Laforteza vs.

Machuca

Facts: Roberto Laforteza and Gonzalo Laforteza, Jr., in their capacities as attorneys-in-fact of Dennis Laforteza,
entrered into a MOA (Contract to Sell) with Alonzo Machuca over a house and lot registered in the name of the
late Francisco Laforteza. Machuca was able to pay the earnest money but however failed to pay the balance on
time. Upon a request of an extension of time, Machuca informed petitioner heirs that the balance was already
covered, but petitioners refused to accept the balance and told Machuca that the subject property is no longer for
sale. The petitioners contend that the Memorandum of Agreement is merely a lease agreement with “option to
purchase”; hence, it only gave the respondent a right to purchase the subject property within a limited period
without imposing upon them any obligation to purchase it. And since the respondent’s tender of payment was
made after the lapse of the option agreement, his tender did not give rise to the perfection of a contract of sale.

Issue: (1) WON the tender of payment after the lapse of the option agreement gave rise to the perfection of a
contract of sale. (2) WON the six-moth period during which the respondent would be in possession of the property
as lessee was a period within which to exercise an option.

Held:
(1) It did. 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. In the case at bench, all
the elements of a contract of sale were thus present.

(1) The six-month period during which the respondent would be in possession of the property as lessee, was
clearly not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell
within an agreed time and at a determined price. An option contract is a separate and distinct contract from that
which the parties may enter into upon the consummation of the option. An option must be supported by
consideration.

An option contract is governed by the second paragraph of Article 1479 of the Civil Code, which
reads:

Art. 1479… .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price.

In the present case, the six-month period merely delayed the demandability of the contract of sale and did not
determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the
part of the petitioners and the respondent to comply with the terms of the sale.


Limson v. Court of Appeals
GR No. 135929, April 20, 2001

Topic in Sales: Earnest Money v. Option Money - Art. 1482
FACTS:
This is a Petition for Review on Certiorari to review, reverse and set aside the Decision of the Court of Appeals
which reversed the Decision of the Regional Trial Court. The petitioner likewise assails the Resolution of the
appellate court denying petitioner's Motion for Reconsideration.
Petitioner Lourdes Ong Limson and respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera agreed
that petitioner would buy a parcel of land owned by respondents. On 31 July 1978, petitioner paid P20,000 as
"earnest money"; respondents signed a receipt and gave her a 10-day option period to purchase the property.
The parties agreed to meet on August 5 and August 11, but failed to consummate the sale because the
respondent spouses did not appear. Petitioner soon learned that subject propery was also under negotiation with
respondent spouses and with Sunvar Realty Development Corporation (SUNVAR). On 15 September 1978,
Limson filed an affidavit of Adverse Claim with the Office of the Registry of Deeds and informed SUNVAR. TCT
N0. S-72377 was issued on 26 September 1978 in favor of SUNVAR with the adverse Claim of petitioner
annotated thereon.
Petitioner claimed that the Deed of Sale should be annuled, that TCT No. S-72377 be canceled and ownership be
restored to respondent spouses, and that a Deed of Sale be executed in favor of her.
The Regional Trial Court rendered its Decision in favor of petitioner. On appeal, the Court of Appeals completely
reversed the decision of the trial court. Petitioner timely filed a Motion for Reconsideration which was denied by
the Court of Appeals on 19 October 1998. Hence, this petition.
ISSUES:
(1) Whether or not there was a perfected contract to sell between petitioner and respondent spouses.
(2) Whether or not the P20,000 paid by Limson represented "earnest money".
RULING:
(1) No, there was no perfected contract to sell. A scrutiny of the facts as well as the evidence of the parties
overwhelmingly leads to the conclusion that the agreement between the parties was a contract of option and not
a contract to sell.
An option, as used in the law of sales, is a continuing offer or contract by which the owner sitpulates with another
that the latter shall have the right to buy the property at a fixed price within a time certain, or under, or in
compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or
demand a sale. It is also sometimes called an "unaccepted offer." An option is not itself a purchase, but merely
secures the privilege to buy.
8
It is not a sale of property but a sale of right to purchase.
9
It is simply a contract by
which the owner of property agrees with another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then agree to sell it; but he does not sell
something, i.e., the right or privilege to buy at the election or option of the other party.
10
Its distinguishing
characteristic is that it imposes no binding obligation on the person holding the option, aside from the
consideration for the offer. Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or
agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the
owner of the property gives the optionee the right or privilege of accepting the offer and buying the property on
certain terms.
11

On the other hand, a contract, like a contract to sell, involves the meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something or to render some service.
12
Contracts, in general,
are perfected by mere consent,
13
which is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.
1

(2) No, the money paid by petitioner was not earnest money but option money. "Earnest money" and "option
money" are not the same but distinguished thus; (a) earnest money is part of the purchase price, while option
money is the money given as a distinct consideration for an option contract; (b) earnest money given only where
there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is
given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not
required to buy,
18
but may even forfeit it depending on the terms of the option.
There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price. Moreover, it
was not shown that there was a perfected sale between the parties where earnest money was given. Finally,
when petitioner gave the "earnest money" the Receipt did not reveal that she was bound to pay the balance of the
purchase price. In fact, she could even forfeit the money given if the terms of the option were not met. Thus, the
P20,000.00 could only be money given as consideration for the option contract. Finally, the Receipt provided for a
period within which the option to buy was to be exercised, i.e., "within ten (10) days" from 31 July 1978.
On or before 10 August 1978, the last day of the option period, no affirmative or clear manifestation was made by
petitioner to accept the offer. Certainly, there was no concurrence of private respondent spouses’ offer and
petitioner’s acceptance thereof within the option period. Consequently, there was no perfected contract to sell
between the parties.
On 11 August 1978 the option period expired and the exclusive right of petitioner to buy the property of
respondent spouses ceased.WHEREFORE, the petition is DENIED. The decision of the Court of Appeals
ordering the Register of Deeds of Makati City to lift the adverse claim and such other encumbrances petitioners
Lourdes Ong Limson may have filed or caused to be annotated on TCT No. S-75377 is AFFIRMED, with
the MODIFICATION that the award of nominal and exemplary damages as well as attorney’s fees is DELETED.


SAN MIGUEL PROPERTIES PHILS., INC. v SPOUSES ALFREDO and GRACE HUANG
G. R. No. 137290, 31 July 2000
Mendoza, J. delivered the decision of the Court.

Nature of the Case: A petition for review for a decision of the Court of Appeals which reversed the
decision of the RTC dismissing the complaint brought by the Huangs against San Miguel Properties for
enforcement of a contract of sale.

Facts: San Miguel Properties offered two parcels of land for sale and the offer was made to an agent of the
respondents. An “earnest-deposit” of P1 million was offered by the respondents and was accepted by the
petitioner’s authorized officer subject to certain terms.

Petitioner, through its executive officer, wrote the respondent’s lawyer that because the parties failed to agree on
the terms and conditions of the sale despite the extension granted by the petitioner, the latter was returning the
“earnest-deposit”.

The respondents demanded execution of a deed of sale covering the properties and attempted to return the
“earnest-deposit” but petitioner refused on the ground that the option to purchase had already expired.

A complaint for specific performance was filed against the petitioner and the latter filed a motion to dismiss the
complaint because the alleged “exclusive option” of the respondents lacked a consideration separate and distinct
from the purchase price and was thus unenforceable; the complaint did not allege a cause of action because
there was no “meeting of the mind” between the parties and therefore the contact of sale was not perfected.

The trial court granted the petitioner’s motion and dismissed the action. The respondents filed a motion for
reconsideration but were denied by the trial court. The respondents elevated the matter to the Court of Appeals
and the latter reversed the decision of the trial court and held that a valid contract of sale had been complied with.

Petitioner filed a motion for reconsideration but was denied.

Issue: WON there was a perfected contract of sale between the parties

Ruling: The decision of the appellate court was reversed and the respondents’ complaint was dismissed.

Ratio Decidendi: 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.

The P1 million “earnest-deposit” could not have been given as earnest money because at the time when
petitioner accepted the terms of respondents’ offer, 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. Such option giving respondents the exclusive right to buy the properties within the
period agreed upon is separate and distinct from the contract of sale which the parties may enter. All that
respondents had was just the option to buy the properties which privilege was not, however, exercised by them
because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by
respondents.

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 perfected 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 contract 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 alleged “indubitable evidence” of a
perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount
to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed
on the real properties which were the objects of the sale and on the purchase price, the fact remains that they
failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner.

Sps Dalion v. CA (1990)
Petitioners: Spouses Dalion
Respondents: CA and Sabesaje, Jr.
Ponente: Medialdea, J.

Doctrine: A contract of sale is a consensual contract, which means that the sale is perfected by mere consent.
No particular form is required for its validity.

Short version: A land was registered in Dalion’s name. He allegedly sold this to Sabesaje. Dalion denies the sale
ever happened (saying his signature was forged) and also says that assuming the signature was valid, sale is still
invalid because it was not executed in a public document. SC says Dalion’s argument is wrong. In a contract of
sale, no particular form is required.

Facts: A land in Southern Leyte was declared in the name of Segundo Dalion. Sabesaje sued to recover
ownership this landbased on a private document of absolute sale, allegedly executed by Segundo Dalion. Dalion,
however, denied the sale, saying that:
o The document was fictitious
o His signature was a forgery, and
o That the land is conjugal property, which he and his wife acquired in 1960 from Saturnina Sabesaje
asevidenced by the "Escritura de Venta Absoluta."

The spouses denied the claims of Sabesaje that after executing a deed of sale over the parcel of land, they had
pleadedwith Sabesaje to be allowed to administer the land because Dalion did not have livelihood.

Spouses Dalion admitted, however, administering 5 parcels of land in Southern Leyte, which belonged to
LeonardoSabesaje, grandfather of Sabesaje, who died in 1956.

The Dalions never received their agreed 10% and 15% commission on the sales of copra and abaca.

Sabesaje's suit, they say, was intended merely to harassand forestall Dalion's threat to sue for these unpaid
commissions.

TC decided in favor of Sabesaje and ordered the Dalions to deliver the parcel of land in a public document. CA
affirmed.

Issue: Was the contract of sale valid? YES. Is a public document needed for transfer of ownership? NO.

Ratio: Re: validity of the contract. People who witnessed the execution of the deed positively testified on its
authenticity. They stated that it had been executed and signed by the signatories.

Re: Public document. The provision of NCC 1358 on the necessity of a public document is only for convenience,
not for validity or enforceability. That this be embodied in a public instrument is not a requirement for the validity of
a contract of sale of a parcel of land.

Dalion argued:
o That the sale is invalid because it is embodied in a private document.

o That "acts and contracts which have for their object the creation, transmission, modification or extinction of real
rights over immovable property must appear in a public instrument." (NCC 1358 par. 1) A contract of sale is a
consensual contract, which means that the sale is perfected by mere consent.

o No particular form is required for its validity.

o Upon perfection of the contract, the parties may reciprocally demand performance (NCC 1475, NCC), i.e., the
vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay
the thing sold (NCC 1458). The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel
of land and to execute corresponding formal deed of conveyance in a public document. Under NCC 1498, when
the sale is made through a public instrument, the execution is equivalent to the delivery of the thing.

o Delivery may either be actual (real) or constructive. Thus delivery of a parcel of land may be done by placing the
vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive).

Decision affirmed.

Secuya v. Vda de Selma (2000)
Petitioner: Benigna Secuya (and other Secuyas)
Respondent: Gerarda Vda. De Selma
Ponente: Panganiban, J.

Doctrine: Although there is no form required for a sale to be valid, a sale pertaining to land must be registered in
the Registry of Property. If it was not, and that it was only a private document, then the sale is valid as to only the
contracting parties, but not to 3rd parties.

Short Version: Maxima partitioned her land and sold it. Secuya eventually held possession of the land and
cultivated it. When he died, his siblings inherited it. A certain Selma came a long and bought a partition of the
Maxima’s land. In Selma’s title, the land in the possession of the Secuyas was within the boundary bought by
Selma. Selma now asserts ownership over the land and files a case of quieting of title. SC says in this case,
Selma is the owner because of the strength of his title.

Facts: Maxima Caballero owned a land. She partitioned the land and executed a deed selling 1/3 of the land to
Pacencia Sabellona.

o Pacencia took possession of the parted 1/3 portion. Dalmacio Secuya bought the land from Pacencia by means
of a private document which was lost.
o Such sale was confirmed by Ramon Sabellona, the only heir of Pacienca.
o Pursuant to Pacencia’s will, Ramos inherited all Pacencia’s properties.

o After Secuya bought the land, Secuya took possession of the land and cultivated it.

o A certain Edilberto Superales married Secuya’s neice.
o With Secuya’s tolerance, Superales was able to build his hou se on the land and continuously lived
there.

o Eventually, Secuya died. Being single, his brothers and sisters took physical possession of the land.
o Then, a certain Selma bought a portion of Lot 5679. The land in the Secuyas’ possession was a portion of Lot
5679 and is included within the boundary of what Selma acquired.

o Selma is now asserting ownership over the land on the strength of his title. RTC-Cebu decided in favor of
Selma. CA affirmed.

Issue: Does the land belong to Selma? Yes.

Ratio: There is strength in his title. Since this is an action for quieting of title, it must first be established if the
Secuyas have the requisite title that would enable them to avail of the remedy of quieting of title.

The Secuyas contest their claim on the basis of 2 documents:
o the Agreement of Partition executed by Maxima Caballero and Paciencia Sabellona, and
o The Deed of Confirmation of Sale executed by Ramon Sabellona.

Re: Partition
Upon closer look, the SC says this Agreement is not one of partition, because there was no property to partition,
and the parties in the contract are not co-owners.

This is one in the nature of a trust agreement.
o Trust is the right to the beneficial enjoyment of property, while the legal title to land is vested in another.
o Caballero merely entrusted the portion specified to Sabellona.
o It therefore does not constitute a title.

Since this is a trust agreement, it can be repudiated.

This (right to) repudiation does not expire, and was therefore exercised by the heirs of Caballeros, when they sold
the land to a 3rd party buyer (Selma).

Re: Sale
Secuyas contest that there was a sale, but allege that the contract had been lost. SC says that although there is
no form required for a sale to be valid, a sale such as this (one pertaining to land) must be registered in the
Registry of Property. If it was not, and that it was only a private document, then the sale is valid as to only the
contracting parties, but not to 3rd parties, like Selma in this case.

Decision affirmed.

Paredes vs Espino
Date: March 13, 1968
Ponente: Reyes, JBL

Facts:
Paredes filed an action to compel Espino (i.e. specific performance and damages), to execute a deed of sale and
to pay damages. The complaint alleged that Espino had entered into the sale to Paredes of Lot. 67 of the Puerto
Princesa Cadastre at P4.00 a square meter. According to Paredes, said deal had been closed by letter and
telegram but the actual execution of the deed of sale and payment of the price were deferred to the arrival of
Espino at Puerto Prinsesa. However, upon Espino’s arrival, he refused and to execute the deed of sale. As a
result, Paredes lost expected profits from a resale of the property.

o Exhibit A: Letter from Espino accepting Paredes’ offer re: purchase price of P4.00 asquare meter
o Exhbit B: Telegram from Espino advising Paredes of his arrival by boat

Espino filed a Motion to Dismiss on the ground that the complaint stated no cause of action and was
unenforceable under the Statute of Frauds.

CFI: Dismissed complaint there being no written contract (CC 1403).

Issue: WON enforcement pleaded in the complaint is barred by the Statute of Frauds; therefore, unenforceable
Held: No.

Ratio: Article 1403 (2) – “…unless the same, or some note of memorandum thereof, be in writing, and subscribed
by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents.”

Exhibits A and B constitute an adequate memorandum of the transaction. All essential terms of the contract are
present; hence, they satisfy the requirements of the Statue of Frauds

o Signed by Espino
o Referred to property sold as Lot. 67 covered by TCT No. 62
o Stipulated its area as 1826 square meters
o Purchase price payable in cash

Berg v Magdalena Estate: “a sufficient memorandum may be contained in two or more documents.”

Shaffer v Palma: “whether the agreement is in writing or not, is a question of evidence; and the authenticity of the
writing need not be established until the trial is held.”

Paredes having alleged that the contract is backed by letter and telegram, and the same being a sufficient
memorandum, his cause of action is thereby established, especially since Espino has not denied the letters in
question. At any rate, if the Court below entertained any doubts about the existence of the written memorandum,
it should have called for a preliminary hearing on that point, and not dismissed the complaint.

Dispositive: Appealed order is set aside and the case remanded to the Court of origin for trial and decision.


Heirs of Cecilio Claudel vs. CA & Heirs of Macario Claudel (Siblings of Cecilio)

Facts: Cecilio Claudel acquired from the Bureau of Lands a parcel of land. Thirty-nine years after his death, two
branches of Cecilio’s family contested the ownership over the land – the Heirs of Cecilio and the Heirs of Siblings
of Cecilio. The Heirs of Cecilio partitioned the lot among themselves and obtained the corresponding TCTs.
Siblings of Cecilio filed a complaint for Cancellation of Titles and Reconveyance with Damages alleging that their
parents had purchased from the late Cecilio several portions of the lot. They admitted that the transaction was
verbal but they were able to present the subdivision plan. The CFI dismissed the complaint disregarding the
evidence. The CA reversed the CFI’s ruling ordering the cancellation of the TCTs issued in the name of the Heirs
of Cecilio. As ruled by the CA, the Statute of Frauds applies only to executory contracts and not to consummated
sales as in the case at bar where oral evidence may be admitted.

Issue: WON a contract of sale of land may be proven orally.

Held: Yes, a contract of sale of land may be proven orally subject to certain exceptions. This case falls within the
exception.

The rule of thumb is that a sale of land, once consummated, is valid regardless of the form it may have been
entered into. The law or jurisprudence does not stipulate that the contract of sale be put in writing before such
contract can validly cede or transmit rights over a certain real property between the parties themselves.

However, in the event that a third party, as in this case, disputes the ownership of the property, the person against
whom that claim is brought cannot present any proof of such sale and hence has no means to enforce the
contract. Thus the Statute of Frauds was precisely devised to protect the parties in a contract of sale of real
property so that no such contract is enforceable unless certain requisites, for purposes of proof, are met.

The provisions of the Statute of Frauds pertinent to the present controversy, state:

Art. 1403 (Civil Code). The following contracts are unenforceable, unless they are ratified:
2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following
cases, an agreement hereafter made shall be unenforceable by action unless the same, or some note or
memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of
the agreement cannot be received without the writing, or a secondary evidence of its contents:
e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an
interest therein;

The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of obligations depending
for their evidence upon the unassisted memory of witnesses by requiring certain enumerated contracts and
transactions to be evidenced in Writing.

Therefore, except under the conditions provided by the Statute of Frauds, the existence of the contract of sale
made by Cecilio with his siblings cannot be proved.



CITY LITE v CA
10 February 2000
Bellosillo, ponente
Nature of case: petition for review on certiorari of a Court of Appeals decision
Doctrine: formation of contract of sale; formalities; form important for validity; sale of realty through an agent


SHORT VERSION:
Only when the agent has written authority to sell realty can the sale be valid.

FACTS:
● FP Holdings and Realty Corp (respondent) was the registered owner of a 71754 sq m-parcel of land
along E Rodriguez Ave, QC known as the “Violago Property” or the “San Lorenzo Ruiz Commercial
Center”.
o It was offered for sale to the general public through a sales brochure:
A parcel of land including buildings and other improvements thereon located along E.
Rodriguez Avenue, Quezon City, with a total lot area of 71,754 square meters - 9,192 square
meters in front, 23,332 square meters in the middle, and 39,230 square meters at the back. But
the total area for sale excludes 5,000 square meters covering the existing chapel and adjoining
areas which will be donated to the Archdiocese of Manila thus reducing the total saleable area to
66,754 square meters. Asking price was P6,250.00/square meter with terms of payment
negotiable. Broker's commission was 2.0% of selling price, net of withholding taxes and other
charges. As advertised, contact person was Meldin Al G. Roy, Metro Drug Inc., with address at
5/F Metro House, 345 Sen. Gil Puyat Avenue, Makati City.
o The 9192 sq m- front portion was the subject of litigation.
● Meldin Roy (respondent) sent a sales brochure, location plane and copy of the TCT to Atty Gelacio
Mamaril, a lawyer and licensed real estate broker. Mamaril passed on the documents to City-Lite’s
Executive VP Antonio Teng and Legal Counsel Atty Victor Villanueva.
o City-Lite conveyed its interest to purchase ½ of the front portion in a letter send to Metro Drug
(Attn: Meldin Roy). Roy also informed City-Lite’s representative that it would take time to
subdivide the lot and FP Holdings wasn’t receptive to a ½ purchase.
o Atty Mamaril sent a letter to Metro Drug expressing City-Lite’s desire to buy the entire front lot so
long as the P6250/sq m asking price was reduced and that payment be made in installments. Roy
made a counter offer in another letter: “1. The price shall beP6,250.00/square meter or a total
of P57,450,000.00; 2. The above purchase price shall be paid to the owner as follows: (a) P15.0
Million downpayment; (b) balance payable within six (6) months from date of downpayment
without interest. “
● City-Lite and Mamaril met with Roy to consummate the transaction; Roy agreed to sell the property
provided City-Lite submit its acceptance in writing to the terms and conditions in Roy’s letter. Later that
afternoon Mamaril and Teng conveyed their formal acceptance of the terms.
● However, FP Holdings refused to execute the corresponding deed of sale and registered an adverse
claim to the title of the property with the Register of Deeds of QC, annotated in the memorandum of
encumbrance in the TCT.
● FP Holdings filed a petition for the cancellation of the adverse claim against City-Lite with the RTC QC;
City-Lite caused the annotation of the first notice of lis pendens which was recorded in the title of the
property.
o RTC dismissed FP Holdings’ petition; FP Holdings caused a resurvey and segregation of the
property, asking and was granted separate titles from the RD QC.
● City-Lite instituted a complaint against FP Holdings for specific performance and damages and caused
the annotation of the second notice of lis pendens.
o The property was transferred to Viewmaster Construction Co (respondent) for which a TCT was
issued; the lis pendens was carried over to the new title.
o The RTC rendered a decision in favor of City-Lite ordering FP Holdings to execute a deed of sale
of the property and ordering the RD QC to cancel Viewmaster’s TCT.
o The CA reversed an set aside the RTC judgment.

ISSUE:
● Was there a contract of sale perfected between City-Lite and FP Holdings through its agent Meldin Roy of
Metro Drug?

REASONING:
● Art. 1874 of the Civil Code provided: "When the sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void."
o Roy was FP Holdings’ authorized agent to sell the property, but the NCC required that the
authority be in writing.
● The absence of authority to sell could be determined from the written memo issued by FP Holdings’
president requesting Metro Drug’s assistance in finding buyers. The memo stated:
We will appreciate Metro Drug's assistance in referring to us buyers for the property. Please proceed
to hold preliminary negotiations with interested buyers and endorse formal offers to us for our final
evaluation and appraisal.
o This meant that Roy and/or Metro Drug were only to assist FP Holdings, and FP Holdings were
the only ones who could make the final evaluation, appraisal and acceptance of any transaction.
o Roy and/or Metro Drug were only a contact person with no authority to conclude a sale of the
property. Consequently, the sale should be null and void, and not produce any legal effect to
transfer the property from FP Holdings to any interested party.

RULING: appealed decision affirmed


Luis Pichel vs. Prudencio Alonzo
G.R.No. L- 36902
30 January 1982

FACTS OF THE CASE:
Prudencio Alonzo (VENDOR) executed a deed of sale for the coconut fruits of his land in Balactasan Plantation in
Lamitan, Basilan, in favor of Luis Pichel (VENDEE). The land from which the subject coconut fruits are derived
from was subjected to a cancellation of the award in 1965, due to the reason of violation of the law that disallows
alienation of land (the vendor’s rights to the land were reinstated in 1972).

The vendor and his wife sold to the vendee the fruits of the coconut trees from 1968 to 1976 for consideration of
Php4,200. Even during the date of sale, the land was still leased to one Ramon Sua, and it was part of the
agreement of the sale that the sum of Php3,650.00 was to be paid by the vendor to Ramon Sua as to release the
land.
The RTC decided in favor of the vendor, due to the fact that the deed of sale that was executed was invalid, due
to its supposed violation of RA No. 477, in which they equated the deed of sale executed by the parties as a
contract of lease.

ISSUES OF THE CASE: Was the Deed of Sale valid?

RULING:
- Yes, The RTC erred in constructing the deed of sale as a contract of lease.
- There was no need on the part of the RTC to interpret the contract, since there was no ambiguity, it merely
contracts the sale of the fruits of the land, not the land itself.
- The S.C. relied upon ART 1370 of the Civil Code, regarding the rule on interpreting contracts.
- Its interpretation in express form is the preferred. Construction shall be employed when such literal interpretation
is impossible.
- The possession of the coconut fruits for 7 years is different from possession of the land, since the coconut fruits
are mere accessories and the land is the principal- a transfer of accessories does not necessarily mean a transfer
of principal, it is the other way around.
- The vendor after having received the consideration for the sale of his coconut fruits cannot be allowed to impugn
the validity of the contracts he entered into, to the prejudice of petitioner who contracted in good faith and
consideration

HELD:
The Judgment of the lower court has been set aside, and another one entered in its place, dismissing the
complaint.

Obligations and Contracts Terms:
• Difference between a contract of sale and a lease of things: that the delivery of the thing sold transfers
ownership, while in a lease no such transfer of ownership results as the rights of the lessee are limited to the use
and enjoyment of the thing leased.
• Contract of Lease- defined as giving or the concession of the enjoyment or use of a thing for a specified time
and fixed price.

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

ISSUE: 1. WON the subject matter of the sale is valid. YES
2. WON the sale of the coconut fruits violated RA 477. NO

The "Deed of Sale” is precisely what it purports to be. It is a document evidencing the agreement of herein
parties for the sale of coconut fruits of the lot, and not for the lease of the land itself as found by the lower Court.
In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut
fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968;
up to JANUARY 1, 1976."

Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the
essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract
of sale may be absolute or conditional.

The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during
the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under
Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale.
And in
Sibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the
sale.

According to Mechem, a valid sale may be made of a thing, which though not yet actually in existence, is
reasonably certain to come into existence as the natural increment or usual incident of something already in
existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into
existence.

2. The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of
absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the
fruits during the seven- year period. The possession and enjoyment of the coconut trees cannot be said to be the
possession and enjoyment of the land itself because these rights are distinct and separate from each other, the
first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A
transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the
accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of
the trees, much less extended further to include the lease of the land itself.The grantee of a parcel of land under
R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land
awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the
permanent improvements thereon. While coconuttrees are permanent improvements of a land, their nuts are
natural or industrial fruits which are meant tobe gathered or severed from the trees, to be used, enjoyed, sold or
otherwise disposed of by the owner ofthe land. Herein respondents, as the grantee of Lot No. 21 from the
Government, had the right andprerogative to sell the coconut fruits of the trees growing on the property.