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Definition of Sale What does the definition cover? POLYTECHNIC UNIVERSITY vs.

COURT OF APPEALS 368 SCRA 691 FACTS: The National Development Corporation (NDC) had in its disposal a 10-hectare property located along Pureza St., Sta. Mesa, Manila which was popularly known as the NDC compound. Respondent Firestone Ceramics, Inc. (Firestone) entered into three contracts of lease with NDC: The first contract was a lease covering 2.90118 hectares (2.60 hectares) of the property for use as a manufacturing plant, for a term of 10 years renewable for another 10 years under the same terms and conditions. The second contract was the lease of NDCs 4-unit pre-fabricated steel warehouse, which was co-extensive with the lease of the LESSEE with the LESSOR on the 2.60 hectare-lot. The third contract concerned a 6-unit pre-fabricated steel warehouse which would expire on December 2, 1978. Prior to the expiration of the third contract, a resolution was passed by the Board of Directors of the NDC which was subject to several conditions including with the approval of higher authorities, decide to dispose and sell these properties including the lot, priority should be given to the LESSEE. In pursuance of the resolution, the lease was extended for another 10 years, renewable for another 10 years and expressly granting Firestone the first option to purchase the leased premises in the event that NDC decides to dispose and sell these properties including the lot... Relationships between the parties went smoothly until early 1988 when the lease agreement was about to expire. Firestone sent notices to NDC but they were unacknowledged. FIRESTONE's predicament worsened when rumors of NDC's supposed plans to dispose of the subject property in favor of petitioner Polytechnic University of the Philippines (PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in the exercise of its contractual right of first refusal. Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. Meanwhile, on 21 February 1989 PUP moved to intervene and asserted its interest in the subject property, arguing that a "purchaser pendente lite of property which is subject of a litigation is entitled to intervene in the proceedings." PUP referred to Memorandum Order No. 214 issued by then President Aquino ordering the transfer of the whole NDC compound to the National Government, which in turn would convey the aforementioned property in favor of PUP at acquisition cost. The issuance was supposedly made in recognition of PUP's status as the "Poor Man's University" as well as its serious need to extend its campus in order to accommodate the growing student population. The order of conveyance of the 10.31-hectare property would automatically result in the cancellation of NDC's total obligation in favor of the National Government in the amount ofP57,193,201.64. NDC argued that the transaction between PUP and NDC amounted to a sale considering that "ownership of the property remained with the government." Petitioner NDC introduced the novel proposition that if the parties involved are both government entities the transaction cannot be legally called a sale. ISSUE: Whether or not there was a sale. HELD: YES. We believe that the courts a quo did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor of petitioner PUP. Aside from the fact that the intention of

NDC and PUP to enter into a contract of sale was clearly expressed in the Memorandum Order No. 214, a close perusal of the circumstances of this case strengthens the theory that the conveyance of the property from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper transfer as argued by petitioners. A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its equivalent. It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the questioned transaction. Petitioners NDC and PUP have their respective charters and therefore each possesses a separate and distinct individual personality. The inherent weakness of NDC's proposition that there was no sale as it was only the government which was involved in the transaction thus reveals itself. Tersely put, it is not necessary to write an extended dissertation on government owned and controlled corporations and their legal personalities. Beyond cavil, a government owned and controlled corporation has a personality of its own, distinct and separate from that of the government. The intervention in the transaction of the Office of the President through the Executive Secretary did not change the independent existence of these entities. The involvement of the Office of the President was limited to brokering the consequent relationship between NDC and PUP. But the withdrawal of the appeal by the Executive Secretary is considered significant as he knew, after a review of the records, that the transaction was subject to existing liens and encumbrances, particularly the priority to purchase the leased premises in favor of FIRESTONE. The preponderance of evidence shows that NDC sold to PUP the whole NDC compound, including the leased premises, without the knowledge much less consent of private respondent FIRESTONE which had a valid and existing right of first refusal. All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject matter, and consideration therefor. Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which explicitly states the acquiescence of the parties to the sale of the property WHEREAS, PUP has expressed its willingness to acquire said NDC properties and NDC has expressed its willingness to sell the properties to PUP The defendants-appellants' interpretation that there was a mere transfer, and not a sale, apart from being specious sophistry and a mere play of words, is too strained and hairsplitting. For it is axiomatic that every sale imposes upon the vendor the obligation to transfer ownership as an essential element of the contract. Transfer of title or an agreement to transfer title for a price paid, or promised to be paid, is the very essence of sale. At whatever legal angle we view it, therefore, the inescapable fact remains that all the requisites of a valid sale were attendant in the transaction between co-defendants-appellants NDC and PUP concerning the realities subject of the present suit. What is more, the conduct of petitioner PUP immediately after the transaction is in itself an admission that there was a sale of the NDC compound in its favor. Thus, after the issuance of Memorandum Order No. 214 petitioner PUP asserted its ownership over the property by posting notices within the compound advising residents and occupants to vacate the premises. In its Motion for Intervention petitioner PUP also admitted that its interest as a "purchaser pendente lite" would be better protected if it was joined as party-defendant in the controversy thereby confessing that it indeed purchased the property.

ACAP vs. CA (December 7, 1995) Nature: This is a petition for review on certiorari of the decision of the CA, which affirmed the decision of the RTC, of holding that private respondent Edy delos Reyes had acquired ownership of Lot. No. 1130 of the Cadastral Survey, based on a document entitled Declaration of Heir ship and Waiver of Rights and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay rentals. Facts: 1. The title to Lot no. 1130 was issued and registered in the name of spouses Santiago Vasquez and Lorenzana Oruma. After both spouses died, their only son Felixberto inherited the Lot. In 1975, Felixberto Vasquez executed a duly notarized document entitled Declaration of Heirship and Deed of Absolute Sale in favor of Cosme Pido. 2. Since 1960,petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of 9500 square meters. When the ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pidos death, to his widow Laurenciana. 3. The controversy began when Pido died intestate and on Nov.27 1981, his surviving heirs executed a notarized document denominated as declaration of Heirshipand Waiver of Rights of lot 1130 Hinigaran Cadastre, wherein they declared themselves as the only heirs of the late Cosme.Pido and adjudicated unto themselves the above mentioned parcel of land in equal shares. The document was signed by all of Pidos heirs. Private respondent Edy delos Reyes did not sign said document. 4. At the time of Cosme Pidos death, title to the property continued to be registered in the name of Vasquez spouses. Upon obtaining Declaration of Heirship with waiver of rights in his favor, private respondent Edy, held the same with the Registry Of Deeds as part of a notice of an adverse claim against the original certificate of title. 5. Thereafter,private respondent sought for petitioner(Acap) to personally inform (edy) he had become the new owner of the land and that the lease rentals thereon should be paid to him. private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay (10) cavans of rice of palay per annum as lease rentals. In 1982, petitioner allegedly complied with said obligation. In 1983, petitioner however refused to pay further the rentals on the land, prompting private respondent to seek the assistance of the Ministry of Agrarian reform. 6. On April 28 1988, after the lapse of o4 years, private respondent filed a complaint for recovery of possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner refused to pay the agreed annual rental of 10 cavans of palay despite repeated demands. 7. During the trial, petitioner reiterated his refusal to recognize private respondents ownership over the subject land. He averred that he continues to recognize Cosme Pido as the owner of the said land, and having been a registered tenant therein since 1960. when Pido died, he continued to pay rentals to Pidos widow. Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurencianas departure for abroad. He denied having entered into verbal lease tenancy contract w/ private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge, RA> 3844, as amended, grants him the right to redeem the same at a reasonable price. The lower court rendered a decision in favor of private respondent. 8. Aggrieved, petitioner appealed to the CA brushed aside petitioners appeal. Like the respondent court was also convinced that the declaration of Heirship and Waiver of Rights atands as prima facie proof of appellees(private respondent) ownership of the land in dispute. Issues: 1. Whether or not the subject declaration of heirship and waiver of rights is a recognized mode of acquiring ownership by private respondent over the lot in question. 2. Whether or not the said document can be considered a deeed of sale in favor of private respondent of the lot in question.

SC HELD: We find the petition impressed w/ merit. In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Right, equating the same with CONTRACT OF (DEED) SALE. They are not the same. 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. Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they fit. It is in effect an extrajudicial settlement between the heirs under rule 74 of Rules of Court. 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 the 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 of document which neither recites the elements of either a sale, or a donation, or any other derivative mode of acquiring ownership. Quite surprisingly, both the trial court and the CA concluded that a SALE transpired between Cosme Pidos heirs and private respondent and that petitioner acquired actual knowledge of said sale when he was summoned by Ministry of Agrarian Reform to discuss private respondents claim over the lot in question. This conclusion has no basis in fact and in law. The declaration of heirship and waiver of rights was excluded by the trial court in its order because the document was neither registered w/ the Registry of Deeds nor identified by the heirs of Pido. There is no showing that private respondent had the same document attached to or made part of the record. What the trial court admitted was a notice of adverse claim filed w/ Registry of Deeds which contained the Declaration of Heirship w/ the waiver of rights and was annotated at the back of the original certificate of title to the land in question. It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pidos heirs and private respondent transferring the rights of Pidos heirs to the land in favor of private respondent. Private respondents rights or interest therefore in the tenanted lot remains the adverse claim whisc cannot by itself be sufficient to cancel the OTC to the land and title the same in private respondents name.

Definition of Sale: Mariano Z. Velarde and Avelina D. Velarde vs. CA, David A. Raymundo and George Raymundo (July 11, 2001) Facts: David Raymundo (herein private respondent) is the absolute and registered owner of a parcel of land , together with the house and other improvement thereon, located at 1918 Kamias St., Dasmarias Village, Makati and covered by TCT No. 142177. Said property was under lease and was negotiated with herein petitioners for sale. On August 8, 1986, a Deed of Sale with Assumption of Mortgage was executed by defendant David Raymundo, as vendor, in favor of plaintiff Avelina Velarde, as vendee that for and in consideration of the sale vendee paid P800,000.00 to the vendor and the vendee hereby assumes to pay the mortgage obligations on the property herein sold in the amount of P1,800.000.00, in favor of Bank of Philippine Islands, in the name of the VENDOR until such time her assumption of the mortgage obligations is approved by the mortgagee bank and in the event said application is disapproved Velarde had to pay in full the P1,800,000.00. She further agrees to strictly and faithfully comply with all the terms and conditions appearing the Real Estate Mortgage otherwise her down payment of P800,000.00 plus all payments made with the Bank of the Philippine Islands on the mortgage loan, shall be forfeited in favor of Mr. David A. Raymundo, as and by way of liquidated damages and the Deed of Sale with Assumption of Mortgage shall be deemed automatically cancelled.

Pursuant to said agreements, plaintiffs paid BPI for 3 months Sept-Oct 96 but she did not make any further payment when informed on December 15, 1986 that their Application for Assumption of Mortgage with BPI, was not approved. This prompted the defendants to write to the plaintiffs informing the latter that their non-payment to the mortgage bank constitute nonperformance of their obligation. Plaintiffs responded that they are willing to pay the balance in cash not later than January 21, 1987 provided: (a) deliver actual possession of the property not later than January 15, 1987 for her immediate occupancy; (b) cause the release of title and mortgage from the Bank and (c) execute and absolute deed of sale in her favor free from any liens or encumbrances not later than January 21, 1987. On January 8, 1987 defendants sent plaintiffs a notarial notice of cancellation/rescission of the intended sale of the subject property allegedly due to the latters failure to comply with the terms and conditions of the Deed of Sale with Assumption of Mortgage. Consequently, petitioners filed on February 9, 1987 a Complaint against private respondents for specific performance, nullity of cancellation, writ of possession and damages. The case was tried and heard by then Judge Consuelo Ynares-Santiago who dismissed the Complaint. Petitioners filed a Motion for Reconsideration. Judge Santiago was promoted to CA and she was replaced by Judge Abad Santos, who granted petitioners Motion for Reconsideration and directed the parties to proceed with the sale. He instructed petitioners to pay the balance of P1.8 million to private respondents, who , in turn, were ordered to execute a deed of absolute sale and to surrender possession of the disputed property to petitioners. Private respondents appealed to the CA. The CA set aside the Order of Judge Abad Santos and reinstated then Judge Ynares-Santiagos earlier Decision dismissing petitioners Complaint. Hence this petition. Issue: Whether or not the non-payment of the mortgage obligation of the petitioner resulted in a breach of the contract of sale. Ruling: Yes, for the petitioners did not merely stop paying the mortgage obligations. They also failed to pay the balance of the purchase price. Their agreement mandated that petitioners should pay the purchase price balance of P1.8 million to private respondents in case the request to assume the mortgage would be disapproved. Thus, on December 15, 1986, when petitioners received notice of the banks disapproval of their application to assume respondents mortgage, they should have paid the balance of the P1.8 million loan. Instead of doing so, petitioners sent a letter to private respondents offering to make such payment only upon the fulfillment of her new conditions. Such conditional offer to pay cannot take the place of actual payment as would discharge the obligation of a buyer under a contract of sale. In a contract of sale, the seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer to pay therefore 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. What does the definition cover: VICENTE GOMEZ, as successor-in-interest of awardee LUISA GOMEZ, vs. CA, City of Manila acting thru the City Tenants Security Committee now the Urban Settlement Office, Register of Deeds of Manila. [G.R. NO. 120747, September 21, 2000] Nature: This is a petition for review on certiorari under Rule 45 of the Rules of Court questioning the decision 1 of the Court of Appeals in C.A. G.R. Sp. No. 32101 promulgated on 22 February 1995 which annulled and set aside the decision of the Regional Trial Court of Manila, Branch 12 in Civil Case No. 51930.

Facts: 1. Pursuant to the Land for the Landless Programs of the City of Manila and in accordance with City Ordinance No. 6880, the Office of the City Mayor issued Resolution No. 16-A, 3 Series of 1978, dated 17 May 1978, which effectively set guidelines and criteria for the award of city home lots to qualified and deserving applicants. Attached to said resolution and made as integral part thereof was a Contract to sell that further laid down terms and conditions, which the lot awardees must comply with. 2. On 30 June 1978, the City of Manila, through the City Tenants Security Committee presently known as the Urban Settlement Office, passed Resolution 17-18 5 which in effect awarded to 46 applicants, 37 home lots in the former Ampil-Gororspe estate located in Tondo, Manila. Luisa Gomez, predecessor-in-interest of herein petitioner Vicente Gomez, was awarded Lot 4, Block 1, subject to the provisions of Resolution No. 3-78 of the CTSC and building, subdivision and zoning rules and regulations. Consequently, a certificate of award dated 02 July 1978 was granted by the CTSC in favor of Luisa Gomez, who paid the purchase price of the lot in the amount of P3,556.00 on installment basis. 3. In 1979, Luisa Gomez traveled to the United States of America but returned to the Philippines in the same year. On 18 January 1980, Luisa Gomez finally paid in full the P3,556.00 purchase price of the lot. Despite the full payment, Luisa still paid in installment an amount of P8,244.00, in excess of the purchase price, which the City of Manila accepted. Additionally, the lot was declared for taxation purposes and the corresponding real estate taxes thereon paid from 19801988. In 1982, Luisa, together with her spouse Daniel, left again for the United States of America where she died on 09 January 1983. She survived by her husband and four children, namely, Ramona Takorda, Edgardo Gomez, Erlinda Pena and Rebecca Dizon. 4. Subsequently, in a memorandum dated 07 February 1984, the Urban Settlements Officer and Executive Secretary of the CTSC directed the Western Police District, City Hall Detachment, to conduct an investigation regarding reported violations of the terms and conditions of the award committed by the lot awardees. 5. On 19 December 1984, team leader Pfc. Reynaldo Cristobal rendered an investigation report addressed to the City Mayor of Manila, as Chairman of the CTSC, stating, among others, that of all the lot awardees in the said estate, Daniel Gomez was confirmed to have violated the terms and conditions of their respective awards, as the place was found actually occupied by Erlinda Perez and her family together with Mr. Mignony Lorghas and family, who are paying monthly rentals of P210.00 each to Vicente Gomez, brother of awardee. Daniel Gomez is now presently residing in the US and only returns for vacation once in awhile as a balikbayan. 6. Thus, on 1 July 1986, the CTSC, headed by then City Mayor Gemiliano Lopez Jr. as Chairman, issued Resolution No. 015-86, adopting the findings of the investigation report submitted by Pfc. Cristobal, and ordering the cancellation of the lot awards of Daniel Gomez, and other awardees who were found to have committed violations, and further declaring the forfeiture of payments made by said awardees as reasonable compensation for the use of the home lots. 7. Petitioner Vicente Gomez, acting as attorney-in-fact of his brother Daniel Gomez asked for reconsideration of the CTSC resolution revoking the award of the lot. Three memoranda were later filed in the CTSC praying the Resolution 15-86 be set aside and that the award of the lot be restored to Luisa Gomez, or her heirs or successor-in-interest, preferably Vicente Gomez. 8. On 5 February 1990, herein petitioner filed before the RTC of Manila, a petition for certiorari and prohibition. The lower court granted this. On appeal, the CA reversed the lower courts decision prompting petitioner to file a motion for reconsideration, which the appellate court denied via its assailed resolution dated 29 June 1995. Hence, the instant appeal where the court of controversy revolves around the propriety of CTSCs act of canceling the lot award, through Resolution # 015-86, and further declaring the forfeiture of amounts paid by the awardee, as reasonable compensation for the use of the home lot. Held: The petition is unmeritorious. The cancellation of the award covering Lot 4, Block 1, by the City of Manila, acting thru the CTSC, was properly exercised within the bounds of law and contractual stipulation between the parties. The cancellation of the award covering, through expediency of Resolution 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

In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract of sell, by agreement, the ownership is reserved in the vendor and is not pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of purchase price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from being effective. A contract of sale may either be absolute or conditional. One form of conditional sale is what is now popularly termed as a Contract to Sell where ownership or title is retained until the fulfillment of positive suspensive condition normally the payment of the purchase price in the manner agreed upon. The contracting parties are accorded the liberality and freedom to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided the same are not contrary to law, morals, good customs, public order or public policy. Under the present circumstances, we see no hindrance that prohibits the parties from stipulating other lawful conditions, aside from full payment of the purchase price, which they pledge to bind themselves and upon which transfer of ownership depends. In the instant case, we uphold the Contract to sell which explicitly provides for additional terms and conditions upon which the lot awardees are bounded. As to the matter of acceptance, the same may be evidenced by some acts, Verily, Resolution 16-A and the contract to sell which was annexed, attached and made to form part of said resolution, clearly laid down the terms and conditions which the awardee-vendee must comply with. Accordingly, as an awardee, Luisa Gomez, her heirs and successors-in-interest alike, are duty-bound to perform the correlative obligations embodied in Resolution 16-A and the Contract to Sell. Stages in the life of a contract of sale: G.R. No. 137290, July 31, 2000 SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner vs. SPOUSES ALFREDO HUANG AND GRACE HUANG, respondents. Nature: This is a petition for review of the decision dated April 8, 1997 of the Court of Appeals which reversed the decision of the Regional Trial Court, Branch 153, Pasig City dismissing the complaint brought by respondents against petitioner for enforcement of a contract of sale. Facts: 1. Part of Petitioner San Miguel Properties Philippines, Inc.s inventory are two parcels of land totaling 1,738 square meters at the corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig city. On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counter-offer. 2. On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the Purchase of the Properties, viz: This is to express our interest to buy your above-mentioned property with an area of 1,738 sq. meters. For this purpose, we are enclosing herewith the sum of P1,000,000.00 representing earnest deposit money subject to the following conditions: 1. We will be given the exclusive option to purchase the property within the 30 days from the date of your acceptance of this offer. 2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the necessary Management and Board approvals; and we initiate the documentation if there is mutual agreement between us. 3. In the event that we do not come to an agreement on this transaction, the said amount of P1,000,000.00 shall be refundable to us in full upon demand. 3. Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted

the earnest deposit of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the FOR SALE sign from the properties. 4. Atty. Dauz and Sobrecarey then commenced negotiatons. During their meeting on April 8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of six months within which to pay. On April 4, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had not yet acted on her counter offer. This prompted Atty. Dauz to propose a four-month period of amortization. On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within which to exercise her option to purchase the property. Her request was granted. 5. On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount of P1 million given as earnest-deposit. On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the executing within 5 days of a Deed of Sale covering the properties. Respondents attempted to return the earnest deposit but petitioner refused on the ground that respondents option to purchase had already expired. 6. On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the Regional Trial Court, Brach 133, Pasig City. The trial court granted petitioners motion and dismissed the action. Respondents filed a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals, which on April 8, 1997, rendered a decision reversing the judgment of the trial court. Petitioner moved for reconsideration of the trial courts decision, but its motion was denied. Hence, this petition. SC HELD: The petition is MERITORIOUS. Respondents did not give the P1 million as earnest money as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an earnest deposit. In the present case, the P1 million earnest deposit could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable. Equally compelling as proof of the absence of a perfect sale is the second condition that, during the option period, the parties would negotiate the terms and conditions of the purchase. The stages of a contact of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. In the present case, the parties never got past the negotiation stage. The allege 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. 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. Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This issue, therefore, needs no further discussion. WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents complaint is DISMISSED. Brokers: MEDRANO vs. CA (February 18, 2005) Nature: This is a petition for review of the Decision of the Court of Appeals (CA) affirming in toto the Decision of the Regional Trial Court (RTC) of Makati City, Branch 135, in Civil Case No. 15664 which awarded to the respondents their 5% brokers commission. Facts: 1. Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank a bank owned by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset of the bank, a 17-hectare mango plantation priced at P2,200,000.00, located in Ibaan, Batangas. 2. Mr. Dominador Lee, a businessman from Kati City, was a client of respondent Mrs. Pacita G. Boran, a licensed real estate broker. The two met through a previous transaction where Lee responded to an ad in a newspaper put up by Borboan for an 8-hectare property in Lubo, Batangas, planted with atis trees. Lee expressed that he preferred a land with mango trees instead. Borbon promised to get back to him as soon as she would be able to find a property according to his specifications. 3. Borbon relayed to her 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 Mediano and to give them a written authority to negotiate the sale of the property. Thus, on September 3, 1986, Medrano issued the Letter of Authority. 4. Two days after an ocular inspection was said to be conducted, respondent Josefina Antonio called Lee to inquire about the result of his ocular inspection. Lee told her that the mango trees looked sick so he was bringing an agriculturist to the property. Three weeks thereafter, Antonio called Lee again to make a follow up of the latters visit to Ibaan. Lee informed her that he already purchased the property and had made a down payment of P1,000,000.00. . The remaining balance of P1,200,000.00 was to be paid upon the approval of the incorporation papers of the corporation he was organizing by the Securities and Exchange Commision. According to Antonio, Lee asked her if they had already received their commission. She answered no and Lee expressed surprise over this. 5. A Deed of Sales was eventually executed on November 6, 1986 between the bank, and KGB Farms, Inc., for the purchase price of P1,200,000.00. Since the sale of 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 respondents were constrained to file an action against herein petitioners. 6. The trial court rendered a Decision in favor of the respondents. 7. On May 3, 2001, the CA promulgated the assailed decision affirming the finding of the trial court that the letter of authority was valid and binding. Applying the principle of agency, the appellate court ruled that Bienvenido Medrano constituted the respondents as his agents, granting them authority to represent and act on behalf of the former in the sale of the 17hectare mango plantation. The CA also ruled that the trial court did not err in finding that the respondents were the procuring cause of the sale. Suffice it to state that were it not for the respondents, Lee would not have known that there was a mango orchard offered for sale. Undaunted by the CAs unfavorable decision, the petitioners filed the instant petition.

SC HELD: The petition is DENIED. The records disclose that respondent Pacita Borbon is a licensed real estate broker and respondents Josefina Antonio and Esta A. Flor are her associates. A BROKER is generally defined as one who is engage, for others, on a commission, negotiating contracts, relative to relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purposes the agent of both parties. A BROKER is one whose occupation is to bring parties together, in matters of trade, commerce or navigation. For the respondents participation in finding a buyer for the petitioners property, the petitioners refuse to pay them commission, asserting that they are not the efficient procuring cause of the sale, and that the letter of authority signed by petitioner Medrano is not binding against the petitioners. Procuring cause is meant to be the proximate cause. The term procuring cause, in describing a brokers activity, refers to a cause originating 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 owners terms. A broker will be regarded as the procuring cause of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun. Indeed, 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 nonexclusive, no evidence was adduced to show that there were other persons, aside from the respondents, who informed Lee about the property for sale. Ganzon testified that no advertisement was made announcing the sale of the lot, nor did she give any authority to other brokers/agents to sell the subject property. It can thus be readily inferred that the respondents were the only ones who knew about the property for sale and were responsible in leading a buyer to its consummation. All these circumstances lead us to the inescapable conclusion that the respondents were the procuring cause of the sale. When there is a close, proximate and causal connection between the brokers efforts and the principals sale of his property, the broker is entitled to a commission. Essential Characteristics: G.R. No. 107207 (November 23, 1995) VIRGILIO R. ROMERO, petitioner, vs. HON. COURT OF APPEALS and ENRIQUE CHUA VDA. DE ONGSIONG, respondents May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period? Facts: 1. Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture and exportation of perlite filer aids, permalite insulation and process perlite ore. In 1988, petitioner and his foreing partners decidd to put up a central warehouse in Metro Manila on a land area of approximately 2,000 square meters. The project was made known to several freelance real estate brokers. 2. A day or so after the announcement, Alfonso Flores and his accompanied by a broker, offered a parcel of land measuring 1,952 square meters covered by TCT No. 361402 in the name of private respondent Enriqueta Chua Vda. De Ongsion. Petitioner visited the property and, except for the presence of squatters in the area, he found the place suitable for a central warehouse. 3. Later, the Flores spouses 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 P800.00 per square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract, denominated Deed of Conditional Sale was executed between petitioner and private respondent. 4. Pursuant to this agreement, private respondent filed a complaint for ejectment (Civil Case No. 7579) against Melchor Musa and other squatter families with the Metropolitan Trial Court of

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Paraaque. A few months later, or on 21 February 1989, judgment was rendered ordering the defendants to vacate the premises. 5. In a letter dated 07 April 1989, private respondent sought to return the P50,000.00 she received from the petitioner since, she said, she could not get rid of the squatters on the lot. Atty. Sergio A. F. Apostol, counsel for the petitioner, in his reply of 17 April 1989, refused the tender. Meanwhile, the President Commission for the Urban Pool (PCUD asked the Metropolitan Trial Court of Paraaque for a grace period of 45 days within which to relocate and transfer the squatter families. Acting favorable on the request, the court suspended the enforcement of the writ of execution accordingly. 6. Atty. Joaquin Yuseco, Jr., counsel for private respondent advised Atty. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his clients failure to evict the squatters form the premises within the agreed 60-day period. He added that private respondent had decided to retain the property. On 23 June 1989, Atty. Apostol wrote back, claiming the perfection of the contract of sale. 7. Private respondent, prompted by petitioners continued refusal to accept the return of the P50,000 advance payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for a rescission of the deed of conditional sale, plus damages, and for the consignation of P50,000.00 cash. The Regional Trial Court of Makati rendered decision holding that private respondent had no right to rescind the contract sine it was she who violated her obligation to eject the squatters from the subject property. Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate court rendered its decision. It opined that the contract entered into by the parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the object of the contract; that private respondent substantially compiled with her obligation to evict the squatters; that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract, and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the squatters within the 60-day period was not a penal clause. SC HELD: A perfected contract of sale may either be absolute or conditional depending on whether the agreement is devoid of, or subject to, any condition imposed on the passing of title of the thing to be conveyed or on the obligation of party thereto. When ownership is retained until the fulfillment of a positive condition the breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force. If the condition is imposed on an obligation of a party which is not complied with, the other party may either refuse to proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon the perfection of the contract itself, the failure of such condition would prevent the juridical relation itself from coming into existence. It would be futile to challenge the agreement here in question as not being duly perfected contract. A sale is at once perfected where 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. The object of the sale, in case before us, was specifically identified to be as 1,952-square meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title No. 361402 of the Registry of Deeds for Pasig and therein technically described. The purchase price was fixed at P1,561,600.00, of which P50,000.00 was to be paid upon the payable 45 days after the removal of all squatters from the above described property. From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all 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 respondents 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. In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the oblige to choose between proceeding with the agreement or waiving the performance of the condition. It is this provision which is the pertinent rule in the

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case at bench. Here, evidently, petitioner has waived the performance of the condition imposed on private respondent to free the property from squatters. In an case, private respondents action for rescission is not warranted. She is not the injured party. WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED and SET ASIDE, and another is entered ordering petitioner to pay private respondent the balance of the purchase price and the latter to execute the deed of absolute sale in favor of petitioner. Title vs. substance; nominate contract SPS. SANTOS vs. CA, SPS. CASEDA (August 1, 2000) Facts: Spouses Santos owned the house and lot consisting of 350 square meters located at Lot 7, Block 8, Better Living Subdivision, Paraaque, Metro Manila. The land together with the house, was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16, 1987. Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in Pasay City and soon became very good friends with her. On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84 in unpaid interest and other charges. Since the Santos couple had no funds, Rosalinda offered to sell the house and lot to Carmen. After inspecting the real property, Carmen and her husband agreed. The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay: (1) the balance of the mortgage loan with the Rural bank; (2) the real estate taxes; (3) the electric and water bills; and (4) the balance of the cash price to be paid not later than June 16, 1987, which was the maturity date of the loan. The Casedas gave an initial payment of P54,100.00 and immediately took possession of the property, which they then leased out. They also paid in installments, P81,696.84 of the mortgage loan. The Casedas, however, failed to pay the remaining balance of the loan because they suffered bankruptcy in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes on the property for 1981-1984. She also settled the electric bills from December 12, 1988 to July 12, 1989. All these payments were made in the name of Rosalinda Santos. In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the remaining installments and/or amortization of the loan, repossessed the property. The Santoses then collected the rentals from the tenants. In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached petitioners and offered to pay the balance of the purchase price for the house and lot. The parties, however, could not agree, and the deal could not push through because the Santoses wanted a higher price. On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati, to have the Santoses execute the final deed of conveyance over the property, or in default thereof, to reimburse the amount of P180,000.00 paid in cash and P249,900.00 paid to the rural bank, plus interest, as well as rentals for eight months amounting to P32,000.00, plus damages and costs of suit. The lower court dismissed the Casedas complaint since plaintiffs were short of the purchase price and cannot, therefore, demand specific performance. The trial court further held that the Casedas were not entitled to reimbursement of payments already made because of failure of plaintiffs to liquidate the mortgage loan on time, which had ballooned from its original figure. Logically, plaintiffs must share in the burden arising from their failure to liquidate the loan per their contractual commitment. On appeal, the appellate court reversed the lower court. The appellate court held that rescission was not justified under the circumstances and allowed the Caseda spouses a period of ninety days within which to pay the balance of the agreed purchase price. Issue: Whether the subject transaction is not a contract of absolute sale but a mere oral contract to sell in which case judicial demand for rescission (art. 1592, 7 civil code) is not applicable Ruling: It must be emphasized from the outset that a contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. Article 1458 of the Civil Code defines a contract of sale. Note that the said article expressly obliges the vendor to transfer the ownership of the thing sold as an essential element of a contract of sale. The Court is far from persuaded that there was a transfer of ownership simultaneously with the delivery of the property purportedly sold. The records clearly show that,

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notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005 (S-11029) issued by the Register of Deeds of Paraaque, has remained always in the name of Rosalinda Santos. 17 Note further that although the parties agreed that the Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos. The foregoing circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to the Casedas . Absent this essential element, their agreement cannot be deemed a contract of sale . The Court agrees with petitioner's averment that the agreement between Rosalinda Santos and Carmen Caseda is a contract to sell . In contracts to sell, ownership is reserved the by the vendor and is not to pass until full payment of the purchase price. This is fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require notarial and other formalities of law before transfer thereof could be validly effected. It follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. As earlier pointed, in a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full . Thus, in contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force . This is entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and not rescinding it. As petitioners correctly point out the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property.23 Neither provision is applicable in the present case. The instant petition is GRANTED and the assailed decision of the Court of Appeals in CAG.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional Trial Court of Makati, Branch 133, with respect to the DISMISSAL of the complaint in Civil Case No. 89-4759, is hereby REINSTATED. Essential Characteristics: CAVITE DEVELOPMENT BANK vs. LIM & CA (February 1, 2000) Facts: June 15, 1983 Rodolfo Guansing obtained a loan in the amount of 90,000.00 from Cavite Devt Bank (CDB), to secure which, he mortgaged a parcel of land situated at No. 63 Calavite St., La Loma, QC registered in his name. As Guansing defaulted in the payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15, 1984 , the mortgage d property was sold to CBD, as the highest bidder. June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios Gatpadan, offered to purchase the property from CBD. Lim paid CBD 30,000.00 as Option Money. Lim discovered that the subject property was originally registered in the name of Perfecto Guansing and was fraudulently acquired by Rodolfo. Aggrieved by what she considered a serious misrepresentation by CBD and its mothercompany, FEBTC, on their ability to sell the subject property, Lim joined by her husband, filed on August 29, 1989 an action for specific performance and damages against petitioners. March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that: (1) there was a perfected contract of sale between Lim and CBD, contrary to the latters

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contention that the written offer to purchase and the payment of 30,000.00 were merely preconditions to the sale and still subject to the approval of FEBTC; (2) performance by CBD of tis obligation under the perfected contract of sale had become impossible on account of the 1984 decision in Civil Case no. Q-39732 canceling the title in the name of mortgagor Rodolfo Guansing; (3) CBD and FEBTC were not exempt from liability despite the impossibility of performance, because they could not credibly disclaim knowledge of the cancellation of Rodolfo Guansings title without admitting their failure to discharge their duties to the public as reputable banking institutions; and (4) CBD and FEBTC are liable for damages for the prejudice caused against the Lims. Petitioners brought the matter to the CA, which, on October 14, 1997 affirmed in toto the decision of the RTC. Issue: WON the sale by CBD to Lim is valid? Ruling: Art. 2085 of the CC, in providing for the essential requisites of the contract of mortgage and pledge, requires, among other things, that the mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default in the payment of the loan. There is, however, a stipulation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of mortgage in good faith based on the rule that all persons dealing with property covered by a Torrens Certificated of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. In the present case, it is clear that the sellers no longer had nay title to the parcels of land at the time of sale. Since Exh. D, the alleged contract of repurchase, was dependent on the validity of Exh. C, it is itself void. A void contract cannot give rise to a valid one. Verily, Art. 1422 of the CC provides that (a) contract which is the direct result of a previous illegal contract is also a void and inexistent contract. Given the CBDs acceptance of Lims offer to purchase, it appears that a contract of sale was perfected and indeed partially executed because of the partial payment of the purchase price. There is however, a serious legal obstacle to such sale, rendering it impossible for CBD to perform its obligation as seller to deliver and transfer ownership of the property. Nemo dat quod non habet , as an ancient Latin maxim says: One cannot give what one does not have. A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. It is, therefore, not required that, at the perfection stage, the seller be the owner of the thing sold or even the such subject matter of the sale exist at that point in time. Thus, Art. 1434 of the CC, when a person sales or alienates a thing which, at the time, was not his, but later acquires title thereto, such title passes by operation of law to the buyer or grantee. This is the same principle behind the sale of future goods under Art. 1462 of the CC. However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his obligation to transfer ownership to the buyer. It is at the consummation stage where the principle of Nemo dat quod non habet applies. It is standard practice for banks, before approving a loan, to send representative to the premises of the land offered as collateral and to investigate who are the real owners thereof, noting the banks are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands, for their business is affected with public interest. Petitioners are guilty of fraud, because on June 16, 1988, when Lim was asked by CBD to pay the 10% option money, CBD already knew that it was no longer the owner of the same property, its title having been cancelled. Essential Characteristics BALATBAT vs. CA, SPS. REPUYAN (August 28, 1996) Facts: On June 15, 1977, Aurelio A. Roque filed a complaint for partition docketed against Corazon Roque, Alberto de los Santos, Feliciano Roque, Severa Roque and Osmundo Roque before the then Court of First Instance of Manila. The trial court rendered a decision in favor of

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plaintiff Aurelio A. Roque, of which he was entitled to one-half share pro-indiviso thereof. With respect to the one-half share pro-indiviso now forming the estate of Maria Mesina (Roques wife), plaintiff and the four children, the defendants here, are each entitled to one-fifth (1/5) share pro-indiviso. On April 1, 1980, Aurelio A. Rogue sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan and Jose Repuyan as evidenced by ."Deed of Absolute Sale." On July 21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim on the Transfer Certificate of Title No. 135671. On August 20, 1980, Aurelio A. Roque filed a complaint for "Rescission of Contract" docketed as Civil Case No. 134131 against spouses Aurora Tuazon-Repuyan and Jose Repuyan before Branch IV of the then Court of First Instance of Manila. The complaint is grounded on spouses Repuyan's failure to pay the balance of P45,000.00 of the purchase price. On September 5, 1980, spouses Repuyan filed their answer with counterclaim. In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case) dated February 2, 1982 of which a deed of absolute sale was executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat. On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No. 134131 which was granted as per court's resolution of October 21, 1982. However, Clara Balatbat failed to file her complaint in intervention. On April 15, 1986, the trial court rendered a decision dismissing the complaint for lack of merit, and declaring the Deed of Absolute Sale dated April 1, 1980 as valid and enforceable. On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the instant complaint for delivery of the owners duplicate copy of T.C.T. No. 135671 docketed as Civil Case No. 88-47176 before Branch 24 of the Regional Trial Court of Manila against private respondents Jose Repuyan and Aurora Repuyan. On August 2, 1990, the Regional Trial Court of Manila, Branch 24, rendered a decision dismissing the complaint. Dissatisfied, petitioner Balatbat filed an appeal before the respondent Court of Appeals which affirmed the ruling of the lower court. Issues: Whether or not the alleged sale to the private respondents was merely executory and not a consummated transaction? Whether or not there was a double sale as contemplated under art. 1544 of the Civil Code? Whether or not petitioner was a buyer in good faith and for value? Whether or not the court of appeals erred in giving weight and consideration to the evidence of the private respondents which were not offered? Ruling: The Court finds the sale as consummated, hence, valid and enforceable. In a decision dated April 15, 1986 of the Regional Trial Court of Manila Branch IV in Civil Case No. 134131, the Court dismissed vendor's Aurelio Roque complaint for rescission of the deed of sale and declared that the Sale dated April 1, 1980, as valid and enforceable. No appeal having been made, the decision became final and executory. It must be noted that herein petitioner Balatbat filed a motion for intervention in that case but did not file her complaint in intervention. In that case wherein Aurelio Roque sought to rescind the April 1, 1980 deed of sale in favor of the private respondents for non-payment of the P45,000.00 balance, the trial court dismissed the complaint for rescission. The P45,000.00 balance is payable only "after the property covered by T.C.T. No. 135671 has been partitioned and subdivided, and title issued in the name of the BUYER" hence, vendor Roque cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of private respondents. Devoid of any stipulation that "ownership in the thing shall not pass to the purchaser until he has fully paid the price", ownership in thing shall pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price has not yet been fully paid. The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract. With respect to the non-delivery of the possession of the subject property to the private respondent, suffice it to say that ownership of the thing sold is acquired only from the time of delivery thereof, either actual or constructive . 28 Article 1498 of the Civil Code provides that 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

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deed the contrary does not appear or cannot be inferred. The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. 30 In the instant case, vendor Roque delivered the owner's certificate of title to herein private respondent. It is not necessary that vendee be physically present at every square inch of the land bought by him, possession of the public instrument of the land is sufficient to accord him the rights of ownership. A contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract; and failure of the vendee to pay the price after the execution of the contract does not make the sale null and void for lack of consideration but results at most in default on the part of the vendee, for which the vendor may exercise his legal remedies. Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. In the case at bar, 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 children (4/10) on February 4, 1982. Undoubtedly, this is a case of double sale contemplated under Article 1544 of the New Civil Code. This is an instance of a double sale of an immovable property hence, the ownership shall vests in the person acquiring it who in good faith first recorded it in the Registry of Property. Evidently, private respondents Repuyan's caused the annotation of an adverse claim on the title of the subject property denominated as Entry No. 5627/T-135671 on July 21, 1980. 35 The annotation of the adverse claim on TCT No. 135671 in the Registry of Property is sufficient compliance as mandated by law and serves notice to the whole world. Evidently, petitioner cannot be considered as a buyer in good faith . If petitioner did investigate before buying the land on February 4, 1982, she should have known that there was a pending case and an annotation of adverse claim was made in the title of the property before the Register of Deeds and she could have discovered that the subject property was already sold to the private respondents. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs. Petition for review is hereby DISMISSED for lack of merit. Essential Characteristics: CORONEL vs CA (263 S 15 October 7, 1996) Facts: This case has its roots in a complaint for specific performance to compel herein petitioners to consummate the sale of a parcel of land with its improvements located along Roosevelt Ave., QC entered in to by the parties sometime in January 1985 for the price of P1,240,000.00. On January 19, 1985, Coronel, et. al executed a document entitled Receipt of Down Payment in favor of plaintiff Ramona Patricia Alcaraz after plaintiff-appellee Concepcion Alcaraz, mother of Ramona, paid the down payment of P50,000.00. However, on February 18, 1985, the Coronels sold the property to intervenor-appellant Catalina Mabanag for P1,580,000.00 after the latter has paid P300,000.00. For this reason, Coronels cancelled and rescinded the contract with Ramona by depositing the down payment paid in the bank in trust for Ramona. On February 22, 1985, Concepcion, et.al filed a complaint for specific performance against the Coronels. RTC-QC rendered judgment favorable to Concepcion and ordered the cancellation of sale to Mabanag. Concepcions Motion for Reconsideration was denied; hence an appeal was made to Ca which affirmed RTCs decision. Hence, this petition where Concepcion contended that the Receipt of Down Payment embodied a perfected contract of sale, while Coronels insisted that what the document

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signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona, who left for the USA, said contract could not possibly ripen into a contract of absolute sale. Issue: WON the Receipt of Down Payment was a binding contract of sale? (contract of sale vs. contract to sell; contract to sell and conditional contract of sale) Ruling: The document entitled Receipt of Down Payment which was offered in evidence by both the parties embodied the binding contract between Ramona and the Coronels, pertaining to a particular house and lot. Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or render some service. Art. 1458. by the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. 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 or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent. Contract to sell may not be considered as a Contract of Sale because the first essential element is lacking. In Contract to Sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. A Contract to Sell may thus be defined as a bilateral contract whereby the prospective seller while expressly reserving the ownership of the subject property despite deliver thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is full payment of the purchase price. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey the title to the prospective buyer by entering into a contract of absolute sale. In conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have nay title to transfer to any third person. Applying Art. 1544 of the CC, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or atleast was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case the title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. When the Receipt of Down Payment is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the Transfer Certificate of Title (TCT) was still in the name of petitioners father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. The agreement could not have been a contract to sell because the seller herein made no express reservation of ownership or title to the subject parcel of land. What is clearly established by the plain language of the subject document is that when the said Receipt of Down Payment was prepared and signed by petitioners Romeo Coronel, et. al, the parties had agreed to a conditional contract of sale, consummation of which is subject

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only to the successful transfer of the certificate of title from the name of petitioners father, Constancio Coronel, to their names. Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners name was fulfilled on February 6,19854, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona Alcaraz, the buyer, and to immediately execute the Deed of Absolute Sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. JUDGMENT AFFIRMED. Consensual Contract LAFORTEZA vs. MACHUCA (June 16, 2000) Facts: The property involved consists of a house and lot located at No. 7757 Sherwood Street, Marcelo Green Village, Paraaque, Metro Manila and registered in the name of the late Francisco Q. Laforteza, although it is conjugal in nature. On August 2, 1988, defendant Lea ZuluetaLaforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Francisco Q. Laforteza. Likewise on the same day, defendant Michael Z. Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr., likewise, granting the same authority. Both agency instruments contained a provision that in any document or paper to exercise authority granted, the signature of both attorneys-in-fact must be affixed. On October 27, 1988, defendant Dennis Z. Laforteza executed a Special Power of Attorney in favor of defendant Roberto Z. Laforteza for the purpose of selling the subject property. A year later, on October 30, 1989, Dennis Z. Laforteza executed another Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr. naming both attorneys-infact for the purpose of selling the subject property and signing any document for the settlement of the estate of the late Francisco Q. Laforteza. The subsequent agency instrument contained similar provisions that both attorneys-in-fact should sign any document or paper executed in the exercise of their authority. In the exercise of the above authority, on January 20, 1989, the heirs of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff over the subject property for the sum of P630,000.00. P30,000.00 as earnest money, to be forfeited in favor of the defendants if the sale is not effected due to the fault of the plaintiff and P600,000.00 upon issuance of the new certificate of title. Significantly, the fourth paragraph of the Memorandum of Agreement contained a provision as follows:xxx. Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified in writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale. On January 20, 1989, plaintiff paid the earnest money plus rentals on the said property. Plaintiff requested an extension of 30 days deadline up to November 15, 1989 within which to produce the balance of P600,000.00. Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiffs letter request. The extension, however, does not appear to have been approved by Gonzalo Z. Laforteza, the second attorney-in-fact as his conformity does not appear to have been secured. On November 15, 1989, plaintiff informed the defendant heirs that he already had the balance but the defendants, refused to accept it. On November 20, 1998, defendants informed the plaintiff that they were canceling the Memorandum of Agreement (Contract to Sell) in view of the plaintiffs failure to comply with his contractual obligations. Thereafter, plaintiff filed the instant action for specific performance. The lower court rendered judgment on July 6, 1994 in favor of the plaintiff. Petitioners appealed to the Court of Appeals, which affirmed with modification the decision of the lower court. Issue: Whether the trial and appellate courts correctly construed the memorandum of agreement as imposing reciprocal obligations

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Ruling: The appeal is bereft of merit. A perusal of the Memorandum Agreement shows that the transaction between the petitioners and the respondent was one of sale and lease. 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. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of 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 in 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 and lot and the respondent to pay the price amounting to six hundred thousand pesos. 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. Prior to the issuance of the "reconstituted" title, the respondent was already placed in possession of the house and lot as lessee thereof for six months at a monthly rate of P3,500.00. The six-month period during which the respondent would be in possession of the property as lessee, was clearly not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. An option must be supported by consideration. In the present case, the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale. The fact that after the expiration of the six-month period, the respondent would retain possession of the house and lot without need of paying rentals for the use therefor, clearly indicated that the parties contemplated that ownership over the property would already be transferred by that time. 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. In the case at bar, there was already a perfected contract. The condition was imposed only on the performance of the obligations contained therein. Considering however that the title was eventually "reconstituted" and that the petitioners admit their ability to execute the extrajudicial settlement of their fathers estate, the respondent had a right to demand fulfillment of the petitioners obligation to deliver and transfer ownership of the house and lot. What further militates against petitioners argument that they did not enter into a contract of sale is the fact that the respondent paid thirty thousand pesos (P30,000.00) as earnest money. Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain. 1[17] 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. The Court does not subscribe to the petitioners view that the Memorandum Agreement was a contract to sell. There is nothing contained in the Memorandum Agreement from which it can reasonably be deduced that the parties intended to enter into a contract to sell Although the memorandum agreement was also denominated as a "Contract to Sell", we hold that the parties contemplated a contract of sale. A deed of sale is absolute in nature although denominated a conditional sale in the absence of a stipulation reserving title in the petitioners until full payment of the purchase price. ] In such cases, ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. The mere fact that the obligation of the respondent to pay the balance of the purchase price was made subject to the condition that the petitioners first deliver the reconstituted title of the house and lot does not make the contract a contract to sell for such condition is not inconsistent with a contract of sale.

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As to whether the failure of the respondent to pay the balance of the purchase price within the period allowed is fatal to his right to enforce the agreement, the court rules in the negative. Admittedly, 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. The extension of thirty (30) days allegedly granted was correctly found by the Court of Appeals to be ineffective inasmuch as the signature of Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers of Attorney. However, the evidence reveals that after the expiration of the six-month period provided for in the contract, the petitioners were not ready to comply with what was incumbent upon them. It was only on September 18, 1989 or nearly eight months after the execution of the Memorandum of Agreement when the petitioners informed the respondent that they already had a copy of the reconstituted title and demanded the payment of the balance of the purchase price. The respondent could not therefore be considered in delay for in reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what was incumbent upon him. Even assuming for the sake of argument that the petitioners were ready to comply with their obligation, we find that rescission of the contract will still not prosper. It is not disputed that the petitioners did not make a judicial or notarial demand for rescission. Besides, the Memorandum Agreement between the parties did not contain a clause expressly authorizing the automatic cancellation of the contract without court intervention in the event that the terms thereof were violated. A seller cannot unilaterally and extrajudicially rescind a contract of sale where there is no express stipulation authorizing him to extrajudicially rescind. At any rate, considering that the six-month period was merely an approximation of the time it would take to reconstitute the lost title and was not a condition imposed on the perfection of the contract and considering further that the delay in payment was only thirty days which was caused by the respondents justified but mistaken belief that an extension to pay was granted to him, we agree with the Court of Appeals that the delay of one month in payment was a mere casual breach that would not entitle the respondents to rescind the contract. Rescission of a contract will not be permitted for a slight or casual breach, but only such substantial and fundamental breach as would defeat the very object of the parties in making the agreement.. The Court of Appeals correctly found the petitioners guilty of bad faith and awarded moral damages to the respondent. Decision of the Court of Appeals in CA G.R. CV No. 47457 is AFFIRMED and the instant petition is hereby DENIED. Commutative and Onerous GAITE vs FONACIER (2 S 831 July 31, 1961)) Facts: Defendant-appellant Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims, known as the Dawahan Group. By a deed of assignment dated September 29, 1954, Fonacier constituted and appointed plaintiff-appellee Fernando Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for ht exploitation and development of the mining claims. On march 19, 1954m Gaite in turn executed a general assignment conveying the development and exploitation of said mining claims into the Larap Iron Mines, a single proprietorship owned solely by and belonging to him. Thereafter, Gaite embarked upon the development and exploitation of the mining claims and in time extracted therefrom what he claimed and estimated to be approximately 24,000 metric tones of iron ore. For some reason or another, Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop the mining claims assented subject to certain conditions. As a result, a document entitled Revocation of Power of Attorney and Contract was executed on December 8, 1954, wherein Gaite transferred to Fonacier all his rights and interest in the mining claims for some considerations. In the same document, Gaite transferred to Fonacier all his rights and interest over the 24,000 tons of iron ore, more or less, that the former had already extracted from the mineral claims, in consideration of the sum of P75,000.00, P10,000.00 of which was paid upon signing of the agreement. The balance of 65,000.00 will be paid from and out fo the first letter of the credit covering the first shipment of ireon ore made by the Larap Mines Smelting Co, Inc., its assigns, administrators, or successors-in-interest. To secure payment, Fonacier delivered a surety bond on December 8, 1954 with himself as and the stockholders of the firem as sureties. However, Gaite refused to sign the Revocation of Power of Attorney and Contract unless another bond underwritten by a bonding company

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was put up by the defendant to secure the payment of the 65,000.00 balance. Hence, a second bond was executed with the Far Eastern Surety & Insurance Co. as additional surety. However, it provides that the surety company would only be liable if there has been an actual sale of iron ore by the mining firm for an amount of not less than 65,000.00 and that the liability of the said surety company would automaticaaly expire on December 8, 1955. Up to December 8, 1955, no sale of the approximately 24,000 tons of iron ore has been made nor had the 65,000.00 blance of the price had been paid to Gaite by Fonacier. Also, the bond with respect to Far Eastern Surety & Insurance Co. expired. When Fonacier and his sureties failed to pay as demandable by Gaite, the latter filed the present complaint against them in the CFI-Manila for the payment of the balance of the ore, consequential damages and attorneys fees. The defendants set-up the defense that the obligation sued upon by Gaite was subject to a condition that the amount of 65,000.00 would be payable out of the first letter of credit covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron ore; that up to the time of the filing of the complaint, no sale of the iron ore had been made, hence the condition has not yet been fulfilled, and that consequently the obligation was not yet due and demandable. Issues: a) WON the obligation to pay the balance is one with a suspensive condition or with a suspensive term? b) WON the contract of sale is commutative and onerous? Ruling: 1. The rules of interpretation would incline the scales in favor of the greater reciprocity of interests, since sale is essentially onerous. Art. 1387 (1) of the CC which provides that if the contract is onerous, the doubt shall be settled in favor of the greater reciprocity of interest. The stipulation of the payment of balance of the purchase price must be deemed to cover a suspensive term rather than a condition, since there can be no question that greater reciprocity obtains if the buyers obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, than if such obligation were viewed as nonexisting or not binding until the ore was sold. 2. Contract of sale is normally commutative and onerous not only does on of the parties assume 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. It recognized that although it is 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 sale of hope or expectancy), it is not in the usual course of business to do so, hence, the contingent character of the obligation must clearly appear. Obligations in a contract of sale can be subordinated to a suspensive condition with a party fully aware that he assumes the risk of receiving nothing for what he gives. Although such stipulation would seem to be contrary to the commutative nature of a contract of sale. This confirms of a contract of sale, the test for compliance therewith is not objective but rather subjective so long as the party believes in all honestly that he is receiving equal value for what he gave up for, then it complies with the commutative character of a sale, and would not be deemed a donation nor an aleatory contract. Reciprocal AGRO CONGLOMERATES, INC. vs. CA & REGENT SAVINGS & LOAN BANK, INC. (December 18, 2000) Facts: The conflict among the parties started from a contract of sale of a farmland between petitioners and Wonderland Food Industries, Inc. On July 17. 1982, petitioner Agro Conglomerates, Inc, as vendor sold two (2) parcels of land to Wonderland Food Industries, Inc. In their Memorandum of Agreement (MOA), the parties convenanted that the purchase price of P5,0000.00 would be settled by the venee, under the following conditions:

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1. P1,000.00 shall be paid in cash upon the signing of the agreement; 2. P2,000.00 worth of common shares of stock of the Wonderland Food Industries, Inc. and 3. The balance of P2,000.00 shall be paid in four equal monthly installment falling due, 180 days after the signing of the agreement and every 6 months thereafter, with an interest rate of 18% per annum, to be advanced by the vendee upon signing of the agreement. On July 19, 1982, the vendor, the vendee and the respondent Regent Savings & Loan Bank (formerly Summa Savings & Loan Association), executed an Addendum to the previous MOA. The new arrangement pertained to the revision of the settlement of the initial payments of P1,000.00 and prepaid interest of P360,000.00 (18% of P2,000.00). xxx (the petitioners would secure a loan in the name of Agro Conglomerates Inc. for the total of the initial payments, while the settlement of said loan would be assumed by Wonderland. Consequently, petitioner Mario Soriano signed as maker several promissory notes, payable to the respondent bank. Thereafter, the bank released the proceeds of the loan to petitioners. However, petitioners failed to meet their obligations as they fell due. During that time, the bank was experiencing financial turmoil and was under the supervision of the Central Bank (CB). CB examiner and liquidator Cordula de Jesus, endorsed the subject promissory notes to the banks counsel for collection. The bank gave petitioners opportunity to settled their account by extending payment due dates. Mario Soriano manifested his intention to restructure the loan, yet did not show up nor submit his formal written request. Respondent bank filed three (3) separate complaints before RTC-Manila for Collection of Sums of Money. Petitioners interposed the defense of novation and insisted there was valid substitution of debtor. They alleged that the addendum specifically states that although the promissory notes were in their names, Wonderland shall be responsible for the payment thereof. Issue: WON petitioner should not be held liable for the payments of the PN? Ruling: No, they are liable. The evidences disclose that Wonderland did not comply with its obligation under said Addendum as the agreement to turn over the farmland to it, did not materialize, and there was actually no sale of the land. Hence, Wonderland is not answerable. No contract of sale of farmland between petitioners and Wonderland materialized. A Contract of sale is a reciprocal transaction. The obligation or promise of each party is the cause or consideration for the obligation by the other. The vendee is obliged to pay the price, while the vendor must deliver actual possession of the land. In the instant case, the original plan was that the initial payments would be paid in cash. Subsequently, the parties (with the participation of respondent bank) executed an Addendum providing instead, that the petitioners would secure a loan in the name of Agro Conglomerates Inc. for the total amount of the initial payments, while the settlement of said loan would be assumed by Wonderland. As subsidiary contract of Suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Suretyship is defined as the relation which exists where one person has undertaken an obligation and another person is also under the obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform. The suretys liability to the creditor or promise of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. And the creditor may proceed against any one of the solidary debtors. The contract of surety between Wonderland and the petitioners was extinguished by the rescission of the contract of sale of the farmland. With the rescission, there was confusion or merger in the persons of the principal obligor and the surety, namely petitioners herein. The Addendum which was dependent thereon likewise lost its efficacy. Petitioners had no legal or just ground to retain the proceeds of the loan at the expense of private respondent. Neither could petitioners excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract. If petitioners sustained damages as a result of the rescission, they should have impleaded Wonderland and asked damages.

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Elements of a Contract of Sale HEIRS OF JUAN SAN ANDRES AND SALVACION S. TRIA VS. VICENTE RODRIGUEZ (May 31, 2000) Facts: Juan San Andres was the registered owner of lot no., 1914-B-2 situated in Liboton, Naga City. On September 28,64, he sold a portion thereof, consisting of 345 square meters. To respondent Vicente Rodriguez for P2,415.00. upon the death of Juan san Andres on May 5, 65. Ramon San Andres was appointed judicial administrator of the decedent estate. Engr., Penero also prepared a sketch plan of the 345 square meters lot sold to respondent. From the result of the survey, it was found that respondent had enlarged the area which he purchased from late Juan by 509 square meters. Respondent alleged that Juan likewise sold to him the following day the remaining portion of the lot consisting of 509 square meters, with both parties treating the 2 lots as one whole parcel of land with a total 854 square meters. He further alleged that with the consent of the former owner, Juan, he took possession of the same and introduced improvements thereon as early as 1964. while the proceedings were pending , judicial administrator Ramon San Andres died and was substituted by his son Ricardo San Andre. On the other hand, respondent Vicente Rodriguez died on August 15, 89., and was substituted by his heirs. Bibiana B Rodriguez, widow of respondent Vicente, testified that they had purchased the subject lot fro Juan, who was there compadre, on Sept., 29,64 at P15.00 per square meter. On Sept. 20 94., the trial court rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of valid object because there was no sufficient indication in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a new contract. Respondent appealed to the CA. which on April 21, 98 rendered a decision reversing the decision of the lower court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within 5 years from the execution of the deed of sale. Issue: W/N the object of the contract is determinable. Held: Article 1458 of the Civil Code Provides: 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 thereof a price certain in money or its equivalent. Following are the elements: 1. consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price. 2. Determinate subject matter. 3. price certain in money or its equivalent. As shown in the receipt, dated Sept., 29,64, the late Juan 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 15. 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 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 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 and further agreement between the parties. Here, this definition finds realization. Thus, all of the essential elements of contract of sale are present. THAT THERE WAS MEETING OF THE MINDS: by virtue of late Juan undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Article 1475 of the CC provides.

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The CONTRACT OF SALE IS PERFECTED AT THE MOMENT THERE IS A MEETING OF THE MINDS UPON THE THING WHICH IS THE OBJECT OF THE CONTRACT AND UPON THE PRICE. That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30,66 asking for P300.00 as partial payment for the subject lot. As the CA observes. Without any doubt, the receipt profoundly speaks of a meeting of the minds between San Andres and Rodriguez for the sale of the property adjoining the 345 square meters portion previously sold to Rodriguez on its 3 sides excepting the frontage. The price certain which is P15.00 per square meter. Evidently, this is a perfected contract of sale on a differed payment of the purchase price. All the pre-requisite elements are present. Sale does not require any formal document for its existence and validity. And delivery of possession of land sold is a consummation of the sale. (Galar vs. HUSAIN 20 S 186. Elements of a Contract of Sale JOVAN LAND, Inc. vs. CA Facts: Petitioner Jovan Land Inc., is a corporation engage in real state business. its President and Chairman of the board of directors is Joseph Sy. Private respondent Eugenio Quesada is an owner of a building. Petitioner learned from co-petitioner Mendoza that private respondent was selling the building. Thus, petitioner through Joseph Sy made a written offer. This first offer was not accepted by Conrado Quesada (general manager of private respondent). Joseph Sy sent a second written offer but the same was rejected by Conrado. Undaunted, Joseph Sy sent a 3 rd written offer for 12M pesos with a check for 1m pesos as earnest money. Annotated on this letter-offer was the phrase received original,9-4-89 beside which appears the signature of Conrado. On the basis of this annotation which petitioner insist is the proof that there already exist a valid, perfected agreement to sell the building, petitioner filed with the RTC, a complaint for specific performance and collection of sum of money with damages. RTC ruled in favor of the private respondent. Petitioner appealed to the CA which affirmed the decision of the RTC. Issue: W/N there is a perfected contract of sale based on the annotation on the third letteroffer. Held: NO. PETITION IS DENIED. There is no perfected contract of sell based on the annotation on the third letter offer. It is fundamental principle that before a contract of sale can be valid, the following elements must be present: a). consent or meeting of the minds b). determinate subject matter c). price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as binding juridical relation between the parties. Clearly, in the present case, a punctilious examination of the receipt reveals that the same can neither be regarded as a contract of sale nor a promise to sell. Such an annotation by Conrado Quesada amounts neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt and therefore the sale is neither valid nor enforceable.

Elements of a Contract of Sale PEALOSA vs. SANTOS (268 S 160) Facts: Respondents Severino Santos and Adela Mendez Santos are registered owners of a residential house and hot. They decided to sell their property and for this purpose, negotiated with the petitioner Henry Pealosa. The property was leased by Eleuterio Perez, who was given preference to buy it under the same terms offered by the buyer. Perez proposed less favorable terms and Severino rejected his offer. Petitioner Henry and respondent Severino attempted to enter into an agreement whereby for a consideration of 1.8M would sell to the former the property. A deed of absolute sale (first deed) evidencing this transaction was signed by Henry but not Severino. On the strength of the first deed and as a new owner of the property, Henry successfully ejected Perez (the lessee of

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the property). Thereafter, Henry and Severino executed another deed of absolute sale (second deed) for a higher consideration of 2M. This was signed by both parties and duly notarized. Henry then gave Severino P300,000 as earnest money with the understanding that the former was to pay the balance within 60 days. The balance of 1.7M would be paid by means of a loan with the property itself given as collateral as agreed by both parties. Thus, Henry filed a loan application with Philam Life for the amount of 2.5M which did not materialize because Severino refused to surrender the owners duplicate title. Meanwhile upon the finality of the favorable judgment of the ejectment case, Henry and his family moved into the disputed house. Then, Severino sent a letter to Henry demanding him to vacate the house and lot on two grounds that Henry did not conclusively offer nor tender a price certain for the purchase of the property and Henrys alleged offer and promise to buy the property has since been rejected by Severino. Then, Severino brought action for quieting of title, recovery of possession and damages against Henry. RTC and CA ruled in favor of Severino. Hence, this petition. Issue: Whether or not there is a valid contract of sale?

Held: Petition granted. Judgment of the lower court is reversed and set aside. There is a valid contract of sale. The elements of a valid contract of sale under Art. 1458 of the Civil Code are: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or its equivalent. In the instant case, the second deed reflects the presence of all these elements and as such, there is already a perfected contract of sale. There is already consent or meeting of the minds of both parties when they already undertook their respective covenants under the second deed, indicating that they intended to give effect to their agreement. As a matter of fact, Severino Santos even admitted that he affixed his signature on the second deed to help Henry acquire a loan. This can only signify that he consented to the manner proposed by the petitioner for payment of the balance and that he accepted the stipulated price of 2M as consideration for the sale. Moreover, simultaneous with the execution of the second deed, petitioner Severino gave P#00,000 in earnest money which under Article 1482 of the New Civil code is part of the purchase price and proof of perfection of the contract. Elements of a Contract of Sale ROBLE vs. ARBASE Facts: On January 2, 1976, spouses Dominador Arbasa and Adelaida Roble (respondents) purchased from Fidela Roble an unregistered parcel of land located at Poblacion, Isabel, Leyte. As reflected on the deed of sale, the property had a total of land area of 240 square meters. Due to their diligent effort in reclaiming a portion of the sea, using stones, sand and gravel, the original size of 240 square meters increased to 884 square meters. Since 1976 and until the present, respondents have been in actual, open, peaceful and continuous possession of the entire parcel of land in the concept of owners and had it declared for taxation purposes in the name of respondent Adelaida Arbasa. Included in the sale were the improvements found on the land, consisting mainly of the house of Fidela. Shortly after Fidelas death on June 15, 1989, petitioners Veronica and Lilibeth Roble claimed ownership of the house and the southern portion of the land with an area of 644 square meters (Veronica and Lilibeth Robler are the daughters of Gualberto Roble, deceased brother of Fidela and Adelaida). Fidela died intestate and without issue. Meanwhile, Gualberto Roble, petitioners father, died sometime in December 1986. In January 1990, petitioners had this parcel of land declared for taxation purposes in the names of Fidela Roble under Tax Declaration No. 8141 and of Gualberto Roble under Tax Delaration No. 8142. As efforts to have them vacate the house and desist from claiming the parcel of land failed, respondent spouses Dominador and Adelaida Roble-Arbasa, referred the dispute to the barangay authorities for conciliation. Nothing happened at the barangay level. Hence, on February 27, 1990, spouses Arbasa filed with the RTC an action for quieting of title with damages. On the other hand, petitioners contended that the total area of the lot which respondents bought from Fidela consisted only of 240 square meters, located at the northern portion of the property. This property was originally classified as foreshore land, but in 1957, due to the effort

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of Ireneo Roble, father of Fidela, Adelaida and Gualberto, a portion of the sea was reclaimed and filled up. This was the piece of property where respondents exercised open, public and continuous possession in the concept of owner, and which had been declared for taxation purposes in the name of Adelaida Roble in Tax Declaration. Upon appeal to the CA, the decision favored the spouses Arbasa. Hence this petition for certiorari. Issues: (1) Whether or not the essential elements of a contract of sale between Fidela and Adelaida Roble were present in this instant case. (2) Whether or not the deed of sale executed by Fidela and Adelaida conveyed the entire 884 square meters parcel of land, including the house of Fidela, or it covered only 240 square meters as the contracted equivalent to the price paid. Held: (1) 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 or meeting of the minds, that is consent to transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price certain in money or its equivalent. All these elements were present. (2) The sale that transpired on January 2, 1976 between Fidela and 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 number than that stated in the contract. Thus, the obligation of the vendor is to deliver everything within the boundaries, in as mush as it is the entirety thereof that distinguishes the determinate object. However, this rule admits of an exception. A 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. In the case at bar, 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. Moreover, at the time of the sale, the only piece of land existing was 240 square meters, the subject of the deed of sale. This 240 square meters parcel of land was originally foreshore land, hence, not alienable and disposable. It was only in 1952, that Fidela applied for and was granted a foreshore lease. And even though respondents claim that they were responsible for reclaiming the portion of the foreshore land adjacent to the property they bought from petitioners predecessor in interest, there is no evidence that respondents subsequently filed an application for lease with regard to the 644 square meters of reclaimed land. Elements of a Contract of Sale HEIRS OF ERNESTO BIONA, NAMELY: EDITHA B. BLANCAFLOR, MARIANITA D. DE JESUS, VILMA B. BLANCA FLOR, ELSIE B. RAMOS and PERLITA B. CARMEN vs. CA, LEOPOLDO HILAJOS Facts: On October 23, 1953, the late Ernesto Biona was awarded the Homestead Patent No. V840 over the property subject of this suit. On June 3, 1954, Ernesto and Soledad Biona obtained a loan from the then Rehabilitatin Finance Corporation (now the Development Bank of the Philippines) and put up as collateral the subject property. On June 12, 1956, Ernesto Biona died leaving as his heirs herein plaintiffs-appellees, namely, his wife, Soledad Estrobillo Vda. De Biona, and five daughters, Editha B. Blancaflor, Marianita B. de Jesus, Vilma B. Blancaflor, Elsie B. Ramos and Perlita B. Carmen. On March 1, 1960, plaintiff-appellee Soledad Biona obtained a loan from defendantappellant in the amount of P1,000 and as security therefore, the subject property was mortgaged. It was further agreed upon by the contracting parties that for a period of 2 years until the debt is paid, defendant-appellant shall occupy the land in dispute and enjoy the usufruct thereof. The 2-year period elapsed but Soledad Biona was not able to pay her indebetedness.

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For a period of not less than 25 years, private respondent continued his peaceful and public occupation of the property, declaring it in his name for taxation purposes. On June 19, 1985, petitioner, filed a complaint for recovery of ownership, possession, accounting and damages, with a prayer for a writ of preliminary mandatory injunction and/or restraining order against defendant-appellant alleging, among others, that: - Private respondent has unlawfully been depriving them of the use, possession and enjoyment of the subject property. Private respondent contended that: - September 11, 1961, Soledad Biona, after obtaining the loan of P1,000 from him, approached and begged the latter to buy the whole of Lot No. 177 since it was then at the brink of foreclosure by DBP and she had no money to redeem the same nor the resources to support herself and her five small children; - That he agreed to buy the property for the amount of P4,300 which consideration was to include the redemption price to be paid to DBP; - That the purchase price paid by him far exceeded the then current market value of the property and he had to sell his own 8-hectrae parcel of land in Surallah to help Soledad Biona - That to evidence the transaction, a deed of sale was handwritten by Soledad Biona and signed by her and the defendant - That by virtue of his continuous and peaceful occupation of the property from the time of its sale and for more than 25 years thereafter, defendant possesses a better right thereto subject only to the rights of the tenant whom he had allowed to cultivate the land under the Land Reform Program of the government.

Issue: Whether or not the deed of sale is valid and if effectively conveyed to the private respondents the subject property. Ruling: Yes, the deed of sale is valid and if it effectively conveyed to the private respondents the subject property. All the requisites for a valid contract of sale are present in the instant case. For a valuable consideration of P4,500, Soledad Biona agreed to sell and actually conveyed the subject property to private respondent. The fact that payment was made is evidenced by the acknowledgment receipt for P3,500 signed by Soledad Biona, and private respondent previous delivery of P1,000.00 to her pursuant to the Mutual Agreement. The contract of sale between the contracting parties was consummated by the delivery of the subject land to private respondent who since then had occupied and cultivated the same continuously and peacefully until the institution of this suit. The fact that the deed of sale was not notarized does not render the agreement null and void without any effect. The provision of Article 1358 of the Civil Code on the necessity of a public document is only for convenience, and not for validity or enforceability. Undeniably, a contract been entered into by Soledad Biona and the private respondent. Regardless of its form, it was valid, binding and enforceable between the parties. As to the authenticity of the deed of sale, the private respondent has substantially proven that Soledad Biona indeed signed the deed of sale of the subject property in his favor. His categorical statement in the trail court that he himself saw Soledad Estrobillo affix her signature on the deed of sale lends credence. This was corroborated by another witness, Mamerto Famular. Although the petitioners consider such testimony as self-serving and biased, it can not, however, be denied that private respondent has shown by competent proof that a contract of sale where all the essential elements are present for its validity was executed between the parties. The burden is on the petitioners to prove the contrary which they have dismally failed to do. Elements of a Contract of Sale VDA. DE APE vs. CA (G.R. 133638, April 15, 2005) Facts: Cleopas Ape was the registered owner of a parcel of land. Upon Cleopas Apes death, the property passed on to his wife, Maria Ondoy, and their 11 children, namely: Fortunato, Cornelio, Bernalda, Bienvenido, Encarnacion, Loreta, Lourdes, Felicided, Adela, Dominador, and Angelina, all surnamed Ape. Generosa Cawit de Lumayno (private respondent

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herein), joined by her husband, Braulio, instituted a case for Specific Performance of a Deed of Sale with Damages against Fortunato and his wife Perpetua (petitioner herein) before the CFI. It was alleged in the complaint that private respondent and Fortunato entered into a contract of sale of land under which for a consideration of P5,000, Fortunato agreed to sell his share lot to private respondent and received P30 as advance payment. The agreement was contained in a receipt prepared by private respondents son-in-law, at her behest. Private respondent demanded that fortunate execute the corresponding deed of sale and to receive the balance of the consideration. However, Fortunato unjustifiably refused to heed her demands. Thus, a civil action for specific performance was brought by the private respondent. Issue: Whether or not there is the existence of a contract of sale between private respondent and Fortunato? Held: Yes, there is a contract of sale between the parties. However, the Court likewise annuls the contract of sale between Fortunato and private respondent on the ground of vitiated consent. A contract of sale is a consensual contract, thus, perfected by mere consent of the parties. It is born from the moment there is a meeting of minds upon the thing which is the object of the sale and upon the price. Upon its perfection, the parties may reciprocally demand performance. For there to be a perfected contract of sale, however, the following elements must be present: consent, object and price in money or its equivalent. 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. In this case, 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 dealing have been entered into fairly and regularly. The exception to this rule is provided for under Article 1332 of the Civil code which provides that : [w]hen one of 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. Thus, 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 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. Distinguished from Other Contracts: Sale and Barter G.R. No. L-69259, January 26, 1998 DELPHER TRADES CORPORATION, and DELPHIN INTERMEDIATE APPELLATE COURT AND HYDRO respondents

PACHECO, petitioners, VS. PIPES PHILIPPINES, INC.,

Facts: Delphin Pacheco and Pelagia Pacheco were the owners of a real estate. They leased to Construction Components Inc. the same property and providing that during the existence or after the term of this lease the lessor should he decide to sell the property leased shall first offer the same to the lessee and the latter has the priority to buy under similar conditions. Lessee Construction Components Inc. assigned its rights and obligations under the Contract of lease in favor of Hydro Pipes Phil. Inc. with the signed conformity and consent of lessors Delphin and Pelagia. Then, a deed of exchange was executed between lessors Delphin and Pelagia an Delpher Trades Corp. whereby the former conveyed to the latter the leased property pursuant to the proviso in the lease agreement. CFI and IAC ruled in favor of the plaintiff and stated that the deed of exchange between the Pachecos and Delpher Trades Corp. in exchange for 2,500 shares of stocks was actually a deed of sale which violated a right of first refusal under the lease contract. Hence, this petition. Issue: Whether or not Deed of Exchange of property between the Pachecos and Delpher Trades Corp. can be considered a contract of sale? Held: Petition is granted. The decision of the IAC is reversed and set aside.

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The Deed of Exchange of property between the Pachecos and Delpher Trades Corp cannot be considered a contract of sale. There was no transfer of actual ownership interest by the Pachecos to a third party. The Pacheco family merely changed their ownership from one form to another. The ownership remains in the same hands. Hence, Hydro Pipes Phil. Inc. has no basis for its claim of a right of first refusal under the lease contract. Furthermore, the Delpher Trades Corp. 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 Corp. to take control of their properties and at the same time save on inheritance taxes. Distinguished from Other Contracts: Sale and Test of Special Orders (Contract for Piece of Work) CELESTINO CO vs. COLLECTOR (99 P 841) (also see Sales book by Villanueva pp 27-29) Facts: Celestino operates Oriental Sash Factory, which habitually makes sash, windows and doors, and cut the same to desires sizes. It used to pay percentages sales tax of 7% on the gross receipts as a manufacturer-seller under the Tax Code. In 1952, it claimed tax liability only to the contractors tax at 3% under the Tax Code. Celestino contended that it manufactures sash, windows and doors only for special customers and in accordance with the desired specs and not for the general public. Thus, its relation with its customers is that of a contract for a piece of work. Issue: Whether or not Celestino does a contract for a piece of work?

Held: No. Celestino habitually makes sash, windows and doors as represented in its ads. Celestino can duplicate or mass-produce doors and windows. In filling orders for windows and doors according to customers specs, Celestino does not alter the nature of its business. It accepts specs from buyers simply because it is called for the employment of such materials. Distinguished from Other Contracts: Sale and Test of Special Orders (Contract for Piece of Work) ENGINEERING & MACHINERY CORPORATION, petitioner vs. CA, PONCIANO L. ALMEDA, respondents (January 24, 1996) Facts: Sometime on September 10, 1962, a contract was entered into between petitioner and private respondent. The former undertook to fabricate, furnish needed materials and install the air-conditioning system in the latters building in consideration of P210,000.00. The system was completed in 1963 and accepted by private respondent, who paid in full the contract price. On September 2, 1965, private respondent sold the building to the National Investment and Development Corporation (NIDC). The latter took possession of the building but sometime in 1971 the sale was rescinded and the former re-acquired possession of the same and learned the defects of the air-conditioning system of the building. Technical evaluation of the system in relation to the contract revealed that the system was not capable of maintaining the desired room temperature of 76F - 2F in violation of the agreed plans and specifications. Private respondent then filed on May 8, 1971 an action for damages against petitioner. Petitioner moved to dismiss the complaint, alleging that the prescriptive period of 6 months for any hidden faults or defects in the thing sold (Art. 1566, 1567 and 151). Private respondent countered that their contract was not a contract of sale but a contract for a piece of work (Art. 1713) and the complaint was timely brought within 10-year prescriptive period (Art 1144(1)). In its reply, petitioner argued that Article 1571 of the Civil Code providing for a 6month period is applicable to a contract for a piece of work by virtue of Article 1714, which provides that such a contract shall be governed by the pertinent provisions on warranty of title and against hidden defects. The trial court denied the motion to dismiss and after trial rendered a decision finding that petitioner failed to install certain parts and accessories called for by the contract. On the question of prescription, the trial court ruled that the complaint was filed within the 10-year prescriptive period although the contract was one for a piece of work. Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. Hence, it instituted the instant petition.

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Issues: (1) Whether or not the contract entered into between the parties is a contract of sale or contract for a piece of work (2) Whether or not the complaint was filed within the required prescriptive period Ruling: On the first issue: Article 1713 of the Civil Code defines a Contract for a Piece of Work that By the contract for a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. The inquiry as to whether the thing transferred is one not in existence and which would ever have existed but for the order of the person desiring it. In such case, the contract is one for a piece of work. 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. To Tolentino, the distinction between the two contracts depends on the intention of the parties. Thus, if the parties intended that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale. But if one of the parties accepts the undertaking on the basis of some plain, taking into account the work he will employ personally or through another, there is a contract for a piece of work. Clearly, the contract in question is one for a piece of work (Art. 1714 and 1715). Petitioners business is the fabrication and installation of such systems as ordered by customers in accordance with particular plans and specifications provided by the customers. On the second issue: The complaint was filed within the prescriptive period. The complain filed in the trial court is for breach of the contract, that the petitioner, in the installation of the air-conditioning systems did not comply with the specifications provided in the contract which was proved by the trail court that indeed petitioner failed to install items and parts required in the contract and substituted some other items contrary to that stipulated in the contract. The SC affirmed the trial courts decision and declare that the governing law then is Article 1715: The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require the contractor to remove the defect or execute another work. If the contractor fails or refuses to comply with his obligation, the employer may have the defect removed or another work executed, at the contractors cost. However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions upon a written contract prescribe in 10 years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed. INCHAUSTI and CO. vs ELLIS CROMWELL, Collector of Internal Revenue (October 16, 1911) * Appeal by the plaintiff from a judgment of the Court of First Instance of the City of Manila Facts: Plaintiff firm for many years past has been and now is engaged in the business of buying and selling at wholesale hemp, both for its own account and on commission. It is customary to sell hemp in bales which are made by compressing the loose fiber by means of presses, covering two sides of the bale with matting, and fastening it by means of strips of rattan; that the operation of bailing hemp is designated among merchants by the word "prensaje." In all sales of hemp by the plaintiff firm, whether for its own account or on commission for others, the price is quoted to the buyer at so much per picul, no mention being made of bailing; but with the tacit understanding, unless otherwise expressly agreed, that the hemp will be delivered in bales and that, according to the custom prevailing among hemp merchants and dealers in the Philippine Islands, a charge, the amount of which depends upon the then prevailing rate, is to be made against the buyer under the denomination of "prensaje." The amount of the charge made against hemp buyers by the plaintiff firm and other sellers of hemp under the denomination of "prensaje" during the period involved in this litigation

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was P1.75 per bale; that the average cost of the rattan and matting used on each bale of hemp is fifteen (15) centavos and that the average total cost of bailing hemp is one (1) peso per bale. Between the first day of January, 1905, and the 31st day of March, 1910, the plaintiff firm, in accordance with the custom mentioned in paragraph V hereof, collected and received, under the denomination of "prensaje," from purchasers of hemp sold by the said firm for its own account, in addition to the price expressly agreed upon for the said hemp, sums aggregating P380,124.35; and between the 1st day of October, 1908, and the 1st day of March, 1910, collected for the account of the owners of hemp sold by the plaintiff firm in Manila on commission, and under the said denomination of "prensaje," in addition to the price expressly agreed upon the said hemp, sums aggregating P31,080. Plaintiff firm in estimating the amount due it as commissions on sales of hemp made by it for its principals has always based the said amount on the total sum collected from the purchasers of the hemp, including the charge made in each case under the denomination of "prensaje." plaintiff has always paid to the defendant or to his predecessor in the office of the Collector of Internal Revenue the tax collectible under the provisions of section 139 of Act No. 1189 upon the selling price expressly agreed upon for all hemp sold by the plaintiff firm both for its own account and on commission, but has not, until compelled to do so as hereinafter stated, paid the said tax upon sums received from the purchaser of such hemp under the denomination of "prensaje." On the 29th day of April, 1910, the defendant, acting in his official capacity as Collector of Internal Revenue of the Philippine Islands, made demand in writing upon the plaintiff firm for the payment within the period of five (5) days of the sum of P1,370.68 as a tax of one third of one per cent on the sums of money mentioned in Paragraph IX hereof, and which the said defendant claimed to be entitled to receive, under the provisions of the said section 139 of Act No. 1189, upon the said sums of money so collected from purchasers of hemp under the denomination of "prensaje." Plaintiff firm paid to the defendant under protest the said sum of P1,370.69, and on the same date appealed to the defendant as Collector of Internal Revenue. It is contended by the plaintiff that the tax of P1,370.68 assessed by the defendant upon the aggregate sum of said charges made against said purchasers of hemp by the plaintiff during the period in question, under the denomination of "prensaje" as aforesaid, namely, P411,204.35, is illegal upon the ground that the said charge does not constitute a part of the selling price of the hemp, but is a charge made for the service of baling the hemp, and that the plaintiff firm is therefore entitled to recover of the defendant the said sum of P1,370.68 paid to him under protest, together with all interest thereon at the legal rate since payment, and the costs of this action. Ruling: It is one of the stipulations in the statement of facts that it is customary to sell hemp in bales, and that the price quoted in the market for hemp per picul is the price for the hemp baled. The fact is that among large dealers like the plaintiff in this case it is practically impossible to handle hemp without its being baled, and it is admitted by the statement of facts, as well as demonstrated by the documentary proof introduced in the case, that if the plaintiff sold a quality of hemp it would be the under standing, without words, that such hemp would be delivered in bales, and that the purchase price would include the cost and expense of baling. In other words, it is the fact as stipulated, as well as it would be the fact of necessity, that in all dealings in hemp in the general market the selling price consists of the value of the hemp loose plus the cost and expense of putting it into marketable form. In the sales made by the plaintiff, which are the basis of the controversy here, there were n services performed by him for his vendee. There was agreement that services should be performed. Indeed, at the time of such sales it was not known by the vendee whether the hemp was then actually baled or not. All that he knew and all that concerned him was that the hemp should be delivered to him baled. He did not ask the plaintiff to perform services for him, nor did the plaintiff agree to do so. The contract was single and consisted solely in the sale and purchase of hemp. The purchaser contracted for nothing else and the vendor agreed to deliver nothing else. The word "price" signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to by him. It is quite possible that the plaintiff, in this case in connection with the hemp which he sold, had himself already paid the additional expense of baling as a part of the purchase price which he paid and that he himself had received the hemp baled from his vendor. It is quite possible also that such vendor

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of the plaintiff may have received the same hemp from his vendor in baled form, that he paid the additions cost of baling as a part of the purchase price which he paid. In such case the plaintiff performed no service whatever for his vendee, nor did the plaintiff's vendor perform any service for him. The distinction between a contract of sale and one for work, labor, and materials is tested by the inquiry whether the thing transferred is one no in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been the subject of sale to some other person, even if the order had not been given. It is clear that in the case at bar the hemp was in existence in baled form before the agreements of sale were made, or, at least, would have been in existence even if none of the individual sales here in question had been consummated. It would have been baled, nevertheless, for sale to someone else, since, according to the agreed statement of facts, it is customary to sell hemp in bales. When a person stipulates for the future sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor. It is otherwise when the article is made pursuant to agreement. Where labor is employed on the materials of the seller he can not maintain an action for work and labor. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at the defendant's request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendant's order for it. It is clear to our minds that in the case at bar the baling was performed for the general market and was not something done by plaintiff which was a result of any peculiar wording of the particular contract between him and his vendee. It is undoubted that the plaintiff prepared his hemp for the general market. Judgment appealed from must be affirmed. Distinguished from Other Contracts: Sale and Test of Special Orders (Contract for Piece of Work) CIR vs. ARNOLDUS CARPENTRY SHOP & CA (159 S 199) Nature: Petition to review the Decision of CA Facts: Arnoldus was a domestic corporation which had for its secondary purpose the preparing, processing, buying, selling, exporting, importing, manufacturing, trading and dealing in cabinet shop products, wood and metal home and office furniture, cabinets, doors, windows, etc., including their component parts and materials, of any and all nature or description. For the business venture, private respondent kept samples or models of its woodwork on display from where its customers may refer to when placing their orders. Sometime in March 1979, an investigation of the business tax liabilities of Arnoldus was conducted, from which it was declared that the business was an other independent contractor under Sec. 205 (16) [now Sec. 169 (q)] of the Tax Code, and was imposed with 3% contractors tax. Arnoldus filed a protest in the CIR claiming that the shop is a manufacturer and therefore entitled to tax exemption on its gross export sales under Sec. 202 (e) of the National Internal Revenue Code. CIR denied the petition. Arnoldus appealed to CTA, which reversed the CIR ruling and declared Arnoldus as manufacturer/seller. Hence this petition. Issue: WON the CTA erred in holding that private respondent is a manufacturer and not a contractor and therefore not liable for the amount of P108,720.92, as deficiency contractors tax, inclusive of surcharge and interest from the year 1977. Ruling: No. Private respondent is a manufacturer as defined in the Tax Code (Sec. 187 (x) [now Sec. 157 (x)]. Manufacturer includes every person who by physical or chemical process alters the

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exterior texture or form or inner substance of any raw material or manufactured or partially manufactured product in such a manner as to prepare it for a special use or uses to which it could not have been in its original condition Though Arnoldus designs and makes samples or models that are displayed or presented or submitted to prospective buyer who might choose therefrom, it did sell goods which it keeps in stock and not services. It had a ready stock of its shop products for sale to its foreign and local buyers. If found to be saleable, some television cabinets were manufactured for display and sold to the general public. Samples were displayed, and if in stock, were available for immediate sale to local and foreign customers. Neither can Art. 1947 of the NCC can help CIRs cause. The test followed in this jurisdiction in determining whether the contract is of sale or for a piece of work is whether the thing has been manufactured specially for the customer and upon his special order and not the mere existence of the product at the time of the perfection of the contract (NB: Contract of Sale not for Piece of Work) Distinguished from Other Contracts: Sale and Agency to sell: SCHMID & OBERY INC. vs RJL MARTINEZ FISHING CORP. (166 S 493) Nature: Petition to review the decision of the CA Facts: RJL Marketing is engaged in the business of deep-sea fishing. As RJL needed electric generators for some of its boats and SCHMID sold electric generators of different brands, negotiations between them for the acquisition thereof took place. The parties had two (2) separate transactions over Nagata- brand generators. The first transaction was the sale of three (3) generators. SCHMID was the vendor of these generators. The second transaction, which gave rise to the present controversy involves twelve (12) Nagata-brand generators. Facts of the 2nd transaction: Agreeing with the terms of the Quotation, RJL Martinez opened a letter of credit in favor of Nagata Co. Accordingly, SCHMID transmitted to Nagata the orders of 12 generators, which were shipped, directly to RJL. The invoice states that, one (1) case of Nagata AC Generators, consisting of 12 set was bought by order and for account risk of Messrs. RJL. All 15 generators burned out after continuous use. It revealed that the generators were overrated. SCHMID replaced the 3 generators subject of the first sale with generators of a different brand. As for the 12 generators on the second transaction, only 3 generators were repaired and returned by Nagata Co. As not all of the generators were replaced or repaired, RJL Martinez demanded from SCHMID that it be refunded the cost of the generators and be paid damages. Both the trial court and the CA upheld the contention of RJL that SCHMID was the vendor in the second transaction and was liable under its warranty. Hence, this instant recourse. Issue: WON the second transaction between the parties was a sale or an indent transaction. (SCHMID maintains that it was the latter; RJL claims it was a sale) WON SCHMID was an indentor or a vendor. Ruling: SCHMID was merely an indentor in the second transaction RJL, in its complaint, admitted that the generators were purchased through indent order and in its demand letter stated that 12 of the 15 generators were purchased through your company (SCHMID), by indent order. Evidence also showed that RJL Martinez paid directly to Nagata Co.

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The only participation of SCHMID was to act as intermediary or middleman between Nagata Co. and RJL, by procuring an order from RJ: and forwarding the same to Nagata Co. Contract is what the law defines it to be considering its essential elements and not what it is called by the contracting parties. Art. 1458 by the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. Rules and Regulations to Implement PD 1789 (Omnibus Investment Code) lumps indentors together with commercial brokers and commission merchants in this manner. An indentor is a middleman in the same class as commercial brokers and commission merchants. The chief feature of commercial broker and merchant is that in effecting a sale, they are merely intermediaries or middlemen, and act in a certain sense as the agent of both parties to the transaction. Petition granted. Distinguished from Other Contracts KER & CO. LTD vs JOSE LINGAD (38 S 524) Facts: Petitioner Ker & Co. Ltd. Entered into a contract with the United States Rubber International, the former being referred to as the Distributor and the latter specifically designated as the Company. The contract was to apply to transactions between the former and petitioner, as Distributor, from Jul 1, 1948 to continue in force until terminated by either party giving to the other sixty (60) days notice. Stipulations of the contract: 1. Petitioner, as Distributor, is required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. 2. The prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion of the company. 3. All goods on consignment shall remain as the property of the Company until sold by the Distributor to the purchaser/s, but all sales made by the Distributor shall be in his name. 4. The Company, at its own expense, was to keep the consigned stock fully insured against loss or damage by fire or as a result of fire. 5. Distributor is not granted, the agent or legal representative of the Company for any purposes whatsoever. 6. Distributor is not granted any right or authority to assume or to create any obligation or responsibility, express or implied in behalf of or in the name of the Company, to bind the Company in any manner or thing whatsoever. The petitioner was assessed by the then Commissioner of Internal Revenue Melecio R. Domingo the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise penalty. The petitioner requested for the cancellation of such assessment, which request was turned down. Issue: WON the relationship thus created is one of vendor and vendee or broker and principal. Ruling: The relationship was one of broker and principal. Despite the disclaimer in the agreement, the Distributor was still an agent of the American company. The decisive test, as therein set forth, is the retention of the ownership of the goods delivered to the possession of the dealer, like herein petitioner, for resale to customers, the price and terms remaining subject to the control of the firm consigning such goods. The number 4 stipulation of the contract, which reads, The Company, at its own expense, was to keep the consigned stock fully insured against loss or damage by fire or as a result of fire, clearly showed that the ownership over the goods was never transferred to Ker & Co. since the insurable interest remained with the American Company.

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The difficulty in distinguishing between the contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale . If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the tranferor as a debtor for the agree price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made. Distinguished from Other Contracts QUIROGA vs PARSONS HARDWARE CO. (38 P 501) Facts: On January 24, 1911, a contract was entered into by and between the plaintiff and J. Parsons (to whose rights and obligations and the present defendant later subrogated itself) for the exclusive sale of Quiroga beds in the Visayan Islands. Of the three causes of action alleged by the plaintiff in his compliant, only two (2) of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: a) not to sell the beds at higher prices that those of the invoices; b) to have an open establishment in Iloilo c) itself to conduct the agency d) to keep the beds on public exhibition, and to pay for the advertisement expenses of the same; and e) to order the beds by the dozen and in o other manner. As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in the contract of commercial agency. Issue: WON Parsons, by reason of the contract hereinbefore transcribed, was a purchaser (buyer) or an agent of the plaintiff for the sale of his beds. Ruling: The contract by and between the defendant and the plaintiff is one of purchase and sale. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in the contract means nothing else than a mere discount on the invoice price. The word agency also used, only expresses that the defendant was the only one that could sell the plaintiffs bed in the Visayan Island, with regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of theses beds in Manila, with discount from 20 to 25%, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiffs request, or in cash, if the defendant so preferred, an in these last tow cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay the price. These features exclude the legal conception of an agency or order to sell whereby the mandatory 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.

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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 ahd or had not sold the beds.

Distinguished from Other Contracts: Sale and Agency to sell: PUYAT & SONS, INC. vs ARCO AMUSEMENT COMPANY (72 P 402) Facts: ARCO brought an action against PUYAT to secure a reimbursement of certain amount allegedly overpaid by it on account of the purchase price of sound reproducing equipment and machinery ordered by the petitioner from the Starr Piano Company of Richmond, Indiana, USA (1929) Teatro Arco was engaged in the business of operating cinematographs. (1930) its name was changed to Arco Amusement Company. About the same time, Gonzalo Puyat & Sons, Inc. was acting as exclusive agents in the Philippines for Starr Piano Company of Richmond, USA. PUYAT dealt in cinematographer equipment and machinery, and ARCO desiring to equip its cinematograph with sound reproducing devices, approached PUYAT. After some negotiations, it was agreed that PUYAT would, on behalf of the plaintiff, order sound reproducing equipment from Star Piano Co. and that plaintiff (PUYAT) would pay the defendant, in addition to the price of the equipment, a 10% commission, plus all expenses, such as freight, insurance, banking charges, cables, etc. At the expense of the plaintiff, the defendant sent a cable to the Starr Piano Co., inquiring about the equipment desired and making the said company quote its price without discount. A reply was received by PUYAT, with the price, evidently the list price of $1,700.00. The defendant did not show the plaintiff the cable inquiry nor the reply but merely informed the plaintiff of the price of $1,700.00. Being agreeable to this price, the plaintiff formally authorized the order. (1929) The equipment arrived and upon delivery to the plaintiff and the presentation of necessary papers, the price of $1,700 plus the 10% commission agreed upon and plus all the expenses and charges, was duly paid by the plaintiff to the defendant. (1930) another order for sound reproducing equipment was placed by the plaintiff with the defendant, on the same terms as the first order. It was agreed that the plaintiff would pay for the equipment the amount of $1,600.00, which was supposed to be the price quoted by the Starr Piano Co., plus 10% commission, plus all expenses incurred. The equipment under the second order arrived in due time, and the defendant was duly paid the price of $1,600.00 with its 10% commission , and $160.00 for all expenses and charges. (3 yrs. later) In connection with a civil case against PUYAT, ARCO discovered that the price quoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the list price, and that the defendants had obtained a discount from the Starr Piano Co. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant were much too high including the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction from the defendant or rather a reimbursement, an failing in this they brought the present action. The TC held that the contract between PUYAT and ARCO was one of purchase and sale, and absolved the petitioner from the complaint. CA, however, held that the relation between petitioner and respondent was that of agent and principal. Issue: WON the contract is a contract of sale? Held: SC agreed with TC. 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 dealers or traders talk, which cannot bind either party. The letters by

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which the respondent accepted the prices of $1,700.00 and $1,600.00, respectively, for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent admitted in its complaint that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. Whatever unforeseen events might have taken place unfavorable to the defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not covered by insurance, or failure of the Starr Piano Co. to properly fill the orders as per specifications, the plaintiff (respondent) might still legally hold the defendant (petitioner) to prices fixed $1,700 and $1,600. This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (Sec. 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (Art. 1729, CC). The 10% commission 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. Distinguished from Other Contracts: Sale and Agency to sell: Agency to sell; significance of distinction: LIM vs CA & SUAREZ (GR # 102784, Feb. 28, 1996) Facts: On January 26, 1989, an information for Estafa was filed against petitioner Rosa Lim, that on or about the 8th day of October 1987, Lim defrauded one VICTORIA SUAREZ. Lim got and received in trust from Suarez a ring 3.35 solo, with the obligation to sell the same on commission basis and to turn over the proceeds of the sale to Suarez or to return said jewelry if unsold. But the said accused once in possession thereof and far from complying with her obligation despite repeated demands therefore, misapplied, misappropriated and converted the same to her own personal use and benefit. The TC and CA ruled in favor of Suarez. In her final bid to exonerate herself, petitioner filed the instant petition for review alleging among others that the true nature of the agreement between her and Suarez was a sale of jewelries and not of agency. Issue: WON transaction between Lim and Suarez was a contract of agency to sell on commission basis? Ruling: The transaction was a contract of agency to sell on commission basis. The receipt which establishes a contract of agency to sell on commission basis between Suarez and Lim showed that indeed Lim received the jewelries, a ring and a bracelet, to be sold in cast, to be returned if not sold. Though Lims signature appeared on the upper portion of the receipt immediately below the description of the items taken, this did 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 did 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. This is clear from Art. 1356 of the NCC which provides, contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, there are some provisions of the law which require certain formalities for particular contracts and a contract of agency to sell on commission basis does not belong to any of these three categories, hence it is valid and enforceable in whatever form it may be entered into. Furthermore, there is only one type of legal instrument where the law strictly prescribes the location of the signature of the parties thereto. This is in the case of notarial wills found in Art. 805 of the CC.

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In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on commission basis, thus making the position of petitioners signature thereto immaterial.

Lease Filinvest Credit Corporation v. CA [G.R. No. 82508; September 29, 1989] Facts: PR Jose Sy Bang and Iluminda Tan-Sy Bang, were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. In order to increase their production they decided to buy a rock crusher. Mercurio referred the PRs to the Rizal Consolidated Corporation which then had for sale one such machinery. PRs signified their intent to purchase the machinery but such carried a cash price tag of P550,000.00. Bent on acquiring the machinery, the PRs applied for financial assistance from the petitioner, Filinvest. The petitioner agreed to extend to the PRs financial aid on the following conditions: that the machinery be purchased in the petitioner's name; that it be leased (with option to purchase upon the termination of the lease period) to the PRs; and that the private respondents execute a real estate mortgage in favor of the petitioner as security for the amount advanced by the latter. A contract of lease of machinery (with option to purchase) was entered into by the parties whereby the PRs agreed to lease from the petitioner the rock crusher for 2 years. The contract also stipulated that at the end of the two-year period, the machine would be owned by the PRs. To guarantee their compliance with the lease contract, the PRs executed a real estate mortgage over two parcels of land in favour of the petitioner. Three months after delivery, PRs complaint that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per hour. They then demanded that the petitioner make good the stipulation in the lease contract. They followed that up with similar written complaints to the petitioner, but the latter did not, however, act on them. Subsequently, the PRs stopped payment on the remaining checks they had issued to the petitioner. Petitioner extrajudicially foreclosed the real estate mortgage but stopped by the trial court upon affirming the petition filed by PRs. Issue: W/N the contract entered into by the parties is that of a lease. Held: NO. 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. 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. Thus in Vda. de Jose v. Barrueco we stated: Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in instalments since the due payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee.

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SALE BY A SPOUSE GUIANG V. COURT OF APPEALS 291 SCRA 372 Facts: Over the objection of Gilda Corpuz and while she was in Manila seeking employment, her husband sold to Guiang spouses one-half of their conjugal property, consisting of their residence and the lot on which it stood. Later the other half of the property was again sold to the said spouses. Upon her return, Gilda stayed in their house despite the sale made by her husband. Because of this, the Guiang spouses filed a complaint for trespassing. They, however, signed an amicable settlement whereby Gilda and children were to leave voluntarily the house of the Guiangs. Later, Gilda filed a complaint seeking the declaration of deed of sale as null and void. The trial court rules that the deed of transfer of rights and amicable settlment are void. On appeal, the CA affirmed lower courts decision. Issue: WON the deed of transfer of rights was validly executed, or it not, ratified by the execution of the amicable settlement. Ruling: Any alienation or encumbrance made after August 3, 1988 when the FC took effect by the husband of the conjugal partnership property without the consent of the wife is null and void (Art. 124). The nullity of the contract of sale is premised on the absence of Gildas consent. To constitute a valid contract, the CC requires the concurrence of the elements of cause, object and consent, the last element being indubitably absent in the case at bar. Deed of transfer of rights cannot be ratified, even by an amicable settlement because a contract which is the direct result of a previous illegal contract, is also void and inexistent. ARCABA V. TABANCURA 370 SCRA 414 [Note: the marriage took place before the FC.] FACTS: Francisco Comille and his wife Zosima Montallana owned a 418-sq. meter lot during their marriage. They had no children. When Zosima died, Francisco and his wifes mother executed a deed of partition wherein the mother waived of her share to the property in favor of Francisco. Having no children, Francisico asked his niece, Leticia, the latters cousin, Luzviminda, and the petitioner, Cirilia Arcaba, to take care of his house. According to the niece, the respondent was the lover of Francisco, but the formers cousin claimed that the respondent was the mistress of Francisco. On the other hand, petitioner claimed that she was a mere helper who was only allowed to enter the room when she was told to do so by the old man.

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When Leticia and Luzviminda were married, only the petitioner was left to take care Francisco. A few months before Franciscos death, the latter executed a deed entitled Donation Inter Vivos in which he ceded a portion of his lot to the petitioner consisting of 150 sq. meters. The alleged donation was in consideration of the petitioners services that she rendered to Francisco. The donated portion was registered to the petitioners name. On February 18, 1983, the respondents, who are decedents nephews and nieces and his heirs by intestate succession, filed a suit against the petitioner for the declaration of nullity of a deed of donation inter vivos, recovery of possession and damages. The respondents invoked Article 87 of the FC as the ground for such nullification. The trial court declared the donation void. On appeal to the CA, the appellate court affirmed the trial courts decision. Hence this appeal. ISSUE: W/N the donation was void. RULING: The donation was void. Article 87 of the FC provides that: Every donation or gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. In the case at bar, the SC the relationship between the petitioner and Francisco was considered as husband and wife without a valid marriage under the last sentence of article 87 of the FC. In Bitangcor vs Tan, the SC ruled that cohabitation means more than sexual intercourse, especially when one of the parties is already old and may no longer be interested in sexat the very least, cohabitation is the public assumption by a man and a woman of the marital relation, and dwelling together as man and wife, thereby holding themselves out to the public as such, and secret meetings or nights clandestinely spent together, even if often repeated, DO NOT constitute such kind of cohabitation. The following are the pieces of evidence that preponderantly proves the relationship of the petitioner with Francisco as common law wife: The application for business permit to operate a real estate business was signed Cerila COMILLE and not her family name Arcaba. The sanitary permit also showed that the petitioner signed as COMILLE and not Arcaba The death certificate of the respondent also showed the she signed as COMILLE. These documents indicate that she was not simply a caregiver-employee, but a common law wife of Francisico. After all, under the law, she is entitled to regular wage. The SC did not believe the petitioner that she served Francisco out of pure beneficence. Human reason would lead to the conclusion that she was Franciscos common law wife. Based on the abovementioned provision, the donation was void. Agapay v. Palang 276 SCRA 340 FACTS: Miguel Palang married private respondent Carlina Vallesterol on July 1969. Their only child Herminia was born on May 1950. On May 17, 1973, Miguel and petitioner Erlinda Agapay jointly purchased a parcel of agricultural land covered by TCT No. 101736. On July 15, 1973, Miguel, 63, contracted his second marriage with Erlinda, 19. They likewise allegedly purchased a house and lot issued in Erlindas name on September 23, 1975. Their cohabitation produced a son named Christopher, born on December 1977. Miguel died on February 1981.

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On October 30, 1975, Miguel and Carlina executed a Deed of Donation as a form of compromise agreement to settle and end a case filed by the latter. The parties therein agreed to donate their conjugal property consisting of six parcels of land to their only child, Herminia. On July 11, 1981 Carlina and Herminia instituted an action for recovery of ownership and possession with damages against petitioner. They sought to get back the Riceland and the house and lot allegedly purchased by Miguel during his cohabitation with petitioner. Erlinda contended that she already gave her half of the riceland to their son and that the house and lot is her sole property, having bought the same with her own money. The lower court dismissed the complaint. The CA reversed the decision. ISSUE: W/N the court should sustain the validity of Erlindas ownership pf the disputed two pieces of property. RULING: The provision of law applicable to the sale of Riceland made in favor of Miguel and Erlinda is Art 148 of the Family Code, providing for cases of cohabitation when a man and a woman who are not capacitated to marry each other live exclusively with each other as husband and wife without the benefit of marriage under a void marriage. Under this article, only the properties acquired by both of the parties through their actual joint contribution of money, property or industry shall be owned by them in common proportion to their respective contributions. Erlinda tried to establish by testimony that she is engaged in buy and sell business and had a sari-sari store but failed to persuade the court that she actually contributed money to buy the Riceland. The court noted that Erlinda was only around twenty years of age during the conveyance while Miguel was already sixty-four and a pensioner of the U.S. government. Even assuming that the Riceland was bought before cohabitation, the rules on co-ownership would still apply and proof of actual contribution would still be essential. Since Erlinda failed to prove her actual contribution, there is no basis to justify her co-ownership with Miguel over the same. It should belong to the conjugal partnership property of Miguel and Carlina. With respect to the house and lot, the testimony of the notary public who prepared the deed of conveyance for the property reveals falsehood of the claim that it was bought by Erlinda. Atty. Sagun testified that Miguel provided the money and directed that Erlindas name alone be placed as the vendee. The transaction was properly a donation by Miguel to Erlinda, but one which was clearly void and inexistent by express provision of law because it was made between persons guilty of adultery and concubinage at the time of the donation. Article 87, FC expressly provides that the prohibition against donations between spouses now applies to donations between persons living together as husband and wife without a valid marriage, for otherwise, the condition of those who incurred guilt would turn out to be better than those in legal union. Petition is denied. Milagros Joaquino vs. Lourdes Reyes July 13, 2004 Facts: Lourdes Reyes was legally married to Rodolfo Reyes on January 3, 1947 in Manila. They have four children, namely: Mercedes, Manuel, Miriam and Rodolfo Jr., all surnamed Reyes and co-[respondents] in this case. Rodolfo Reyes died on September 12, 1981. At the time of his death, Rodolfo Reyes was living with his common-law wife, Milagros Joaquino, with whom she begot three (3) children namely: Jose Romillo, Imelda May and Charina, all surnamed Reyes. During his lifetime, Rodolfo Reyes worked with Marsman and Company and later transferred to Warner Barnes & Co., where he assumed the position of Vice-President [Comptroller] until he retired on September 30, 1980. His monthly salary at Warner Barnes & Co. was P15,000.00 and upon his separation or retirement from said company, Rodolfo Reyes received a lump sum of P315,011.79 in full payment and settlement of his separation and retirement benefits.

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During the common-law relationship of Rodolfo Reyes and [petitioner] Milagros Joaquino and while living together, they decided to buy the house and lot situated at No. 12 Baghdad Street, Phase 3, BF Homes, Paraaque, Metro Manila. A Deed of Absolute Sale dated July 12, 1979 was executed in favor of [petitioner] Milagros Joaquino and Transfer Certificate of Title No. S-90293 covering the said property was issued in the name of [petitioner only] on July 20, 1979. To secure the finances with which to pay the purchase price of the property in the amount of P140,000.00, [petitioner] executed on July 20, 1979, a Special Power of Attorney in favor of Rodolfo A. Reyes for the latter, as attorney-in-fact, to secure a loan from the Commonwealth Insurance Company. An application for mortgage loan was filed by Rodolfo Reyes with the Commonwealth Insurance Company and a Real Estate Mortgage Contract was executed as collateral to the mortgage loan. The loan was payable in ten (10) years with a monthly amortization of P1,166.67. The monthly amortizations were paid by Rodolfo Reyes and after his death, the balance of P109,797.64 was paid in full to the Commonwealth Insurance by the Philam Life Insurance Co. as insurer of the deceased Rodolfo A. Reyes. Held: As to the facts, it is undisputed that the deceased Rodolfo Reyes was legally married to Respondent Lourdes Reyes on January 3, 1947. It is also admitted that for 19 years or so, and while their marriage was subsisting, he was actually living with petitioner. It was during this time, in 1979, that the disputed house and lot was purchased and registered in petitioners name. Plainly, therefore, the applicable law is the Civil Code of the Philippines. Under Article 145 thereof, a conjugal partnership of gains (CPG) is created upon marriage and lasts until the legal union is dissolved by death, annulment, legal separation or judicial separation of property. Conjugal properties are by law owned in common by the husband and wife. As to what constitutes such properties are laid out in Article 153 of the Code, which we quote: "(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses; (2) That which is obtained by the industry, or work, or as salary of the spouses, or of either of them; (3) The fruits, rents or interests received or due during the marriage, coming from the common property or from the exclusive property of each spouse." Moreover, under Article 160 of the Code, all properties of the marriage, unless proven to pertain to the husband or the wife exclusively, are presumed to belong to the CPG. For the rebuttable presumption to arise, however, the properties must first be proven to have been acquired during the existence of the marriage. The law places the burden of proof on the plaintiffs (respondents herein) to establish their claim by a preponderance of evidence -- evidence that has greater weight or is more convincing than that which is offered to oppose it. On the other hand, Article 144 of the Civil Code mandates a co-ownership between a man and a woman who are living together but are not legally married. Prevailing jurisprudence holds, though, that for Article 144 to apply, the couple must not be incapacitated to contract marriage. It has been held that the Article is inapplicable to common-law relations amounting to adultery or concubinage, as in this case. The reason therefor is the absurdity of creating a coownership in cases in which there exists a prior conjugal partnership between the man and his lawful wife. In default of Article 144 of the Civil Code, Article 148 of the Family Code has been applied. The latter Article provides: "Art. 148. In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions

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and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money and evidence of credit. "If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party which acted in bad faith is not validly married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding Article. "The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith." Thus, when a common-law couple have a legal impediment to marriage, only the property acquired by them -- through their actual joint contribution of money, property or industry -shall be owned by them in common and in proportion to their respective contributions . The present controversy hinges on the source of the funds paid for the house and lot in question. Upon the resolution of this issue depends the determination of whether the property is conjugal (owned by Rodolfo and Lourdes) or exclusive (owned by Milagros) or co-owned by Rodolfo and Milagros. The above issue, which is clearly factual, has been passed upon by both the trial and the appellate courts, with similar results in favor of respondents. Such finding is generally conclusive; it is not the function of this Court to review questions of fact. Moreover, it is well-settled that only errors of law and not of facts are reviewable by this Court in cases brought to it from the Court of Appeals or under Rule 45 of the Rules of Court. This principle applies with greater force herein, because the CA came up with the same factual findings as those of the RTC. Even then, heeding petitioners plea, we have gone through the pleadings and the evidence presented by the parties to find out if there is any circumstance that might warrant a reversal of the factual findings. Unfortunately for petitioner, we have found none. Indeed, a preponderance of evidence has duly established that the disputed house and lot was paid by Rodolfo Reyes, using his salaries and earnings. By substantial evidence, respondents showed the following facts: 1) that Rodolfo was gainfully employed as comptroller at Warner, Barnes and Co., Inc. until his retirement on September 30, 1980, upon which he received a sizeable retirement package; 2) that at exactly the same time the property was allegedly purchased, he applied for a mortgage loan -- intended for "housing" -- from the Commonwealth Insurance Company; 3) that he secured the loan with a real estate mortgage over the same property; 4) that he paid the monthly amortizations for the loan as well as the semi-annual premiums for a Philam Life insurance policy, which he was required to take as additional security; and 5) that with the proceeds of his life insurance policy, the balance of the loan was paid to Commonwealth by Philam Life Insurance Company. All told, respondents have shown that the property was bought during the marriage of Rodolfo and Lourdes, a fact that gives rise to the presumption that it is conjugal. More important, they have established that the proceeds of the loan obtained by Rodolfo were used to pay for the property; and that the loan was, in turn, paid from his salaries and earnings, which were conjugal funds under the Civil Code. In contrast, petitioner has failed to substantiate either of her claims -- that she was financially capable of buying the house and lot, or that she actually contributed to the payments therefor. Indeed, it does not appear that she was gainfully employed at any time after 1961 when the property was purchased. Hearsay are the Affidavits and the undated Certification she had presented to prove that she borrowed money from her siblings and had earnings from a jewelry business. Respondents had not been given any opportunity to cross-examine the affiants, who had not testified on these matters. Based on the rules of evidence, the Affidavits and the Certification have to be rejected. In fact, they have no probative value. The CA was also correct in disregarding petitioners allegation that part of the purchase money had come from the sale of a drugstore four years earlier.

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Under the circumstances, therefore, the purchase and the subsequent registration of the realty in petitioners name was tantamount to a donation by Rodolfo to Milagros. By express provision of Article 739(1) of the Civil Code, such donation was void, because it was "made between persons who were guilty of adultery or concubinage at the time of the donation." The prohibition against donations between spouses must likewise apply to donations between persons living together in illicit relations; otherwise, the latter would be better situated than the former. Article 87 of the Family Code now expressly provides thus: "Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage." (Italics supplied) Regarding the registration of the property in petitioners name, it is enough to stress that a certificate of title under the Torrens system aims to protect dominion; it cannot be used as an instrument for the deprivation of ownership. It has been held that property is conjugal if acquired in a common-law relationship during the subsistence of a preexisting legal marriage, even if it is titled in the name of the common-law wife. In this case, a constructive trust is deemed created under Article 1456 of the Civil Code, which we quote: "Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes." The registration of the property in petitioners name was clearly designed to deprive Rodolfos legal spouse and compulsory heirs of ownership. By operation of law, petitioner is deemed to hold the property in trust for them. Therefore, she cannot rely on the registration in repudiation of the trust, for this case is a well-known exception to the principle of conclusiveness of a certificate of title. Maria Ching vs. Joseph Goyanko November 10, 2006 Facts: On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married. Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko. Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia). On May 1, 1993, Sulpicia executed a deed of sale over the property in favor of respondents father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale over the property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioners name. After Goyankos death on March 11, 1996, respondents discovered that ownership of the property had already been transferred in the name of petitioner. Respondents thereupon had the purported signature of their father in the deed of sale verified by the Philippine National Police Crime Laboratory which found the same to be a forgery. Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages against petitioner, praying for the nullification of the deed of sale and of TCT No. 138405 and the issuance of a new one in favor of their father Goyanko.

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In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price. To disprove that Goyankos signature in the questioned deed of sale is a forgery, she presented as witness the notary public who testified that Goyanko appeared and signed the document in his presence. Held: We find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. The sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects. Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes is contrary to law, morals, good customs, public order, or public policy are void andinexistent from the very beginning. Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy." Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the will of the parties. . . . (Italics in the original; emphasis and underscoring supplied) As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein petitioner, it was null and void. Petitioners argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as provided in Articles 1448 and 1450 of the Civil Code which read: ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him. does not persuade. For petitioners testimony that it was she who provided the purchase price is uncorroborated. That she may have been considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her claim.

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WHEREFORE, the petition is DENIED for lack of merit.

Mercedes Calimlim-Canullas vs. Hon. Willelmo Fortun June 22, 1984 Facts: Petitioner MERCEDES Calimlim-Canullas and FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small house on the residential land in question with an area of approximately 891 square meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land. In 1978, FERNANDO abandoned his family and was living with private respondent Corazon DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a judgment rendered on October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which judgment has become final. On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited by me from my deceased parents." Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980 for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house in dispute where she and her children were residing, including the coconut trees on the land, were built and planted with conjugal funds and through her industry; that the sale of the land together with the house and improvements to DAGUINES was null and void because they are conjugal properties and she had not given her consent to the sale, Issues: (1) whether or not the construction of a conjugal house on the exclusive property of the husband ipso facto gave the land the character of conjugal property; and (2) whether or not the sale of the lot together with the house and improvements thereon was valid under the circumstances surrounding the transaction. Held: The determination of the first issue revolves around the interpretation to be given to the second paragraph of Article 158 of the Civil Code, which reads: xxx xxx xxx Buildings constructed at the expense of the partnership during the marriage on land belonging to one of the spouses also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same. We hold that pursuant to the foregoing provision both the land and the building belong to the conjugal partnership but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, 1 which value would be reimbursed at the liquidation of the conjugal partnership. It is true that in the case of Maramba vs. Lozano, relied upon by respondent Judge, it was held that the land belonging to one of the spouses, upon which the spouses have built a house, becomes conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of the land. We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs. Paterno, 3 SCRA 678, 691 (1961), where the following was explained:

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As to the above properties, their conversion from paraphernal to conjugal assets should be deemed to retroact to the time the conjugal buildings were first constructed thereon or at the very latest, to the time immediately before the death of Narciso A. Padilla that ended the conjugal partnership. They can not be considered to have become conjugal property only as of the time their values were paid to the estate of the widow Concepcion Paterno because by that time the conjugal partnership no longer existed and it could not acquire the ownership of said properties. The acquisition by the partnership of these properties was, under the 1943 decision, subject to the suspensive condition that their values would be reimbursed to the widow at the liquidation of the conjugal partnership; once paid, the effects of the fulfillment of the condition should be deemed to retroact to the date the obligation was constituted (Art. 1187, New Civil Code) ... The foregoing premises considered, it follows that FERNANDO could not have alienated the house and lot to DAGUINES since MERCEDES had not given her consent to said sale. Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. That sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects. Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning. Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy." Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or con conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the wig of the parties. That was the ruling in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited in Matabuena vs. Cervantes. We quote hereunder the pertinent dissertation on this point: We reach a different conclusion. While Art. 133 of the Civil Code considers as void a donation between the spouses during the marriage, policy considerations of the most exigent character as wen as the dictates ofmorality require that the same prohibition should apply to a common-law relationship. As announced in the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old Civil Code speaks unequivocally. If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor of the other consort and his descendants because of fear of undue influence and improper pressure upon the donor, a prejudice deeply rooted in our ancient law, ..., then there is every reason to apply the same prohibitive policy to persons living together as husband and wife without benefit of nuptials . For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased'. Moreover, as pointed out by Ulpian (in his lib 32 ad Sabinum, fr. 1), "It would not be

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just that such donations should subsist, lest the conditions of those who incurred guilt should turn out to be better." So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage (Emphasis supplied),

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Parties: SALE BETWEEN SPOUSES UY SIU PIN and CHUA HUE vs. CASIMIRA CANTOLLAS, ET AL. (June 20, 1940) FACTS: Spouses Pedro Velegao and Casimira Cantollas were indebted to El Hogar Filipino in the sum of P2,000 secured by a mortgage on certain land. Upon the death of Pedro Velegao, there remained an unpaid balance of P1,300. Casimira Cantollas and her son Blas Velegao, entered into a contract with Uy Siu Pin by which Casimira and Blas agreed to deliver said land to Uy Siu Pin on condition that Uy Siu Pin would pay to El Hogar Filipino the unpaid balance of the indebtedness. In pursuance of this agreement, Uy Siu Pin took possession of the land and proceeded to make payments to El Hogar Filipino. Uy Siu Pin ceased to make further payments to El Hogar Filipino, as a result of which the latter foreclosed the mortgage. In the foreclosure sale, the land was bought by El Hogar Filipino. On December 26, 1934 the latter sold the aforesaid land to Uy Siu Pin. Uy Siu Pin in turn sold the land to his wife Chua Hue. Casimira Cantollas and Blas Velegao filed a complaint against Uy Siu Pin and Chua Hue in which it was prayed that the sale in favor of Chua Hue be cancelled. Juan Magbajos, intervening in the action, prayed that he be declared the owner of the land involved therein by virtue of the sale executed in his favor by Chua Hue. After trial, the Court of First Instance of Tayabas rendered judgment setting aside the sale executed by Uy Siu Pin in favor of Chua Hue as well as the sale executed by the latter in favor of Juan Magbajos. The Court of Appeals affirmed the same with the sole modification that the award of damages in the sum of P380 was eliminated therefrom. ISSUE: Whether or not the sale between Uy Siu Pin and his wife Chua Hue is valid.

RULING It cannot be contended with fairness that Uy Siu Pin acquired the land in his own right from El Hogar Filipino after the latter had foreclosed the mortgage thereon, because the foreclosure was brought about by his own failure to pay the indebtedness of Casimira and Blas. Neither could the latter be blamed for their failure to redeem the land from El Hogar Filipino after the foreclosure sale, for the reason that they had the perfect right to rely on their contract with Uy Siu Pin. In any event, whether we consider Uy Siu Pin as having purchased the land from El Hogar Filipino in his own right, and not on behalf of Casimira Cantollas and Blas Velegao, he is still bound, under the circumstances of this case, to reconvey the same to Casimira and Blas after the expiration of the period stipulated in the existing contract Exhibit A. The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because the former had no right to dispose of the land in controversy in view of the existence of the contract Exhibit A, but because such sale come within the prohibition of article 1458 of the Civil Code. It is not necessary to dwell upon the sale from Chua Hue to the intervenor Juan Magbajos, as the latter has not appealed from the decision complained of by the petitioners. The petition for certiorari will therefore be DISMISSED and the appealed decision affirmed. Sale made in violation of Articles 1490 and 1492 MEDINA vs. COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS. (January 28, 1961) FACTS: Petitioning taxpayer Antonio Medina married Antonia Rodriguez. Before 1946, the spouses had neither property nor business of their own. Later, however, petitioner, acquired forest concessions in the municipalities of San Mariano and Palanan in the Province of Isabela. From 1946 to 1948, the logs cut and removed by the petitioner from his concessions were sold to different persons in Manila through his agent, Mariano Osorio. Some time in 1949, Antonia R. Medina, petitioner's wife, started to engage in business as a lumber dealer, and up to around 1952, petitioner sold to her almost all the logs produced in his San Mariano concession. Mrs. Medina, in turn, sold in Manila the logs bought from her husband through the same agent, Mariano Osorio. The proceeds were, upon instructions from petitioner, either received by Osorio for petitioner or deposited by said agent in petitioner's current account with the Philippine National Bank.

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On the thesis that the sales made by petitioner to his wife were null and void pursuant to the provisions of Article 1490 of the Civil Code of the Philippines (formerly, Art. 1458, Civil Code 1889), the Collector considered the sales made by Mrs. Medina as the petitioner's original sales taxable under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax assessment on petitioner. Petitioner protested the assessment; however, respondent Collector insisted on his demand. Petitioner filed a petition for reconsideration, revealing for the first time the existence of an alleged premarital agreement of complete separation of properties between him and his wife, and contending that the assessment for the years 1946 to 1952 had already prescribed. Petitioner appealed to the Court of Tax Appeals, which rendered judgment upholding a tax assessment of the Collector of Internal Revenue except with respect to the imposition of socalled compromise penalties. ISSUE: Whether or not the sales made by the petitioner to his wife could be considered as his original taxable sales. RULING: Circumstantial evidence is against petitioner's claim. It appears that at the time of the marriage between the petitioner and his wife, they neither had any property nor business of their own, as to have really urged them to enter into the supposed property agreement. Secondly, the testimony that the separation of property agreement was recorded in the Registry of Property three months before the marriage, is patently absurd, since such a pre-nuptial agreement could not be effective before marriage is celebrated, and would automatically be cancelled if the union was called off. In the third place, despite their insistence on the existence of the ante-nuptial contract, the couple, strangely enough, did not act in accordance with its alleged covenants. It was proved that even during their taxable years, the ownership, usufruct, and administration of their properties and business were in the husband. And even when the wife was engaged in lumber dealing, and she and her husband contracted sales with each other as aforestated, the proceeds she derived from her alleged subsequent disposition of the logs incidentally, by and through the same agent of her husband, Mariano Osorio were either received by Osorio for the petitioner or deposited by said agent in petitioner's current account with the Philippine National Bank. Fourth, although petitioner, a lawyer by profession, already knew that the primary reason why the sales of logs to his wife could not be considered as the original taxable sales was because of the express prohibition found in Article 1490 of the Civil Code of sales between spouses married under a community system; yet it was not until July of 1954 that he alleged, for the first time, the existence of the supposed property separation agreement. Finally, the Day Book of the Register of Deeds on which the agreement would have been entered did not show that the document in question was among those recorded therein. Petitioner's contention that the respondent Collector cannot assail the questioned sales, he being a stranger to said transactions, is likewise untenable. The government, as correctly pointed out by the Tax Court, is always an interested party to all matters involving taxable transactions and, needless to say, qualified to question their validity or legitimacy whenever necessary to block tax evasion. Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca, 45 Phil. 43). Being void transactions, the sales made by the petitioner to his wife were correctly disregarded by the Collector in his tax assessments that considered as the taxable sales those made by the wife through the spouses' common agent, Mariano Osorio. In upholding that stand, the Court below committed no error. The decision appealed from is AFFIRMED.

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Common law relationships MATABUENA vs. CERVANTES (March 31, 1971) FACTS: The plaintiff, now appellant Cornelia Matabuena, a sister to the deceased Felix Matabuena, maintains that a donation made while he was living maritally without benefit of marriage to defendant, now appellee Petronila Cervantes, was void. Defendant would uphold its validity. The lower court, after noting that it was made at a time before defendant was married to the donor, sustained the latter's stand. The lower court, after stating that in plaintiff's complaint alleging absolute ownership of the parcel of land in question, she specifically raised the question that the donation made by Felix Matabuena to defendant Petronila Cervantes was null and void under the aforesaid article of the Civil Code and that defendant on the other hand did assert ownership precisely because such a donation was made in 1956 and her marriage to the deceased did not take place until 1962. ISSUE: Whether the ban on a donation between the spouses during a marriage applies to a common-law relationship. RULING: While Art. 133 of the Civil Code considers as void a "donation between the spouses during the marriage," policy considerations of the most exigent character as well as the dictates of morality require that the same prohibition should apply to a common-law relationship. In the language of the opinion of the then Justice J.B.L. Reyes of that Court, "to prohibit donations in favor of the other consort and his descendants because of fear of undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law. There is every reason to apply the same prohibitive policy to persons living together as husband and wife without the benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased. The lack of validity of the donation made by the deceased to defendant Petronila Cervantes does not necessarily result in plaintiff having exclusive right to the disputed property. Prior to the death of Felix Matabuena, the relationship between him and the defendant was legitimated by their marriage on March 28, 1962. She is therefore his widow. As provided for in the Civil Code, she is entitled to one-half of the inheritance and the plaintiff, as the surviving sister, to the other half. The lower court decision of November 23, 1965 dismissing the complaint with costs is REVERSED. The questioned donation is declared void, with the rights of plaintiff and defendant as pro indiviso heirs to the property in question recognized. The case is remanded to the lower court for its appropriate disposition in accordance with the above opinion. Guardians and wards THE PHILIPPINE TRUST COMPANY, as Guardian of the Property of the minor, MARIANO L. BERNARDO vs. SOCORRO ROLDAN, FRANCISCO HERMOSO, FIDEL C. RAMOS and EMILIO CRUZ (May 31, 1956) FACTS: 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father. In view of his minority, guardianship proceedings were instituted, wherein Socorro Roldan was appointed his guardian. She was the surviving spouse of Marcelo Bernardo, and the stepmother of said Mariano L. Bernardo. On July 27, 1947, Socorro Roldan filed in said guardianship proceedings a motion asking for authority to sell as guardian the 17 parcels of land to Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest the money in a residential house, which the minor desired to have on Tindalo Street, Manila. The motion was granted. On August 13, 1947, Dr. Fidel C. Ramos executed in favor of Socorro Roldan, personally, a deed of conveyance covering the same seventeen parcels. And on October 21, 1947 Socorro Roldan sold four parcels out of the seventeen to Emilio Cruz. The Philippine Trust Company replaced Socorro Roldan as guardian. And this litigation, started two months later, seeks to undo what the previous guardian had done. The step-mother in effect, sold to herself, the properties of her ward, contends the plaintiff, and the sale should be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian from purchasing "either in person or through the mediation of another" the property of her ward.

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ISSUE: Whether the sale of the parcels of land between Roldan and Ramos is valid RULING: Remembering the general doctrine that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his ward's interest and in line with the court's suspicion whenever the guardian acquires the ward's property, Socorro Roldan took by purchase her ward's parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies. She acted it may be true without malice; there may have been no previous agreement between her and Dr. Ramos to the effect that the latter would buy the lands for her. But the stubborn fact remains that she acquired her protege's properties, through her brother-in-law. That she planned to get them for herself at the time of selling them to Dr. Ramos. Hence, from both the legal and equitable standpoints these three sales should not be sustained: the first two for violation of article 1459 of the Civil Code; and the third because Socorro Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil Code) the obligation of Socorro Roldan to return the 17 parcels together with their fruits and the duty of the minor, through his guardian to repay P14,700 with legal interest. Judgment is therefore rendered: (a) Annulling the three contracts of sale in question; (b) declaring the minor as the owner of the seventeen parcels of land , with the obligation to return to Socorro Roldan the price of P14,700 with legal interest from August 12, 1947; (c) Ordering Socorro Roldan and Emilio Cruz to deliver said parcels of land to the minor; (d) Requiring Socorro Roldan to pay him beginning with 1947 the fruits, which her attorney admits, amounted to P1,522 a year; (e) Authorizing the minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the sum of P3,000; and (f) charging appellees with the costs. Administrators and executors NAVAL ET AL vs. ENRIQUEZ ET AL (April 12, 1904) FACTS: Don Jorge Enriquez, as heir of his deceased parents, Antonio Enriquez, And Dona Ciriaca Villanueva, whose estates were at that time still undistributed, by public instrument sold to Don Victoriano Reyes his interest in both estates, equivalent to a tenth part thereof. By another instrument executed, Don Enrique Barrera y Caldes, Don Victoriano Reyes sold to Dona Carmen de la Cavada this interest in the estates of Don Antonio Enriquez and Dona Ciriaca Villanueva, which by the deed above referred to, he had acquired from Don Jorge Enriquez. The purchaser, Dona Carmen, was the wife of Don Francisco Enriquez, who was the executor and administrator of the testamentary estates of Don Antonio Enriquez at the dates of the execution of the two deeds above mentioned. The plaintiffs demand that these deeds be declared null and void, as well as the contracts evidence thereby, apparently solely so far as they refer to the estate of Don Antonio Enriquez. Among other grounds, relief is prayed for because Don Victoriano Reyes, the purchaser under the first deed, merely acted as an intermediary at the request and instance of Don Francisco Enriquez for the purpose of subsequently facilitating the acquisition by Dona Carmen de la Cavada, his wife, of the hereditary share of Don Jorge Enriquez, the real acquirer being Don Francisco Enriquez, the executor and administrator of the estate of Don Antonio Enriquez. As such executor Don Francisco Enriquez was unable to acquire by his own act or that any intermediary the said hereditary portion of Don Jorge Enriquez under the provisions of paragraph 3 of article 1459 of the Civil Code. ISSUE: Whether or not there was a violation of the provision of paragraph 3 of Article 1459 of the Civil Code with regards to the sale of the interests the said estate RULING: The thing sold in the two contracts of sale mentioned in the complaint was the hereditary right of Don Jorge Enriquez, which evidently was not in charge of the executor, Don Francisco Enriquez. Executors, even in those cases in which they administer the property pertaining to the estate, do not administer the hereditary rights of any heir. The right is vested entirely in the heirs, who retain it or transmit it in whole or in part, as they may deem convenient, to some other person absolutely independent of the executor, whose authority, whatever powers the testator may have desired to confer upon him, do not and can not under

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any circumstances in the slightest degree limit the power of the heirs to dispose of the said right at will. The right does not form part of the property delivered to the executor for administration. This conclusion having been reached, the Court is of the opinion that Article 1459 of the Civil Code, cited by the plaintiffs to show the alleged incapacity of Don Francisco Enriquez as executor of the will of Don Antonio Enriquez, to acquire by purchase the hereditary right of Jorge Enriquez, has no application to the present case . The prohibition which paragraph 3 of that article imposes upon executors refers to the property confided to their care, and does not extend, therefore, to property not falling within this class . Consequently, even upon the supposition that the executor, Don Francisco Enriquez, was the person who really acquired the hereditary rights of Jorge Enriquez, the sale in question would not for that reason be invalid, the executor, Don Francisco Enriquez, not being legally incapable of acquiring the hereditary right in question as the plaintiffs erroneously suppose. The judgment of the court below is reversed and the complaint DISMISSED. Lawyers RUBIAS vs. BATILLER (May 29, 1973) FACTS: On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot located in Barrio General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, who allegedly entered said portions of the lot on two occasions. On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging that plaintiff does not have a cause of action against him because the property in dispute which he (plaintiff) allegedly bought from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought on appeal to this Court and docketed as CA-G.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of his father-in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code. Defendant claims that plaintiff could not have acquired any interest in the property in dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and void. Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of illegality of contracts is not available to third persons whose interests are not directly affected. The lower court issued an order dismissing plaintiff's complaint. ISSUE: whether or not the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case involving the property in RULING: No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code , and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that his client could sell the same, since as already shown above, his client's claim to the property was defeated and rejected) was void and could produce no legal effect , by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law" are "inexistent and void from the beginning" and that "(T)hese contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived." Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law. The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and

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not void "that the Code does not recognize such nullity de pleno derecho" is no longer true and applicable to our own Philippine Civil Code which does recognize the absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy" or which are "expressly prohibited or declared void by law" and declares such contracts "inexistent and void from the beginning." Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. In this aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions, it has been opined that they may be "ratified" by means of and in "the form of a new contract, in which case its validity shall be determined only by the circumstances at the time of execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratification or second contract; or the service which v. as impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract." The lower court therefore properly acted upon defendant appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's alleged cause of action founded thereon were being asserted against defendantappellant. The order of dismissal appealed from is hereby AFFIRMED. Lawyers THE MUNICIPAL COUNCIL OF ILOILO vs. EVANGELISTA ET AL.. TAN ONG SZE VDA. DE TAN TOCO, appellant. (November 17, 1930) FACTS: On March 20, 1924, the CFI of Iloilo rendered judgment, wherein the appellant herein, Tan Ong Sze Vda. de Tan Toco was the plaintiff, and the municipality of Iloilo the defendant, and the former sought to recover of the latter the value of a strip of land belonging to said plaintiff taken by the defendant to widen a public street. On appeal, the judgment was affirmed. After the case was remanded to the court of origin, and the judgment rendered therein had become final and executory, Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of Jose Ma. Arroyo's intestate estate, filed a claim in the same case for professional services rendered by him, which the court, acting with the consent of the appellant widow, fixed at 15 per cent of the amount of the judgment. At the hearing on said claim, the claimants appeared, as did also the Philippine National Bank, which prayed that the amount of the judgment be turned over to it because the land taken over had been mortgaged to it. Antero Soriano also appeared claiming the amount of the judgment as it had been assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc. After hearing all the adverse claims on the amount of the judgment, the court ordered that the attorney's lien in the amount of 15 per cent of the judgment, be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of the deceased Jose Ma. Arroyo, and directed the municipality of Iloilo to file an action of interpleading against the adverse claimants, the Philippine National Bank, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista, and Jose Arroyo. On March 29, 1928, the municipal treasurer of Iloilo, with the approval of the auditor, of the provincial treasurer of Iloilo, and of the Executive Bureau, paid the late Antero Soriano the amount of P6,000 in part payment of the judgment mentioned above, assigned to him by Tan Boon Tiong, acting as attorney-in-fact of the appellant herein, Tan Ong Sze Vda. de Tan Toco. This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the late Attorney Antero Soriano by virtue of the said judgment in payment of professional services rendered by him to the said widow and her coheirs.

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ISSUE: Whether or not the lower court erred in sustaining the validity of the deed of assignment of the credit instead of finding that said assignment made by Tan Buntiong to Attorney Antero Soriano was null and void. RULING: The appellant's contention that the amounts of P200 and P500 evidenced by said receipts should be considered as payments made to Attorney Antero Soriano for professional services rendered by him personally to the interests of the widow of Tan Toco, is untenable. In view of the fact that the amounts involved in the cases prosecuted by Attorney Antero Soriano as counsel for Tan Toco's widow, some of which cases have been appealed to this court, run into the hundreds of thousands of pesos, and considering that said attorney had won several of those cases for his clients, the sum of P10,000 to date paid to him for professional services is wholly inadequate, and shows, even if indirectly, that the assignment of the appellant's rights and interests made to the late Antero Soriano and determined in the judgment aforementioned, was made in consideration of the professional services rendered by the latter to the aforesaid widow and her coheirs. It does not appear that Attorney Antero Soriano was counsel for the herein appellant in the civil case, which she instituted against the municipality of Iloilo, for the recovery of the value of a strip of land expropriated by said municipality for the widening of a certain public street. The only lawyers who appear to have represented her in that case were Arroyo and Evangelista, who filed a claim for their professional fees. When the appellant's credit, right, and interests in that case were assigned by her attorney-in-fact Tan Boon Tiong, to Attorney Antero Soriano in payment of professional services rendered by the latter to the appellant and her coheirs in connection with other cases, that particular case had been decided, and the only thing left to do was to collect the judgment. There was no relation of attorney and client, then, between Antero Soriano and the appellant, in the case where that judgment was rendered; and therefore the assignment of her credit, right and interests to said lawyer did not violate the prohibition cited above. The assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the Civil Code. By virtue whereof, and finding no error in the judgment appealed from, the same is AFFIRMED in its entirety, with costs against the appellant. Lawyers THE DIRECTOR OF LANDS vs. ABABA, ET AL., LARRAZABAL, DE LARRAZABAL, ABARQUEZ and ACABIGAS, FERNANDEZ (February 27, 1979) FACTS: After winning a case for annulment of a contract of sale with right of repurchase and recovery of the parcels of land subject matter thereof, petitioner Abarquez refused to comply with his contractual obligation to his counsel to give the latter 1/2 of the property recovered as attorney's fees, and instead offered to sell the whole parcels of land to the petitioner-spouses Larrazabal. Hence, his counsel, Atty. Fernandez, filed an affidavit of adverse claim with the Register of Deeds of Cebu, annotating his claim on petitioner Abarquez' Transfer Certificate of Title. Despite said annotation, Abarquez sold 2/3 of the lands to petitioner-spouses Larrazabal. Subsequently, the latter filed a cancellation proceeding of the adverse claim before the trial court where it was dismissed. The petitioner-spouses appealed from the order of dismissal directly to the Supreme Court contending among others that a contract for a contingent fee is violative of Article 1491 of the New Civil Code. ISSUE: Whether or not a contract for a contingent fee is not covered by Article 1491 of the New Civil Code. RULING: The Supreme Court affirmed the trial court's decision and held that a contract for a contingent fee is not covered by Article 1491 of the New Civil Code since the transfer of 1/2 of the property in litigation takes effect only after the finality of a favorable judgment and not during the pendency of the litigation of the property in question; that Canon 13 of the Canons of Professional Ethics expressly recognizes contingent fees as an exception to Canon 10;

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that the adverse-claimant's contingent fee is valid; and that the registration thereof as the only remedy open to him, substantially complied with Section 110 of Act 496. This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. "The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation, In other words, for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property" (Rosario Vda. de Laig vs. Court of Appeals, et al., L-26882, November 21, 1978). A contract for a contingent fee is not covered by Article 1491 because the transfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment. A contingent fee contract is always subject to the supervision of the courts with respect to the stipulated amount may be reduced or nullified. So that in the event that there is any undue influence or fraud in the execution of the contract or that the fee is excessive, the client is not without remedy because the court will amply protect him. The decision of the lower court denying the petition for the cancellation of the adverse claim should be, as it is hereby AFFIRMED. Lawyers PAULINO VALENCIA vs. ATTY. ARSENIO FER. CABANTING CONSTANCIA L. VALENCIA, vs. ATTY. DIONISIO C. ANTINIW, ATTY. EDUARDO U. JOVELLANOS and ATTY. ARSENIO FER. CABANTING LYDIA BERNAL, vs. ATTY. DIONISIO C. ANTINIW, April 26, 1991 FACTS: These consolidated administrative cases seek to disbar respondents Dionisio Antiniw, Arsenio Fer Cabanting and Eduardo Jovellanos (the last named, now an MCTC Judge) for grave malpractice and misconduct in the exercise of their legal profession. In 1933, complainant Paulino Valencia and his wife Romana allegedly bought a parcel of land, where they built their residential house, from a certain Serapia Raymundo, an heir of Pedro Raymundo the original owner. However, they failed to register the sale or secure a transfer certificate of title in their names. On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer Cabanting, filed a complaint against Paulino for the recovery of possession with damages. The Valencias engaged the services of Atty. Dionisio Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the private document written in Ilocano. The Court of First Instance of Pangasinan, Branch V, rendered a decision in favor of plaintiff, Serapia Raymundo. Paulino, thereafter, filed a Petition for Certiorari. While the petition was pending, the trial court, issued an order of execution stating that "the decision in this case has already become final and executory". Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the remaining portion she sold to her counsel, Atty. Arsenio Fer Cabanting. Paulino filed a disbarment proceeding against Atty. Cabanting on the ground that said counsel allegedly violated Article 1491 of the New Civil Code as well as Article II of the Canons of Professional Ethics, prohibiting the purchase of property under litigation by a counsel. The appellate court dismissed the petition of Paulino. ISSUE: Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of the New Civil Code. RULING: Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice and is a ground for suspension. Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending. In the case at bar, while it is true that Atty. Arsenio Fer Cabanting purchased the lot after finality of judgment, there was still a pending certiorari proceeding. A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. Hence, it is not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the judgment of the trial court become

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final while a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of Professional Ethics. Clearly, this malpractice is a ground for suspension. The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-client relationship between Serapia and Atty. Jovellanos, considering that the latter did not take part as counsel in Civil Case No. V-2170. The transaction is not covered by Art. 1491 nor by the Canons adverted to. Lawyers DEL ROSARIO vs. MILLADO (January 31, 1969) FACTS: Complainant, Florentino B. del Rosario seeks the disbarment of respondent, Attorney Eugenio Millado, upon the ground that the latter had committed malpractice, in violation of Article 1491 of the Civil Code of the Philippines and Canon No. 10 of the Canons of Legal Ethics, by acquiring an interest in the land involved in a litigation in which he had taken part by reason of his profession; that said interest was adverse to that of his client in the aforementioned litigation; and that he filed therein pleadings containing allegations which were inconsistent with those made in another pleading subsequently filed by him in the same proceedings, as well as false. In his answer to these charges, respondent alleged that his interest in said land had been acquired before he intervened in said proceedings, as counsel for one of the parties therein; that his client therein was aware of his aforementioned interest; that there is no conflict between the same and that of his client; and that there is neither a false allegation of facts in the pleadings alluded to in the complaint herein nor any inconsistency between said pleadings. ISSUE: Whether or not an interest acquired before counsel intervened in litigation is a included in the prohibition mentioned in Article 1491 RULING: The records show that respondent's alleged interest in said lots was acquired before he intervened as counsel for Mrs. Pascual in the ejectment cases against her and that said interest is not necessarily inconsistent with that of his aforementioned client, aside from the fact that he had made no substantial misrepresentation in the pleadings filed by him in said cases. This fact and the absence of said conflict are made more manifest by the circumstance that the charges under consideration have been preferred, not by Mrs. Pascual, but by her opponent in one of the ejectment cases above mentioned. Finding no merit in the complaint herein, the same is, accordingly, DISMISSED.

Lawyers FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), vs. THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case Division) and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M. Babol) (March 11, 1991) FACTS: In her last will and testament dated August 16, 1957; Justina Fabillo bequeathed to her brother, Florencio, a house and lot in San Salvador Street, Palo, Leyte and to her husband, Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte. Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property. Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3632 against Gregorio D. Brioso to recover the San Salvador property. The case was terminated when the court, upon the parties' joint motion in the nature of a compromise agreement, declared Florencio Fabillo as the lawful owner not only of the San Salvador property but also the Pugahanay parcel of land. Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo by taking possession and exercising rights of ownership over 40% of said properties. He installed a tenant in the Pugahanay property. Sometime in 1966, Florencio

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Fabillo claimed exclusive right over the two properties and refused to give Murillo his share of their produce. Murillo filed on March 23, 1970 in the then Court of First Instance of Leyte a complaint captioned "ownership of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo, his wife Josefa Taa, and their children. The lower court ruled that there was insufficient evidence to prove that the Fabillo spouses' consent to the contract was vitiated. Ruling that the contract of services did not violate Article 1491 of the Civil Code as said contract stipulated a contingent fee, the court upheld Murillo's claim for "contingent attorney's fees of 40% of the value of recoverable properties." The appellate court affirmed in toto the decision of the lower court. ISSUE: Whether the contract of services was in violation of Article 1491 of the Civil Code. RULING: The contract of services did not violate said provision of law . Article 1491 of the Civil Code, specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction, properties and rights which are the objects of litigation in which they may take part by virtue of their profession. The said prohibition, however, applies only if the sale or assignment of the property takes place during the pendency of the litigation involving the client's property. Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien over funds and property of his client and may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements. As long as the lawyer does not exert undue influence on his client, that no fraud is committed or imposition applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for contingent fee is valid and enforceable. The decision of the then Intermediate Appellate Court is hereby REVERSED and SET ASIDE. Judges GAN TINGCO vs. SILVINO PABINGUIT (.October 17, 1916) FACTS: Candida Acabo was the owner of six parcels of land, all situated in the municipality of Jimalalud, Oriental Negros. These lands were sold on June 12, 1911, by their owner Candida Acabo, to one Gan Tingco. But the purchaser Gan Tingco was unable to take possession of the six parcels of land sold him by Acabo, for they were in the possession of Silvino Pabinguit, who alleges certain rights therein. He claims to have purchased them P375 from Faustino Abad; that Abad had become their owner through purchase from Henry Gardner; that the latter, in turn, had owned them by reason of having purchased them at a public auction. The Court of First Instance of Oriental Negros rendered judgment in behalf of the plaintiff, Gan Tingco, declaring him the owner of the lands described in the complaint, and ordered the defendant, Silvino Pabinguit, to restore the plaintiff to their possession. Leaving out of account that things which should have been proven at trial were not prove, it is a positive fact that Henry Gardner, justice of the peace of Guijulngan, was the purchaser at public auction of Candida Acabo's lands and carabaos levied upon as a result of the judgment, and that he delivered the price of the sale to the sheriff; but the latter returned this sum to the justice of the peace, who said that he was authorized by Silvestre Basaltos, the supposed creditor, to receive the same. At the finish the sheriff delivered nothing to the owner Acabo, all the proceeds of the auction sale having been expended in one way or another without the consent of the judgment debtor appearing of record. Aside from everything else, the trial court was impressed by the circumstance that in the public auction the purchaser was the justice of the peace himself. This, in the judge's opinion, was unauthorized, because article 1459, No. 5, of the Civil Code, prohibits judges from acquiring by purchase, even at public or judicial sale, either in person or by an agent, any property or rights litigated in the court in the jurisdiction or territory within which they exercise their respective duties; this prohibition includes the taking of property by assignment.

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The appellant alleges that the property purchased by justice of the peace Gardner was not the subject of litigation in the justice court; that the action was to recover a certain sum of money, and that he had ordered the property sold on execution. ISSUE: Whether or not it is required that some contest or litigation over the property should have been tried by the said judge as to be covered under Article 1459, paragraph 5 of the Civil Code. RULING:One of the bodies of law which constitute the legislation now in force is the Novisima Recopilacion. In Law 4, Title 14, Book 5 of the same is found the following provision: "We order that in public auctions held by direction of our alcaldes, neither the latter nor any other person whomsoever in their name shall bid in anything sold at such public auctions." The word alcaldes means judges. .Judging from the legal precedents on which the Civil Code is based, it would not seem too much to conclude that the said article of the Civil Code does not make any distinction between property in litigation. In effect, it appears to be as delicate a matter for a judge to take part in the sale of property that had been the subject of litigation in his court, as to intervene in the auction of property which, though not directly litigated in his court, is nevertheless levied upon and sold as the result of a writ of execution issued by him. What the law intends to avoid is the improper interference with and interest of a judge in a thing levied upon and sold by his order. If under the law Gardner was prohibited from acquiring the ownership of Acabo's lands, then he could not have transmitted to Faustino Abad the right of ownership that he did not possess; nor could Abad, to whim this alleged ownership had not been transmitted, have conveyed the ownership had not been transmitted, have conveyed the same to Pabinguit. This court finds no reason whatever why it should not affirm the judgment appealed from. It is therefore hereby AFFIRMED with the costs of this instance against the appellant. Consent was vitiated by senile dementia JULIAN FRANCISCO, (Substituted by his Heirs, namely: CARLOS ALTEA FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA SALANGSANG-FRANCISCO (surviving spouse), and his children namely: TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA, THERESA S. FRANCISCO, PAULINA S. FRANCISCO; THOMAS S. FRANCISCO, PEDRO ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA FRANCISCO and ANTONIO ALTEA FRANCISCO), vs. PASTOR HERRERA (November 21, 2002) FACTS: Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land located at Barangay San Andres, Cainta, Rizal. On January 3, 1991, petitioner bought from said landowner the first parcel for P100,000. On March 12, 1991, petitioner bought the second parcel for P 750,000. Contending that the contract price for the two parcels of land was grossly inadequate, the children of Eligio, Sr., namely, Josefina Cavestany, Eligio Herrera, Jr., and respondent Pastor Herrera, tried to negotiate with petitioner to increase the purchase price. When petitioner refused, herein respondent then filed a complaint for annulment of sale, with the RTC of Antipolo City. In his complaint, respondent claimed ownership over the second parcel, allegedly by virtue of a sale in his favor since 1973. He likewise claimed that the first parcel, the lot covered by TD No. 01-00495, was subject to the co-ownership of the surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering that she died intestate on April 2, 1990, before the alleged sale to petitioner. Respondent also alleged that the sale of the two lots was null and void on the ground that at the time of sale, Eligio, Sr. was already incapacitated to give consent to a contract because he was already afflicted with senile dementia, characterized by deteriorating mental and physical condition including loss of memory. Petitioner as defendant below alleged that respondent was estopped from assailing the sale of the lots. Petitioner contended that respondent had effectively ratified both contracts of sales, by receiving the consideration offered in each transaction. The RTC declared the deeds of sale null and void. The appellate court affirmed the decision of the Regional Trial Court.

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ISSUE: Whether the assailed contracts of sale void or merely voidable and hence capable of being ratified? RULING: Both the trial court and the Court of Appeals found that Eligio, Sr. was already suffering from senile dementia at the time he sold the lots in question. In other words, he was already mentally incapacitated when he entered into the contracts of sale. A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be validated either by the passage of time or by ratification. Article 1318 of the Civil Code states that no contract exists unless there is a concurrence of consent of the parties, object certain as subject matter, and cause of the obligation established. Article 1327 provides that insane or demented persons cannot give consent to a contract. But, if an insane or demented person does enter into a contract, the legal effect is that the contract is voidable or annullable as specifically provided in Article 1390. In the present case, it was established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the former's capacity to consent was vitiated by senile dementia. Hence, the assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and binding unless annulled through a proper action filed in court seasonably. An annullable contract may be rendered perfectly valid by ratification, which can be express or implied. Implied ratification may take the form of accepting and retaining the benefits of a contract. 13 This is what happened in this case. Respondent's contention that he merely received payments on behalf of his father merely to avoid their misuse and that he did not intend to concur with the contracts is unconvincing. If he was not agreeable with the contracts, he could have prevented petitioner from delivering the payments , or if this was impossible, he could have immediately instituted the action for reconveyance and have the payments consigned with the court. None of these happened. As found by the trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the increase of the purchase price while receiving the installment payments. It was only when respondent failed to convince petitioner to increase the price that the former instituted the complaint for reconveyance of the properties. Clearly, respondent was agreeable to the contracts, only he wanted to get more. Further, there is no showing that respondent returned the payments or made an offer to do so. This bolsters the view that indeed there was ratification. One cannot negotiate for an increase in the price in one breath and in the same breath contend that the contract of sale is void. It was found by both the trial court and the Court of Appeals that Eligio, Sr., was the "declared owner" of said lots. This finding is conclusive on us. As declared owner of said parcels of land, it follows that Eligio, Sr., had the right to transfer the ownership thereof under the principle of jus disponendi. In sum, the appellate court erred in sustaining the judgment of the trial court that the deeds of sale of the two lots in question were null and void. The instant petition is GRANTED.

Subject Matter: Article 1461 SIBAL vs. VALDEZ (August 4, 1927) FACTS: Plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, , attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on parcels of land. Within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff. Plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the seven parcels of land and that he had harvested and taken possession of

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the palay in one of said seven parcels and in another parcel and that all of said palay belonged to the plaintiff. Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys and agents, restraining them (1) from distributing him in the possession of the parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar cane in question; and (3) from taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering them to consent to the redemption of the sugar cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two parcels above-mentioned ,with interest and costs. The trial court rendered a judgment against the plaintiff and in favor of the defendants. It appeared that the eight parcels of land belonging to Sibal were attached and Macondray Co., Inc. bought the eight parcels of land. Within 1 year from the sale, Sibal paid Macondray Co., Inc. for the account of the redemption price. The deputy sheriff attached the personal property of Sibal, which included the sugar cane now in question in the seven parcels of land. Said personal properties were sold to Valdez in a public auction. Real property of Sibal was also attached, consisting of 11 parcels of land, 8 of which were bought by Valdez in an auction held by the sheriff. The remaining 3 parcels were released by virtue of claims of Cuyugan and Tizon. On that same date, Macondray sold all of its rights to Valdez in the eight parcels of land acquired, for the unpaid balance of the redemption price of said eight parcels of land. Valdez became the absolute owner of the land. ISSUE: Whether or not pending crops which have potential existence may be the valid subject matter of a sale. RULING: Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and then title will vest in the buyer the moment the thing comes into existence. Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He may make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be also owned at the time by the vendor. The Supreme Court held that pending crops which have potential existence may be the valid subject matter of sale and may be dealt with separately from the land on which they grow. Judgment appealed from AFFIRMED. Subject Matter: Article 1461 PICHEL vs. ALONZO (January 30, 1982) FACTS: Alonzo awarded by the Government a parcel of land in Lamitan, Basilan City in accordance with RA 477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that, previous thereto, Alonzo was proved to have alienated the land to another, in violation of law. In 1972, Alonzo's rights to the land were reinstated. On August 14, 1968, Alonzo and his wife sold to Pichel the fruits of the coconut trees which may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to one, Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by Pichel directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment Alonzo refused to snow the defendant to make any harvest. In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land. An action for the annulment of the Deed of Sale was executed by Alonzo. The lower court held that although the agreement in question is denominated by the parties as a deed of

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sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, a contract of lease of the land itself. ISSUE: Whether or not the deed of sale is the prohibited encumbrance contemplated in Section 8 of Republic Act No. 477? Whether or not there was a contract of sale. RULING: Respondent is not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could exercise all the rights pertaining to a grantee with respect to Lot No. 21. The document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code. The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the sale. The trial courts holding that the contract in question fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite is erroneous. The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased. The contract was clearly a "sale of the coconut fruits." The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other. The grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent improvements thereon. While coconut trees are permanent improvements of a land, their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of by the owner of the land. Judgment of the lower court is SET ASIDE. Complaint is DISMISSED. Subject Matter: Sale of Inheritance TAEDO vs. CA (January 22, 1996) FACTS: On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute sale in favor of his eldest brother, Ricardo Taedo, and the latters wife whereby he conveyed to the latter in consideration of P1,500.00, one hectare of whatever share I shall have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by Title T-l3829 of the Register of Deeds of Tarlac, the said property being his future inheritance from his parents. Upon the death of his father, Lazaro executed an Affidavit of Conformity and another notarized deed of sale in favor of private respondents covering his undivided ONE TWELVE (1/12) of a parcel of land. In February 1981, Ricardo learned that Lazaro sold the same property to his children, petitioners herein, through a deed of sale dated December 29, 1980. On June 7, 1982, private respondents recorded the Deed of Sale in their favor in the Registry of Deeds and the corresponding entry was made in Transfer Certificate of Title No. 166451. Petitioners filed a complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from his father. Petitioners claimed that their father, Lazaro, executed an Absolute Deed of Sale conveying to his ten children his allotted portion under the extrajudicial partition executed by the heirs of Matias, which deed included the land in litigation. Private respondents, however presented in evidence a Deed of Revocation of a Deed of Sale dated March 12, 1981 wherein Lazaro revoked the sale in favor of petitioners for the reason that it was simulated or fictitious without any consideration whatsoever. Shortly after the case a quo was filed, Lazaro executed a sworn statement which virtually repudiated the contents of the Deed of Revocation of a Deed of Sale and the Deed of Sale in favor of private respondents. However, Lazaro testified that he sold the property to Ricardo, and that it was a lawyer who induced him to execute a deed of sale

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in favor of his children after giving him five pesos to buy a drink. The trial court decided in favor of private respondents. CA affirmed the decision of the trial court. ISSUE: Whether or not a sale of future inheritance is valid. Whether or not the subsequent execution of a deed of sale covering the same property to the same buyers valid? RULING: Pursuant to Article 1347 of the Civil Code, (n)o contract may be entered into upon a future inheritance except in cases expressly authorized by law. Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the creator of any obligation between the parties. Hence, the affidavit of conformity dated February 28, 1980, insofar as it sought to validate or ratify the 1962 sale, is also useless and, in the words of the respondent Court, suffers from the same infirmity. The These two documents were executed after the death of Matias (and his spouse) and after a deed of extrajudicial settlement of his (Matias) estate was executed, thus vesting in Lazaro actual title over said property. In other words, these dispositions, though conflicting, were no longer infected with the infirmities of the 1962 sale. Critical in determining which of these two deeds should be given effect is the registration of the sale in favor of private respondents with the register of deeds on June 7, 1982. Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales. The property in question is land, an immovable, and following the above-quoted law, ownership shall belong to the buyer who in good faith registers it first in the registry of property. Thus, although the deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership would vest in the former because of the undisputed fact of registration. On the other hand, petitioners have not registered the sale to them at all. As between two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable property. Petition DENIED. Decision of the CA AFFIRMED.

Subject Matter: Sale of probate property PAHAMOTANG vs. PNB, HEIRS OF ARGUNA (March 31, 2005) FACTS: On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang. On September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a petition for issuance of letters administration over the estate of his deceased wife. In his petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of his deceased spouse. The intestate court issued an order granting Agustins petition. Philippine National Bank (PNB) and Agustin executed an Amendment of Real and Chattel Mortgages with Assumption of Obligation. It appears that earlier, or on December 14, 1972, the intestate court approved the mortgage to PNB of certain assets of the estate to secure an obligation in the amount of P570,000.00. Agustin signed the document in behalf of (1) the estate of Melitona; (2) daughters Ana and Corazon; and (3) a logging company named Pahamotang Logging Enterprises, Inc. (PLEI) which appeared to have an interest in the properties of the estate. Offered as securities are twelve (12) parcels of registered land. Agustin filed with the intestate court a Petition for Authority To Increase Mortgage on the above mentioned properties of the estate, which was granted. Agustin again filed with the intestate court another petition, Petition for Declaration of Heirs And For Authority To Increase Indebtedness, which was also granted. Agustin filed with the intestate court a Petition (Request for Judicial Authority To Sell Certain Properties of the Estate) , therein praying for authority to sell to Arturo Arguna the properties of the estate. Agustin yet filed with the intestate court another petition, this time a Petition To Sell the Properties of the Estate. In separate Orders both dated February 25, 1980, the intestate court granted Agustin authority to sell estate properties, in which orders the court also required all the heirs of Melitona to give their express conformity to the disposal of the subject properties of the estate and to sign the deed of sale to be submitted to the same court. Strangely, the two (2) orders were dated two (2) days earlier than February 27, 1980, the day Agustin supposedly filed his petition.

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The estate properties , were sold to respondent Arturo Arguna, while the property covered by OCT No. P-7131 was sold to PLEI. Arguna and PLEI filed with the intestate court a motion for the approval of the corresponding deeds of sale in their favor, which the intestate court granted. Thereafter, three (3) daughters of Agustin, namely, Ana, Isabelita and Corazon petitioned the intestate court for the payment of their respective shares from the sales of estate properties, which was granted by the intestate court. The obligation secured by mortgages on the subject properties of the estate was never satisfied. Hence, on the basis of the real estate mortgage contracts, mortgagor PNB filed a petition for the extrajudicial foreclosure of the mortgage. Petitioner Josephine filed a motion with the intestate court for the issuance of an order restraining PNB from extrajudicially foreclosing the mortgage. The intestate court denied Josephines motion. Hence, PNB was able to foreclose the mortgage in its favor. Petitioners Josephine and Eleanor, together with their sister Susana, filed their complaint for Nullification of Mortgage Contracts and Foreclosure Proceedings and Damages against Agustin, PNB, Arturo Arguna, PLEI, the Provincial Sheriff of Mati, Davao Oriental, the Provincial Sheriff of Tagum, Davao del Norte and the City Sheriff of Davao City. PNB moved to dismiss the complaint, which the trial court granted in its Order of January 11, 1985. However, upon motion of the plaintiffs, the trial court reversed itself and ordered defendant PNB to file its answer. CA reversed the appealed decision of the trial court. ISSUE: Whether or not the Real Estate Mortgage contracts are null and void RULING: The action filed by the petitioners before the trial court is for the annulment of several contracts entered into by Agustin for and in behalf of the estate of Melitona, namely: (a) contract of mortgage in favor of respondent PNB, (b) contract of sale in favor of Arguna involving seven (7) parcels of land; and (c) contract of sale of a parcel of land in favor of PLEI. Settled is the rule in this jurisdiction that when an order authorizing the sale or encumbrance of real property was issued by the testate or intestate court without previous notice to the heirs, devisees and legatees as required by the Rules, it is not only the contract itself which is null and void but also the order of the court authorizing the same. Clearly, the requirements of Rule 89 of the Rules of Court are mandatory and failure to give notice to the heirs would invalidate the authority granted by the intestate/probate court to mortgage or sell estate assets. Here, it appears that petitioners were never notified of the several petitions filed by Agustin with the intestate court to mortgage and sell the estate properties of his wife. Assailed issuances of the CA are REVERSED and SET ASIDE. Decision of the trial court is REINSTATED. Subject Matter: Determinate Subject Matter NOEL vs. CA, DELESTE; MERCADO vs. CA, DELESTE (January 11, 1995) FACTS: Gregorio Nanaman and Hilaria Tabuclin (Nanaman spouses) were a childless, legallymarried couple. Gregorio, however, had a child named Virgilio Nanaman by another woman. Since he was two years old, Virgilio was reared by Gregorio and Hilaria. He was sent to school by the couple until he reached third year of the law course. During their marriage, Gregorio and Hilaria acquired certain property including a 34.7-hectare land in Tambo, Iligan City on which they planted sugarcane, corn and bananas. They also lived there with Virgilio and fifteen tenants. When Gregorio died, Hilaria then administered the property with the help of Virgilio enjoyed the procedure of the land to the exclusion of Juan Nanaman, the brother of Gregorio, and Esperanza and Caridad Nanaman, Gregorio's daughters by still another woman. In 1953, Virgilio declared the property in his name for taxation purposes. Hilaria and Virgilio, mortgaged the 34.7-hectare land in favor of private respondent, in consideration of the amount of P4,800.00. On February 16, 1954, Hilaria and Virgilio executed a deed of sale over the same tract of land also in favor of private respondent in consideration of the sum of P16,000.00. Having discovered that the property was in arrears in the payment of taxes from 1952, private respondent paid the taxes. From then on, private respondent has paid the taxes on the property.

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When Hilaria died, Esperanza and Caridad Nanaman filed intestate estate proceedings concerning the estate of their father, Gregorio. Included in the list of property of the estate was the 34.7-hectare land. Inasmuch as only Esperanza, Caridad and Virgilio Nanaman were named as heirs of Gregorio in the petition, Juan Nanaman, Gregorio's brother, opposed it. Having been appointed special administrator of the estate of the Nanaman couple, Juan Nanaman included the 34.7-hectare land in the list of the assets of the estate. When Edilberto Noel took over as regular administrator of the estate, he was not able to take possession of the land in question because it was in the possession of private respondent and some heirs of Hilaria. Noel filed an action against private respondent for the version of title over the 34.7hectare land to the Nanaman estate and to order private respondent to pay the rentals and attorney's fees to the estate. The trial court rendered a decision, holding that the action for annulment of the deed of sale had prescribed in 1958 inasmuch as the sale was registered in 1954 and that Gregorio's heirs had slept on their rights by allowing Hilaria to exercise rights of ownership over Gregorio's share of the conjugal property after his death in 1945. The appellate court ruled that the transaction between Hilaria and Virgilio on one hand and private respondent on the other, was indeed a sale. The appellate court, however, agreed with Noel that Hilaria could not validly sell the 37.7-hectare land because it was conjugal property, and Hilaria could sell only her one-half share thereof. But it thereafter amended its decision, affirming and reiterating the regularity and due execution of the deed of sale,affirming the decision of the lower court in all its parts. Pinito W. Mercado, as new administrator of the estate, appealed to this Court, questioning the court of Appeals' Amended Decision applying the doctrine of laches and equating the said doctrine with acquisitive prescription. Another petition for certiorari to declare the sale to private respondent as an equitable mortgage, was filed by Atty. Bonifacio Legaspi, representing the heirs of Hilaria. ISSUE: Whether or not Hilaria and Virgilio could dispose of the entire property sold to private respondent and assuming that they did not have full ownership thereof, whether the right of action to recover the share of the collateral heirs of Gregorio had prescribed or been lost through laches. RULING: Succession to the estate of Gregorio was governed primarily by the provisions of the Spanish Civil Code of 1889. Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters or children of brothers or sisters of the decedent, as is obtaining in this case, was entitled to receive in usufruct the part of the inheritance pertaining to said heirs. Hilaria, however, had full ownership, not merely usufruct, over the undivided half of the estate. It is only this undivided half-interest that she could validly alienate. Virgilio was not an heir of Gregorio under the Spanish Civil Code of 1889. Although he was treated as a child by the Nanaman spouses, illegitimate children who were not natural were disqualified to inherit under the said Code. Therefore, Virgilio had no right at all to transfer ownership over which he did not own. In a contract of sale, it is essential that the seller is the owner of the property he is selling. The principal obligation of a seller is "to transfer the ownership of" the property sold. This law stems from the principle that nobody can dispose of that which does not belong to him. NEMO DAT QUAD NON HABET . While it cannot be said that fraud attended the sale to private respondent, clearly there was a mistake on the part of Hilaria and Virgilio in selling an undivided interest in the property which belonged to the collateral heirs of Gregorio. The sale, having been made in 1954, was governed by the Civil Code of the Philippines. Under Article 1456 of said Code, an implied trust was created on the one-half undivided interest over the 34.7-hectare land in favor of the real owners. On the issue of prescription, the action for recovery of title or possession over the 34.7hectare land had not yet prescribed when the complaint was filed on April 30, 1963. In the same manner, the doctrine of laches does not apply. There is no evidence showing any failure or neglect on his part, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. The action to recover the undivided half-interest of the collateral heirs of Gregorio prescribes in ten years. The cause of action is based on Article 1456 of the Civil Code of the Philippines, which made private respondent a trustee of an implied trust in favor of the said

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heirs. Under Article 1144 of the Civil Code of the Philippines, actions based upon an obligation created by law, can be brought within ten years from the time the right of action accrues. Amended decision of the CA is REVERSED and SET ASIDE. Subject Matter: Determinate Subject Matter MELLIZA vs. CITY OF ILOILO, UP, CA (April 30, 1968) FACTS: Juliana Melliza during her lifetime owned, among other properties, three parcels of residential land in Iloilo City. On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square meters of Lot 1214, to serve as site for the municipal hall. 1 The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the municipality, the so-called "Arellano Plan". Juliana Melliza conveyed a portion of her lot to the Municipality of Iloilo and sold her remaining interest in Lot 1214 to Remedios Sian Villanueva who thereafter obtained her own registered title thereto, under Transfer Certificate of Title No. 18178. Remedios in turn on November 4, 1946 transferred her rights to said portion of land to Pio Sian Melliza. Annotated at the back of Pio Sian Melliza's title certificate indicate that a portion of the subdivision belongs to the Municipality of Iloilo. On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines. UP enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff, the City did not have funds. Pio San Melliza filed an action for the recovery of the lot. CFI dismissed the complaint. CA affirmed CFIs decision. The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant maintains that the public instrument is clear that only Lots Nos. 1214-C and 1214-D with a total area of 10,788 square meters were the portions of Lot 1214 included in the sale; that the purpose of the second paragraph, relied upon for a contrary interpretation, was only to better identify the lots sold and none other; and that to follow the interpretation accorded the deed of sale by the Court of Appeals and the Court of First Instance would render the contract invalid because the law requires as an essential element of sale, a "determinate" object. ISSUE: Whether or not the description whatever you need for the construction of avenues, parks, and city hall according to the Arellano Plan renders the subject matter of sale indeterminable. RULING: Reading the public instrument in toto, with special reference to the paragraphs describing the lots included in the sale, shows that said instrument describes four parcels of land by their lot numbers and area; and then it goes on to further describe, not only those lots already mentioned, but the lots object of the sale, by stating that said lots are the ones needed for the construction of the city hall site, avenues and parks according to the Arellano plan . If the parties intended merely to cover the specified lots Lots 2, 5, 1214-C and 1214-D, there would scarcely have been any need for the next paragraph, since these lots are already plainly and very clearly described by their respective lot number and area. Said next paragraph does not really add to the clear description that was already given to them in the previous one. The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties. The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site, avenues and parks, according to the Arellano plan , sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. Decision of the CA is affirmed. Complaint is DISMISSED.

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Subject Matter: Determinate Subject Matter ATILANO vs. ATILANO (May 21, 1969) FACTS: In 1916, Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, lot No. 535 of the then municipality of Zamboanga cadastre. In 1920 he had the land subdivided into five parts. Eulogio Atilano I, for the sum of P150.00, executed a deed of sale covering lot No. 535-E in favor of his brother Eulogio Atilano II, who thereupon obtained transfer certificate of title No. 3129 in his name. Three other portions were likewise sold to other persons, the original owner, Eulogio Atilano I, retaining for himself only the remaining portion of the land. Upon his death the title to this lot passed to Ladislao Atilano. On December 6, 1952, Eulogio Atilano II having become a widower upon the death of his wife Luisa Bautista, he and his children obtained transfer certificate of title No. 4889 over lot No. 535-E in their names as co-owners. They had the land resurveyed so that it could properly be subdivided; and it was then discovered that the land they were actually occupying on the strength of the deed of sale executed in 1920 was lot No. 535-A and not lot 535-E, as referred to in the deed, while the land which remained in the possession of the vendor, Eulogio Atilano I, and which passed to his successor, defendant Ladislao Atilano, was lot No. 535-E and not lot No. 535-A. The heirs of Eulogio Atilano II , filed the present action in the Court of First Instance of Zamboanga, alleging, inter alia, that they had offered to surrender to the defendants the possession of lot No. 535-A and demanded in return the possession of lot No. 535-E, but that the defendants had refused to accept the exchange. The trial court rendered judgment for the plaintiffs on the sole ground that since the property was registered under the Land Registration Act the defendants could not acquire it through prescription. ISSUE: Whether or not the heirs of Atilano II are entitled to Lot No 535-E, the bigger lot. RULING: The logic and common sense of the situation lean heavily in favor of the defendants' contention. When one sells or buys real property a piece of land, for example one sells or buys the property as he sees it, in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title. In the particular case before us, the portion correctly referred to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II, who had constructed his residence therein, even before the sale in his favor even before the subdivision of the entire lot No. 535 at the instance of its owner, Eulogio Atillano I. In like manner the latter had his house on the portion correctly identified, after the subdivision, as lot No. 535-E, even adding to the area thereof by purchasing a portion of an adjoining property belonging to a different owner. The two brothers continued in possession of the respective portions the rest of their lives, obviously ignorant of the initial mistake in the designation of the lot subject of the 1920 until 1959, when the mistake was discovered for the first time. The mistake did not vitiate the consent of the parties, or affect the validity and binding effect of the contract between them. The new Civil Code provides a remedy for such a situation by means of reformation of the instrument. This remedy is available when, there having been a meeting of the funds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct on accident. In this case, the deed of sale executed in 1920 need no longer reformed. The parties have retained possession of their respective properties conformably to the real intention of the parties to that sale, and all they should do is to execute mutual deeds of conveyance. Judgment appealed from is REVERSED. Subject Matter: Determinate Subject Matter YU TEK CO vs. GONZALES (February 1, 1915) FACTS: Yu Tek Co and Gonzales entered into a contract whereby Gonzales acknowledged receipt of the sum of P3,000 and that in consideration of said sum be obligates himself to deliver to the said Yu Tek and Co., 600 piculs of sugar of the first and second grade, according to the result of the polarization, within the period of three months, beginning on the 1st day of January, 1912, and ending on the 31st day of March of the same year, 1912. Gonzales obligated himself to deliver to the said Messrs. Yu Tek and Co., of this city the said 600 piculs of sugar at any place

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within the said municipality of Santa Rosa. And in case Gonzales does not deliver 600 piculs of sugar within the period of three months the contract will be rescinded and Gonzales will be obligated to return the P3,000 he received. Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover the P3,000. Gonzales was not able to deliver due to the total failure of hic crop. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200. Judgment was rendered for P3,000 only, and from this judgment both parties appealed. ISSUE: Whether or not the loss of the subject matter relieves the seller from his obligation RULING: In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant. There is no clause in the written contract which even remotely suggests such a condition. The defendant undertook to deliver a specified quantity of sugar within a specified time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at liberty to purchase it on the market or raise it himself. It may be true that defendant owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. There is a perfected sale with regard to the "thing" whenever the article of sale has been physically segregated from all other articles. There was no delivery under the contract. Now, if called upon to designate the article sold, it is clear that the defendant could only say that it was "sugar." He could only use this generic name for the thing sold. There was no "appropriation" of any particular lot of sugar. The contract in the case at bar was merely an executory agreement; a promise of sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The defendant having defaulted in his engagement, the plaintiff is entitled to recover the P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must therefore be affirmed. For the foregoing reasons the judgment appealed from is modified by allowing the recovery of P1,200 under paragraph 4 of the contract. As thus modified, the judgment appealed from is AFFIRMED, without costs in this instance. Subject Matter:Quantity NATIONAL GRAINS AUTHORITY, CABAL vs. IAC, SORIANO (March 8, 1989) FACTS: National Grains Authority (now National Food Authority, NFA for short) is a government agency wherein one of its incidental functions is the buying of palay grains from qualified farmers. Soriano offered to sell palay grains to the NFA, through William Cabal, the Provincial Manager of NFA stationed at Tuguegarao, Cagayan. Private respondent Soriano's documents were processed and accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmer's Information Sheet represented the maximum number of cavans of palay that Soriano may sell to the NFA. In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered 630 cavans of palay. The palay delivered during these two days were not rebagged, classified and weighed. when Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be held in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona tide farmer and the palay delivered by him was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans Soriano delivered stating that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX technician, Napoleon Callangan that Soriano is not a bona fide farmer. Soriano insisted that the palay grains delivered be paid. He then filed a complaint for specific performance and/or collection of money with damages. The trial court rendered judgment ordering petitioner National Food Authority, its officers and agents to pay respondent Soriano. The IAC upheld the findings of the trial court. ISSUE: Whether or not there was a contract of sale in the case at bar. RULING: The petition is not impressed with merit. 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

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noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. The acceptance referred to which determines consent is the acceptance of the offer of one party by the other and not of the goods delivered as contended by petitioners. The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is that it (NFA) cannot legally accept the said delivery because Soriano is allegedly not a bona fide farmer. The trial court and the appellate court found that Soriano was a bona fide farmer and therefore, he was qualified to sell palay grains to NFA. Both courts likewise agree that NFA's refusal to accept was without just cause. The above factual findings which are supported by the record should not be disturbed on appeal. Petition is DISMISSED. Decision of the IAC is AFFIRMED. Subject Matter: Sale for future delivery ESGUERRA vs. PEOPLE (July26, 1960) FACTS: Esguerra made representations made with Yu Yek Huy & Co., a business firm duly organized and existing under and by virtue of the laws of the Philippines, thru the Manager of said Company, Yu Yek Bio. Esguerra had copras ready for delivery to it, took and received from said Yu Yek Bio the sum of P4,400 under the express obligation on part of the said accused to deliver to the said company the equivalent worth of copras at its bodega at Siain, Atimonan, Quezon. But Esguerra once in possession of the said sum of money and far from complying with aforesaid obligation, despite repeated demands made upon him to do so, did then and there wilfully, unlawfully and feloniously with intent to defraud the aforesaid company, misapply, misappropriate and convert the said amount to his own personal use and benefit to the damage and prejudice of the Yu Yek Huy & Co. Esguerra insisted insisted that he had already delivered the copra corresponding to the first payment of P2,400.00 and to prove this delivery, he presented in evidence purchase vouchers showing the receipt of copra by the complainant company on different dates. Esguerra filed a motion to quash but was denied. The trial court found the accused guilty of estafa. ISSUE: Whether or not after denial of a motion to quash, precisely on the vagueness of the information, upon assurance by the fiscal and the private prosecutor and accepted by the court that the offense for which the accused was being prosecuted is that of misappropriation defined in paragraph 1 (b) of Articles 315, involving unfaithfulness or abuse of confidence and under which the accused entered trial, the latter could, on appeal, be convicted of an entirely different offense with different elements, that of false pretenses of possessing property or business made prior to or simultaneously with the commission of the fraud. RULING: It is undisputed that the information contains no allegation of misrepresentation, bad faith or false pretense, essential element in the crime of which appellant was found guilty by the Court of Appeals. Nowhere does it appear in the information that these "representations" were false or fraudulent, or that the accused had no such copra at the time he allegedly made such "representations". The falsity or fraudulentness of the pretense or representation or act being the very constitutive element of the offense, allegation to that effect, either in the words of the law or in any other language of similar import, must be made in the information if the right of the accused to be informed of the nature and cause of the accusation against him is to be preserved. In this case, for instance, since the representation wherefor the money was delivered is not being charged as false, and since, if not false, the receipt of the money on such representation does not constitute an offense, the motion to quash the information on the ground that it did not charge an offense or the allegations therein did not constitute an offense, should have been granted. Instead, the fiscal and the private prosecutor assured the court, and

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both the court and the accused depended on the assurance that the offense charged is not that of misrepresentation or false pretense, but that of misappropriation and conversion, of unfaithfulness and abuse of confidence. To convict him now of the very offense which he correctly assailed was not adequately alleged in the information and with which the prosecution expressly stated they were not charging the accused, could result not only in violating appellant's constitutional right to be informed of the nature and cause of the accusation against him, but in actually misleading him. On the merits, there is reason to believe that the responsibility of herein appellant is only civil in nature. The transaction was that of sale of copra for future delivery. Obviously, an advance payment is subject to the disposal of the vendor. If the transaction fails, the liability arising therefrom is of a civil and not of a criminal nature. Decision appealed from is REVERSED. Accused is ACQUITTED. Subject Matter TAC-AN vs. CA, ACOPIADO, et al (May 21, 1984) FACTS: Felipe G. Tac-An, is a lawyer whose services were engaged by the brothers Eleuterio Acopiado and Maximino Acopiado who were accused of frustrated murder and theft of large cattle before the Municipal Court of New Pian, Zamboanga del Norte. Tac-An caused a document entitled, "Deed of Quitclaim" to be thumb-marked by the Acopiado brothers whereby for the sum of P1,200.00 representing his fees as their lawyer in the criminal cases, they conveyed to him a parcel of land with an area of three hectares. The document was acknowledged before Notary Public. Two days after the execution of the deed, the Acopiados told Tac-An that they were terminating his services because their wives and parents did not agree that the land be given to pay for his services. They also said that they had hired another lawyer, a relative, to defend them. But Tac-An continued to represent them. In the case for frustrated murder, the Acopiados were acquitted. The cases for theft of large cattle were dismissed due to the desistance of the complainants. Eleuterio sold his share of the land previously conveyed to Tac-An to Jesus Paghasian and Pilar Libetario but the latter did not take possession thereof. Tac-An appointed Irineo Villejo, a barrio captain, as his overseer in the land and also secured the approval of the Provincial Governor of Zamboanga del Norte to the Deed of Quitclaim. Tac-An filed a complaint against the Acopiado brothers, Paghasian and Libetario in the CFI of Zamboanga del Norte. He prayed that he be declared the owner of the land; that the sale made in favor of Paghasian and owner Libetario be annulled; and that he be paid damages, attorney's fees, etc. CFI decided in favor of Tac-an. The Court of Appeals voided the transfer of the land to Tac-An but held that for his services in the criminal cases he was entitled to the agreed upon amount of P1,200.00. The Court of Appeals found as a fact that the Acopiado brothers fully understood the tenor of the Deed of Quitclaim which they executed. But the Court of Appeals also found as a fact that the Acopiado brothers are Non-Christians, more specifically Subanons, and that each is married to a Subanon. And because they are Non-Christians, the Court of Appeals applied Section 145 of the Administrative Code of Mindanao and Sulu ISSUE: Whether or not the transfer of land to Tac-an was valid. RULING: It should be recalled that on July 2, 1964, Tac-An secured the approval of the Provincial Governor of Zamboanga del Norte to the Deed of Quitclaim and that should have satisfied the requirement of Sec. 145 of the Administrative Code for Mindanao and Sulu. But it appears that on April 12, 1965, while Tac-An's suit was pending in the trial court, the Governor of Zamboanga del Norte revoked his approval for the reasons stated therein. The petitioner also argues that the Administrative Code of Mindanao and Sulu was repealed on June 19, 1965 by Republic Act No, 4252, hence the approval of the Provincial Governor became unnecessary. Suffice it to say that at times material to the case, i.e. when the Deed of Quitclaim was executed, when the approval by the Provincial Governor was given and when the approval was revoked, Sections 145 and 146 of the Administrative Code of Mindanao and Sulu were in full force and effect and since they were substantive in nature the repealing statute cannot be given retroactive effect. It should also be stated that the land in question must be presumed to be conjugal in nature and since the spouses of the Acopiado brothers did not

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consent to its transfer to the petitioner, the transaction was at least voidable. DISMISSED. (NB: IPRA Sec 8(a)(b); cultural minority can sell their lands)

Petition

I. DEFINITION OF PRICE INCHAUSTI AND CO. v. ELLIS CROMWELL G.R. No. L-6584; October 16, 1911 * Appeal by the plaintiff from a judgment of the Court of First Instance of the City of Manila Facts: Plaintiff firm for many years past has been and now is engaged in the business of buying and selling at wholesale hemp, both for its own account and on commission. It is customary to sell hemp in bales which are made by compressing the loose fiber by means of presses, covering two sides of the bale with matting, and fastening it by means of strips of rattan; that the operation of bailing hemp is designated among merchants by the word "prensaje." In all sales of hemp by the plaintiff firm, whether for its own account or on commission for others, the price is quoted to the buyer at so much per picul , no mention being made of bailing; but with the tacit understanding, unless otherwise expressly agreed, that the hemp will be delivered in bales and that, according to the custom prevailing among hemp merchants and dealers in the Philippine Islands, a charge, the amount of which depends upon the then prevailing rate, is to be made against the buyer under the denomination of " prensaje." The amount of the charge made against hemp buyers by the plaintiff firm and other sellers of hemp under the denomination of " prensaje" during the period involved in this litigation was P1.75 per bale; that the average cost of the rattan and matting used on each bale of hemp is fifteen (15) centavos and that the average total cost of bailing hemp is one (1) peso per bale. Between the first day of January, 1905, and the 31st day of March, 1910, the plaintiff firm, in accordance with the custom mentioned in paragraph V hereof, collected and received, under the denomination of "prensaje," from purchasers of hemp sold by the said firm for its own account, in addition to the price expressly agreed upon for the said hemp, sums aggregating P380,124.35; and between the 1st day of October, 1908, and the 1st day of March, 1910, collected for the account of the owners of hemp sold by the plaintiff firm in Manila on commission, and under the said denomination of " prensaje," in addition to the price expressly agreed upon the said hemp, sums aggregating P31,080. Plaintiff firm in estimating the amount due it as commissions on sales of hemp made by it for its principals has always based the said amount on the total sum collected from the purchasers of the hemp, including the charge made in each case under the denomination of "prensaje." Plaintiff has always paid to the defendant or to his predecessor in the office of the Collector of Internal Revenue the tax collectible under the provisions of section 139 of Act No. 1189 upon the selling price expressly agreed upon for all hemp sold by the plaintiff firm both for its own account and on commission, but has not, until compelled to do so as hereinafter stated, paid the said tax upon sums received from the purchaser of such hemp under the denomination of "prensaje." On the 29th day of April, 1910, the defendant, acting in his official capacity as Collector of Internal Revenue of the Philippine Islands, made demand in writing upon the plaintiff firm for the payment within the period of five (5) days of the sum of P1,370.68 as a tax of one third of one percent on the sums of money mentioned in Paragraph IX hereof, and which the said defendant claimed to be entitled to receive, under the provisions of the said section 139 of Act No. 1189, upon the said sums of money so collected from purchasers of hemp under the denomination of "prensaje." Plaintiff firm paid to the defendant under protest the said sum of P1,370.69, and on the same date appealed to the defendant as Collector of Internal Revenue. It is contended by the plaintiff that the tax of P1,370.68 assessed by the defendant upon the aggregate sum of said charges made against said purchasers of hemp by the plaintiff during the period in question, under the denomination of " prensaje" as aforesaid, namely, P411,204.35, is illegal upon the ground that the said charge does not constitute a part of the selling price of

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the hemp, but is a charge made for the service of baling the hemp , and that the plaintiff firm is therefore entitled to recover of the defendant the said sum of P1,370.68 paid to him under protest, together with all interest thereon at the legal rate since payment, and the costs of this action. Held: It is one of the stipulations in the statement of facts that it is customary to sell hemp in bales, and that the price quoted in the market for hemp per picul is the price for the hemp baled. The fact is that among large dealers like the plaintiff in this case it is practically impossible to handle hemp without its being baled, and it is admitted by the statement of facts, as well as demonstrated by the documentary proof introduced in the case, that if the plaintiff sold a quality of hemp it would be the under standing, without words, that such hemp would be delivered in bales, and that the purchase price would include the cost and expense of baling. In other words, it is the fact as stipulated, as well as it would be the fact of necessity, that in all dealings in hemp in the general market the selling price consists of the value of the hemp loose plus the cost and expense of putting it into marketable form. In the sales made by the plaintiff, which are the basis of the controversy here, there were n services performed by him for his vendee. There was agreement that services should be performed. Indeed, at the time of such sales it was not known by the vendee whether the hemp was then actually baled or not. All that he knew and all that concerned him was that the hemp should be delivered to him baled. He did not ask the plaintiff to perform services for him, nor did the plaintiff agree to do so. The contract was single and consisted solely in the sale and purchase of hemp. The purchaser contracted for nothing else and the vendor agreed to deliver nothing else. The word " price" signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to by him. It is quite possible that the plaintiff, in this case in connection with the hemp which he sold, had himself already paid the additional expense of baling as a part of the purchase price which he paid and that he himself had received the hemp baled from his vendor. It is quite possible also that such vendor of the plaintiff may have received the same hemp from his vendor in baled form, that he paid the additions cost of baling as a part of the purchase price which he paid. In such case the plaintiff performed no service whatever for his vendee, nor did the plaintiff's vendor perform any service for him. The distinction between a contract of sale and one for work, labor, and materials is tested by the inquiry whether the thing transferred is one no in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been the subject of sale to some other person, even if the order had not been given. It is clear that in the case at bar the hemp was in existence in baled form before the agreements of sale were made, or, at least, would have been in existence even if none of the individual sales here in question had been consummated. It would have been baled, nevertheless, for sale to someone else, since, according to the agreed statement of facts, it is customary to sell hemp in bales. When a person stipulates for the future sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor. It is otherwise when the article is made pursuant to agreement. Where labor is employed on the materials of the seller he can not maintain an action for work and labor. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at the defendant's request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendant's order for it. It is clear to our minds that in the case at bar the baling was performed for the general market and was not something done by plaintiff which was a result of any peculiar wording of the particular contract between him and his vendee. It is undoubted that the plaintiff prepared his hemp for the general market. Judgment appealed from must be affirmed.

II. WHAT MAY CONSTITUTE PRICE REPUBLIC v. PHILIPPINE DEVELOPMENT CORP.

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G.R. No. L-10141; January 31, 1958 Facts: Macario Apostol submitted the highest bid the amount P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau of Prisons and a contract was drawn therefore. Apostol obtained goods from the Bureau of Prisons valued P15,878.59 and paid only P691.10 leaving a balance obligation of P15,187.49. Apostol submitted the best bid with the Bureau of Prisons for the purchase of three million board feet of logs at P88.00 per 1,000 board feet and that a contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at P65.830.00. Apostol failed to pay a balance account Of P18,827.57. All told, for the total demand set forth in complaint against Apostol is for P34,015.06 with legal interests thereon from January 8, 1952. The Empire lnsurance Company was included in the complaint having executed a performance bond of P10,000.00 in favor of Apostol. Apostol interposed payment as a defense and sought the dismissal of the complaint. Philippine Resources Development Corporation moved to intervene. Sometime prior to Apostol's transactions the corporate had some goods deposited in a warehouse. Apostol, then the president of the corporation but without the knowledge or consent of the stockholders thereof, disposed of said goods by delivering the same to the Bureau of Prisons of in an attempt to settle his personal debts with the latter entity; that upon discovery of Apodol's act, the corporation took steps to recover said goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return said goods, the corporation sought leave to intervene. The Goverment contends that the intervenor has no legal interest in the matter in litigation, because the action brought in the Court of First Instance of Manila against Macario Apostol and the Empire Insurance Company is just for the collection from the defendant Apostol of a sum of money, the unpaid balance of the purchase price of logs and almaciga bought by him from the Bureau of Prisons, whereas the intervenor seeks to recover ownership and possession of G. I. sheets, black sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an intervention which would change a personal action into one ad rem and would unduly delay the disposition of the case. CFI denied the motion to intervene. CA set this aside saying the PRDC had to protect its interest. Issue: Whether or not the goods delivered could be considered payment of the balance

Held: Yes. The Government argues that "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 purschaser 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. Judgment under review is AFFIRMED. II. WHAT MAY CONSTITUTE PRICE TORRES v. CA G.R. No. 134559; December 9, 1999 Facts: Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had it registered in his name. By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed to share the proceeds from the sale of the subdivided lots. The project did not push through, and the land was subsequently foreclosed by the bank.

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According to petitioners, the project failed because of "respondent's lack of funds or means and skills." They add that respondent used the loan not for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company. On the other hand, respondent alleged that he used the loan to implement the Agreement. With the said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu Lapu City Council's approval of the subdivision project which he advertised in a local newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with an engineering firm for the building of sixty low-cost housing units and actually even set up a model house on one of the subdivision lots. He did all of these for a total expense of P85,000. Respondent claimed that the subdivision project failed, however, because petitioners and their relatives had separately caused the annotations of adverse claims on the title to the land, which eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the claims, thereby forcing him to give up on the project. Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted. Thereafter, they filed the present civil case which, upon respondent's motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal, however, the appellate court remanded the case for further proceedings. Thereafter, the RTC issued its assailed Decision, which, as earlier stated, was affirmed by the CA. The Court of Appeals held that petitioners and respondent had formed a partnership for the development of the subdivision. Thus, they must bear the loss suffered by the partnership in the same proportion as their share in the profits stipulated in the contract. Disagreeing with the trial court's pronouncement that losses as well as profits in a joint venture should be distributed equally, Hence, this Petition. Issue: Whether or not the sale of the land was without a valid consideration thereby rendering the contract illegal. Held: Petitioners deny having formed a partnership with respondent. They contend that the Joint Venture Agreement and the earlier Deed of Sale, both of which were the bases of the appellate court's finding of a partnership, were void. In the same breath, however, they assert that under those very same contracts, respondent is liable for his failure to implement the project. Because the agreement entitled them to receive 60 percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay them damages equivalent to 60 percent of the value of the property. Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly stipulated, but also to all necessary consequences thereof, as follows: Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. It is undisputed that petitioners are educated and are thus presumed to have understood the terms of the contract they voluntarily signed. If it was not in consonance with their expectations, they should have objected to it and insisted on the provisions they wanted. Courts are not authorized to extricate parties from the necessary consequences of their acts, and the fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto of their obligations. They cannot now disavow the relationship formed from such agreement due to their supposed misunderstanding of its terms. Petitioners also contend that the Joint Venture Agreement is void under Article 1422 of the Civil Code, Art. 1422. A contract which is the direct result of a previous illegal contract, is also void and inexistent.

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because it is the direct result of an earlier illegal contract, which was for the sale of the land without valid consideration. This argument is puerile. The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project . Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration, more properly denominated as cause, can take different forms, such as the prestation or promise of a thing or service by another. In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project, for which the land was intended to be used. As explained by the trial court, "the land was in effect given to the partnership as [petitioner's] participation therein. . . . There was therefore a consideration for the sale, the [petitioners] acting in the expectation that, should the venture come into fruition, they [would] get sixty percent of the net profits." The petition is DENIED. III. ARTICLE 1469, WHAT CONSTITUTES CERTAINTY OF PRICE BOSTON BANK OF THE PHILS v. PERLA P. MANALO, ET AL. G.R. No. 158149; February 9, 2006 Facts: Xavierville Estate, Inc. (XEI), the owner of parcels of land known as the Xavierville Estate Subdivision, caused the subdivision of the property into residential lots, which then offered for sale to individual lot buyers. XEI, through its General Manager, Antonio Ramos, as vendor, and The Overseas Bank of Manila (OBM), as vendee, executed a Deed of Sale of Real Estate over some residential lots in the subdivision, including Lot 1, Block 2 (907.5 sq.m) and Lot 2, Block 2 (832.8 sq.m). Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos Manalo, Jr. who was in business of drilling deep water wells and installing pumps. For P34,887.66, Manalo, Jr. installed water pump at Ramos residence. Manalo, Jr. then proposed to XEI, through Ramos, to purchase their chosen lots: Lot 1 and 2 of Block 2 with a total area of 1,740.3 sq.m. In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. He also pegged the price of the lots at P200.00 per sq m, or a total of 348,060.00 with a 20% down payment of the purchase price amounting to P69,612.00 less the P34,887.66 owing from Ramos; payable on or before December 31, 1972; the corresponding Contract of Conditional Sale would then be signed on or before the same date, but if the selling operations of XEI resumed after December 31, 1972, the balance of the down payment would fall due then, and the spouses would sign the aforesaid contract within five (5) days from receipt of the notice of resumption of such selling operations. It was also stated in the letter that, in the meantime, the spouses may introduce improvements thereon subject to the rules and regulations imposed by XEI in the subdivision. Perla Manalo (wife of Carlos) conformed to the letter agreement. The sps Manalo took possession of the property on Sept. 2, 1972, constructed a house thereon, and installed a fence around the perimeter of the lots. The spouses Manalo were notified of the resumption of the selling operations of XEI. However, they did not pay the balance of the down payment on the lots because Ramos failed to prepare a contract of conditional sale and transmit the same to Manalo for their signature. Sps Manalo received letters and statement of accounts from XEI inclusive of interests on the purchase price of the lots. Manalo, Jr. stated they had not yet received the notice of resumption of Leis selling operations, and that there had been no arrangement on the payment of interests; hence, they should not be charged with interest on the balance of the down payment on the property. Further, they demanded that a deed of conditional sale over the two lots be transmitted to them for their signatures. However, XEI ignored the demands. Consequently, the spouses refused to pay the balance of the down payment of the purchase price. XEI turned over its selling operations to (OBM) and later on Commercial Bank of Manila(CBM) acquired the Xavierville Estate from OBM. CBM filed a complaint for unlawful detainer against sps Manalo. CBM claimed that the spouses had been unlawfully occupying the property without its consent and that despite its demands, they refused to vacate the property. The latter alleged that they, as vendors, and XEI, as vendee, had a contract of sale over the lots which had not yet been rescinded. The spouses Manalo wrote CBM to offer an amicable settlement, promising to abide by the purchase price of the property (P313,172.34), per agreement with XEI, through Ramos.

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However, on July 28, 1988, CBM wrote the spouses, through counsel, proposing that the price of P1,500.00 per square meter of the property was a reasonable starting point for negotiation of the settlement. The spouses rejected the counter proposal, emphasizing that they would abide by their original agreement with XEI. In the meantime, the CBM was renamed the Boston Bank of the Philippines. After petitioner filed its complaint against the spouses Manalo, the latter filed a complaint for specific performance and damages against the bank before the Regional Trial Court (RTC). The plaintiffs alleged therein that they had always been ready, able and willing to pay the instalments on the lots sold to them by the defendants remote predecessor-in-interest, as might be or stipulated in the contract of sale, but no contract was forthcoming; they constructed their house worth P2,000,000.00 on the property in good faith; Manalo, Jr., informed the defendant, through its counsel, on October 15, 1988 that he would abide by the terms and conditions of his original agreement with the defendants predecessor-in-interest; during the hearing of the ejectment case on October 16, 1988, they offered to pay P313,172.34 representing the balance on the purchase price of said lots; such tender of payment was rejected, so that the subject lots could be sold at considerably higher prices to third parties. Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the execution and delivery of a Deed of Absolute Sale covering the subject lots, sufficient in form and substance to transfer title thereto free and clear of any and all liens and encumbrances of whatever kind and nature. The plaintiffs prayed that, after due hearing, judgment be rendered in their favour. The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs, the parties had a "complete contract to sell" over the lots, and that they had already partially consummated the same. It declared that the failure of the defendant to notify the plaintiffs of the resumption of its selling operations and to execute a deed of conditional sale did not prevent the defendants obligation to convey titles to the lots from acquiring binding effect. Consequently, the plaintiffs had a cause of action to compel the defendant to execute a deed of sale over the lots in their favor. The appellate court sustained the ruling of the RTC that the appellant and the appellees had executed a Contract to Sell over the two lots but declared that the balance of the purchase price of the property amounting to P278,448.00 was payable in fixed amounts, inclusive of precomputed interests, from delivery of the possession of the property to the appellees on a monthly basis for 120 months, based on the deeds of conditional sale executed by XEI in favor of other lot buyers. The CA also declared that, while XEI must have resumed its selling operations before the end of 1972 and the down payment on the property remained unpaid as of December 31, 1972, absent a written notice of cancellation of the contract to sell from the bank or notarial demand therefor as required by Republic Act No. 6552, the spouses had, at the very least, a 60-day grace period from January 1, 1973 within which to pay the same. Issue: Whether or not petitioner or its predecessors-in-interest, the XEI or the OBM, as seller, and the respondents, as buyers, forged a perfect contract to sell over the property; or Whether or not there is a perfected contract to sell. Held: No. SC agree with petitioners contention that, for a perfected contract of sale or contract to sell to exist in law, there must be an agreement of the parties, not only on the price of the property sold, but also on the manner the price is to be paid by the vendee. Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the contracting parties obliges himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and the price. From the averment of perfection, the parties are bound, not only to the fulfillment of what has been expressly stipulated, but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. On the other hand, when the contract of sale or to sell is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties . Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.

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It is not enough for the parties to agree on the price of the property. The parties must also agree on the manner of payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. This is so because the agreement as to the manner of payment goes into the price, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the amount of down payment. The parties must, likewise, agree on the manner of payment of the balance of the purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a down payment or portion thereof, such payment cannot be considered as sufficient proof of the perfection of any purchase and sale between the parties. Indeed, this Court ruled in Velasco v. Court of Appeals that: It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000.00 as part of the downpayment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under article 1482 of the New Civil Code, as the petitioners themselves admit that some essential matter the terms of payment still had to be mutually covenanted. SC agree with the contention of the petitioner that, as held by the CA, there is no showing, in the records, of the schedule of payment of the balance of the purchase price on the property amounting to P278,448.00. SC have meticulously reviewed the records, including Ramos February 8, 1972 and August 22, 1972 letters to respondents, and find that said parties confined themselves to agreeing on the price of the property (P348,060.00), the 20% downpayment of the purchase price (P69,612.00), and credited respondents for the P34,887.00 owing from Ramos as part of the 20% downpayment. The timeline for the payment of the balance of the downpayment (P34,724.34) was also agreed upon, that is, on or before XEI resumed its selling operations, on or before December 31, 1972, or within five (5) days from written notice of such resumption of selling operations. The parties had also agreed to incorporate all the terms and conditions relating to the sale, inclusive of the terms of payment of the balance of the purchase price and the other substantial terms and conditions in the "corresponding contract of conditional sale," to be later signed by the parties, simultaneously with respondents settlement of the balance of the down payment. Based on the February 8 and August 22, 1972 letters, the determination of the terms of payment of the P278,448.00 had yet to be agreed upon on or before December 31, 1972, or even afterwards, when the parties sign the corresponding contract of conditional sale. Jurisprudence is that if a material element of a contemplated contract is left for future negotiations, the same is too indefinite to be enforceable. And when an essential element of a contract is reserved for future agreement of the parties, no legal obligation arises until such future agreement is concluded. So long as an essential element entering into the proposed obligation of either of the parties remains to be determined by an agreement which they are to make, the contract is incomplete and unenforceable. The reason is that such a contract is lacking in the necessary qualities of definiteness, certainty and mutuality. There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after December 31, 1972, on the terms of payment of the balance of the purchase price of the property and the other substantial terms and conditions relative to the sale. Indeed, the parties are in agreement that there had been no contract of conditional sale ever executed by XEI, OBM or petitioner, as vendor, and the respondents, as vendees. Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be considered certain if it be so with reference to another thing certain. It is sufficient if it can be determined by the stipulations of the contract made by the parties thereto or by reference to an agreement incorporated in the contract of sale or contract to sell or if it is capable of being ascertained with certainty in said contract; or if the contract contains express or implied provisions by which it may be rendered certain; or if it provides some method or criterion by which it can be definitely ascertained. As the SC held in Villaraza v. Court of Appeals, the price

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is considered certain if, by its terms, the contract furnishes a basis or measure for ascertaining the amount agreed upon. SC have carefully reviewed the August 22, 1972 letter agreement of the parties and find no direct or implied reference to the manner and schedule of payment of the balance of the purchase price of the lots covered by the deeds of conditional sale executed by XEI and that of the other lot buyers as basis for or mode of determination of the schedule of the payment by the respondents of the P278,448.00. It bears stressing that the respondents failed and refused to pay the balance of the down payment and of the purchase price of the property amounting to P278,448.00 despite notice to them of the resumption by XEI of its selling operations. The respondents enjoyed possession of the property without paying a centavo. On the other hand, XEI and OBM failed and refused to transmit a contract of conditional sale to the respondents. The respondents could have at least consigned the balance of the down payment after notice of the resumption of the selling operations of XEI and filed an action to compel XEI or OBM to transmit to them the said contract; however, they failed to do so. As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected contract to sell the two lots; hence, respondents have no cause of action for specific performance against petitioner. Republic Act No. 6552 applies only to a perfected contract to sell and not to a contract with no binding and enforceable effect. The petition is GRANTED. IV. ARTICLE 1470, EFFECT OF INADEQUACY OF PRICE VDA. DE GORDON v. CA G.R. No. L-37831; November 23, 1981 Facts: Two parcels of land were sold at public auction at the City Hall, Quezon City on December 3, 1964 under the direction and supervision of the City Treasurer of Quezon City after the proper procedures and legal formalities had been duly accomplished. The taxes against the 2 parcels of land in question for the years 1953 to 1963 remained unpaid, thus the City Treasurer of Quezon City advertised the sale of the 2 parcels of land to satisfy the taxes, penalties and costs. At the public sale, the two parcels of land in question were sold to Rosario Duazo for the amount of P10, 500.00 representing the tax, penalty and costs. Upon the failure of the registered owner (Restituta Vda. De Gordon) to redeem the two parcels of land in question within the one year period prescribed by law, the City Treasurer of Quezon City executed on January 4, 1966 a final deed of sale of said lands and the improvements thereon, and said final deed of sale was also registered in the Office of the Register of Deeds of Quezon City on January 18, 1966. Issue: W/N whether the price is so grossly inadequate as to justify the setting aside of the public sale? NO. Held: Petitioner's assignment of error as to the alleged gross inadequacy of the purchase price must likewise fail. As the Court has held in Velasquez vs. Coronel, alleged gross inadequacy of price is not material "when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption."

VI. EFFECT OF ABSENCE OF PRICE MAPALO v. MAPALO G.R. No. L-21489 and L-21628; May 19, 1966

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Facts: Sps. Miguel and Candida Mapalo, (illiterate) farmers, were registered owners of a 1,635 square-meter residential land in Manaoag, Pangasinan with OCT No. 46503 They decided to donate the eastern half of the property to Maximo (brother of Miguel) who was about to get married. The OCT was delivered. As a result however, they were deceived into signing a deed of absolute sale over the entire land in his (maximo) favor. Their signature thereto were procured by fraud, that is, they were made to believe by Maximo Mapalo and the attorney who acted as notary public who "translated" the document, that the same was a deed of donation in Maximo's favor covering one half (the eastern half) of their land. Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses did not receive anything of value for the land. Following the execution of the afore-stated document the spouses Miguel Mapalo and Candida Quiba immediately built a fence of permanent structure in the middle of their land segregating the eastern portion from its western portion.Not known to them, meanwhile, Maximo, on March 15, 1938, registered the deed of sale in his favor and obtained in his name Transfer Certificate of Title over the entire land. On October 20, 1951, he sold for P2,500.00 said entire land in favor the Narcisos, which was subsequently registered and a TCT issued in their name over the entire property. The Narcisos took possession only of the eastern portion of the land in 1951, after the sale. On February 7, 1952 they filed suit in the Court of First Instance of Pangasinanto be declared owners of the entire land; for possession of its western portion; for damages; and for rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land with the consent of the spouses Mapalo. CFI ruled in favor of spouses Mapalo but CA reversed the decision upon appeal, solely on the ground that the consent of the Mapalo sps. to the deed of sale having been obtained by fraud, was voidable, not void ab initio. Hence, the action to annul the same had long prescribed. It reckoned said notice of the fraud from the date of registration of the sale on March 15, 1938. The Court of First Instance and the Court of Appeals are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on prescription that they lost in the Court of Appeals. Issue: W/N the sale (as to the western portion) was void or voidable (Appelants contention was that it was void for being absolutely simulated) Held: The sale is void. The Court of Appeals is right in that the element of consent is present as to the deed of sale of October 15, 1936. For consent was admittedly given, albeit obtained by fraud. Accordingly, said consent, although defective, did exist. In such case, the defect in the consent would provide a ground for annulment of a voidable contract, not a reason for nullity ab initio.The parties are agreed that the second element of object is likewise present in the deed of October 15, 1936, namely, the parcel of land subject matter of the same.Not so, however, as to the third element of cause or consideration. And on this point the decision of the Court of Appeals is silent. As to the sale of the eastern portion of the land, there is no question, it being admitted that said land was donated to Maximo. However, as regards the western portion, the question is whether or not there was a cause or consideration to support the existence of a contract of sale. The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or consideration produce no effect whatsoever. Nonetheless, under the Old Civil Code, the statement of a false consideration renders the contract voidable, unless it is proven that it is supported by another real and licit consideration. And it is further provided by the Old Civil Code that the action for annulment of a contract on the ground of falsity of consideration shall last four years, the term to run from the date of the consummation of the contract. Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should be asked whether its case is one wherein there is no consideration, or one with a statement of a false consideration. If the former, it is void and inexistent; if the latter, only voidable, under the Old Civil Code. As observed earlier, the deed of sale of 1936 stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however, said consideration was totally absent. The problem, therefore, is whether a deed which states a consideration that in fact did not exist is a contract without consideration, and therefore void ab initio, or a contract with a false consideration, and therefore, at least under the Old Civil Code, voidable.

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From the foregoing it can be seen that where, as in this case, there was in fact no consideration, the statement of one in the deed will not suffice to bring it under the rule of Article 1276 of the Old Civil Code as stating a false consideration. VI. EFFECT OF ABSENCE OF PRICE SALVACION SERRANO LADANGA v. CA G.R. No. L-55999; August 24, 1984 Facts: Clemencia, a spinster who retired as division superintendent of public schools at 65 in 1961, had a nephew named Bernardo S. Aseneta, the child of her sister Gloria, and a niece named Salvacion, the daughter of her sister Flora. She legally adopted Bernardo in 1961. On a single date, April 6, 1974 (when Clemencia was about 78 years old), she signed nine deeds of sale in favor of Salvacion for various real properties. One deed of sale concerned a property in Paco which purportedly was sold to Salvacion for P26,000. The total price involved in the nine deeds of sale and in the tenth sale executed on November 8, 1974 was P92,200. Clemencia denied having "received even one centavo" of the price of P26,000, much less the P92,000. This testimony was corroborated by Soledad L. Maninang, 69, a dentist with whom Clemencia had lived for more than thirty years in Kamuning, Quezon City. The notary testified that the deed of sale for the Paco property was signed in the office of the Quezon City registry of deeds. He did not see Salvacion giving any money to Clemencia. In May, 1975, Bernardo as guardian of Clemencia, filed an action for reconveyance of the Paco property, accounting of the rentals and damages. Clemencia was not mentally incompetent but she was placed under guardianship because she was an easy prey for exploitation and deceit. Clemencia died on on May 21, 1977 at the age of 80. She allegedly bequeathed her properties in a holographic will dated November 23, 1973 to Doctor Maninang. In that will she disinherited Bernardo. The will was presented for probate. the trial court and the Appellate Court declared void the sale of the Paco property. The Ladanga spouses contend that the Appellate Court disregarded the rule on burden of proof. Issue: Whether or not the sale of the Paco Party between Clemencia and Salvacion is valid

Held: This contention is devoid of merit because Clemencia herself testified that the price of P26,000 was not paid to her. The burden of the evidence shifted to the Ladanga spouses. They were not able to prove the payment of that amount. The sale was fictitious. Clemencias testimony and that of the notary leave no doubt that the price of P26,000 was never paid. A contract of sale is void and produces no effect whatsoever where the price, which appears therein as paid, has in fact never been paid by the purchaser to the vendor. Such a sale is inexistent and cannot be considered consummated. It was not shown that Clemencia intended to donate the Paco property to the Ladangas. Her testimony and the notary's testimony destroyed any presumption that the sale was fair and regular and for a true consideration. Ladangas abused Clemencia's confidence and defrauded her of properties with a market value of P393,559.25 when she was already 78 years old. Judgment of the Appellate Court is affirmed with the modification that the adjudication for moral and exemplary damages is discarded. VII. EFFECT OF STATEMENT OF NOMINAL PRICE ONG v. ONG G.R. No. L-67888; October 8, 1985 Facts: Records show that on February 25, 1976 Imelda. Ong, for and in consideration of One (P1.00) Peso and other valuable considerations, executed in favor of private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quitclaimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in the ONE-HALF (1/2) undivided portion of the parcel of land consisting of an area of 125 sq. m.

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On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on January 20, 1982 donated the whole property described above to her son, Rex Ong Jimenez. On June 20,1983, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with the Regional Trial Court of Makati, Metro Manila an action against petitioners, for the recovery of ownership/possession and nullification of the Deed of Donation over the portion belonging to her and for Accounting. On December 12, 1983, the trial court rendered judgment in favor of respondent Maruzzo and held that the Quitclaim Dead is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter. Petitioners appealed to the respondent Intermediate Appellate Court. They reiterated their argument below and, in addition, contended that the One (P1.00) Peso consideration is not a consideration at all to sustain the ruling that the Deed of Quitclaim is equivalent to a sale. On June 20, 1984, respondent Intermediate Appellate Court promulgated its Decision affirming the appealed judgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or consideration; that the consideration is the One (P1.00) Peso which is clearly stated in the deed itself; that the apparent inadequacy is of no moment since it is the usual practice in deeds of conveyance to place a nominal amount although there is a more valuable consideration given. Issue: w/n the quitclaim was a deed of sale, and if so w/n the same was valid. (YES) Held: A careful perusal of the subject deed reveals that the conveyance of the one-half () undivided portion of the above described property was for and in consideration of the One (Pl.00) Peso and the other valuable considerations paid by private respondent Sandra Maruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or consideration is not the One Peso alone but also the other valuable considerations. As aptly stated by the Appellate Court "x x x although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or consideration supporting a contract even if such cause is not stated therein. This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. VII. EFFECT OF STATEMENT OF NOMINAL PRICE BAGNAS v. CA G.R. No. 109410; August 28, 1996 Facts: Hilario Mateum of Kawit, Cavite, died on March 11, 1964, single, without ascendants or descendants, and survived only by collateral relatives, of whom petitioners herein, his first cousins, were the nearest. Mateum left no will, no debts, and an estate consisting of twenty-nine parcels of land in Kawit and Imus, Cavite, ten of which are involved in this appeal. On April 3, 1964, the private respondents, themselves collateral relatives of Mateum though more remote in degree than the petitioners, registered with the Registry of Deeds for the Province of Cavite two deeds of sale purportedly executed by Mateum in their (respondents') flavor covering ten parcels of land. Both deeds were in Tagalog, save for the English descriptions of the lands conveyed under one of them; and each recited the consideration of P1.00 and services rendered to and for Mateum's benefit. On May 22, 1964 the petitioners commenced suit against the respondents in the Court of First Instance of Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as donations void for want of acceptance embodied in a public instrument. Claiming ownership pro indiviso of the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum, the petitioners prayed for recovery of ownership and possession of said lands, accounting of the fruits thereof and damages.

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Defendants aver that they were collateral relatives of Hilario Mateum and had done many good things for him, nursing him in his last illness, which services constituted the bulk of the consideration of the sales. Trial court dismissed the petition on the ground that the plaintiff's evidence of alleged fraud was insufficient, the fact that the deeds of sale each stated a consideration of only P1 .00 not being in itself evidence of fraud or simulation. Also on the ground (laid down in Armential vs. Patriarca) that the plaintiffs as mere collateral relatives could not legally question the disposition made by the deceased during his life time. CA affirmed the decision. Issue: w/n the deeds of sale were void or inexistent from teh beginning or merely voidable. If they were only voidable, then it is a correct proposition that since the vendor Mateum had no forced hairs whose legitimes may have been impaired, and the petitioners, his collateral relatives, not being bound either principally or subsidiarily to the terms of said deeds, the latter had and have no actionable right to question those transfers. On the other hand, if said deeds were void ab initio because to all intents and purposes without consideration, then a different legal situation arises since if there has no cause or consideration, the property allegedly conveyed never really leaves the patrimony of the transferor, and upon the death without testament, such property would have passed to the transferors' heirs intestate and can be recoverable by them, or by the Administrator of the transferor's estate.. (so in this case pwede ma-recover ng petitioners)] Held: The deeds of sale are void and of no force or effect whatsoever. Upon the consideration alone that the apparent gross, not to say enormous, disproportion between the stipulated price (in each deed) of P1 .00 plus unspecified and unquantilled services and the undisputably valuable real estate allegedly sold - worth at least P10,500.00 going only by assessments for tax purposes which, it is well-known, are notoriously low indicators of actual value - plainly and unquestionably demonstrates that they state a false and fictitious consideration, and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio. The transfers in question being void, it follows as a necessary consequence and conformably to the concurring opinion in Armentia, with which the Court fully agrees, that the properties purportedly conveyed remained part of the estate of Hilario Mateum, said transfers notwithstanding, recoverable by his intestate heirs, the petitioners herein, whose status as such is not challenged. IX. MEETING OF THE MINDS AS TO MANNER OF PAYMENT VELASCO v. CA G.R. No. L-31018; June 19, 1973 Facts: Velasco family had been leasing the subject property from the Magdalena Estate, Inc., since December 29, 1961. That on Nov. 29, 1962, the plaintiff thru Socorro Velasco (his sisterin-law) and the defendant (Magdalena Estate, Inc. had entered into a contract of sale be virtue of which the defendant offered to sell the plaintiff and the plaintiff in return agreed to buy a parcel of land with an area of 2058 sq. m. more specifically described as Lot 15, Blk 7 psd-6129 located at no. 39 corner 6 th st. and Pacific Ave., New Manila for the total purchase price of P100,000. Plaintiff averred that he was to give a down payment of P10,000 to be followed by P20,000 and the balance of P70,000 would be paid in installments in 10 years from November 29,1 962, the equal monthly amortization of which was to be determined as soon as the P30,000 had been completed. And so, plaintiff paid the down payment of P10,000 in which he was given a receipt on November 29, 1962. that on January 8, 1964 he tendered to defendant the additional P20,000 to complete the P30,000 which was refused by the defendant and likewise refused to executed the deed of sale. On the other hand, defendant denied all the allegations. And that he contends that there was no perfected sale. Issue: Whether or not there was a perfected contract of sale

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Held: There was no perfected contract of sale in regard to the manner of payment. It can be easily gleaned from their agreement that petitioner and defendant still had to meet and agree on how and when the down payment and the installment payments were to be paid. To give down a payment of P10,000 to be followed by P20,000 and the balance of P70,000 would be paid in installments in 10 years from November 29, 1962, the equal monthly amortization of which was to be determined as soon as the P30,000 had been completed. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. It is a well settled rule that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact therefore that the petitioners delivered to the respondent the sum of P10,000 part of the down payment cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties under Article 1482 of the New Civil Code, as the petitioners themselves admit that some essential matter the terms of payment still had to be covenanted. INADEQUACY OF PRICE CU BIE vs. IAC FACTS: Conchita Sydeco-Hautea, Mary Sydeco de Tayengco, Ramon Militante and his children (as heirs of Rosario Sydeco-Militante), Cu Bie (as heir of Cipriano Sydeco) and Salvacion SydecoTayengco own in common and in equal shares a piece of land in Iloilo. This land, known as Lot No. 282 of the Cadastral Survey of Iloilo, has an area of 225 square meters and is covered by Transfer Certificate of Title No. 15994. In 1954, Salvacion filed in the CFI of Iloilo an action for partition, naming as defendants her co-owners and a certain Maraindas T. Malvani, who, it was alleged, was in possession of the land as well as of the house and building thereon. After the answers had been filed, the parties submitted to the court an "Agreement" in which they asked that the lot in question be sold "at public auction and to the highest bidder for cash" and that the proceeds be divided among the co-owners. The court approved the agreement. And forthwith a public auction was held on August 1955. In the public auction, Conchita won by bidding 40,500, however she could only produce 8,100. So a re-bidding was conducted, wherein Tirol emerged as the highest bidder for 12,000. (spanish portion na eh.. sorry limited lang ang powers ko ) Subsequently, Salvacion asked the court to confirm the sale to Roberto Tirol, divide the proceeds among the co-owners and award to her the sum of 5, 642 as damages -- The amount is said to represent the difference between what she would have received as share had the lot been sold for P40,500.00 and what she would actually received as share in the P12,000.00 bid of Tirol. rom that judgment, Conchita Sydeco-Hautea, Mary Sydeco Tayengco, Ramon Militante and Cu Bie appealed to the Court of Appeals. The appellate court upheld the sale to Tirol, but modified the decision of the lower court insofar as it awarded damages to Salvacion. ISSUE: w/n the sale to Tirol was valid HELD: The sale to Tirol could not be assailed on the ground of inadequacy of price. It is now settled that inadequacy of price, unless shocking to the conscience, is not a sufficient ground for setting aside a sale if there is no showing that, in the event of a resale, a better price can be obtained. Moran lists down a good number of cases on this point with which this case may be compared. INADEQUACY OF PRICE IN AUCTION SALE VDA. DE GORDON vs. CA FACTS: Two parcels of land were sold at public auction at the City Hall, Quezon City on December 3, 1964 under the direction and supervision of the City Treasurer of Quezon City after the proper procedures and legal formalities had been duly accomplished. The taxes against the 2 parcels of land in question for the years 1953 to 1963 remained unpaid, thus the City Treasurer of Quezon City advertised the sale of the 2 parcels of land to satisfy the taxes, penalties and costs.

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At the public sale, the two parcels of land in question were sold to Rosario Duazo for the amount of P10, 500.00 representing the tax, penalty and costs. Upon the failure of the registered owner (Restituta Vda. De Gordon) to redeem the two parcels of land in question within the one year period prescribed by law, the City Treasurer of Quezon City executed on January 4, 1966 a final deed of sale of said lands and the improvements thereon, and said final deed of sale was also registered in the Office of the Register of Deeds of Quezon City on January 18, 1966. ISSUE: W/N whether the price is so grossly inadequate as to justify the setting aside of the public sale? NO. RULING:Petitioner's assignment of error as to the alleged gross inadequacy of the purchase price must likewise fail. As the Court has held in Velasquez vs. Coronel, alleged gross inadequacy of price is not material "when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption." (jo anne b.) DE LEON vs. SALVADOR FACTS: A judgment for P35, 000.00 was obtained by Enrique de Leon against private respondent Eusebio Bernabe. Having become final and executory, a writ of execution was issued by the court. Pursuant thereto, the city sheriff levied on execution on two parcels of land, 682.5 square meters each, registered in the name of Bernabe. At the execution sale, the city sheriff sold the properties to herein petitioner, Aurora (sister of the judgment creditor) as the highest bidder for the total sum of P30, 194.00. Two weeks before the expiration of the one-year period to redeem the properties sold in execution, the judgment debtor Bernabe filed a separate civil action against his judgment creditor Enrique de Leon, herein petitioner Aurora P. de Leon as purchaser and the sheriff as defendants for the setting aside or annulment of the execution sale for being anomalous and irregular," and for the ordering of a new auction sale, on the grounds that the sheriff had allegedly sold the two parcels of land jointly instead of separately, and that the total sales price of P30,194.00 was shocking to the conscience, alleging that the two parcels, if sold separately, could easily be sold at P235,000.00 and P150,000.00. ISSUE: W/N the price is grossly inadequate? NO. RULING: As to the alleged gross inadequacy of the price of P30, 194.00 paid by Aurora, when according to Bernabe the properties could have been easily sold for a total price of P385, 000.00, Bernabe has admitted that there was an existing mortgage lien on the properties in the amount of P120, 000, 00 which necessarily affected their value. The failure of Bernabe to timely sell the properties for their fair value through negotiated sales with third persons either before or after the execution sale in order to be able to discharge his judgment debt or redeem the properties within the redemption period, or to raise the necessary amount there from to so effect redemption can be attributed only to his own failings and gross improvidence. They cannot be cited in law or in equity to defeat the lawful claim of Aurora nor to give validity to the void orders of Judge Salvador's court. The applicable rule on forced sales where the law gives the owner the right of redemption was thus stated by the Court in Velasquez vs. Coronel: "However, while in ordinary sales for reasons of equity a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the courts to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption. And so it was aptly said: 'When there is the right to redeem, inadequacy of price should not be material, because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale."

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FORMATION LIMKETKAI SONS MILLING INC. vs. CA (March 29, 1996) FACTS: Philippine Remnants Co., Inc. constituted BPI as its trustee to manage, administer, and sell its real estate property. One such piece of property placed under trust was the disputed lot. Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to sell the lot for P1,000.00 per square meter. This arrangement was concurred in by the owners of the Philippine Remants. Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. Petitioners officials, Alfonso Lim and Albino Limketkai, went to BP to confirm the sale. The parties agreed that the lot would be sold at P1,000.00 per square meter to be paid in cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it may be mentioned at this juncture that there is no dispute over petitioners being the first comer and the buyer being first served. Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso Lim asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask for payment on terms because previous transactions, the same had been allowed. It was the understanding, however, that should the term payment be disapproved, then the price shall be paid in cash. It was Albano who dictated the terms under which the installment payment may be approved, and acting thereon, Alfonso Lim, on the same date, wrote BPI through Merlin Albano embodying the payment initially of 10% and the remaining 90% within a period of 90 days. Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI on July 18, 1988 and tendered the full. The payment was refused because Albano stated that the authority to sell that particular piece of property in Pasig had been withdrawn from his unit. An action for specific performance with damages was thereupon filed petitioner against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under litigation to National Bookstore. ISSUE: Whether or not there was a perfected contract of sale between BPI and Limketkai.

RULING: Yes, there was a perfected contract of sale. The requirement in the payment of the purchase price on terms instead of cash were suggested by BPI Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the possibility of paying on terms was referred to the Trust committee but with the mutual agreement that if the proposed payment on terms will not be approved by our Trust Committee, Limketkai should pay in cash the amount was no longer subject to the approval or disapproval of the Committee, it is only on the terms. The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But because petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent to higher officials immediately upon learning that payment on terms was frozen and/or denied. Limketkai exercised his right within the period given to him and tendered payment in full. The BPI rejected the payment. The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfono Lim with Albino Limketkai, acting for petitioner. Limketkai, agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and the authorized broker. There was a concurrence of offer and acceptance, on the object and on the cause thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the cause thereof. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer (Article 1319, Civil Code). An acceptance may be express or implied (Article 1320, Code) It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granter or not, a

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contract is formed (Stuart vs. Franklin Life Ins. Co., 105 Fed. 2 nd 965, citing Sec. 79, Williston on Contracts) the vendors change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender of a counter-offer. ANTONIO M. BARRETO vs. JOSE SANTA MARINA December 2, 1913 FACTS: The LA Insular cigar and cigarette factory is a joint account association. Barretos attorneys wrote Santa Marina local representative a letter offering to sell his participation in the factory. A committee of appraisers was appointed to ascertain and fix the actual value of La Insular. The committee rendered its report fixing the net value at P4,428,194.44. Of this amount, 4/173 represented the plaintiffs share on his P20,000 of the nominal capita. A document was executed whereby Barreto made demand for his share of the profits from June 30, 1909 to November 22, 1910. This demand was refused and thereupon this action was instituted to recover said profits. ISSUE: Whether or not there was a valid contract of sale

RULING: No. It appears that the plaintiffs offered to sell the defendant his participation in La Insular. This offer was made on account of the strained relations existing between the parties at that time and the desire on the part of the plaintiff to separate himself from that business. In the offer, the plaintiffs interest or participation was definitely defined and stated to be P20,000 in the nominal capital of P865,000. Article 1450 of the Civil Code reader: The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is the objects of the contract and upon the price even when neither has been delivered. This is supplemented by Article 1447 of the Code which reads as follows: In order that the price may be considered fixed, it shall be sufficient that it be fixed with regard to another determinate thing also specific, or that the determination of the same be left to the judgment of a specified person. Under Article 1450, there are two indispensable requisites in a perfected sale: (1) There must be an agreement upon the thing which is the objects of the contract; and (2) The contracting parties must agree upon the price. The object of the contract in the case at bar was the whole of the plaintiffs right, title and interest in La Insular. This whole was 4/173 of the entire net value of the business. The parties agreed that the price should be 4/173 of the total net value. The fixing of such net value was unreservedly left to the judgment of the appraisers. As to the thing and the price the minds of the contracting parties met, and all questions relating thereto were settled. Nothing was left unfinished in so far as the contracting parties were concerned. Neither party could withdraw from the contract without the consent of the other. The result is that the two essential requisites necessary to constitute a perfected sale were present. But the plaintiff strongly insists that the language used in the contracts of May 3 and November 22 and the fact that the appraisers did not take into consideration of fixing the value of the business the profits accruing after June 30, 1909, show beyond doubt that the first named contract constitutes an agreement to sell in the future and not a perfected sale and that this is clearly in harmony with the intention of the parties. The total value of the business as fixed by the appraiser was final and conclusive and binding upon each of the parties. Neither could question the correctness of such value when once thus fixed. The only thing which either could then do was the one to tender and the other to accept the cash. The one could not immediately sell and the other could not immediately buy because the purchase and sale had already taken place. If they could have done this then the plaintiff could have sold his interest to any other person at any time after the execution of the contract of May 3 and before November 22 for the reason that by a contract to sell only a jus in personam is created; while by a sale a jus in rem is transferred. Did the parties intend to include the profits in question in the purchase and sale, and did the appraisers include said profits when they fixed the total net value of the La Insular?

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In the 2nd paragraph of the contract of May 3, this language was used: Whereas the respective contracting parties have been made to agree as to the true present value of said interest of the party of the second part The said interest was the whole of the right, title and interest of the plaintiff in the factory. The true present value was the actual value of the plaintiffs entire interest on that date, May 3. The appraisers were appointed to ascertain and fix the total net value so that the true present value, 4/173 of the whole net value, of the plaintiffs interest might be segregated and paid for. The contracts and the report of the appraisers were so clear and cover the entire subject matter so fully that the Court is convinced that the subsequent demand for the profits in question was an afterthought. GAMALIEL C. VILLANUEVA and IRENE C. VILLANUEVA vs. COURT OF APPEALS, SPS. JOSE and LEONILA DELA CRUZ and SPS. GUIDO and FELICITAS PILE (January 28, 1997) FACTS: Gamaliel Villanueva has been a tenant-occupant of a unit in the 3-door apartment building erected on a parcel of land owned by Jose and Leonila dela Cruz, with an area of 403 square meters, more or less, located at Short Horn, Project 8, Quezon City, having succeeded in the occupancy of said unit from the previous tenant Lolita Santos sometime in 1985. About February of 1986, defendant Jose dela Cruz offered said parcel of land with the 3-door apartment building for sale and plaintiffs, son and mother, showed interest in the property. As an initial step, defendant Jose dela Cruz gave plaintiff Irene Villanueva a letter of authority date February 12, 1986 for her to inspect the subject property. Because said property was in arrears in the payment of reality taxes, Jose dela Cruz approached Irene Villanueva and asked for a certain amount to pay for the taxes so that the property would be cleared of any encumbrance. Plaintiff Irene Villanueva gave P10,000.00. It was agreed by them that said P10,000.00 would form part of the sale price of P550,000.00. Jose dela Cruz went to plaintiff Irene Villanueva brining with him Mr. Ben Sabio, a tenant of one of the units in the 3-door apartment building located on the subject property, and requested her and her son to allow said Ben Sabio to purchase one-half (1/2) of the property where the unit occupied by him pertained to which the plaintiffs consented, so that they would just purchase the other half portion and would be paying only P265,000.00, they having already given an amount of P10,000.00 used for paying the realty taxes in arrears. Accordingly, the property was subdivided and two separate titles were secured by defendants Dela Cruz. Mr. Ben Sabio immediately made payments by installments. Sometime in March 1987, Dela Cruz executed in favor of Guido Pili and Felicitias Fili, a Deed of Assignment of the other portion of the parcel of land wherein Gamaliel Villanuevas apartment unit is situated, purportedly as full payment and satisfaction of an indebtedness obtained from defendants Pili. Consequently, a TCT was issued in the name of Pili. Immediately thereafter, the plaintiffs came to know of such assignment and transfer and issuance of a new certificate of title in favor of Pili so that plaintiff Gamaliel Villanueva complained to the barangay captain on the ground that there was already an agreement between defendants Dela Cruz and themselves that said portion of the parcel of land owned by defendants Dela Cruz would be sold to him. As there was no settlement arrived at, the plaintiffs elevated their complaint to this Court through the instant action. ISSUE: Whether or not there is a perfected contract of sale of subject property between petitioners and respondents spouses Dela Cruz RULING: Appellants theory of earnest money cannot be sustained in view of the catena of circumstance showing that the P10,000.00 given to appellees was not intended to form part of the purchase price. As the great commentator Manresa observes tha thte delivery of part of the purchase price should not be understood as constituting earnest money unless it be shown that such was the intention of the parties. Moreover, as can be gleaned from the records, there was no concrete agreement to the price and manner of payment. Petitioners content that private respondents counsel admitted that P10,000 is partial or advance payment. Necessarily then, there must have been an agreement to the price. They cite Article 1482 of the Civil Code which provides that whenever earnest money is given in a

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contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. Private respondents contradict this claim with the argument that what was clearly agreed upon between petitioners and respondents was that the P10,000 primarily intended as payment for realty tax was going to form part of the consideration of the sale if and when the transaction would finally be consummated. Private respondents insist that there was no clear agreement as to the true amount of consideration. Respondent dela Cruz never testified that he or his spouse Leonila had agreed to a definite price for the subject property. In fact, his testimony during the cross-examination firmly negated any price agreement with petitioners because he and his wife quoted the price of P575,000 and did not agree to reduce it to P550,000 as claimed by petitioner. To settle the above conflicting claims of the parties, petitioners could have presented the contract of sale allegedly prepared by private respondent dela Cruz. Unfortunately, the contract was not presented in evidence. However, petitioners aver that even if the unsigned deed of sale was not produced, private respondent Jose dela Cruz admitted prerparing said deed in accordance with their agreement. This judicial admission is allegedly the best proof of its existence. Further it was impossible for petitioners to produce the same since it was and remained in the possession of private respondent. The Court does not agree with the petitioners. Assuming arguendo that such draft deed existed, it dos not necessarily follow that there was already a definite agreement as to the price. If there was, why then did private respondent not sign it? If indeed the draft deed of sale was that important to petitioners cause, they should have shown some effort to procure it. They could have secured it through a subpoena duces tecum or thru the use of one of the modes of discovery. But petitioners made no such effort. And even if produced, it would not have commanded any probative value as it was not signed. As has been said in an old case, the price of the leased land not having been fixed, the essential elements which give life to the contract were lacking. It follows that the lessee cannot compel the lessor to sell the leased land to him. The price must be certain, it must be real, not fictitious. It is not necessary that the certainty of the price be actual or determined at the time of executing the contract. The fact that the exact amount to be paid therefore is not precisely fixed, is no bar to an action to recover such compensation, provided the contract, by its terms, furnishes a basis or measure for ascertaining the amount agreed upon. The price could be made certain by the application of know factors; where, in a sale of coal, a basic price was fixed, but subject to modification in proportion to variations in calories and ash content, and not otherwise, the price was held certain. A contract of sale is not void for uncertainty when the price, though not directly stated in terms of pesos and centavos, can be made certain by reference to existing invoices identified in the agreement. In this respect, the contract of sale is perfected. The price must be certain, otherwise there is not true consent between the parties. There can be no sale without a price. In the instant case, however, what is dramatically clear from the evidence is that there was no meeting of mind as to the price, expressly or impliedly, directly or indirectly. Sale is a consensual contract. He who alleges it must show its existence by competent proof. Here, the very essential element of price has not been proven. Lastly, petitioners claim that they are ready to pay private respondents is immaterial and irrelevant as the latter cannot be forced to accept such payment, there being no perfected contract of sale in the first place. True, the statute of frauds applies only to executory contracts and not to partially or completely executed ones. However, there is no perfected contract in this case. Therefore, there is no basis for the application of the statute of frauds. The application of such statute presupposes the existence of a perfected contract and requires only that a note or memorandum be executed in order to compel judicial enforcement thereof. Also, the civil law rule on double sale finds no application because there was no sale at all to begin with. What took place as only a prolonged negotiation to buy and sell, and at most, an offer and a counter-offer but no definite agreement was reached by the parties. Hence, the rules on perfected contract of sale, statute of frauds and double sale find no relevance nor application.

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RIGHT OF REDEMPTION OSCAR C. FERNANDEZ, GIL G. FERNANDEZ and ARMANDO C. FERNANDEZ vs. SPS. CARLOS and NARCISA TARUN (November 14, 2002) The right of redemption may be exercised by a co-owner, only when part of the community property is sold to a stranger. When the portion is sold to a co-owner, the right does not arise because a new participant is not added to the co-ownership. FACTS: An 8,209 square meter fishpond situated at Arellano-Bani, Dagupan City is disputed by Carlos Tarun and Narcisa Zareno, and petitioners Corazon Cabal Vda. De Fernandez and her children Oscar, Gil and Armando, all surnamed Fernandez. The brothers Antonio, Santiago, Demetria and Angel Fernandez, together with their uncle Armando, co-owned this property to the extent of 1/6 thereof. It was subsequently increased to 1/5 on account of the 1/6 share of Armando, who died single and without issue, which accrued in favor of the five remaining co-owners. Antonio Fernandez sold his share of about 547.27 sq. m. to Tarun. Demetria Fernandez also sold her share on the same fishpond consisting of 547.27 sq. m. to Tarun. Thus, the total area sold to them is 1094.54 sq. m., more or less. The two sales were registered and annotated on OCT No. 43099. Later, the co-owners of the subject fishpond and another fishpond covered by TCT No 10944 executed a Deed of Extrajudicial Partition of 2 parcels of registered land with exchange of shares. Among the parties to the deed are Antonio, Santiago, Demetria and Angel, all surnamed Fernandez. It was stipulated in the deed that the parties recognized and respect the sale of apportion of Lot 2991 consisting of 1094.54 sq. m. previously sold by Antonio and Demetria Fernandez in favor of Taru. This portion was executed in the partition. Likewise, by virtue of the Deed of Extrajudicial Partition, Angel B. Fernandez exchanged his shared on the other fishpond covered by TCT No. 10944 to the shares of his co-ownerson the remaining portion of Lot No. 2991 covered by TCT NO. 10945, making Angel B. Fernandez and Tarun as co-owners of Lot. No. 2991. By virtue of the terms and conditions set forth in the Deed, TCT No. 24440 of the Registry of Deeds was issued in favor of Angel B. Fernandez and Tarun. From the time the latter bought the 1094.54 sq. m. portion of the fishpond, they had been paying the realty taxes thereon. However, it was Angel B. Fernandez and later on his heirs, who remained in possession of the entire fishpond. When Angel B. Fernandez was still alive, Tarun sought the partition of the property and their share of its income. Angel Fernandez refused to heed their demand. After the death of Angel Fernandez, Tarun wrote to the petitioners of their desire for partition but this was rejected by petitioners. Hence, this suit for partition and damages. On August 1, 1996, the RTC rendered judgment in favor of petitioners, ruling that, under Articles 1620 and 1621 of the Civil Code, they were entitled to redeem the property that they had sold to respondents. It further held that the sale was highly iniquitous and void for respondents failure to comply with Article 1623 of the same code. Reversing the RTC, the Ca held that petitioners where not entitled to redeem the controversial property for several reasons. First, it was Angel Fernandez who was its co-owner at the time of the sale; hence, he was the one entitled to receive notice and to redeem the property, but he did not choose to exercise that right. Second, the execution of the Deed of Extrajudicial Partition was a substantial compliance with the notice requirement under that law. Finally, it was too late in the day to declare the exchange highly iniquitous, when Angel Fernandez had not complained about it. As his successors-in-interest, petitioners were bound by the terms of the agreement. ISSUE: Whether or not the transaction is one of sale or one of equitable mortgage

RULING: Petitioners contend that the sale was only an equitable mortgage because: (1) the price was grossly inadequate; and (2) the vendors remained in possession of the land and enjoyed its fruits Since the property is situated primely within the city property, the price of P7,662 for 1,094.54 sq. m. is supposedly unconscionable. Moreover, since June 4, 1967 up to the present , the vendees have allegedly never been in actual possession of the land.

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The contention is untenable. On its face, a document is considered a contract of equitable mortgage when the circumstances enumerated in Article 1602 of the Civil Code are manifest, as follows: (a) when the price of the sale with the right to repurchase is unusually inadequate, and (b) when the vendor remain in possession as lessee or otherwise. Although it is undisputed that Angel Fernandez was in actual possession of the property, it is important to note that he did not sell it to respondents. The sellers were his co-owners Antonio and Demetria Fernandez, who, however, are not claiming that the sale between them was an equitable mortgage. For the presumption of an equitable mortgage to arise, one must first satisfy the requirement that the parties entered into a contract denominated as a contract of sale, and that their intention was to secure an existing debt by way of mortgage. Furthermore, mere alleged inadequacy of the price does not necessarily void a contract of sale, although the inadequacy may indicate that there was a dejection of the consent, or that the parties really intended a donation, mortgage or some other act or contract. Finally, unless the price is grossly inadequate or shocking to the conscience, a sale is not set aside. In this case, petitioners failed to established the fair market value of the property when it was sold in 1967. Hence, there is no basis to conclude that the price was grossly inadequate or shocking to the conscience. MONTECILLO vs. IGNACIA REYES and SPS. REDEMPTOR and ELIS ABUCAY July 26, 2002 FACTS: Reynes and Spouses Abucay filed on June 20, 1984 a complaint for Declaration of Nullity and Quieting of Title against petitioner Montecillo. Reynes asserted that she is the owner of a lot situated in Mabolo, Cebu City, covered by TCT No. 74196 and containing an area of 448 sq. m. In 1981, Reynes sold 185 square meters of the Mabolo Lot to the Abucay spouses who built a residential house on the lot they bought. Reynes alleged further than on March 1, 1984 she signed a Deed of Sale of the Mabolo Lot in favor of Montecillo. Reynes, being illiterate, signed by affixing her thumbark on the document. Montecillo promised to pay the agreed P47,000.00 purchase price within one month from the signing of the Deed of Sale. Montecillo\s Deed of Sale states as follows: Reynes further alleged that Montecillo failed to pay the purchase price after the lapse of the one-month period, prompting Reynes to demand from Montecillo the return of the Deed of Sale. Since Montecillo refused to return the Deed of Sale, Reynes executed a document unilaterally revoking the sale and gave a copy of the document to Montecillo. Subsequently, Reynes signed a Deed of Sale transferring to the Abucay spouses the entire Mabolo Lot at the same time confirming the previous sale in 1981 of a 185 sq. m. portion of the lot. Reynes and the Abucay Spouses alleged that they received information that the Register of Deeds of Cebu City issued a Certificate of Title in the name of Montecillo for the Mabolo Lot. Reynes and the Abucay Spouses argues that for lack of consideration there was no meeting of the minds between Reynes and Montecillo. Thus, the trial court should declare null and void ab initio Montecillos Deed of Sale, and order the cancellation of TCT in the name of Montecillo. In his Answer, Montecillo, a bank executive with a B.S. Commerce Degree, claimed he was a buyer in good faith and had actually paid the P47,000.00 consideration stated in his Deed of Sale. Montecillo, however, admitted he still owed Reynes a balance of P10,000.00 He also alleged that he paid P50,000.00 for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. He further alleged that he paid for the real property tax as well as the capital gains tax on the Mabolo Lot. In their Reply, Reynes and the Abucay Spouses contended that Montecillo did not have authority to discharge the chattel mortgage, especially after Reynes revoked Montecillos Deed of Sale and gave the mortgagee a copy of the document of revocation. Reynes and the Abucay Spouses claimed that Montecillo secured the release of the chattel mortgage, through machination. They further asserted that Montecillo took advantage of the real property taxes paid by the Abucay Spouses and surreptitiously caused the transfer of the title to the Mabolo Lot in his name. Montecillo claimed that the consideration for the sale of the Mabolo Lot was the amount he paid to Cebu Ice and Cold Storage Corporation for the mortgage debt of Bienvenido Jayag.

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Montecillo argued that the release of the mortgage was necessary since the mortgage constituted a lien on the Mabolo Lot. Reynes, however, stated that she had nothing to do with Jayags mortgage debt except that the house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated that the payment by Montecillo to release the mortgage on Jayags house is a matter between Montecillo and Jayag. The mortgage on the house, being a chattel mortgage, could not be interpreted in any way as an encumbrance on the Mabolo Lot. Reynes further claimed that the mortgage debt had long prescribed since the P47,000.00 mortgage debt was due for payment on January 30, 1967. ISSUE: Whether or not there was an agreement between Reynes and Montecillo that the stated consideration of P47,000.00 in the Deed of Sale be paid to Cebu Ice and Cold Storage to secure the release of the TCT? If there was none, is the Deed of Sale void from the beginning or simply rescissible? RULING: First issue: manner of payment of the P$7,000.00 purchase price. Montecillos Ded of Sale does not state that the P47,000.00 purchase price should be paid by Montecillo to Cebu Ice Storage. Montecillo failed to adduce any evidence before the trial court showing that Reynes had agreed, verbally or in writing, that the P47,000.00 purchase price should be paid to Cebu Ice Storage. Absent any evidence showing that Reynes had agreed to the payment of the purchase price to any other party, the payment to be effective must be made to Reynes, the vendor in the sale. Article 1240 of the Civil Code provides as follows: Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. Thus, Montecillos payment ot Cebu Ice Storage is not the payment that would extinguish Montecillos obligation to Reyne sunder the Deed of Sale. It militates against common sense for Reynes to sell her Mabolo lot for P47,000.00 if this entire amount would only go to Cebu Ice Storage, leaving not a single centavo to her for giving up ownership of a valuable property. This incredible allegation of Montecillo becomes even more absurd when one considers that Reynes did not benefit, directly or indirectly, from the payment of the P47,000.00 to Cebu Ice Storage. The trial court found that Reynes had nothing to do with Jayags mortgage debt with Cebu ice Storage. Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and Cold Storage Corporation, obligation being exclusively of Bienvenido Jayag and wife who mortgaged their residential house constructed on the land subject matter of the complaint. The payment by the defendant to release the residential house form the mortgage is matter between him and Jayag and cannot by implication or deception be made to appear as an encumbrance upon the land. Thus, Montecillos payment to Jayags creditor could not possibly redound to the benefit of Reynes. Second issue: Whether the Deed of Sale is void ab initio or only rescissible Under Article 1318 of the Civil Code, There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. Article 1352 of the Civil Code also provides that Contracts without cause x x x produce no effect whatsoever. Montecillo argues that his Deed of Sale has all the requisites of a valid contract. Montecillo points out that he agreed to purchase, and Reynes agreed to sell, the Mabolo Lot at the price of P47,000.00. Thus, the three requisites for a valid contract concur: consent, object certain and consideration. Montecillo asserts there is no lack of consideration that would prevent the existence of a valid contract. Rather, there is only non-payment of the consideration within the period agreed upon for payment. Montecillo argues there is only a breach of his obligation pay the full purchase price on time. Such breach merely gives Reynes a right to ask for specific performance, or for annulment of the obligation to sell the Mabolo Lot. Montecillo maintains that in reciprocal obligations, the injured party can choose between fulfillment and rescission, or more properly cancellation, of the

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obligation under Article 1191 of the Civil Code. This Article also provides that the court shall decree the rescission claimed, unless there be just cause authorizing the fixing of the period. Montecillo claims that because Reynes failed to make a demand for payment, and instead unilaterally revoked Montecillos Deed of Sale, the court has a just cause to fix the period for payment of the balance of the purchase price. These argument are not persuasive. MOntecillos Deed of Sale states that Montecillo paid, and Reynes received, the P47,000.00 purchase price on March 1, 1984, the date of signing of the Deed of Sale. On its face, Montecillos Deed of Absolute Sale appears supported by a valuable consideration. Howver, based on the evidence presented by both Reynes and Montecillo, the trial court found that Montecillo never paid to Reynes, and Reynes never received from Montecillo, the P47,000.00 purchase price. There was indisputably a total absence of consideration contrary to what is stated in Montecillos Deed of Sale. The court is convinced that the Deed of Sale executed by Reynes is devoid of any consideration. Reynes through the representation of Baudillo Baladjay had executed a Deed of Sale in favor of defendant on the promise that the consideration should be paid within 1 month from the execution of the Deed of Sale. However, after the lapse of said period, defendant failed to pay even a single centavo of the consideration. The answer of the defendant did not allege clearly why no consideration was paid by him except for the allegation that he had a balance of only P10,000.00. It turned out during the pre-trial that what the defendant considered as the consideration was the amount which he paid for the obligation of Bienvenido Jayag with the Cebu Ice and Cold Storage Corporation over which plaintiff Ignacia Reynes did not have a part except that the subject of the mortgage was constructed on the parcel of land in question. Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and Cold Storage Corp. the obligation being exclusively of Bienvenido Jayag and wife who mortgaged their residential house constructed on the land subject matter of the complaint. The payment of the defendant to release the residential house from the mortgage is a matter between him and Jayag and cannot by implication or deception be made to appear as an encumbrance upon the land. This is not merely a case of failure to pay the purchase price, as Montecillo claims, which can only amount to a breach of obligation with rescission as the proper remedy. What we have here is a purported contract that lacks a cause one of the three essential requisites of a valid contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the purchaser to the vendor. Such a sale is non-existent or cannot be considered consummated. Applying this well-entrenched doctrine to the instant case, Montecillos Deed of Sale is null and void ab initio for lack of consideration. One of the three essential requisites of a valid contract is consent of the parties on the object and cause of the contract. In a contract of sale, the parties must agree not only on the price, but also on the manner of payment of the price. An agreement on the price but a disagreement on the manner of its payment will not result in consent, thus preventing the existence of a valid contract for lack of consent. This lack of consent is separate and distinct from lack of consideration where the contract states that the price has been paid when in fact it has never been paid. There was no consent or meeting of the minds between Reynes and Montecillo on the manner of payment. This prevented existence of a valid contract because of lack of consent. REXLON REALTY GROUP, INC. vs. THE HONORABLE COURT OF APPEALS, HON. ARTURO T. DE GUIA, RTC JUDGE (Cavite City), BRANCH 16, ALEX L. DAVID, THE REGISTER OF DEED FOR THE PROVINCE OF CAVITE AND PARAMOUNT DEVELOPMENT CORP OF THE PHIL (March 15, 2002) FACTS: Respondent Alex L. David is the registered owner of 2 parcels of land. On August 17, 1989, petitioner Rexlon Realty Group, Inc. entered into an agreement with respondent David for

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the purchase of the said 2 parcels of land as evidenced by a document denominated as Absolute Deed of Sale On February 18, 1994, David filed a petition for the issuance of owners duplicate copies of the 2 parcels of land to replace the owners duplicate copies which were allegedly entrusted to a friend and member of his staff but were misplaced and could not be found despite diligent effort to locate the same; and that said owners duplicate copies have not been delivered to nay person or entity to secure payment or performance of nay obligation. The RTC granted the said petition in a decision. Petitioner Rexlon then filed with the Court of Appeals a petition for annulment of the said Decision of the trial court on the ground that respondent David allegedly employed fraud and deception in securing the replacement owners duplicate copies of the subject TCTs; that there was absence of due process; and that the decision of the trial court was tainted with grave abuse of discretion amounting to lack of jurisdiction. The petition was later amended, with leave of court, to include as respondent Paramount Development Corporation of the Phil upon discovering that respondent David had executed on September 20, 1994, a Deed of Sale of subject parcels of land in favor of Paramount. As a result of that sale, new certificates of title designated as TCT Nos. T-525664 and T-525665 were issued in the name of respondent Paramount in lieu of TCT Nos. T-72537 and T-72538 in the name of Alex L. David. ISSUE: Whether or not the transaction between Rexlon and David is void for lack of consideration. RULING: No. The claim of respondents David and Paramount that the sale is void for lack of consideration after the petitioner allegedly failed to pay the down payment cannot prevail over the uncontroverted contractual provision in the notarized Deed of Absolute Sale regarding the full payment of the consideration of P500,000.00 made by Paramount, as vendee, to David, as vendor, who explicitly acknowledged receipt thereof on the face of that document. Respondent David was therefore well aware that there was no truth in his allegation in his petition for issuance of new owners duplicate copies of said certificates of title on the false and fraudulent ground that his owners duplicate copies of TCT Nos T-52537 and T-52538 were lost and that they were not delivered to any person to secure the performance of any obligation. The document denominated as Absolute Deed of Sale where the signature of respondent Davis as seller has not been uncontroverted, states that the latter has received payment for the said sale and has bound him to cede and deliver to petitioner Rexlon, as vendee, rights, interest, participation and title over the 2 parcels of land covered by TCT Nos. T-75237 and T-75238. The court further held that the issuance of an owners duplicate certificates of title by the trial court in favor of respondent David is indeed tainted with extrinsic fraud. EDILBERTO CRUZ and SIMPLICIO CRUZ vs. BANCOM FINANCE CORP (now UNION BANK OF THE PHIL) (March 19, 2002) An absolutely simulated contract of sale is void ab initio and transfers no ownership right. The purported buyer, not being the owner, cannot validly mortgage the subject property. Consequently, neither does the buyer at the foreclosure sale acquire any title thereto. FACTS: Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiff herein, were the registered owners of a 33.9335 hectare parcel of agricultural land together with improvement located in Barangay PUlang Yantoc, Angat, Bulacan. Sometime in May 1978, defendant Norma Sulit, after being introduced by Candelaria Sanchez to Fr. Cruz, offered to purchase the land. Plaintiffs asking price for the land was P700,000.00 but Norma only had P25,000.00 which Fr. Cruz accepted as earnest money with the agreement that titles would be transferred to Norma upon payment of the balance of P675,000.00. Norma failed to pay the balance and proposed to Fr. Cruz to transfer the property to her but the latter refused, obviously because he had no reason to trust Norma. But capitalizing on the close relationship of Candelaria Sanchez with the plaintiffs, Norma succeeded in having the plaintiffs execute a document of sale of the land in favor of Candelaria who would then obtain a bank loan in her name using plaintiffs land as collateral. On the same day, Candelaria executed another Deed of Absolute Salve over the land in favor of Norma. In both documents, it

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appeared that the consideration for the sale of the land was only P150,000.00. Pursuant to the sale, Norma was able to effect the transfer of the title to the land in her name under TCT NO. T248262. Evidence alone shows that aside from the P150,000.00, Candelaria undertook to pay the plaintiffs the amount of P655,000.000 representing the balance of the actual price of the land. In a Special Agreement dated September 1, 1978, Norma assumed Candelarias obligation, stipulating to pay the plaintiffs the said amount within 6 months on pain of fine or penalty in case of non-fulfillment. Unknown to the plaintiffs, Norma managed to obtain a loan form Bancom in the amount of P569,000.00 secured by a mortgage over the land now titled in her name. On account of Normas failure to pay the amount stipulated in the Special Agreement and her subsequent disappearance from her usual address, plaintiffs were prompted to file the herein complaint for the reconveyance of the land. Norma defaulted in her payment to the Bank and her mortgage was foreclosed. At the subsequent auction sale, Bancom was declared the highest bidder and was issued the corresponding certificate of sale over the land. Norma failed to appear in court and was eventually declared in default. Bancom filed a motion for leave to intervene which was granted by the trial court. In its Answer in Intervention, Bancom claimed priority as mortgaged in good faith and that the contract of mortgage with Norma had been executed before the annotation of plaintiffs interest in the title. ISSUE: Whether or not the sale between Cruz and Candelaria was valid

RULING: No. Petitioners claim that the Deed of Sale they executed with Sanchez, as well as the Deed of Sale executed between Sanchez and Sulit, was absolutely simulated; hence, null and void. On the other hand, echoing the appellate court, respondent contends that petitioners intended to be bound by those Deeds, and that the real estate mortgage over the subject property was valid. Simulation takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings. Simulation or vices of declaration may either be absolute or relative. Although the Deed of Sale between petitioners and Sanchez stipulated a consideration of P150,000, there was actually no exchange of money between them. Respondent never offered any evidence to refute the testimony of Cruz. She even admitted that the stipulated consideration of P150,000 in the 2 Deeds of Sale had never been actually paid by Sanchez to petitioners; neither by Sulit to the former. Another telling sign of simulation was the complete absence of any attempt on the part of the buyers Sanchez and Sulit to assert their alleged rights of ownership over the subject property. This fact was confirmed by respondent which, however, tried to notify the nonoccupancy of the land by Sanchez and Sulity. Supposedly, because the two failed to pay the purchase price of the land, they could not force petitioners to vacate it. The records clearly show that the 2 Deeds of Absolute Sale were executed over the same property on the same date. Six days thereafter, it was mortgaged by Sulit to Federal Insurance Company. The mortgaged was cancelled when she again mortgaged property to respondent for P569,000. It is undisputed that petitioners did not receive any portion of the proceeds of the loan. Clearly, the Deeds of Sale were executed merely to facilitate the use of the property as collateral to secure a loan from a bank. Being merely a subterfuge, these agreements could not have been the source of any consideration for the supposed sales. Indeed, the execution of the two documents on the same day sustains the position of petitioners that the Contract of Sale were absolutely simulated, and that they received no consideration therefore. The evidence before us indicates that respondent bank was not a mortgagee in good faith. At the time the property was mortgaged to it, it failed to conduct the ocular inspection. Respondent, however, is not an ordinary mortgagee; it is a mortgagee bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealing, including those of registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its operations In the instant case, the two Deeds of Sale were absolutely simulated, hence null and void. Thus, they did not convey any rights that could ripen into valid titles. Necessarily, the

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subsequent real estate mortgage constituted by Sulit in favor of respondent was also null and void, because the former was not the owner thereof. There being no valid real estate mortgage, there could also be no valid foreclosure of valid auction sale, either. At bottom, respondent cannot be considered either as a mortgagee or as a purchaser in good faith. This being so, petitioners would be in the same position as they were before they executed the simulated Deed of Sale in favor of Sanchez. They are still the owners of the property.

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VELASCO vs. CA FACTS: Velasco family had been leasing the subject property from the Magdalena Estate, Inc., since December 29, 1961. That on Nov. 29, 1962, the plaintiff thru Socorro Velasco (his sisterin-law) and the defendant (Magdalena Estate, Inc. had entered into a contract of sale be virtue of which the defendant offered to sell the plaintiff and the plaintiff in return agreed to buy a parcel of land with an area of 2058 sq. m. more specifically described as Lot 15, Blk 7 psd-6129 located at no. 39 corner 6 th st. and Pacific Ave., New Manila for the total purchase price of P100,000. Plaintiff averred that he was to give a down payment of P10,000 to be followed by P20,000 and the balance of P70,000 would be paid in installments in 10 years from November 29,1 962, the equal monthly amortization of which was to be determined as soon as the P30,000 had been completed. And so, plaintiff paid the down payment of P10,000 in which he was given a receipt on November 29, 1962. that on January 8, 1964 he tendered to defendant the additional P20,000 to complete the P30,000 which was refused by the defendant and likewise refused to executed the deed of sale. On the other hand, defendant denied all the allegations. And that he contends that there was no perfected sale. ISSUE: Whether or not there was a perfected contract of sale

RULING: There was no perfected contract of sale in regard to the manner of payment. It can be easily gleaned from their agreement that petitioner and defendant still had to meet and agree on how and when the down payment and the installment payments were to be paid. To give down a payment of P10,000 to be followed by P20,000 and the balance of P70,000 would be paid in installments in 10 years from November 29, 1962, the equal monthly amortization of which was to be determined as soon as the P30,000 had been completed. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. It is a well settled rule that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact therefore that the petitioners delivered to the respondent the sum of P10,000 part of the down payment cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties under Article 1482 of the New Civil Code, as the petitioners themselves admit that some essential matter the terms of payment still had to be covenanted. REPUBLIC vs. PHIL. RESOURCES DEVELOPMENT CORP, CA (January 31, 1958) FACTS: Macario Apostol submitted the highest bid the amount P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau of Prisons and a contract was drawn therefore. Apostol obtained goods from the Bureau of Prisons valued P15,878.59 and paid only P691.10 leaving a balance obligation of P15,187.49. Apostol submitted the best bid with the Bureau of Prisons for the purchase of three million board feet of logs at P88.00 per 1,000 board feet and that a contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at P65.830.00. Apostol failed to pay a balance account Of P18,827.57. All told, for the total demand set forth in complaint against Apostol is for P34,015.06 with legal interests thereon from January 8, 1952. The Empire lnsurance Company was included in the complaint having executed a performance bond of P10,000.00 in favor of Apostol. Apostol interposed payment as a defense and sought the dismissal of the complaint. Philippine Resources Development Corporation moved to intervene. Sometime prior to Apostol's transactions the corporate had some goods deposited in a warehouse. Apostol, then the president of the corporation but without the knowledge or consent of the stockholders thereof, disposed of said goods by delivering the same to the Bureau of Prisons of in an attempt to settle his personal debts with the latter entity; that upon discovery of Apodol's act, the corporation took steps to recover said goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return said goods, the corporation sought leave to intervene.

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The Goverment contends that the intervenor has no legal interest in the matter in litigation, because the action brought in the Court of First Instance of Manila against Macario Apostol and the Empire Insurance Company is just for the collection from the defendant Apostol of a sum of money, the unpaid balance of the purchase price of logs and almaciga bought by him from the Bureau of Prisons, whereas the intervenor seeks to recover ownership and possession of G. I. sheets, black sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an intervention which would change a personal action into one ad rem and would unduly delay the disposition of the case. CFI denied the motion to intervene. CA set this aside saying the PRDC had to protect its interest. ISSUE: Whether or not the goods delivered could be considered payment of the balance

RULING: Yes. The Government argues that "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 purschaser 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. Judgment under review is AFFIRMED.

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*** OBLIGATIONS OF SELLER *** P.T. Cerna Corp vs. CA, Peter Scheider and Juan Bunyi FACTS: This case originated from a complaint for Replevin filed by P.T. Cerna Corporation against Peter Scheider and Juan Bunyi. The subjects of this case are three (3) personal properties, all of which are "jaw crushers." The first one is a rock crusher, jaw size 34" x 33", purchased from Bormaheco, Inc. for P165,000.00. The other two are US Mfg. jaw crushers, both purchased from the International Tractor Sales, each for P111,000.00. Both parties, petitioner and private respondent Scheider, claim ownership over the three jaw crushers. Petitioner anchored its claim of ownership of the first rock crusher on the "Customer's Copy" of Invoice No. 43984, dated January 24, 1984 issued in the name of the corporation by Bormaheco., Inc. for P165,000.00. As to the other two crushers, it presented Invoice No. 601-A, dated March 30, 1984, by International Tractor and Equipment Sales, for the total purchase price of P222,000.00. All of these purchases were purportedly paid through the corporation checks duly signed by Noe de la Cerna and Edwin Tiu, its President and VicePresident, respectively. Petitioner's president alleged further that sometime in late 1983, an agreement was entered into by private respondent Scheider to quarry stones and crush them for sale to the public; that he was able to find a suitable land for the quarry and had negotiated for its lease. Private respondent Scheider, as per agreement, was supposed to be the technical man, and was thus in possession of said machineries for a complete check-up. However, allegedly, private respondents Scheider and Bunyi took advantage of their possession and proceeded to organize their own company, together with Scheider's in-laws and other private persons, to engage in the quarrying of stones and rocks and without the knowledge of the corporation, using the litigated rock crushers for said purpose. Scheider, on the other hand, claimed that the three rock crushers were actually purchased by him and in reality are owned by him. he presented the "Sales Department Copy" of the same Invoice No. 43984, which was in his name properly countersigned by Mr. Cervantes, the President of Bormaheco. He also presented a notarized deed of sale of said rock crushers executed by Bormaheco in his favor and a further certification by Mr. Cervantes, dated August 3, 1984, stating that the purchaser and owner of said equipment was Mr. Peter Scheider. For the two rock crushers, he also managed to present a notarized deed of sale executed by Mr. Virgil Lundberg in his favor. In connection with this, he presented a delivery receipt and a certification by Mr. Virgil Lundberg attesting that Mr. Peter Scheider is the purchaser and owner of the two rock crushers. Private respondent Scheider, however, admitted that the purchase price of the crushers were paid for by petitioner, but only to set off outstanding obligations of the same to him due to various spare parts sold to petitioner, prior to the dispute, amounting to over P500,000.00. On August 1, 1984, the trial court issued a Replevin Order, requiring delivery to petitioner of possession of the three (3) rock crushers. However, upon motion for reconsideration, the order of replevin was reversed. Petitioner then seasonably filed its appeal with the CA On May 3, 1985, the Court of Appeals promulgated in AC-G.R. SP No. 05066, a Decision setting aside the order of December 21, 1984, insofar as it directed the immediate restoration of the replevined property to private respondents. ISSUE: Who is the rightful owner of the crushers? HELD: Scheider. It has been held time and again that 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. Thus, petitioner's contention that the issuance of the invoices in its name occurred much earlier than the execution of the Deeds of Sale between private respondent Scheider and the vendor corporations, becomes inconsequential. Inasmuch as petitioner's invoices are mere statements regarding the thing sold, as opposed to private respondent Scheider's Deeds of Sale which are public documents, petitioner's claim of ownership cannot prosper.

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The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal manner therein expressed. As such, they have in their favor, the presumption of regularity. To contradict facts in a notarial document and the presumption of regularity in its favor, the evidence must be clear, convincing and more than merely preponderant. As borne out by the records of the case, petitioner challenged the authenticity of the invoices presented by private respondent Scheider, alleging falsification of the same. The ruling however of this court with respect to this matter still would not affect the evidentiary value of the Deeds of Sale. Petitioner should have attacked private respondent Scheider's deeds of sale on which the latter anchors his claim. Instead, petitioner did not even present the signatories to the contracts of sale to successfully rebut the presumption of regularity accorded the deeds of sale. Consequently, petitioner failed miserably to overcome the binding force and effect of the deeds of sale. (Hanniyah Sevilla) *** COMPLETENESS OF DELIVERY *** LA FUERZA vs. CA FACTS: Antonio Co, manager of plaintiff corporation (Associated Engineering Co.), who is an engineer, offered his services to manufacture and install a conveyor system which, according to him, would increase production and efficiency of the business of Mariano Lim, president and general manager of defendant corporation La Fuerza. The defendant expressed his conformity to the offer made in writing by putting his signature therein. He caused to be added to this offer a note which reads: "All specifications shall be in strict accordance with the approved plan made part of this agreement hereof. A few days later, Antonio Co made the demand for the down payment of P5,000.00 which was readily delivered by the defendant in the form of a check for the said amount. Deducting this down payment, there is a balance of P8,250.00 to be paid by the defendant upon the completion of the installation. The work was completed during the month of May, 1960. Trial runs were made in the presence of defendant and plaintiff. As a result of this trial or experimental runs, it was discovered that the conveyor system did not function to defendants satisfaction. The defects had not been remedied so that they came to the parting of the ways. When plaintiff billed the defendant for the balance of the contract price, the latter refused to pay for the reason that the conveyor system installed by the plaintiff did not serve the purpose for which the same was manufactured and installed at such a heavy expense. The CFI rendered a decision rescinding the contract and ordering the plaintiff to refund or return to the defendant the amount of P5,000.00 which they had received as down payment. This decision was affirmed by the CA, which, on motion for reconsideration of the plaintiff, later set aside its original decision and rendered another in plaintiff's favor. The appealed resolution of the Court of Appeals was based upon the theory of prescription of La Fuerza's right of action for rescission of its contract with the plaintiff, for "Article 1571 of the Civil Code provides that an action to rescind 'shall be barred after six months from delivery of the thing sold' ", and, in the case at bar, La Fuerza did not avail of the right to demand rescission until the filing of its answer in the Court of First Instance, on April 17, 1961, or over ten (10) months after the installation of the conveyors in question had been completed on May 30, 1960. ISSUE: W/N there was delivery of the conveyors by the plaintiff? YES. RULING: Upon the completion of the installation of the conveyors, in May, 1960, particularly after the last trial run, in July, 1960, La Fuerza was in a position to decide whether or not it was satisfied with said conveyors, and, hence, to state whether the same were accepted or rejected. The failure of La Fuerza to express categorically whether they accepted or rejected the conveyors does not detract from the fact that the same were actually in its possession and control; that, accordingly, the conveyors had already been delivered by the plaintiff; and that, the period prescribed in said Art. 1571 had begun to run. If the thing sold has hidden faults or defects as the conveyors are claimed to have the vendor (plaintiff) shall be responsible therefore and the vendee (La Fuerza) "may elect between withdrawing from the contract and demanding a proportional reduction of the price,

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with damages in either case."(Art. 1567) In the exercise of this right of election, La Fuerza had chosen to withdraw from the contract, by praying for its rescission; but the action therefore in the language of Art. 1571 "shall be barred after six months, from the delivery of the thing sold." The period of four (4) years, provided in Art. 1389 of said Code, for "the action to claim rescission," applies to contracts, in general, and must yield, in the instant case, to said Art. 1571, which refers to sales in particular. (Jo Anne Beltran)

*** DOUBLE SALES *** CARBONELL vs. CA (69 SCRA 99) FACTS: Respondent Jose Poncio mortgage his land in favor of the Republic Savings Bank for the sum of P1,500.00. Respondent Poncio offered to sell to Petitioner Carbonell the said lot, excluding the house where the respondent is living. Carbonell accepted the offer. They went to the bank to secure the consent of the President of the bank. It was agreed that Carbonell would be the one to pay the arrears on the mortgage and the installments. They made and executed a document, in the presence of a witness, which stated that Poncio would be allowed to stay in the lot for one year and at the end of the said year, should he choose to stay, he should pay rent. When Carbonell went to Poncios house to execute a formal deed of sale, Poncio refused to proceed with the sale because he had already given the lot to Respondent Emma Infante. Subsequently, Carbonell saw Infante erecting a wall around the lot with a gate. Informed that the deed of sale in favor of Infante was not yet registered, Carbonells counsel filed an adverse claim on February 8,1955 with the Register of Deeds. The deed of sale in favor of Infante was registered on Feruary 12,1955 and an original certificate of title was issued in favor of Infante but with annotation of adverse claim. Carbonell then filed a complaint against Infante and Poncio praying that she be declared the lawful owner of the questioned land. The trial court declared the sale to Infante as null and void. A motion for re-trial was filed. The trial court reversed the previous decision on the ground that the claim of Respondents Infante and Poncio is superior to that of Carbonell. Issue: Whether or not Carbonell had the better right?

Ruling: Yes, Carbonell has a superior right. In cases of double sales of an immovable property, the 2nd paragraph of Article 1544 of the Civil Code directs that ownership should be recognized in favor of one who is in good faith and first recorded his right. If there is no inscription, what is decisive is the prior possession in good faith. Carbonell was in good faith because 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 a mortgage duly annotated thereon. Carbonell could not have been aware of any sale to Infante as there was no such sale to Infante during the that time. Her good faith subsisted and continued to exist when she filed an adverse claim four days prior to the registration of Infantes deed of sale. Her good faith did not cease after Poncio told her that he had sold the lot to another. Infante was in bad faith because she had knowledge of the previous sale to Carbonell. Also, when Infante registered her deed of sale, Carbonell had already registered her adverse claim 4 days earlier. Here, she was again on notice of the prior sale to Carbonell. The first buyer of the property always has priority rights over subsequent buyers of the same property. While Carbonell has superior title, she must however refund to Respondents Infante and Poncio the amount paid by the latter to the bank to redeem the mortgage. (Alex Mariano) Agricultural and Home Extension Development Group vs. Court of Appeals 213 563 SCRA

FACTS: Spouses Diaz sold to Bruno Gundran a parcel of land. Gundran did not register the Deed of Absolute Sale because he said he was advised in the Office of the Register of Deeds of the existence of notice of lis pendens on the title. Gundran and herein petitioner entered into a Joint Venture Agreement for the improvement and subdivision of the land.

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Spouses Diaz again entered into another contract of sale of the same property with private respondent Cabautan. The notice of lis pendens annotated on the title was cancelled and the Deed of Sale in favor of private respondent Cabautan was recorded. A new TCT was thereupon issued in his name. Gundran instituted an action for reconveyance against private respondent for the cancellation of the new TCT and the issuance of a new certificate of title in his name. His complaint and petitioners complaint in intervention were dismissed for lack of merit. Court of Appeals affirmed the decision with modification. ISSUE: Whether or not Gundran is entitled to the lot in question

RULING: NO!!! Under Article 1544 of the Civil Code. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith. The courts below were justified in according preferential rights to private respondent, who had registered the sale in his favor as against the petitioners co-venturer whose right to the same property had not been recorded. A purchaser in good faith is defined as one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property. An examination of the Transfer Certificate of Title discloses no annotation of any sale, lien encumbrance or adverse claim in favor of Gurdan or petitioner. (Norliza Mamukid)

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*** OBLIGATIONS OF SELLER *** Municipality Of Victorias vs.CA- March 31, 1987 FACTS: Lot No. 76 forms a part of Cadastral Lot No. 140, a 27.2460 ha. land in the name of Gonzalo Ditching. He was survived by his widow Simeona Jingeo Vda. de Ditching and a daughter, who died leaving one offspring, respondent Norma Leuenberger. Leuenberger inherited the whole of Lot No. 140 from her grandmother, Simeona. She donated a portion of the lot to the municipality for the ground of a certain high school and had 4 ha. converted into a subdivision. She had the remaining 21 has. relocated by a surveyor . It was then that she discovered that a parcel of land used by the Municipality as a cemetery is within her property now identified as Lot 76. Respondent wrote the Mayor of Victorias requesting delivery of the area. The Mayor replied that Petitioner bought the land. She asked to be shown the papers but the municipal treasurer refused. Respondents filed a complaint for recovery of possession of the parcel of land In its answer, petitioner Municipality, alleged ownership of the lot, , having bought it from Simeona Jingco Vda. de Ditching sometime in 1934. ISSUE: Whether or not there is valid sale of Lot 76 to the Municipality of Victorias RULING: There is merit in the petition. It is expressly provided by law that the thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. Where there is no express provision that title shall not pass until payment of the price, and the thing sold has been delivered, title passes from the moment the thing sold is placed in the possession and control of the buyer. Delivery produces its natural effects in law, the principal and most important of which being the conveyance of ownership, without prejudice to the right of the vendor to claim payment of the price. 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 clearly inferred. It operates as a formal or symbolic delivery of the property sold and authorizes the buyer to use the document as proof of ownership. (Lendl Floyd Montes) MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO REDOVAN, petitioners, vs. THE HONORABLE COURT OF APPEALS FACTS: Petitioner Manuel R. Dulay Enterprises, Inc., a domestic corporation. Manuel R. Dulay with 19,960 shares was designated as president, treasurer and general manager. Manuel Dulay by virtue of Board Resolution No. 18 of petitioner corporation sold the subject property to private respondents spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as evidenced by the Deed of Absolute Sale. Subsequently, Manuel Dulay and private respondents spouses Veloso executed a Memorandum to the Deed of Absolute Sale of December 23, 1976 9 dated December 9, 1977 giving Manuel Dulay within two (2) years to repurchase the subject property for P200,000.00 which was, however, not annotated in the transfer certificate of title. Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject property to Manuel A. Torres for a loan of P250,000.00. Upon the failure of Maria Veloso to pay Torres, the subject property was sold on April 5, 1978 to Torres as the highest bidder in an extrajudicial foreclosure sale. Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem in favor of Manuel Dulay assigning her right to repurchase the subject property. Neither t Maria Veloso nor Manuel Dulay was able to redeem the subject property within the one year statutory period for redemption. Torres filed a petition for the issuance of a writ of possession against Veloso and Manuel Dulay however, Virgilio Dulay appeared in court to intervene alleging that Manuel Dulay was never authorized by the petitioner corporation to sell or mortgage the subject property. RTC ruled in favor of private a respondent which was affirmed by CA.

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ISSUE: WON the sale between Veloso and Dulay was

valid?

HELD: YES. In the instant case, Petitioner Corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president. At any rate, a corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which, in this case, petitioner Virgilio Dulay failed to do. Article 1498 of the New Civil Code provides: "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 clearly be inferred."Under the aforementioned article, the mere execution of the deed of sale in a public document is equivalent to the delivery of the property. "It is settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale. As such, he is entitled to the possession of the said property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title. WHEREFORE, the petition is DENIED and the decision appealed from is hereby AFFIRMED. (Rubylin G. Doquilla) G.R. No. 66140 January 21, 1993 INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHIL., INC. vs. LPJ ENTERPRISES, INC. FACTS: It appears on record that respondent LPJ Enterprises, Inc. had a contract to supply 300,000 bags of cement per year to Atlas Consolidated Mining and Development Corporation (Atlas for short), a member of the Soriano Group of Companies. The cement was delivered packed in kraft paper bags, then as now, in common use. October, 1970, Cesar Campos, a Vice-President of petitioner Industrial Textile Manufacturing Company of the Philippines (or Itemcop, for brevity), asked Lauro Panganiban, Jr., President of respondent corporation, if he would like to cooperate in an experiment to develop plastic cement bags. Panganiban acquiesced, principally because Itemcop is a sister corporation of Atlas, respondent's major client. The experiment, however, was unsuccessful. Cement dust oozed out under pressure through the small holes of the woven plastic bags and the loading platform was filled with dust. The second batch of plastic bags subjected to trial was likewise a failure. Although the weaving of the plastic bags was already tightened, cement dust still spilled through the gaps. Finally, with three hundred (300) "improved bags", the seepage was substantially reduced. On December 29, 1970, Campos sent Panganiban a letter proclaiming dramatic results in the experiment. Consequently, Panganiban agreed to use the plastic cement bags. Four purchase orders (P.O.s) were thereafter issued, to wit:

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DATE NUMBER OF BAGS UNIT COST AMOUNT 5 January 1971-----53,800 ---24February1971--11,000 ---March 1971 -------41,000 ---6 April 1971 ---------10,000 -----

P .83 ---.90----.92 ----.92-----

P44,654.00 9,900.00 37,720.00 9,200.00

TOTAL: P101,474.00 Petitioner delivered the above orders consecutively on January 12, February 17, March 19, and April 17, 1971 (p. 74, Rollo). Respondent, on the other hand, remitted the amounts of P1,640.00, P2,480.00. and P13,230.00 on March 31, April 31, and May 3, 1971 respectively, thereby leaving a balance of P84,123.80 (p. 58, Ibid.). No other payments were made, thus prompting A. Soriano y Cia of petitioner's Legal Department to send demand letters to respondent corporation. Reiterations thereof were later sent by petitioner's counsel. A collection suit was filed on April 11, 1973 when the demands remained unheeded. At the trial on the merits, respondent admitted its liability for the 53,800 polypropylene lime bags covered by the first purchase order. (TSN, January 5, 1971, p. 131). With respect to the second, third, and fourth purchase orders, respondent, however, denied full responsibility therefor. Respondent said that it will pay, as it did pay for, only the 15,000 plastic bags it actually used in packing cement. As for the remaining 47,000 bags, the workers of Luzon Cement strongly objected to the use thereof due to the serious health hazards posed by the continued seepage of cement dust.Thereafter, petitioner was asked to take back the unused plastic bags. Considering however, that the bags were in the cement factory of respondent's supplier, petitioner maintained that it was respondent's obligation to return the bags to them. Apparently, this was not done and so petitioner demanded payment for the said bags. The trial court rendered a decision against the defendant sentencing him to pay the sum of P84, 123.00 with 12% interest per annum from May 1971 plus 15% of the total obligation plus attorney's fees, and the costs. On appeal, the CA reversed the trial court's decision and dismissed the case witj costs against the petitioner. The first issue to be resolved is the propriety of this petition as it calls for a reexamination of the factual findings of the appellate court. A review of the record, respondent has repeatedly admitted its liability for the 53,800 plastic lime bags amounting to P44,654.00 yet the appellate court disregarded this fact and totally cleared respondent from all responsibility. On this point alone, the decision of the appellate court may be overturned, or at least modified. MAJOR ISSUE: whether or not respondent may be held liable for the 47,000 plastic bags which were not actually used for packing cement as originally intended. HELD: The conditions which allegedly govern the transaction according to respondent may not be considered. The trial court correctly observed that such conditions should have been distinctly specified in the purchase orders and respondent's failure to do so is fatal to its cause. We find that Article 1502 of the Civil Code, invoked by both parties herein, has no application at all to this case. The provision in the Uniform Sales Act and the Uniform Commercial Code from which Article 1502 was taken, clearly requires an express written agreement to make a sales contract either a "sale or return" or a "sale on approval". Parol or extrinsic testimony could not be admitted for the purpose of showing that an invoice or bill of sale that was complete in every aspect and purporting to embody a sale without condition or restriction constituted a contract of sale or return. If the purchaser desired to incorporate a stipulation securing to him the right of return, he should have done so at the time the contract was made. On the other hand, the buyer cannot accept part and reject the rest of the goods since this falls outside the normal intent of the parties in the "on approval" situation. In the light of these principles, We hold that the transaction between respondent and petitioner constituted an absolute sale. Accordingly, respondent is liable for the plastic bags delivered to it by petitioner. (Magnolia Quidet) LOTHAR F. ENGEL, ET AL. vs. MARIANO VELASCO and CO. (G.R. Nos. L-21651-21653, December 29, 1924, 47 PR 115)

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FACTS: Plaintiffs were export brokers, or jobbers, of textile merchandise in the City of New York, while the defendant was the owner, as it still is, of a large store in Manila where general merchandise is sold both at wholesale and retail. Defendant Velasco from time to time imports textile fabrics on a large scale. In 1920 commercial relations were established between the plaintiffs and the defendant, and in the succeeding 3 months the defendant sent to the plaintiffs numerous orders for merchandise. The defendant would first obtain from the plaintiffs by cable information as to the prices of the goods desired, and would thereupon send a cablegram to the plaintiffs, instructing them to buy and hold specified qualities of goods in the amount and at the prices stated. Defendant would dispatch by mail more extended instructions, confirming the cablegram and giving such other advice as was desirable. The cablegrams were written in cipher and were necessarily brief, while the letters of confirmation and advice were more extended, containing specifications as to patterns in the case of suitings and stampings in the case of fabrics. The causes of action stated in the three complaints have their origin in sixteen or seventeen orders nearly all of which were sent to the plaintiffs between February 5 and April 2, 1920, inclusive. These orders appears to have been promptly placed with the manufacturers by the plaintiffs, but delay occurred in the matter of shipment; and when delivery was finally tendered in Manila of the goods acceptance was refused. ISSUES: 1. Whether or not correspondence by cable is admissible? 2. Whether or not plaintiffs did not comply with the term of the agreement and that refusal to accept by Velasco was justified? RULING: 1. Article 51 of the Code of Commerce provides: Telegraphic correspondence shall only be the basis of an obligation between contracting parties who have previously admitted this medium in a written contract, and provided the telegrams fulfill the conventional conditions or conventional signs which may have been previously fixed and agreed to by the contracting parties. Nevertheless, the court held that where telegraphic communications are followed by letters EXPRESSLY referring to the telegrams and confirming the same, such telegrams are ADMISSIBLE. 2. The defendant is not in a position successfully to invoke delay in the making of shipments as ground for its release from the obligation to pay for the merchandise. It appears that the delay was requested by the purchaser and was rendered necessary by the inability of the purchaser to comply with an agreement to supply the credit necessary to transport the goods. (Natasha Go) *** DOUBLE SALES *** HANOPOL vs. PILAPIL FACTS: This is a case of double sale of the same parcel of unregistered land decided by the Court of First Instance of Leyte (Civil Case No. 21) in favor of defendant-appellee Perfecto Pilapil, originally appealed by plaintiff-appellant Iluminado Hanopol to the Court of Appeals, but later certified to this Court for proper adjudication, the issues involved being exclusively of law. Appellant Hanopol claims ownership of the land by virtue of a series of purchases effected in 1938 by means of private instruments, executed by the former owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all surnamed Siapo On the other hand, appellee Pilapil asserts title to the property on the strength of a duly notarized deed of sale executed in his favor by the same owners on December 3, 1945, which deed of sale was registered in the Registry of Deeds of Leyte on August 20, 1948 under the provisions of Act No. 3344. Hanopol argues that the registration of Pilapil's notarized deed of sale in 1948 under Act No. 3344 which bore the information "shall be understood to be without prejudice to a third

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party with a better right", He contends that since at the time the Siapos sold the land in question in 1945 to Pilapil, the former were no longer the owners as they had already sold the same to appellant since 1938, the first sale to him is a better right which cannot be prejudiced by the registration of the second sale. ISSUE: Whether or not the term better right provided for in Act No. 3344 includes private deeds of sale which would not be affected by subsequent registration of the same parcel of land by a second buyer? RULING:In citing the case of Lichauco vs. Berenguer (39 Phil. 643). It appears that the "better right" referred to in Act No. 3344 is much more than the mere prior deed of sale in favor of the first vendee. In the Lichauco case, it was the prescriptive right that had supervened. Or, as also suggested in that case, other facts and circumstances exist which, in addition to his deed of sale, the first vendee can be said to have better right than the second purchaser. In the case at bar, there appears to be no clear evidence of Hanopol's possession of the land in controversy nor other facts and circumstances which in addition to his private deed of sale which if combined, would make it clear that the first vendee has a better right than the second purchaser who had registered such property. Hanopol cannot have a better right than appellee Pilapil who, according to the trial court, "was not shown to be a purchaser in bad faith Art. 1544. Paragraph 2 provides: Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. WHEREFORE, finding no error in the decision appealed from, the same is hereby affirmed, with costs against the appellant. (German Lyndon Yap)

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