San Miguel vs properties vs Spouses huang

Facts:

Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the
purchase and sale of real properties. Part of its inventory are two parcels of land totalling 1, 738
square meters.

On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer
was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed
principals. Atty. Dauz signified her clients interest in purchasing the properties for the amount
for which they were offered by petitioner, under the following terms: the sum of P500,000.00
would be given as earnest money and the balance would be paid in eight equal monthly
installments from May to December, 1994. However, petitioner refused the counter-offer.

Subsequently, Atty. Dauz wrote another letter modifying the earnest-deposit money in the sum
of P1,000,000.00 subject to the following conditions.

1. We will be given the exclusive option to purchase the property within the 30
days from date of your acceptance of this offer.

2. During said period, we will negotiate on the terms and conditions of the
purchase; SMPPI will secure the necessary Management and Board approvals;
and we initiate the documentation if there is mutual agreement between us.

3. In the event that we do not come to an agreement on this transaction, the said
amount of P1,000,000.00 shall be refundable to us in full upon demand. .

Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real
estate, indicated his conformity to the offer by affixing his signature to the letter and accepted
the "earnest-deposit" of P1 million.

Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting Sobrecarey
informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term.
Atty. Dauz countered with an offer of six months within which to pay.

On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that
petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to propose a four-
month period of amortization.

Atty. Dauz then asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within
which to exercise her option to purchase the property. Her request was granted.

Petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty.
Dauz informing her that because the parties failed to agree on the terms and conditions of the
sale despite the extension granted by petitioner, the latter was returning the amount of P1
million given as "earnest-deposit.
On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the
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.

Thereafter, respondent spouses filed a complaint for specific performance against petitioner
before the RTC of Pasig City.

Petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive option"
of respondent spouses lacked a consideration separate and distinct from the purchase price and
was thus unenforceable and (2) 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. T

The trial court granted petitioners motion and dismissed the action.

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 P1 million was tendered by respondents, had already been
accepted by petitioner. The court cited Art. 1482 of the Civil Code which provides that
"[w]henever 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.

Hence, this 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. Petitioner argues that the absence of
agreement as to the mode of payment was fatal to the perfection of the contract of sale.

Respondents were required to comment within ten (10) days from notice. However, despite 13
extensions totalling 142 days which the Court had given to them, respondents failed to file their
comment. They were thus considered to have waived the filing of a comment.

Issue: Whether or not there was a perfected sale between the parties

Ruling:

No, in holding that there is a perfected contract of sale, the Court of Appeals relied on the
following findings: (1) earnest money was allegedly given by respondents and accepted by
petitioner through its vice-president and operations manager, Isidro A. Sobrecarey; and (2) the
documentary evidence in the records show that there was a perfected contract of sale.

With regard to the alleged payment and acceptance of earnest money, the Court holds that
respondents did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil
Code. They presented the amount merely as a deposit of what would eventually become the
earnest money or downpayment should a contract of sale be made by them. The amount was
thus given not as a part of the purchase price and as proof of the perfection of the contract of
sale but only as a guarantee that respondents would not back out of the sale. Respondents in
fact described the amount as an "earnest-deposit."

In the present case, the P1 million "earnest-deposit" could not have been given as earnest money
as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of
respondents offer of March 29, 1994, their contract had not yet been perfected. This is evident
from the following conditions attached by respondents to their letter, to wit: (1) that they be
given the exclusive option to purchase the property within 30 days from acceptance of the offer;
(2) that during the option period, the parties would negotiate the terms and conditions of the
purchase; and (3) petitioner would secure the necessary approvals while respondents would
handle the documentation.

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.

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.
The appellate court opined that the failure to agree on the terms of payment was no bar to the
perfection of the sale because Art. 1475 only requires agreement by the parties as to the price of
the object. This is error. In Navarro v. Sugar Producers Cooperative Marketing Association, Inc.,[14] we
laid down the rule that the manner of payment of the purchase price is an essential element
before a valid and binding contract of sale can exist. Although the Civil Code does not expressly
state that the minds of the parties must also meet on the terms or manner of payment of the
price, the same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of
Appeals, agreement on the manner of payment goes into the price such that a disagreement on
the manner of payment is tantamount to a failure to agree on the price.

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

Villanueva vs PNB

Facts:

The Special Assets Management Department of the Philippine National Bank issued an
advertisement for the sale thru bidding of certain PNB properties
in Calumpang, General Santos City, including Lot No. 17, consisting of 22,780 square meters,
with an advertised floor price of P1,409,000.00, and Lot No. 19, consisting of 41,190 square
meters, with an advertised floor price of P2,268,000.00. Bidding was subject to the following
conditions: 1) that cash bids be submitted not later than April 27, 1989; 2) that said bids be
accompanied by a 10% deposit in managers or cashiers check; and 3) that all acceptable bids be
subject to approval by PNB authorities.

In a June 28, 1990 letter to the Manager, PNB-General Santos Branch, Reynaldo
Villanueva (Villanueva) offered to purchase Lot Nos. 17 and 19 for P3,677,000.00. He also
manifested that he was depositing P400,000.00 to show his good faith but with the
understanding that said amount may be treated as part of the payment of the purchase price
only when his offer is accepted by PNB.

PNB-General Santos Branch forwarded the letter of Villanueva to Ramon Guevara, Vice
President, SAMD. On July 6, 1990, Guevara informed Villanueva that only Lot No. 19 is
available and that the asking price therefor is P2,883,300.00. Guevara further wrote:

If our quoted price is acceptable to you, please submit a revised offer to

purchase. Sale shall be subject to our Board of Directors approval and to other
terms and conditions imposed by the Bank on sale of acquired assets.
 Instead of submitting a revised offer, Villanueva merely inserted at the bottom of
Guevaras letter a marginal note, which reads:

C O N F O R M E:

PRICE OF P2,883,300.00 (downpayment of P600,000.00 and the balance payable

in two (2) years at quarterly amortizations.)

Villanueva paid P200,000.00 to PNB which issued an OR to acknowledge receipt of the partial
payment deposit on offer to purchase.[12] On the dorsal portion of Official Receipt, Villanueva
signed a typewritten note, stating:

This is a deposit made to show the sincerity of my purchase offer with the
understanding that it shall be returned without interest if my offer is not
favorably considered or be forfeited if my offer is approved but I fail/refuse to
push through the purchase.

Also, P380,000.00 was debited from Villanuevas Savings Account and credited to
SAMD. However, Guevara wrote Villanueva that, upon orders of the PNB Board of Directors to
conduct another appraisal and public bidding of Lot No. 19, SAMD is deferring negotiations
with him over said property and returning his deposit of P580,000.00.

Hence, Villanueva filed with the RTC a Complaint for specific performance and
damages against PNB. In its September 14, 1995 Decision, the RTC granted the Complaint. The
RTC anchored its judgment on the finding that there existed a perfected contract of sale
between PNB and Villanueva. The RTC also pointed out that
Villanuevas P580,000.00 downpayment was actually in the nature of earnest money acceptance
of which by PNB signified that there was already a sale. The RTC further cited
contemporaneous acts of PNB purportedly indicating that, as early as July 25, 1990, it
considered Lot 19 already sold, as shown by Guevaras letter (Exh. H) to another interested
buyer and the plaintiff was also given the go signal by the defendant to improve Lot 19 because
it was already in effect sold to him and because of that the defendant fenced the lot and
completed his two houses on the property.
PNB appealed to the CA which reversed and set aside the RTC decision. According to
the CA, there was no perfected contract of sale because the July 6, 1990 letter of Guevara
constituted a qualified acceptance of the June 28, 1990 offer of Villanueva.
The CA held in the case at bench, consent, in respect to the price and manner of its
payment, is lacking. The record shows that appellant, thru Guevaras July 6, 1990 letter,
made a qualified acceptance of appellees letter-offer dated June 28, 1990 by imposing an
asking price of P2,883,300.00 in cash for Lot 19. The letter dated July 6, 1990 constituted a
counter-offer (Art. 1319, Civil Code), to which appellee made a new proposal, i.e., to pay
the amount of P2,883,300.00 in staggered amounts, that is, P600,000.00
as downpayment and the balance within two years in quarterly amortizations.

A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer

and a rejection of the original offer (Art. 1319, id.). Consequently, when something is
desired which is not exactly what is proposed in the offer, such acceptance is not
sufficient to generate consent because any modification or variation from the terms of
the offer annuls the offer. Appellees new proposal, which constitutes a counter-offer,
was not accepted by appellant, its board having decided to have Lot 19 reappraised and
sold thru public bidding. Moreover, it was clearly stated in Guevaras July 6, 1990 letter
that the sale shall be subject to our Board of Directors approval and to other terms and
conditions imposed by the Bank on sale of acquired assets. Hence this petition.

Issue: whether a perfected contract of sale exists between petitioner and respondent PNB

Ruling:

No, Contracts of sale are perfected by mutual consent whereby the seller obligates himself, for a
price certain, to deliver and transfer ownership of a specified thing or right to the buyer over
which the latter agrees. Mutual consent being a state of mind, its existence may only be inferred
from the confluence of two acts of the parties: an offer certain as to the object of the contract and
its consideration, and an acceptance of the offer which is absolute in that it refers to the exact
object and consideration embodied in said offer. Anything short of that level of mutuality
produces not a contract but a mere counter-offer awaiting acceptance. More particularly on the
matter of the consideration of the contract, the offer and its acceptance must be unanimous both
on the rate of the payment and on its term. An acceptance of an offer which agrees to the rate
but varies the term is ineffective.
Here, it cannot be said that the June 28, 1990 letter of petitioner was an effective acceptance of
the April 1989 invitation to bid since it was subject to the condition that all sealed bids
submitted and accepted be approved by respondents higher authorities.
However, respondent replied to the June 28, 1990 offer with a July 6, 1990 letter that only Lot
No. 19 is available and that the price therefor is now P2,883,300.00. As the CA pointed out, this
reply was certainly not an acceptance of the June 28, 1990 offer but a mere counter-offer. It
deviated from the original offer on three material points: first, the object of the proposed sale is
now only Lot No. 19 rather than Lot Nos. 17 and 19; second, the area of the property to be sold
is still 41,190 sq. m but an some portion is now part of a public road; and third, the
consideration is P2,883,300 for one lot rather than P3,677,000.00 for two lots. More important,
this July 6, 1990 counter-offer imposed two conditions: one, that petitioner submit a revised
offer to purchase based on the quoted price; and two, that the sale of the property be approved
by the Board of Directors and subjected to other terms and conditions imposed by the Bank on
the sale of acquired assets. In reply to the July 6, 1990 counter-offer, petitioner signed
his conformity to the quoted price of P2,883,300.00 but inserted the term downpayment
of P600,000.00 and the balance payable in two years at quarterly amortization. The CA viewed
this conformity not as an acceptance of the counter-offer but a further counter-offer for, while
petitioner accepted the P2,883,300.00 price for Lot No. 19, he qualified his acceptance by
proposing a two-year payment term.

Petitioners own June 28, 1990 offer quoted the price of P3,677,000.00 for two lots but was silent
on the term of payment. Respondents July 6, 1990 counter-offer quoted the price
of P2,833,300.00 and was also silent on the term of payment. Up to that point, the term or
schedule of payment was not on the negotiation table. Thus, when petitioner suddenly
introduced a term of payment in his July 11, 1990 counter-offer, he interjected into the
negotiations a new substantial matter on which the parties had no prior discussion and over
which they must yet agree. Petitioners July 11, 1990 counter-offer, therefore, did not usher the
parties beyond the negotiation stage of contract making towards its perfection. He made a
counter-offer that required acceptance by respondent.

As it were, respondent, through its Board of Directors, did not accept this last counter-
offer in clear repudiation not only of the proposed price but also the term of payment thereof.

Petitioner insists, however, that the October 11, 1990 repudiation was belated as
respondent had already agreed to his July 11, 1990 counter-offer when it accepted
his downpayment or earnest money of P580,000.00. He cites Article 1482 of the Civil Code
where it says that acceptance of downpayment or earnest money presupposes the perfection of
a contract.
 Not so. Acceptance of petitioners payments did not amount to an implied acceptance of
his last counter-offer.

To begin with, PNB-General Santos Branch, which accepted petitioners P380,000.00

payment, and PNB-SAMD, which accepted his P200,000.00 payment, had no authority to bind
respondent to a contract of sale with petitioner. Petitioner is well aware of this. Said branch did
not act on his offer except to endorse it to Guevarra. Thereafter, petitioner transacted directly
with Guevarra.
Neither did SAMD have authority to bind PNB. In its April 1989 invitation to bid, as
well as its July 6, 1990 counter-offer, SAMD was always careful to emphasize that whatever
offer is made and entertained will be subject to the approval of respondents higher authorities.
Moreover, petitioners payment of P200,000.00 was with the clear understanding that his July 11,
1990 counter-offer was still subject to approval by respondent. It appears on the dorsal portion
of O.R. that petitioner acceded that the amount he paid was a mere deposit made to show the
sincerity of his purchase offer with the understanding that it shall be returned without interest
if his offer is not favorably considered

It is only in the debit notice issued by PNB-General Santos Branch where petitioners payment is
referred to as downpayment. But then, as we said, PNB-General Santos Branch has no authority
to bind respondent by its interpretation of the nature of the payment made by petitioner.
In sum, the amounts paid by petitioner were not in the nature of downpayment or
earnest money but were mere deposits or proof of his interest in the purchase of Lot No. 19.
Acceptance of said amounts by respondent does not presuppose perfection of any contract.

Quijada vs CA

Facts:

Plaintiffs 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 the two-hectare parcel of land
subject of the case, situated in Talacogon, Agusan del Sur.

On April 1956, Trinidad Quijada together with her brother and sisters executed a conditional
deed of donation of the two-hectare parcel of land subject of the case in favor of the
Municipality of 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 Talacogon.
On July 1962, Trinidad sold one (1) hectare of the subject parcel of land to defendant-Regalado
Mondejar .Subsequently, Trinidad verbally sold the remaining one (1) hectare to
defendant Regalado Mondejar without the benefit of a written deed of sale and evidenced
solely by receipts of payment.

In 1980, the heirs of Trinidad, who at that time was already dead, filed a complaint for forcible
entry against defendant-appellant Regalado Mondejar, which complaint was, however,
dismissed for failure to prosecute .

In 1987, the proposed provincial high school having failed to materialize, the Sangguniang
Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares of
land donated back to the donors . In the meantime, defendant-appellant Regalado Mondejar
sold portions of the land to defendants-appellants Fernando Bautista , Rodolfo Goloran , Efren
Guden and Ernesto Goloran

"On July 5, 1988, plaintiffs filed this action against defendants-appellants . In the complaint,
plaintiffs alleged 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.

"Defendants, on the other hand, in their answer claimed that the land in dispute was sold to
Regalado Mondejar, the one hectare on July 29, 1962, and the remaining one hectare on
installment basis until fully paid.

The court a quo rendered judgment in favor of plaintiffs: firstly because '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
and, secondly, that the deed of sale executed by Trinidad Quijada in favor of Mondejar did not
carry with it the conformity and acquiescence of her children, more so that she was already 63
years old at the time, and a widow.

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 an inchoate
interest on the lots by virtue of the automatic reversion clause in the deed of donation. Hence
this petition.

Issue: WON the sale of the subject property to the respondents are valid.

Ruling:

Yes, The donation made by Trinidad Quijada and her brother and sisters was subject to the
condition that the donated property shall be "used solely and exclusively as a part of the
campus of the proposed Provincial High School in Talacogon. If the condition is not complied
the donated property shall automatically revert to the donor.Such condition, not being contrary
to law, morals, good customs, public order or public policy was validly imposed in the
donation.
When the Municipality's acceptance of the donation was made known to the donor, the
former became the new owner of the donated property. Accordingly, ownership is immediately
transferred to the latter and that ownership will only revert to the donor if the resolutory
condition is not fulfilled.
In this case, that resolutory condition is the construction of the school. Thus, at the time of
the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not have sold the lots
since she had earlier transferred ownership thereof by virtue of the deed of donation. So long as
the resolutory condition subsists and is capable of fulfillment, the donation remains effective
and the donee continues to be the owner subject only to the rights of the donor or his
successors-in-interest under the deed of donation. Since no period was imposed by the donor
on when must the donee comply with the condition, the latter remains the owner so long as he
has tried to comply with the condition within a reasonable period. Such period, however,
became irrelevant herein when the donee-Municipality manifested through a resolution that it
cannot comply with the condition of building a school and the same was made known to the
donor. Only then - when the non-fulfillment of the resolutory condition was brought to the
donor's knowledge - that ownership of the donated property reverted to the donor as provided
in the automatic reversion clause of the deed of donation.
The donor may have an inchoate interest in the donated property during the time that
ownership of the land has not reverted to her. Such inchoate interest may be the subject of
contracts including a contract of sale. In this case, however, what the donor sold was the land
itself which she no longer owns. It would have been different if the donor-seller sold her
interests over the property under the deed of donation which is subject to the possibility of
reversion of ownership arising from the non-fulfillment of the resolutory condition.
Be that at it may, the 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.
The consummation, however, of the perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer when the seller or her
successors-in-interest subsequently acquires ownership thereof. Such circumstance happened in
this case when petitioners -- who are Trinidad Quijada's heirs and successors-in-interest --
became the owners of the subject property upon the reversion of the ownership of the land to
them.Consequently, ownership is transferred to respondent Mondejar ands those who claim
their right from him. Article 1434 of the New Civil Code supports the ruling that the seller's
"title passes by operation of law to the buyer.
There is also no merit in petitioners' contention that since the lots were owned by the
municipality at the time of the sale, they were outside the commerce of men under Article 1409
(4) of the NCC; thus, the contract involving the same is inexistent and void from the
beginning. However, nowhere in Article 1409 (4) is it provided that the properties of a
municipality, whether it be those for public use or its patrimonial property are outside the
commerce of men. Besides, the lots in this case were conditionally owned by the
municipality. To rule that the donated properties are outside the commerce of men would
render nugatory the unchallenged reasonableness and justness of the condition which the donor
has the right to impose as owner thereof. Moreover, the objects referred to as outsides the
commerce of man are those which cannot be appropriated, such as the open seas and the
heavenly bodies.

CORTES vs CA

Facts:

The antecedents show that for the purchase price of P3,700,000.00, the Villa Esperanza
Development Corporation (Corporation) as buyer, and Cortes as seller, entered into a contract
of sale over the lots located at Baclaran, Parañaque, Metro Manila. On various dates in 1983, the
Corporation advanced to Cortes the total sum of P1,213,000.00. Sometime in September 1983,
the parties executed a deed of absolute sale containing the following terms:

1. Upon execution of this instrument, the Vendee shall pay unto the Vendor sum of TWO
MILLION AND TWO HUNDRED THOUSAND (P2,200,000.00) PESOS, Philippine Currency,
less all advances paid by the Vendee to the Vendor in connection with the sale;

2. The balance of ONE MILLION AND FIVE HUNDRED THOUSAND [P1,500,000.00] PESOS,
Phil. Currency shall be payable within ONE (1) YEAR from date of execution of this instrument,
payment of which shall be secured by an irrevocable standby letter of credit to be issued by any
reputable local banking institution acceptable to the Vendor.

On January 14, 1985, the Corporation filed the instant case for specific performance seeking to
compel Cortes to deliver the TCTs and the original copy of the Deed of Absolute Sale.
According to the Corporation, despite its readiness and ability to pay the purchase price, Cortes
refused delivery of the sought documents.

In his Answer with counterclaim,Cortes claimed that the owner's duplicate copy of the three
TCTs were surrendered to the Corporation and it is the latter which refused to pay in full the
agreed down payment. He thus prayed that the Corporation be ordered to pay the outstanding
balance plus interest and in the alternative, to cancel the sale and forfeit the P1,213,000.00 partial
down payment, with damages in either case.

The trial court rendered a decision rescinding the sale and directed Cortes to return to the
Corporation the amount of P1,213,000.00, plus interest. It ruled that pursuant to the contract of
the parties, the Corporation should have fully paid the amount of P2,200,000.00 upon the
execution of the contract. It stressed that such is the law between the parties because the
Corporation failed to present evidence that there was another agreement that modified the
terms of payment as stated in the contract. And, having failed to pay in full the amount of
P2,200,000.00 despite Cortes' delivery of the Deed of Absolute Sale and the TCTs, rescission of
the contract is proper.

In its motion for reconsideration, the Corporation contended that the trial court failed to
consider their agreement that it would pay the balance of the down payment when Cortes
delivers the TCTs. The motion was, however, denied by the trial court holding that the
rescission should stand because the Corporation did not act on the offer of Cortes' counsel to
deliver the TCTs upon payment of the balance of the down payment.

On appeal, the Court of Appeals reversed the decision of the trial court and directed Cortes to
execute a Deed of Absolute Sale conveying the properties and to deliver the same to the
Corporation together with the TCTs, simultaneous with the Corporation's payment of the
balance of the purchase price of P2,487,000.00. It found that the parties agreed that the
Corporation will fully pay the balance of the down payment upon Cortes' delivery of the three
TCTs to the Corporation. The records show that no such delivery was made, hence, the
Corporation was not remiss in the performance of its obligation and therefore justified in not
paying the balance. Hence this petition.

Issue: WON Cortes incurred delay in not delivering the TCT’s to the corporation

Ruling:

Yes, There is no doubt that the contract of sale in question gave rise to a reciprocal obligation of
the parties. Reciprocal obligations are those which arise from the same cause, and which each
party is a debtor and a creditor of the other, such that the obligation of one is dependent upon
the obligation of the other. They are to be performed simultaneously, so that the performance of
one is conditioned upon the simultaneous fulfillment of the other.

Article 1169 of the same Code provides that “In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the
other begin”.

Here, the stipulation in the Deed of Absolute Sale was that the Corporation shall pay in full the
P2,200,000.00 down payment upon execution of the contract. However, as correctly noted by the
Court of Appeals, the transcript of stenographic notes reveal Cortes' admission that he agreed
that the Corporation's full payment of the sum of P2,200,000.00 would depend upon his
delivery of the TCTs of the three lots. In fact, his main defense in the Answer is that, he
performed what is incumbent upon him by delivering to the Corporation the TCTs and the
carbon duplicate of the Deed of Absolute Sale, but the latter refused to pay in full the down
payment. What further confirmed the agreement to deliver the TCTs is the testimony of Cortes
that the title of the lots will be transferred in the name of the Corporation upon full payment of
the P2,200,000.00 down payment.

By agreeing to transfer title upon full payment of P2,200,000.00, Cortes' impliedly agreed to
deliver the TCTs to the Corporation in order to effect said transfer. Hence, the phrase "execution
of this instrument" as appearing in the Deed of Absolute Sale, and which event would give rise
to the Corporation's obligation to pay in full the amount of P2,200,000.00, cannot be construed
as referring solely to the signing of the deed. The meaning of "execution" in the instant case is
not limited to the signing of a contract but includes as well the performance or implementation
or accomplishment of the parties' agreement. With the transfer of titles as the corresponding
reciprocal obligation of payment, Cortes' obligation is not only to affix his signature in the Deed,
but to set into motion the process that would facilitate the transfer of title of the lots, i.e., to have
the Deed notarized and to surrender the original copy thereof to the Corporation together with
the TCTs.

Having established the true agreement of the parties, the Court must now determine whether
Cortes delivered the TCTs and the original Deed to the Corporation. The Court of Appeals
found that Cortes never surrendered said documents to the Corporation. Cortes testified that he
delivered the same to Manny Sanchez, the son of the broker, and that Manny told him that her
mother, Marcosa Sanchez, delivered the same to the Corporation. However, Marcosa Sanchez's
unrebutted testimony is that, she did not receive the TCTs. She also denied knowledge of
delivery thereof to her son, Manny. What further strengthened the findings of the Court of
Appeals that Cortes did not surrender the subject documents was the offer of Cortes' counsel at
the pre-trial to deliver the TCTs and the Deed of Absolute Sale if the Corporation will pay the
balance of the down payment. Indeed, if the said documents were already in the hands of the
Corporation, there was no need for Cortes' counsel to make such offer.

Since Cortes did not perform his obligation to have the Deed notarized and to surrender the
same together with the TCTs, the trial court erred in concluding that he performed his part in
the contract of sale and that it is the Corporation alone that was remiss in the performance of its
obligation. Actually, both parties were in delay. Considering that their obligation was
reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the
Corporation therefore gave rise to a compensation morae or default on the part of both parties
because neither has completed their part in their reciprocal obligation. Cortes is yet to deliver
the original copy of the notarized Deed and the TCTs, while the Corporation is yet to pay in full
the agreed down payment of P2,200,000.00. This mutual delay of the parties cancels out the
effects of default, such that it is as if no one is guilty of delay.

The Court find no merit in Cortes' contention that the failure of the Corporation to act on the
proposed settlement at the pre-trial must be construed against the latter. Cortes argued that
with his counsel's offer to surrender the original Deed and the TCTs, the Corporation should
have consigned the balance of the down payment. This argument would have been correct if
Cortes actually surrendered the Deed and the TCTs to the Corporation. With such delivery, the
Corporation would have been placed in default if it chose not to pay in full the required down
payment. Under Article 1169 of the Civil Code, from the moment one of the parties fulfills his
obligation, delay by the other begins. Since Cortes did not perform his part, the provision of the
contract requiring the Corporation to pay in full the down payment never acquired obligatory
force. Moreover, the Corporation could not be faulted for not automatically heeding to the offer
of Cortes. For one, its complaint has a prayer for damages which it may not want to waive by
agreeing to the offer of Cortes' counsel. For another, the previous representation of Cortes that
the TCTs were already delivered to the Corporation when no such delivery was in fact made, is
enough reason for the Corporation to be more cautious in dealing with him.
BUENAVENTURA VS CA

FACTS:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs
Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio,
Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN.

Sought to be declared null and void ab initio are certain deeds of sale of real property executed
by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant
children and the corresponding certificates of title issued in their names.

In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title,
plaintiffs, in their complaint, aver that the deeds of sale are simulated as they are, are NULL
AND VOID AB INITIO because

a) Firstly, there was no actual valid consideration for the deeds of sale over the
properties in litis;

b) Secondly, assuming that there was consideration in the sums reflected in the
questioned deeds, the properties are more than three-fold times more valuable
than the measly sums appearing therein;

c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties
(vendors and vendees); and

d) Fourthly, the purported sale of the properties in litis was the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs
(plaintiffs herein) of their legitime.

Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them
as well as the requisite standing and interest to assail their titles over the properties in litis; (2)
that the sales were with sufficient considerations and made by defendants parents voluntarily,
in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that
the certificates of title were issued with sufficient factual and legal basis.

The trial court ruled in favor of the defendants and dismissed the complaint. The trial court
stated:

In the first place, the testimony of the defendants, particularly that of the father will show that
the Deeds of Sale were all executed for valuable consideration. This assertion must prevail over
the negative allegation of plaintiffs.

And then there is the argument that plaintiffs do not have a valid cause of action against
defendants since there can be no legitime to speak of prior to the death of their parents. The
court finds this contention tenable. In determining the legitime, the value of the property left at
the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the
legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs
therefore cannot claim an impairment of their legitime while their parents live.

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled that
there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are
compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their
parents. However, their right to the properties of their defendant parents, as compulsory heirs,
is merely inchoate and vests only upon the latters death. While still alive, defendant parents are
free to dispose of their properties, provided that such dispositions are not made in fraud of
creditors.

Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they
claim to be creditors of their defendant parents. Consequently, they cannot be considered as real
parties in interest to assail the validity of said deeds either for gross inadequacy or lack of
consideration or for failure to express the true intent of the parties.

Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the
dispositions made by their defendant parents in favor of their defendant brothers and
sisters. But, as correctly held by the court a quo, the legitime of a compulsory heir is computed
as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of
their legitime while their parents live.

Hence, the instant petition.

Issue: WON the sale made by the defendant parents were valid

Ruling:
Yes, Petitioners assert that their respondent siblings did not actually pay the prices stated in
the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds
of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract,
a contract of sale becomes a binding and valid contract upon the meeting of the minds as to
price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid,
despite the manner of payment, or even the breach of that manner of payment. If the real price
is not stated in the contract, then the contract of sale is valid but subject to reformation. If there
is no meeting of the minds of the parties as to the price, because the price stipulated in the
contract is simulated, then the contract is void.
It is not the act of payment of price that determines the validity of a contract of
sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the
price goes into the performance of the contract. Failure to pay the consideration is different
from lack of consideration. The former results in a right to demand the fulfillment or
cancellation of the obligation under an existing valid contract while the latter prevents the
existence of a valid contract.
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To
prove simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their
father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed
of sale without need for her payment of the purchase price. The trial court did not find the
allegation of absolute simulation of price credible. Petitioners failure to prove absolute
simulation of price is magnified by their lack of knowledge of their respondent siblings
financial capacity to buy the questioned lots. On the other hand, the Deeds of Sale which
petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in the Deeds
of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to
their respondent father.

Petitioners ask that assuming that there is consideration, the same is grossly inadequate as
to invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence.

Article 1470 of the Civil Code further provides:

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract.

Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the
Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no
requirement that the price be equal to the exact value of the subject matter of sale.

SAN LORENZO DEVELOPMENT VS CA

FACTS:

It appears that respondents Miguel Lu and Pacita Lu owned two (2) parcels of land
situated in Sta. Rosa, Laguna.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta, for the price of 15 pesos per square meter. Babasanta made a downpayment
of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu
of the same date. Several other payments totaling two hundred thousand pesos (P200,000.00)
were made by Babasanta.
 Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a
final deed of sale in his favor so that he could effect full payment of the purchase price. In the
same letter, Babasanta notified the spouses about having received information that the spouses
sold the same property to another without his knowledge and consent. He demanded that the
second sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having
agreed to sell the property to him at fifteen pesos (P15.00) per square meter. She, however,
reminded Babasanta that when the balance of the purchase price became due, he requested for a
reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added that
she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court of
San Pedro, Laguna, a Complaint for Specific Performance and Damages against his co-respondents
herein, the Spouses Lu. Babasanta alleged that the lands had been sold to him by the spouses at
fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution of a
final deed of sale in his favor, respondents allegedly refused.
In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and
when the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and
Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to transform
the transaction into a contract to sell the two parcels of land to Babasanta with the fifty
thousand pesos (P50,000.00) to be considered as the downpayment for the property and the
balance to be paid on or before 31 December 1987. Respondents Lu added that as of November
1987, total payments made by Babasanta amounted to only two hundred thousand pesos
(P200,000.00) and the latter allegedly failed to pay the balance of P260,000.00 despite repeated
demands. Babasanta had purportedly asked Pacita for a reduction of the price from P15.00 to
P12.00 per square meter and when the Spouses Lu refused to grant Babasantas request, the
latter rescinded the contract to sell and declared that the original loan transaction just be carried
out in that the spouses would be indebted to him in the amount of two hundred thousand pesos
(P200,000.00).
Babasanta later filed an Amended Complaint wherein he prayed for the issuance of a writ of
preliminary injunction with temporary restraining order. He contended that the issuance of a
preliminary injunction was necessary to restrain the transfer or conveyance by the Spouses Lu
of the subject property to other persons.
The Spouses Lu filed their Opposition to the amended complaint contending that it raised
new matters which seriously affect their substantive rights under the original complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed
a Motion for Intervention before the trial court. SLDC alleged that it had legal interest in the
subject matter under litigation because on 3 May 1989, the two parcels of land involved had
been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good
faith and for value and therefore it had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land involved
herein had already been conveyed to him by the Spouses Lu and hence, the vendors were
without legal capacity to transfer or dispose of the two parcels of land to the intervenor.
 The trial court in its Order allowed SLDC to intervene. SLDC filed its Complaint-in-
Intervention on 19 April 1990. Respondent Babasantas motion for the issuance of a preliminary
injunction was likewise granted by the trial court. SLDC in its Complaint-in-Intervention alleged
that on 11 February 1989, the Spouses Lu executed in its favor an Option to Buy the lots subject
of the complaint. Accordingly, it paid an option money in the amount of P316,160.00 out of the
total consideration for the purchase of the two lots of P1,264,640.00. After the Spouses Lu
received a total amount of P632,320.00 they executed on 3 May 1989 a Deed of Absolute Sale with
Mortgage in its favor. SLDC added that the certificates of title over the property were delivered
to it by the spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC
argued that it had no obligation to look beyond the titles submitted to it by the Spouses Lu
particularly because Babasantas claims were not annotated on the certificates of title at the time
the lands were sold to it.
The RTC rendered its Decision upholding the sale of the property to SLDC. Applying
Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not
register the respective sales in their favor, ownership of the property should pertain to the
buyer who first acquired possession of the property. The trial court equated the execution of a
public instrument in favor of SLDC as sufficient delivery of the property to the latter. It
concluded that symbolic possession could be considered to have been first transferred to SLDC
and consequently ownership of the property pertained to SLDC who purchased the property in
good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in
the main that the trial court erred in concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
On 4 October 1995, the Court of Appeals rendered its Decision which set aside the judgment
of the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and
subsisting. The appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of
SLDC was null and void on the ground that SLDC was a purchaser in bad faith.
Hence, this petition. SLDC contended that the appellate court erred in concluding that it
had prior notice of Babasantas claim over the property merely on the basis of its having
advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the
latters representation that she needed the money to pay her obligation to Babasanta. It argued
that it had no reason to suspect that Pacita was not telling the truth that the money would be
used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the amount of two
hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu would be deducted from
the balance of the purchase price still due from it and should not be construed as notice of the
prior sale of the land to Babasanta. It added that at no instance did Pacita Lu inform it that the
lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took
possession of the property and asserted its rights as new owner as opposed to Babasanta who
has never exercised acts of ownership.
On the other hand, respondent Babasanta argued that SLDC could not have acquired
ownership of the property because it failed to comply with the requirement of registration of
the sale in good faith. He emphasized that at the time SLDC registered the sale in its favor on 30
June 1990, there was already a notice of lis pendens annotated on the titles of the property made
as early as 2 June 1989. Hence, petitioners registration of the sale did not confer upon it any
right. Babasanta further asserted that petitioners bad faith in the acquisition of the property is
evident from the fact that it failed to make necessary inquiry regarding the purpose of the
issuance of the two hundred thousand pesos (P200,000.00) managers check in his favor.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document
signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as
partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna. While the receipt signed by Pacita did not mention the price for which the property
was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989 wherein she
admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos (P15.00)
per square meter.

Issue: WON there is perfected contract of sale between Spouses Lu and Babasanta

Ruling:

No, an analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent, which is manifested by the meeting of
the offer and the acceptance upon the thing which are to constitute the contract. The offer must
be certain and the acceptance absolute. Moreover, contracts shall be obligatory in whatever
form they may have been entered into, provided all the essential requisites for their validity are
present.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (P50,000.00) from Babasanta as partial payment of the land. While there is no stipulation
that the seller reserves the ownership of the property until full payment of the price which is a
distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that
the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of
the purchase price.
Babasantas on his letter stated therein that despite his repeated requests for the execution of
the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu
allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the
property would not be transferred to him until such time as he shall have effected full payment
of the price. Moreover, had the sellers intended to transfer title, they could have easily executed
the document of sale in its required form simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be
considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a
contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a
contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until
the full payment of the price. In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell,
title is retained by the vendor until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective. The perfected contract to sell
imposed upon Babasanta the obligation to pay the balance of the purchase price. There being an
obligation to pay the price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Mere sending of a letter by the vendee
expressing the intention to pay without the accompanying payment is not considered a valid
tender of payment. Consignation of the amounts due in court is essential in order to extinguish
Babasantas obligation to pay the balance of the purchase price. Glaringly absent from the
records is any indication that Babasanta even attempted to make the proper consignation of the
amounts due, thus, the obligation on the part of the sellers to convey title never acquired
obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a
contract to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent and from that moment, the
parties may reciprocally demand performance. The essential elements of a contract of sale, to
wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the price;
(2) object certain which is the subject matter of the contract; (3) cause of the obligation which is
established.
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be noted that
sale is not a mode, but merely a title. A mode is the legal means by which dominion or
ownership is created, transferred or destroyed, but title is only the legal basis by which to affect
dominion or ownership. Contracts only constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of accomplishing the same.Therefore, sale by
itself does not transfer or affect ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers
ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Article 1497 to 1501. The
word delivered should not be taken restrictively to mean transfer of actual physical possession
of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery;
and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the
vendee. Legal or constructive delivery, on the other hand, may be had through any of the
following ways: the execution of a public instrument evidencing the sale; symbolical tradition
such as the delivery of the keys of the place where the movable sold is being kept; traditio longa
manu or by mere consent or agreement if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale; traditio brevi manu if the buyer already had
possession of the object even before the sale; and traditio constitutum possessorium, where the
seller remains in possession of the property in a different capacity.
 Following the above disquisition, respondent Babasanta did not acquire ownership by the
mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the
property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was not
embodied in a public instrument. Hence, no constructive delivery of the lands could have been
effected. For another, Babasanta had not taken possession of the property at any time after the
perfection of the sale in his favor or exercised acts of dominion over it despite his assertions that
he was the rightful owner of the lands. Simply stated, there was no delivery to Babasanta,
whether actual or constructive, which is essential to transfer ownership of the property. Thus,
even on the assumption that the perfected contract between the parties was a sale, ownership
could not have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold.

DINO VS CA

Facts:

Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion
Garment" are engaged in the business of manufacturing and selling shirts. Respondent Sio is
part owner and general manager of a manufacturing corporation doing business under the
trade name "Universal Toy Master Manufacturing."
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. These frogs and mooseheads were to be attached to the shirts petitioners would
manufacture and sell.
Respondent Sio delivered in several installments the 40,000 pieces of frogs and
mooseheads. The last delivery was made on September 28, 1988. 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. The return was made on different dates: the
initial one on December 12, 1988 consisting of 1,720 pieces,the second on January 11, 1989, and
the last on January 17, 1989.
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 the RTC of Manila. The trial court
ruled in favor of the petitioners.
On appeal, the CA affirmed the trial court decision. Respondent then filed a Motion for
Reconsideration and a Supplemental Motion for Reconsideration alleging therein that the
petitioners' action for collection of sum of money based on a breach of warranty had already
prescribed. On January 24, 1994, the respondent court reversed its decision and dismissed
petitioners' Complaint for having been filed beyond the prescriptive period. The CA held that
"Even if there is failure to raise the affirmative defense of prescription in a motion to dismiss or
in an appropriate pleading and an amendment would no longer be feasible, still prescription, if
apparent on the face of the complaint may be favorably considered. Hence this petition.
Petitioners claim that the Complaint they filed in the trial court on July 24, 1989 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: WON the action filed was for collection of sum of money based on breach of warranty.

Ruling:
Yes, In this case the court first determine the nature of the action filed in the trial court to
resolve the issue of prescription.

Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market, whether the
same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured
specially for the customer and upon his special order, and not for the general market, it is a
contract for a piece of work."

The Court ruled in Engineering & Machinery Corporation v. Court of Appeals, et al., "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. 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.

"Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the
thing sold may have, should they render it unfit for the use for which it is intended, or should
they diminish its fitness for such use to such an extent that, had the vendee been aware thereof,
he would not have acquired it or would have given a lower price for it; but said vendor shall
not be answerable for patent defects or those which may be visible, or for those which are not
visible if the vendee is an expert who, by reason of his trade or profession, should have known
them."

Petitioners aver that they discovered the defects in respondent's products when customers
in their (petitioners') 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.
 Article 1567 provides for the remedies available to the vendee in case of hidden
defects, viz:

"Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with
damages in either case."

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, viz:

"Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after
six months from the delivery of the thing sold."

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 dismissed the action.

CIR VS CA AND ATENEO

FACTS:

Private respondent is a non-stock, non-profit educational institution with auxiliary

units and branches all over the Philippines. One such auxiliary unit is the Institute of
Philippine Culture (IPC), which has no legal personality separate and distinct from that
of private respondent. The IPC is a Philippine unit engaged in social science studies of
Philippine society and culture. Occasionally, it accepts sponsorships for its research
activities from international organizations, private foundations and government
agencies.
On July 8, 1983, private respondent received from petitioner Commissioner of Internal
Revenue a demand letter , assessing private respondent the sum of P174,043.97 for
alleged deficiency contractors tax, and an assessment dated June 27, 1983 in the sum
of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended March 31,
1978. Denying said tax liabilities, private respondent sent petitioner a letter-protest and
subsequently filed with the latter a memorandum contesting the validity of the
assessments.
Petitioner rendered a letter-decision canceling the assessment for deficiency income tax
but modifying the assessment for deficiency contractors tax by increasing the amount
due to P193,475.55. Unsatisfied, private respondent requested for a reconsideration or
 reinvestigation of the modified assessment. At the same time, it filed in the respondent
court a petition for review of the said letter-decision of the petitioner. While the petition
was pending before the respondent court, petitioner issued a final decision dated
August 3, 1988 reducing the assessment for deficiency contractors tax from P193,475.55
to P46,516.41.
On July 12, 1993, the respondent court ruled in favor of the private respondent The
deficiency contractors tax assessment in the amount of P46,516.41 exclusive of
surcharge and interest is hereby CANCELED.
Hence this petition. Petitioner contends that the respondent court erred in holding that
private respondent is not an independent contractor within the purview of Section 205
of the Tax Code. To petitioner, the term independent contractor, as defined by the
Code, encompasses all kinds of services rendered for a fee and that the only exceptions
are the following:
a. Persons, association and corporations under contract for embroidery and
apparel for export and gross receipts of or from pioneer industry registered
with the Board of Investment under R.A. No. 5186;
b. Individuals occupation tax under Section 12 of the Local Tax Code (under
the old Section 182 [b] of the Tax Code); and
c. Regional or area headquarters established in the Philippines by
multinational corporations, including their alien executives, and which
headquarters do not earn or derive income from the Philippines and which act
as supervisory, communication and coordinating centers for their affiliates,
subsidiaries or branches in the Asia Pacific Region (Section 205 of the Tax
Code).
Petitioner thus submits that since private respondent falls under the definition of an
independent contractor and is not among the aforementioned exceptions, private
respondent is therefore subject to the 3% contractors tax imposed under the same Code.
Issue: WON the private respondent is an independent contractor within the purview of the tax
code

Ruling:

No, The court held that there is no evidence that Ateneos Institute of Philippine Culture ever
sold its services for a fee to anyone or was ever engaged in a business apart from and
independently of the academic purposes of the university.
Stressing that it is not the Ateneo de Manila University per se which is being taxed,
Petitioner Commissioner of Internal Revenue contends that the tax is due on its activity of
conducting researches for a fee. The tax is due on the gross receipts made in favor of IPC
pursuant to the contracts the latter entered to conduct researches for the benefit primarily of its
clients. The tax is imposed on the exercise of a taxable activity. The sale of services of private
respondent is made under a contract and the various contracts entered into between private
respondent and its clients are almost of the same terms, showing, among others, the
compensation and terms of payment.
However, the records do not show that Ateneos IPC in fact contracted to sell its research
services for a fee.
In the first place, the petitioner has presented no evidence to prove its bare contention that,
indeed, contracts for sale of services were ever entered into by the private respondent. As
appropriately pointed out by the latter:
An examination of the Commissioners Written Formal Offer of Evidence in the Court
of Tax Appeals shows that only the following documentary evidence was presented:
Exhibit 1 BIR letter of authority no. 331844
2 Examiners Field Audit Report
3 Adjustments to Sales/Receipts
4 Letter-decision of BIR Commissioner
Bienvenido A. Tan Jr.

None of the foregoing evidence even comes close to purport to be contracts between private
respondent and third parties.

Moreover, the Court of Tax Appeals accurately and correctly declared that the funds
received by the Ateneo de Manila University are technically not a fee. They may however fall as
gifts or donations which are tax-exempt under the National Internal Revenue Code providing
for the exemption of such gifts to an educational institution.

The fact, the research activities being carried out by the IPC is focused not on business or profit
but on social sciences studies of Philippine society and culture. Since it can only finance a
limited number of IPCs research projects, private respondent occasionally accepts sponsorship
for unfunded IPC research projects from international organizations, private foundations and
governmental agencies. However, such sponsorships are subject to private respondents terms
and conditions, among which are, that the research is confined to topics consistent with the
private respondents academic agenda; that no proprietary or commercial purpose research is
done; and that private respondent retains not only the absolute right to publish but also the
ownership of the results of the research conducted by the IPC. Quite clearly, the
aforementioned terms and conditions belie the allegation that private respondent is a contractor
or is engaged in business.
Moreover, the records do not show that in accepting sponsorship of research work, IPC
realized profits from such work. On the contrary, the evidence shows that for about 30
years, IPC had continuously operated at a loss, which means that sponsored funds are less
than actual expenses for its research projects. That IPC has been operating at a loss loudly
bespeaks of the fact that education and not profit is the motive for undertaking the research
projects.
Then, too, granting arguendo that IPC made profits from the sponsored research projects,
the fact still remains that there is no proof that part of such earnings or profits was ever
distributed as dividends to any stockholder.
 Therefore, it is clear that the funds received by Ateneos Institute of Philippine Culture are
not given in the concept of a fee or price in exchange for the performance of a service or
delivery of an object. Rather, the amounts are in the nature of an endowment or donation given
by IPCs benefactors solely for the purpose of sponsoring or funding the research with no strings
attached. As found by the two courts below, such sponsorships are subject to IPCs terms and
conditions. No proprietary or commercial research is done, and IPC retains the ownership of
the results of the research, including the absolute right to publish the same. The copyrights over
the results of the research are owned by Ateneo and, consequently, no portion thereof may be
reproduced without its permission.
It is also well to stress that the questioned transactions of Ateneos Institute of Philippine
Culture cannot be deemed either as a contract of sale or a contract for a piece of work. By the
contract of sale, one of the contracting parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent. By its very nature, a contract of sale requires a transfer of ownership. Thus, Article
1458 of the Civil Code expressly makes the obligation to transfer ownership as an essential
element of the contract of sale. Transfer of title or an agreement to transfer it for a price paid or
promised to be paid is the essence of sale. In the case of a contract for a piece of work, the
contractor binds himself to execute a piece of work for the employer, in consideration of a
certain price or compensation. If the contractor agrees to produce the work from materials
furnished by him, he shall deliver the thing produced to the employer and transfer dominion
over the thing. Ineludably, whether the contract be one of sale or one for a piece of work, a
transfer of ownership is involved and a party necessarily walks away with an object.
In the case at bench, it is clear from the evidence on record that there was no sale either of
objects or services because, as adverted to earlier, there was no transfer of ownership over the
research data obtained or the results of research projects undertaken by the Institute of
Philippine Culture.
Furthermore, it is clear that the research activity of the Institute of Philippine Culture is
done in pursuance of maintaining Ateneos university status and not in the course of an
independent business of selling such research with profit in mind.

The trial court held that the contract between the petitioner and the respondent was one of
outright purchase and sale, and absolved that petitioner from the complaint. The appellate
court, however, — by a division of four, with one justice dissenting — held that the relation
between petitioner and respondent was that of agent and principal, the petitioner acting as
agent of the respondent in the purchase of the equipment in question, and sentenced the
petitioner to pay the respondent alleged overpayments in the total sum of $1,335.52 or
P2,671.04, together with legal interest thereon from the date of the filing of the complaint until
said amount is fully paid, as well as to pay the costs of the suit in both instances. The appellate
court further argued that even if the contract between the petitioner and the respondent was
one of purchase and sale, the petitioner was guilty of fraud in concealing the true price and
hence would still be liable to reimburse the respondent for the overpayments made by the
latter.
Montecalvo vs Heirs of Primero

Facts:

The property involved in this case is a parcel of land located in Iligan City registered in the
name of Eugenia Primero, married to Alfredo Primero, Sr.

In the early 1980s, Eugenia leased the lot to petitioner Irene Montecalvo for a monthly rental of
₱500.00. Eugenia entered into an un-notarized Agreement with Irene, where the former offered
to sell the property to the latter for ₱1,000.00 per square meter. They agreed that Irene would
deposit the amount of ₱40,000.00 which shall form part of the down payment equivalent to 50%
of the purchase price. They also stipulated that during the term of negotiation of 30 to 45 days
from receipt of said deposit, Irene would pay the balance of ₱410,000.00 on the down payment.
In case Irene defaulted in the payment of the down payment, the deposit would be returned
and the Agreement deemed terminated. However, if the negotiations pushed through, the
balance of the full value of ₱860,000.00 or the net amount of ₱410,000.00 would be paid in 10
equal monthly installments from receipt of the down payment.

Irene failed to pay the full down payment within the stipulated 30-45-day negotiation period.
Nonetheless, she continued to stay on the disputed property, and still made several payments
with an aggregate amount of ₱293,000.00. On the other hand, Eugenia did not return the
₱40,000.00 deposit to Irene, and refused to accept further payments only in 1992.

Thereafter, Irene caused a survey of the property and the segregation of a portion equivalent to
293 square meters in her favor. However, Eugenia opposed her claim and asked her to vacate
the property. Thereafter, Eugenia and the heirs of her deceased husband filed a complaint for
unlawful detainer against Irene and her husband before the MTC. During the preliminary
conference, the parties stipulated that the issue to be resolved was whether their Agreement
had been rescinded and novated. Hence, the MTC dismissed the case for lack of jurisdiction
since the issue is not susceptible of pecuniary estimation.

Thereafter, Irene retaliated by instituting Civil Case No. II-3588 with the RTC of Lanao del
Norte for specific performance, to compel Eugenia to convey the 293-square meter portion of
the lot.

RTC proceedings

Irene testified that after their Agreement for the purpose of negotiating the sale of the failed to
materialize, she and Eugenia entered into an oral contract of sale and agreed that the amount of
₱40,000.00 she earlier paid shall be considered as down payment.

Irene claimed that she made several payments amounting to ₱293,000.00 which prompted
Eugenia's daughters to ask Engr. Ravacio to conduct a segregation survey on the subject
property. Thereafter, Irene requested Eugenia to execute the deed of sale, but the latter refused
to do so because her son, Atty. Alfredo Primero, Jr. would not agree.
Respondents presented the testimony of Atty. Primero to establish that Eugenia could not have
sold the disputed portion of the Lot to the petitioners since at the time of the signing of the
Agreement. Eugenia's husband, was already dead. Eugenia merely managed or administered
the subject property and had no authority to dispose of the same since it was a conjugal
property.

The RTC rendered a Decision in favor of the respondent.

Aggrieved, petitioners appealed the Decision of the trial court to the CA.

Court of Appeals Proceedings

However, the CA rendered a Decision1 affirming the RTC Decision.

Issue: WON the parties entered a contract of sale

Ruling:

No, the agreement was a contract to sell. Hence, with petitioners' non-compliance with its terms
and conditions, the obligation of the respondents to deliver and execute the corresponding deed
of sale never arose. The CA found that the Agreement was not a contract of sale but a mere
contract to sell, the efficacy of which is dependent upon the resolutory condition that Irene pay
at least 50% of the purchase price as down payment within 30-45 days from the day Eugenia
received the ₱40,000.00 deposit, which in this case the Irene failed to pay.

The court held that a contract of sale differ from a contract to sell in that in a contract of sale the
title to the property passes to the buyer upon the delivery of the thing sold; in a contract to sell,
ownership is, by agreement, reserved in the seller and is not to pass to the buyer until full
payment of the purchase price. (Otherwise stated, in a contract of sale, the seller loses ownership over
the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a
contract to sell, title is retained by the seller until full payment of the price. In the latter contract,
payment of the price is a positive suspensive condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective.For exam purposes).

Here, the absence of a provision in the Agreement transferring title from the owner to the buyer
is taken as a strong indication that the Agreement is a contract to sell. The Agreement expressly
provided that it was "entered into for the purpose of negotiating the sale of the property
between the parties." The term of the negotiation shall be for a period of 30-45 days from receipt
of the ₱40,000.00 deposit and the buyer has to pay the balance of the 50% down payment
amounting to ₱410,000.00 within the said period of negotiation. Thereafter, an Agreement to
Sell shall be executed by the parties and the remainder of the purchase price amounting to
another ₱410,000.00 shall be paid in 10 equal monthly installments from receipt of the down
payment.

Hence, for petitioners' failure to comply with the terms and conditions laid down in the
Agreement, the obligation of the predecessor-in-interest of the respondents to deliver and
execute the corresponding deed of sale never arose.
The alleged oral contract of sale for the 293-square meter portion of the property was not
proved by preponderant evidence. Hence, petitioners cannot compel the successors-in-interest
of the deceased Eugenia to execute a deed of absolute sale in their favor.

Contention of Irene RE In pari delicto

Petitioners argue that it was not only the buyer, Irene, who failed to meet the condition of
paying the balance of the 50% down payment. They assert that the Agreement explicitly
required Eugenia to return the deposit of ₱40,000.00 within 10 days, in case Irene failed to pay
the balance of the 50% down payment within the stipulated period.Thus, petitioners posit that
for the cancellation clause to operate, two conditions must concur, namely, (1) buyer fails to pay
the balance of the 50% down payment within the agreed period and (2) seller should return the
deposit of ₱40,000.00 within 10 days if the first condition was not complied with. Petitioners
conclude that since both seller and buyer failed to discharge their reciprocal obligations, being
in pari delictu, the seller could not repudiate their agreement to sell.

Held: The fact that the predecessor-in-interest of the respondents failed to return the ₱40,000.00
deposit subsequent to the expiration of the period of negotiation did not prevent the
respondents from repudiating the Agreement. The obligation of the respondent to convey the
property never came to pass as the petitioners did not comply with the positive suspensive
condition of full payment of the purchase price within the period as stipulated

Reyes vs Tuparan

Facts:

On 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with
Damages against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner
alleged that she was the registered owner of a residential and commercial lot located in
Valenzuela City, that on that property, she put up a three-storey commercial building known as
RBJ Building that since 1990, she had been operating a drugstore and cosmetics store on the
ground floor of RBJ Building where she also had been residing while the other areas of the
buildings including the sidewalks were being leased and occupied by tenants and street
vendors.
In December 1989, respondent leased from petitioner a space on the ground floor of
the RBJ Building for her pawnshop business for a monthly rental of ₱4,000.00. A close
friendship developed between the two which led to the respondent investing thousands of
pesos in petitioners financing/lending business.
Thereafter, petitioner mortgaged the subject real properties to the Farmers Savings Bank
to secure a loan of ₱2,000,000.00 payable in installments. The petitioners outstanding account
on the mortgage reached ₱2,278,078.13. Petitioner then decided to sell her real properties for at
least ₱6,500,000.00 so she could liquidate her bank loan and finance her businesses. As a gesture
of friendship, respondent verbally offered to conditionally buy petitioners real properties for
₱4,200,000.00 payable on installment basis without interest and to assume the bank loan.
Thereafter, the parties and FSL Bank executed the corresponding Deed of Conditional
Sale with Assumption of Mortgage. Under the Deed, respondent was bound to pay the
petitioner a lump sum of ₱1.2 million pesos without interest as part of the purchase price in
three (3) fixed installments.
Respondent, however, defaulted in the payment of her obligations on their due dates.
The respondent had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as principal on the
unpaid installments,
Thereafter, respondent offered the amount of ₱751,000.00 as full payment of the
purchase price of the subject real properties and demanded the execution of the corresponding
deed of absolute sale.

RTC Proceedings

The RTC handed down its decision finding that respondent failed to pay in full the ₱4.2 million
total purchase price of the subject real properties leaving a balance of ₱805,000.00. It stated that
the checks and receipts presented by respondent refer to her payments of the mortgage
obligation with FSL Bank and not the payment of the balance of ₱1,200,000.00. The RTC also
considered the Deed of Conditional Sale of Real Property with Assumption of Mortgage
executed by and among the two parties and FSL Bank a contract to sell, and not a contract of
sale. It was of the opinion that although the petitioner was entitled to a rescission of the
contract, it could not be permitted because her(tuparan) non-payment in full of the purchase
price may not be considered as substantial and fundamental breach of the contract as to defeat
the object of the parties in entering into the contract. The RTC believed that the respondents
offer stated in her counsels letter to settle what she thought was her unpaid balance of
₱751,000.00 showed her sincerity and willingness to settle her obligation. Hence, it would be
more equitable to give respondent a chance to pay the balance plus interest within a given
period of time.

CA Proceedings

On appeal, the CA rendered agreed with the RTC that the contract entered into by the parties is
a contract to sell but ruled that the remedy of rescission could not apply because the
respondents failure to pay the petitioner the balance of the purchase price in the total amount of
₱805,000.00 was not a breach of contract, but merely an event that prevented the seller
(petitioner) from conveying title to the purchaser (respondent). Since respondent had already
paid a substantial amount of the purchase price, it was but right and just to allow her to pay the
unpaid balance of the purchase price plus interest.

Hence this petition, The petitioner basically argues that the CA should have granted the
rescission of the subject Deed of Conditional Sale of Real Properties with Assumption of
Mortgage since the subject deed of conditional sale is a reciprocal obligation whose outstanding
characteristic is reciprocity arising from identity of cause by virtue of which one obligation is
correlative of the other. The respondent counters that the subject Deed of Conditional Sale with
Assumption of Mortgage entered into between the parties is a contract to sell and not a contract
of sale because the title of the subject properties still remains with the petitioner as she failed to
pay the installment payments in accordance with their agreement.

Issue: Whether or not the contract can be rescinded.

Ruling:

No, the court held that the subject Deed of Conditional Sale with Assumption of Mortgage
entered into by the two parties and FSL Bank is a contract to sell and not a contract of sale,
hence it cannot be rescinded.

Based on th agreement, the title and ownership of the subject properties remains with the
petitioner until the respondent fully pays the balance of the purchase price and the assumed
mortgage obligation. Accordingly, the petitioners obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive condition, which is
the respondents full payment of the purchase price. Without respondents full payment, there
can be no breach of contract to speak of because petitioner has no obligation yet to turn over the
title. Respondents failure to pay in full the purchase price is not the breach of contract
contemplated under Article 1191 of the New Civil Code but rather just an event that prevents
the petitioner from being bound to convey title to the respondent.

Since the Deed of Conditional Sale executed in their favor was merely a contract to sell, the
obligation of the seller to sell becomes demandable only upon the happening of the suspensive
condition. Thus, for its non-fulfilment, there is no contract to speak of, the obligor having failed
to perform the suspensive condition which enforces a juridical relation. With this circumstance,
there can be no rescission or fulfillment of an obligation that is still non-existent, the suspensive
condition not having occurred as yet. Emphasis should be made that the breach contemplated
in Article 1191 of the New Civil Code is the obligors failure to comply with an obligation
already extant, not a failure of a condition to render binding that obligation.

Thus, the Court fully agrees with the CA that considering that the Deed of Conditional Sale was
not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject
property in the amount of ₱4,200,000.00, the remaining unpaid balance of Tuparan is only
₱805,000.00, a substantial amount of the purchase price has already been paid. It is only right
and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes

(In Nabus v. Joaquin & Julia Pacson, the Court holds that the contract entered into by the
Spouses Nabus and respondents was a contract to sell, not a contract of sale.

A contract of sale is defined in Article 1458 of the Civil Code, 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.

Sale, by its very nature, is a consensual contract because it is perfected by mere

consent. The essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer

ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of

Sale because the first essential element is lacking. In a contract to sell, the prospective
seller explicitly reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the property
subject of the contract to sell until the happening of an event, which for present purposes
we shall take as the full payment of the purchase price. What the seller agrees or obliges
himself to do is to fulfill his promise to sell the subject property when the entire amount
of the purchase price is delivered to him. In other words, the full payment of the purchase
price partakes of a suspensive condition, the non-fulfillment of which prevents the
obligation to sell from arising and, thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.)Not really important except review sa
exam and ask ni sir sa recit
 (Further, A contract to sell as defined hereinabove, may not even be considered as
a conditional contract of sale where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition
is not fulfilled, the perfection of the contract of sale is completely abated. However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there
had already been previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the
full payment of the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The prospective seller
still has to convey title to the prospective buyer by entering into a contract of absolute
sale.) Not really important except review sa exam and ask ni sir sa recit

Spouses Herrera vs Caguiat

Facts:

Spouses Herrera, petitioners, are the registered owners of a lot located in Las Pinas,
Metro Manila. Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the
lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave
petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the
corresponding receipt stating that respondent promised to pay the balance of the purchase price
on or before March 23, 1990.

On March 28, 1990, respondent, through his counsel, wrote petitioners informing them
of his readiness to pay the balance of the contract price and requesting them to prepare the final
deed of sale.

On April 4, 1990, petitioners, through his counsel, sent a letter to respondent stating that
petition is leaving for abroad and that they are canceling the transaction. Petitioners also
informed respondent that he can recover the earnest money of P100,000.00 anytime.

In view of the cancellation of the contract by petitioners, respondent filed with the
Regional Trial Court a complaint against them for specific performance and damages.
RTC Proceedings

The Trial Court ruled that there was a perfected contract of sale between the parties and
ordering petitioners to execute a final deed of sale in favor of respondent.

The trial court held that plaintiffs position deserves more weight and credibility. First,
the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed
that there was already a perfected contract. Art. 1482 of the Civil Code 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”.

Second, plaintiff was the first to react to show his eagerness to push through with the
sale by sending defendants the letter dated March 25, 1990. Third, plaintiff had the
balance of the purchase price ready for payment.

CA Proceedings

On appeal, the CA affirmed the trial courts judgment. Hence this petition.

Issue: WON there was perfected Contract of Sale

Ruling:

No, The court held that a distinction must be made between a contract of sale in which
title passes to the buyer upon delivery of the thing sold and a contract to sell where by
agreement the ownership is reserved in the seller and is not to pass until the full
payment, of the purchase price is made. In the first case, non-payment of the price is a
negative resolutory condition; in the second case, full payment is a positive suspensive
condition. In the first case, the vendor has lost and cannot recover the ownership of the
land sold until and unless the contract of sale is itself resolved and set aside. In the
second case, however, the title remains in the vendor if the vendee does not comply with
the condition precedent of making payment at the time specified in the contract.

In other words, in a contract to sell, ownership is retained by the seller and is not to pass
to the buyer until full payment of the price

In this case, the Receipt for Partial Payment shows that the true agreement between the
parties is a contract to sell.
First, ownership over the property was retained by petitioners and was not to pass to
respondent until full payment of the purchase price. Thus, petitioners need not push
through with the sale should respondent fail to remit the balance of the purchase price
before the deadline on March 23, 1990. In effect, petitioners have the right to rescind
unilaterally the contract the moment respondent fails to pay within the fixed period.

Second, the agreement between the parties was not embodied in a deed of sale. The
absence of a formal deed of conveyance is a strong indication that the parties did not
intend immediate transfer of ownership, but only a transfer after full payment of the
purchase price.

Third, petitioners retained possession of the certificate of title of the lot. This is an
additional indication that the agreement did not transfer to respondent, either by actual
or constructive delivery, ownership of the property

It is true that Article 1482 of the Civil Code provides that Whenever earnest money is
given in a contract of sale, it shall be considered as part of the price and proof of the
perfection of the contract. However, this article speaks of earnest money given in
a contract of sale.

In this case, the earnest money was given in a contract to sell. The earnest money forms
part of the consideration only if the sale is consummated upon full payment of the
purchase price. Now, since the earnest money was given in a contract to sell, Article
1482, which speaks of a contract of sale, does not apply.

Nabus vs Pacson

Facts:

The spouses Bate and Julie Nabus were the owners of parcels of lands situated in, La
Trinidad, Benguet. The property was mortgaged by the Spouses Nabus to the PNB, La Trinidad
Branch, to secure a loan in the amount of P30,000.00.

Thereafter, the Spouses Nabus executed a Deed of Conditional Sale covering 1,000
square meters of the 1,665 square meters of land in favor of respondents Spouses Pacson for a
consideration of P170,000.00. The consideration was to be paid, thus:

THAT, the consideration of the amount of P170,000.00 will be paid by the

VENDEE herein in my favor in the following manner:

a. That the sum of P13,000.00, will be paid directly to the PNB, La

Trinidad Branch, and which will form part of the purchase price;
 b. That after paying the above amount to the PNB, La Trinidad,
Benguet branch, a balance of about P17,500.00 remains as
my mortgage balance and this amount will be paid by the VENDEE
herein.

c. That, as soon as the mortgage obligation with the PNB as cited above is
fully paid, then the VENDEE herein hereby obligates himself, his
heirs and assigns, to pay the amount of not less than P2,000.00 a
month in favor of the VENDOR, his heirs and assigns, until the full
amount of P170,000.00 is fully covered
THAT, as soon as the full consideration of this sale has been paid by the
VENDEE, the corresponding transfer documents shall be executed by the
VENDOR to the VENDEE for the portion sold;

Thereafter, respondents paid PNB the amount of P12,038.86 and P20,744.30 for the full
payment of the loan.
.
Further, receipts showed that the total sum paid by respondents to the Spouses Nabus
was P112,455.16 leaving a balance of P57,544.84.

During the last week of January 1984, Julie Nabus approached Joaquin Pacson to ask for
the full payment of the lot. Joaquin Pacson agreed to pay, but told her to return after four days
as his daughter, Catalina Pacson, would have to go over the numerous receipts to determine
the balance to be paid. When Julie Nabus returned after four days, Joaquin sent her and his
daughter, Catalina, to Atty. Rillera for the execution of the deed of absolute sale. Since Julie was
a widow with a minor daughter, Atty. Rillera required Julie Nabus to return in four days with
the necessary documents, such as the deed of extrajudicial settlement, the transfer certificate of
title in the names of Julie Nabus and minor Michelle Nabus, and the guardianship papers of
Michelle. However, Julie Nabus did not return.

Thereafter, Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty
Tolero. Catalina Pacson and Atty. Rillera went to the Register of Deeds of the Province of
Benguet, and found that Julie Nabus and her minor daughter, Michelle Nabus, had executed a
Deed of Absolute Sale in favor of Betty Tolero on covering the whole lot comprising 1,665
square meters. Then, the gate to the repair shop of the Pacsons was padlocked. A sign was
displayed on the property stating No Trespassing.

Thereafter, respondents Joaquin and Julia Pacson filed with the Regional Trial Court of La
Trinidad, Benguet a Complaint for Annulment of Deeds. They sought the annulment the
Extra-judicial Settlement of Estate, insofar as their right to the 1,000-square-meter lot subject of
the Deed of Conditional Sale was affected.

In their Answer, Nabus alleged that respondent Joaquin Pacson did not proceed with the
conditional sale of the subject property when he learned that there was a pending case over the
whole property..

RTC proceedings

The trial court ruled in favor of respondents, it held that the Deed of Conditional Sale
contained reciprocal obligations between the parties, when the vendees (the Spouses Pacson)
were already ready to pay their balance, it was the corresponding obligation of the vendors
(Nabuses) to execute the transfer documents. The trial court held that under Article 1191 of the
Civil Code, an injured party in a reciprocal obligation, such as the Deed of Conditional Sale in
the case at bar, may choose between the fulfillment or the rescission of the obligation, with the
payment of damages in either case. It stated that in filing the case, the Spouses Pacson opted for
fulfillment of the obligation, that is, the execution of the Deed of Absolute Sale in their favor
upon payment of the purchase price.

CA proceedings
The Court of Appeals affirmed the trial courts decision

Issue: Whether the Deed of Conditional Sale was a contract to sell or a contract of sale.

Ruling

The court held that the Deed of Conditional Sale was a contract to sell.

(Contract of Absolute Sale vs Contract of Conditional Sale

Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A contract
of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold. A deed of
sale is absolute when there is no stipulation in the contract that title to the property remains with the
seller until full payment of the purchase price. The sale is also absolute if there is no stipulation giving the
vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed
period. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass
to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a
suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising).

Contract of Sale vs Contract to Sell

The court distinguished a contract to sell from a contract of sale, thus:

Sale, by its very nature, is a consensual contract because it is perfected by

mere consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as

a Contract of Sale because the first essential element is lacking. In a contract to
sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take as
the full payment of the purchase price. What the seller agrees or obliges
himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him.In other words, the full
payment of the purchase price partakes of a suspensive condition, the non-
fulfilment of which prevents the obligation to sell from arising and, thus,
ownership is retained by the prospective seller without further remedies by
the prospective buyer.

Contract to Sell vs Conditional Contract of Sale

A contract to sell as defined hereinabove, may not even be considered as

a conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may
or may not occur. If the suspensive condition is not fulfilled, the perfection of
 the contract of sale is completely abated. However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already
been previous delivery of the property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not
automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to
the prospective buyer by entering into a contract of absolute sale.

It is not the title of the contract, but its express terms or stipulations that determine the
kind of contract entered into by the parties. In this case, the contract entitled Deed of
Conditional Sale is actually a contract to sell. The contract stipulated that as soon as the
full consideration of the sale has been paid by the vendee, the corresponding transfer
documents shall be executed by the vendor to the vendee for the portion sold. Where the
vendor promises to execute a deed of absolute sale upon the completion by the vendee
of the payment of the price, the contract is only a contract to sell. The aforecited
stipulation shows that the vendors reserved title to the subject property until full
payment of the purchase price.

Since the Deed of Conditional Sale executed in their favor was merely a contract to
sell, the obligation of the seller to sell becomes demandable only upon the happening of
the suspensive condition. The full payment of the purchase price is the positive
suspensive condition, the failure of which is not a breach of contract, but simply an
event that prevented the obligation of the vendor to convey title from acquiring
binding force. Thus, for its non-fulfilment, there is no contract to speak of, the obligor
having failed to perform the suspensive condition which enforces a juridical
relation. With this circumstance, there can be no rescission or fulfilment of an obligation
that is still non-existent, the suspensive condition not having occurred as yet. Emphasis
should be made that the breach contemplated in Article 1191 of the New Civil Code is
the obligors failure to comply with an obligation already extant, not a failure of a
condition to render binding that obligation.

The trial court, therefore, erred in applying Article 1191 of the Civil Code in this case by
ordering fulfillment of the obligation, that is, the execution of the deed of absolute sale in favor
of the Spouses Pacson upon full payment of the purchase price, which decision was affirmed by
the Court of Appeals. Ayala Life Insurance, Inc. v. Ray Burton Development Corporation] held:

Evidently, before the remedy of specific performance may be availed of,

there must be a breach of the contract.

Under a contract to sell, the title of the thing to be sold is retained by the
seller until the purchaser makes full payment of the agreed purchase price. Such
payment is a positive suspensive condition, the non-fulfillment of which
is not a breach of contract but merely an event that prevents the seller from
 conveying title to the purchaser. The non-payment of the purchase price
renders the contract to sell ineffective and without force and effect. Thus, a
cause of action for specific performance does not arise.

Since the contract to sell was without force and effect, Julie Nabus validly conveyed the
subject property to another buyer, petitioner Betty Tolero, through a contract of absolute sale,
and on the strength thereof, new transfer certificates of title over the subject property were duly
issued to Tolero

Hiers of Reyes vs Mijares

Facts:

The controversy stemmed from a dispute over lot located in Balintawak, Quezon City and
registered in the name of Spouses Vicente Reyes and Ignacia Aguilar-Reyes. Said lot and the
apartments built thereon were part of the spouses conjugal properties having been purchased
using conjugal funds from their garments business.
Vicente and Ignacia were married in 1960, but had been separated de facto since
1974. Sometime in 1984, Ignacia learned that Vicente sold the Lot to respondent spouses
Cipriano and Florentina Mijares for P40,000.00.
She likewise found out that Vicente misrepresented that his wife, Ignacia, died in 1982, and
that he and their 5 minor children were her only heirs. Thereafter, court appointed Vicente as
the guardian of their minor children. Subsequently, the court authorized Vicente to sell the
estate of Ignacia.
Ignacia sent a letter to respondent spouses demanding the return of her share in the lot. Failing
to settle the matter amicably, Ignacia filed a complaint for annulment of sale against respondent
spouses.
In their answer, respondent spouses claimed that they are purchasers in good faith and that the
sale was valid because it was duly approved by the court. Vicente Reyes, on the other hand,
contended that what he sold to the spouses was only his share in the Lot excluding the share of
his wife, and that he never represented that the latter was already dead.

RTC proceedings
The court a quo rendered a decision declaring the sale of the Lot void with respect to the
share of Ignacia. It held that the purchase price of the lot was P110,000.00 and ordered
Vicente to return thereof or P55,000.00 to respondent spouses.

Ignacia filed a motion for modification of the decision praying that the sale be declared
void in its entirety and that the respondents be ordered to reimburse to her the rentals they
collected on the apartments built on the Lot
The trial court modified its decision by declaring the sale void in its entirety and ordering
Vicente Reyes to reimburse respondent spouses the purchase price of P110,000.
Both Ignacia Aguilar-Reyes and respondent spouses appealed the decision to the Court of
Appeals.
CA proceedings
Petitioners contended that they are entitled to reimbursement of the rentals collected on the
apartment built on the Lot, while respondent spouses claimed that they are buyers in good
faith. The Court of Appeals reversed and set aside the decision of the trial court. It ruled that
notwithstanding the absence of Ignacias consent to the sale, the same must be held valid in
favor of respondents because they were innocent purchasers for value.

Issue: Whether to contract of sale can be annulled in its entirety

Ruling:

Yes,

Art.166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real
property of the conjugal partnership without the wifes consent. If she refuses unreasonably to
give her consent, the court may compel her to grant the same

Art. 173. The wife may, during the marriage and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband entered into
without her consent, when such consent is required, or any act or contract of the husband which
tends to defraud her or impair her interest in the conjugal partnership property. Should the wife
fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the
value of property fraudulently alienated by the husband.

Pursuant to the foregoing provisions, the husband could not alienate or encumber any conjugal
real property without the consent, express or implied, of the wife otherwise, the contract is
voidable. Indeed, in several case the Court had ruled that such alienation or encumbrance by
the husband is void. The better view, however, is to consider the transaction as merely
voidable and not void. This is consistent with Article 173 of the Civil Code pursuant to which
the wife could, during the marriage and within 10 years from the questioned transaction, seek
its annulment.

This particular provision giving the wife ten (10) years during [the] marriage to annul the
alienation or encumbrance was not carried over to the Family Code. It is thus clear that 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

In the case at bar, there is no dispute that the, is a conjugal property having been purchased
using the conjugal funds of the spouses during the subsistence of their marriage. It is beyond
cavil therefore that the sale of said lot to respondent spouses without the knowledge and
consent of Ignacia is voidable. Her action to annul the March 1, 1983 sale which was filed on
June 4, 1986, before her demise is perfectly within the 10 year prescriptive period under Article
173 of the Civil Code. Even if we reckon the period from November 25, 1978 which was the date
when Vicente and the respondent spouses entered into a contract concerning the Ignacias action
would still be within the prescribed period.

Anent the second issue, the trial court correctly annulled the voidable sale of the Lot in its
entirety. In Bucoy v. Paulino, a case involving the annulment of sale with assumption of
mortgages executed by the husband without the consent of the wife, it was held that the
alienation or encumbrance must be annulled in its entirety and not only insofar as the share of
the wife in the conjugal property is concerned. Although the transaction in the said case was
declared void and not merely voidable, the rationale for the annulment of the whole transaction
is the same thus:

The necessity to strike down the contract as a whole, not merely as to the share of the wife, is not without
its basis in the common-sense rule. To be underscored here is that upon the provisions of Articles 161,
162 and 163 of the Civil Code, the conjugal partnership is liable for many obligations while the conjugal
partnership exists. Not only that. The conjugal property is even subject to the payment of debts
contracted by either spouse before the marriage, as those for the payment of fines and indemnities imposed
upon them after the responsibilities in Article 161 have been covered, if it turns out that the spouse who is
bound thereby, should have no exclusive property or if it should be insufficient. These are considerations
that go beyond the mere equitable share of the wife in the property. These are reasons enough for the
husband to be stopped from disposing of the conjugal property without the consent of the wife.

Guiang vs CA

Facts:

Plaintiff Gilda Corpuz and defendant Judie Corpuz are legally married spouses. The couple
have three children.
Sometime in 1983, the couple, bought a 421 sq. meter lot located in Koronadal, South Cotabato,
from Manuel Callejo who signed as vendor.
Sometime in 1988, the couple sold one-half portion of their Lot to the defendants-spouses
Antonio and Luzviminda Guiang. The latter have since then occupied the one-half portion and
built their house thereon.
Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to look for
work abroad, in the Middle East. Unfortunately, she became a victim of an unscrupulous
illegal recruiter. She was not able to go abroad.
Sometime in January 1990, Harriet Corpuz, their 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. She replied that she was objecting
to the sale. Harriet, however, did not inform her father about this; but instead gave the letter
to Mrs. Luzviminda Guiang so that she would advise her father.
However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed through
the sale of the remaining one-half portion of the Lot
Four (4) days after March 1, 1990 or on March 5, 1990, obviously to cure whatever defect in
defendant Judie Corpuz title over the lot transferred, defendant Luzviminda Guiang as
vendee executed another agreement over the Lot this time 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.
Sometime on March 11, 1990, plaintiff returned home. She found her children staying with
other households. She was informed by her children that their father had a wife already.
On May 28, 1990, Private Respondent Gilda Corpuz filed a complaint against her husband
Judie Corpuz and Petitioners-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.

RTC proceedings
The ruled in favor of the plaintiff and against the defendants. It declared both the Deed of
Transfer of Rights as null and void and of no effect

CA proceedings
The CA found no reversible error in the trial courts ruling that any alienation or
encumbrance by the husband of the conjugal property 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 settlement 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: WON the Deed of Transfer of right is void

Ruling:
Yes
Petitioners insist that the questioned Deed of Transfer of Rights was validly
executed by the parties-litigants in good faith and for valuable consideration. The absence of
private respondents consent merely rendered the Deed voidable.
The error in petitioners contention is evident. Article 1390, par. 2, refers to contracts visited
by vices of consent, i.e., contracts which were entered into by a person whose consent was
obtained and vitiated through mistake, violence, intimidation, undue influence or fraud. In
this instance, private respondents 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, which was correctly applied by the two lower courts.
ART. 124. The administration and enjoyment of the conjugal partnership property shall
belong to both spouses jointly. In case of disagreement, the husbands decision shall
prevail, subject to recourse to the court by the wife for proper remedy, which must be
availed of within five years from the date of the contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or encumbrance
which must have the authority of the court or the written consent of the other
spouse. In the absence of such authority or consent, the disposition or encumbrance
shall be void. However, the transaction shall be construed as a continuing offer on the
part of the consenting spouse and the third person, and may be perfected as a binding
contract upon the acceptance by the other spouse or authorization by the court before
the offer is withdrawn by either or both offerors.
Comparing said law with its equivalent provision in the Civil Code, the trial court
explained the amendatory effect of the above provision in this wise:
The legal provision is clear. The disposition or encumbrance is void. It becomes still
clearer if we compare the same with the equivalent provision of the Civil Code of the
Philippines. Under Article 166 of the Civil Code, the husband cannot generally alienate
or encumber any real property of the conjugal partnership without the wifes
consent. The alienation or encumbrance if so made however is not null and void. It is
merely voidable. The offended wife may bring an action to annul the said alienation or
encumbrance. Thus, the provision of Article 173 of the Civil Code of the Philippines, to
wit:
Art. 173. The wife may, during the marriage and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of the
husband entered into without her consent, when such consent is required, or
any act or contract of the husband which tends to defraud her or impair her
interest in the conjugal partnership property. Should the wife fail to exercise
 this right, she or her heirs after the dissolution of the marriage, may demand
the value of property fraudulently alienated by the husband.(n)
This particular provision giving the wife ten (10) years during the marriage to annul
the alienation or encumbrance was not carried over to the Family Code. It is thus clear
that 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.
In sum, the nullity of the contract of sale is premised on the absence of private respondents
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.

Ainza vs Spouses Padua

Facts:

In her complaint for partition of real property, annulment of titles with damages Concepcion
Ainza alleged that respondent-spouses Eugenia and Antonio Padua owned a a parcel of
land located in Quezon City. Sometime in April 1987, she bought one-half of an undivided
portion of the property from her daughter, Eugenia and the latters husband, Antonio, for
P100,000.00.
No Deed of Absolute Sale was executed to evidence the transaction, but cash payment was
received by the respondents, and ownership was transferred to Concepcion through
physical delivery to her attorney-in-fact and daughter, Natividad Tuliao.
Thereafter, Concepcion alleged that without her consent, respondents caused the
subdivision of the property into three portions and registered it in their names.
On the other hand, Antonio averred that he bought the property in 1980 and introduced
improvements thereon. Between 1989 and 1990, he and his wife, Eugenia, allowed Natividad
and Ceferino to occupy the premises temporarily. In 1994, they caused the subdivision of the
property and three separate titles were issued.
Thereafter, Antonio requested Natividad to vacate the premises but the latter refused and
claimed that Concepcion owned the property.

RTC Proceedings
The RTC rendered judgment in favor of Concepcion. The trial court upheld the sale between
Eugenia and Concepcion. It ruled that the sale was consummated when both contracting parties
complied with their respective obligations. Eugenia transferred possession by delivering the
property to Concepcion who in turn paid the purchase price. It also declared that the transfer of
the property did not violate the Statute of Frauds because a fully executed contract does not fall
within its coverage.

CA proceedings
On appeal by the respondents, the Court of Appeals reversed the decision of the trial court, and
declared the sale null and void. Applying Article 124 of the Family Code, the Court of Appeals
ruled that since the subject property is conjugal, the written consent of Antonio must be
obtained for the sale to be valid.

Issue: whether there was a valid contract of sale between Eugenia and Concepcion.

Ruling:

Yes, contract of sale is perfected by mere consent, upon a meeting of the minds on the offer
and the acceptance thereof based on subject matter, price and terms of payment.
In this case, there was a perfected contract of sale between Eugenia and Concepcion. The
records show that Eugenia offered to sell a portion of the property to Concepcion, who accepted
the offer and agreed to pay P100,000.00 as consideration. The contract of sale was consummated
when both parties fully complied with their respective obligations. Eugenia delivered the
property to Concepcion, who in turn, paid Eugenia the price of One Hundred Thousand Pesos
(P100,000.00).
It is undisputed that the subject property was conjugal and sold by Eugenia in April 1987 or
prior to the effectivity of the Family Code on August 3, 1988, Article 254 of which repealed the
Civil Code provisions on the property relations between husband and wife. However, Article
256 thereof limited its retroactive effect only to cases where it would not prejudice or impair
vested or acquired rights in accordance with the Civil Code or other laws. In the case at bar,
vested rights of Concepcion will be impaired or prejudiced by the application of the Family
Code; hence, the provisions of the Civil Code should be applied.
The legal effect of a sale of conjugal properties by the wife without the consent of the
husband prior to the effectivity of the Family Code is voidable. It is supported by the legal
provision that contracts entered by the husband without the consent of the wife when such
consent is required, are annullable at her instance during the marriage and within ten years
from the transaction questioned
In this case, The consent of both Eugenia and Antonio is necessary for the sale of the
conjugal property to be valid. Antonios consent cannot be presumed. Eugenia alone is incapable
of giving consent to the contract. Therefore, in the absence of Antonios consent, the disposition
made by Eugenia is voidable.]
The contract of sale between Eugenia and Concepcion being an oral contract, the action to
annul the same must be commenced within six years from the time the right of action accrued.
Eugenia sold the property in April 1987 hence Antonio should have asked the courts to annul
the sale on or before April 1993. No action was commenced by Antonio to annul the sale, hence
his right to seek its annulment was extinguished by prescription.
Even assuming that the ten (10)-year prescriptive period under Art. 173 should apply,
Antonio is still barred from instituting an action to annul the sale because since April 1987,
more than ten (10) years had already lapsed without any such action being filed.
In sum, the sale of the conjugal property by Eugenia without the consent of her husband is
voidable. It is binding unless annulled. Antonio failed to exercise his right to ask for the
annulment within the prescribed period, hence, he is now barred from questioning the validity
of the sale between his wife and Concepcion.

Calimlim Canulas vs Fortun

Facts:
Petitioner MERCEDES Calimlim-Canullas and FERNANDO Canullas were married on
December 1962. They lived in a small house on the residential land in question located at
Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land.
In 1978, FERNANDO abandoned his family and was living with private respondent Corazon
DAGUINES. On April 15, 1980, FERNANDO sold the subject property with the house thereon
to DAGUINES for the sum of P2,000.00. In the document of sale, FERNANDO described the
house as "also inherited by me from my deceased parents."
Unable to take possession of the lot and house, DAGUINES initiated a complaint for quieting of
title and damages against MERCEDES. The latter resisted and claimed that the house in dispute
where she and her children were residing, including the coconut trees on the land, were built
and planted with conjugal funds and through her industry; that the sale of the land together
with the house and improvements to DAGUINES was null and void because they are conjugal
properties and she had not given her consent to the sale,
RTC proceedings
The RTC declared DAGUINES "as the lawful owner of the land in question as well as the one-
half () of the house erected on said land. Upon reconsideration prayed for by MERCEDES, the
RTC amended its decision Declaring plaintiff as the true and lawful owner of the land in
question and the 10 coconut trees but Declaring as null and void the sale of the conjugal house
to plaintiff on April 15, 1980 including the 3 coconut trees and other crops planted during the
conjugal relation between Fernando Canullas (vendor) and his legitimate wife, herein
defendant Mercedes Calimlim- Canullas
Issue: Whether or not the sale to Daguines is valid
Ruling:
The court held that the contract of sale was null and void for being contrary to morals and
public policy. The sale was made by a husband in favor of a concubine after he had abandoned
his family and left the conjugal home where his wife and children lived and from whence they
derived their support.
Article 1409 of the Civil Code states that contracts whose cause, object, or purpose is contrary to
law, morals, good customs, public order, or public policy are void and inexistent from the very
beginning.
Additionally, the law emphatically prohibits the spouses from selling property to each other
subject to certain exceptions.Similarly, donations between spouses during marriage are
prohibited. And this is so because it would destroy the system of conjugal partnership.
The prohibitions apply to a couple living as husband and wife without benefit of marriage,
otherwise, "the condition of those who incurred guilt would turn out to be better than those in
legal union."

Abalos vs Macatangay

Facts:
Spouses Arturo and Esther Abalos are the registered owners of a parcel of land located at
Azucena St., Makati
Armed with a SPA purportedly issued by his wife, Arturo executed a Receipt and
Memorandum of Agreement (RMOA) in favor of respondent, binding himself to sell to respondent
the subject property and not to offer the same to any other party within thirty (30) days from
date.
Arturo acknowledged receipt of a check from respondent in the amount of Five Thousand Pesos
(P5,000.00), representing earnest money for the subject property, the amount of which would be
deducted from the purchase price of One Million Three Hundred Three Hundred Thousand
Pesos (P1,300,000.00).Further, the RMOA stated that full payment would be effected as soon as
possession of the property shall have been turned over to respondent.
Subsequently, Arturos wife, Esther, executed a Special Power of Attorney appointing her
sister in her behalf relative to the transfer of the property to respondent. Apparently, a marital
squabble was brewing between Arturo and Esther at the time and to protect his interest,
respondent caused the annotation of his adverse claim on the title of the spouses to the
property.
Respondent sent a letter to Arturo and Esther informing them of his readiness and
willingness to pay the full amount of the purchase price. The letter contained a demand upon
the spouses to comply with their obligation to turn over possession of the property to him.
Esther executed in favor of respondent, a Contract to Sell the property to the extent of her
conjugal interest therein for the sum of six hundred fifty thousand pesos (P650,000.00). Esther
agreed to surrender possession of the property to respondent within twenty (20) days from
November 16, 1989, while the latter promised to pay the balance of the purchase price in the
amount of one million two hundred ninety thousand pesos (P1,290,000.00) after being placed in
possession of the property.
Thereafter, respondent informed the spouses that he had set aside the amount of One Million
Two Hundred Ninety Thousand Pesos (P1,290,000.00) as evidenced by Citibank Check 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
On January 12, 1990, respondent filed a complaint for specific performance with damages
against petitioners. Arturo filed his answer to the complaint while his wife was declared in
default.

RTC Proceedings

The RTC dismissed the complaint for specific performance. It ruled that the Special Power of
Attorney issued by Esther in favor of Arturo was void as it was falsified. The trial court also
noted that the check issued by respondent to cover the earnest money was dishonored due to
insufficiency of funds and while it was replaced with another check by respondent, there is no
showing that the second check was issued as payment for the earnest money on the property.

CA proceedings

On appeal taken by respondent, 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. The appellate court ratiocinated that it was by virtue of the
SPA executed by Esther, in favor of her sister, that the sale of the property to respondent was
effected. On the other hand, the appellate court considered the RMOA executed by Arturo in
favor of respondent valid to effect the sale of Arturos conjugal share in the property.

Issue: whether petitioner may be compelled to convey the property to respondent under the
terms of the RMOA and the Contract to Sell

No, Contracts, in general, require the presence of three essential elements: (1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of
the obligation which is established.
Being essentially consensual, a contract of sale is perfected at the moment there is a meeting of
the minds upon the thing which is the object of the contract and upon the price. However,
ownership of the thing sold shall not be transferred to the vendee until actual or constructive
delivery of the property.
Option Money
On the other hand, an accepted unilateral promise which specifies the thing to be sold and the
price to be paid, when coupled with a valuable consideration distinct
and separate from the price, is what may properly be termed a perfected contract of option. An
option merely grants a privilege to buy or sell within an agreed time and at a determined
price. It is separate and distinct from that which the parties may enter into upon the
consummation of the option. A perfected contract of option does not result in the perfection or
consummation of the sale; only when the option is exercised may a sale be perfected. The option
must, however, be supported by a consideration distinct from the price.
In this case, the RMOA, it signifies a unilateral offer of Arturo to sell the property to
respondent for a price certain within a period of thirty days. The RMOA does not impose upon
respondent an obligation to buy petitioners property, as in fact it does not even bear his
signature thereon. It is quite clear that after the lapse of the thirty-day period, without
respondent having exercised his option, Arturo is free to sell the property to another. This
shows that the intent of Arturo is merely to grant respondent the privilege to buy the
property within the period therein stated. There is nothing in the RMOA which indicates that
Arturo agreed therein to transfer ownership of the land which is an essential element in a
contract of sale. Unfortunately, the option is not binding upon the promissory since it is not
supported by a consideration distinct from the price.
In an accepted unilateral promise to sell, the promissor is not bound by his promise and may,
accordingly, withdraw it, since there may be no valid contract without a cause or consideration.
Pending notice of its withdrawal, his accepted promise partakes of the nature of an offer to sell
which, if acceded or consented to, results in a perfected contract of sale.
Even conceding for the that respondent had accepted the offer within the period stated and,
as a consequence, a bilateral contract of purchase and sale was perfected, the outcome would be
the same. To benefit from such situation, respondent would have to pay or at least make a valid
tender of payment of the price for only then could he exact compliance with the undertaking of
the other party. This respondent failed to do. By his own admission, he merely informed
respondent spouses of his readiness and willingness to pay. The fact that he had set aside a
check could not help his cause. Settled is the rule that tender of payment must be made in legal
tender. A check is not legal tender, and therefore cannot constitute a valid tender of payment.
Not having made a valid tender of payment, respondents action for specific performance must
fail.

Earnest Money
With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view
that the amount is not earnest money as the term is understood in Article 1482 which signifies
proof of the perfection of the contract of sale, but merely a guarantee that respondent is really
interested to buy the property. 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.
Granting for the sake of argument that the RMOA is a contract of sale, the same would still
be void not only for want of consideration and absence of respondents signature thereon, but
also for lack of Esthers 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 wifes consent
 The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers
consent thereto but also from want of consideration and absence of respondents signature
thereon. Such nullity cannot be obliterated by Esthers subsequent confirmation of the putative
transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be
ratified.
True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by
Arturo in favor of respondent. However, the RMOA which Arturo signed is different from the
deed which Esther executed through her attorney-in-fact. For one, the first is sought to be
enforced as a contract of sale while the second is purportedly a contract to sell only. For
another, the terms and conditions as to the issuance of title and delivery of possession are
divergent.
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 documents on which the signatures of the spouses separately appear,
textual concordance of the documents is indispensable. Hence, in this case where the wifes
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.
Under the Civil Code, the husband is the administrator of the conjugal partnership. This
right is clearly granted to him by law.
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 wifes consent. Similarly, the wife cannot dispose of any property belonging to the
conjugal partnership without the conformity of the husband.
More significantly, 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. Thus, 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.
As an exception, the husband may dispose of conjugal property without the wifes
consent if such sale is necessary to answer for conjugal liabilities. The Court ruled that the
husband may sell property belonging to the conjugal partnership even without the consent of
the wife if the sale is necessary to answer for a big conjugal liability which might endanger the
familys economic standing. This is one instance where the wifes consent is not required and,
impliedly, no judicial intervention is necessary.
Here, petitioners action for specific performance must fail. 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.

LO vs KJS

Facts:

Respondent KJS is a corporation engaged in the sale of steel scaffoldings, while petitioner
Sonny L. Lo, is a building contractor. Petitioner ordered scaffolding equipments from
respondent worth P540,425.80. He paid a downpayment in the amount of P150,000.00. The
balance was made payable in ten monthly installments.
Respondent delivered the scaffoldings to petitioner. Petitioner was able to pay the first two
monthly installments. His business, however, encountered financial difficulties and he was
unable to settle his obligation to respondent
Thereafter, petitioner and respondent executed a Deed of Assignment, whereby petitioner
assigned to respondent his receivables in the amount of P335,462.14 from Jomero Realty
Corporation.
The Deed of Assignment contained a provision that the Assignor (LO) further agrees and
stipulates as aforesaid that the said ASSIGNOR, his heirs, executors, administrators execute and
do all such further acts and deeds as shall be reasonably necessary to effectually enable said ASSIGNEE
to recover whatever collectibles said ASSIGNOR has in accordance with the true intent and meaning of
these presents
However, when respondent tried to collect the said credit from Jomero Realty Corporation, the
latter refused to honor the Deed of Assignment because it claimed that petitioner was also
indebted to it. Thereafter, respondent sent a letter to petitioner demanding payment of his
obligation, but petitioner refused to pay claiming that his obligation had been extinguished
when they executed the Deed of Assignment.
Consequently, respondent filed an action for recovery of a sum of money against the petitioner
before the RTC of Makati.

RTC Proceedings
During the trial, petitioner argued that his obligation was extinguished with the execution
of the Deed of Assignment of credit. Respondent, for its part, presented the testimony of its
employee who testified that Jomero Realty refused to honor the assignment of credit because it
claimed that petitioner had an outstanding indebtedness to it.
 On August 25, 1994, the trial court rendered a decision dismissing the complaint on the
ground that the assignment of credit extinguished the obligation.
CA Proceedings

Respondent appealed the decision to the CA. The CA reversed the decision of the RTC. The CA
held that petitioner failed to comply with his warranty under the Deed; (2) the object of the
Deed did not exist at the time of the transaction, rendering it void pursuant to Article 1409 of
the Civil Code; and (3) petitioner violated the terms of the Deed of Assignment when he failed
to execute and do all acts and deeds as shall be necessary to effectually enable the respondent to
recover the collectibles

Issue: Whether the obligation of LO was extinguished upon the execution of the Deed of
Assignment

Ruling:

No, An assignment of credit is an agreement by virtue of which the owner of a credit, known as
the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without
the consent of the debtor, transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it
against the debtor.
Corollary thereto, in dacion en pago, as a special mode of payment, the debtor offers another
thing to the creditor who accepts it as equivalent of payment of an outstanding debt. In order
that there be a valid dation in payment, the following are the requisites:
(1) There must be the performance of the prestation in lieu of payment (animo solvendi) which
may consist in the delivery of a corporeal thing or a real right or a credit against the third
person;
(2) There must be some difference between the prestation due and that which is given in
substitution (aliud pro alio);
(3) There must be an agreement between the creditor and debtor that the obligation is
immediately extinguished by reason of the performance of a prestation different from that due.

Hence, it may well be that the assignment of credit, which is in the nature of a sale of
personal property, produced the effects of a dation in payment which may extinguish the
obligation. However, as in any other contract of sale, the vendor or assignor is bound by certain
warranties. More specifically, the first paragraph of Article 1628 of the Civil Code provides:

The vendor in good faith shall be responsible for the existence and legality of the credit at the
time of the sale, unless it should have been sold as doubtful; but not for the solvency of the
debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale
and of common knowledge.

Here, petitioner, as vendor or assignor, is bound to warrant the existence and legality of the
credit at the time of the sale or assignment. When Jomero claimed that it was no longer indebted
to petitioner since the latter also had an unpaid obligation to it, it essentially meant that its
obligation to petitioner has been extinguished by compensation. In other words, respondent
alleged the non-existence of the credit and asserted its claim to petitioners warranty under the
assignment. Therefore, it behooved on petitioner to make good its warranty and paid the
obligation. In other words, respondent alleged the non-existence of the credit and asserted its
claim to petitioners warranty under the assignment. Therefore, it behooved on petitioner to
make good its warranty and paid the obligation.

Indeed, by warranting the existence of the credit, petitioner should be deemed to have ensured
the performance thereof in case the same is later found to be inexistent. He should be held liable
to pay to respondent the amount of his indebtedness.

Puyat vs Arco Amusement

Facts:

The Arco Amusement Company, desiring to equip its cinematograph with sound reproducing
devices. approached Gonzalo Puyat & Sons, Inc., acting as exclusive agents in the Philippines
for the Starr Piano Company of Richmond, Indiana, U.S. A to order sound reproducing
equipment from the Starr Piano Company and that the Arco would pay the Puyat, in addition
to the price of the equipment, a 10 per cent commission, plus all expenses, such as, freight,
insurance, banking charges, cables, etc. At the expense of the Arco, Puyat sent a cable, to the
Starr Piano Company, inquiring about the equipment desired and making the said company to
quote its price without discount. A reply was received by Gonzalo Puyat & Sons, Inc., with the
price, evidently the list price of $1,700. Puyat did not show the plaintiff the cable of inquiry nor
the reply but merely informed the plaintiff of the price of $1,700.
Being agreeable to this price, Arco authorized the order. The equipment arrived and upon
delivery of the same to the plaintiff,, the price of $1.700, plus the 10 per cent commission agreed
upon and plus all the expenses and charges, was duly paid by Arco to Puyat
The following year, another order for sound reproducing equipment was placed by the Arco
with Puyat, on the same terms as the first order. This agreement was the plaintiff would pay for
the equipment the amount of $1,600, plus 10 per cent commission, plus all expenses incurred.
The equipment under the second order arrived in due time, and Puyat was duly paid the price
of $1,600 with its 10 per cent commission.
Thereafter, the officials of the Arco discovered that Puyat obtained a discount from the Starr
Piano Company. Moreover, by reading reviews on prices of machinery and cinematograph
equipment, it discovered that the prices charged them by Puyat were much too high including
the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction from
Puyat or rather a reimbursement, and failing in this they brought the present action.
RTC Proceedings
The trial court held that the contract between the petitioner and the respondent was one of
outright purchase and sale, and absolved that Arco from the complaint.
CA Proceedings
The appellate court, however, held that the relation between petitioner and respondent was that
of agent and principal, that Puyat acting as agent of the Arco in the purchase of the equipment
in question, and sentenced the petitioner to pay the respondent alleged overpayments. The
appellate court further argued that even if the contract between the petitioner and the
respondent was one of purchase and sale, the petitioner was guilty of fraud in concealing the
true price and hence would still be liable to reimburse the respondent for the overpayments
made by the latter.
Issue: WON there was a contract of purchase and sale
Ruling:
Yes, the contract between the petitioner and the respondent was one of purchase and sale, and
not one of agency.
In the first place, the contract is the law between the parties and should include all the things
they are supposed to have been agreed upon.
The letters, by which the respondent accepted the prices of $1,700 and $1,600, respectively, for
the sound reproducing equipment subject of its contract with the petitioner, are clear in their
terms and admit no other interpretation that the respondent in question at the prices indicated
which are fixed and determinate. The respondent admitted in its complaint filed with the Court
of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing
equipment and machinery.
The Court agreed with the trial judge that "whatever unforseen events might have taken place
unfavorable to the Puyat, such as change in prices, mistake in their quotation, loss of the goods
not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per
specifications, Arco might still legally hold Puyat to the prices fixed of $1,700 and $1,600."
This is incompatible with the pretended relation of agency between the petitioner and the
respondent, because in agency, the agent is exempted from all liability in the discharge of his
commission provided he acts in accordance with the instructions received from his principal
and the principal must indemnify the agent for all damages which the latter may incur in
carrying out the agency without fault or imprudence on his part.
While the petitioner was to receive ten per cent (10%) commission, this does not necessarily
make the petitioner an agent of the respondent, as this provision is only an additional price
which the respondent bound itself to pay, and which stipulation is not incompatible with the
contract of purchase and sale.
In the second place, to hold the petitioner an agent of the respondent in the purchase of
equipment and machinery from the Starr Piano Company is incompatible with the admitted
fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of
the ordinary for one to be the agent of both the vendor and the purchaser.
It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for
any difference between the cost price and the sales price which represents the profit realized by
the vendor out of the transaction.
It is to be observed that the twenty-five per cent (25%) discount granted by the Starr piano
Company to the petitioner is available only to the latter as the former's exclusive agent in the
Philippines. The respondent could not have secured this discount from the Starr Piano
Company and neither was the petitioner willing to waive that discount in favor of the
respondent.
Moreover, the petitioner was not duty bound to reveal the private arrangement it had with the
Starr Piano Company relative to such discount to its prospective customers, and the respondent
was not even aware of such an arrangement. The respondent, therefore, could not have offered
to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per
cent discount enjoyed by the petitioner. It is well known that local dealers acting as agents of
foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to
the list price when they resell to local purchasers. It was apparently to guard against an
exhorbitant additional price that the respondent sought to limit it to 10 per cent, and the
respondent is estopped from questioning that additional price.
If the respondent later on discovers itself at the short end of a bad bargain, it alone must bear
the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess
price, on that ground alone. The respondent could not secure equipment and machinery
manufactured by the Starr Piano Company except from the petitioner alone; it willingly paid
the price quoted; it received the equipment and machinery as represented; and that was the end
of the matter as far as the respondent was concerned.
Not every concealment is fraud; and short of fraud.

Aquintey vs Tibong

Facts:

Petitioner Agrifina Aquintey filed before the RTC of Baguio City, a complaint for sum of money
and damages against the respondents, spouses Felicidad and Rico Tibong.
Agrifina and Felicidad were classmates. Upon Felicidad's prodding, Agrifina agreed to lend
money to Felicidad. Felicidad told Agrifina that since she was engaged in the sale of dry goods
she would use the money to buy bonnels and thread. Thus, Agrifina lent a total sum
of P773,000.00 to Felicidad, and each loan transaction was covered by either a promissory note
or an acknowledgment receipt.

According to Agrifina, Felicidad was able to pay only her loans amounting to P122,600.00.
In the meantime, Agrifina learned that Felicidad had re-loaned the amounts to other borrowers.
Agrifina sought the assistance of Atty. Torres G. A-ayo who advised her to require Felicidad to
execute deeds of assignment over Felicidad's debtors. The lawyer also suggested that Felicidad's
debtors execute promissory notes in Agrifina's favor, to "turn over" their loans from Felicidad.

This arrangement would facilitate collection of Felicidad's account. Agrifina agreed to the
proposal. Agrifina, Felicidad, and the latter's debtors had a conference where Atty. A-ayo
explained that Agrifina could apply her collections as payments of Felicidad's account.

Felicidad executed deeds of assignment of credits in which Felicidad transferred and assigned
to Agrifina the total amount of P546,459.00 due from her debtors. In the said deeds, Felicidad
confirmed that her debtors were no longer indebted to her for their respective loans. However,
one of the debtor of Felicidad, Edna Papat-iw was not able to affix her signature on the deed of
assignment nor sign the promissory note because she was in Taipei, Taiwan. Following the
execution of the deeds of assignment and promissory notes, Agrifina was able to collect the
total amount of P301,000.00 from Felicidad's debtors.

In April 1990, she tried to collect the balance of Felicidad's account, but the latter told her to
wait until her debtors had money. When Felicidad reneged on her promise, Agrifina filed a
complaint in the Office of the Barangay Captain for the collection of P773,000.00. However, no
settlement was arrived at.

In her defense, Felicidad testified that she and her friend Agrifina had been engaged in the
money-lending business. Agrifina would lend her money with monthly interest, and she, in
turn, would re-lend the money to borrowers at a higher interest rate. Before the respective
maturity dates of her debtors' loans, Agrifina asked her to pay her account since Agrifina
needed money to buy a house and lot in Manila. However, she told Agrifina that she could not
pay yet, as her debtors' loan payments were not yet due. Agrifina then came to her store every
afternoon to collect from her, and persuaded her to go to Atty. Torres G. A-ayo for legal
advice.The lawyer suggested that she indorse the accounts of her debtors to Agrifina so that the
latter would be the one to collect from her debtors and she would no longer have any obligation
to Agrifina.
She then executed deeds of assignment in favor of Agrifina covering the sums of money due
from her debtors. She signed the deeds prepared by Atty. A-ayo in the presence of Agrifina.
Some of the debtors signed the promissory notes which were likewise prepared by the lawyer.
Thereafter, Agrifina personally collected from Felicidad's debtors.

RTC proceedings
RTC held in favor of Agripina ordering to pay 472,000 (773,000-301,000). The trial court ruled
that Felicidad's obligation had not been novated by the deeds of assignment and the promissory
notes executed by Felicidad's borrowers. It explained that the documents did not contain any
express agreement to novate and extinguish Felicidad's obligation. It declared that the deeds
and notes were separate contracts which could stand alone from the original indebtedness of
Felicidad. Considering, however, Agrifina's admission that she was able to collect from
Felicidad's debtors the total amount of P301,000.00, this should be deducted from the latter's
accountability. Hence, the balance, exclusive of interests, amounted to P472,000.00.

CA proceedings
On appeal, the CA affirmed with modification the decision of the RTC and stated that, based on
the promissory notes and acknowledgment receipts signed by Felicidad, the appellants secured
loans from the appellee in the total principal amount of only P637,000.00, not P773,000.00 since
the promissory notes of 136,000 was. Of the P637,000.00 total account, P585,659.00 was covered
by the deeds of assignment and promissory notes; hence, the balance of Felicidad's account
amounted to only P51,341.00.

The appellate court sustained the trial court's ruling that Felicidad's obligation to Agrifina had
not been novated by the deeds of assignment and promissory notes executed in the latter's
favor. Although Agrifina was subrogated as a new creditor in lieu of Felicidad, Felicidad's
obligation to Agrifina under the loan transaction remained; there was no intention on their part
to novate the original obligation.

Nonetheless, the appellate court held that the legal effects of the deeds of assignment could not
be totally disregarded. The assignments of credits were onerous, hence, had the effect of
payment, pro tanto, of the outstanding obligation. The fact that Agrifina never repudiated or
rescinded such assignments only shows that she had accepted and conformed to it.
Consequently, she cannot collect both from Felicidad and her individual debtors without
running afoul to the principle of unjust enrichment. Agrifina's primary recourse then is against
Felicidad's individual debtors on the basis of the deeds of assignment and promissory notes.

The CA further declared that the deeds of assignment executed by Felicidad had the effect of
payment of her outstanding obligation to Agrifina in the amount of P585,659.00. Hence, this
petition

Issue:

Whether the deeds of assignment in favor of petitioner has the effect of payment of the original
obligation.

Ruling:

Yes, The court ruled that the CA correctly found that respondents' obligation to pay the balance
of their account with petitioner was extinguished, pro tanto, by the deeds of assignment of credit
executed by respondent Felicidad in favor of petitioner.

An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without
the consent of the debtor, transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it
against the debtor. It may be in the form of sale, but at times it may constitute a dation in
payment, such as when a debtor, in order to obtain a release from his debt, assigns to his
creditor a credit he has against a third person.

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.

The requisites for dacion en pago are:

1) there must be a performance of the prestation in lieu of payment (animo solvendi) which may
consist in the delivery of a corporeal thing or a real right or a credit against the third person;

2) there must be some difference between the prestation due and that which is given in
substitution (aliud pro alio); and

3) there must be an agreement between the creditor and debtor that the obligation is
immediately extinguished by reason of the performance of a prestation different from that due

Here, All the requisites for a valid dation in payment are present in this case. As gleaned from
the deeds, respondent Felicidad assigned to petitioner her credits "to make good" the balance of
her obligation. Felicidad testified that she executed the deeds to enable her to make partial
payments of her account, since she could not comply with petitioner's frenetic demands to pay
the account in cash. Petitioner and respondent Felicidad agreed to relieve the latter of her
obligation to pay the balance of her account, and for petitioner to collect the same from
respondent's debtors.

Admittedly, some of respondents' debtors, like Edna Papat-iw, were not able to affix their
conformity to the deeds. In an assignment of credit, however, the consent of the debtor is not
essential for its perfection; the knowledge thereof or lack of it affecting only the efficaciousness
or inefficaciousness of any payment that might have been made. The assignment binds the
debtor upon acquiring knowledge of the assignment.

The transfer of rights takes place upon perfection of the contract, and ownership of the right,
including all appurtenant accessory rights, is acquired by the assignee who steps into the shoes
of the original creditor as subrogee of the latter from that amount, the ownership of the right is
acquired by the assignee. The law does not require any formal notice to bind the debtor to the
assignee, all that the law requires is knowledge of the assignment.

While it is true that respondent Felicidad likewise authorized petitioner in the deeds to collect
the debtors' accounts, and for the latter to pay the same directly, it cannot thereby be considered
that respondent merely authorized petitioner to collect the accounts of respondents' debtors and
for her to apply her collections in partial payments of their accounts. It bears stressing that
petitioner, as assignee, acquired all the rights and remedies passed by Felicidad, as assignee, at
the time of the assignment.Such rights and remedies include the right to collect her debtors'
obligations to her.
Distajo vs CA
Facts:

During the lifetime of Iluminada Abiertas, she designated one of her sons, Rufo Distajo, to be
the administrator of the four parcels of land situated in Pontevedra, Capiz.
Iluminada sold all the lots except lot 1018-A to Rufo Distajo.
Meanwhile, Justo Abiertas, Jr., the brother of Iluminada Abiertas, died leaving behind his
children three parcels of land. Teresita, one of his children sold the lots to Rufo Distajo.
When Iluminada Abiertas died in 1971, the other children of Iluminada assailed the sale of the
lots to Rufo and demanded possession of the seven parcels of land. However, Rufo refused.
Hence, they filed a complaint for recovery of possession and ownership of the 4 parcels of land
owned by their mother and the 3 parcels of land owned by their uncle.
RTC proceedings
The trial court dismissed the complaint for lack of cause of action, laches and prescription.
CA proceedings
The CA rendered its decision in favor of Rufo.
Hence this petition, Petitioner alleges that Iluminada Abiertas exclusively owns the seven
parcels of land all of which should be partitioned among all her heirs. Furthermore, Rufo
Distajo cannot acquire the subject parcels of land owned by Iluminada Abiertas because the
Civil Code prohibits the administrator from acquiring properties under his administration. Rufo
Distajo merely employed fraudulent machinations in order to obtain the consent of his mother
to the sale, and may have even forged her signature on the deeds of sale of the parcels of land.
Issue: Whether Rufo, as administrator, is prohibited to buy the lands in question
Ruling:

No, Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial
auction, either in person or through the mediation of another:

(1) The guardian, the property of the person or persons who may be under
guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to
them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;

Under paragraph (2) of the above article, the prohibition against agents purchasing
property in their hands for sale or management is not absolute. It does not apply if the
principal consents to the sale of the property in the hands of the agent or administrator.
In this case, the deeds of sale signed by Iluminada Abiertas shows that she gave consent to
the sale of the properties in favor of her son, Rufo, who was the administrator of the
properties. Thus, the consent of the principal Iluminada Abiertas removes the transaction
out of the prohibition contained in Article 1491(2).
In his petition, petitioner assails the genuineness of the signatures of Iluminada Abiertas in
the deeds of sale of the parcels of land, and claims that Rufo Distajo forged the signature of
Iluminada Abiertas.However, no handwriting expert was presented to corroborate the
claim of forgery. Petitioner even failed to present a witness who was familiar with the
signature of Iluminada Abiertas. Forgery should be proved by clear and convincing
evidence, and whoever alleges it has the burden of proving the same.

Pichel vs Alonzo (3rd set)

Facts:
This case originated in the lower Court as an action for the annulment of a "Deed of Sale"
executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property
awarded to the former by the Philippine Government under RA No. 477

Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land designated as
Lot No. 21 located in Lamitan, Basilan City in accordance with RA No. 477. The award was
cancelled by the Board of Liquidators on 1965 on the ground that 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, plaintiff and his wife sold to defendant the fruits of the coconut trees which
may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976,
in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease
to one, Ramon Sua, and it was the agreement that part of the consideration of the sale, in the
sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to release the land
from the clutches of the latter. Pending said payment plaintiff refused the defendant to make
any harvest.

Thereafter, defendant executed the deed of sale in his favor and caused the harvest of the fruit
of the coconut trees in the land.

RTC proceedings

The lower court rendered its decision, holding 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 a contract of lease of the land itself.

Further, the court, concluded that the deed of sale in question is an encumbrance prohibited by
Republic Act No. 477 which provides thus:
 Sec. 8. Except in favor of the Government or any of its branches, units, or
institutions, land acquired under the provisions of this Act or any permanent
improvements thereon shall not be thereon and for a term of ten years from
and after the date of issuance of the certificate of title, nor shall they become
liable to the satisfaction of any debt contracted prior to the expiration of such
period.

Any occupant or applicant of lands under this Act who transfers whatever rights
he has acquired on said lands and/or on the improvements thereon before the
date of the award or signature of the contract of sale, shall not be entitled to
apply for another piece of agricultural land or urban, homesite or residential lot,
as the case may be, from the National Abaca and Other Fibers Corporation; and
such transfer shall be considered null and void.

Issue: 1. WON the contract entered into is a contract of lease

2. WON the Deed of Sale is valid contract of sale

1. No, The terms of the agreement are clear and unequivocal, hence the literal and plain
meaning thereof should be observed.

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control.

Pursuant to the afore-quoted legal provision, the first and fundamental duty of the
courts is the application of the contract according to its express terms, interpretation
being resorted to only when such literal application is impossible.

Here, the deed of sale is clear that the document evidencing the agreement of herein parties for
the sale of coconut fruits of Lot No. 21, and not for the lease of the land itself. 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 1968 up to January 1976, which subject matter is a
determinate thing. Under Article 1461 of the New Civil Code, things having a potential
existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending
crops which have potential existence may be the subject matter of the sale.

The decision of the lower court that the contract in question fits the definition of a lease of
things is erroneous. The essential difference between a contract of sale and a lease of things is
that the delivery of the thing sold transfers ownership, while in lease no such transfer of
ownership results as the rights of the lessee are limited to the use and enjoyment of the thing
leased.

In concluding that the possession and enjoyment of the coconut trees can therefore be said to be
the possession and enjoyment of the land itself because the defendant-lessee in order to enjoy
his right under the contract, he actually takes possession of the land, at least during harvest
time is erroneous.

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.

2. Yes, the grantee of a parcel of land under R.A. No. 477 is ewnot 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. Permanent improvements on a parcel of
land are things incorporated or attached to the property in a fixed manner, naturally or
artificially. They include whatever is built, planted or sown on the land which is
characterized by fixity, immutability or immovability. Houses, buildings, machinery,
animal houses, trees and plants would fall under the category of permanent
improvements, the alienation or encumbrance of which is prohibited by R.A. No. 477.
While coconut trees are permanent improvements of a land, their nuts are natural or
industrial fruits which are meant to be gathered or severed from the trees, to be used,
enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as
the grantee of Lot No. 21 from the Government, had the right and prerogative to sell the
coconut fruits of the trees growing on the property.

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