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CASE DIGESTS FOR SALES: Ordua, et al. v. Fuentebella, et al. Makati Sports Club, Inc. v. Cheng, et. al.

Vazquez v. Ayala Corporation Spouses Serrano, et. al. v. Caguiat Philippine National Bank v. Spouses Rocamora PCI Leasing & Finance, Inc. v. Spouses Dai Magna Financial Services Group, Inc. v. Colarina

SUBMITTED TO: JUDGE MA. CECILIA AUSTRIA

SUBMITTED BY: JERUEH L. LABRO Doctor of Jurisprudence JD2 July 27, 2011

Statute of Frauds ORDUA, ET AL. v. FUENTEBELLA, ET AL. G.R. No. 176841 June 29, 2010 Velasco, Jr., J.: FACTS: Antonita Ordua purchased a residential lot from Gabriel Sr. payable in installments but no deed of sale was executed. The installments were paid to Gabriel Sr. and later to Gabriel Jr. after

the death of the former. Improvements were thereafter introduced by petitioner and the latter even paid its real property tax since 1979. Unknown to Ordua, the property has been subject to further alienations until the same was ceded to respondent, Fuentebilla, Jr. Ordua, after being demanded by Fuentebilla to vacate the disputed land, then filed a Complaint for Annulment of Sale, Title, Reconveyance with Damages with a prayer to acquire ownership over the subject lot upon payment of their remaining balance. The Regional Trial Court dismissed the petition because the verbal sale between Gabriel Sr. and Ordua was unenforceable under the Statute of Frauds. This was later affirmed by the Court of Appeals. ISSUE: Whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable under the Statute of Frauds HELD: No. It is a well-settled rule that the Statute of Frauds as expressed in Article 1403, par. (2), of the Civil Code is applicable only to purely executory contracts and not to contracts which have already been executed either totally or partially. Here, the verbal contract of sale has been partially executed through the partial payments made by Ordua duly received by both Gabriel Jr. and his father. The purpose of the Statute of Fraud is prevention fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring some contracts and transactions to be evidenced by a writing signed by the party to be charged. Since there is already ratification of the verbal contract through the acceptance of benefits through the partial payments, it is thus withdrawn from the purview of the Statute of Frauds. Sale of Shares of Stock in relation to Articles 1461-1462 of the New Civil Code MAKATI SPORTS CLUB, INC. v. CHENG, ET. AL. G.R. No. 178523 June 16, 2010 Nachura, J.: FACTS: Makati Sports Club Inc (MSCI) adopted a resolution authorizing the sale of its unissued shares. Respondent Hodreal expressed his interest to buy a share but it was Mc Foods who acquired the same from MSCI and in whose favor a stock certificate was issued. Unknown to plaintiff, pending its negotiation for the sale of the shares with Mc Foods, the latter had likewise been negotiating the sale of the same with Hodreal. Eventually, Hodreal was able to

acquire the share from Mc Foods when the latter made known its intention to resell the share. Mc Foods notified MSCI of the sale to Hodreal and a new certificate of stock was issued. MSCIs complaint for fraud was dismissed by the lower court, whose decision was affirmed by the Court of Appeals. Before the Supreme Court, MSCI, among many of its contentions, alleged that the resale of the said share to the Hodreal occurred before Mc Foods gained ownership over the said unissued share, thus the transfer from Mc Foods to Hodreal is void. ISSUE: Whether or not the anticipated and expected ownership of shares of stock may be the object of a contract of sale HELD: Yes. Considering that Mc Foods tendered its full payment to MSCI and the execution of the Deed of Sale, even assuming that it was driven solely by the intent to speculate on the price of the share of stock, it had all the right to negotiate and transact, at least on the anticipated and expected ownership of the share, with Hodreal. Mc Foods had the inherent right flowing from its ownership of the stocks to demand the delivery of the stock certificate in its name. The corporations obligation to register is ministerial upon the buyers acquisition of ownership of the share of stock. MSCI, either by its board, its by-laws, or the act of its officers, cant then create restrictions in stock transfers notwithstanding that the stock certificate, mere representation of ownership, was issued at a later time. Right of First Refusal/ Option Contract VASQUEZ v. AYALA CORPORATION G.R. No. 149734 November 19, 2004 Tinga, J.: FACTS: The Vasquez spouses sold to Ayala Corporation all their shares of stocks in Conduit Development, Inc. Among the terms and conditions stipulated under the Memorandum of Agreement (MOA) was that Ayala Corp. would give the Vasquez spouses a first option to purchase four developed lots next to the Retained Area at the prevailing market price at the time of the purchase as indicated in paragraph 5. 15 of the MOA. When Ayala offered to sell the four lots back to the Vasquez spouses by virtue of the provision of the MOA, the parties were not able to agree what prevailing price should apply. The regional trial court ruled that since the option to purchase the 4 lots was with a consideration, paragraph 5.15 is an option contract. The Court of Appeals held

otherwise and claimed that it was a right of first refusal there being no separate consideration. ISSUE: Whether or not paragraph 5.15 of the MOA constitute an option contract or a right of first refusal HELD: Paragraph 5.15 of the MOA constitutes a mere right of first refusal there being no fixed period and a determined price at which the subject lots will be offered for sale as connoted by the phrase at the prevailing market price at the time of the purchase. More so, paragraph 5.5 is not in any way a preparatory or a separate and distinct contract from that which the parties may enter into upon its the consummation. An independent consideration was also wanting because the contested paragraphs purpose was to give the Vasquez spouses the first option to purchase the lots at a price acceptable by Ayala upon the latters offer. Articles 1324 and 1479 were then not applicable. Thus, paragraph 5.15 cannot be considered an option contract. Relatively, petitioners' right of first refusal was deemed lost when its counter-offer was rejected by respondent. Article 1482 of the Civil Code - Earnest Money SPOUSES SERRANO, ET. AL. v. CAGUIAT G.R. No. 139173 February 28, 2007 Sandoval-Gutierrez, J.: FACTS: Spouses Serrano agreed to sell in favor of respondent Caguiat a parcel of land at 1,500.00 per square meter. Caguiat partially paid petitioners 100, 000.00 as evidenced by a receipt issued by petitioners indicating therein respondents promise to pay the remaining balance. Respondent, after making known his readiness to pay the balance, requested from petitioners the preparation of the necessary Deed of Sale. When petitioners cancelled the transaction and intended to return to Caguiat his partial payment, respondent filed a complaint for specific performance and damages. The trial court relying on Article 1482 of the Civil Code ruled that the payment of 100, 000.00 being an earnest money signified the perfection of the contract of sale. The Court of Appeals denied petitioners motion for reconsideration in affirmation of the lower courts decision. ISSUE:

Whether or not the partial payment constitutes an earnest money as manifested in Article 1482 of the Civil Code HELD: No. Article 1482 applies only to earnest money given in a contract of sale. It was apparent that the earnest money in the case at bar was given in lieu of a contract to sell. Unlike in a contract of sale, the ownership of the parcel of land was retained by the Spouses Serrano and shall only be passed to Caguiat upon full payment of the purchase price as evidenced by the receipt. Relatively, no Deed of Sale has been executed as proof of the intention of the parties to immediately transfer the ownership of the parcel of land. Spouses Serrano also retained ownership of the certificate of title of the lot, thereby indicating no actual or constructive delivery of the ownership of the property. Finally, should the transaction pushed through, Caguiats payment of the remaining balance would have been a suspensive condition since the transfer of ownership was subordinated to the happening of a future and uncertain event. Article 1484 Remedies of a vendor in a contract of sale of a personal property payable in installments (Not Applicable in Real Estate Mortgage) PHILIPPINE NATIONAL BANK v. SPOUSES ROCAMORA G.R. No. 164549 September 18, 2009 Brion, J.: FACTS: Respondent Spouses Rocamora obtained a loan from Philippine National Bank (PNB) secured by deeds of real estate mortgage and of chattel mortgage. Escalation clauses were indicated in both promissory note and real estate mortgage deed in case of nonpayment or nonrenewal on due date. When respondents defaulted in their payment, foreclosure proceedings followed. However, the recovered proceeds were insufficient to cover the entire loan obligations of respondents, hence a complaint for deficiency judgment was initiated by PNB. Spouses Rocamora claimed that they were not liable for the deficiency because of the invalidity of the escalation clauses and the unreasonable delay of PNB in initiating the foreclosure proceedings. The Court of Appeals affirmed the trial courts decision finding merit in respondents arguments and dismissing PNBs complaint. ISSUE: Whether or not petitioner PNB may still recover the deficiency of the loan obligations resulting after the foreclosure proceedings

HELD: No. Although the silence of both Acts Nos. 1508 and 3153 as to the right to recover the deficiency resulting after the foreclosure proceeds were deducted from the principal obligation is generally construed to grant the mortgagee of the right to maintain an action for the deficiency, the mortgagee must be able to prove the basis for the deficiency judgment it seeks. Unfortunately, PNB did not prove this by its failure to provide a detailed and credible accounting of the claimed deficiency. Moreover, the delay in commencing foreclosure proceedings included interest and penalty charges which accrued during the period covered by the delay. Hence, to award PNBs deficiency claim would be to award it for its delay and its undisputed disregard of PD 385. Article 1484 Remedies of a vendor in a contract of sale of a personal property payable in installments PCI LEASING & FINANCE, INC. v. SPOUSES DAI G.R. No.148980 September 21, 2007 Carpio-Morales, J.: FACTS: Spouses Dai obtained a loan from PCI Leasing & Finance, Inc. payable in monthly installments. The loan was secured by a promissory note and a deed of chattel mortgage both of which provided for acceleration clause. When respondents defaulted in paying the 2nd and 3rd installments, petitioner initiated a complaint for replevin and won. However, after a year, petitioner filed a complaint for deficiency judgment and/or collection of sum money. Respondents argued that petitioner was barred by a prior judgment and Article 1484 of the Civil Code. The trial court decided in favor of respondent. The Court of Appeals, although affirming the lower court, dismissed the invocation of Article 1484 since it applies only to a case of sale of personal property payable in installments which is secured by a chattel mortgage between the vendor and the vendee over the thing sold. ISSUE: Whether or not petitioner, a chattel mortgagee, after opting to foreclose the mortgage, may still sue to recover any deficiency in the loan obligation HELD: No. It is clear that petitioner succeeded in taking possession of the mortgaged vehicle and pursued the foreclosure of the mortgage as manifested by the conduct of the auction sale. Under Article 1484, par. 3 of the Civil Code, the delivery of possession of the mortgaged property extinguished Spouses Dais liability because petitioner had actually caused the foreclosure sale of the

mortgaged property when it recovered possession. Consequently, petitioner is barred from recovering any balance of the respondents outstanding obligation not satisfied by the loan The election of any of the remedies in Article 1484 is a waiver of the right to resort to the other.
Article 1484 Remedies of a vendor in a contract of sale of a personal property payable in installments MAGNA FINANCIAL SERVICES GROUP, INC. v. COLARINA G.R. No. 158635 December 9, 2005 Chico-Nazario, J.: FACTS: Colarina bought from petitioner a Suzuki Multicab payable on installments and secured by an integrated promissory note and a deed of chattel mortgage. Upon respondents default in payment, petitioner filed a Complaint for Foreclosure of the Chattel Mortgage with Replevin. Colarina then voluntarily surrendered the physical possession of the vehicle. Failing to answer within the reglementary period, the Municipal Trial Court ordered respondent to pay petitioner the unpaid balance of the vehicles purchase price. This was affirmed by the Regional Trial Court. The Court of Appeals, on the other hand, reversed and set aside the decisions of the lower courts granting the payment of the payment of the unpaid balance for being inconsistent with petitioners complaint for foreclosure. ISSUE: Whether or not the foreclosure of mortgage, as an exercise of the rd 3 remedy in Article 1484, is in nature an action for sum of money with execution of the security HELD:

No. A contract of chattel mortgage is in the nature of a conditional sale of personal property given as a security for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchaser a sum of money or doing some other act named. If the condition is performed according to its terms, the mortgage and sale immediately become void, and the mortgagee is thereby divested of his title. But in case of nonpayment, foreclosure is one of the alternative remedies available to a mortgagee. Since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of the Civil Code, it is bound by its election and thus may not be allowed to change what it has opted for nor to ask for more.