TEODORO ACAP vs. COURT OF APPEALS and EDY DE LOS REYES NO.

NO. The Declaration of Heirship and Waiver of Rights cannot be considered

G.R. No. 118114 December 7, 1995
PADILLA, J.
Facts:
Petitioner had been the tenant of a portion of land which was originally
owned by Sps. Vasquez. After the death of the latter, their only son Felixberto
inherited the same and sold it to Cosme Pido. When Pido died, his heirs executed a
notarized Declaration of Heirship and Waiver of Rights in favor of Ely De Los Reyes.
Upon obtaining the document, private respondent filed the same with the Registry
of Deeds as part of a notice of an adverse claim.
as a Deed of Sale in favor of private respondent of the lot in question. The trial court
was obviously confused as to the nature and effect of the Declaration of Heirship
and Waiver of Rights, equating the same with a contract of sale.
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 see fit. It is in effect an extrajudicial
settlement between the heirs.

Thereafter, private respondent claims that he entered into an oral lease
agreement with herein petitioner who agreed to pay 10 cavans of palay per annum
as lease rental. In 1982, petitioner allegedly complied with said obligation but
refused to pay any further lease rentals.After the lapse of 4 years, private
respondent filed a complaint for recovery of possession and damages against
petitioner for his failure to pay the agreed annual rentals.
During the trial, petitioner refused to recognize private respondent's
ownership over the land averring that he continues to recognize Cosme Pido as the
owner of the same and that after Pido’s death, he continued to pay rentals to Pido's
widow who instructed him to stay in the landholding and to pay the accumulated
rentals thereon upon her demand or return from abroad.
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 other
persons who are co-heirs in the succession. Private respondent, being then a
stranger to the succession of Cosme Pido, cannot conclusively claim ownership over
the subject lot on the sole basis of the waiver document which neither recites the
elements of either a sale, or a donation, or any other derivative mode of acquiring
ownership.

The trial court ruled in favor of private respondent ratiocinating that the
subject land was "sold" by the heirs of Cosme Pido to private respondent which in
effect passed on their ownership of the lot to the latter. On appeal, respondent court
brushed aside petitioner's argument as it considered the rental payment in 1982 as
estoppel on petitioner's part to thereafter refute private respondent's claim of
ownership over the said land. Hence, this petition wherein Acap points out that the
Declaration of Heirship and Waiver of Rights is not one of the recognized modes of
acquiring ownership and that the same cannot be considered a deed of because no
consideration is stated in the contract.

Issue:

Whether or not the Declaration of Heirship and Waiver of Rights can be

considered as a Deed of Sale in favor of private respondent

Ruling:
 Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE vs. COURT OF APPEALS,
DAVID A. RAYMUNDO and GEORGE RAYMUNDO
G.R. No. 108346 July 11, 2001
PANGANIBAN, J.
Facts:
David Raymundo is the registered owner of a parcel of land together with the house and other
improvements thereon located at the City of Makati. George Raymundo is David's father who
negotiated with herein petitioners Avelina and Mariano Velarde for the sale of said property.
A Deed of Sale with Assumption of Mortgage was then executed by David Raymundo in favor
of Avelina Velarde. It was agreed upon that the vendee will pay Php.800,000.00 in full and
will assume to pay the mortgage in the amount of Php,1,800,000.00 obligations to BPI.
Petitioner Avelina also executed an Undertaking for the purpose of attesting and confirming
their private understanding concerning the said mortgage. It is stipulated therein that in the
event of violation of any terms of the Deed, Avelina agrees that her down payment of
P800,000.00 and all payments made with the BPI shall be forfeited in favor of David
Raymundo and he shall resume total and complete ownership and possession of the property
and the Deed of Sale shall be deemed automatically cancelled and be of no further force or
effect. Also, since private respondents had a standing approved credit line with the BPI, the
parties agreed to avail of this subject to the approval of an application for assumption of
mortgage by petitioners.
Pursuant to said agreements, petitioners paid BPI the monthly interest on the loan secured
by the aforementioned mortgage for 3 months. On 15 December 1986, however, plaintiffs
were advised that the Application for Assumption of Mortgage with BPI, was not approved.
This prompted plaintiffs not to make any further payment.
On January 5, 1987, defendants wrote plaintiffs informing the latter that their non-payment
to the mortgage bank constitutes non-performance of their obligation In reply, petitioners
expressed to the respondent that they are willing to pay the balance in cash provided that
respondents: (a) deliver actual possession of the property to her not later than January 15,
1987 for her immediate occupancy; (b) cause the re- lease of title and mortgage from the BPI
and make the title available and free from any liens and encumbrances; and (c) execute an
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 latter's failure to comply with
the terms and conditions of the Deed of Sale with Assumption of Mortgage and the
Undertaking.
Consequently, petitioners filed a Complaint against private respondents for specific
performance, nullity of cancellation, writ of possession and damages. Then Judge Ynares-
Santiago dismissed the Complaint. However, Judge Abad Santos reversed the decision 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 who then set aside the order of Judge Abad Santos
upholding the validity of the rescission. In the present petition, Avelina claims, among others,
that their nonpayment of private respondents' mortgage obligation did not constitute a
breach of contract, considering that their request to assume the obligation had been
disapproved by the mortgagee bank.
Issue:
Whether or not the non-payment of the mortgage obligation resulted in a breach of the
contract
Ruling:
YES. Petitioner’s non-payment of the mortgage obligation resulted in a breach of their
contract.
As admitted by both parties, 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, when petitioners received notice of the bank's
disapproval of their application to assume respondents' mortgage, they should have paid the
balance of the P1.8 million loan.
But instead of doing so, petitioners sent a letter to private respondents offering to make such
payment only upon the fulfillment of certain conditions not originally agreed upon in the
contract of sale. 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 therefor a price certain in money or its equivalent.
Private respondents had already performed their obligation through the execution of the
Deed of Sale, which effectively transferred ownership of the property to petitioner through
constructive delivery. Prior physical delivery or possession is not legally required, and the
execution of the Deed of Sale is deemed equivalent to delivery. Petitioners, on the other hand,
did not perform their correlative obligation of paying the contract price in the manner agreed
upon.
True, petitioners expressed their willingness to pay the balance of the purchase price one
month after it became due; however, this was not equivalent to actual payment as would
constitute a faithful compliance of their reciprocal obligation. Moreover, the offer to pay was
conditioned on the performance by private respondents of additional burdens that had not
been agreed upon in the original contract.
The Supreme Court, in sum, affirmed the decision of the Court of Appeals but orders the
private respondents to return the amount paid by petitioners as a consequence of the
rescinded contract on the basis of the principle of unjust enrichment and that rescission can
only be carried out when the one who demands the same can return whatever he may be
obliged to restore.
 ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONZALES (for herself and on behalf of Florida C. Tupper, as
attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and
CATALINA BALAIS MABANAG vs. THE COURT OF APPEALS, CONCEPCION D.
ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact
G.R. No. 103577 October 7, 1996
MELO, J.
Facts:
On January 19, 1985, petitioners Romulo Coronel et al. executed a Receipt
of Down Payment in favor of respondent Ramona Patricia Alcaraz. It is agreed upon
that Ramona will make a down payment of Php. 50,000.00 upon execution of the
document aforestated; that the Coronels will cause the transfer in their names of
the title of the property registered in the name of their deceased father upon receipt
of the down payment; that upon such transfer, the Coronels will execute the deed of
absolute sale in favor of Ramona and the latter will pay the former the whole
balance of Php.1,190,000.00. In compliance with said agreement, Ramona’s mother,
Concepcion D. Alcaraz, paid the down payment to the Coronels.
On February 6, 1985, the property was transferred in the name of the
Coronels. However, petitioners, on 18 February 1985, sold the property to Catalina
B. Mabanag for Php.1,580,000.00 after the latter has paid P300,000.00. For this
reason, Coronels canceled and rescinded the contract with Ramona by depositing
the down payment in the bank in trust for Ramona Patricia Alcaraz.
Due to the foregoing, Concepcion et al. filed a complaint for specific
performance against the Coronels and caused the annotation of a notice of lis
pendens on the property. On the other hand, Catalina caused the annotation of a
notice of adverse claim covering the same property. On April 25, 1985, the Coronels
executed a Deed of Absolute Sale over the subject property in favor of Catalina and
a new title was subsequently issued in the name of Catalina.
The trial court rendered a judgment ordering the Coronels to execute a
Deed of Absolute Sale in favor of herein respondents. The motion for
reconsideration filed was denied and on appeal, the decision of the RTC was fully
affirmed by the CA. On the present petition, it is the position of private respondents
that the "Receipt of Down Payment" embodied a perfected contract of sale while
petitioners insist that what the document signified was a mere executory contract
to sell, subject to certain suspensive conditions.
Issue:
Whether or not the “Receipt of Down Payment” embodied a perfected
contract of sale
Ruling:
YES. The Receipt of Down Payment embodied a perfected contract of sale
and is not a mere contract to sell.
When the "Receipt of Down Payment" is considered in its entirety, it
becomes manifest that there was a clear intent on the part of petitioners to transfer
the title to the buyer, but since the TCT was still in the name of petitioner's father,
they could not fully effect such transfer although the buyer was then willing and
able to immediately pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private respondent Ramona P.
Alcaraz, to cause the issuance of a new certificate of title in their names from that of
their father, after which, they promised to present said title, now in their names, to
the latter and to execute the deed of absolute sale whereupon, the latter shall, in
turn, pay the entire balance of the purchase price.
Unlike in a contract to sell, petitioners did not merely promise to sell the
properly to private respondent upon the fulfillment of the suspensive condition. On
the contrary, having already agreed to sell the subject property, they undertook to
have the certificate of title changed to their names and immediately thereafter, to
execute the written deed of absolute sale.
It should also be noted that the sellers were the one who were unable to
enter into a contract of absolute sale by reason of the fact that the certificate of title
to the property was still in the name of their father. It was the sellers in this case
who, as it were, had the impediment which prevented, so to speak, the execution of
a contract of absolute sale. 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 A. Coronel, et al., the parties had agreed to a
conditional contract of sale, consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners' father to their names.
Hence, in light of the foregoing, the Supreme Court affirmed the judgment
of the lower court and dismissed the instant petition.
 an inchoate interest on the lots by virtue of the automatic reversion clause in the
deed of donation.
ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA, DEMETRIO
QUIJADA, ELIUTERIA QUIJADA, EULALIO QUIJADA, and WARLITO QUIJADA vs.
When the CA denied their motion, petitioners instituted the present
COURT OF APPEALS, REGALADO MONDEJAR, RODULFO GOLORAN, ALBERTO
petition arguing that the sale of the subject property made by Trinidad Quijada to
ASIS, SEGUNDINO RAS, ERNESTO GOLORAN, CELSO ABISO, FERNANDO
respondent Mondejar is void, considering that at that time, ownership was already
BAUTISTA, ANTONIO MACASERO, and NESTOR MAGUINSAY
transferred to the Municipality of Talacogon. On the contrary, private respondents
G.R. No. 126444 December 4, 1998
contend that the sale was valid, that they are buyers in good faith, and that
MARTINEZ, J.:
petitioners' case is barred by laches.
Facts:
Issue:
Petitioners are the children of the late Trinidad Corvera Vda de Quijada.
Trinidad was one of the heirs of the late Pedro Corvera and inherited from the latter Whether or not the fact that the seller is not the owner of the thing sold at
the 2-hectare parcel of land subject of the case. On April 5, 1956, Trinidad Quijada the time of the perfection of the contract nullifies the same
together with her sisters Leonila and nd brother Epapiadito executed a conditional
deed of donation of the 2-hectare parcel of land in favor of the Municipality of Ruling:
Talacogon, the condition being that the parcel of land shall be used solely and
exclusively as part of the campus of the proposed provincial high school in NO. The fact that Trinidad is not the owner of the subject property at the
Talacogon. time of the perfection of the contract does not nullify the same.

On July 29, 1962, Trinidad sold 1 hectare of the subject parcel of land to
Regalado Mondejar. Subsequently, Trinidad verbally sold the remaining one 1
hectare to Regalado Mondejar without the benefit of a written deed of sale and
evidenced solely by receipts of payment.
In 1987, the proposed provincial high school having failed to materialize,
the Sangguniang Bayan of the municipality of Talacogon enacted a resolution
reverting the 2 hectares of land donated back to the donors. In the meantime,
Regalado Mondejar sold portions of the land to Fernando Bautista, Rodolfo Goloran,
Efren Guden and Ernesto Goloran.
Sale, being a consensual contract, is perfected by mere consent, which is
manifested the moment there is a meeting of the minds as to the offer and
acceptance thereof on three (3) elements: subject matter, price and terms of
payment of the price. Ownership by the seller on the thing sold at the time of the
perfection of the contract of sale is not an element for its perfection. What the law
requires is that the seller has the right to transfer ownership at the time the thing
sold is delivered. Perfection per se does not transfer ownership which occurs upon
the actual or constructive delivery of the thing sold. A perfected contract of sale
cannot be challenged on the ground of non-ownership on the part of the seller at
the time of its perfection; hence, the sale is still valid.

On July 5, 1988, petitioners filed an action against respondents alleging that

their deceased mother never sold, conveyed, transferred or disposed of the
property in question to any person or entity much less to Regalado Mondejar save
the donation made to the Municipality of Talacogon in 1956; that at the time of the
alleged sale to Regalado Mondejar by Trinidad Quijada, the land still belongs to the
Municipality of Talacogon, hence, the supposed sale is null and void.

The court a quo rendered judgment in favor of herein petitioners

ratiocinating that Trinidad Quijada had no legal title or right to sell the land to
defendant Mondejar in 1962, 1966, 1967 and 1968, the same not being hers to
dispose of because ownership belongs to the Municipality of Talacogon. On appeal,
the Court of Appeals reversed and set aside the judgment a quo ruling that the sale
made by Trinidad Quijada to respondent Mondejar was valid as the former retained
 MIGUEL MAPALO, ET AL. vs. MAXIMO MAPALO, ET AL.
G.R. No. L-21489 and L-21628 May 19, 1966
BENGZON, J.P., J.
Facts:
Sps. Miguel Mapalo and Candida Quiba were registered owners of a 1,635-square-meter
residential land. Said spouses-owners decided to donate the eastern half of the land to
Maximo Mapalo, Miguel’s brother. However, they were deceived into signing a deed of
absolute sale over the entire land in his favor. Their signatures thereto were procured
by fraud, that is, they were made to believe by Maximo and by the attorney who acted
as notary public that the same was a deed of donation in Maximo's favor covering one-
half of their land. Although the document of sale stated a consideration of Php. 500.00,
the aforesaid spouses did not receive anything of value for the land.
Not known to the Sps. Mapalo, Maximo registered the deed of sale in his favor
and obtained in his name a TCT over the entire land. 13 years later, he sold for P2,500.00
said entire land in favor of Evaristo, Petronila Pacifico and Miguel all surnamed Narciso.
The sale to the Narciso’s was in turn registered and a TCT was issued for the whole land
in their names. The Narciso’s took possession only of the eastern portion of the land in
1951, after the sale in their favor was made.
On February 7, 1952, the Narciso’s filed suit in the CFI of Pangasinan to 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 and Quiba.
The Mapalo spouses filed their answer with a counterclaim seeking the
cancellation of the TCT of the Narciso’s as to the western half of the land on the grounds
that their signatures to the deed of sale of 1936 was procured by fraud and that the
Narciso’s were buyers in bad faith. In addition, the Mapalo spouses filed their own
complaint in the CFI against the Narciso’s and Maximo Mapalo asking that the deeds of
sale of 1936 and of 1951 over the land in question be declared null and void as to the
western half of said land.
The court tried the two cases jointly and rendered a decision in favor of the
Mapalo spouses. The Narciso’s appealed to the Court of Appeals which reversed the
judgment of the CFI solely on the ground that the consent of the Mapalo spouses to the
deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab
initio, and, therefore, the action to annul the same, within four years from notice of the
fraud, had long prescribed.
From said decision, the Mapalo spouses appealed to the Supreme court arguing
that the document dated October 15, 1936, purporting to sell the entire land in favor of
Maximo Mapalo, is void, not merely voidable, as to the western portion of the land for
being absolutely simulated or fictitious.
Issue:
Whether or not Deed of Sale between Sps. Mapalo and Maximo is merely
voidable for having a false consideration
Ruling:
NO. The Deed of Sale between Sps. Mapalo and Maximo is not merely voidable
but void and inexistent for having no cause or consideration.
As regards the eastern portion of the land, the Mapalo spouses are not claiming
the same, it being their stand that they have donated and freely given said half of their
land to Maximo Mapalo. As to the western portion, however, the fact not disputed herein
is that no donation by the Mapalo spouses obtained as to said portion. Accordingly, we
start with the fact that liberality as a cause or consideration does not exist as regards the
western portion of the land in relation to the deed of 1936; that there was no donation
with respect to the same.
The rule under the Civil Code, 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.
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.
According to Manresa, what is meant by a contract that states a false
consideration is one that has in fact a real consideration but the same is not the one
stated in the document. 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. A contract of purchase and sale is null and void and
produces no effect whatsoever where the same is without cause or consideration in that
the purchase price which appears thereon as paid has in fact never been paid by the
purchaser to the vendor. Hence, premises considered, the Supreme Court reversed the
decision of the CA and affirmed the judgment of the CFI.
 SAN MIGUEL PROPERTIES PHILIPPINES, INC. vs. SPS. ALFREDO HUANG and
GRACE HUANG
G.R. No. 137290 July 31, 2000
MENDOZA, J.
Facts:
Petitioner is a domestic corporation engaged in the purchase and sale of
real properties. Part of its inventory are two parcels of land located in Pasig City.
The same were offered for sale to Atty. Helena M. Dauz, who was acting for
respondent spouses, for ₱52,140,000.00 in cash. 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 ₱500,000.00 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.
After such rejection, Atty. Dauz wrote another letter on 29 March 1994
proposing that they will be given the exclusive option to purchase the property
within the 30 days from date of petitioner’s acceptance; that during said period,
negotiation shall be made and that in the event that no agreement will be made, the
earnest-deposit money of ₱1,000,000.00 enclosed in the letter shall be refunded
upon demand.
Isidro A. Sobrecarey, petitioner’s 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 ₱1 million. Atty. Dauz
and Sobrecarey then commenced negotiations on the first of which 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 the next negotiation, Sobrecarey informed Atty. Dauz that petitioner had not yet
acted on her counter-offer which prompted Atty. Dauz to propose a four-month
period of amortization.
Atty. Dauz subsequently 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
which was granted by petitioner. But, on 7 July 1994, petitioner 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 ₱1 million given as earnest-deposit. On July 20, 1994, respondent
spouses, wrote petitioner demanding the execution within five 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.
Respondent spouses then filed a complaint for specific performance
against petitioner before the Regional Trial Court. Petitioner moved to dismiss the
complaint alleging that the alleged exclusive option of respondent spouses lacked a
consideration separate and distinct from the purchase price and was thus
unenforceable and the complaint did not allege a cause of action because there was
no meeting of the minds between the parties and, therefore, no perfected contract
of sale. The motion was opposed by respondents.
The trial court granted petitioner’s 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 rendered a decision reversing the
judgment of the trial court. The appellate court held that all the requisites of a
perfected contract of sale had been complied with as the offer made on March 29,
1994, in connection with which the earnest money in the amount of ₱1 million was
tendered by respondents, had already been accepted by petitioner. The court cited
Art. 1482 of the Civil Code which provides that "whenever earnest money is given
in a contract of sale, it shall be considered as part of the price and as proof of the
perfection of the contract." The fact the parties had not agreed on the mode of
payment did not affect the contract as such is not an essential element for its
validity.
On the instant petition, petitioner contends that the Court of Appeals erred
in finding that there was a perfected contract of sale between the parties because
the March 29, 1994 letter of respondents, which petitioner accepted, merely
resulted in an option contract, albeit it was unenforceable for lack of a distinct
consideration.
Issue:
Whether or not there is a contract of sale between the petitioner and the
respondents
Ruling:
No. There is no perfected contract of sale between the parties.
The ₱1 million "earnest-deposit", as what the respondents argues, 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. In fact, Respondents did not give the ₱1
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 The manner of payment of the purchase price is an essential element before
not back out of the sale. Respondents in fact described the amount as an "earnest- a valid and binding contract of sale can exist. Although the Civil Code does not
deposit. 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.
Such is also evident from the conditions attached by respondents to their
letter dated 20 March 1994. 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.

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 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.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES vs. COURT OF APPEALS and
FIRESTONE CERAMICS, INC.
G.R. No. 143513 November 14, 2001
BELLOSILLO, J.:
Facts: Petitioner had in its disposal a ten (10)-hectare property located along Pureza St., Sta.
Mesa, Manila. On 24 August 1965 NDC and private respondent FIRESTONE entered into a
contract of lease covering 2.90118 hectares of NDC’s property for use as a manufacturing
plant for a term of ten (10) years, renewable for another ten (10) years under the same terms
and conditions. FIRESTONE entered into a second contract of lease with NDC over the latter's
4-unit pre-fabricated reparation steel warehouse stored in Daliao, Davao. FIRESTONE agreed
to ship the warehouse to Manila for eventual assembly within the NDC compound. The
second contract was for similar use as a ceramic manufacturing plant and was agreed
expressly to be co-extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot.
On 31 July 1974 the parties signed a similar contract concerning a six (6)-unit pre-fabricated
steel warehouse which would expire on 2 December 1978. Prior to the expiration of the
aforementioned contract, FIRESTONE wrote NDC requesting for an extension of their lease
agreement. The term of the lease was extended subject to several conditions among which
was that in the event NDC with the approval of higher authorities, decide to dispose and sell
these properties including the lot, priority should be given to the lessee.
The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,
cognizant of the impending expiration of their lease agreement, informed NDC that it was
renewing its lease over the property. When FIRESTONE learned about NDC's supposed plans
to dispose of the subject property in favor of petitioner Polytechnic University of the
Philippines (PUP), private respondent 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.
FIRESTONE averred that it was pre-empting the impending sale of the NDC compound to
petitioner PUP in violation of its leasehold rights over the 2.60-hectare property and the
warehouses thereon which would expire in 1999.
Meanwhile, 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 argued that the lease contract covering the property had
expired long before the institution of the complaint and that the right of first refusal invoked
by FIRESTONE applied solely to the six-unit pre-fabricated warehouse and not the lot upon
which it stood.
After trial on the merits, judgment was rendered declaring the contracts of lease executed
between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses
constructed thereon valid and existing until 2 June 1999 and PUP was ordered and directed
to sell to FIRESTONE the 2.6 hectare leased premises.
Subsequently, the Court of Appeals affirmed the decision of the trial court ordering the sale
of the property in favor of FIRESTONE and gave the latter a grace period of six (6) months
from finality of the court's judgment within which to purchase the property in questioned in
the exercise of its right of first refusal. The Court of Appeals observed that as there was a sale
of the subject property, NDC could not excuse itself from its obligation to offer the property
for sale first to firestone before it could to other parties.
PUP moved for reconsideration asserting that in ordering the sale of the property in favor of
FIRESTONE the courts a quo unfairly created a contract to sell between the parties. It argued
that the court cannot substitute or decree its mind or consent for that of the parties in
determining whether or not a contract has been perfected between PUP and NDC.
Issue: Whether the conveyance of the property from NDC to PUP was one of absolute sale
Ruling:
YES. 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.
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 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. In addition, the cancellation of NDC's
liabilities in favor of the National Government in the amount of P57,193,201.64 constituted
the "consideration" for the sale.
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.
 CELESTINO CO & COMPANY vs. COLLECTOR OF INTERNAL REVENUE
G.R. No. L-8506 August 31, 1956
BENGZON, J.:
Facts:
Petitioner is a duly registered general co-partnership doing business under
the trade name of "Oriental Sash Factory". From 1946 to 1951 it paid percentage
taxes of 7% on the gross receipts of its sash, door and window factory, in accordance
with Sec. 186 of the National Revenue Code imposing taxes on sale of manufactured
articles. However, in 1952 it began to claim liability only to the contractor's 3%
under Sec. 191 of the same Code; and having failed to convince the Bureau of
Internal Revenue, it brought the matter to the Court of Tax Appeals, where it also
failed.
The CTA ruled that it should be noted that petitioner has chosen for its
tradename and has offered itself to the public as a "Factory", which means it is out
to do business, in its chosen lines on a big scale. As a general rule, sash factories
receive orders for doors and windows of special design only in particular cases but
the bulk of their sales is derived from a ready-made doors and windows of standard
sizes for the average home. Also, even if we believe petitioner's claim that it does
not manufacture ready-made sash, doors and windows for the public and that it
makes these articles only special order of its customers, that does not make it a
contractor within the purview of section 191 of the National Internal Revenue
Code.
Petitioner’s argument, on the other hand, is that it manufactures sash,
windows and doors only for special customers and upon their special orders and in
accordance with the desired specifications of the persons ordering the same and not
for the general market: since the doors ordered by Don Toribio Teodoro & Sons,
Inc., for instance, are not in existence and which never would have existed but for
the order of the party desiring it; and since petitioner's contractual relation with his
customers is that of a contract for a piece of work or since petitioner is engaged in
the sale of services, it follows that the petitioner should be taxed under section 191
of the Tax Code and NOT under section 185 of the same Code.
Issue:
Whether or not petitioner company is engaged in a contract for a piece of
work
Ruling:
No. Petitioner is not engaged in a contract for a piece of work.
Celestino Co & Company, as it has represented in its stationery and
advertisements to the public, habitually makes sash, windows and doors. That it
"manufactures" the same is practically admitted by appellant itself. The fact that
windows and doors are made by it only when customers place their orders, does
not alter the nature of the establishment, for it is obvious that it only accepted such
orders as called for the employment of such material-moulding, frames, panels-as it
ordinarily manufactured or was in a position habitually to manufacture.
Nobody will say that when a sawmill cuts lumber in accordance with the
peculiar specifications of a customer-sizes not previously held in stock for sale to
the public-it thereby becomes an employee or servant of the customer, not the seller
of lumber. The same consideration applies to this sash manufacturer.
Appellant invokes Article 1467 of the New Civil Code to bolster its
contention that in filing orders for windows and doors according to specifications,
it did not sell, but merely contracted for particular pieces of work or "merely sold
its services". Such contention is misplaced. It is at once apparent that the Oriental
Sash Factory did not merely sell its services to Don Toribio Teodoro & Co. because it
also sold the materials. The truth of the matter is that it sold materials ordinarily
manufactured by it — sash, panels, mouldings — to Teodoro & Co., although in such
form or combination as suited the fancy of the purchaser. Such new form does not
divest the Oriental Sash Factory of its character as manufacturer. Neither does it
take the transaction out of the category of sales under Article 1467 above quoted,
because although the Factory does not, in the ordinary course of its business,
manufacture and keep on stock doors of the kind sold to Teodoro, it could stock
and/or probably had in stock the sash, mouldings and panels it used therefor.
When petitioner accepts a job that requires the use of extraordinary or
additional equipment, or involves services not generally performed by it-it thereby
contracts for a piece of work — filing special orders within the meaning of Article
1467. However, the orders exhibited were not shown to be special. They were
merely orders for work — nothing is shown to call them special requiring
extraordinary service of the factory. Hence, petitioner is not engaged on a contract
for a piece of work and should be taxed under Sec. 186 of the National Revenue
Code.
THE COMMISSIONER OF INTERNAL REVENUE vs. ENGINEERING EQUIPMENT AND sale of services or labor of a contractor rather than on the sale of articles subject to the
SUPPLY COMPANY and THE COURT OF TAX APPEALS tax referred to in Sections 184, 185 and 186 of the Code.
G.R. No. L-27044 June 30, 1975
Issue: Whether or not Engineering is a contractor of air-conditioning units
ENGINEERING EQUIPMENT AND SUPPLY COMPANY vs. THE COMMISSIONER OF
INTERNAL REVENUE and THE COURT OF TAX APPEALS
Ruling:
G.R. No. L-27452 June 30, 1975
ESGUERRA, J.:
Facts: YES. Engineering Equipment and Supply Co. is a contractor engaged in a
contract for a piece of work of air conditioning units.
Engineering Equipment and Supply Co. is engaged in the design and installation
of central type air conditioning system, pumping plants and steel fabrications. On 27 July The distinction between a contract of sale and one for work, labor and materials
1956, one Juan de la Cruz, wrote the CIR denouncing Engineering for tax evasion by is tested by the inquiry whether the thing transferred is one not in existence and which
misdeclaring its imported articles and failing to pay the correct percentage taxes due never would have existed but for the order of the party desiring to acquire it, or a thing
thereon in connivance with its foreign suppliers. Acting on the same, a raid and search which would have existed and has been the subject of sale to some other persons even
was conducted and on which occasion voluminous records of the firm were seized and if the order had not been given. If the article ordered by the purchaser is exactly such as
confiscated. the plaintiff makes and keeps on hand for sale to anyone, and no change or modification
of it is made at defendant's request, it is a contract of sale, even though it may be entirely
made after, and in consequence of, the defendants order for it.
It was reported to the CIR that Engineering be assessed for P480,912.01 as
deficiency advance sales tax on the theory that it misdeclared its importation of air
conditioning units and parts and accessories thereof which are subject to tax under Sec. It should be noted that Engineering did not manufacture air conditioning units
185(m) of the Tax Code, instead of Sec. 186 thereof. Such was revised and was raised to for sale to the general public, but imported some items which were used in executing
P916,362.56 representing deficiency advance sales tax and manufacturers sales tax, contracts entered into by it. Engineering, therefore, undertook negotiations and
inclusive of the 25% and 50% surcharges. execution of individual contracts for the design, supply and installation of air
conditioning units of the central, taking into consideration in the process such factors as
the area of the space to be air conditioned; the number of persons occupying or would
On 3 March 1959. the Commissioner assessed against, and demanded upon,
be occupying the premises; the purpose for which the various air conditioning areas are
Engineering payment of the increased amount and suggested that P10,000 be paid as
to be used; and the sources of heat gain or cooling load on the plant such as sun load,
compromise in extrajudicial settlement of Engineering's penal liability for violation of
lighting, and other electrical appliances which are or may be in the plan.
the Tax Code. The firm, however, contested the same and appealed to the Court of Tax
Appeals; and during the pendency of the case the investigating revenue examiners
reduced Engineering's deficiency tax liabilities from P916,362.65 to P740,587.86 based Engineering, in a nutshell, fabricates, assembles, supplies and installs in the
on findings after conferences had with Engineering's Accountant and Auditor. buildings of its various customers the central type air conditioning system; prepares the
plans and specifications therefor which are distinct and different from each other; the
air conditioning units and spare parts or accessories thereof used by petitioner are not
The CTA rendered its decision declaring petitioner exempt from the deficiency
the window type of air conditioner which are manufactured, assembled and produced
manufacturers sales tax covering the period from June 1, 1948. to September 2, 1956.
locally for sale to the general market; and the imported air conditioning units and spare
However, petitioner is ordered to pay respondent, or his duly authorized collection
parts or accessories thereof are supplied and installed by petitioner upon previous
agent, the sum of P174,141.62 as compensating tax and 25% surcharge for the period
orders of its customers conformably with their needs and requirements. The facts and
from 1953 to September 1956.
circumstances therefore support the theory that Engineering is a contractor rather than
a manufacturer.
On the present petition, the CIR claims that Engineering is a manufacturer and
seller of air conditioning units and parts or accessories thereof and, therefore, it is
In view of the foregoing, the Supreme Court affirmed the conclusion of the
subject to the 30% advance sales tax prescribed by Section 185(m) of the Tax Code, in
Court of Tax Appeals that Engineering is a contractor rather than a manufacturer,
relation to Section 194 thereof. On the other hand, Engineering claims that it is not a
subject to the contractor’s tax prescribed by Section 191 of the Code and not to the
manufacturer and setter of air-conditioning units and spare parts or accessories thereof
advance sales tax imposed by Section 185(m) in relation to Section 194 of the same
subject to tax under Section 185(m) of the Tax Code, but a contractor engaged in the
Code.
design, supply and installation of the central type of air-conditioning system subject to
the 3% tax imposed by Section 191 of the same Code, which is essentially a tax on the
 INOCENCIA YU DINO and her HUSBAND doing business under the trade name
"CANDY CLAIRE FASHION GARMENTS" vs. COURT OF APPEALS and ROMAN
SIO, doing business under the name "UNIVERSAL TOY MASTER
MANUFACTURING"
G.R. No. 113564 June 20, 2001
PUNO, J.:
Facts:
Petitioners and respondent Sio entered into a contract whereby the latter
would manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000
pieces of vinyl mooseheads at P7.00 per piece in accordance with the sample
approved by the petitioners. Respondent Sio delivered in several installments the
said 40,000 pieces of frogs and mooseheads while petitioner fully paid the agreed
price.
Subsequently, petitioners returned to respondent 29,772 pieces of frogs
and mooseheads for failing to comply with the approved sample. Petitioners then
demanded from the respondent a refund of the purchase price of the returned goods
in the amount of P208,404.00. As respondent Sio refused to pay, petitioners filed on
July 24, 1989 an action for collection of a sum of money in RTC who ruled in their
favor
On appeal, respondent court reversed its decision and dismissed
petitioners' Complaint for having been filed beyond the prescriptive period. Hence,
this petition wherein Dino claims that the Complaint they filed was one for the
collection of a sum of money. Respondent contends that it was an action for breach
of warranty as the sum of money petitioners sought to collect was actually a refund
of the purchase price they paid for the alleged defective goods they bought from the
respondent.
Issue:
Whether or not the contract between the parties is a contract for a piece of
work
Ruling:
YES. The contract between the parties is a contract for a piece of work.
A contract for a piece of work, labor and materials may be distinguished
from a contract of sale by the inquiry as to whether the thing transferred is one not
in existence and which would never have existed but for the order of the person
desiring it. In such case, the contract is one for a piece of work, not a sale. On the
other hand, if the thing subject of the contract would have existed and been the
subject of a sale to some other person even if the order had not been given then the
contract is one of sale.
The contract between the petitioners and respondent stipulated that
respondent would manufacture upon order of the petitioners 20,000 pieces of vinyl
frogs and 20,000 pieces of vinyl mooseheads according to the samples specified and
approved by the petitioners. Respondent Sio did not ordinarily manufacture these
products, but only upon order of the petitioners and at the price agreed upon.
Clearly, the contract executed by and between the petitioners and the respondent
was a contract for a piece of work. However, at any rate, whether the agreement
between the parties was one of a contract of sale or a piece of work, the provisions
on warranty of title against hidden defects in a contract of sale apply to the case at
bar.
Petitioners aver that they discovered the defects in respondent's products
when customers in their shirt business came back to them complaining that the frog
and moosehead figures attached to the shirts they bought were torn. Petitioners
allege that they did not readily see these hidden defects upon their acceptance. A
hidden defect is one which is unknown or could not have been known to the vendee.
Petitioners then returned to the respondent 29,772 defective pieces of vinyl
products and demanded a refund of their purchase price in the amount of
P208,404.00. Having failed to collect this amount, they filed an action for collection
of a sum of money.
Article 1567 provides for the remedies available to the vendee in case of
hidden defects, wherein the latter may elect between withdrawing from the
contract and demanding a proportionate reduction of the price, with damages in
either case.
On the issue of prescription, by returning the 29,772 pieces of vinyl
products to respondent and asking for a return of their purchase price, petitioners
were in effect withdrawing from the contract as provided in Art. 1567. The
prescriptive period for this kind of action is provided in Art. 1571 of the New Civil
Code which states that actions arising from the provisions of the preceding ten
articles shall be barred after six months from the delivery of the thing sold.
Hence, there is no dispute that respondent made the last delivery of the
vinyl products to petitioners on September 28, 1988. It is also settled that the action
to recover the purchase price of the goods petitioners returned to the respondent
was filed on July 24, 1989, more than nine months from the date of last delivery.
Petitioners having filed the action three months after the six-month period for filing
actions for breach of warranty against hidden defects stated in Art. 1571, the
appellate court is justified in dismissing the action.
 MAMERTA VDA. DE JAYME et. al. vs. HON. COURT OF APPEALS et. al.
G.R. No. 128669 October 4, 2002
QUISUMBING, J.
Facts:
The spouses Graciano and Mamerta Jayme are the registered owners of Lot
2700 situated at Mandaue City, Cebu. They entered into a Contract of Lease covering a
period of 20 years with George Neri, president of Cebu Asiancars Inc, covering one-half
of Lot 2700.The terms and conditions stipulated that Asiancars may use the leased
premises as a collateral to secure payment of a loan which it may obtain from any bank,
provided that the proceeds of the loan shall be used solely for the construction of a
building which, upon the termination of the lease or the voluntary surrender of the
leased premises before the expiration of the contract, shall automatically become the
property of the Jayme spouses.
In October 1977, Asiancars obtained a loan of P6,000,000 from the
Metropolitan Bank and Trust Company. The entire Lot 2700 was offered as one of
several properties given as collateral for the loan. As mortgagors, the spouses signed a
Deed of Real Estate in favor of MBTC. It stated that the deed was to secure the payment
of a loan obtained by Asiancars from the bank. To assure the Jayme spouses, Neri and
the other officers of Asiancars, executed an Undertaking wherein they promised that
even in their own capacity, they will compensate Mr. & Mrs. Graciano Jayme for any and
all or whatever damage they may sustain or suffer by virtue and arising out of the
mortgage to MBTC of the aforestated parcel of land.
Meeting financial difficulties and incurring an outstanding balance on the loan,
Asiancars conveyed ownership of the building on the leased premises to MBTC by way
of dacion en pago. The building was valued at P980,000 and the amount was applied as
partial payment for the loan. There still remained a balance of P2,942,449.66, which
Asiancars failed to pay. Eventually, MBTC extrajudicially foreclosed the mortgage. A
public auction was held and MBTC was the highest bidder. A certificate of sale was then
issued and registered with the Register of Deeds
As a result of the foreclosure, Graciano’s heirs filed a civil complaint for
Annulment of Contract with Damages with Prayer for Issuance of Preliminary
Injunction, against respondent Asiancars, its officers and incorporators and MBTC.
Petitioners claim that Neri and Asiancars did not tell them that the indebtedness secured
by the mortgage was for P6,000,000 and that the security was the whole of Lot 2700.
Petitioners allege that the deed presented to the Jayme spouses was in blank, without
explanation on the stipulations contained therein, except that its conditions were
identical to those of the stipulations when they mortgaged half the lot’s area previously
with General Bank. Petitioners also alleged that the Jayme spouses were illiterate and
only knew how to sign their names. That because they did not know how to read nor
write, and had given their full trust and confidence to George Neri, the spouses were
deceived into signing the Deed of Real Estate Mortgage. Their intention as well as
consent was only to be bound as guarantors.
Respondents deny that any fraud was employed, nor was there a scheme to
make the spouses sign as mortgagors instead of guarantors. They aver that the spouses
were fully advised and compensated for the use of their property as collateral with
MBTC; that they voluntarily signed the deed of mortgage upon the request of George
Neri, whom they previously trusted and who fulfilled his promise to pay the loan to
General Bank and who obtained the release of the same property by faithfully paying his
indebtedness with General Bank.
After trial, the RTC rendered a decision declaring that the Real Estate Mortgage
executed by the Jaymes in favor of Metrobank as valid and binding; and allowing the
Jaymes to redeem the mortgaged property. Petitioners and respondent MBTC elevated
the case to the Court of Appeals, which affirmed the ruling of the RTC, with
modifications.
Issue:
Whether or not the dacion en pago by Asiancars in favor of MBTC is valid and
binding despite the stipulation in the lease contract that ownership of the building will
vest on the Jaymes at the termination of the lease
Ruling:
YES. The alienation of the building by Asiancars in favor of MBTC for the partial
satisfaction of its indebtedness is valid.
The ownership of the building had been effectively in the name of the Asiancars,
though with the provision that said ownership be transferred to the Jaymes upon
termination of the lease or the voluntary surrender of the premises. The lease was
constituted on January 8, 1973 and was to expire 20 years thereafter, or on January 8,
1993. The alienation via dacion en pago was made by Asiancars to MBTC during the
subsistence of the lease. At this point, the mortgagor, Asiancars, could validly exercise
rights of ownership, including the right to alienate it, as it did to MBTC.
Dacion en pago is the delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of the obligation. It
is a special mode of payment where the debtor offers another thing to the creditor who
accepts it as equivalent of payment of an outstanding debt. The undertaking really
partakes in one sense of the nature of sale, that is the creditor is really buying the thing
or property of the debtor, payment for which is to be charged against the debtor’s debt.
As such, the essential elements of a contract of sale, namely, consent, object certain, and
cause or consideration must be present. In its modern concept, what actually takes place
in dacion en pago is an objective novation of the obligation where the thing offered as
an accepted equivalent of the performance of an obligation is considered as the object
of the contract of sale, while the debt is considered as the purchase price. In any case,
common consent is an essential prerequisite, be it sale or novation, to have the effect of
totally extinguishing the debt or obligation.
 EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN vs. HON.
COURT OF APPEALS, FELIPE C. RIGONAN and CONCEPCION R. RIGONAN
G.R. No. 127540 October 17, 2001
QUISUMBNG, J.
Facts:
Paulina Rigonan owned three (3) parcels of land, located at Batac and Espiritu,
Ilocos Norte, including the house and warehouse on one parcel. She allegedly sold them
to private respondents, who claim to be her relatives. In 1966, herein petitioners who
claim to be her closest surviving relatives allegedly took possession of the properties by
means of stealth, force and intimidation, and refused to vacate the same. Consequently,
herein respondent filed a complaint for reinvindicacion against petitioners alleging that
they were the owners of the three parcels of land through the deed of sale executed by
Paulina Rigonan on January 28, 1965; that since then, they had been in continuous
possession of the subject properties and had introduced permanent improvements
thereon; and that petitioners entered the properties illegally, and they refused to leave
them when asked to do so.
On the other hand, herein petitioners claim that the alleged deed of absolute
sale was void for being spurious as well as lacking consideration. They said that Paulina
Rigonan did not sell her properties to anyone. As her nearest surviving kin within the
5th degree of consanguinity, they inherited the three lots and the permanent
improvements thereon when Paulina died in 1966. They said they had been in
possession of the contested properties for more than 10 years.
private respondents appealed to the Court of Appeal which reversed the trial court's
decision. Petitioners now come to the Supreme Court averring that the consideration of
only P850 for the parcels of land sold, together with a house and a warehouse, was
another indication that the sale was fictitious because no person who was financially
stable would sell said property at such a grossly inadequate consideration and that at
the time of the execution of the deed of sale, Paulina Rigonan was already senile and
could not have consented to the sale by merely imprinting her thumbmark on the deed.
Issue: Whether or not the alleged sale between the late Paulina Rigonan and private
respondents is valid
Ruling:
NO. The alleged sale between the late Paulina Rigonan and private respondents
is not valid.
The Court examined the element of consideration for the sale. The price
allegedly paid by private respondents for nine (9) parcels, including the three parcels in
dispute, a house and a warehouse, raises further questions. Consideration is the why of
a contract, the essential reason which moves the contracting parties to enter into the
contract. On record, there is unrebutted testimony that Paulina as landowner was
financially well off. She loaned money to several people. We see no apparent and
compelling reason for her to sell the subject parcels of land with a house and warehouse
at a meager price of P850 only.

In the present case, at the time of the execution of the alleged contract, Paulina
For the respondents, Atty. Tagatag testified that he personally prepared the
Rigonan was already of advanced age and senile. She died an octogenarian on March 20,
deed, he saw Paulina Rigonan affix her thumbprint on it and he signed it both as witness
1966, barely over a year when the deed was allegedly executed on January 28, 1965, but
and notary public. He further testified that he also notarized Paulina's last will and
before copies of the deed were entered in the registry allegedly on May 16 and June 10,
testament dated February 19, 1965. The will mentioned the same lots sold to private
1966. The general rule is that a person is not incompetent to contract merely because of
respondents. When asked why the subject lots were still included in the last will and
advanced years or by reason of physical infirmities. However, when such age or
testament, he could not explain. Atty. Tagatag also mentioned that he registered the
infirmities have impaired the mental faculties so as to prevent the person from properly,
original deed of absolute sale with the Register of Deeds.
intelligently, and firmly protecting her property rights then she is undeniably
incapacitated. The unrebutted testimony of Zosima Domingo shows that at the time of
For the petitioners, Jose Flores testified that he knew herein petitioners who the alleged execution of the deed, Paulina was already incapacitated physically and
had lived on the land with Paulina Rigonan since he could remember and continued to mentally. She narrated that Paulina played with her waste and urinated in bed. Given
live there even after Paulina's death. He said he did not receive any notice nor any offer these circumstances, there is in our view sufficient reason to seriously doubt that she
to sell the lots from Paulina, contrary to what was indicated in the deed of sale that the consented to the sale of and the price for her parcels of land. Moreover, there is no
vendor had notified all the adjacent owners of the sale. He averred he had no knowledge receipt to show that said price was paid to and received by her.
of any sale between Paulina and private respondents. Also, Zosima Domingo testified
that her husband Eugenio was Paulina's nephew. She also said that they lived with
Thus, the Court agreed with the trial court's finding and conclusion on the
Paulina and her husband, Jose Guerson, since 1956. They took care of her, spent for her
matter holding that the whole evidence on record does not show clearly that the
daily needs and medical expenses, especially when she was hospitalized prior to her
fictitious P850.00 consideration was ever delivered to the vendor. Undisputably, the
death. She stated that Paulina was never badly in need of money during her lifetime.
P850.00 consideration for the nine (9) parcels of land including the house and bodega is
grossly and shockingly inadequate, and the sale is null and void ab initio.
On March 23, 1994, the trial court rendered judgment in favor of herein
petitioners and declared the alleged deed of sale declared null and void and fake. Herein
ANTONIO and LUZVIMINDA GUIANG vs. COURT OF APPEALS and GILDA COPUZ
G.R. No. 125172 June 26, 1998
PANGANIBAN, J.:
Facts:
Gilda Corpuz and Judie Corpuz are legally married spouses. Said spouses, with
plaintiff-wife Gilda Corpuz as vendee, bought a 421 sq. meter lot from Manuel Callejo
who signed as vendor through a conditional deed of sale for a total consideration of
P14,735.00. The consideration was payable in installment, with right of cancellation in
favor of vendor should vendee fail to pay three successive installments. Subsequently,
one-half portion of said propery was sold to the defendants-spouses Antonio and
Luzviminda Guiang.
Gilda left for Manila sometime in June 1989 as she was trying to look for work
abroad. Unfortunately, she became a victim of an unscrupulous illegal recruiter and she
was not able to go abroad. After his wife's departure for Manila, defendant Judie seldom
went home to the conjugal dwelling. Sometime in January 1990, Harriet Corpuz, Gilda
and Judie’s daughter, learned that her father intended to sell the remaining one-half
portion including their house, of their homelot to defendants Guiangs. She wrote a letter
to her mother informing her and the latter signified her objection to the sale. However,
the sale pushed through. Junie sold to defendant Luzviminda Guiang thru a document
known as "Deed of Transfer of Rights" the remaining one-half portion of their lot and
the house standing thereon for a total consideration of P30,000.00 of which P5,000.00
was to be paid in June, 1990.
To cure whatever defect in defendant Judie Corpuz's title over the lot
transferred, defendant Luzviminda Guiang as vendee executed another agreement with
Manuela Jimenez Callejo, a widow of the original registered owner from whom the
couple Judie and Gilda Corpuz originally bought the lot, who signed as vendor for a
consideration of P9,000.00. Defendant Judie Corpuz signed as a witness to the sale.
When Gilda returned home, she found her children staying with other
households. She then gathered her children together and stayed at their house. Her
husband was nowhere to be found. She was informed by her children that their father
had a wife already.
For staying in their house sold by her husband, Gilda was complained against
by Sps. Guiang before the Barangay authorities. The parties thereat signed a document
known as "amicable settlement" which states that Gilda and her three children will leave
voluntarily the house of Mr. and Mrs. Antonio Guiang where they are presently boarding
without any charge.
Gilda Corpuz then filed a complaint against her husband Judie Corpuz and
Petitioner-Spouses Antonio and Luzviminda Guiang. The said Complaint sought the
declaration of a certain deed of sale, which involved the conjugal property of private
respondent and her husband, null and void. The court rendered judgment for the
plaintiff and declared both the Deed of Transfer of Rights and the "amicable settlement"
as null void and of no effect.
On appeal, Respondent Court found no reversible error in the trial court's
ruling that any alienation or encumbrance by the husband of the conjugal propety
without the consent of his wife is null and void as provided under Article 124 of the
Family Code. It also rejected petitioners' contention that the "amicable sttlement"
ratified said sale, citing Article 1409 of the Code which expressly bars ratification of the
contracts specified therein, particularly those "prohibited or declared void by law.
Issue:
Whether the sale was merely voidable and was ratified by the amicable
settlement
Ruling:
NO. The sale was void and thus cannot be ratified by the amicable settlement.
Petitioners insist that the absence of private respondent's consent merely
rendered the Deed voidable under Article 1390 of the Civil Code. Such contention is
erroneous. Article 1390, par. 2, refers to contracts visited by vices of consent. In this
instance, private respondent's consent to the contract of sale of their conjugal property
was totally inexistent or absent. This being the case, said contract properly falls within
the ambit of Article 124 of the Family Code.
The husband cannot generally alienate or encumber any real property of the
conjugal partnershit without the wife's consent. Any alienation or encumbrance made
after August 3, 1988 when the Family Code took effect by the husband of the conjugal
partnership property without the consent of the wife is null and void.
Furthermore, it must be noted that the fraud and the intimidation referred to
by petitioners were perpetrated in the execution of the document embodying the
amicable settlement. Gilda Corpuz alleged during trial that barangay authorities made
her sign said document through misrepresentation and coercion. In any event, its
execution does not alter the void character of the deed of sale between the husband and
the petitioners-spouses. The fact remains that such contract was entered into without
the wife's consent.
In sum, the nullity of the contract of sale is premised on the absence of private
respondent's consent. To constitute a valid contract, the Civil Code requires the
concurrence of the following elements: (1) cause, (2) object, and (3) consent, the last
element being indubitably absent in the case at bar.
 ARTURO R. ABALOS vs. DR. GALICANO S. MACATANGAY, JR
G.R. No. 155043 September 30, 2004
TINGA, J.
Facts:
Sps. Arturo and Esther Abalos are the owners of a parcel of land located at Makati
City. Armed with a Special Power of Attorney, purportedly issued by his wife, Arturo executed
a Receipt and Memorandum of Agreement in favor of respondent, binding himself to sell to
respondent the subject property and not to offer the same to any other party 30 days from
date. Arturo acknowledged receipt of a check from respondent in the amount of ₱5,000.00,
representing earnest money for the subject property, the amount of which would be
deducted from the purchase price of ₱1,300,000.00.
Subsequently, Arturo’s wife, Esther, executed a Special Power of Attorney
appointing her sister, Bernadette Ramos, to act for and in her behalf relative to the transfer
of the property to respondent. Respondent sent a letter to Arturo and Esther informing them
of his readiness and willingness to pay the full amount of the purchase price. On the same
date, Esther, through her attorney-in-fact, executed in favor of respondent, a Contract to Sell
the property to the extent of her conjugal interest therein for the sum of ₱650,000.00 less the
sum already received by her and Arturo. Esther agreed to surrender possession of the
property to respondent within 20 days from November 16, 1989, while the latter promised
to pay the balance of the purchase price in the amount of ₱1,290,000.00 after being placed in
possession of the property.
In a letter dated December 7, 1989, respondent informed the spouses that he had
set aside the amount of ₱1,290,000.00 as evidenced by Citibank Check No. 278107 as full
payment of the purchase price. He reiterated his demand upon them to comply with their
obligation to turn over possession of the property. Arturo and Esther failed to deliver the
property which prompted respondent to file a complaint for specific performance with
damages against petitioners.
The RTC dismissed the complaint for specific performance ruling that the SPA
ostensibly issued by Esther in favor of Arturo was void as it was falsified. Hence, the court
concluded that the SPA could not have authorized Arturo to sell the property to respondent.
On appeal, the Court of Appeals reversed the decision of the trial court. It ruled that the SPA
in favor of Arturo, assuming that it was void, cannot affect the transaction between Esther
and respondent. Also, the court considered the RMOA executed by Arturo in favor of
respondent valid to effect the sale of Arturo’s conjugal share in the property.
Issue: Whether or not the sale is valid
Ruling:
NO. The sale is not valid even as regard to the share of Arturo in the conjugal
property.
Assuming arguendo that the RMOA is a contract of sale, the same would still be void
not only for want of consideration and absence of respondent’s signature thereon, but also
for lack of Esther’s conformity thereto. Quite glaring is the absence of the signature of Esther
in the RMOA, which proves that she did not give her consent to the transaction initiated by
Arturo. The husband cannot alienate any real property of the conjugal partnership without
the wife’s consent.
The nullity of the RMOA as a contract of sale emanates not only from lack of Esther’s
consent thereto but also from want of consideration and absence of respondent’s signature
thereon. Such nullity cannot be obliterated by Esther’s subsequent confirmation of the
putative transaction as expressed in the Contract to Sell. Under the law, a void contract
cannot be ratified and the action or defense for the declaration of the inexistence of a contract
does not prescribe. A void contract produces no effect either against or in favor of anyone–it
cannot create, modify or extinguish the juridical relation to which it refers.
The congruence of the wills of the spouses is essential for the valid disposition of
conjugal property. Where the conveyance is contained in the same document which bears the
conformity of both husband and wife, there could be no question on the validity of the
transaction. But when there are two (2) documents on which the signatures of the spouses
separately appear, textual concordance of the documents is indispensable. Hence, in this case
where the wife’s putative consent to the sale of conjugal property appears in a separate
document which does not, however, contain the same terms and conditions as in the first
document signed by the husband, a valid transaction could not have arisen.
Arturo and Esther appear to have been married before the effectivity of the Family
Code. There being no indication that they have adopted a different property regime, their
property relations would automatically be governed by the regime of conjugal partnership
of gains. The subject land which had been admittedly acquired during the marriage of the
spouses forms part of their conjugal partnership. The husband, even if he is statutorily
designated as administrator of the conjugal partnership, cannot validly alienate or encumber
any real property of the conjugal partnership without the wife’s consent. Similarly, the wife
cannot dispose of any property belonging to the conjugal partnership without the conformity
of the husband.
It has been held that prior to the liquidation of the conjugal partnership, the interest of each
spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal
nor an equitable estate, and does not ripen into title until it appears that there are assets in
the community as a result of the liquidation and settlement. The interest of each spouse is
limited to the net remainder resulting from the liquidation of the affairs of the partnership
after its dissolution. The right of the husband or wife to one-half of the conjugal assets does
not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution
of the marriage, when it is finally determined that, after settlement of conjugal obligations,
there are net assets left which can be divided between the spouses or their respective heirs.
Even on the supposition that the parties only disposed of their respective shares in
the property, the sale, assuming that it exists, is still void for as previously stated, the right of
the husband or the wife to one-half of the conjugal assets does not vest until the liquidation
of the conjugal partnership. Nemo dat qui non habet. No one can give what he has not.
 UY SIU PIN and CHUA HUE vs. CASIMIRA CANTOLLAS, ET AL.
G.R. No. L-46850 June 20, 1940
LAUREL, J.
Facts:
Sps. Pedro Velegaño 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 Velegaño, there remained an unpaid balance of P1,300. Casimira Cantollas
and her son Blas Velegaño entered into a contract with Uy Siu Pin by which Casimira
and Blas agreed to deliver the latter to possess and enjoy the same on condition that
Uy Siu Pin would pay to El Hogar Filipino the unpaid balance of the indebtedness of
Casimira and Blas, together with all other expenses.
Ruling:
NO. The sale between Uy Siu Pin and his wife is not valid.
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 comes 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.

In pursuance of this agreement, Uy Siu Pin, took possession of the land and
proceeded to make payments to El Hogar Filipino. The payments thus made
amounted to P600 up to July, 1933, when Uy Siu Pin ceased to make further
payments, as a result of which the latter foreclosed the mortgage which it held on
the land in question. In the foreclosure sale, the land was bought by El Hogar
Filipino for P1,062.66. The mortgage debtors, Casimira and Blas, having failed to
redeem the land within the statutory period, a final deed of sale was issued in favor
of El Hogar Filipino. Subsequently, the latter sold the aforesaid land to Uy Siu Pin for
P1,198.17. On December 28, 1934 Uy Siu Pin in turn sold the land to his wife Chua
Hue in consideration of P4,000.

Casimira Cantollas and Blas Velegaño then filed in the Court of First
Instance of Tayabas a complaint against Uy Siu Pin and Chua Hue in which it was
prayed that the sale in favor of Chua Hue and transfer certificate of title No. 8447 in
her name be cancelled. The defendant Uy Siu Pin and Chua Hue filed an answer
averring that the latter after acquiring said land from El Hogar
Filipino independently of the contract Exhibit A, sold the same to his codefendant
Chua Hue. Juan Magbajos intervening 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 on December 31, 1935.

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, ordering the register of deeds of
Tayabas to cancel transfer certificate of title No. 8447 issued in the name of Chua
Hue and to note the agreement Exhibit A on transfer certificate of title No. 8446
issued in the name of Uy Siu Pin, and sentencing the latter to pay to the plaintiffs as
damages the sum of P380 plus the costs of the action. On Appeal, the CA affirmed
the decision of the CFI.

Issue:
Whether or not the sale between Uy Siu Pin and his wife is valid
 CORNELIA MATABUENA vs. PETRONILA CERVANTES of the then Justice J.B.L. Reyes of that Court, "to prohibit donations in favor of the
G.R. No. L-28771 March 31, 1971. other consort and his descendants because of fear of undue and improper pressure
FERNANDO, J.: and influence 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
Facts: 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
Felix Matabuena executed a Deed of Donation inter vivos in favor of one party over the other, so that the danger that the law seeks to avoid is
defendant Petronila Cervantes over the parcel of land in question on February 20, correspondingly increased.
1956, which same donation was accepted by defendant. The donation of the said
land was made during the common law relationship as husband and wife between
the defendant-donee and the now deceased donor and later said donor and done
were married on March 28, 1962. When Felix Matabuena died intestate, the plaintiff
claims the property by reason of being the only sister and nearest collateral relative
of the deceased by virtue of an affidavit of self-adjudication executed by her in 1962
and had the land declared in her name and paid the estate and inheritance taxes
thereon.

The judgment of the lower court on the above facts was adverse to plaintiff.
It reasoned out that a donation under the terms of Article 133 of the Civil Code is
void if made between the spouses during the marriage. When the donation was
made by Felix Matabuena in favor of the defendant on February 20, 1956, Petronila
Cervantes and Felix Matabuena were not yet married. At that time, they were not
spouses. They became spouses only when they married on March 28, 1962, six years
after the deed of donation had been executed.

Plaintiff 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. Hence this appeal.

Issue:

Whether or not the ban on a donation between the spouses during a

marriage applies to a common-law relationship

Ruling:

YES. The ban on a donation between the spouses during a marriage also
applies to a common-law relationship.

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. If the policy of the law is, in the language of the opinion
 DOMINGO D. RUBIAS vs. ISAIAS BATILLER
G.R. No. L-35702 May 29, 1973
TEEHANKEE, J.:
Facts:
Francisco Militante claimed ownership of a parcel of land located in the
Barrio of General Luna, municipality of Barotac Viejo province of Iloilo. Before the
war with Japan, Francisco Militante filed with the Court of First Instance of Iloilo an
application for the registration of the title of the land which was dismissed by the
trial court. Pending the disposal of the appeal in CA-GR No. 13497-R and more
particularly on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo
Rubias the subject property.
Plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the
Justice of the Peace Court of Barotac Viejo Province of Iloilo. The Municipal Court,
after trial, decided the case on May 10, 1961 in favor of the defendant and against
the plaintiff.
Defendant claims that plaintiff does not have cause of action against
him because the property in dispute which the plaintiff allegedly bought from his
father-in-law, Francisco Militante was the subject matter of a Land registration case
wherein 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.
Article 1491 of our 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 criterion of nullity of such prohibited contracts is a matter of public order and
policy.
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 his 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, as to whose transactions it had been opined that they may be
"ratified" by means of and in "the form of a new contact, in which cases its validity
shall be determined only by the circumstances at the time the 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 was 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.

Plaintiff, on the other hand, strongly opposed defendant's claim and argues
that defendant cannot 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. On appeal, the
CA affirmed the decision of the trial court.

Issue:

Whether or not the sale between plaintiff and his father-in-law was void
because it was made when plaintiff was counsel of his father-in-law in a land
registration case involving the property in dispute

Ruling:

YES. The sale between plaintiff and his father-in-law was void because it
was made when plaintiff was counsel of his father-in-law in a land registration case
involving the property in dispute and thus prohibited by Art. 1491(5) of the Civil
Code.