-extendible.

While it is true that written notice is required by the law (Art. 1623), it is equally true that the same Art.
1623 does not prescribe any particular form of notice, nor any distinctive method for notifying the
redemptioner. So long, therefore, as the latter is informed in writing of the sale and the particulars
thereof, the 30 days for redemption start running, and the redemptioner has no real cause to complain.
The furnishing of a copy of the disputed deed of sale to the redemptioner is equivalent to the giving of
written notice required by law in a more authentic manner than any other writing could have done, and
that We cannot adopt a stand of having to sacrifice substance to technicality. More so, in the case at bar,
where the vendors or co-owners of petitioner stated under oath in the deeds of sale, that notice of sale
had been given to prospective redemptioners in accordance with Article 1623 of the Civil Code. A sworn
statement or clause in a deed of sale to the effect that a written notice of sale was given to possible
redemptioners or co-owners might be used to determine whether an offer to redeem was made on or out
of time, or whether there was substantial compliance with the requirement of said Art. 1623.

ABS-CBN BROADCASTING CORPORATION VS COURT OF APPEALS


G.R. No. 128690 January 21, 1999

FACTS:
In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement whereby ABS-CBN was given the
right of first refusal to the next twenty-four (24) Viva films for TV telecast under such terms as may be
agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN
from the actual offer in writing. Consequently, Viva, through defendant Del Rosario, offered ABS-CBN,
through its vice-president Charo Santos-Concio, a list of three(3) film packages (36 titles) from which
ABS-CBN may exercise its right of first refusal under the afore-said agreement. ABS CBN rejected said
list.

CASE DIGESTS IN SALES – Leng J. Page 20


On February 27, 1992, Del Rosario approached Ms. Concio, with a list consisting of 52 original movie
titles, as well as 104 re-runs from which ABS-CBN may choose another 52 titles, or a total of 156 titles,
proposing to sell to ABS-CBN airing rights over this package of 52 originals and 52 re-runs for
P60,000,000.00. The package was rejected by ABS-CBN.
On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS discussed the terms and conditions of
Viva's offer to sell the 104 films.

On April 07, 1992, defendant Del Rosario received through his secretary, a handwritten note from Ms.
Concio which reads: "Here's the draft of the contract. I hope you find everything in order," to which was
attached a draft exhibition agreement, a counter-proposal covering 53 films for a consideration of P35
million. The said counter-proposal was however rejected by Viva's Board of Directors.
On April 29, 1992, Viva granted RBS the exclusive right to air 104 Viva-produced and/or acquired films
including the fourteen (14) films subject of the present case.

ABS-CBN then filed a a complaint for specific performance. RTC rendered a decision in favor of RBS and
VIVA and against ABS-CBN, ruling that there was no meeting of minds on the price and terms of the
offer. Furthermore, the right of first refusal under the 1990 Film Exhibition Agreement had previously
been exercised per Ms. Concio's letter to Del Rosario ticking off ten titles acceptable to them, which
would have made the 1992 agreement an entirely new contract. The Court of Appeals affirmed the
decision of the RTC. Hence, this petition.

ISSUES
1. Whether or not there was no perfected contract between petitioner and private respondent

2. Whether or not ABS-CBN has already exercised its right of first refusal

HELD
1. The issue should be resolved against ABS-CBN.

Contracts that are consensual in nature are perfected upon mere meeting of the minds. Once there is
concurrence between the offer and the acceptance upon the subject matter, consideration, and terms
of payment a contract is produced. The offer must be certain. To convert the offer into a contract,
the acceptance must be absolute and must not qualify the terms of the offer; it must be plain,
unequivocal, unconditional, and without variance of any sort from the proposal. A qualified
acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the
original offer. Consequently, when something is desired which is not exactly what is proposed in the
offer, such acceptance is not sufficient to generate consent because any modification or variation
from the terms of the offer annuls the offer.

When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at the Tamarind Grill on 2 April 1992
to discuss the package of films, said package of 104 VIVA films was VIVA's offer to ABS-CBN to enter
into a new Film Exhibition Agreement. But ABS-CBN, sent, through Ms. Concio, a counter-proposal in
the form of a draft contract proposing exhibition of 53 films for a consideration of P35 million. This
counter-proposal could be nothing less than the counter-offer of Mr. Lopez during his conference with
Del Rosario at Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVA's offer, for it was
met by a counter-offer which substantially varied the terms of the offer. Even if it be conceded
arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bind VIVA, as
there was no proof whatsoever that Del Rosario had the specific authority to do so. That Del Rosario
did not have the authority to accept ABS-CBN's counter-offer was best evidenced by his submission
of the draft contract to VIVA's Board of Directors for the latter's approval. In any event, there was
between Del Rosario and Lopez III no meeting of minds.

2. Yes.

CASE DIGESTS IN SALES – Leng J. Page 21


ABS-CBN’s right of first refusal had already been exercised when Ms. Concio wrote to VIVA ticking off
ten films. As observed by the trial court, the subsequent negotiation with ABS-CBN was for an
entirely different package. Ms. Concio herself admitted on cross-examination to having used or
exercised the right of first refusal. She stated that the list was not acceptable and was indeed not
accepted by ABS-CBN. Del Rosario himself knew and understood that ABS-CBN has lost its rights of
the first refusal when his list of 36 titles were rejected.

NOOL V. CA
G.R. NO. 116635. JULY 24, 1997

FACTS

One lot formerly owned by Victorio Nool (TCT T-74950) has an area of 1 hectare. Another lot previously
owned by Francisco Nool (TCT T-100945) has an area of 3.0880 hectares. Both parcels are situated in
San Manuel, Isabela. Spouses Conchita Nool and Gaudencio Almojera (plaintiffs) alleged that they are the
owners of the subject land as they bought the same from Victorio and Francisco Nool, and that as they
are in dire need of money, they obtained a loan from the Ilagan Branch of the DBP (Ilagan, Isabela),
secured by a real estate mortgage on said parcels of land, which were still registered in the names of
Victorino and Francisco Nool, at the time, and for the failure of the plaintiffs to pay the said loan,
including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the
period of redemption, the plaintiffs contacted Anacleto Nool for the latter to redeem the foreclosed
properties from DBP, which the latter did; and as a result, the titles of the 2 parcels of land in question
were transferred to Anacleto; that as part of their arrangement or understanding, Anacleto agreed to buy
from Conchita the 2 parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of
which price was paid to Conchita, and upon payment of the balance of P14,000.00, the plaintiffs were to
regain possession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emilia Nebre
(defendants) failed to pay, and the same day the said arrangement was made; another covenant was
entered into by the parties, whereby the defendants agreed to return to plaintiffs the lands in question,
at anytime the latter have the necessary amount; that latter asked the defendants to return the same but
despite the intervention of the Barangay Captain of their place, defendants refused to return the said
parcels of land to plaintiffs; thereby impelling the plaintiffs to come to court for relief.

On the other hand, defendants theorized that they acquired the lands in question from the DBP, through
negotiated sale, and were misled by plaintiffs when defendant Anacleto Nool signed the private writing,
agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto
having been made to believe, then, that his sister, Conchita, still had the right to redeem the said
properties.

It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the 1-year
redemption period (from 16 March 1982 up to 15 March 1983) and that the mortgagors’ right of
redemption was not exercised within this period. Hence, DBP became the absolute owner of said parcels
of land for which it was issued new certificates of title, both entered on 23 May 1983 by the Registry of
Deeds for the Province of Isabela. About 2 years thereafter, on 1 April 1985, DBP entered into a Deed of
Conditional Sale involving the same parcels of land with Anacleto Nool as vendee. Subsequently, the
latter was issued new certificates of title on 8 February 1988.

The trial court ruled in favor of the defendants, declaring the private writing to be an option to sell, not
binding and considered validly withdrawn by the defendants for want of consideration; ordering the
plaintiffs to return to the defendants the sum of P30,000.00 plus interest thereon at the legal rate, from
the time of filing of defendants’ counterclaim until the same is fully paid; to deliver peaceful possession of
the 2 hectares; and to pay reasonable rents on said 2 hectares at P5,000.00 per annum or at P2,500.00

CASE DIGESTS IN SALES – Leng J. Page 22


per cropping from the time of judicial demand until the said lots shall have been delivered to the
defendants; and to pay the costs. The plaintiffs appealed to the Court of Appeals (CA GR CV 36473),
which affirmed the appealed judgment in toto on 20 January 1993. Hence, the petition before the
Supreme Court.

The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals.

HELD:

Nono dat quod non habet, No one can give what he does not have; Contract of repurchase
inoperative thus void

Article 1505 of the Civil Code provides that ―where goods are sold by a person who is not the owner
thereof, and who does not sell them under authority or with consent of the owner, the buyer acquires no
better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded
from denying the seller’s authority to sell.‖ Jurisprudence, on the other hand, teaches us that ―a person
can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than
what the seller can legally transfer.‖

No one can give what he does not have — nono dat quod non habet. In the present case, there is no
allegation at all that petitioners were authorized by DBP to sell the property to the private respondents.
Further, the contract of repurchase that the parties entered into presupposes that petitioners could
repurchase the property that they ―sold‖ to private respondents. As petitioners ―sold‖ nothing, it follows
that they can also ―repurchase‖ nothing. In this light, the contract of repurchase is also inoperative and
by the same analogy, void.

ROMERO vs . COURT OF APPEALS


G.R. No. 107207 November 23, 1995

FACTS:
Romero, a civil engineer, was engaged in the business of production, manufacture and exportation of
perlite filter aids, permalite insulation and processed perlite ore. In 1988, he decided to put up a central
warehouse inMetro Manila.

Flores and his wife offered a parcel of land measuring 1,952 square meters. The lot was covered in a TCT
in the name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the property and,
except for the presence of squatters in the area, he found the place suitable for a central warehouse.
Flores called on petitioner with a proposal that should he advance the amount of P50,000.00 which could
be used in taking up an ejectment case against the squatters, private respondent would agree to sell the
property for only P800/square meter. Romero agreed. Later, a "Deed of Conditional Sale" was executed
between Flores and Ongsiong.

Purchase price = P1,561,600.00; Downpayment = P50K; Balance = to be paid 45 days after the removal
of all the squatters; upon full payment, Ongsiong shall execute deed of absolute sale in favour of
Romero.

Ongsiong sought to return the P50,000.00 she received from petitioner since, she said, she could not
"get rid ofthe squatters" on the lot. She opted to rescind the sale in view of her failure to get rid of the
squatters. Regional Trial Court of Makati rendered decision holding that private respondent had no right
to rescind the contract since it was she who "violated her obligation to eject the squatters from the
subject property" and that petitioner, being the injured party, was the party who could, under Article
1191 of the Civil Code, rescind the agreement.

CASE DIGESTS IN SALES – Leng J. Page 23


ISSUE:

WON there was a perfected contract of sale?

HELD:

YES. A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to
deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter
agrees.(BILATERAL and RECIPROCAL CHARACTERISTIC OF SALE). In determining the real character of
the contract, the title given to it by the parties is not as much significant as its substance. For example, a
deed of sale, although denominated as a deed of conditional sale, may be treated as absolute in nature,
if title to the property sold is not reserved in the vendor or if the vendor is not granted the right to
unilaterally rescind the contract predicated on the fulfilment or non-fulfilment, as the case may be, of the
prescribed condition.

From the moment the contract is perfected, the parties are bound not only to the fulfilment of what has
been expressly stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. Under the agreement, private respondent is obligated to evict
the squatters on the property. The ejectment of the squatters is a condition the operative act of which
sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of
the purchase price. Private respondent's failure "to remove the squatters from the property" within the
stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that
condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and
not to private respondent.

There was no potestative condition on the part of Ongsiong but a "mixed" condition "dependent not on
the will of the vendor alone but also of third persons like the squatters and government agencies and
personnel concerned."

DELPHER TRADES CORPORATION vs. IAC


G.R. No. L-69259 January 26, 1988

FACTS:

Delfin Pacheco and sister Pelagia were the owners of a parcel of land in Polo (now Valenzuela). On April
3,1974, they leased to Construction Components International Inc. the property and providing for a right
of first refusal should it decide to buy the said property.

Construction Components International, Inc. assigned its rights and obligations under the contract of
lease in favor of Hydro Pipes Philippines, Inc. with the signed conformity and consent of Delfin and
Pelagia. In 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and
defendant Delpher Trades Corporation whereby the Pachecos conveyed to the latter the leased property
together with another parcel of land also located in Malinta Estate, Valenzuela for 2,500 shares of stock
of defendant corporation with a total value of P1.5M.

On the ground that it was not given the first option to buy the leased property pursuant to the proviso in
the lease agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for
reconveyance of the lot. (Trivia lang: Delpher Trades Corp is owned by the Pacheco Family, managed by
the sons and daughters of Delfin and Pelagia.) Their primary defense is that there is no transfer of
ownership because the Pachecos remained in control of the original co-owners. The transfer of
ownership, if anything, was merely in form but not in substance.

CASE DIGESTS IN SALES – Leng J. Page 24


ISSUE:

WON the Deed of Exchange of the properties executed by the Pachecos and the Delpher Trades
Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the Hydro
Phil's right of first refusal over the leased property included in the "deed of exchange"?

HELD:

NO. By their ownership of the 2,500 no par shares of stock, the Pachecos have control of the
corporation. Their equity capital is 55% as against 45% of the other stockholders, who also belong to the
same family group. In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What
they really did was to invest their properties and change the nature of their ownership from
unincorporated to incorporated form by organizing Delpher Trades Corporation to take control of their
properties and at the same time save on inheritance taxes. The "Deed of Exchange" of property between
the Pachecos and Delpher Trades Corporation cannot be considered a contract of sale. There was no
transfer of actual ownership interests by the Pachecos to a third party. The Pacheco family
merely changed their ownership from one form to another. The ownership remained in the same hands.
Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract.

MEDRANO and IBAAN RURAL BANK vs . COURT OF APPEALS


G.R. No. 150678 February 18, 2005

FACTS:

Bienvenido Medrano was the Vice-Chairman of Ibaan Rural Bank. He asked Flor (a cousin), to look for a
buyer of a foreclosed asset of the bank (17-hectare mango plantation with 720 trees priced at P2.2M).
Dominador Lee, a Makati businessman was a client of respondent Pacita Borbon, a licensed real estate
broker. Borbon relayed toher business associates and friends that she had a ready buyer for a mango
orchard. Flor then advised her that her cousin-in-law owned a mango plantation which was up for sale.
She told Flor to confer with Medrano and to give them a written authority to negotiate the sale of the
property. Medrano issued the Letter of Authority to Borbon and Antonio to negotiate with any prospective
buyer for the sale of the mango plantation. He promised Borbon to pay a commission of 5% of the total
purchase price to be agreed upon by the buyer and seller.

An ocular inspection was held by Lee. Lee informed Antonio that he already purchased the property and
had made a down payment ofP1M. The remaining balance of P1.2M was to be paid upon the approval of
the incorporation papers of the corporation he was organizing by the SEC. According to Antonio, Lee
asked her if they had already received their commission. She answered "no," and Lee expressed surprise
over this. Since the sale of the property was consummated, the respondents asked from the petitioners
their commission, or 5% of the purchase price. The petitioners refused to pay and offered a measly sum
of P5,000.00 each. Hence, the present action.

Medrano’s defense: Borbon and Antonio did not perform any act to consummate the sale. The
petitioners pointed out that the respondents (1) did not verify the real owner of the property; (2) never
saw the property in question; (3) never got in touch with the registered owner of the property; and (4)
neither did they perform any act of assisting their buyer in having the property inspected and verified.

ISSUE:

WON the plaintiffs are entitled to any commission for the sale of the subject property?

HELD

CASE DIGESTS IN SALES – Leng J. Page 25


YES. The respondents are indeed the procuring cause of the sale. If not for the respondents, Lee
would not have known about the mango plantation being sold by the petitioners. The sale was
consummated. The bank had profited from such transaction. It would certainly be iniquitous if the
respondents would not be rewarded their commission pursuant to the letter of authority.

“Procuring cause” = the proximate cause. The term "procuring cause," in describing a broker’s activity,
refers to a causeor igniting a series of events which, without break in their continuity, result in
accomplishment of prime objective of the employment of the broker – producing a purchaser ready,
willing and able to buy real estate on the owner’s terms.

The evidence on record shows that the respondents were instrumental in the sale of the property to Lee.
Without their intervention, no sale could have been consummated. They were the ones who set the sale
of the subject land in motion. While the letter-authority issued in favor of the respondents was non-
exclusive, no evidence was adduced to show that there were other persons, aside from the respondents,
who informed Lee about the property for sale. When there is a close, proximate and causal connection
between the broker’s efforts and the principal’s sale of his property, the broker is entitled to a
commission.

In the absence of fraud, irregularity or illegality in its execution, such letter-authority serves as a
contract, and is considered as the law between the parties. The clear intention is to reward the
respondents for procuring a buyer for the property.

HEIRS OF ENRIQUE ZAMBALES VS. CA

FACTS:

The Zambales spouses were the homestead patentees of a parcel of land. Claiming that the Nin Bay
Mining Corp. had removed silica sand from their land and destroyed the plants and other improvements
therein, they instituted a case claiming for damages. The Zambales spouses entered into a Compromise
Agreement with the Corporation; by virtue of which, the disputed property was sold to one Preysley. Ten
years after the Trial Court’s decision based on the Compromise Agreement and nine years after the sale,
the Zambales spouses filed a civil case for annulment of the Deed of Sale with recovery of possession and
ownership with damages, contending that it was their lawyer who prevailed upon them to sign the
Compromise Agreement; that they were unschooled and did not understand the contents thereof.

ISSUE:

WON the Compromise Agreement violates the alienation and encumbrance of a homestead lot within five
years from the issuance of the patent.

HELD:

The sale is void. The law does not distinguish between executor and consummated sales. The bilateral
promise to buy and sell the homestead lot at a price certain, which was reciprocally demandable, was
entered into within the five-year prohibitory period and is therefore, illegal and void. To all interests and
purposes, therefore, there was an actual executory sale perfected during the period of prohibition except
that it was reciprocally demandable thereafter and the agency to sell to any third person was deferred
until after the expiration of the prohibitory period, and the agency to sell made effective only after the
lapse of the said period, was merely a devise to circumvent the prohibition.

CASE DIGESTS IN SALES – Leng J. Page 26


The bilateral promise to buy and sell and the agency to sell entered into within five years from the date
of the homestead patent was in violation of the Public Land Law, although the executed sale was
deferred until after the expiration of the five-year prohibitory period.

RADIOWEALTH FINANCE CO. VS. PALILEO


197 SCRA 245, MAY 1991

FACTS:

In April 1970, defendant spouses Enrique Castro and Herminio R. Castro (spouse Castro) sold to herein
respondent Manuelito Palileo a parcel of unregistered coconut land in Surigao del Norte. The sale is
evidenced by a notarized Deed of Absolute Sale, but the deed was not registered in the Registry of
Property for unregistered lands in the province of Surigao del Norte. Since the execution of the deed of
sale, Palileo who was then employed in Lianga, Surigao del Sur, exercised acts of ownership over the
land through his mother Rafaela Palileo, as administratrix or overseer. Manuelito Palileo has continuously
paid the real estate taxes on said land from 1971 until the present.

In November 1976, the CFI of Manila rendered a judgment was rendered against defendant Enrique T.
Castro to pay herein petitioner Radiowealth Finance Company (Radiowealth), the sum of P22,350.35 with
interest rate of 16% per annum from November 2, 1975 until fully paid, and upon the finality of the
judgment, a writ of execution was issued. The Provincial Sheriff Marietta E. Eviota, through defendant
Deputy Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public auction the subject land
that defendant Enrique Castro had sold to Palileo in 1970. The said Provincial Sheriff executed a
certificate of sale was by the in favor of Radiowealth as the only bidder, and upon expiration of the
redemption period, she also executed a deed of final sale. Both documents were registered with the
Registry of Deeds.

Learning of what happened to the land, Palileo filed an action for recovery of the subject property. The
court a quo rendered a decision in favor of Palileo, which the Court of Appeals affirmed.

ISSUE:

Who is the rightful owner of the subject property?

HELD

The Supreme Court likewise affirmed the appellate court’s decision on this case. There is no doubt that
had the subject property been a registered land, this case would have been decided in favor of
Radiowealth since it was the company that had its claim first recorded in the Registry of Deeds for it is
the act of registration that operates to convey and affect registered land. Therefore, a bonafide purchaser
of a registered land at an execution sale acquires a good title as against a prior transferee, if such
transfer was unrecorded.

However, a different set of rules applies in the case at bar which deals with a parcel of unregistered land.
Under Act No. 3344, registration of instruments affecting unregistered lands is "without prejudice to a
third party with a better right." The aforequoted phrase has been held by the Supreme Court to mean
that the mere registration of a sale in one's favor does not give him any right over the land if the vendor
was not anymore the owner of the land having previously sold the same to somebody else even if the
earlier sale was unrecorded. Applying this principle, the Court of Appeals correctly held that the execution
sale of the unregistered land in favor of petitioner is of no effect because the land no longer belonged to
the judgment debtor as of the time of the said execution sale.

CASE DIGESTS IN SALES – Leng J. Page 27


ATKINS KROLL & CO. VS. CU HIAN TEK
102 PHIL 984, JANUARY 1958

FACTS:

On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent B. Cu Hian Tek
(Hian Tek) offering (a) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25
per carton, (b) 300 cartons of Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c)
300 cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the
offers subject to reply by September 23, 1951. Hian Tek unconditionally accepted the said offer through a
letter delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the shortage
of catch of sardines by the packers in California.

Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor.
Upon Atkins’ appeal, the Court of Appeals affirmed said decision but reduced the damages to P3,240.15
representing unrealized profits. Atkins herein contends that there was no such contract of sale but only
an option to buy, which was not enforceable for lack of consideration because it is provided under the
2nd paragraph of Article 1479 of the New Civil Code that "an accepted unilatateral 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.‖ Atkins also insisted that the offer was a mere offer of option,
because the "firm offer" was a continuing offer to sell until September 23.

ISSUE

Was there a contract of sale between the parties or only a unilateral promise to buy?

HELD

The Supreme Court held that there was a contract of sale between the parties. Petitioner’s argument
assumed that only a unilateral promise arose when the respondent accepted the offer, which is incorrect
because a bilateral contract to sell and to buy was created upon respondent’s acceptance.

Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or to pay for their
price, he could also be sued. But his letter-reply to Atkins indicated that he accepted "the firm offer for
the sale" and that "the undersigned buyer has immediately filed an application for import license.‖ After
accepting the promise and before he exercises his option, the holder of the option is not bound to buy. In
this case at bar, however, upon respondent’s acceptance of herein petitioner's offer, a bilateral promise
to sell and to buy ensued, and the respondent had immediately assumed the obligations of a purchaser.

HEIRS OF ENRIQUE ZAMBALES VS. COURT OF APPEALS


120 SCRA 897, FEBRUARY 1983

FACTS:

The spouses Enrique Zambales and Joaquina Zambales (the Zambaleses), who are illiterate, were the
homestead patentees of a parcel of land in the Municipality of Del Pilar, Roxas, Palawan, pursuant to
Homestead Patent No. V-59502 dated September 6, 1955. They claimed in November 1956 that
respondent Nin Bay Mining Corporation (Corporation) had removed silica sand from their land and
destroyed the plants and other improvements thereon, to which said Corporation denied to have done so.
On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. Perfecto de los Reyes, and
the Corporation, entered into a Compromise Agreement which state, among others, that the Zambaleses

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are giving the Corporation full power and authority to sell, transfer and convey on September 10, 1960 or
at any time thereafter the whole or any part of herein subject property.

On September 10, 1960, the Corporation sold the disputed property to Joaquin B. Preysler for the sum of
P8,923.70 fixed in the Compromise Agreement. On December 6, 1969, or ten (10) years after the Trial
Court's Decision based on the Compromise Agreement, and nine (9) years after the sale to Preysler, the
Zambaleses filed a civil action in the CFI of Palawan for "Annulment of a Deed of Sale with Recovery of
Possession and Ownership with Damages‖, alleging that Atty. de los Reyes and the Corporation induced
them through fraud, deceit and manipulation to sign the Compromise Agreement.

The trial court declared null and void the deed of sale executed between Preysler and the Corporation,
but the Court of Appeals reversed the said decision after finding that the alleged fraud or
misrepresentation in the execution of the Compromise Agreement had not been substantiated by
evidence.

ISSUE

Are the compromise agreement and the subsequent deed of sale valid and legal?

HELD

The Supreme Court sustained the finding of the appellate court that fraud and misrepresentation did not
vitiate petitioners' consent to the Agreement because the latter were not as ignorant as they themselves
tried to show. The Zambaleses were political leaders who speak in the platform during political rallies,
and the lawyers they have hired belong to well-established law firms in Manila, which show that although
they were illiterate, they are still well-informed.

However, while the Compromise Agreement was held to be in violation of the Public Land Act, which
prohibits alienation and encumbrance of a homestead lot within five years from the issuance of the
patent. Although the issue was not raised in the Courts below, the Supreme Court has the authority to
review matters even if they are not assigned as errors in the appeal, if it is found that their consideration
is necessary in arriving at a just decision of the case. The bilateral promise to sell between the
Zambaleses and the Corporation, and the subsequent deed of sale between Preysler and the latter were
declared null and void.

SERRA VS. COURT OF APPEALS, AND RCBC


229 SCRA 60, JANUARY 1994

FACTS:

Petitioner Federico Serra, who is the owner of a 374 square meter parcel of land located at Masbate,
Masbate, and private respondent Rizal Commercial Banking Corporation (RCBC) entered into a "Contract
of Lease with Option to Buy" in May 25, 1975 which provided that Serra will lease the subject land to
RCBC for a period of 25 years from June 1, 1975 to June 1, 2000, that the RCBC has the option to
purchase the same at P210.00 per square meter within a period of 10 years from May 25, 1975, the date
of the signing of the Contract, and that Serra will have to register said land under the Torrens System to
the Register of Deeds of Province of Masbate within the same 10-year option period. Pursuant to said
contract, RCBC constructed improvements on the subject land to house its branch office, while the
petitioner had the property, within 3 years from 1975, duly registered with OCT No. 0-232 under the
Torrens System. Later, petitioner alleged that as soon as he had the property registered, he kept on
pursuing the branch manager for the sale of the lot as per their agreement, but it was not until
September 4, 1984, that RCBC decided to exercise the option.

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RCBC informed petitioner, through a letter, of its intention to buy the property at the agreed price of not
greater than P210.00 per square meter or a total of P78,430.00, but petitioner replied that he is no
longer selling the property. RCBC then filed an action for specific performance and damages against Serra
in March 1985 alleging that during the negotiations it made clear to petitioner that it intends to stay
permanently on property once its branch office is opened unless the exigencies of the business requires
otherwise.

Although finding that the contract was valid, the lower court ruled that the option to buy is unenforceable
because it lacked a consideration distinct from the price and RCBC did not exercise its option within the
reasonable time. Upon motion for reconsideration, however, the lower court reversed itself on the 2nd
issue, declared the contract as valid, and ordered Serra to deliver the proper deed of sale to RCBC. The
Court of Appeals likewise affirmed said decision.

ISSUE:

Was there a valid contract of lease with option to buy between the parties? Was there a consideration
distinct from the price to support the option given to RCBC?

HELD:

The Supreme Court affirmed the appellate court’s decision. A contract of adhesion is one wherein a party,
usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his
signature or his "adhesion" thereto. These types of contracts are as binding as ordinary contracts
because in reality, the party who adheres to the contract is free to reject it entirely.

In the case at bar, the Supreme Court did not find the situation to be inequitable because petitioner is a
highly educated man, who, at the time of the trial was already a CPA-Lawyer, and when he entered into
the contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission.
It is evident that a man of his stature should have been more cautious in transactions he enters into,
particularly where it concerns valuable properties. Also, in the present case, the consideration is even
more onerous on the part of the lessee since it entails transferring of the building and/or improvements
on the property to petitioner, should respondent bank fail to exercise its option within the period
stipulated.

CARBONELL VS. COURT OF APPEALS, AND PONCIO


69 SCRA 99, JANUARY 1976

FACTS:

On January 27, 1955, respondent Jose Poncio executed a private memorandum of sale of his parcel of
land with improvements situated in San Juan, Rizal in favor of petitioner Rosario Carbonell who knew that
the said property was at that time subject to a mortgage in favor of the Republic Savings Bank (RSB) for
the sum of P1,500.00. Four days later, Poncio, in another private memorandum, bound himself to sell the
same property for an improved price to one Emma Infante for the sum of P2,357.52, with the latter still
assuming the existing mortgage debt in favor of the RSB in the amount of P1,177.48. Thus, in February
2, Poncio executed a formal registrable deed of sale in her (Infante's) favor. So, when the first buyer
Carbonell saw the seller Poncio a few days afterwards, bringing the formal deed of sale for the latter's
signature and the balance of the agreed cash payment, she was told that he could no longer proceed
with formalizing the contract with her (Carbonell) because he had already formalized a sales contract in
favor of Infante.

To protect her legal rights as the first buyer, Carbonell registered on February 8, 1955 with the Register
of Deeds her adverse claim as first buyer entitled to the property. Meanwhile, Infante, the second buyer,

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was able to register the sale in her favor only on February 12, 1955, so that the transfer certificate of title
issued in her name carried the duly annotated adverse claim of Carbonell as the first buyer. The trial
court declared the claim of the second buyer Infante to be superior to that of the first buyer Carbonell, a
decision which the Court of Appeals reversed. Upon motion for reconsideration, however, Court of
Appeals annulled and set aside its first decision and affirmed the trial court’s decision.

ISSUE:

Who has the superior right over the subject property?

HELD
The Supreme Court reversed the appellate court’s decision and declared the first buyer Carbonell to have
the superior right over the subject property, relying on Article 1544 of the Civil Code. Unlike the first and
third paragraphs of said Article 1544, which accord preference to the one who first takes possession in
good faith of personal or real property, the second paragraph directs that ownership of immovable
property should be recognized in favor of one "who in good faith first recorded" his right. Under the first
and third paragraphs, good faith must characterize the prior possession, while under the second
paragraph, good faith must characterize the act of anterior registration.

When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the
title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon.
Carbonell was not aware - and she could not have been aware - of any sale to Infante as there was no
such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith which did
not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante.
Carbonell wanted to meet Infante but the latter refused so to protect her legal rights, Carbonell
registered her adverse claim on February 8, 1955. Under the circumstances, this recording of Carbonell’s
adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad
faith when the latter registered her deed of sale 4 days later.

COMMISSIONER OF INTERNAL REVENUE VS. COURT OF APPEALS


G.R. NO. 115349 APRIL 18, 1997

FACTS:

ADMU Institute of Philippine Culture is engaged in social science studies of Philippine society and culture.
Occasionally, it accepts sponsorships for its research activities from international organizations, private
foundations and government agencies.

On July 1983, CIR sent a demand letter assessing the sum of P174,043.97 for alleged deficiency
contractor’s tax. Accdg to CIR, ADMU falls under the purview of independent contractor pursuant to Sec
205 of Tax Code and is also subject to 3% contractor’s tax under Sec 205 of the same code.
(Independent Contractor means any person whose activity consists essentially of the sale of all kinds of
services for a fee regardless of whether or not the performance of the service calls for the exercise or use
of the physical or mental faculties of such contractors or their employees.)

ISSUE:

1) WON ADMU is an independent contractor hence liable for tax? NO.


2) WON the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a
piece of work? NEITHER.

HELD:

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1) Hence, to impose the three percent contractor’s tax on Ateneo’s Institute of Philippine Culture, it
should be sufficiently proven that the private respondent is indeed selling its services for a fee in pursuit
of an independent business.

2) Records do not show that Ateneo’s IPC in fact contracted to sell its research services for a fee. In the
first place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts
for sale of services were ever entered into by the private respondent. Funds received by the Ateneo de
Manila University are technically not a fee. They may however fall as gifts or donations which are tax-
exempt. Another fact that supports this contention is that for about 30 years, IPC had continuously
operated at a loss, which means that sponsored funds are less than actual expenses for its research
projects.

In fact, private respondent is mandated by law to undertake research activities to maintain its university
status. In fact, the research activities being carried out by the IPC is focused not on business or profit but
on social sciences studies of Philippine society and culture. Since it can only finance a limited number of
IPC’s research projects, private respondent occasionally accepts sponsorship for unfunded IPC research
projects from international organizations, private foundations and governmental agencies. However, such
sponsorships are subject to private respondent’s terms and conditions, among which are, that the
research is confined to topics consistent with the private respondent’s academic agenda; that no
proprietary or commercial purpose research is done; and that private respondent retains not only the
absolute right to publish but also the ownership of the results of the research conducted by the IPC.

SALE vs. CONTRACT FOR PIECE OF WORK

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent.
By its very nature, a contract of sale requires a transfer of ownership. In the case of a contract for a
piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration
of a certain price or compensation. If the contractor agrees to produce the work from materials furnished
by him, he shall deliver the thing produced to the employer and transfer dominion over the thing.
Whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a
party necessarily walks away with an object. In this case, there was no sale either of objects or services
because there was no transfer of ownership over the research data obtained or the results of research
projects undertaken by the Institute of Philippine Culture.

OTHER DOCTRINES

ACAP VS. CA (G.R. NO. 118114 DECEMBER 7, 1995)

In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other party to pay a price certain in money or its equivalent.
Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2)
classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual
creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain
contracts, such as sale, barter, donation, assignment or mutuum).

Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights.
The first presumes the existence of a contract or deed of sale between the parties. The second is,
technically speaking, a mode of extinction of ownership where there is an abdication or intentional
relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of

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other persons who are co-heirs in the succession. Private respondent, being then a stranger to the
succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of
the waiver document which neither recites the elements of either a sale, or a donation, or any other
derivative mode of acquiring ownership.

A notice of adverse claim, by its nature, does not however prove private respondent’s ownership over the
tenanted lot. ―A notice of adverse claim is nothing but a notice of a claim adverse to the registered
owner, the validity of which is yet to be established in court at some future date, and is no better than a
notice of lis pendens which is a notice of a case already pending in court.‖

VELARDE VS. CA (G.R. NO. 108346 JULY 11, 2001)

In a contract of sale, the seller obligates itself to transfer the ownership of and deliver a determinate
things, and the buyer to pay therefor a price certain in money or its equivalent.

Private respondents had already performed their obligation through the execution of the Deed of Sale,
which effectively transferred ownership of the property to petitioner through constructive delivery. Prior
physical delivery or possession is not legally required, and the execution of the Deed of Sale is deemed
equivalent to delivery.

Petitioners, on the other hand, did not perform their correlative obligation of paying the contract price in
the manner agreed upon. Worse, they wanted private respondents to perform obligations beyond those
stipulated in the contract before fulfilling their own obligation to pay the full purchase price.

GOMEZ VS. CA (G.R. NO. 120747 SEPTEMBER 21, 2000)

Cancellation of the award of Lot 4, Block 1, through the expediency of Resolution No. 015-86, was
proper. Primarily, it must be stressed that the contract entered into between the City of Manila and
awardee Luisa Gomez was not one of sale but a contract to sell, which, under both statutory and case
law, has its own attributes, peculiarities and effects.

For a contract, like a contract to sell, involves a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some service. Contracts, in
general, are perfected by mere consent, which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain
and the acceptance absolute.

The provisions of Article 777 of the Civil Code notwithstanding, we hold that the surviving children of
awardee Luisa Gomez are not qualified transferees of Lot 4, Block 1 for failure to conform with the
prerequisites set by Resolution 16-A, to wit, Filipino citizenship and actual occupancy, which in the
present case, are basic criteria for the award of the lot, pursuant to the ―Land for the Landless Program‖
of the City of Manila.

HEIRS OF SAN MIGUEL VS. CA (G.R. NO. 136054 SEPTEMBER 5, 2001)

True, in contracts of sale, the vendor need not possess title to the thing sold at the perfection of the
contract.36 However, the vendor must possess title and must be able to transfer title at the time of
delivery. In a contract of sale, title only passes to the vendee upon full payment of the stipulated
consideration, or upon delivery of the thing sold.

Under the facts of the case, Severina’s heirs are not in a position to transfer title. Without passing on the
question of who actually owned the land covered by LRC Psu -1312, we note that there is no proof of

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ownership in favor of Severina’s heirs. In fact, it is a certain Emiliano Eugenio, who holds a tax
declaration over the said land in his name.

Therefore, to insist that Dominador, et al. pay the price under such circumstances would result in
Severina’s heirs’ unjust enrichment. Hence, the non-payment of the three hundred thousand pesos
(P300,000.00) is not a valid justification for refusal to deliver the certificate of title.
ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay a price certain in money or its
equivalent.

ARTICLE 1459. The thing must be licit and the vendor must have a right to transfer the ownership
thereof at the time it is delivered.

ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing
which is the object of sale (emphasis ours).

SAN MIGUEL PROPERTIES VS. HUANG (G.R. NO. 137290)

It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the
contract of sale which establishes the existence of a perfected sale.

Was it an earnest deposit? NO. At the time when petitioner accepted the terms of respondents’ offer of
March 29, 1994, their contract had not yet been perfected. It does not satisfy Article 1482.

The stages of a contract of sale are as follows: (1) negotiation, (2) perfection, and (3) consummation.
The alleged ―indubitable evidence‖ of a perfected sale cited by the appellate court was nothing more than
offers and counter-offers which did not amount to any final arrangement containing the essential
elements of a contract of sale. While the parties already agreed on the real properties which were the
objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually
acceptable terms of payment, despite the 45-day extension given by petitioner.

There was also failure to agree on the manner of payment. The manner of payment of the purchase price
is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does
not expressly state that the minds of the parties must also meet on the terms or manner of payment of
the price, the same is needed, otherwise there is no sale.

Agreement on the manner of payment goes into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price.

CAOIBES VS. CAOIBES-PANTOJA (GR NO. 162873 JULY 21, 2006)

This was about 4 siblings who agreed that the land they inherited from their mother be waived and
transferred to their sister Corazon, in exchange of her payment of the mortgage of a certain Guillermo
Javier in the bank. By then, the land was still undergoing registration proceedings. 18 years later,
Corazon wants to be subrogated as the petitioner in the land registration proceedings. Her brothers and
sisters oppose. Corazon raises the issue of laches.

Issue: WON there is still a need for Corazon to file a motion to subrogate her in the rights of her siblings
as the new owner of the lot and the petitioner in land registration proceedings? NO

The substitution by respondent of petitioners as applicant in the land registration case over Lot 2 is not
even necessary. All respondent has to do is to comply with the requirements under the above-quoted
Sec. 22 of the Property Registration Decree. Ergo, it was unnecessary for respondent to file the case for

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specific performance subject of the present petition against petitioners to honor their agreement allowing
her to be substituted in their stead as applicant in the land registration proceeding.

The law does not require that the application for registration be amended by substituting the ―buyer‖ or
the ―person to whom the property has been conveyed‖ for the applicant. Neither does it require that the
―buyer‖ or the ―person to whom the property has been conveyed‖ be a party to the case. He may thus be
a total stranger to the land registration proceedings. The only requirements of the law are: (1) that the
instrument be presented to the court by the interested party together with a motion that the same be
considered in relation with the application; and (2) that prior notice be given to the parties to the case.

CAVITE DEVELOPMENT VS. LIM (G.R. NO. 131679 FEBRUARY 1, 2000)

Was it an option contract? NO. In the case at bar, the sum of P30,000.00, although denominated in the
offer to purchase as ―option money,‖ is actually in the nature of earnest money or down payment. An
option contract is a preparatory contract in which one party grants to the other, for a fixed period and
under specified conditions, the power to decide, whether or not to enter into a principal contract, hence
only preparatory. After the payment of the 10% option money, the Offer to Purchase provides for the
payment only of the balance of the purchase price, implying that the ―option money‖ forms part of the
purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. It
is clear then that the parties in this case actually entered into a contract of sale, partially consummated
as to the payment of the price.

Was the sale null and void? YES, for being an impossible service. CDB never acquired a valid title to the
property because the foreclosure sale, by virtue of which, the property had been awarded to CDB as
highest bidder, is likewise void since the mortgagor was not the owner of the property foreclosed. Such
contract may be deemed to be inoperative and may thus fall, by analogy, under item No. 5 of Article
1409 of the Civil Code: Those which contemplate an impossible service.

The bank was also negligent. There is no evidence that CDB observed its duty of diligence in ascertaining
the validity of Rodolfo Guansing’s title. The alleged ocular inspection report20 by CDB’s representative
was never formally offered in evidence.

DALION VS. CA (G.R. NO. 78903 FEBRUARY 28, 1990)

Dalion allegedly bought the parcel of land from Sabesaje. Sabesaje impugns the contract of sale since his
signature was allegedly forged. The court ruled he was not able to substantiate his allegations of forgery
by not presenting any witnesses on his affirmative defences.

Dalion also said that the contract is of no effect since it is in a private instrument only. Ruling:
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).

A sale of a real property may be in a private instrument but that contract is valid and binding between
the parties upon its perfection. And a party may compel the other party to execute a public instrument
embodying their contract affecting real rights once the contract appearing in a private instrument hag
been perfected (See Art. 1357).

BALATBAT VS. CA (G.R. NO. 109410 AUGUST 28, 1996)

Vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private respondents Repuyan
on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his

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children (4/10). Balatbat, one of the children, said that she bought the property for value and in good
faith. Repuyan was the first one to annotate adverse claim over the property in the Registry of Deeds.

Was the sale to Repuyan spouses merely executor and thus does not confer any right? No. The sale was
consummated, hence, valid and enforceable. In April 1980, Aurelio filed for rescission of the sale between
him and Repuyan but the court denied his petition, it was not appealed so it became final and executory.
Roque cannot demand payment of the balance unless and until the property has been subdivided and
titled in the name of private respondents.

On the contention that there was no delivery to the Repuyan spouses. Ruling: When the sale is made
through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or cannot be inferred. A
contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing
bought or payment of the price is not necessary for the perfection of the contract.

On the issue of double sale: Yes there was double sale. But whom shall the right over the property
pertain to. Article 1544 provides an answer for this. The ownership shall vests in the person acquiring it
who in good faith first recorded it in the Registry of Property. It cannot also be said that Balatbat was in
good faith, failing to investigate on the annotation of adverse claim by the Repuyan, which is constructive
knowledge already.

CORONEL VS. CA (G.R. NO. 103577 OCTOBER 7, 1996)

The sale of the subject parcel of land between petitioners and Ramona P. Alcaraz perfected on February
6, 1985 became valid and enforceable, prior to that between petitioners and Catalina B. Mabanag on
February 18, 1985. Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following: a) Consent; b) Determinate
subject matter; and c) Price certain in money or its equivalent.

The agreement could not have been a contract to sell because the sellers herein made no express
reservation of ownership or title to the subject parcel of land. Moreover, unlike in a contract to sell,
petitioners in the case at bar did not merely promise to sell the properly to private respondent upon the
fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject
property, they undertook to have the certificate of title changed to their names and immediately
thereafter, to execute the written deed of absolute sale.

As soon as the new certificate of title is issued in their names, petitioners were committed to immediately
execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the
purchase price arise.

Was there double sale? YES. In a case of double sale, what finds relevance and materiality is not whether
or not the second buyer was a buyer in good faith but whether or not said second buyer registers such
second sale in good faith, that is, without knowledge of any defect in the title of the property sold.

LAFORTEZA VS. MACHUCA (G.R. NO. 137552 JUNE 16, 2000)

Is Memorandum of Agreement merely a lease agreement with ―option to purchase‖? NO. it was a
contract of sale, although it was denominated a contract to sell.

A contract of sale is a consensual contract and 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. 10 From that moment the
parties may reciprocally demand performance subject to the provisions of the law governing the form of

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contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or
meeting of the minds; (2) determinate subject matter and (3) price certain money or its equivalent.

In the case at bench, there was a perfected agreement between the petitioners and the respondent
whereby the petitioners obligated themselves to transfer the ownership of and deliver the house. All the
elements of a contract of sale were thus present. However, the balance of the purchase price was to be
paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late
Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. This was only a
suspensive condition on a conditional contract of sale.

The issuance of the new certificate of title in the name of the late Francisco Laforteza and the execution
of an extrajudicial settlement of his estate was not a condition which determined the perfection of the
contract of sale. The petitioners fail to distinguish between a condition imposed upon the perfection of
the contract and a condition imposed on the performance of an obligation. Failure to comply with the first
condition results in the failure of a contract, while the failure to comply with the second condition only
gives the other party the option either to refuse to proceed with the sale or to waive the condition.

Earnest money is something of value to show that the buyer was really in earnest, and given to the seller
to bind the bargain. Whenever earnest money is given in a contract of sale, it is considered as part of the
purchase price and proof of the perfection of the contract.

Contention: the failure of the respondent to pay the balance of the purchase price was a breach of the
contract and was a ground for rescission thereof. CONTENTION WRONG. It is not disputed that the
petitioners did not make a judicial or notarial demand for rescission. Besides, that the delay of one month
in payment was a mere casual breach that would not entitle the respondents to rescind the contract.

PILIPINAS SHELL VS. GOBONSENG (G.R. NO. 163562)

A contract of sale, being consensual in nature, becomes valid and binding upon the meeting of the minds
of the parties as to the object and the price. If there is a meeting of the minds, the contract is valid
despite the manner of payment, or even if the manner of payment was breached. In fine, it is not the act
of payment of the contract price that determines the validity of a contract of sale. The manner of
payment and the payment itself of the agreed price have nothing to do with the perfection of the
contract. Payment of the price goes into the performance of the contract. Failure of a party to effect
payment of the contract price results in a right to demand the fulfillment or cancellation of the obligation
under an existing valid contract.
Is Pilipinas Shell liable for rentals from 1982 to 1991? No. The gasoline station was dealer-owned, run by
Julio Tan Pastor himself. respondent himself does not dispute the fact that he never demanded rental
payments from Tan Pastor from 1982 to 1991. It was only after the criminal case for bouncing checks
was dismissed that he claimed entitlement to rentals. Prior thereto, he never demanded for any rental
payment, much less instituted any action to enforce the same. What is more, respondent and Tan Pastor
had already executed an Agreement whereunder they declared that they had ―no more further claims
against each other, and waived, abandoned, relinquished, any such claim or claims.‖ Hence, he is now
stopped from asking for rent.

HEIRS OF BAJENTING VS. BANEZ (GR 166190 SEPT 20, 2006)

Are they entitled to repurchase the property? NO.

While it is true that the offer to repurchase was made within the statutory period both the trial and
appellate courts found as a fact that the petitioners did not really intend to derive their livelihood from it
but to resell part of it for a handsome profit. It is now settled that homesteaders should not be allowed to

CASE DIGESTS IN SALES – Leng J. Page 37


take advantage of the salutary policy behind the Public Land Law to enable them to recover the land in
question from vendees only to dispose of it again at much greater profit.

Should the heirs be compelled to execute a deed of sale in favour of Banez? YES. We agree with
respondents’ contention that petitioners are obliged to execute a notarized deed of absolute sale over the
property upon payment of the P150,000.00 balance of the purchase price of the property. A contract of
sale is a consensual contract. Upon the perfection of the contract, the parties may reciprocally demand
performance. 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. In this case, the balance of the purchase price of the
property was due on or before December 31, 1993.

JIMENEZ VS. JORDANA (GR 152526 NOVEMBER 25, 2004)

Was there a perfected contract of sale? YES.

Prior to the second sale and delivery to petitioners, there was already a perfected sale of the Adelfa
property to respondent. Hence, Bunye was duty-bound to execute a deed of sale; and petitioners, to
reconvey the property to him. From this hypothesis sprang the CA’s conclusion that the suit against
petitioners was for recovery of property.

The elements of a valid contract of sale under Article 1458 of the Civil Code are the following: (1) the
parties’ consent or meeting of minds, (2) a determinate subject matter, and (3) a price certain in money
or its equivalent. Being consensual, a contract of sale is perfected upon the meeting of the minds of the
buyer and the seller as to the object of the sale and the cause or consideration.18 From that moment on,
the parties may reciprocally demand performance; that is, the vendee may compel the transfer of the
ownership of the object of the sale, and the vendor may require the vendee to pay the price of the thing
sold.

Was the Jimenez spouses in good faith? NO.

Petitioners are heavy with allegations of the latter’s actual notice and knowledge of the previous sale. In
fact, Intervenors were officially notified on March 24, 1995 about plaintiff’s earlier contract with
Madeliene E. Bunye on December 29, 1993 to purchase the same property.

GAITE VS. FONACIER (G.R. NO. L-11827 JULY 31, 1961)

The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and
not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and
that the previous sale or shipment of the ore was not a suspensive condition for the payment of the
balance of the agreed price, but was intended merely to fix the future date of the payment.

A contract of sale is normally commutative and onerous: not only does each one of the parties assume a
correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay
the price),but each party anticipates performance by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands
that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent
character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite
desired or assumed to run the risk of losing his right over the ore without getting paid for it, or that
Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a
bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines
& Smelting Co., and the company’s stockholders, but also on one by a surety company; and the fact that

CASE DIGESTS IN SALES – Leng J. Page 38


appellants did put up such bonds indicates that they admitted the definite existence of their obligation to
pay the balance of P65,000.00.

Assuming that there could be doubt whether by the wording of the contract the parties indented a
suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules
of interpretation would incline the scales in favor of ―the greater reciprocity of interests‖, since sale is
essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides: If the
contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests. There can
be no question that greater reciprocity obtains if the buyer’ obligation is deemed to be actually existing,
with only its maturity (due date) postponed or deferred, that if such obligation were viewed as non-
existent or not binding until the ore was sold.

AGRO CONGLOMERATES VS. CA


(GR NO. 117660 DEC. 18, 2000)

A contract of sale is a reciprocal transaction. The obligation or promise of each party is the cause or
consideration for the obligation or promise by the other. The vendee is obliged to pay the price, while the
vendor must deliver actual possession of the land.

Subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker
and accommodation party for the benefit of Wonderland. Petitioners became liable as accommodation
party. An accommodation party is a person who has signed the instrument as maker, acceptor, or
indorser, without receiving value therefor, and for the purpose of lending his name to some other person
and is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking
the instrument knew (the signatory) to be an accommodation party.

Was there novation? NO. The first requisite for a valid novation is lacking. There was no novation by
―substitution‖ of debtor because there was no prior obligation which was substituted by a new contract.
The contract of sale between Wonderland and petitioners did not materialize. But it was admitted that
petitioners received the proceeds of the promissory notes obtained from respondent bank. Agro should
reimburse Wonderland if it shall subsequently settle the debt with the bank.

TITONG VS. CA (GR NO. 111141 MARCH 6, 1998)

The courts below correctly held that when petitioner ―sold, ceded, transferred and conveyed‖ the 5.5-
hectare land in favor of Pablo Espinosa, his rights of ownership and possession pertaining thereto ceased
and these were transferred to the latter. In the same manner, Espinosa’s rights of ownership over the
land ceased and were transferred to private respondent upon its sale to the latter.

In other words, a sale is a contract transferring dominion and other real rights in the thing sold. In the
case at bar, petitioner’s claim of ownership must of necessary fail because he has long abdicated his
rights over the land when he sold it to private respondent’s predecessor-in-interest. On the evidence of
ownership:

Survey: A survey under a proprietary title is not a conveyance. It is an instrument sui generis in the
nature of a partition; a customary mode in which a proprietor has set off to himself in severalty a part of
the common estate. Therefore, a survey, not being a conveyance, is not a mode of acquiring ownership.
Tax declaration: It is merely an indicium of a claim of ownership.

On quieting of title: The complaint failed to allege that an ―instrument, record, claim, encumbrance or
proceeding‖ beclouded the plaintiff’s title over the property involved.

CASE DIGESTS IN SALES – Leng J. Page 39


Can Titong acquire the property by acquisitive prescription? NO. He has only occupied it for 21 years. The
NCC requires prescription with no title/bad faith at 30 yrs. The good faith of the possessor consists in the
reasonable belief that the person from whom he received the thing was the owner thereof, and could
transmit his ownership. For purposes of prescription, there is just title when the adverse claimant came
into possession of the property through one of the modes recognized by law for the acquisition of
ownership or other real rights but the grantor was not the owner or could not transmit any right.

LEABRES VS CA (GR NO. 41847 DEC. 12, 1986)

WON Leabres had to submit his receipt to the probate court in order that his right over the parcel of land
in dispute could be recognized valid and binding and conclusive against the Manotok Realty?

An examination of the receipt reveals that the same can neither be regarded as a contract of sale or a
promise to sell. There was merely an acknowledgment of the sum of One Thousand Pesos (P1,000.00).
There was no agreement as to the total purchase price of the land nor to the monthly installment to be
paid by the petitioner. The requisites of a valid Contract of Sale namely 1) consent or meeting of the
minds of the parties; 2) determinate subject matter; 3) price certain in money or its equivalent-are
lacking in said receipt and therefore the ―sale‖ is not valid nor enforceable Dona Clara Tambunting died
on April 22, 1950. Her estate was thereafter under custodia legis of the Probate Court which appointed
Don Vicente Legarda as Special Administrator on August 28, 1950. Don Vicente Legarda entered into said
sale in his own personal-capacity and without court approval, consequently, said sale cannot bind the
estate of Clara Tambunting.

Petitioner should have submitted the receipt of alleged sale to the Probate Court for its approval of the
transactions. Thus, the respondent Court did not err in holding that the petitioner should have submitted
his receipt to the probate court in order that his right over the subject land could be recognized-assuming
of course that the receipt could be regarded as sufficient proof.

HEIRS OF SAN ANDRES VS. RODRIGUEZ


(G.R. NO. 135634 MAY 31, 2000)

Was the object of the contract determinate/determinable? YES.

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from
respondent as ―advance payment for the residential lot adjoining his previously paid lot on three sides
excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount
of the purchase price was to be based on the results of a survey and would be due and payable in five
(5) years from the execution of a deed of sale.

Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil
Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being
determinate without necessity of a new or further agreement between the parties.

Appellee’s Exhibit ―A‖ (page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold
lies at the middle of Lot 1914-B-2 surrounded by the remaining portion of the said Lot 1914-B-2 on three
(3) sides, in the east, in the west and in the north. The northern boundary is a 12 meter road.
Conclusively, therefore, this is the only remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345
sq. m. lot initially purchased by Rodriguez. It is quite difined, determinate and certain. Withal, this is the
same portion adjunctively occupied and possessed by Rodriguez since September 29, 1964, unperturbed
by anyone for over twenty (20) years until appellee instituted this suit.

CASE DIGESTS IN SALES – Leng J. Page 40


Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the
minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership
of and to deliver a determinate thing for a price certain in money.

REPUBLIC VS. PHIL. RESOURCES DEV’T CORP.


(G.R. NO. L-10141 JANUARY 31, 1958)

Was the price certain? YES.

Price . . . is always paid in terms of money and the supposed payment beeing in kind, it is no payment at
all, ―citing Article 1458 of the new Civil Code. However, the same Article provides that the purchaser may
pay ―a price certain in money or its equivalent,‖ which means that they meant of the price need not be in
money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes claimed by the
respondent corporation to belong to it and delivered to the Bureau of Prison by Macario Apostol in
payment of his account is sufficient payment therefore, is for the court to pass upon and decide after
hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value
or price of the materials delivered by him, certainly the herein respondent corporation would be affected
adversely if its claim of ownership of such sheets, plates, bars and pipes is true.

The conclusion, therefore, is inescapable that the petitioner possesses a legal interest in the matter in
litigation and that such interest is of an actual, material, direct and immediate nature as to entitle
petitioner to intervene.

JOVAN LAND VS. CA (G.R. NO. 125531. FEBRUARY 12, 1997)

Does the annotation of the third letter-offer signed ―Received original, 9-4-89″ constitutes a perfected
agreement to sell as respondent can be said to have accepted petitioner’s payment in the form of a check
which was enclosed in the third letter? NO.

Such an annotation by Conrado Quesada amounts to neither a written nor an implied acceptance of the
offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latter’s offer. The
requisites of a valid contract of sale are lacking in said receipt and therefore the ―sale‖ is neither valid nor
enforceable.

Although there was a series of communications through letter-offers and rejections as evident from the
facts of this case, still it is undeniable that no written agreement was reached between petitioner and
private respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable
as the requirements under the Statute of Frauds have not been complied with. Under the said provision,
an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing
and subscribed by the party charged or by an agent thereof.

Moreover, it is a fundamental principle that before contract of sale can be valid, the following elements
must be present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price
certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties.

PENALOSA VS. SANTOS (G.R. NO. 133749 AUGUST 23, 2001)

Ownership of the property has been transferred to petitioner. Article 1477 of the Civil Code states that
ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof. It is undisputed that the property was placed in the control and possession of petitioner45when

CASE DIGESTS IN SALES – Leng J. Page 41


he came into material possession thereof after judgment in the ejectment case. Not only was the contract
of sale perfected, but also actual delivery of the property effectively consummated the sale.

Non-payment of the purchase price is not among the instances where the law declares a contract to be
null and void. Although the law allows rescission as a remedy for breach of contract, the same may not
be availed of by respondents in this case. To begin with, it was Severino who prevented full payment of
the stipulated price when he refused to deliver the owner’s original duplicate title to Philam Life. His
refusal to cooperate was unjustified, because as Severino himself admitted, he signed the deed precisely
to enable petitioner to acquire the loan.

It should be emphasized that the non-appearance of the parties before the notary public who notarized
the deed does not necessarily nullify nor render the parties’ transaction void ab initio. Article 135834 of
the New Civil Code on the necessity of a public document is only for convenience, not for validity or
enforceability.

DIZON VS. CA (G.R. NO. 122544. JANUARY 28, 1999)

Was there a perfected contract of sale when Alice Dizon, agent of the lessor, accepted the P300k
representing the partial payment of the property? NO.

Under Article 1475 of the New Civil Code, ―the contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.‖ Thus, the elements of a contract of sale are consent, object, and price
in money or its equivalent. It bears stressing that the absence of any of these essential elements negates
the existence of a perfected contract of sale. Sale is a consensual contract and he who alleges it must
show its existence by competent proof.

There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed
sale entered into by Alice A. Dizon, as petitioners’ alleged agent, and private respondent. The basis for
agency is representation and a person dealing with an agent is put upon inquiry and must discover upon
his peril the authority of the agent.[26] As provided in Article 1868 of the New Civil Code,there was no
showing that petitioners consented to the act of Alice A. Dizon nor authorized her to act on their behalf
with regard to her transaction with private respondent. The most prudent thing private respondent
should have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this
regard, private respondent cannot seek relief on the basis of a supposed agency.
Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of
the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent’s authority,
and his ignorance of that authority will not be any excuse.

ROBLE VS. ARBASA (G.R. NO. 130707 JULY 31, 2001)

Was the subject matter determinate as to its metes and bounds? YES, it was determinate upon the sale
of the property (described as 240sq.m. more or less) but since it had acquired area due to reclamation,
there is a need to remand the case to the RTC to determine whether the land is a foreshore land or not.
The sale that transpired on January 2, 1976 between vendor Fidela and vendee Adelaida was one of
cuerpo cierto or a sale for lump sum. Pursuant to Article 1542, Civil Code of the Philippines, in the sale of
real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number,
there shall be no increase or decrease of the price although there be a greater or lesser area or number
than that stated in the contract.

Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the
entirety thereof that distinguishes the determinate object. However, this rule admits of an exception. A

CASE DIGESTS IN SALES – Leng J. Page 42


vendee of land, when sold in gross or with the description ―more or less‖ with reference to its area, does
not thereby ipso facto take all risk of quantity in the land. The use of ―more or less‖ or similar words in
designating quantity covers only a reasonable excess or deficiency. An area of ―644 square meters more‖
is not reasonable excess or deficiency, to be deemed included in the deed of sale of January 2, 1976.

There is a need, therefore, to determine whether the lands subject of the action for quieting of title are
foreshore lands. The classification of public lands is a function of the executive branch of government,
specifically the director of lands (now the director of the Lands Management Bureau). Due to the dearth
of evidence on this particular issue, we cannot arrive at a conclusive classification of the land involved.
The instant case has to be remanded to the trial court for that determination.

BIONA VS. CA (G.R. NO. 105647 JULY 31, 2001)

Was the sale valid? YES, with regards only to Soledad’s share (7/12). But since the daughters of Biona
failed to assert their rights and allowed defendant Hilajos to occupy the land in peace for more than 30
years, they are now stopped due to laches.

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

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

VDA. DE APE VS. CA (G.R. NO. 133638 APRIL 15, 2005)

Was there consent on the part of Fortunato when he signed the receipt of P30 stipulating the transfer of
land to Lumayno? NO, his consent was vitiated. Fortunato is illiterate and Lumayno was not able to prove
that prior to the signing of the receipt, the contents thereof were fully explained to him.
To be valid, consent must meet the following requisites: (a) it should be intelligent, or with an exact
notion of the matter to which it refers; (b) it should be free and (c) it should be spontaneous. Intelligence
in consent is vitiated by error; freedom by violence, intimidation or undue influence; spontaneity by
fraud.

The general rule is that he who alleges fraud or mistake in a transaction must substantiate his allegation
as the presumption is that a person takes ordinary care for his concerns and that private dealings have
been entered into fairly and regularly.56The exception to this rule is provided for under Article 1332 of
the Civil Code which provides that ―[w]hen one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must
show that the terms thereof have been fully explained to the former.‖

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In this case, as private respondent is the one seeking to enforce the claimed contract of sale, she bears
the burden of proving that the terms of the agreement were fully explained to Fortunato Ape who was an
illiterate. This she failed to do. While she claimed in her testimony that the contents of the receipt were
made clear to Fortunato, such allegation was debunked by Andres Flores himself when the latter took the
witness stand.

ESCUETA VS. LIM (G.R. NO. 137162 JANUARY 24, 2007)

Was there a perfected contract of sale between Virginia (agent of Patricia Llamas, who is the agent of
petitioner Rubio)? YES.

―[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as:
(1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or
its equivalent.‖26 Ignacio Rubio, the Baloloys, and their co-heirs sold their hereditary shares for a price
certain to which respondent agreed to buy and pay for the subject properties. ―The offer and the
acceptance are concurrent, since the minds of the contracting parties meet in the terms of the
agreement.‖

In fact, earnest money has been given by respondent. ―[I]t shall be considered as part of the price and
as proof of the perfection of the contract.28 It constitutes an advance payment to ―be deducted from the
total price.‖29 Article 1477 of the same Code also states that ―[t]he ownership of the thing sold shall be
transferred to The vendee upon actual or constructive delivery thereof.‖30 In the present case, there is
actual delivery as manifested by acts simultaneous with and subsequent to the contract of sale when
respondent not only took possession of the subject properties but also allowed their use as parking
terminal for jeepneys and buses. Moreover, the execution itself of the contract of sale is constructive
delivery.

Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having
sold them to respondent. ―[I]n a contract of sale, the vendor loses ownership over the property and
cannot recover it until and unless the contract is resolved or rescinded x x x.‖

On the authority of Virginia as sub-agent: By authorizing Virginia Lim to sell the subject properties,
Patricia merely acted within the limits of the authority given by her father, but she will have to be
―responsible for the acts of the sub-agent,‖ among which is precisely the sale of the subject properties in
favor of respondent.

CIR VS. ARNOLDUS CARPENTRY (GR 71122)

A contract for the delivery at a certain price of an article Which the vendor in the ordinary course of his
business manufactures or procures for the – general market, whether the same is on hand at the time or
not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his
special order, and not for the general market, it is a contract for a piece of work.

TRUE: The distinction between a contract of sale and one for work, labor and materials is tested by the
inquiry whether the thing transferred is one not in existence and which never would have existed but for
the order of the party desiring to acquire it, or a thing which would have existed and has been the
subject of sale to some other persons even if the order had not been given.

FALSE: The true test of whether or not the contract is a piece of work or a contract of is the mere
existence of the product at the time of the perfection of the contract such that if the thing already exists,
the contract is of sale, if not, it is work.

CASE DIGESTS IN SALES – Leng J. Page 44


He is a manufacturer. One who has ready for the sale to the general public finished furniture is a
manufacturer, and the mere fact that he did not have on hand a particular piece or pieces of furniture
ordered does not make him a contractor only.

When the vendor enters into a contract for the delivery of an article which in the ordinary course of his
business he manufactures or procures for the general market at a price certain (Art. 1458) such contract
is one of sale even if at the time of contracting he may not have such article on hand. Such articles fall
within the meaning of ―future goods‖ mentioned in Art. 1462, par. 1.

CIR VS. CA AND ADMU (GR 115349)

Is the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a piece of
work? NEITHER.

Transactions of Ateneo’s Institute of Philippine Culture cannot be deemed either as a contract of sale or a
contract of a piece of work.

―By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.‖
By its very nature, a contract of sale requires a transfer of ownership. Transfer of ownership is the
primary purpose of sale. The delivery of the thing does not mean a mere physical transfer, but is a
means of transmitting ownership. Transfer of title or an agreement to transfer it for a price paid or
promised to be paid is the essence of sale.‖

In the case of a contract for a piece of work, ―the contractor binds himself to execute a piece of work for
the employer, in consideration of a certain price or compensation. . . . If the contractor agrees to produce
the work from materials furnished by him, he shall deliver the thing produced to the employer and
transfer dominion over the thing, . . .‖

Whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a
party necessarily walks away with an object. In the case at bench, it is clear from the evidence on record
that there was no sale either of objects or services because, as adverted to earlier, there was no transfer
of ownership over the research data obtained or the results of research projects undertaken by the
Institute of Philippine Culture.

CO & CO. VS. CIR (GR L-8506)

Is Co & Co. a manufacturer or contractor? MANUFACTURER.

That Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its
stationery and advertisements to the public. That it ―manufactures‖ the same is practically admitted by
appellant itself. It also named itseld ―factory‖.

Is Co & Co.’s business a matter of contract of sale or contract of piece of work? SALE.

In our opinion when this Factory accepts a job that requires the use of extraordinary or additional
equipment, or involves services not generally performed by it-it thereby contracts for a piece of work —
filing special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be
special. They were merely orders for work — nothing is shown to call them special requiring
extraordinary service of the factory.

CASE DIGESTS IN SALES – Leng J. Page 45


The thought occurs to us that if, as alleged-all the work of appellant is only to fill orders previously made,
such orders should not be called special work, but regular work. Would a factory do business performing
only special, extraordinary or peculiar merchandise?

Supposing for the moment that the transactions were not sales, they were neither lease of services nor
contract jobs by a contractor. But as the doors and windows had been admittedly ―manufactured‖ by the
Oriental Sash Factory, such transactions could be, and should be taxed as ―transfers‖ thereof under
section 186 of the National Revenue Code.

CIR VS. ENGINEERING EQUIPMENT (G.R. NO. L-27044 JUNE 30, 1975)

Is the installation of a centralized air-conditioning system a contact of sale or a contract for piece of
work? CONTRACT FOR PIECE OF WORK.

The air conditioning units installed in a central type of air conditioning system would not have existed but
for the order of the party desiring to acquire it and if it existed without the special order of Engineering’s
customer, the said air conditioning units were not intended for sale to the general public.

The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry
whether the thing transferred is one not in existence and which never would have existed but for the
order of the party desiring to acquire it, or a thing which would have existed and has been the subject of
sale to some other persons even if the order had not been given. If the article ordered by the purchaser
is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or
modification of it is made at defendant’s request, it is a contract of sale, even though it may be entirely
made after, and in consequence of, the defendants order for it.

Engineering did not manufacture air conditioning units for sale to the general public, but imported some
items (as refrigeration compressors in complete set, heat exchangers or coils, which were used in
executing contracts entered into by it. Engineering, therefore, undertook negotiations and execution of
individual contracts for the design, supply and installation of air conditioning units of the central, taking
into consideration in the process such factors as the area of the space to be air conditioned; the number
of persons occupying or would be occupying the premises; the purpose for which the various air
conditioning areas are to be used; and the sources of heat gain or cooling load on the plant such as sun
load, lighting, and other electrical appliances which are or may be in the plan.

Contractor or manufacturer? Engineering is a contractor rather than a manufacturer, subject to the


contractors tax prescribed by Section 191 of the Code and not to the advance sales tax imposed by
Section 185(m) in relation to Section 194 of the same Code.

ENGINEERING AND MACHINERY CORP. VS. CA


(G.R. NO. 52267 JANUARY 24, 1996)

Is a contract for the fabrication and installation of a central air-conditioning system in a building, one of
―sale‖ or ―for a piece of work‖? CONTRACT FOR PIECE OF WORK.

It is not petitioner’s line of business to manufacture air-conditioning systems to be sold ―off-the-shelf.‖ Its
business and particular field of expertise is the fabrication and installation of such systems as ordered by
customers and in accordance with the particular plans and specifications provided by the customers.
Naturally, the price or compensation for the system manufactured and installed will depend greatly on
the particular plans and specifications agreed upon with the customers.

CASE DIGESTS IN SALES – Leng J. Page 46


A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his
business manufactures or procures for the general market, whether the same is on hand at the time or
not is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his
special order, and not for the general market, it is a contract for a piece of work (Art. 1467, Civil Code).
The mere fact alone that certain articles are made upon previous orders of customers will not argue
against the imposition of the sales tax if such articles are ordinarily manufactured by the taxpayer for sale
to the public.

A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the
inquiry as to whether the thing transferred is one not in existence and which would never have existed
but for the order, of the person desiring it . In such case, the contract is one for a piece of work, not a
sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a
sale to some other person even if the order had not been given, then the contract is one of sale.

What is the prescriptive period for filing actions for breach of the terms of such contract? What is the
proper remedy – rescission, or enforcement warranty for hidden defect or damages for breach of
contract? BREACH OF CONTRACT. 10 years prescription period in relation to Art. 1144.

In the installation of the air conditioning system did not comply with the specifications provided‖ in the
written agreement between the parties, ―and an evaluation of the air-conditioning system as installed by
the defendant showed the following defects and violations of the specifications of the agreement.

SCHMID & OBERLY VS. RJL MARTINEZ CORP.


(G.R. NO. 75198 OCTOBER 18, 1988)

Was it a contract of sale or indent transaction? INDENT TRANSACTION.

Webster defines an indent as ―a purchase order for goods especially when sent from a foreign country. It
would appear that there are three parties to an indent transaction, namely, the buyer, the indentor, and
the supplier who is usually a non-resident manufacturer residing in the country where the goods are to
be bought. An indentor may therefore be best described as one who, for compensation, acts as a
middleman in bringing about a purchase and sale of goods between a foreign supplier and a local
purchaser.

An indentor is a middlemen in the same class as commercial brokers and commission merchants.
It has been said that the essence of the contract of sale is transfer of title or agreement to transfer it for
a price paid or promised. If such transfer puts the transferee in the attitude or position of an owner and
makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must
account for the proceeds of a resale, the transaction is, a sale.

Thus, the chief feature of a commercial broker and a commercial merchant is that in effecting a sale,
they are merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to
the transaction. Not being the vendor, SCHMID cannot be held liable for the implied warranty for hidden
defects under the Civil Code.

PUYAT AND SONS VS. ARCO AMUSEMENT (G.R. NO. L-47538 JUNE 20, 1941)

Was the contract a contract of sale or contract of agency to sell? CONTRACT OF SALE.

The contract is the law between the parties and should include all the things they are supposed to have
been agreed upon. What does not appear on the face of the contract should be regarded merely as
―dealer’s‖ or ―trader’s talk‖, which can not bind either party.

CASE DIGESTS IN SALES – Leng J. Page 47


While Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%) commission, this does
not necessarily make the petitioner an agent of the respondent, as this provision is only an additional
price which the respondent bound itself to pay, and which stipulation is not incompatible with the
contract of purchase and sale.

Puyat and Sons is the exclusive agent of the same company in the Philippines. It is out of the ordinary for
one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not
point to anything but plain ordinary transaction where the respondent enters into a contract of purchase
and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United
States.

The respondent, therefore, could not have offered to pay a 10 per cent commission to the petitioner
provided it was given the benefit of the 25 per cent discount enjoyed by the petitioner. It is well known
that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the
home office, sometimes add to the list price when they resell to local purchasers. It was apparently to
guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and
the respondent is estopped from questioning that additional price. If the respondent later on discovers
itself at the short end of a bad bargain, it alone must bear the blame, and it cannot rescind the contract,
much less compel a reimbursement of the excess price, on that ground alone.

LIM VS. CA (G.R. NO. 102784 FEBRUARY 28, 1996)

Was is a contract of sale or contract of agency to sell? CONTRACT OF AGENCY.

Rosa Lim’s signature indeed appears on the upper portion of the receipt immediately below the
description of the items taken: We find that this fact does not have the effect of altering the terms of the
transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it
indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract
void or voidable. The moment she affixed her signature thereon, petitioner became bound by all the
terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise from
their breach.

It is of no moment that the signature was found in the upper portion of the receipt. Contracts shall be
obligatory in whatever form they may have been entered into, provided all the essential requisites for
their validity are present. A contract of agency to sell on commission basis does not need the formalities
of the location of the signature unlike notarial wills, hence it is valid and enforceable in whatever form it
may be entered into.

Rosa Lim could not have turned over or entrusted the ring to Aurelia Nadera because the latter is also
heavily indebted to Suarez, such that the entrustment will cause her a lot of risk. It does not prove much
of the absence of a contract of agency.

PNB VS. PINEDA (G.R. NO. L-46658 MAY 13, 1991)

Was the possession by PNB of machinery tantamount to dation in payment? NO.

Contrary to the allegation of the Pineda, PNB did not become the real owner of the goods. It was merely
the holder of a security title for the advances it had made to Pineda. The goods the Pineda had
purchased through PNB financing remain their own property and they hold it at their own risk. The trust
receipt arrangement did not convert the PNB into an investor; the latter remained a lender and creditor.
Payment would legally result only after PNB had foreclosed on said securities, sold the same and applied
the proceeds thereof to TCC’s loan obligation. Mere possession does not amount to foreclosure for

CASE DIGESTS IN SALES – Leng J. Page 48


foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on
the property and includes the sale itself.

Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in
money and the same is governed by sales. Dation in payment is the delivery and transmission of
ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the
obligation. As aforesaid, the repossession of the machinery and equipment in question was merely to
secure the payment of TCC’s loan obligation and not for the purpose of transferring ownership thereof to
PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished.

FILINVEST CREDIT VS. PHIL. ACETYLENE CORP.


(G.R. NO. L-50449 JANUARY 30, 1982)

Did the return of the mortgaged motor vehicle to the mortgagee by virtue of mortagagor’s voluntary
surrender totally extinguished its money debt obligation to Filinvest? (Was there dation in payment?) NO.
The mere return of the mortgaged motor vehicle by the mortgagor, the herein appellant, to the
mortgagee, the herein appellee, does not constitute dation in payment or dacion en pago in the absence,
express or implied of the true intention of the parties.

Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by the debtor to
the creditor as an accepted equivalent of the performance of obligation. In dacion en pago, as a special
mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment
of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the
creditor is really buying the thing or property of the debtor, payment for which is to be charged against
the debtor’s debt. As such, the essential elements of a contract of sale, namely, consent, object certain,
and cause or consideration must be present. In its modern concept, what actually takes place in dacion
en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of
the performance of an obligation is considered as the object of the contract of sale, while the debt is
considered as the purchase price.

In any case, common consent is an essential prerequisite, be it sale or innovation to have the effect of
totally extinguishing the debt or obligation.

In the absence of clear consent of appellee to the proferred special mode of payment, there can be no
transfer of ownership of the mortgaged motor vehicle from appellant to appellee. If at all, only transfer of
possession of the mortgaged motor vehicle took place, for it is quite possible that appellee, as
mortgagee, merely wanted to secure possession to forestall the loss, destruction, fraudulent transfer of
the vehicle to third persons, or its being rendered valueless if left in the hands of the appellant.

FILINVEST CREDIT VS. CA AND SY BANG


(G.R. NO. 82508 SEPTEMBER 29, 1989)

Was it a contract of sale or contract of lease? CONTRACT OF SALE. Ergo, the respondent is entitled to
warranty against defects.

The real intention of the parties should prevail. The nomenclature of the agreement cannot change its
true essence, i.e., a sale on instalments. It is basic that a contract is what the law defines it and the
parties intend it to be, not what it is called by the parties. 13 It is apparent here that the intent of the
parties to the subject contract is for the so-called rentals to be the instalment payments. Upon the
completion of the payments, then the rock crusher, subject matter of the contract, would become the
property of the private respondents. This form of agreement has been criticized as a lease only in name.

CASE DIGESTS IN SALES – Leng J. Page 49


The device contract of lease with option to buy is at times resorted to as a means to circumvent Article
1484, particularly paragraph (3) thereof. Through the set-up, the vendor, by retaining ownership over the
property in the guise of being the lessor, retains, likewise, the right to repossess the same, without going
through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the
instalments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More
important, the vendor, after repossessing the property and, in effect, cancelling the contract of sale, gets
to keep all the instalments-cum-rentals already paid.

Is Filinvest liable for warranty against defect? NO.

It was the private respondents who chose, inspected, and tested the subject machinery. It was only after
they had inspected and tested the machine, and found it to their satisfaction, that the private
respondents sought financial aid from the petitioner. Common sense dictates that a buyer inspects a
product before purchasing it (under the principle of caveat emptor or ―buyer beware‖) and does not
return it for defects discovered later on, particularly if the return of the product is not covered by or
stipulated in a contract or warranty.

Besides, there was a waiver of the warranty signed by Sy Bang.

KERR VS LINGAD

The transfer of title or agreement to transfer it for a price paid is the essence of sale. If such transfer
puts the transferee in the position of an owner and makes him liable for the agreed price, the transaction
is a sale. On the other hand, the essence of an agency to sell is the delivery to an agent, not as his
property, but as the property of his principal, who remains the owner and has the right to control sales,
fix the price and terms, demand and receive the proceeds less the agent's commission upon sales made.

In the case at bar, the relationship between the petitioner and US Rubber International is one of
brokerage or agency because of the following contractual stipulations:

 that petitioner can dispose of the products of the Company only to certain persons or entities and
within stipulated limits, unless excepted by the contract or by the Rubber Company (Par. 2)

 that it merely receives, accepts and/or holds upon consignment the products, which remain
properties of the latter company (Par. 8);

 that every effort shall be made by petitioner to promote in every way the sale of the products
(Par. 3);
 that sales made by petitioner are subject to approval by the company (Par. 12);

 that on dates determined by the rubber company, petitioner shall render a detailed report
showing sales during the month (Par. 14);

 that the rubber company shall invoice the sales as of the dates of inventory and sales report (Par.
14);

 that the rubber company agrees to keep the consigned goods fully insured under insurance
policies payable to it in case of loss (Par. 15);

 that upon request of the rubber company at any time, petitioner shall render an inventory of the
existing stock which may be checked by an authorized representative of the former (Par. 15);
and

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 that upon termination or cancellation of the Agreement, all goods held on consignment shall be
held by petitioner for the account of the rubber company until their disposition is provided for by
the latter (Par. 19).

ATILANO VS. ATILANO, 28 SCRA 231

Eulogio acquired by purchase lot 535. Thereafter, he obtained a transfer certificate of title in his name. A
few years later, he had the land subdivided into five parts. After the subdivision had been effected, he
executed a deed of sale in favor of his brother supposedly covering lot 535-E. His brother thereupon
obtained a transfer of certificate in his name. But even prior to the execution of the sale, the brother had
possession of the subject property and had built his house thereon. Years later, when the heirs of the
brother had his lots resurveyed for subdivision, it was discovered that the land they were occupying on
the strength of the deed of sale was not lot 535-E, but actually lot 535-A. On the other had, the lot which
Eulogio was occupying as residence was actually 535-E. The brother’s heirs filed an action in court
seeking possession of the real lot 535-E, which had a bigger lot area.

The court held that the object of the sale was actually 535-A, although the deed of sale referred to lot
535-E. there was only a mistake in designating the particular lot to be sol in the instrument, which
mistake was deemed pro forma and did not vitiate the consent of the parties or affect the validity and
binding effect of the contract of sale. The reason is that when one seeks to sell or buy a real property,
one sells or buys the property as he sees it in its actual setting and by its physical metes and bounds, and
not by the mere lot number assigned to it in the certificate of title. It was clear that when the brothers
entered into a contract they were referring to lot 535-A because even before that, the brother had
already been occupying said lot as his residence.

Atilano emphasizes the point that the true contract of sale is intangible or properly a legal concept. The
deed of sale is merely an evidence of the contract. And when the deed fails to cover the real contract or
the true meeting of the minds of the parties, then the deed must give way to the real contract of the
parties. The defect in the final deed would not work to invalidate the contract where all the essential
elements for its validity are present ad can be proven.

MELLIZA VS. CITY OF ILOILO, 23 SCRA 477 (1968)


Melliza was the owner of several parcels of land. She sold several big parcels of land. She sold several
tracts of land to the then Municipality of Iloilo, including lots 1214-C and 1214-D. The instrument of sale
did not mention lot 1214-B, although it was contiguous to the other lots. But the contract did stipulate
that the area being sold to the Municipality shall include the area ―needed for the construction of the city
hall site, avenues and parks according to the Arellano plan.‖

A few years later, Melliza sold her remaining interest in lot 1214 with a stipulation in the contract that she
was selling ―portions of Lot 1214 as were not included in the previous sale to Iloilo Municipality.‖ When
the then City of Iloilo donated the city hall site to the University of the Philippines, the donation included
lots 1214-B, 1214-C and 1214-D. Pio Melliza, who ultimately became the buyer of the remaining portions
of lot 1214 sold by Melliza, filed an action for the recovery of the lot 1214-B or its value stating that it
was not included in the contract executed between Melliza and the Mun. of Iloilo, and therefore was part
of the land that he purchase as the ―remaining portion of lot 1214.‖
One of his causes of action was that the contract of sale executed between Melliza and the Mun. referred
only to lots 1214-C and 1214-D and it is unwarranted to include lot 1214-B as being included under the
description therein because that would mean that the object of the contract of sale would be
indeterminate. One of the essential requirements for a contract of sale is that it should have for its object
a determinate thing.

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The Supreme Court held that a sale must have for its object a determinate thing, an this requirement is
fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being
made determinate without the necessity of a new or further agreement between the parties. The
requirement in Melliza was deemed fulfilled under the contract of sale because it referred to the Arellano
plan. At that time, the plan had long been in existence and it specifically provided for the land areas
needed for the city hall site Therefore, at the time of the execution of the contract, the exact area of the
land needed, which was the subject matter of the sale, could be determined by simply referring to the
Arellano plan, without the parties needing to draw-up a new contract.

NATIONAL GRAINS AUTHORITY VS. IAC, 171 SCRA 131 (1989)

Where the parties had come into an agreement on a specified type of rice which was to be harvested
from the sellers farmland, and as specified prices per cavan, and although the exact quantity had not
been agreed upon, it was provided I the agreement that the seller was allowed to deliver within a
specified quota of 2,640 cavans. The Supreme Court held that there was, at the point of agreement,
already a perfected an binding contract of sale, and to which NFA was obliged to comply and pay the
purchase price for the grains actually delivered by the seller-farmer Soriano.

The Court held: 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. Art. 1349 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.

The controlling doctrine in National Grains Authority is that, specific quantity of the subject matter is not
important when it is still possible to determine the quantity ―without the need of a new contract between
the parties, ― and therefore complies with the requisite of being determinable.

LONDRES VS. CA GR. NO. 136427, DEC. 17, 2002

Supreme Court reiterated the principle that when one sells or buys real property, one sells or buys the
property as he sees it, in its actual setting and by its metes and bounds, and not by the mere lot number
assigned to it in the certificate of title.

As long as the true intentions of the parties are evident, the mistake will not vitiate the consent of the
parties, or affect the validity and binding effect of the contract between them. In such a case, the lot
actually taken possession pursuant to the prior agreement of the parties shall be the true subject of the
sale, and not the one described in the Deed of Absolute Sale.

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