SALES REVIEWER Respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner’s offer

he PNB Board of Directors had accepted petitioner’s offer to purchase

Edited by Tanya Ibanez the property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it.

CHAPTER 1 –NATURE AND FORM OF CONTRACTS Both trial court and CA ruled that there was no perfected contract of sale between the parties; hence, petitioner
had no cause of action for specific performance against respondent. Both declared that respondent had rejected
Art. 1458 – CONCEPT OF A CONTRACT OF SALE
petitioner’s offer to repurchase the property.
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and
ISSUE: whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to
to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract
repurchase the property from respondent.
of sale may be absolute or conditional.

SC RULED that there was NO perfected contract of sale between the parties.
DEFINITION

A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is
Sale is a contract where one party (seller or vendor) obligates himself to transfer the ownership of and to deliver
merely an offer by one party without acceptance of the other, there is no contract. When the contract of sale is
a determinate thing, while the other party (buyer or vendee) obligates himself to pay for said thing a price certain
not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the
in money or its equivalent.
parties.
Note that in harmony with Art. 1164, ownership of the thing sold does not pass to the buyer until delivery. See
To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer;
Arts. 1475, 1477, 1496. Essential requisites are consent, object and price. No special form is required. (Art.
it must be plain, unequivocal, unconditional and without variance of any sort from the proposal.
1483)

Cases
1. Effect of offer and counter-offer
Manila Metal Container Corporation vs. PNB, G.R. No. 166862, December 20, 2006
FACTS: Petitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City),
Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No. 332098 of the Registry of
Deeds of Rizal. To secure a P900,000.00 loan it had obtained from respondent Philippine National Bank (PNB),
petitioner executed a real estate mortgage over the lot. Respondent PNB later granted petitioner a new credit
accommodation of P1,000,000.00; and, petitioner executed an Amendment of Real Estate Mortgage over its
property. The petitioner was unable to pay its obligation to the said respondent. In turn, the respondent filed for
a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public
auction.
A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the
original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the
negotiation between the parties on a different basis. Consequently, when something is desired which is not
exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any
modification or variation from the terms of the offer annuls the offer. The acceptance must be identical in all
respects with that of the offer so as to produce consent or meeting of the minds.
Stages of a contract of sale:
(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
The petitioner was given a period (expiration--Feb. 17, 1984) to redeem the property, but, failed to do so. It
sale, culminating in the extinguishment thereof.
caused the petitioner to ask for a one year extension to redeem the said property. The respondent referred the
matter to Pasay City Branch for appropriate action and recommendation. Some PNB Pasay City Branch personnel
2. Effect of document denominated “Agreement between Mr. Sosa & Bernardo of Toyota Shaw, Inc.”
informed petitioner that as a matter of policy, the bank does not accept “partial redemption.” A new title in favor
of PNB was issued for petitioner’s failure to redeem the property. Toyota Shaw, Inc. vs. CA, L-11650, May 23, 1995

Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of
June 25, 1984 petitioner’s obligation amounted to P1,574,560.47. When apprised of the statement of account,
petitioner remitted P725,000.00 to respondent PNB as “deposit to repurchase,”.
Petitioner declared that it had already agreed to the SAMD’s offer to purchase the property for P1,574,560.47,
and that was why it had paid P725,000.00.
FACTS: Luna L. Sosa, respondent, wanted to purchase a Toyota Lite Ace. He transacted business with Popong
Bernardo, sales representative of Toyota. A Vehicle Sales Proposal (VSP) was accomplished and Mr. Sosa paid a
down payment of P100,000. On the scheduled date and time for the delivery of the car, Toyota refused to release
the car because the financing company, B.A. Finance Corporation, refused to finance the outstanding balance.
Mr. Sosa demanded the return of the down payment, which Toyota honored, without prejudice to future claim
for damages.
ISSUE: Was this document, executed and signed by the petitioner's sales representative, a perfected contract of E. Principal—for the contract of sale to validly exist, there is no necessity for it to depend upon the
sale, binding upon the petitioner, breach of which would entitle the private respondent to damages and attorney's existence of another contract.
fees? F. Commutative—the values exchanged are almost equivalent to each other (general rule). By way of
exception, some contracts of sale are aleatory, that is, one receives may in time be greater or smaller
SC RULED that it is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a than what he has given, i.e. sale of genuine sweepstakes ticket.
determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain G. Delivery transfers ownership – ownership does not pass until delivery.
appears therein.
CONTRACT OF SALE DISTINGUISHED FROM OTHER CONTRACTS
This Court had already ruled that a definite agreement on the manner of payment of the price is an essential
element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to A. Agency to Sell
the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount B. Lease of service or contract for a piece of work
to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to C. Barter
sell personal property. D. Dation in payment
E. Lease of things
At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of F. Donation
a contract of sale.
A. Sale vs. Agency to Sell
ELEMENTS
Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the
A. Essential Elements (without which there can be no valid of sale) contract of agency to sell, the essential clauses of the whole instrument shall be considered. (n)

1. Consent or meeting of the minds—consent to transfer ownership in exchange for the price. Cases:
2. Determinate subject matter – includes generic objects that are least determinable
(segregated/separated of the same class) 1. Effect of agreement for exclusive sale of beds where the other party is entitled to commission, among
3. Price certain in money or its equivalent others

B. Natural Elements (those which are inherent in the contract, and which in the absence of any contrary Quiroga vs. Parsons Hardware co.
provision, are deemed to exist in the contract)
Facts: The defendant was granted by the plaintiff of the exclusive right to sell as an “agent” Quiroga beds in the
1. Warranty against eviction (deprivation of the property bought) Visayas at the invoice price in Manila. The agreement was for the defendant to pay for the beds at a discount
2. Warranty against hidden defects from 20% to 25% as commission on the sales. The defendant shall pay the plaintiff claims that the defendant
is his “agent” while defendant says he was merely a purchaser.
C. Accidental Elements (those which may be present or absent in the stipulation, such as the place or time of
payment, or the presence of conditions) Issue: Is this a contract of sale or agency?

EFFECTS OF PRESENCE, ABSENCE, INCOMPLETE ELEMENTS Held: The Supreme Court declared that the contract by and between the plaintiff and the defendant was one of
purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed
 When all 3 elements are present – Perfected Contract upon the defendant, either by agreement or by law.
 If not present – no perfected contract
 If all the elements are present but there is a defect/illegal – contract is voidable/void In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what
was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with
CHARACTERISTICS the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the
manner stipulated. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of
A. Consensual—perfected by mere consent. the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell
B. Bilateral (reciprocal)—both parties are bound by obligations dependent upon each other. The power whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the
to rescind is implied, neither party incurs delay if the party does not comply, from the moment one of principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it,
the parties fulfills his obligation, the default by the other begins w/out need of prior demand. he returns it.
C. Onerous—valuable consideration must be given in order to acquire rights.
D. Nominate—the Code refers to it by special designation or name, that is, the contract of sale.
B. Sale vs. Lease of Service or Contract for a piece of work
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.
Cases:
1. Nature of transactions of company engaged in the design, supply and installation of certain type of air
conditioning system.
Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction
shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall
be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the
money or its equivalent; otherwise, it is a sale.
If the value of the thing is more than the value of the money or its equivalent, the contract is a barter. If the
value of the thing is less than the value of the money, then the contract is a sale.
D. Sale vs. Dation in payment
Dation in payment implies that there is an existing obligation whereas contract of sale, there is no prior obligation.

Commissioner of Internal Revenue v. Engineering Equipment and Supply Co. E. Sale vs. Lease of Service of Contract

Facts: Engineering Equipment and Supply Co., a domestic corporation, is engaged in the design and installation Delivery in this latter contract does not involve a transfer of ownership.
of central type air conditioning system, pumping plants and steel fabrications. CIR now denounced Engineering
for tax evasion by misdeclaring its imports and failing to pay the correct percentage taxes due thereon in F. Sale vs. Donation
connivance with its foreign suppliers. The Commissioner contends that Engineering is a manufacturer and seller
of air conditioning units and parts or accessories thereof and, therefore, it is subject to the 30% advance sales Donation – in that this latter contract is gratuitous and requires special formalities.
tax. Engineering is a contractor this subject only to the 3% tax imposed on contractors.
Art. 1479 – PROMISE TO SELL: WHEN BINDING
Contract of Sale v. Contract of Services; Test. — The distinction between a contract of sale and one for work,
labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never Art. 1479. A promise to buy and sell and determinate thing for a price certain is reciprocally demandable. An
would have existed but for the order of the party desiring to acquire it, or a thing which would have existed but accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
has been the subject of sale to some other persons even if the order had not been given. If the article ordered promissor if the promise is supported by a consideration distinct from the price.
by the purchaser is exactly such as the seller makes and keeps on hand for sale to anyone, and no change or
IF BILATERAL
modification of it is made at purchaser's request, it is a contract of sale even though it may be entirely made
after, and in consequence of the purchaser's order for it.
A “bilateral promise to buy and sell” requires NO CONSIDERATION distinct from the selling price - a bilateral
promise to buy or to sell a certain thing for a price certain gives to the contracting parties personal rights in
Engineering is a contractor rather than a manufacturer. Supply of air conditioning units to Engineer's various
that each has the right to demand from the other the fulfillment of the obligation.
customers, whether the said machineries were in hand or not, was especially made for each customer and
installed in his building upon his special order. The air conditioning units installed in a central type of air
IF UNILATERAL
conditioning system would not have existed but for the order of the party desiring to acquire it and if it existed
without the special order of Engineering's customer, the said air conditioning units were not intended for sale to
Only the “accepted unilateral promise to buy or sell” that needs consideration distinct from the selling price - the
the general public. Moreover, it advertises itself as a contractor and pays the contractor's tax for design and
acceptance of a unilateral promise to sell must be plain, clear and unconditional. Therefore, if there is qualified
construction of central type air conditioning systems, and does not have ready-made air-conditioning units for
acceptance with terms different from the offer there is no acceptance, that there is no promise to buy and there
sale, but must design and construct each unit to meet the particular requirements of its customers, said taxpayer
is no perfected sale.
is considered a contractor rather than a manufacturer for purposes of the Tax Code. Thus, such taxpayer is not
a manufacturer subject to the 30% advance sales tax prescribed in Section 185 (m) in relation to Section 194 of Cases:
the Tax Code, but is a contractor subject to the 3% tax imposed by Section 191 of the same Code.
1. Option defined
A taxpayer is required by law to truly declare his importation in the import entries and internal revenue
declarations before it is released. Thus, by requiring its foreign supplier to change the nomenclature of air Eulogio vs. Apeles, G.R. No. 167884, January 20, 2009
conditioning parts and accessories, and misdeclaring its importation so as to make them subject to the lower rate
of 7% percentage tax under Section 186 of the Tax Code, thereby evading the payment of the 30% tax under Contract of Lease with an Option
Section 185(m) thereof, said taxpayer is subject to the payment of the 50% fraud surcharge prescribed by Section
183(a). An option is a contract by which the owner of the property agrees with another person that the latter shall have
the right to buy the former’s property at a fixed price within a certain time. It is a condition offered or contract
C. Sale vs. Barter by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price
within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the owner the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into
of the property the right to sell or demand a sale. a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later
firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical
An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a relations governed not by contracts (since the essential elements to establish the vinculum juris would still be
sale of the right to purchase. It is simply a contract by which the owner of the property agrees with another indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions
person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his of the Civil Code on human conduct.
land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election
or option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the person Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach
holding the option, aside from the consideration for the offer. cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its
existence, nor would it sanction an action for specific performance without thereby negating the indispensable
"An accepted unilateral promise" can only have a binding effect if supported by a consideration, which means element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right of first refusal
that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for
instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for damages.
ii) Remedy of optionee for breach – specific performance
Note: right of first refusal cannot be deemed a perfected sale because it merely pertains to a specific property
2. Right of First Refusal – right on the part of the owner that if he decides to sell the property in the w/out containing an agreement as to the price.
future, he would first negotiate its sale to the one he promised.
THE CONTRACT OF SALE MAY BE:
Ang Yu Asuncion vs. CA
1. Absolute
Facts: On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ann Yu Asuncion 2. Conditional
and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, A. Executed contract
Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of B. Executory contract
residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo,
Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental and complying A. Absolute
with all the conditions of the lease contract; that on several occasions before October 9, 1986, defendants
informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same; Ramos vs. Heruela, G.R. No. 145330, Oct. 14, 2005
that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer
of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that Absolute sale Conditional sale
they specify the terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent
another letter dated January 28, 1987 with the same request; that since defendants failed to specify the terms
Ownership remains with the vendor and does not
and conditions of the offer to sell and because of information received that defendants were about to sell the When title to the property passes to the vendee upon pass to the vendee until full payment of the purchase
property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. delivery of the thing sold price.

"After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower
court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that When there is no stipulation in the contract that title The full payment of the purchase price partakes of a
the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of to the property remains with the seller until full suspensive condition, and non-fulfillment of the
sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer their property for payment of the purchase price condition prevents the obligation to sell from arising.
sale at a price of P11-million or below, plaintiffs will have the right of first refusal.
If there is no stipulation giving the vendor the right
Issue: Whether or not there is perfected contract of sale to cancel unilaterally the contract the moment the
vendee fails to pay within a fixed period
Held: In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point
out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right
of first refusal, understood in its normal concept, per sebe brought within the purview of an option under the
second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An
option or an offer would require, among other things, 10 a clear certainty on both the object and the cause or
consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate,
Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005 Transfer of ownership

Facts: It is settled that a perfected contract of sale cannot be challenged on the ground of the non-transfer of  Absolute – upon delivery
ownership of the property sold at that time of the perfection of the contract, since it is consummated upon  Conditional – ownership is reserved by the owner
delivery of the property to the vendee. It is through tradition or delivery that the buyer acquires ownership of
the property sold. As provided in Article 1458 of the New Civil Code, when the sale is made through a public CONTRACT TO SELL VS. CONTRACT OF SALE
instrument, the execution thereof is equivalent to the delivery of the thing which is the object of the contract,
unless the contrary appears or can be inferred. The record of the sale with the Register of Deeds and the issuance
of the certificate of title in the name of the buyer over the property merely bind third parties to the sale. As Contract to sell Contract of sale
between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument
covering the real property. Long before the petitioners secured a Torrens title over the property, the respondents
The payment in full of the price is a positive The non-payment of the price is a RESOLUTORY
had been in actual possession of the property and had designated Barte as their overseer. suspensive condition. Hence, if the price is not paid, condition, i.e. the contract of sale may by such
it is as if the obligation of the seller to deliver and to occurrence put an end to a transaction that once
Although denominated a “Deed of Conditional Sale,” a sale is still absolute where the contract is devoid of any transfer ownership never became effective and upon a time existed
proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. binding.
Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g. by the execution of a
public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself,
Ownership is retained by the seller, regardless of Title over the property generally passes to the buyer
the failure of the condition would prevent such perfection. If the condition is imposed on the obligation of a party
delivery and is not pass until fill payment of the price upon delivery
which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale. (Art.
1545, Civil Code)
Since the seller retains ownership, despite delivery, After delivery has been made, the seller has lost
A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the he is enforcing not rescinding the contract if he seeks ownership and cannot recover it unless the contract
property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to to oust the buyer for failure to pay. is resolved or rescinded
unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.

B. Conditional, which may in turn be—

Contract to sell – a bilateral contract whereby the prospective seller, while expressly reserving the ownership
A. An executed contract – which property (ownership) in the thing is transferred from seller to buyer, and of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
nonpayment of the price is a negative resolutory condition. exclusively to the prospective buyer upon payment of full purchase price.
B. An executory contract- ownership does not pass until some future time (the fulfillment of some
condition, such as full payment of the purchase price) Contract of Sale – no reservation of ownership where the owner can unilaterally rescind the contract if one of
the party fails to fulfill its duty.
DISTINCTIONS
1. Interpretation of document denominated “Agreement of Purchase and Sale”

Executed Contract Executory Contract Ong vs. CA, G.R. No. 97347, July6, 1999

It is in the nature of a contract to sell.

Property ownership is conveyed
If buyer defaults, seller may sue for the price
Risk of loss is generally borne by the buyer
No property is conveyed
If buyer defaults, seller is only entitled to damages
Risk of loss is generally borne by the seller
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; while in
a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price. In a contract to sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of
the vendor to convey title from acquiring an obligatory force.

Spouses Robles, respondents in the case at bar bound themselves to deliver a deed of absolute sale and clean
title covering the two parcels of land upon full payment by the buyer of the purchase price of P2,000,000.00.
This promise to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase
price by the petitioner. Petitioner, however, failed to complete payment of the purchase price. The non-fulfillment
of the condition of full payment rendered the contract to sell ineffective and without force and effect. It must be
stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with
an obligation. Failure to pay, in this instance, is not even a breach but merely an event which prevents the
vendor's obligation to convey title from acquiring binding force. Hence, the agreement of the parties in the case
at bench may be set aside, but not because of a breach on the part of petitioner for failure to complete payment
of the purchase price. Rather, his failure to do so brought about a situation which prevented the obligation of
respondent spouses to convey title from acquiring an obligatory force.
2. Interpretation of document denominated “Receipt of Partial Payment”
Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996
FACTS: Defendants Coronels issued a document, receipt of down payment, in favor of Ramona. In the said
document, it was stipulated that the Coronels, upon receipt of the down payment in the amount of 50k (1.24M
total price) for their inherited house and lot, bind themselves to the effect that they will transfer, from their father,
the transfer certificate title to their names. After the TCT is under their name, they will execute immediately a
deed of absolute sale in favor of Ramona and she will pay the balance of 1.19M. The mother of Ramona,
Concepcion, paid the 50k as down payment. Thereafter, the Coronels transferred the said property in their names.
Coronels sold the property to Catalina for the amount of 1.58M after the latter paid a down payment of 300k. For
this reason, Coronels canceled and rescinded the contract with Ramona by depositing the down payment paid by
Concepcion in the bank in trust for Ramona Patricia Alcaraz.
Concepcion et al. filed a case against specific performance. A notice of lis pendens was annotated at the back of
the title. An adverse claim by Catalina was also annotated. The Coronels executed a deed of absolute sale in
favor of Catalina. Thus, a new title was issued in the name of Catalina.
Both trial court and CA ruled in favor of Concepcion. It ordered the specific performance of the agreement.
ISSUE: legal determination of the document, Receipt of Downpayment
SC RULED that when the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that
there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate
of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was
then willing and able to immediately pay the purchase price. This is a contract OF sale, SC affirmed the decision
of CA.
In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to
sell, ownership is not transferred upon delivery of the property but upon full payment of the purchase price. In
the former, the vendor has lost and cannot recover ownership until and unless the contract is resolved or
rescinded; whereas in the latter, 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.
CONTRACT TO SELL VS. CONDITIONAL SALE
Conditional Sale – upon happening of the condition, title is transferred. Seller cannot sell to another person.
Contract to sell – ownership is transferred upon creation of necessary documents.
Coronel vs CA
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 (cf. Homesite and Housing Corp. vs.
Court of Appeals, 133 SCRA 777 [1984]). 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.
Nabus vs. Pacson
Facts: The spouses Bate and Julie Nabus were the owners of parcels of land with a total area of 1,665 square
meters, situated in Pico, La Trinidad, Benguet, duly registered in their names under TCT No. T-9697 of the
Register of Deeds of the Province of Benguet. The property was mortgaged by the Spouses Nabus to the Philippine
National Bank (PNB), La Trinidad Branch, to secure a loan in the amount of P30,000.00.
On February 19, 1977, the Spouses Nabus executed a Deed of Conditional Sale 4 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,
which was duly notarized on February 21, 1977. Their contract had the following condition:
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;
THAT, it is mutually understood that in as much as there is a claim by other persons of the entire property of
which the portion subject of this Instrument is only a part, and that this claim is now the subject of a civil case
now pending before Branch III of the Court of First Instance of Baguio and Benguet, should the VENDOR herein
be defeated in the said civil action to the end that he is divested of title over the area subject of this Instrument,
then he hereby warrants that he shall return any and all monies paid by the VENDEE herein whether paid to the
PNB, La Trinidad, Benguet Branch, or directly received by herein VENDOR, all such monies to be returned upon
demand by the VENDEE;
THAT, a portion of the parcel of land subject of this instrument is presently in the possession of Mr. Marcos
Tacloy, and the VENDOR agrees to cooperate and assist in any manner possible in the ouster of said Mr. Marcos
Tacloy from said possession and occupation to the end that the VENDEE herein shall make use of said portion as
soon as is practicable;
Thereafter, respondents took possession of the subject property. They constructed an 80 by 32-feet building and
a steel-matting fence around the property to house their truck body-building shop which they called the "Emiliano
Trucking Body Builder and Auto Repair Shop."
On December 24, 1977, before the payment of the balance of the mortgage amount with PNB, Bate Nabus died.
On August 17, 1978, his surviving spouse, Julie Nabus, and their minor daughter, Michelle Nabus, executed a
Deed of Extra Judicial Settlement over the registered land covered by TCT No. 9697. On the basis of the said
document, TCT No. T-17718 8 was issued on February 17, 1984 in the names of Julie Nabus and Michelle Nabus.
During the last week of January 1984, Julie Nabus, accompanied by her second husband, 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. Elizabeth
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.
Getting suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet and asked for a
copy of the title of the land. She found that it was still in the name of Julie and Michelle Nabus
After a week, 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, represented by the former's mother as appointed guardian by a court
order dated October 29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero on March 5, 1984.
Issue: Whether the Deed of Conditional Sale was a contract to sell or a contract of sale.
Held: 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." 41 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." 42 The aforecited stipulation shows that the vendors reserved
title to the subject property until full payment of the purchase price.
As vendees given possession of the subject property, the ownership of which was still with the vendors, the
Pacsons should have protected their interest and inquired from Julie Nabus why she did not return and then
followed through with full payment of the purchase price and the execution of the deed of absolute sale. The
Spouses Pacson had the legal remedy of consigning their payment to the court; however, they did not do so. A
rumor that the property had been sold to Betty Tolero prompted them to check the veracity of the sale with the
Register of Deeds of the Province of Benguet. They found out that on March 5, 1984, Julie Nabus sold the same
property to Betty Tolero through a Deed of Absolute Sale, and new transfer certificates of title to the property
were issued to Tolero.
Unfortunately for the Spouses Pacson, 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. 43 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. 44 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. 45 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.
Arts. 1459 to 1465 – OBJECT
Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the
time it is delivered.
Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other of the
same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the
thing is capable of being made determinate without the necessity of a new or further agreement between the
parties.
Art. 1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale
of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The
sale of a vain hope or expectancy is void.
Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or
possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the
contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition
by the seller depends upon a contingency which may or may not happen.
Art. 1463. The sole owner of a thing may sell an undivided interest therein.
Art. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though
the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass,
and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer
becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the
number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought,
the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods
of the same kind and quality, unless a contrary intent appears. (n)
Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n)
OBJECT
 The object must be licit – not contrary to law, morals, good customs, public order or public policy, within
the commerce of man. If illicit, contract is void
 All rights which are not intransmissible or personal may also be the object of sale (i.e. right of usufruct)
 Services cannot be the object of a contract of sale
Test of Determinability
1. Capacity to Segregate
 2. No further agreement B. Determinate or Determinable - Undivided interest can be subject to sale. The buyer will become a co-
owner.
QUALITIES OF AN OBJECT
a) Before partition
1. Lawful b) In a mass of fungible goods.
2. Determinate or determinable
3. Existing, future or contingent Cases:
4. Transferability of ownership
1. Sale by co-heir of undivided portion of estate
A. Lawful
Vagilidad v. Vagilidad
The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is
delivered. (n) Facts:

 Object must be licit 4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died. Subsequently son of Zolio, Loreto sold to Gabino
 Vendor must have the right to transfer ownership at the time the object is delivered Vagilidad a portion of said lot as evidenced by the Deed of Absolute Sale executed by Loreto on 1986. After,
Zoilo’s children executed an Extrajudicial Settlement of Estate adjudicating the entire lot to Loreto in 1987. Gabino
Unlawful object: filed petition of surrender of lot against Loreto, claiming that he is owner pursuant to deed of Sale issued before
the extra judicial settlement.
 Future inheritance
 Homestead (sale within 5 year prohibitory period) However, there seemed to be an amicable settlement between them, and the case was sent to archives.

Manalapat v. CA
Facts: In 1976, a free patent was issued in Manlapat’s name. In 1954, before the subject lot was titled, he sold
a portion to Ricardo evidenced by a deed of sale. He conveyed another portion to Ricardo in 1981. Leon Banaag
(son-in-law of Manlapat) executed a mortgaged with the subject lot as the collateral. Heirs of Ricardo sought to
obtain the title from petitioners which was in the custody of RBSP, earlier surrendered as a consequence of the
mortgage.
SC: Five-year prohibition against alienation or encumbrances under the Public Land Act. Eduardo was issued a
title in 1976 on the basis of his free patent application. Such application implies the recognition of the public
dominion character of the land and, hence, the 5-year prohibition imposed by the PLA against alienation or
encumbrance of the land covered by a free patent or homestead should have been considered.
The deed of sale which was executed in 1981 is obviously covered by the proscription, the free patent having
been issued in 1976. However, petitioners may recover the portion sold since the prohibition was imposed in
favor of the free patent holder.
The sale executed 1954 was before the issuance of the patent in 1976. Apparently, Eduardo disposed of the
portion even before he thought of applying for a free patent. Where the sale or transfer took place before the
filing of the free patent application, whether by the vendor or the vendee, the prohibition should not be applied.
In such a situation, neither the prohibition nor the rationale therefore which is to keep in the family of the
patentee that portion of the public land which the government has gratuitously given him, by shielding him from
the temptation to dispose of his landholding, could be relevant. Precisely, he had disposed of his rights to the
lot even before the government could give the title to him.
Gabino paid real estate taxes on the land he bought from Loreto which he later sold to Wilfredo Vagilidad.
Likewise, a Deed of Absolute Sale was also made by Loreto in favor of Wilfredo for the same portion of lot.
Wlfredo mortgaged this property to obtain a loan. Gabino and his wife filed petition for reconveyance.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable
of being made determinate without the necessity of a new or further agreement between the parties. Art. 1349
states that the object of every contract must be determinate, as to its kind. The fact that the quantity is not
determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the
same, without the need of a new contract between the parties. Art. 1460 defines that a thing is determinate
when it is particularly designated or physically segregated from all others of the same class. The property sold
by Loreto to Gabino was determinable.
A co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and
substitute another person for its enjoyment. The subject parcel, being an inherited property, is subject to the
rules of co-ownership under the Civil Code. Co-ownership is the right of common dominion which two or more
persons have in a spiritual part of a thing, not materially or physically divided. Before the partition of the property
held in common, no individual or co-owner can claim title to any definite portion thereof. All that the co-owner
has is an ideal or abstract quota or proportionate share in the entire property. LORETO sold the subject property
to GABINO as a co-owner. LORETO had a right, even before the partition to transfer in whole or in part his
undivided interest in the lot even without the consent of his co-heirs. This right is absolute. Thus, what GABINO
obtained by virtue of the sale on were the same rights as the vendor LORETO had as co-owner, in an ideal share
equivalent to the consideration given under their transaction. Consequently, when LORETO purportedly sold to
WILFREDO the same portion of the lot, he was no longer the owner said lot. Based on the principle that "no one
can give what he does not have," LORETO could not have validly sold to WILFREDO what he no longer had.

The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was forged in December 2. Effect of agreement where the exact number of palay to be sold was not fixed.
1981 a few months past the period of prohibition.
National Grains Authority v. IAC
Facts: Leon Soriano submitted the documents required by the NFA for pre-qualifying as a seller. These were
processed and he was given a quota of 2,640 cavans of palay. On August 1979, Soriano delivered 630 cavans of
palay. The palay delivered were not rebagged, classified and weighed. When Soriano demanded payment, he
was informed that it was held in abeyance since Mr. Cabal was still investigating on an information that Soriano
was not a bona fide farmer and the palay delivered was not produced from his farmland but was taken from the
warehouse of a rice trader, Ben de Guzman. Petitioner wrote Soriano advising him to withdraw the 630 cavans.
Instead of withdrawing, Soriano insisted that the palay grains delivered be paid. NFA was ordered to pay Soriano.
Present case involves a perfected contract of sale. Soriano initially offered to sell palay grains produced in his
farmland to NFA. When the latter accepted the offer by noting in Soriano’s Farmer’s Information Sheet a quota
of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being
the palay grains produced in Soriano’s farmland and the NFA was to pay the same depending upon its quality.
The contention that – since the delivery were not rebagged, classified and weighed in accordance with the palay
procurement program of NFA, there was no acceptance of the offer thus – this is a clear case of an unaccepted
offer to sell, is untenable.
Quantity being indeterminate does not affect perfection of contract; No need to create new contract. The fact
that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection
of the contract. In the present case, there was no need for NFA and Soriano to enter into a new contract to
determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as
it does not exceed 2,640 cavans. (It did not need a new contract to make 630 cavans a determinate thing).
Sale a consensual contract; Acceptance is on the offer and not the goods delivered. Sale is a consensual contract,
“there is perfection when there is consent upon the subject matter and price, even if neither is delivered.” (Obana
vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560). The acceptance referred to which determines consent
is the acceptance of the offer of one party by the other and not of the goods delivered.
Compliance of mutual obligations once a contract of sale is perfected. 
From the moment the contract of sale is
perfected, it is incumbent upon the parties to comply with their mutual obligations or “the parties may reciprocally
demand performance” thereof. (Article 1475, Civil Code, 2nd par.)
C. Existing, Future, or contingent
Case:
1. Sale of Future Inheritance
Tanedo vs Ca
Facts: On October 20, 1962, Lazaro Tañedo executed a notarized deed of absolute sale in favor of his eldest
brother, Ricardo Tañedo, and the latter’s wife, Teresita Barera, private respondents herein, whereby he conveyed
to the latter in consideration of P1,500.00, “one hectare of whatever share I shall have over Lot No. 191 of the
cadastral survey of Gerona, Province of Tarlac and covered by Title T-l3829 of the Register of Deeds of Tarlac,”
the said property being his “future inheritance” from his parents (Exh. 1). Upon the death of his father Matias,
Lazaro executed an “Affidavit of Conformity” dated February 28, 1980 (Exh. 3) to “re-affirm, respect. acknowledge
and validate the sale I made in 1962.” On January 13, 1981, Lazaro executed another notarized deed of sale in
favor of private respondents covering his “undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 x
x (Exh. 4). He acknowledged therein his receipt of P 10,000.00 as consideration therefor. In February 1981,
Ricardo learned that Lazaro sold the same property to his children, petitioners herein, through a deed of sale
dated December 29, 1980 (Exh. E). On June 7, 1982, private respondents recorded the Deed of Sale (Exh. 4) in
their favor in the Registry of Deeds and the corresponding entry was made in Transfer Certificate of Title No.
166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale executed by
Lazaro in favor of private respondents covering the property inherited by Lazaro from his father.
Issue: Is a sale of future inheritance valid?
Held: No contract may be entered into upon a future inheritance except in cases expressly authorized by law.”
Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the creator of
any obligation between the parties.
Hence, the “affidavit of conformity” dated February 28, 1980, insofar as it sought to validate or ratify the 1962
sale, is also useless and, in the words of the respondent Court, “suffers from the same infirmity.” Even private
respondents in their memorandum concede this.
D. Transferability of Ownership
Ownership
1. It need not exist at the perfection of the contract. Required at the time of delivery
2. Subsequent acquisition of title by a vendor w/out title validates the sale
3. Acquisition of title by the vendee may depend upon a contingency (right of redemption)
Notes:
• The seller must have the right to transfer the ownership of the thing or right sold to the buyer at the time
of delivery and not at the time of the making of the contract.
• Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what does not have.
• When ownership is required – At the time of sale but ownership may not be w/ the seller in case of future
things.
Cases:
1. Sale by mortgagee of land not proper subject of mortgage
Cavite Development Bank v. Lim, 324 scra 346
Facts: Rodolfo Guansing obtained a fraudulent title by executing an Extra-Judicial Settlement of the Estate With
Waiver where he made it appear that he and Perfecto Guansing were the only surviving heirs entitled to the
property, and that Perfecto had waived all his rights thereto. Consequently he acquired title and used this to
acquire a loan. CDB foreclosed the mortgage and granted him the period of redemption, which he did not exercise.
It is not required that, at the perfection stage, the seller be the owner of the thing sold or even that such subject
matter of the sale exists at that point in time. Thus, under Art. 1434 of the Civil Code, when a person sells or
alienates a thing which, at that time, was not his, but later acquires title thereto, such title passes by operation
of law to the buyer or grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of
the Civil Code. However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is required
that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his obligation to
transfer ownership to the buyer. It is the consummation stage where the principle of nemo dat quod non habet
applies. In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolgo Guansing must,
therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be sure, CDB never
acquired a valid title to the property because the foreclosure sale, by virtue of which the property had awarded
to CDB as highest bidder, is likewise void since the mortgagor was not the owner of the property foreclosed.
CDB cannot be considered a mortgagee in good faith. While petitioners are not expected to conduct an exhaustive
investigation on the history of the mortgagor's title, CDB cannot be excused from the duty of exercising the due
diligence required of banking institutions in ascertaining the validity of the title.
That after the payment of the 10% “option money”, the Offer to Purchase provides for the payment only of the
balance of the purchase price, implying that the "option money" forms part of the purchase price. This is precisely
the result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case
actually entered into a contract of sale, partially consummated as to the payment of the price.
2. Conveyance of privilege to purchase land before it is awarded to the tenant or occupant.
Hermosilla v. Remoquillo
Facts: Apolinario Hermosilla was occupying a lot in San Pedro Tunasan Homesite, a land of the Republic. He
divided the lot into 2. The 1st portion was given to his son Salvador and the other(questioned lot) to his grandson
Jaime Remoquillo through a Deed of Assignment. A law was passed prohibiting the transfer of ownership of the
said lot. Salvador and Jaime after made a Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar
(Kasunduan) whereby Jaime transferred ownership of the 65 square meters (the questioned property) in favor
of Salvador. NHA awarded Jaime title. Salvador and his heirs questioned the title stating they have their house
and in actual possession of the questioned lot.
When the Kasunduan was executed in 1972 by Jaime in favor of Salvador — petitioners' predecessor-in-interest
— Lot 19, of which the questioned property forms part, was still owned by the Republic. Nemo dat quod non
habet. Nobody can give what he does not possess. Jaime could not thus have transferred anything to Salvador
via the Kasunduan.
The transfer became one in violation of law and therefore void ab initio. Hence, petitioners acquired no right over
the lot from a Void Kasunduan, for no rights are created. It is generally considered that as between the parties
to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy.
Since the property was previously a public land, petitioners have no personality to impute violation of the law. If
the title was in fact fraudulently obtained, it is the State which should file the suit to recover the property through
the Office of the Solicitor General. Consequently, Jaime’s ownership was valid not being contrary to any law and
since there was no pending other application yet. That at the time he applied for title, he was recogned as the
actual applicant / occupant.
Heirs of Arturo Reyes v. Beltran G.R. No. 176474
Facts: A big parcel of lot was originally owned by Spouses Laquian. When the Spouses died, the property was
left with the wife’s siblings. Through an "Extrajudicial Settlement of the Estate of the Deceased Constancia R.
Socco (wife)," the parcel of land was partitioned into 3 lots. Before the partition, Miguel Socco, 1 of the heirs sold
his share to Arturo Reyes as evidenced by the Contract to Sell stating that he is to inherit a particular portion.
But upon partition, the said portion sold was adjudicated to respondent, Elena Socco – Beltran, and not to Miguel
Socco.
SC: Article 1459 of the Civil Code on contracts of sale, “The thing must be licit and the vendor must have a right
to transfer ownership thereof at the time it is delivered.” The law specifically requires that the vendor must have
ownership of the property at the time it is delivered. Petitioners claim that the property was constructively
delivered to them in 1954 by virtue of the Contract to Sell. However, as already pointed out by this Court, it was
explicit in the Contract itself that, at the time it was executed, Miguel R. Socco was not yet the owner of the
property and was only expecting to inherit it. Hence, there was no valid sale from which ownership of the subject
property could have transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of the subject
property, Arturo Reyes also could not have conveyed the same to his heirs, herein petitioners.
The law specifically requires that the vendor must have ownership of the property at the time it is delivered.
Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was stated in the Contract
that the vendor was not yet the owner of the subject property and was merely expecting to inherit the same. It
was also declared that conveyance of the subject to the buyer was a conditional sale. It is, therefore, apparent
that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that Miguel Socco
would actually inherit and become the owner of the said property. Absent such occurrence, Miguel R. Socco never
acquired ownership of the subject property which he could validly transfer to Arturo Reyes. Without acquiring
ownership of the subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein
petitioners.
Assignment was done prior to the application.
Arts. 1469 to 1474 – PRICE
Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to
another thing certain, or that the determination thereof be left to the judgment of a special person or persons.
Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by mistake, the courts may fix the price.
Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the
buyer, as the case may be. (1447a)
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation or some other act or contract. (n)
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation,
or some other act or contract. (n)
Art. 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the
price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or
when an amount is fixed above or below the price on such day, or in such exchange or market, provided said
amount be certain. (1448)
Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However,
if the price fixed by one of the parties is accepted by the other, the sale is perfected. (1449a)
Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other
manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and
appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a question of
fact dependent on the circumstances of each particular case. (n)
PRICE
Price – sum certain in money or its equivalent.
Case:
1. General principles in the agreement as to price
Boston Bank of the Philippines v. Manalo, G. R. No. 158149, February 9, 2006
FACTS: Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA rulings.
It maintains that, as held by the CA, the records do not reflect any schedule of payment of the 80% balance of
the purchase price, or P278,448.00. Petitioner insists that unless the parties had agreed on the manner of
payment of the principal amount, including the other terms and conditions of the contract, there would be no
existing contract of sale or contract to sell.47
Issue: Whether petitioner, as seller, forged a perfect contract to sell over a real property to respondents, as
buyer.
HELD: We agree with petitioner’s contention that, for a perfected contract of sale or contract to sell to exist in
law, there must be an agreement of the parties, not only on the price of the property sold, but also on the manner
the price is to be paid by the vendee.
A definite agreement as to the price is an essential element of a binding agreement to sell personal or real
property because it seriously affects the rights and obligations of the parties. Price is an essential element in the
formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision
of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other,
gives rise to a perfected sale.57
It is not enough for the parties to agree on the price of the property. The parties must also agree on the manner
of payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to
sell. This is so because the agreement as to the manner of payment goes into the price, such that a disagreement
on the manner of payment is tantamount to a failure to agree on the price.58
In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the
amount of downpayment. The parties must, likewise, agree on the manner of payment of the balance of the
purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a downpayment
or portion thereof, such payment cannot be considered as sufficient proof of the perfection of any purchase and
sale between the parties.
We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the records, of
the schedule of payment of the balance of the purchase price on the property amounting to P278,448.00
REQUISITES OF PRICE
1. The price must be real
2. In money or its equivalent
3. Certain or ascertainable (determinable)
1. The price must be real (1471)
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation,
or some other act or contract.
 Price is real – when at the perfection of the sale, there is legal intention on the part of the buyer to
pay the price and the legal expectation on the part of the seller to receive such price as the value of
the subject matter he obligates himself to deliver.
 Price is false – the contract is valid but subject to reformation to indicate the real price upon which the
minds of the parties have met.
Cases:
1. Effect if price is simulated- produces no effect.
Cruzado v. Bustos, G. R. No. 10244, February 29, 1916
FACTS: Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended on
September 25, 1913, in which he alleged that plaintiff was the owner of certain rural property situated in the
barrio of Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga, containing an area of 65 balitas
and bounded as set forth in the complaint; that Estafania Bustos, during her lifetime, and now the administrator
of her estate, together with the other defendant, Manuel Escaler, had, since the year 1906 up to the present,
been detaining the said parcel of land, and had refused to deliver the possession thereof to plaintiff and to
recognize his ownership of the same, notwithstanding the repeated demands made upon them; that by such
detention, the plaintiff had suffered losses and damages to the amount of P3,500. He therefore asked for
judgment declaring plaintiff to be the owner of the said parcel of land and ordering defendants to return it to
plaintiff and to pay the latter P3,500 for losses and damages, and the costs.
Issue: W/N the deed of sale of 65 balitas of land situated in the municipality of Bacolor, Pampanga, executed by
Estefania Bustos, with the assistance of her husband Bernardino Dizon, in favor of Agapito Geronimo Cruzado,
for the sum of P2,200, was simulated.
HELD: The simulation of the said sale was effected by making a pretended contract which bore the appearance
of truth, when really and truly there was no contract, because the contracting parties did not in fact intend to
execute one, but only to formulate a sale in such a manner that, for the particular purposes sought by Bustos
and Cruzado, it would appear to have been celebrated solely that Cruzado might hold his office of procurador on
the strength of the security afforded by the value of the land feignedly sold.
This action is of course improper, not only because the sale was simulated, but also because it was not
consummated. The price of the land was not paid nor did the vendee take possession of the property from the
7th of September, 1875, when the said sale was feigned, until the time of his death; nor did any of his successors,
nor the plaintiff himself until the date of his claim, enter into possession of the land.
That the contract of purchase and sale, as consensual, is perfected by consent as to the price and the thing and
is consummated by the reciprocal delivery of the one and the other, the full ownership of the thing sold being
conveyed to the vendee, from which moment the rights of action derived from this right may be exercised.
It is, then, of the utmost importance to examine whether in the said sale the purchase price was paid and whether
the vendee took possession of the land supposed to have been sold.
2. Effect if there is no consideration – null and void (non-existence of the contract)
Doles v. Angeles, G. R. No. 149353, June 26, 2006
FACTS: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific
Performance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-82716.
Respondent alleged that petitioner was indebted to the former in the concept of a personal loan amounting to
P405,430.00 representing the principal amount and interest; that on October 5, 1996, by virtue of a "Deed of
Absolute Sale", petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements
thereon, with an area of 42 square meters, covered by Transfer Certificate of Title No. 382532,4 and located at
a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal
loan with respondent; that this property was mortgaged to National Home Mortgage Finance Corporation
(NHMFC) to secure petitioner’s loan in the sum of P337,050.00 with that entity.
WON: The contract of sale on the parcel of land was executed for a cause.
HELD: Since the sale is predicated on that loan, then the sale is void for lack of consideration.
In view of these anomalies, the Court cannot entertain the possibility that respondent agreed to assume the
balance of the mortgage loan which petitioner allegedly owed to the NHMFC, especially since the record is bereft
of any factual finding that petitioner was, in the first place, endowed with any ownership rights to validly mortgage
and convey the property. As the complainant who initiated the case, respondent bears the burden of proving the
basis of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the sale
void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of whether
duress or intimidation had been foisted upon petitioner upon the execution of the sale.2
2. In money or its equivalent (1458)
Torres vs CA
Facts: Petitioners and respondent entered into a joint venture agreement for the development of a parcel land
located at Lapu-Lapu City island of Mactan into a subdivision. Pursuant to the contract, petitioners executed a
deed of sale covering the said parcel of land in favor of the respondent, who then had it registered in his name.
Thereafter, respondent mortgaged the property in the bank, and according to the joint agreement, the money
obtained amounting to P40,000.00 was to be used for the development of the subdivision. However, the project
did not push through, and the land was subsequently foreclosed by the bank. Because of this, petitioners filed a
civil case before the Regional Trial Court of Cebu City, which was later dismissed by the trial court. On appeal,
the Court of Appeals affirmed the decision of the trial court. The appellate court held that the petitioner and
respondent had formed a partnership for the development of the subdivision. Thus, they must bear the loss
suffered by the partnership in the same proportion as their share in the profits stipulated in the contract.
Aggrieved by the decision, petitioner filed the instant petition contending that the Court of Appeals erred in
concluding that the transaction between the petitioners and respondent was that of a joint venture/partnership.
SC: The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits
from the subdivision project. Its first stipulation states that petitioners did not actually receive payment for the
parcel of land sold to respondent. Consideration, more properly denominated as cause, can take different forms,
such as the prestation or promise of a thing or service by another. In this case, the cause of the contract of sale
consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project,
for which the land was intended to be used. As explained by the trial court, "the land was in effect given to the
partnership as [petitioner's] participation therein. . . . There was therefore a consideration for the sale, the
[petitioners] acting in the expectation that, should the venture come into fruition, they [would] get sixty percent
of the net profits."
¬-expectations of profits from the subdivision projects is a valid form of consideration.
-it is sufficient if it can be determined by the stipulations of the contract made by the parties thereto/ by reference
to an agreement incorporated in the contract.
3. Certain or ascertainable (determinable)
A. How determined?
 By a third person
 By the courts
 By reference to a definite day, etc.
 By reference to invoices
 By application of known facts
1. By a third person – If the third person is unable or unwilling to fix the price, the contract is inefficacious
unless the parties come to an agreement
Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913
(CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE RELATED TO SALES NOT CLEARLY
ESTABLISHED IN THE CASE)
FACTS: The La Insular cigar and cigarette factory is a joint account association with a nominal capital of P865,000,
the plaintiff’s share being P20,000, or 4/173 of the whole. On March 14, 1910, the plaintiff’s attorneys wrote the
defendant’s local representative a letter offering to sell to the defendant plaintiff’s participation in the factory.
The result of the correspondence between the parties and their representatives was that Exhibit G was duly
executed on May 3, 1910. In accordance with the terms of this exhibit a committee of appraisers was appointed
to ascertain and fix the actual value of La Insular. The committee rendered its report on November 14, 1910,
fixing the net value at P4,428,194.44. Of this amount 4/173 part represented the plaintiffs’s share on his P20,000
of the nominal capital. In Exhibit J which was executed on November 22, 1910, the plaintiff acknowledged to
have received from the defendant that amount.
Subsequently to the execution of Exhibit J, demand was made by the plaintiff upon the defendant for his share
of the profits from June 30, 1909, to November 22, 1910. This demand was refused and thereupon this action
was instituted to recover said profits. Upon the evidence submitted at the hearing, the court below held: (1) That
the agreement of May 3, 1910, was by its terms a contract to sell in the future and did not pass title and (2) that
the sale of plaintiff’s interest did not include the profits in question. Judgment was rendered accordingly, with
interest and cost. The defendant appealed.
SC: It was the appraisers who were appointed to ascertain and fix the total net value of the factory for the
purpose of determining the true present value of the interest. The appraiser was the one who determined the
total net value of the shares of the company and thereafter that of Bareto’s share.
2. By the Courts (1469, par. 3) if there is bad faith or mistake of the third party fixing the price
3. By reference to a definite day, a particular exchange or market (1472)
4. By reference to invoices
McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904
FACTS: For the purpose of carrying into effect the said contract of sale entered into with the other party hereto,
said Francisco Gonzalez y de la Fuente and Don Antonio la Puente y Arce, in the name and on behalf of the
mercantile partnership denominated R. Aenlle & Co., by virtue of the powers conferred upon them and in
compliance with the instructions given them by Don Matias Saenz de Vizmanos y Lecaros, the manager of the
said partnership, solemnly declare that they sell, absolutely and in fee simple, to E. C. McCullough, the tobacco
and cigarette factory known as "La Maria Cristina," located at No. 36 Calle Echague, Plaza de Goiti, Santa Cruz
district, this city, said sale including the trade-mark "La Maria Cristina," which was been duly registered, the stock
of tobacco in leaf and manufacture, machinery, labels, wrappers, furniture, fixtures, and everything else belonging
to the said factory, as shown in the inventory to be drawn up for the purpose of making formal delivery of the
said property.
This sum is subject to modification, in accordance with the result shown by the inventory to be drawn up. In this
inventory the value of each individual piece of furniture will be fixed at 10 per cent below the price shown in the
partnership inventory. The machinery and cost of installing the same will also be fixed at 10 per cent below its
invoice price. The value of the tobacco, both in leaf and in process of manufacture, boxes, labels, wrappers,
cigars, cigarettes, and paper mouthpieces for cigarettes will be fixed at the invoice price. The value of tobacco
made up into cigars will be fixed in accordance with the price list of the partnership, less 20 per cent discount.
The cigars will be inventoried at the prices in the same list, less a discount of 35 per cent. The P20,000 mentioned
as the value of the trade-mark will, however, remain unchanged.
In December, 1901, the plaintiff, with others, organized a company, to which the plaintiff sold all the tobacco
bought by him from the defendant. The purchaser, the new company, on examining these two lots, rejected
them because the tobacco was not of the quality indicated in the inventory. Thereupon the plaintiff, claiming that
the tobacco in these two lots was worthless, brought this action against the defendant to recover what he paid.
WON: There was a perfected contract of sale entered into by the parties on August 27,1901.
HELD: The document of August 27 was a completed contract of sale. The articles which were the subject of the
sale were definitely and finally agreed upon. The appellee agreed to buy, among other things, all of the leaf
tobacco in the factory. This was sufficient description of the thing sold. The price for each article was fixed. It is
true that the price of this tobacco, for example, was not stated in dollars and cents in the contract. But by its
terms the appellee agreed to pay therefor the amount named in the invoices then in existence. The price could
be made certain by a mere reference to those invoices. By the instrument of August 27 the contract was perfected
and thereafter each party could compel the other to fulfill it. By its terms the appellee was bound to take all the
leaf tobacco then belonging to the factory and to pay therefor the prices named in the invoices. This obligation
was absolute and did not depend at all upon the quality of the tobacco or its value. The appellee did not, in this
contract, reserve the right to reject the tobacco if it were not of a specific crop. He did not buy tobacco of a
particular kind, class, or quality. He bought all the tobacco which the appellant owned and agreed to pay for it
what the defendant had paid for it. The plaintiff testified that this was the express agreement.
5. By reference to the application of known factors, e.g. “in proportion to variations in calories and ash
content of coal”2.)
B. Effect of indeterminability – contract is inefficacious
Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927
(Sale of Improvements introduced in Hacienda)
FACTS: This action was instituted in the Court of First Instance of Occidental Negros by Zacarias Robles against
Lizarraga Hermanos, a mercantile partnership organized under the laws of the Philippine Islands, for the purpose
of recovering compensation for improvements made by the plaintiff upon the hacienda "Nahalinan" and the value
of implements and farming equipment supplied to the hacienda by the plaintiff, as well as damages for breach of
contract. Upon hearing the cause the trial court gave judgment for the plaintiff to recover of the defendant the
sum of P14,194.42, with costs. From this judgment the defendant appealed.
WON: The petitioner is allowed to recover the value of the improvements.
HELD: In the case before us the deed of conveyance purports to transfer to the defendant only such interests in
certain properties as had come to the conveyors by inheritance. Nothing is said concerning the rights in the
hacienda which the plaintiff had acquired by lease or concerning the things that he had placed thereon by way
of improvement or had acquired by purchase. The verbal contract which the plaintiff has established in this case
is therefore clearly independent of the main contract of conveyance, and evidence of such verbal contract is
admissible under the doctrine above stated. The rule that a preliminary or contemporaneous oral agreement is
not admissible to vary a written contract appears to have more particular reference to the obligation expressed
in the written agreement, and the rule had never been interpreted as being applicable to matters of consideration
or inducement. In the case before us the written contract is complete in itself; the oral agreement is also complete
in itself, and it is a collateral to the written contract, notwithstanding the fact that it deals with related matters.
A contract for the sale of goods, chattels or things in action, at a price of not less than P100, shall be unenforceable
unless the contract, or some note or memorandum thereof shall be in writing and subscribed by the party charged,
or by his agent; and it is insisted that the court erred in admitting proof of a verbal contract over the objection
of the defendant's attorney. But it will be noted that the same subsection contains a qualification, which is stated
in these words, "unless the buyer accept and receive part of such goods and chattels." In the case before us the
trial court found that the personal property, consisting of farming implements and other movables placed on the and Rubiato was to remain in possession of the land as lessee. One year expired and Aguilar filed a case to
farm by the plaintiff, have been utilized by the defendant in the cultivation of the hacienda, and that the defendant consolidate ownership over the lands.
is benefiting by those things.
Issue: Whether the contract was of sale or loan.
We are of the opinion that the stipulation with respect to the appraisal of the property did not create a suspensive
condition. The true sense of the contract evidently was that the defendant would take over the movables and the Held: It was a contract of loan. In addition to the evidence, there is one very cogent reason which impels us to
improvements at an appraised valuation, and the defendant obligated itself to promote the appraisal in good the conclusion that Rubiato is only responsible to the plaintiff for a loan. It is — that the inadequacy of the price
faith. As the defendant partially frustrated the appraisal, it violated a term of the contract and made itself liable which Vila obtained for the eight parcels of land belonging to Rubiato is so great that the minds revolts at it.
for the true value of the things contracted about, as such value may be established in the usual course of proof.
Furthermore, it must occur to any one, as the trial judge pointed out, that an unjust enrichment of the defendant Xxx The members of this court after most particular and cautious consideration, having in view all the facts and
would result from allowing it to appropriate the movables without compensating the plaintiff thereof. all the naturals tendencies of mankind, consider that Rubiato is only responsible to the plaintiff for the loan of
P800.
The fourth assignment of error is concerned with the improvements. Attention is here directed to the fact that
the improvements placed on the hacienda by the plaintiff became a part of the realty and as such passed to the D. Effect of Failure of Consideration
defendant by virtue of the transfer effected by the three owner in the deed of conveyance (Exhibit B.). It is
therefore insisted that, the defendant having thus acquired the improvements, the plaintiff should not be Sps. Buenaventura v. CA
permitted to recover their value again from the defendant. This criticism misses the point. There can be no doubt
Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of petitioners. Petitioners assail the sale of
that the defendant acquired the fixed improvements when it acquired the land, but the question is whether the
several lands by their parents to their other siblings (see p. 265 for complete list of sales made) for being void
defendant is obligated to indemnify the plaintiff for his outlay in making the improvements. It was upon the
ab initio based on the following grounds:
consideration of the defendant's promise so to indemnify the plaintiff that the latter agreed to surrender the lease
nearly two no doubt as to the validity of the promise made under these circumstances to the plaintiff.
1. No actual valid consideration
2. Properties are more than 3x more valuable than the measly purchase price (purchase price was grossly
C. Effect of inadequacy of price
inadequate)
Inadequacy does not affect the contract, but may show vice of consent (1470). Refer to inadequacy of cause in 3. Deeds of sale do not reflect & express the true intent of the parties
general, Art. 1355. 4. Deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs of their legitime.

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the Defense of the respondents:
consent, or that the parties really intended a donation or some other act or contract. (The offended party may
1. No cause of action, requisite standing & interest
invoke Art. 19 of the NCC – abuse of rights principle)
2. Sales were w/sufficient considerations & made by their parents voluntarily in good faith & w/full
Askay v. Cosolan knowledge of the consequences
3. Certificates of title were issued w/factual & legal basis.
Facts: Askay obtained a title to the Mineral Claim which he allegedly sold to Cosalan. It was alleged that there is
inadequacy of the consideration for transfer which, according to the deed of conveyance, and to the oral Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled in favor of the respondents & dismissed the
testimony, consisted of P107.00 in cash, a bill fold, one sheet, one cow and two carabaos. complaint.

Issue: WON the sale is valid. 1. The right of the compulsory heirs to a legitime is contingent & it only commences from the moment of
the death of the decedent (CC Art. 777). The value of the property left at the death of the testator is
Held: YES. The fact that the bargain is a hard one, coupled with mere inadequacy of price when both parties are the basis for determining the legitime (Art. 908). Plaintiffs cannot claim an impairment of their legitime
in a position to form an independent judgment concerning the transaction, is not sufficient ground for the since their parents are still alive.
cancellation of a contract. 2. Deeds of Sale were executed for valuable consideration.

Aguilar v. Rubiato CA affirmed Trial Court decision. In addition to the grounds stated by the trial court, CA also mentioned that:

Facts: Rubiato was the owner of parcels of land and was desirous of obtaining a loan. He thereafter signed a 1. While still alive, parents are free to dispose of their properties provided such is not done in fraud of
power of attorney in favor of a certain Vila to secure a loan and to execute any writing for the mortgage of land. creditors.
Vila pursuant to the power of attorney then sold the land to Aguilar, with the right of repurchase within one year 2. Petitioners are not parties in interest since they’re not parties to the deeds of sale nor are they creditors
of their parents.
Issues:
1. WON petitioners have a legal interest over the properties subject of the Deeds of Sale. – NO.
The complaint betrays their motive for filing the case. They are interested in obtaining the properties by hereditary
succession but they have failed to show any legal right to these properties.
Real party-in-interest is one who is either benefited or injured by the judgment of the party entitled to the avails
of the suit. This includes parties to the agreement or are bound either principally/subsidiarily. Parties must have
a present substantial interest & not merely expectancy/future contingent subordinate or consequential interest.
In this case, the petitioners only have an inchoate rt w/c vests only upon the death of their parents. Besides, sale
of the lots to their siblings does not affect the value of their parents’ estate since the lots are replaced with cash
of equivalent value.
2. WON the deeds of sale are void for lack of consideration. – NO.
A contract of sale is not a real contract but a consensual contract. It’s binding & valid upon the meeting of the
minds as to the price regardless of the manner of payment or breach of such. It’s still valid even if the real price
is not stated in the contract, making it subject to reformation. But if the price is simulated, there is no meeting
of the minds, thus the contract is void (CC Art. 1471).
Act of payment of the price does not determine the validity of a contract of sale. Failure to pay the consideration
is different from lack of consideration. The former results in a rt to demand fulfillment or cancellation of the
contract while the latter prevents the existence of a valid contract.
Petitioners failed to show that the prices in the deeds of sale were simulated. They don’t even know the financial
capacity of their siblings to buy these lots. Respondents’ minds met as to the purchase price w/c was stated in
the deeds of sale & the buyer siblings have paid the price to their parents.
3. WON the Deeds of Sale are void for gross inadequacy of the price. – NO.
CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY OF CAUSE shall not invalidate a contract,
unless there has been fraud, mistake or undue influence.
CC Art. 1470: Gross inadequacy of price doesn’t 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 instance in the aforementioned provisions that would invalidate the deeds of sale.
There is no requirement that the price be equal to the exact value of the property on sale. It only matters that
all respondents believed that they received the commutative value of what they gave.
Vales vs. Villa: Courts cannot be guardians of people who are not legally incompetent. Courts operate not because
a person has been defeated/overcome by another, but because he has been defeated or overcome ILEGALLY.
There should be a violation of the law, commission of what the law knows as an actionable wrong, before the
courts are authorized to lay hold of the situation & remedy it.
Effect of failure of consideration
Failure of consideration is different from the lack of consideration, the former results in a right to demand the
fulfillment/ cancellation of the obligation under the existing valid contract. This is different from lack of
consideration w/c prevents the existence of a valid contract.
EARNEST MONEY
Art. 1482. 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
a. It is considered part of the price, unless the contract is otherwise
b. It is proof of perfection of the contract
Earnest money – it is something of value that the buyer was really in earnest and given after the perfection of
the contract. It is part of the purchase price.
Option money- distinct consideration.
Oesmer v. Paraiso Devt Corp
Facts: Petitioners in this case are brothers and sisters and the co-owners of undivided shared is parcels of land
originally owned by their parents. One the petitioners, Ernesto, met with the President of Paraiso for purpose of
brokering the sale of petitioners’ properties to respondent corp. A contract to sell was the executed, signed by
the siblings except Adolfo and Jesus. An amount of P100,000 was also given as option money. Later however,
petitioners informed PAraiso of their intention to rescind the Contract to sell and to return the amount of P100,000
paid by the corporation. Their contention was that the contract to sell was void because the signatures made by
the siblings were not for consent to sell the property, assuming the signatures indicate consent, the contract was
subject to a suspensive condition which is the approval of the sale by all the co-owners which did not occur
because two of the siblings did not approve of the sale; lastly, that it is void for it is a unilateral promise to sell
without consideration distinct from price.
Held: As to the last contention, the court ruled that the contract to sell is not a unilateral promise to sell:
In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was referred to as "option
money." However, a careful examination of the words used in the contract indicates that the money is not option
money but earnest money. "Earnest money" and "option money" are not the same but distinguished thus: (a)
earnest money is part of the purchase price, while option money is the money given as a distinct consideration
for an option contract; (b) earnest money is given only where there is already a sale, while option money applies
to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while
when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on
the terms of the option.20
The sum of P100,000.00 was part of the purchase price. Although the same was denominated as "option money,"
it is actually in the nature of earnest money or down payment when considered with the other terms of the
contract. Doubtless, the agreement is not a mere unilateral promise to sell, but, indeed, it is a Contract to Sell as
both the trial court and the appellate court declared in their Decisions.
Manila Metal Container Corporation v. PNB
Facts: Petitioner was the owner of a parcel of land and to be able to secure a loan from PNB, petitioner executed
a real party mortgage over the land. For its failure to pay, PNB foreclose the mortgaged and sold at public auction
for which PNB was the winning bidder, with a one year period of redemption by the petitioner. Petitioner
requested that there be an extension of time to redeem the property and it allowed to repurchase the property
on installment. Meanwhile, the Special Assets Management Department had prepared a statement of account of
the petitioner’s obligation to which amounted to 1.5M. petitioner thereafter remitted thte amount of 800,000 as
deposit to repurchase the property. When SAMD recommended to the management of the PNB that petitioner
be allowed to repurchase the property at 1.5M, the management rejected and suggested that the property be
purchased at 2.7M which was later reduced to 1.9M. But petitioner refused.
Petitioner now filed a case for delivery of title, annulment of mortgage and specific performance with damages.
It was its contention that it already accepted the offer of SAMD to sell the property at 1.5M, hence, PNB could
no longer unilaterally withdraw its offer to sell the property. Its acceptance of the offer resulted in a perfected
contract of sale.
Respondent contended that the parties never graduated for the negotiation stage – all that transpires was an
exchange of proposal and counter-proposals and nothing more. There was still no agreement as to the amount
and the manner of payment. The account made by SAMD cannot be classified as counter-offer because it was
merely recital of facts of the obligations of petitioners.
Issue: WON the P800,000 deposited is an earnest money.
Held: NO. The P800,000 could not be considered as an earnest money because an earnest money forms part of
the purchase price. In this case, it did not. The P800,000 was merely a deposit that was accepted by PNB on the
condition that the purchase price is subject to the approval of the PNB Board.
Note: absence of proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest
money cannot establish the existence of a perfected contract of sale.
Serrano v Caguiat G.R. No. 139173
Facts: Caguiat offered to buy the lot owned by spouses Serrano. Respondent gave P100K as partial payment, in
turn, petitioners gave a receipt with a statement that respondent promised to pay the balance of the purchase
price. Respondents were leaving for abroad and sought to cancel the transaction. Petitioners contend that there
is no perfected contract as there was no clear agreement between the parties as to the amount of consideration.
SC: In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by
respondent to petitioners (Art. 1482). We are not convinced.
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.
As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place.
Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.
Arts. 1475 to 1488 – RULES
I. RULES IN ORDINARY SALES
A. Form
B. Perfection
C. Expenses
FORM
General Rule: Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a
contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth,
or may be inferred from the conduct of the parties.
C. Written agreement is not essential
D. Sale is consensual contract
Cases:
1. Verbal agreement of sale
Caoili v. CA
FACTS: Caoili was a lessee in the property of respondent. Respondent borrowed money from Caoili in the amount
of Php 30,000 which they stipulated would form part of their rentals. When rentals was paid off, they entered
into a “not formal or written contract” on the sale of the property. They executed a "Receipt" denominated as an
"Addendum to Agreement dated August 8, 1990". It was stated they received from petitioners the sum of
P140,000.00, in addition to the partial payment of P60,000.00, the "balance payable when the good title in the
name of herein vendor is delivered to the spouses." Yet respondent refused to execute document. Respondent
says that the Php 140,000 was for improvements and the Php 60,000 served as rental on the period they haven’t
paying their rentals (amounts were claimed as partial payments by Caoili. RTC and CA both decided in favor of
Caoili yet CA reduced the amount awarded.
Held:
1. (Not made in writing) The absence of a formal deed of sale does not render the agreement null and void or
without any effect. The provision of Article 1358 of the Civil Code on the necessity of a public document is only
for convenience, not for validity or enforceability. It does not mean that no contract has been perfected so long
as the essential requisites of consent of the contracting parties, object, and cause of the obligation concur. Under
the agreement, private respondent was obligated to deliver a good title to petitioners and this condition is the
operative act which would give rise to the corresponding obligation of petitioners to pay the balance of the
purchase price. Since it is not disputed that private respondent has not delivered a good title, petitioners have by
law the right to either refuse to proceed with the agreement or to waive that condition pursuant to Article 1545
of the Civil Code.
2. The Addendum being notarized is a prima facie evidence of the facts stated therein.
 2. Effect of lack of technical description in the contract a. Specific performance, and
b. For damages based on breach of contract
Naranja v. CA
Where the contract of sale has already been consummated, its enforcement cannot be barred by the Statute of
Facts: Roque Naranja was the registered owner of a parcel of land, denominated as Lot No. 4 in Consolidation- Frauds, which applies on executory agreement .
Subdivision Plan (LRC) Pcs-886, Bacolod Cadastre, with an area of 136 square meters and covered by Transfer
Certificate of Title (TCT) No. T-18764. Roque was also a co-owner of an adjacent lot, Lot No. 2, of the same When form is essential
subdivision plan, which he co-owned with his brothers, Gabino and Placido Naranja. When Placido died, his one-
third share was inherited by his children, Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja, 1. Under the Statute of Frauds
herein petitioners. Lot No. 2 is covered by TCT No. T-18762 in the names of Roque, Gabino and the said children • Realty- a sale of real property orally is valid. The buyer may compel the seller to execute a formal
of Placido. TCT No. T-18762 remained even after Gabino died. The other petitioners — Serafin Naranja, Raul deed of sale to be enforceable.
Naranja, and Amelia Naranja-Rubinos — are the children of Gabino. • Goods and chattels at a price of not less than P 500.

Roque had no other source of income except for the P200.00 monthly rental of his two properties. To show his 2. Sale of land through an Agent (1874) – authority shall be in writing.
gratitude to Belardo, Roque sold Lot No. 4 and his one-third share in Lot No. 2 to Belardo on August 21, 1981,
through a Deed of Sale of Real Property which was duly notarized by Atty. Eugenio Sanicas. The Deed of Sale B. PERFECTION OF A CONTRACT OF SALE (Art. 1475)
reads:
 At the moment there is a meeting of the minds (consensual)
I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod City, do hereby declare that I am the  The parties may reciprocally demand performance, subject to the provisions of law governing the form
registered owner of Lot No. 4 of the Cadastral Survey of the City of Bacolod, consisting of 136 square meters, of contracts
more or less, covered by Transfer Certificate of Title No. T-18764 and a co-owner of Lot No. 2, situated at the
City of Bacolod, consisting of 151 square meters, more or less, covered by Transfer Certificate of Title No. T- Requirements for perfection:
18762 and my share in the aforesaid Lot No. 2 is one-third share.
a. When parties are face to face – when an offer is accepted without conditions nor qualifications
Issue: W/N the sale was valid. b. Thru correspondence or telegram – when the offeror has knowledge of the acceptance
c. When sale is subject to a suspensive condition – from the moment the condition is fulfilled
Held: To be valid, a contract of sale need not contain a technical description of the subject property. Contracts
of sale of real property have no prescribed form for their validity; they follow the general rule on contracts that Take note: Mere perfection of the contract does not necessarily transfer ownership.
they may be entered into in whatever form, provided all the essential requisites for their validity are present. The
failure of the parties to specify with absolute clarity the object of a contract by including its technical description
is of no moment. What is important is that there is, in fact, an object that is determinate or at least determinable,
Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577, October 7, 1996
as subject of the contract of sale. The deed of sale clearly identifies the subject properties by indicating their
respective lot numbers, lot areas, and the certificate of title covering them.
FACTS: The Coronels sold their inherited house and lot to Ramona Patricia Alcaraz, with the conditions that they
will effect the transfer of the title from their deceased father to their names upon receipt of the down payment,
One who alleges any defect, or the lack of consent to a contract by reason of fraud or undue influence, must
and after the transfer they will execute a Deed of Sale in favor of Alcaraz. The conditions were embodied in a
establish by full, clear and convincing evidence, such specific acts that vitiated the party’s consent. Petitioners
document labeled “Receipt of Down Payment.” Alcaraz paid, and the title was transferred in the Coronels’ name.
adduced no proof that Roque had lost control of his mental faculties at the time of the sale. Undue influence is
However, the Coronels sold the property to Catalina Mabanag, rescinded the contract with Alcaraz, and eventually
not to be inferred from age, sickness, or debility of body, if sufficient intelligence remains.
executed a Deed of Sale in favor of Mabanag. In the complaint for specific performance filed against them, the
The Deed of Sale which states “receipt of which in full I hereby acknowledge to my entire satisfaction” is an Coronels contended that theirs was merely an executory contract to sell, hence there was no perfected contract
acknowledgment receipt in itself. Moreover, the presumption that a contract has sufficient consideration cannot of sale.
be overthrown by a mere assertion that it has no consideration.
HELD: The parties had agreed to a conditional contract of sale, consummation of which is subject only to the
Heirs are bound by contracts entered into by their predecessors-in-interest. Having been sold already to Belardo, successful transfer of the certificate of title from the name of the petitioner’s father to their names.
the two properties no longer formed part of Roque’s estate which petitioners could have inherited.
Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioner’s names
Statute of Frauds applied was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became
mutually demandable.
Statute of Frauds applies only in cases for
Note: even if document was denominated “ Receipt of down payment” from that moment on, there was a • The auctioneer may withdraw the goods from the sale
perfected contract of sale albeit conditional (i.e. transfer of title to heirs and payment of balance of purchase Exception: If the auction has been announced to be without reserve
price)
4. Limitations of the seller:
Manila Mining Corporation (MMC) vs. Miguel Tan G.R. No. 171702, February 12, 2009  The seller himself cannot bid
 He cannot employ or induce any person to bid on his behalf
FACTS: MMC ordered and received various electrical materials from Miguel Tan, and upon failure to pay the full Exception: If right to bid has been expressly reserved
amount despite several demands, Tan filed a collection suit. MMC contended that the absence of stamp marks
on the original invoices and purchase orders negated the receipt of said documents by MMC’s representatives, a 5. Limitations of the auctioneer (if he is not the seller);
requisite for payment. Having not received them thereby having no consent, their contract could not have been  The auctioneer cannot bid
perfected.  He cannot employ or induce to bid on behalf of the seller
 He cannot knowingly take any bid from the seller or any person employed by him.
HELD: The purchase orders constituted accepted offers when Tan supplied the electrical materials to MMC. Hence,
petitioner cannot evade its obligation to pay by claiming lack of consent to the perfected contracts of sale. The Cases:
invoices furnished the details of the transactions.
1. The sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer
Take note: The purchase orders constituted accepted offers when Tan supplied electrical materials to MMC. or in other customary manner

1) The buyer has the right to a reasonable opportunity for examination before acceptance (1584) except Dizon vs. Dizon
when a carrier delivers “C.O.D.”
2) Sale by description and/or sample (1481): The bulk of the goods must correspond to either or both. Considering that the auction sale has been perfected, a supplemental sale with higher consideration at the
instance of only one party(herein petitioner) could no longer be validly executed)
Place of Perfection
Before the hammer falls:
1. Where there was meeting of the minds
2. In case of acceptance through letter or telegram, in the place where the offer was made.  The bidder may retract his bid. The reason behind this is that every bidder is merely an offer and
therefore, before it is accepted, it may be withdrawn
EXPENSES  The auctioneer may also withdraw the goods from the sale EXCEPT if the auction has been announced
to be WITHOUT RESERVE.
A. Expenses of execution and Registration of the sale (1487) are borne by the seller
B. Expenses of putting the goods in a deliverable state (1521, last par.) are also borne by the seller.
2. Auction Sale where the seller reserved the right to reject any and all the bids
II. RULES IN SPECIAL SALES
Case: Leoquinco vs. Postal Savings Bank
A. Sales at Auction
B. Sales by Sample and/or Description Because of the expressed stipulation that PSB reserved to themselves the right to reject any and all bids, the bid
C. Sale of Personalty payable by Installments (Recto Law) of petitioner may be rejected. Petitioner’s participation in the auction means submission or being bounded to the
D. Leases of Personalty with Option to Buy rules of auction whether the purchaser knew the rules or not
E. Sale of Real Property on Instalment
F. PD No. 957 Limitations of the seller:

A. SALES AT AUCTION  The seller himself cannot bid

 He cannot employ or induce any person to bid on his behalf (people who bid for the seller, but are not
Rules: themselves bound, are called “by-bidders” or “puffers”)

1. Sales of separate lots are separate contracts of sale EXCEPTION: if right to bid has been expressly reserved and that notice of such was given
2. When perfected – when the auctioneer announces its perfection by the fall of the hammer, or in other
customary manner Limitations of the auctioneer (if he is not the seller)
3. Before the fall of the hammer
• The bidder may retract his bid  The auctioneer cannot bid
  He cannot employ or induce to bid on behalf of the seller
 He cannot knowingly take any bid from the seller or any person employed by him
In an execution sale:
• Judgment Creditor will have a writ to garnish or attach the property of the debtor and sheriff sells it in
a public sale
• Judgment debtor has the right to redeem the property within 1 year
Take Note: The owner of the property offered for sale at auction has the right to prescribe the manner, condition
and terms of sale and where these are reasonable and are made known to the buyer, they are binding upon
them.
Q: Why can’t the seller participate in the bidding?
A: He cannot bid because in doing such he can manipulate the biddings of other participants
Note: it is the seller who will set the terms and condition of the sale. If the seller will bid in the auction without
reserving such right and informing the public, the sales will be considered as fraudulent.
Q: Will such fraud affect the perfection of the contract?
A: Yes, the contract will be VOID with NO force and effect
B. SALES BY SAMPLE AND/ OR DESCRIPTION
a. The bulk of the goods must correspond to either or both
b. The buyer must have an opportunity to compare
c. Effect: the contract may be rescinded at the option of the buyer
Pacific Commercial Compan Vs. Ermita Market & Cold Stores, Inc.
Plaintiff contracted to sell to defendant an automatic refrigerating machine as per description stated in the sales
contract. The machine was delivered and by mutual agreement the vendor installed the machine. The machine
did not give the results expected from it, and the defendant refused to pay the balance of its purchase price and
the cost of the installation of the machine. Thereupon plaintiff brought this action.
Held: The fact that the defendant could not use the machine satisfactorily in the three cold stores divisions cannot
be attributed to plaintiff's fault; the machine was strictly in accordance with the written contract between the
parties, and the defendant can hardly honestly say that there was any deception by the plaintiff.
C. SALE OF PERSONALTY PAYABLE BY INSTALLMENTS (RECTO LAW)
Alternative remedies in case of non-payment (1484)
1. To exact fulfillment of the obligation
2. Cancel the sale should the vendee fail to pay two or more installments
 This is an exception to 1191
3. Foreclose the chattel mortgage (if one was constituted) should the vendee fail to pay two or more
installments. But there may be no further action to recover the unpaid balance. A contrary stipulation
is void.
Cases:
1. Promissory note with chattel mortgage
Macondray vs. De Santos
Granting that there was a contract between the parties for the sale of personal property payable in installments,
which does not clearly appear in the record before this court, the complaint does not allege nor does it appear in
the record that there was a failure to pay twoor more installments. On the contrary the promissory note, copied
in the complaint, was executed January 11, 1934, and, according to the complaint, on or about January 21,
1934,the automobile, while in the possession of the defendant, was wrecked and by reason of the failure of the
defendant to replace said automobile or to pay the value thereof the plaintiff foreclosed the mortgage on what
remained of the wrecked automobile and brought this suit to recover the balance due on the promissory note
executed in its favor.
In order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for
the sale of personal property payable in installments and that there has been a failure to pay two or more
installments.
2. Sale of car on straight term
Levy Hermanos vs. Gervacio
In Macondray & Co. vs. De Santos (33 OG 2170), it was held that “in order to apply the provisions of article 1454-
A of the Civil Code it must appear that there was a contract for the sale of personal property payable in
installments and that there has been a failure to pay two or more installments.” The contract, in the present case,
while a sale of personal property, is not, however, one on installments, but on straight term, in which the balance,
after payment of the initial sum, should be paid in its totality at the time specified in the promissory note.
The transaction is not, therefore, the one contemplated in Act 4122 and accordingly the mortgagee is not bound
by the prohibition therein contained as to its right to the recovery of the unpaid balance.
Theoretically, there is no difference between paying the price in two installments and paying the same partly in
cash and partly in one installment, in so far as the size of each partial payment is concerned; but in actual practice
the difference exists, for, according to the regular course of business, in contracts providing for payment of the
price in two installments, there is generally a provision for initial payment.
A cash payment cannot be considered as a payment by installment, and even if it can be so considered, still the
law does not apply, for it requires non-payment of two or more installments in order that its provisions may be
invoked. In the present case, only one installment was unpaid.
3. Sale of Truck on installment where foreclosure was not pursued
Spouses De La Cruz vs. Asian Consumer And Industrial Finance Corporation
Facts: On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo,
petitioners herein, purchased on installment basis one (1) unit Hino truck from Benter Motor Sales Corporation
(BENTER for brevity). To secure payment, they executed in favor of BENTER a chattel mortgage over the vehicle
1 and a promissory note for P282,360.00 payable in thirty (30) monthly installments of P9,412.00. 2 On the same
date, BENTER assigned its rights and interest over the vehicle in favor of private respondent Asian Consumer and
Industrial Finance Corporation (ASIAN for brevity). 3 Although petitioners initially paid some installments they
subsequently defaulted on more than two (2) installments. Thereafter, notwithstanding the demand letter of
ASIAN, 4 petitioners failed to settle their obligation.
On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of chattel mortgage, the sheriff
attempted to repossess the vehicle but was unsuccessful because of the refusal of the son of petitioner, Rolando
de la Cruz to surrender the same. Hence, the return of the sheriff that the service was not satisfied. LLpr
On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the office of ASIAN and left it there
where it was inventoried and inspected. 5
On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection of the balance of
P196,152.99 of the purchase price, plus liquidated damages and attorney's fees.
Petitioners take exception. They nevertheless insist that he should not later be allowed to change course midway
in the process, abandon the foreclosure and shift to other remedies such as collection of the balance, especially
after having recovered the mortgaged chattel from them and while retaining possession thereof.
HELD: The instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil Code, which
provides: "In a contract of sale of personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2)
Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel
mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void." In this jurisdiction, the three (3) remedies provided for
in the "Recto Law" are alternative and not cumulative; the exercise of one would preclude the other remedies.
Consequently, should the vendee-mortgagor default in the payment of two or more of the agreed installments,
the vendor-mortgagee has the option to avail of any of these three (3) remedies: either to exact fulfillment of
the obligation, to cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted.
(Pacific Commercial Co. vs. De la Rama)
It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not
pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever
conducted. "Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein
appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the foreclosure
sale of the mortgaged property when it recovered possession thereof. Consequently, in the case before Us, there
being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for
collection of the unpaid balance of the purchase price.
4. Magna vs. Colarina
“Undoubtedly the principal object of the above amendment (referring to Act 4122 amending
Art. 1454, Civil Code of 1889) was to remedy the abuses committed in connection with the foreclosure of chattel
mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure
sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost
invariable result of this procedure was that the mortgagor found himself minus the property and still owing
practically the full amount of his original indebtedness.”
In its Memorandum before us, petitioner resolutely declared that it has opted for the remedy provided under
Article 1484(3) of the Civil Code, that is, to foreclose the chattel mortgage.
It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and third
remedies under Article 1484, at the same time suing for replevin. For this reason, the Court of Appeals justifiably
set aside the decision of the RTC. Perusing the
Complaint, the petitioner, under its prayer number 1, sought for the payment of the unpaid amortizations which
is a remedy that is provided under Article 1484(1) of the Civil Code, allowing an unpaid vendee to exact fulfillment
of the obligation. At the same time, petitioner prayed that Colarina be ordered to surrender possession of the
vehicle so that it may ultimately be sold at public auction, which remedy is contained under Article 1484(3). Such
a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for the
foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may have under the
promissory note.
Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel
mortgage, “he shall have no further action against the purchaser to recover any unpaid balance of the purchase
price. Any agreement to the contrary shall be void.” In other words, in all proceedings for the foreclosure of
chattel mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited
to the property included in the mortgage.
D. LEASES OF PERSONALTY WITH OPTION TO BUY
Cases:
Elisco Tool and Manufacturing Corp. vs. CA
Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash department. On
January 9, 1980, he entered into an agreement with the company, called lease with option to buy car within 5
years. That owner ship shall retain with the company until full payment and all necessary expenses for
maintenance shall be borne by the employee. Subsequently the company has ceased operation and the employee
was laid off. It took the company 2 years to institute proceedings.
Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that
form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases
either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called
rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest
in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily
be regarded as payment of the price in installments since the due payment of the agreed amount results, by the Art. 1485. The preceding article shall be applied to contract purporting to be leases of personal property with the
terms of the bargain, in the transfer of title to the lessee. option to buy, when the leasor deprived the lesee of the possession or enjoyment of the thing.

The so-called monthly rentals are in truth form monthly amortization on the price of the car. The contract being
one of sale on installment, the Court of Appeals correctly applied to it the following provisions of the Civil Code:
Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies:
1. Exact fulfillment of the obligation, should the vendee fail to pay;
2. Cancel the sale, should the vendee's failure to pay cover two or more installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
Therefore Giraffe is not liable to pay for the remaining term since the machineries has been foreclosed.
PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase the equipment. This has
been made manifest by the actions of the petitioner itself, foremost of which is the declarations made in its
demand letter to the respondent. There could be no other explanation than that if the respondent paid the
balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly an option
to purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply.
E. SALE OF REAL PROPERTY ON INSTALLMENTS (MACEDA LAW)
RA 6552) Realty Installment Buyer Protection Act.

The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of Applicability – Real estate bought on installment basis.
the others. limitation applies to contracts purporting to be leases of personal property with option to buy by virtue
of Art. 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for Transactions covered: sale/ financing of real estate on installment payments, including residential condominium
the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin apartments, EXCEPT:
to recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy
sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was 1. Industrial lots
not returned to private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance 2. Commercial building
by the Court of Appeals of a writ of execution. 3. Sales to tenants under RA 3844

The employee having found to have paid more than the value of the thing P60,000 should be considered as Rules when the buyer has paid at least 2 years of installments
payment of the full purchase price. It further petitioner to pay private respondents the amount of P431.94 as
A. Rights of Buyers
excess payment, as well as rentals at the rate of P1,000 a month for depriving private respondents of the use of
their car.
1. Right to update payments
PCI Leasing and finance vs. Giraffe X Right to sell or assign his rights to another person (must be done by notarial act)
2. Right to reinstate the contract by updating the account during the grace period and before actual
Giraffe entered into an agreement with PCI leasing over 2 machines worth P8,000,000. Giraffe agreed to pay cancellation of the contract.
P116,878.21 monthly and P181,362 for the other machine. It has also remitted the amount of P3,120,000 as 3. Right to advance payment without interest
goodwill. A year into the life of the lease agreement, respondent defaulted in paying the monthly rentals. PCI 4. Right to be refunded of the cash surrender value of his payments if the contract is cancelled
Sued Giraffe for possession of the machineries and for payment of the remaining term.
 In case of default in payment –
Issue: Whether the underlying lease agreement are covered between 1484 and 1485 of the New Civil Code?
1. To pay without additional interest the unpaid installments (cash surrender value) within the
SC: Yes they are. Evidently the contract above is in reality an option to purchase the equipment. grace period
2. Grace period is 1 month for every year of installment payments made
The Recto Law
Limitation: The right can be exercised only every 5 years
Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may
exercise any of the following  In case of cancellation of contract of sale –

3.) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to 1. The seller shall refund to the buyer the cash surrender value of the payments on the property
pay cover two or more installments. In this case he shall have no further action against the purchaser to recover equivalent to 50% of the total payments made.
any unpaid balance of the price. Any agreement contrary shall be void. 2. After 5 years of installments, additional 5% per year, but shall not exceed 90% of total
payments made

Provided:
 The actual cancellation of the contract shall take place after 30 days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a notarial
act
 Upon full payment of the cash surrender value to the buyer.
Case:
1. When cancellation takes effect
Pagtalunan vs. De Manzano
Facts: Patricio, petitioner’s stepfather and predecessor-in-interest, entered into a Contract to Sell with respondent,
wife of Patricio’s former mechanic, Teodoro Manzano, whereby the former agreed to sell, and the latter to buy,
a house and lot which formed half of a parcel of land. The consideration of P17,800 was agreed to be paid in the
following manner: P1,500 as downpayment upon execution of the Contract to Sell, and the balance to be paid in
equal monthly installments of P150 on or before the last day of each month until fully paid.
It was also stipulated in the contract that respondent could immediately occupy the house and lot; that in case
of default in the payment of any of the installments for 90 days after its due date, the contract would be
automatically rescinded without need of judicial declaration, and that all payments made and all improvements
done on the premises by respondent would be considered as rentals for the use and occupation of the property
or payment for damages suffered, and respondent was obliged to peacefully vacate the premises and deliver the
possession thereof to the vendor.
Petitioner claimed that respondent paid only P12,950. She allegedly stopped paying after December 1979 due to
personal problems with the petitioner. Petitioner asserted that when respondent ceased paying her installments,
her status of buyer was automatically transformed to that of a lessee. Therefore, she continued to possess the
property by mere tolerance of Patricio.
Issue: Whether the respondent has the right to occupy the premises?
Ruling: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer Protection Act," or more
popularly known as the Maceda Law.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to fifty percent of the total payments made and, after five years of installments, an
additional five percent every year but not to exceed ninety percent of the total payments made: Provided, That
the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.9
The Court agrees with petitioner that the cancellation of the Contract to Sell may be done outside the court
particularly when the buyer agrees to such cancellation.
However, the cancellation of the contract by the seller must be in accordance with Sec. 3.
Firstly the demand letter made by the petitioner to vacate the premises does not constitute notice of cancellation.
Second petitioner cannot insist on compliance with the requirement by assuming that the cash surrender value
payable to the buyer had been applied to rentals of the property after respondent failed to pay the installments
due.
Therefore a deed of absolute sale shall be made after payment of purchase price.
Rules when buyer has paid less than 2 years installments
1. The buyer has at least 60 days grace period within which to pay the installment due
2. After the grace period, contract may be cancelled.
(If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel
the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.)
Cases:
1. Where the buyer has paid less than 2 years installments
Ramos vs Heruela
Down payments, deposits or options on the contract shall be included in the computation of the total number of
installments made.
Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period
of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments
due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552 applies.
However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses
Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp., 22 the Court ruled that the vendor could go to court
to demand judicial rescission in lieu of a notarial act of rescission. However, an action for reconveyance is not an
action for rescission. The Court explained in Olympia:
The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell executed
in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no
such cancellation took place at any time prior to the institution of the action for reconveyance.
Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the
effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects.
The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can
arise in an action for reconveyance. Additionally, in an action for rescission (also often termed as resolution),
unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the
Court, instead of decreeing rescission, may authorize for a just cause the fixing of a period. 23
In the present case, there being no valid rescission of the contract to sell, the action for reconveyance is
premature. Hence, the spouses Heruela have not lost the statutory grace period within which to pay. The trial
court should have fixed the grace period to sixty days conformably with Section 4 of RA 6552.
1. Sale of subdivision lot on installments where the buyer defaulted.
Active Realty Corporation vs. Daroya
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a Contract to Sell1 with respondent NECITA
DAROYA whereby the latter agreed to buy a 515 sq. m. lot for P224,025.00 in petitioner’s subdivision to be paid
in amortization within 5 years, valued at P346,367.00, a figure higher than that stated as the contract price. The
buyer defaulted in three (3) monthly amortizations. Petitioner sent respondent a notice of cancellation2 of their
contract to sell. When respondent offered to pay for the balance of the contract price, petitioner refused as it has
allegedly sold the lot to another buyer. The respondent has already paid 4 years. already more than the contract
price.
Issue: Whether or not the petitioner can be compelled to refund to the respondent the value of the lot or to
deliver a substitute lot at respondent’s option?
SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer Protection Act," or more popularly
known as the Maceda Law
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the payment
of succeeding installments, where he has already paid at least two (2) years of installments, thus:
"(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him,
which is hereby fixed at the rate of one month grace period for every one year of installment payments made; x
xx
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to fifty per cent of the total payments made; provided, that the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand
for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer."
We hold that the contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A.
No. 6552, respondent has the right to offer to pay for the balance of the purchase price, without interest, which
she did in this case. However since the lot has been sold to another party it is only just and equitable that the
petitioner be ordered to refund to respondent the actual value of the lot resold, i.e., P875,000.00, with 12%
interest per annum.
PD NO. 957
Important provisions
Secs. 4, 5, 7, 18, 23, 24, 25
Section 4. Registration of Projects. The registered owner of a parcel of land who wishes to convert the same
into a subdivision project shall submit his subdivision plan to the Authority which shall act upon and approve the
same, upon a finding that the plan complies with the Subdivision Standards' and Regulations enforceable at the
time the plan is submitted. The same procedure shall be followed in the case of a plan for a condominium project
except that, in addition, said Authority shall act upon and approve the plan with respect to the building or buildings
included in the condominium project in accordance with the National Building Code (R.A. No. 6541).
The subdivision plan, as so approved, shall then be submitted to the Director of Lands for approval in accordance
with the procedure prescribed in Section 44 of the Land Registration Act (Act No. 496, as amended by R.A. No.
440): Provided, that it case of complex subdivision plans, court approval shall no longer be required. The
condominium plan as likewise so approved, shall be submitted to the Register of Deeds of the province or city in
which the property lies and the same shall be acted upon subject to the conditions and in accordance with the
procedure prescribed in Section 4 of the Condominium Act (R.A. No. 4726).
The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project
or condominium project shall register the project with the Authority by filing therewith a sworn registration
statement containing the following information:
a. Name of the owner;
b. The location of the owner's principal business office, and if the owner is a non-resident Filipino, the
name and address of his agent or representative in the Philippines is authorized to receive notice;
c. The names and addresses of all the directors and officers of the business firm, if the owner be a
corporation, association, trust, or other entity, and of all the partners, if it be a partnership;
d. The general character of the business actually transacted or to be transacted by the owner; and
e. A statement of the capitalization of the owner, including the authorized and outstanding amounts of its
capital stock and the proportion thereof which is paid-up.
The following documents shall be attached to the registration statement:
a. A copy of the subdivision plan or condominium plan as approved in accordance with the first and second
paragraphs of this section.
b. A copy of any circular, prospectus, brochure, advertisement, letter, or communication to be used for the
public offering of the subdivision lots or condominium units;
c. In case of a business firm, a balance sheet showing the amount and general character of its assets and
liabilities and a copy of its articles of incorporation or articles of partnership or association, as the case
may be, with all the amendments thereof and existing by-laws or instruments corresponding thereto.
d. A title to the property which is free from all liens and encumbrances: Provided, however, that in case
any subdivision lot or condominium unit is mortgaged, it is sufficient if the instrument of mortgage
contains a stipulation that the mortgagee shall release the mortgage on any subdivision lot or
condominium unit as soon as the full purchase price for the same is paid by the buyer.
The person filing the registration statement shall pay the registration fees prescribed therefor by the Authority.
Thereupon, the Authority shall immediately cause to be published a notice of the filing of the registration
statement at the expense of the applicant-owner or dealer, in two newspapers general circulation, one published
in English and another in Pilipino, once a week for two consecutive weeks, reciting that a registration statement
for the sale of subdivision lots or condominium units has been filed in the National Housing Authority; that the
aforesaid registration statement, as well as the papers attached thereto, are open to inspection during business
hours by interested parties, under such regulations as the Authority may impose; and that copies thereof shall
be furnished to any party upon payment of the proper fees.
The subdivision project of the condominium project shall be deemed registered upon completion of the above of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is
publication requirement. The fact of such registration shall be evidenced by a registration certificate to be issued outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage
to the applicant-owner or dealer. or the corresponding portion thereof within six months from such issuance in order that the title over any fully
paid lot or unit may be secured and delivered to the buyer in accordance herewith.
Section 5. License to sell. Such owner or dealer to whom has been issued a registration certificate shall not,
however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall Cases:
have first obtained a license to sell the project within two weeks from the registration of such project.
Far East Bank & Trust Co vs. Marquez
The Authority, upon proper application therefor, shall issue to such owner or dealer of a registered project a
license to sell the project if, after an examination of the registration statement filed by said owner or dealer and Marquez entered into a contract to sell with TSE involving a 52.5 sqm lot and a three storey townhouse for
all the pertinent documents attached thereto, he is convinced that the owner or dealer is of good repute, that his P800,000. Later respondent was able to pay a total of P600,000. TSE then mortgaged the whole property to Far
business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the public East Bank. TSE was unable to pay and the property was foreclosed and sold in favor of Far East Bank.
would not be fraudulent.
Issues:
Section 7. Exempt transactions. A license to sell and performance bond shall not be required in any of the
following transactions: 1) Whether or not the mortgage contract violated Section 18 of PD.957, hence void insofar as third persons are
concerned.
a. Sale of a subdivision lot resulting from the partition of land among co-owners and co-heirs.
b. Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent sale of the same 2) Who has a higher right the new buyer or the respondent?
lot.
c. Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in the ordinary
course of business when necessary to liquidate a bona fide debt.
Supreme Court ruling:
Section 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or developer without prior
1) Yes violated Sec. 18. as provides as follows.
written approval of the Authority. Such approval shall not be granted unless it is shown that the proceeds of the
mortgage loan shall be used for the development of the condominium or subdivision project and effective
Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by the owner or developer without prior written
measures have been provided to ensure such utilization. The loan value of each lot or unit covered by the
approval of the authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage
mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The
loan shall be used for the development of the condominium or subdivision project and effective measures have
buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the
been provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be
payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with
determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his
a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereto;
option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtness secured by the particular lot or unit being paid for , with a view to enabling
Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or
said buyer to obtain title over the lot or unit promptly after full payment thereof.
condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer
when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of
Since TSE did not obtain prior approval from the NHA the mortgage is void as regarding to the property to the
the owner or developer to develop the subdivision or condominium project according to the approved plans and
respondent as he has no standing to question the validity of the other property.
within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount
paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.
2) Respondent has a higher right over the property. Petitioner cannot be considered as a buyer in good faith.
He should have considered that it was a town house that was already in progress. The conversion of status from
Section 24. Failure to pay installments. The rights of the buyer in the event of this failure to pay the installments
mortgagee to buyer will not lessen the importance of such knowledge.
due for reasons other than the failure of the owner or developer to develop the project shall be governed by
Republic Act No. 6552.
Tamayo vs. Huang

Where the transaction or contract was entered into prior to the effectivity of Republic Act No. 6552 on August
Respondents Huang registered owners of four parcels of land located in Barangay Matina, Davao City executed
26, 1972, the defaulting buyer shall be entitled to the corresponding refund based on the installments paid after
a contract of "Indenture" with EAP Development Corporation (EAP) under which EAP undertook to manage and
the effectivity of the law in the absence of any provision in the contract to the contrary.
develop said parcels of land into a first class subdivision and sell the lots therein in, Doña Luisa Village (the
subdivision).
Section 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the buyer upon
full payment of the lot or unit. No fee, except those required for the registration of the deed of sale in the Registry
Carlos R. Tamayo (petitioner) entered into a contract to sell with respondents through EAP for a certain lot. Under
the contract, petitioner was to pay upon execution P35,749.60 and the balance, including interest at the rate of
14% per annum, in 60 monthly installments of P4,791.40, without necessity of demand; and if petitioner failed
to pay the installments, respondents were given the right to demand interest thereon at the rate of 14% per
annum, to be computed on the same day of the month the installments became due. Later on the development
of the subdivision was put to stop by EAP, in effect petitioner stopped paying the monthly amortization. The
respondents sent the petitioner a demand letter, but after the reply of the petitioner with an explanation of stop
payment the respondent was unheard of.. After 5 years the development was soon in progress and petitioner
offered to pay the full purchase price which was already rejected by the respondent. Later on the property was
sold by the respondent to another person.
Issues: 1) Did the petitioner have any legal basis for stop payment? 2) Is the contract to sell between the parties
rescinded?
SC: 1) Yes. According Section 23 of PD 957 requires only due notice to the owner or developer for stopping
further payments by reason of the latter’s failure to develop the subdivision according to the approved plans and
within the time limit.
Therefore the buyer had the right to stop payment due to the failure of the developer to comply with the contract.
He only needed to give due notice to the owner (Huangs) or Developer to give it effect.
2) Yes. Respondents sent no notarized notice or any notice of cancellation at all. In fact, it was only after petitioner
filed on July 24, 1997 the complaint before the HLURB that respondents offered to reimburse petitioner of the
total amount he had already paid.
The contract not having been cancelled in accordance with law, it has remained valid and subsisting. It was,
therefore, within petitioner’s right to maintain his option to await the completion of the development of and
introduction of improvements in the subdivision and thereafter, upon full payment of the purchase price, without
interest, compel respondents to execute a deed of absolute sale, but since the property was sold to a buyer in
good faith. The respondents should refund the petitioner for the value of the property when it was sold.
Cantemperante vs CRS realty
Facts: Herein petitioners were among those who filed before the HLURB a complaint 6 for the delivery of
certificates of title against respondents CRS Realty Development Corporation (CRS Realty), Crisanta Salvador and
Cesar Casal.
Petitioners averred that they had bought on an installment basis subdivision lots from respondent CRS Realty and
had paid in full the agreed purchase prices; but notwithstanding the full payment and despite demands,
respondents failed and refused to deliver the corresponding certificates of title to petitioners. The complaint
prayed that respondents be ordered to deliver the certificates of title corresponding to the lots petitioners had
purchased and paid in full and to pay petitioners damages.
In his answer, respondent Casal averred that despite his willingness to deliver them, petitioners refused to accept
the certificates of title with notice of lis pendens covering the subdivision lots.
Respondents Ang and Cuason claimed in their answer with counterclaim 16 that respondent Casal remained the
registered owner of the subdivided lots when they were transferred to them and that the failure by petitioners to
annotate their claims on the title indicated that they were unfounded. Respondent CRS Realty and the Heirs of
Laudiza were declared in default for failure to file their respective answers.
Issues: (1) Whether or not the absence of a license to sell has rendered the sales void; (2) whether or not the
subsequent sale to respondent Cuason and Ang constitutes double sale;
Held:
Petitioners assail the Court of Appeals' ruling that the lack of the requisite license to sell on the part of respondent
CRS Realty rendered the sales void; hence, neither party could compel performance of each other's contractual
obligations.
The only requisite for a contract of sale or contract to sell to exist in law is the meeting of minds upon the thing
which is the object of the contract and the price, including the manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the
contracting parties obliges himself to transfer the ownership of and deliver a determinate thing, and the other to
pay therefor a price certain in money or its equivalent.
In the instant case, the failure by respondent CRS Realty to obtain a license to sell the subdivision lots does not
render the sales void on that ground alone especially that the parties have impliedly admitted that there was
already a meeting of the minds as to the subject of the sale and price of the contract. The absence of the license
to sell only subjects respondent CRS Realty and its officers civilly and criminally liable for the said violation under
Presidential Decree (P.D.) No. 957 30 and related rules and regulations. The absence of the license to sell does
not affect the validity of the already perfected contract of sale between petitioners and respondent CRS Realty.
As found by the Court of Appeals, in the case at bar, the requirements of Sections 4 and 5 of P.D. [No.] 957 do
not go into the validity of the contract, such that the absence thereof would automatically render the contract
null and void. It is rather more of an administrative convenience in order to allow a more effective regulation of
the industry.
CHAPTER 2 – CAPACITY TO BUY OR SELL
Arts. 1489 to 1492 – PARTIES AND THEIR CONSENT
CAPACITY IN GENERAL
Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale,
saving the modifications contained in the following articles.
Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a
reasonable price therefor. Necessaries are those referred to in article 290.
Note: A person who has both juridical capacity and capacity to act is said to have full civil capacity. It is understood
that he is of legal age and suffers no restriction on his capacity to act, such person may enter into any contract
including sale.
SPECIAL DISQUALIFICATIONS
  Between spouses
 By a spouse without consent of the other spouses
 Persons in trust relations
a) Between Spouses
Case:
1. Effect of sale of land to one’s own spouse
Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940
Facts: There was a contract entered into between Uy Siu Pin and Casimira and Blas, which the latter agreed to
deliver the mortgaged land and to enjoy the same with its improvements to the during the period of 15 years on
condition that Uy Siu Pin would pay El Hogar Filipino the unpaid balance of the indebtedness of casimira and Blas,
together with all other expenses including realty taxes.
When the mortgage debtors, Casimira and Blas, failed to redeem the land within the statutory period, a final
deed of sale was issued in favor of the mortgagee, El Hogar Filipino. The latter sold the land to Uy Siu Pin and in
turn sold the land to his wife Chua Hue.
Issues: Is the sale valid between Uy Siu Pin and Chua Hue?
Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because theformer had
no right to dispose of the land in contorversy but because the sale comes within the prohibition of Article 1458
of the Civil Code.
Note: The case did not extensively explicate the reason why the sale between spouses are prohibited. However,
Art 1490 provides that “the husband and wife cannot sell property to each other, except: (1) when a separation
of property was agreed upon in the marriage settlements; or (2) when there has been a judicial separation of
property under articel 191.
Rationale behind the prohibiton: (a) to prevent the stronger spouse from exploiting the weaker spouse; (b)
prevent donations disguised as sales; (c) protect third persons, specially creditors, against fraud through the
transfer of the properties of one spouse to the other to evade payment of obligations.
2. Transfer in common law relationship
Ching vs. Goyanko, G.R. No. 165879, November 10, 2006
FACTS: Respondents claim that their parents (Goyanko and Epifania) acquired a 661 square meter property but
they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt,
Sulpicia Ventura. Sulpicia executed a deed of sale over the property in favor of reespondent’s father Goyanko
that in turn executed a deed of sale over the same property in favor of his common-law-wife-herein petitioner
Maria B. Ching. It was only after Goyanko’s death that they discovered the transfer of the said property to Ching.
Respondents thus filed with the RTC of Cebu City a complaint for recovery of the property and the nullification
of the deed of sale.
ISSUE: Whether or not the sale of the property by Goyanko to Ching is valid.
HELD: The conveyance of Goyanko in favor of his common-law-wife-herein petitioner, was null and void. Article
1409 of the Civil Code states inter alia that contracts whose cause, object, or purpose is contrary to law, morals,
good customs, public order, or public policy are void and inexistent from the very beginning. Article 1352 also
provides that: “Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is
unlawful if it is contrary to law, morals, good customs. Public order, or public policy.” Additionally, the law
emphatically prohibits the spouses from selling property to each other subject to certain exceptions. Similarly,
donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances
between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic
policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other,
as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to
a couple living as husband and wife without benefit of marriage, otherwise, “the condition of those who incurred
guild would turn out to be better that those in legal union.”
b) By Spouse without consent of the other spouse – Void
c) Persons in Trust Relations
Cases:
1. Sale to agent: Exception to prohibition against sale by principal in favor of his agent.
Pelayo vs. Perez, G.R. No. 141323, June 8, 2005
FACTS: David Pelayo, by a Deed of Absolute Sale, conveyed to Melki Perez two parcels of agricultural land. Loreza,
wife of David Pelayo,k and another one whose signature is illegible witnessed the execution of the deed. Loreza,
however, signed only the third page. Perez asked Loreza to sign on the first and second pages of the deed but
refused, hence, he instituted the instant complaint for specific performance against the spouses. Petitioners, in
adopting the trial court’s narration of antecedent facts in their petition, admitted that they authorized respondent
to represent them in negotiations with the “squatters” occupying the disputed property and, in consideration of
respondent’s services, they executed the subject deed of sale. Defendant Pelayo claimed that the deed was
without his wife’s consent, hence, it is null and void.
ISSUE: Whether or not the deed of sale was null and void.
HELD: Petitioner Lorenza, by affixing her signature to the Deed of Sale on the space provided for witnesses, is
deemed to have given her implied consent to the contract of sale. Sale is a consensual contract that is perfected
by mere consent, which may either be express or implied. A wife’s consent to the husband’s disposition of conjugal
property does not always have to be explicit or set forth in any particular document, so long as it is shown by
acts of the wife that such consent or approval was indeed given. In the present case, although it appears on the
face of the deed of sale that Lorenza signed only as an instrumental witness, circumstances leading to the
execution of said document point to the fact that Lorenza was fully aware of the sale of their conjugal property
and consented to the sale.
Under Article 173, in relation to Article 166, both of the New Civil Code, when the deed in question was executed,
the lack of marital consent to the disposition of conjugal property does not make the contract void ab initio but
merely voidable. It has been held that the contract is valid until the court annuls the same and only upon an
action brought by the wife whose consent was not obtained. In the present case, despite respondent’s repeated
demands for Lorenza to affix her signature on all the pages of the deed of sale, showing respondent’s insistence
on enforcing said contract, Lorenza still did not fle a case for annulment of the deed of sale. Thus, if the
transaction was indeed entered into without Lorenza’s consent, we find it quite puzzling why for more than three
and a half years, Lorenza did nothing to seek the nullification of the assailed contract.
With regards to petitioner’s asservation that the deed of sale is invalid under Article 1491 (2) of the New Civil
Code, we find such argument unmeritorious. Petitioners, by signing the Deed of Sale in favor of respondent, are
also deemed to have given their consent to the sale of the subject property in favor of respondent, thereby
making the transaction an exception to the general rule that agents are prohibited from purchasing the property
of their principals.
2. Sale to guardians
Philippine Trust Co. vs Roldan
Facts: Parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from
his father, Marcelo Bernardo, deceased. In view of his minority, guardianship proceedings were instituted,
wherein Socorro Roldan was appointed his guardian. She was the surviving spouse of Marcelo Bernardo, and the
stepmother of said Mariano L. Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings (Special Proceeding 2485, Manila), a
motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, the
purpose of the sale being allegedly to invest the money in a residential house, which the minor desired to have
on Tindalo Street, Manila. The motion was granted.
Socorro Roldan, as guardian, executed the proper deed of sale in favor of her brother-in-law Dr. Fidel C. Ramos.
Dr. Fidel C. Ramos executed in favor of Socorro Roldan, personally, a deed of conveyance covering the same
seventeen parcels, for the sum of P15,000.
The Philippine Trust Company replaced Socorro Roldan as guardian, on August 10, 1948. And this litigation,
started two months later, seeks to undo what the previous guardian had done. The step-mother in effect, sold
to herself, the properties of her ward, contends the plaintiff, and the sale should be annulled because it violates
Article 1459 of the Civil Code prohibiting the guardian from purchasing "either in person or through the mediation
of another" the property of her ward.
ISSUE: Whether or not the sale was valid.
HELD: As Guardianship is a trust of the highest order, the trustee cannot be allowed to have any inducement to
neglect his ward's interest; and whenever the guardian acquires the ward's property through an intermediary, he
violates the provision of Article 1459 of the Civil Code and such transaction and subsequent ones emanating
therefrom shall be annulled.
Even without proof that she had connived with Dr. Ramos. Remembering the general doctrine that guardianship
is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his ward's
interest and in line with the court's suspicion whenever the guardian acquires the ward's property 1 we have no
hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward's parcels
thru Dr. Ramos, and that Article 1459 of the Civil Code applies.
3. Sale to public officers
Maharlika Broadcasting Corp. vs. Tagle
FACTS: The GSIS was the registered owner of a parcel of land that was sold to petitioner Maharlika Publishing
Corporation together with the building thereon as well as the printing machinery and equipment therein. Among
the conditions of the sale are that petitioner shall pay to the GSIS monthly installments until the total purchase
price shall be fully paid and that failure to pay any monthly installment within 90 days from due date, the contract
shall be deemed automatically cancelled. Maharlika failed to pay the installments for several months. This
resulted to a public bidding of this particular property. Petitioner submitted a letter-proposal that reads: “I bid to
match the highest bidder.” The bidding committee rejected petitioner’s bid and accepted the private respondent
Luz Tagle’s bid. After approval and confirmation of the sale, the GSIS executed a Deed of Conditional Sale in
favor of Tagles. Luz Tagle is the wife of Edilberto Tagle. Edilberto Tagle was the Chief, Retirment Division, GSIS,
from 1970 to 1978. He worked for the GSIS since 1952.
ISSUE: Whether or not the sale is valid.
HELD: In providing the prohibitions under Article 1491, the Code tends to prevent fraud, or more precisely, tends
not give occasion for fraud, which is what can and must be done.
The point is that he is a public officer and his wife acts for and in his name in any transaction with the GSIS. If
he is allowed to participate in the public bidding of properties foreclosed or confiscated by the GSIS, there will
always be the suspicion among other bidders and the general public that the insider official had access to
information and connection with his fellow GSIS official as to allow him to eventually acquire the property. It is
precisely the need to forestall such suspicions and to restore confidence in the public service that the Civil Code
now declares such transactions to be void from the beginning and not merely voidable.
4. Sale/transfer to attorney
Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No. 58253) until her death. Thereafter, a special
proceeding was instituted to settle her estate. Under her will, the San Juan lot was bequeathed to Pilar and Luis
Gurrea, while 700,000 pesetas, ¼ of the lot in Baguio and 1-hectare piece of land in Negros Occidental were
given to Ricardo Gurrea. Ricardo Gurrea, represented by and through his counsel Atty. Enrique Suplico filed an
Opposition in Special Proceeding No. 7185. In consideration of said representation, Ricardo Gurrea agreed to pay
Atty. Suplico “a contigent fee of twenty (20%) of whatever is due me, either real or personal property.” Later on,
Ricardo withdrew his Opposition. The properties adjudicated to Ricardo based on the project of partition were
the Baguio lot, San Juan lot, and a parcel of land in Negros Occidental. As payment of his attorney’s fees, Ricarod
Gurrea offered the San Juan lot to Atty. Suplico who was hesitant to accept as the property was occupied by
squatters. However, in order not to antagonize his client, Atty. Suplico agreed to Ricardo’s proposal with the
further understanding that he will receive an additional commission of 5% if he sells the Baguio property.
Thereafter, Atty. Suplico registered the deed of Transfer of Rights and Interest and obtained the title to the San
Juan property under his name.
ISSUE: Whether or not the subject property is still the object of litigation; If affirmative, whether or not the sale
is void for being violative of the provisions of Article 1491 (5) of the Civil Code.
HELD: The sale to Atty. Suplico is null and void.
A thing is said to be in litigation only if there is some contest or litigation over it in court, but also from the
moment that it becomes subject to the judicial action of the judge. In the present case, there is no proof to show
that at the time the deed of Transfer of Rights and Interest was executed, the probate court issued an order
granting the Motion for Termination of Proceeding and Discharge of the Executor and Bond. Since the judge has
yet to act on the above-mentioned motion, if follows that the subject property which is the subject matter of the
deed of Transfer of Rights and Interest, is still the object of litigation.
Having been established that the subject property was still the object of litigation at the time the subject deed of
Transfer of Rights and Interest was executed, the assignment of rights and interest over the subject property in
favor of respondent is null and void for being violative of the provisions of Article 1491 of the Civil Code which
expressly prohibits lawyers from acquiring property or rights which may be the object of any litigation in which
they may take party by virtue of their profession.
INCAPACITY TO SELL
 Homesteaders
Cases:
1. Sale of portions of a parcel of land (1) prior to issuance and (2) within 5 years from issuance of free
patent
Manlapat vs. CA, G.R. No. 125585, June 8, 2005
FACTS: The controversy involves Lot No. 2204 that had been originally in the possession of Jose Alvarez,
Eduardo’s grandfather, until his demise in 1916. It remained unregistered until October 8, 1976 when OCT No.
P-153 was issued in the name of Eduardo pursuant to a free patent issued in Eduardo’s name that was entered
in the Registry of Deed. Before the subject lot was titled, Eduardo sold 533 sq.m. of the land to Ricardo on
December 19, 1954. The sale is evidence by a deed of sale entitled “Kasulatan ng Bilihang Tuluyan ng Lupang
Walang Titulo” which was signed by Eduardo himself as vendor and his wife Engracia Ancieto with a certain
Santiago Enriquez signing as witness. The Kasulatan was registered with the Register of Deeds. On March 18,
1981, another Deed of Sale conveyed another portion of the subject lot as right of way was executed by Eduardo
in favor of Ricardo. The deed was notarized. Leon Banaag, as attorney-in-fact of his father-in-law (Eduardo)
mortgage with the Rural Bank for P100,000.00 with the subject lot as collateral. Banaag deposited the owner’s
duplicate certificate of OCT No. P-153 with the bank. Ricardo and Eduardo died.
The Cruzes, upon learning their right to the subject lot immediately tried to confront petitioners mortgage and
obtain the surrender of the OCT. Having failed to physically obtain the title from petitioners, the Cruzes went to
RBSP which had custody of the owner’s duplicate certificate of the OCT. They were able to secure a clearance to
borrow the title and was able to have the Register of Deeds cancel the OCT and issue two separate titles in the
name of Ricardo andEduardo.
ISSUE: Whether or not the sale of the land is prohibited or not.
HELD: Free patent application implies the recognition of the public dominion character of the land and, hence,
the five year prohibition imposed by the Public land Act against alienation or encumbrance of the land covered
by a free patent or homestead should have been considered.
The deed of sale covering the 50 sq.m. right of way executed on March 18, 1981 is obviously covered by
proscription, the free patent having been issued on October 8, 1979. However, petitioners may recover the
portion sold since the prohibition was imposed in favor of the free patent holder. Under the Public Land Act, the
prohibition to alienate is predicated on the fundamental policy of the State to preserve and keep in the family of
the homesteader that portion of public land which the State has gratuitously given to him, and recovery is allowed
even where the land acquired under the Public Land Act was sold and not merely encumbered, within the
prohibited period.
The sale of the 533 sq.m. was executed 22 years before the issuance of the patent in 1976. Where the sale or
transfer took place before the filing of the free patent application, whether by the vendor or the vendee, the
prohibition should not be applied. In such situation, neither the prohibition not the rationale therefor which is to
keep in the family of the patentee that portion of the public land which the government has gratuitously given
him, by shielding him from the temptation to dispose of his landholdings, could be relevant. Precisely, he had
disposed of his rights to the lot even before the government could give the title to him.
2. Effect of verbal sale within 5-year prohibitory period
Manzano vs. Ocampo, L-46850, June 20, 1940
Facts: Victoriano Manzano, now deceased, was granted a homestead patent on June 25, 1934, and the land was
registered in his name on July 25, 1934 under Original Certificate of Title No. 4590. On January 4, 1938, he and
respondent Rufino Ocampo agreed on the sale of said homestead for the amount of P1,900.00, P1,100.00 of
which was paid by Ocampo to Manzano on the same day, and for the balance, he executed a promissory note.
Knowing, however, that any sale of the homestead at that time was prohibited and void, the parties likewise
agreed that the deed of sale was to be made only after the lapse of five years from the date of Manzano's patent.
And to protect the buyer Ocampo's rights in the agreed sale, Manzano executed in his favor a "Mortgage of
Improvements" over the homestead to secure the amount of P1,100.00 already received as down payment on
the price.
It is clear that a perfected contract of sale had already been entered into by the parties within the period of
prohibition. There was nothing "futuristic" in this agreement, except that, being fully aware of the prohibition,
Manzano's title has not ripened into absolute ownership.
This execution of the formal deed after the expiration of the prohibitory period did not and could not legalize a
contract that was void from its inception. Nor was this formal deed of sale "a totally distinct transaction from the
promissory note and the deed of mortgagee for it was executed only in compliance and fulfillment of the vendor's
previous promise, under the perfected sale to execute in favor of his vendee the formal act of conveyance after
the lapse of the period of inhibition of five years from the date of the homestead patent.
Sale in question is illegal and void for having been made within five years from the date of Manzano's patent, in
violation of section 118 of the Public Land Law. Being void from its inception, the approval thereof by the
Undersecretary of Agriculture and Natural Resources after the lapse of five years from Manzano's patent did not
legalize the sale. The result is that the homestead in question must be returned to Manzano's heirs, who are, in
turn, bound to restore to Ocampo the, sum of P3,000.00 received by Manzano as the price thereof.
WHEN INCOMPETENT BUYS
He must pay a reasonable price for necessaries delivered to him. The resulting sale is valid.
The above rule seems to be founded on quasi-contract
EFFECT OF FORBIDDEN SALES
1. Between husband and wife under the community regime – sale is void
Take note: But strangers cannot assail the transfer

2. Between persons in trust relations – sale is void

a. Those based on public trust

 Public officers, employees, government experts
 Judges, justices, prosecutors, clerks of court, lawyers

b. Those based on private trust

 Guardians
 Agents
 Executors and administrators