L A WO N S A L E S

Prelim Reviewer

 Chapter 1 - Arts. 1458 to 1488

 Chapter 2 - Arts. 1489 to 1492

Art. 1458
Nature and characteristics
Definition
1. Villonco Realty Co. vs. Bormaheco, Inc., G.R. No. L-26872, 25 Jul 1975
(EARNEST MONEY AND PERFECTION OF SALE)
Facts:
In the early part of February, 1964 there were negotiations for the sale of the said lots and
the improvements thereon between Romeo Villonco of Villonco Realty Company "and
Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through the
intervention of Edith Perez de Tagle, a real estate broker".
During the negotiations, Cervantes did not disclose to the broker and to Villonco Realty
Company that the lots were conjugal properties of himself and his wife and that they were
mortgaged to the DBP.
The Nassco Board of Directors in its resolution of February 18, 1964 authorized the General
Manager to sign the necessary contract. Cervantes and Teofilo Villonco made a revised
counter- offer for the purchase of the property. The counter-offer was accepted by Cervantes
The check for P100,000.
26 days after the signing of the contract of sale, Cervantes returned the earnest money, with
interest. Cervantes cited as an excuse the circumstance that "despite the lapse of 45 days
there is no certainty yet" bec. Villonco Realty Company refused to accept the letter and the
checks of Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded the
contract, he was already aware that the Punta lot had been awarded to Bormaheco, Inc.
Issue:
Whether or not the sale was perfected.
Whether or not the condition set by Bormaheco was fulfilled.
Held:
Earnest money is something of value given by the buyer to the seller to show that the buyer
is really in earnest, and to bind the bargain. It is actually a partial payment of the purchase
price and is considered as proof of the perfection of the contract.
Vendor's acceptance of the vendee's offer to purchase the property indubitably proves
that there was a meeting of the minds upon the subject and consideration of the sale. From
that moment, the sale was perfected, and the vendor's acceptance of the part payment of
one hundred thousand pesos shows that the sale was conditionally consummated or partly
executed subject to the purchase by the vendor of another property. The nonconsummation
of that purchase would be a negative resolutory condition.

CIRCUMSTANCES SHOWING PERFECTION OF CONTRACT. — The contention that the

sale was not perfected because the seller allegedly qualified his acceptance of the buyer's
offer, and therefore his acceptance amounted to a counter-offer, which the buyer should
accept, is without merit in the absence of evidence as to what changes were made by the
seller in the buyer's offer and in the absence of evidence that the buyer did not assent to the
supposed changes and that assent was never made known to the seller.
EFFECT OF ACCEPTANCE OF EARNEST MONEY. — Where it is shown that the buyer paid
and the seller accepted the agreed sum of earnest money or down payment, it may be
assumed that the alleged changes or qualifications made by the seller on the buyer's offer
was approved by the latter and that such approval was duly communicated to the seller. The
payment by the buyer and acceptance by the seller of the earnest money implies that the
seller was aware that the buyer had accepted the modifications which the former had made in
the latter's offer. 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.
CHANGES WHICH MERELY CLARIFY WHAT HAVE BEEN PREVIOUSLY AGREED UPON
DOES NOT PREVENT PERFECTION OF CONTRACT. —Where the changes or qualifications
made by the seller on the buyer's offer are not material or are mere clarifications of what the
parties had previously agreed upon, such changes would not prevent a perfection of the
contract. Thus, the alleged insertion of the letters "PA" (per annum) after the word "interest"
could not be categorized as a major alternation of the offer as to prevent a meeting of the
minds of the parties. It is understood that the parties contemplated a rate of ten percent per
annum since ten percent a month or semi-annually would be usurious.
CHANGE WHICH DOES NOT ESSENTIALLY ALTER TERMS IN OFFER TO PURCHASE
DOES NOT AMOUNT TO REJECTION OF OFFER. — It is true that an acceptance may
contain a request for certain changes in the terms of the offer and yet be a binding
acceptance. So long as it is clear that the meaning of the acceptance is positively and
unequivocally to accept the offer, whether such request is granted or not, a contract is
formed. Thus, the vendor's change in a phrase of the offer to purchase, which change does
not essentially change the terms of the offer, does not amount to a rejection of the offer and
the tender of a counter-offer.
In an offer to sell a land it was stated that the sale would be consummated after he
(the vendor) had consummated the purchase of another property. In another paragraph
thereof, it was stated "that the final negotiations on both properties can be definitely known
after 45 days." HELD: The term 45 days was not a part of the condition that the other
property should be acquired. The statement does not and cannot mean that the
vendor should acquire the other property within the forty-five day period. It is
simply a surmise that after forty-five days it would be known whether the vendor
would be able to acquire the other property and whether it would be able to sell the
property subject to sale.
VALIDITY OF SALE DESPITE MISREPRESENTATION. — Where the seller, in entering into
a contract of sale in his capacity as President of a corporation, has concealed the fact that the
lots subject of sale were actually registered in his and his wife's name as owners in fee
simple, making the buyer believe that as President of the corporation he could dispose of said
lots, he cannot subsequently argue that he did not bind the conjugal partnership and his wife
nor that the corporation cannot be required to sell the said lots because they are conjugal
properties.

2. Asuncion vs. Court of Appeals, G.R. No. 109125, 02 Dec 1994

( Stages, Right of First Refusal)
Facts: Plaintiffs are tenants or lessees of residential and commercial spaces owned by
defendants; that they have occupied said spaces since 1935 and have been religiously paying
the rental and complying 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; that during the negotiations,
Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-
million; they asked to put their offer in writing to which request defendants acceded; they
sought to specify the terms and conditions of the offer to sell but to no avail. They received
an information that defendants were about to sell the property, plaintiffs were compelled to
file the complaint to compel defendants to sell the property to them.
RTC: found that defendants' offer to sell was never accepted by the plaintiffs for the reason
that the parties did not agree upon the terms and conditions of the proposed sale, hence,
there was no contract of sale at all.
CA: There was no meeting of the minds between the parties concerning the sale of the
property. Absent such requirement, the claim for specific performance will not lie. Appellants'
demand for actual, moral and exemplary damages will likewise fail as there exists no
justifiable ground for its award.
Issue: Whether or not there was a contract of sale
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.
An option or an offer would require, among other things, 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, the exercise of the right, however, would be dependent
not only on the grantor's eventual intention to enter into 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 relations governed not by contracts (since the essential elements to establish
the vinculum juris would still be indefinite and inconclusive) but by, among other laws of
general application, the pertinent scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment,
like here, its breach 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 element
of consensuality in the perfection of contracts.

Note: right of first refusal cannot be deemed a perfected sale because it

merely pertains to a specific property w/out containing an agreement as to
the price.

3. Vda. De Ape vs. Court of Appeals, G.R. No. 133638, 15 Apr 2005
(anak nga fibaligya iya bahin say utang wa pa nadivide)
Fact:
DOCTRINE: A contract of sale is a consensual contract, thus, it is perfected by mere consent
of the parties. It is born from the moment there is a meeting of minds upon the thing which is
the object of the sale and upon the price.

FACTS: Cleopas Ape was the registered owner of a parcel of land particularly known as Lot
No. 2319 of the Escalante Cadastre of Negros Occidental. When she died, the property was
informally divided by his wife and 11 children, one of the children is Fortunato.

The Spouses Lumayno alleged that Fortunato entered into a contract of sale of land in
exchange for P5,000.00 and that Fortunato agreed to sell his share in Lot No. 2319 to private
respondent. A receipt was given to Fortunato, indicating that Lumayno paid P30 as
an advance payment. In 1973, Lumayno filed a case for "Specific Performance of a Deed of
Sale with Damages" against Fortunato and his wife Perpetua. Lumayno compelled Fortunato
to make the delivery of a deed of sale over Fortunato’s portion on Lot No. 2319. Fortunato, on
the other hand, claimed that he never sold his share in Lot No. 2319 to Lumayno and that his
signature appearing on the purported receipt was forged. The Petitioner claimed that her
husband was illiterate and only learned how to write his name in order to be employed in a
sugar central. CA concluded that private respondent did not have the right to demand the
delivery to her of the registrable deed of sale over Fortunato's portion of Lot No. 2319. CA,
however, rejected Fortunato and petitioner's claim that they had the right of redemption over
the shares previously sold to Lumayno. Hence, this petition.

ISSUE: WHETHER OR NOT the receipt signed by Fortunato proves the existence of a contract
of sale between him and private respondent.

DECISION: No. Fortunato was illiterate; hence, the burden of proving the terms of
the agreement bears on the private respondent---which she failed to do. A contract of
sale is a consensual contract, thus, it is perfected by mere consent of the parties. It is born
from the moment there is a meeting of minds upon the thing which is the object of the sale
and upon the price. Upon its perfection, the parties may reciprocally demand performance,
that is, the vendee may compel the transfer of the ownership and to deliver the object of the
sale while the vendor may demand the vendee to pay the thing sold. For there to be a
perfected contract of sale, however, the following elements must be present: consent, object,
and price in money or its equivalent. To be valid, consent must meet the following requisites:
(a) it should be intelligent, or with an exact notion of the matter to which it refers; (b) it
should be free and (c) it should be spontaneous. Intelligence in consent is vitiated by error;
freedom by violence, intimidation or undue influence; spontaneity by fraud Hence, the Court
annuls the contract of sale between Fortunato and private respondent on the
ground of vitiated consent.
VERSION 2 DOCTRINE: Article 1623 of the Civil Code provides that the right of legal pre-
emption or redemption shall not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as the case may be.

ISSUE: Whether or not Fortunato was furnished with a written notice of sale of the shares of
his co-owners as required by Article 1623 of the Civil Code

DECISION/ DISCUSSION: The petition is partly meritorious. Article 1623 of the Civil Code
provides that the right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor, or by the vendor, as
the case may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners. Art. 1623 of the Civil Code is clear in requiring that the written
notification should come from the vendor or prospective vendor, not from any other person.
In this case, the records show that Fortunato was not given any written notice of prospective
or consummated sale. The 30 day redemption period under the law, therefore, has not
commenced to run. However, the Court still ruled that petitioner could no longer invoke her
right to redeem from private respondent for the exercise of this right "presupposes the
existence of a co-ownership at the time the conveyance is made by a co-owner and when it is
demanded by the other co-owner or co-owners.” As legal redemption is intended to minimize
co-ownership once the property is subdivided and distributed among the co-owners, the
community ceases to exist and there is no more reason to sustain any right of legal
redemption. In this case, records reveal that although Lot No. 2319 has not yet been
formally subdivided, still, the particular portions belonging to the heirs of Cleopas
Ape had already been ascertained and they in fact took possession of their
respective parts.

right of first refusal, the remedy is not a writ of execution on the judgment, since
there is none to execute, but an action for damages in a proper forum for the
purpose.
4. Sps. Torcuator vs. Sps. Bernabe, G.R. No. 134219, 08 Jun 2005
(Yuta na gibaligya bisan naa sa kontrata di pwede)
Facts: The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa,
Metro-Manila, The lower court found that the above parcel of land was purchased by the
Salvadors, from the developers of Ayala Alabang subject  to Conditions. The Salvadors sold
the parcel of land to the Defendant. The Defendant, on the other hand, without making any
improvement, contracted to sell the parcel of land to the Plaintiff who  thereafter had the
plans of their house prepared and offered to pay the Bernabes for the land upon delivery of
the sale contract. For one reason or another, the deed of sale was never consummated nor
was payment on the said sale ever effected. Subsequently, the Defendant sold the subject
land to another. As a result, the Torcuators commenced the instant action against the
Bernabes and Salvadors for Specific Performance or Rescission with Damages.
Issue: Whether the Contract entered by the parties was a Contract to Sell?
Held: Yes, The differences between a contract to sell and a contract of sale is that in a
contract of sale, title passes to the buyer upon delivery of the thing sold, while in a contract
to sell, ownership is reserved in the seller and is not to pass until the full payment of the
purchase price is made. In the first case, non-payment of the price is a negative resolutory
condition; in the second case, full payment is a positive suspensive condition. Being
contraries, their effect in law cannot be identical. In the first case, the vendor has lost and
cannot recover the ownership of the land sold until and unless the contract of sale is itself
resolved and set aside. In the second case, however, the title remains in the vendor if the
vendee does not comply with the condition precedent of making payment at the time
specified in the contract.

Essential elements
5. Manila Metal Container Corp. vs. PNB, G.R. No. 166862, 20 Dec 2006
 (ESSENTIAL ELEMENTS AND EARNEST MONEY)
To secure a P900,000.00 loan from (PNB), Manila Metal executed a real estate mortgage over
the lot. Manila Metal defaulted and PNB filed for a petition for extrajudicial foreclosure of the
real estate mortgage and sought to have the property sold at public auction.
Manila Metal was given a period (expiration--Feb. 17, 1984) to redeem the property, but,
failed to do so. It asked for a one-year extension to redeem the said property.
PNB referred the matter to Pasay City Branch for appropriate action and recommendation.
Some PNB Pasay City Branch personnel 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.
Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of
account, and as of June 25, 1984 Manila Metal’s obligation amounted to P1,574,560.47.
Manila Metal then paid P725,000.00 to PNB as “deposit torepurchase.”
Manila Metal declared that it had already agreed to PNB’s offer to purchase the property for
P1,574,560.47, and that was why it had paid P725,000.00.
PNB informed Manila Metal that its Board of Directors had accepted the offer to purchase the
property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it.
Both trial court and CA ruled that there was no perfected contract of sale between the
parties; hence, Manila Metal had no cause of action for specific performance against PNB.
Held:
There was NO perfected contract of sale between the parties.
A contract of sale is consensual in nature and is perfected upon mere meeting of the minds.
When there is merely an offer by one party without acceptance of the other, there is no
contract. When the contract of sale is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties.
To convert the offer into a contract, the acceptance must be absolute and must not qualify
the terms of the offer; it must be plain, unequivocal, unconditional and without variance of
any sort from the proposal.
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 enough 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.
EARNEST MONEY:

6. Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, 23 May 1995
(STAGES, PRICE)
Facts: Luna L. Sosa, respondent, wanted to purchase a Toyota Lite Ace. A Vehicle Sales
Proposal was accomplished by the agent 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.

Held: This document, executed and signed by Toyota’s sales representative, is not a
perfected contract of sale.
There is no obligation on the part of Toyota to transfer ownership of a determinate thing to
Sosa and there is no correlative obligation on the part of the latter to pay therefor a price
certain appears therein.
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 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. Definiteness as to the price is an essential element of a binding agreement to sell
personal property.
 The provision on the downpayment of P100,000.00 made no specific reference to a sale
of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on
installment basis, as the VSP executed the following day confirmed. But nothing was
mentioned about the full purchase price and the manner the installments were to be
paid.
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 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.
At the most, Exhibit "A" may be considered as part of the initial phase of the
generation or negotiation stage of a contract of sale.

7. E. C. McCullough & Co. vs. Berger, G.R. No. L-19009, 26 Sep 1922
Facts:
E.C. Mccullough and Co., the plaintiff, and Berger, the defendant, entered into an agreement
by which the defendant was to deliver for the plaintiff 501 bales of tobacco to New York City
in good condition. A precept of the agreement stated the following “the shipment of 501 bales
of tobacco sold to you”. The contract was made in February 1918 the draft was payable
ninety days after date; the first shipment of 213 bales of tobacco arrived on April 26, and the
second of 288 bales on May 18. Thereafter, payment was made on May 21, 1918, and the
transaction between the parties then became complete. In between that period, the plaintiff
sold and shipped 75 bales of the tobacco to a customer in Pennsylvania.
However, on May 23, E.C Mcullough Co., upon learning the true condition of the tobacco,
communicated to Berger that the tobacco was unsatisfactory and that it was in a musty
condition.
Which was reiterated on their letter dated June 28, 1918 and in addition to that E.C.
Mcullough Co. expressed their sentiments that they would suffer loss due to the tobacco’s
unsatisfactory quality.
On September 5, the defendant wrote to the New York Agency of the Philippine National Bank
that he would take the tobacco back on a condition that there should be no shortage in the
number of bales of tobacco; however, the offer was not actually made to the plaintiff until
October and was based upon the condition that the full amount of the 501 bales should be
returned, which was an impossible condition for the plaintiff to perform since some of which
were already sold. The plaintiff did offer to account to the defendant the tobacco which they
had sold and at the same time to return all the unsold tobacco which was then in their
warehouse. However, the defendant declined the offer.
Issue: Whether the word “sold” used in the written contract shows that the sale was
completed?
Held: No, Although the word “sold” is used in the written contract, the transaction shows that
the sale was not complete until the arrival of the goods in New York. The defects in the
tobacco were inherent and could not be ascertained without opening the bales and making a
physical examination. When this was done, the plaintiff promptly cabled the defendant that
the tobacco was not satisfactory. In the nature of things, the plaintiff could not then render
the defendant a statement of the amount of this claim. By the terms of the contract, the
defendant guaranteed the arrival of the tobacco in New York “in good condition.” The
testimony is conclusive that the plaintiff in good faith tried to sell the tobacco, and that he
sold the 141 bales at the best obtainable price; that the only reason why he did not sell the
remainder was because the tobacco was not “in good condition;” and that when he first knew
that it was not “in good condition,” he promptly cabled that defendant that it was
unsatisfactory. As we construe the record, after the tobacco was inspected, the plaintiff
promptly advised the defendant that it was unsatisfactory, and that he would have to sustain
a loss, and in good faith undertook to protect the defendant and to minimize the loss, and
plaintiff’s claim is not barred by the provisions of either article 336 or 342 of the Code of
Commerce.
Although the word "sold" is used in the written contract, the transaction shows that the sale
was not complete until the arrival of the goods in New York.
EXECUTORY CONTRACT. — Where by a writing made in Manila B guaranteed "the
arrival of the tobacco in New York in good condition," and at the time the tobacco
 was in transit on the high seas and by its terms the tobacco was to be delivered and
received in New York, the contract was executory and the title to it did not pass until
after the arrival of the tobacco in New York.
SALE WAS NOT COMPLETE. — Although the contract was made in Manila, under the
facts shown, articles 336 and 342 of the Code of Commerce do not apply. The
contract was executory and the sale was not complete until after "the arrival of the
tobacco in New York in good condition.
CONDITION PRECEDENT. — Where under the terms of a contract made in Manila the
defendant was to deliver "the tobacco in New York in good condition" at which time
the Plaintiff should pay the contract price, "the arrival of the tobacco in New York in
good condition" was a condition precedent to the completion of the sale.

8. Sps. Portic vs. Cristobal, G.R. No. 156171, 22 Apr 2005

Facts: Spouses Portic acquired a parcel of land with a 3 door apartment from spouses
Alcantara even though they’re aware that the land was mortgaged the SSS. Portic defaulted
in paying SSS. The Portics then executed a contract with Anastacia Cristobal and the latter
agreed to buy the said property for P200k. Cristobal’s down payment was P45k and she also
agreed to pay SSS.
Thereafter, a transfer Certificate of Title was executed in favor of Cristobal. Petitioners
demanded from respondent the alleged unpaid balance of P55, 000.00, but the latter refused
to pay. Petitioners claimed that they sold the subject property to respondent on the condition
that respondent shall pay the balance on or before May 22, 1985; that in case of failure to
pay, the sale shall be considered void and petitioners shall reimburse respondent of the
amounts already paid; that respondent failed to fully pay the purchase price within the
period; that on account of this failure, the sale of the subject property by petitioners to
respondent is void.
Respondent on her part claimed that her title over the subject property is already
indefeasible; that the true agreement of the parties is that embodied in the Deed of Absolute
Sale with Assumption of Mortgage; that respondent had fully paid the purchase price; that
respondent is the true owner of the subject property; that petitioners claim is already barred
by laches.
Issue: Whether or not there was a contract of sale in this case.
Held: NO. What transpired between the parties was a contract to sell. The provision of
the contract characterizes the agreement between the parties as a contract to sell, not a
contract of sale.  Ownership is retained by the vendors, the Portics; it will not be passed to
the vendee, the Cristobals, until the full payment of the purchase price.  Such payment is a
positive suspensive condition, and failure to comply with it is not a breach of
obligation; it is merely an event that prevents the effectivity of the obligation of the
vendor to convey the title.  In short, until the full price is paid, the vendor retains
ownership. Also, the mere issuance of the Certificate of Title in favor of Cristobal did not
vest ownership in her. Neither did it validate the alleged absolute purchase of the lot. 
Registration does not vest, but merely serves as evidence of title.
An agreement in which ownership is reserved in the vendor and is not to
pass to the vendee until full payment of the purchase price is known as a
contract to sell. The absence of full payment suspends the vendors’
obligation to convey title. This principle holds true between the parties, even
if the sale has already been registered. Registration does not vest, but
merely serves as evidence of, title to a particular property. Our land
registration laws do not give title holders any better ownership than what
they actually had prior to registration.

9. Heirs of Mascuñana vs. Court of Appeals, G.R. No. 158646, 23 Jun 2005
Facts: Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of land .
Over time, Gertrudis and two other co-owners sold each of their one-seventh (1/7) shares, or
a total area of 741 square meters, to Jesus Mascuñana. The latter then sold a portion of his
140-square-meter undivided share of the property to Diosdado Sumilhig. Mascuñana later
sold an additional 160-square-meter portion to Sumilhig on April 7, 1961. In a Deed of
Absolute Sale executed on Aug. 21, 1961, Mascuñana, as vendor, sold an undivided 469-
square-meter portion of the property for ₱4,690.00, with ₱3,690.00 as down payment,with
the terms of payment which states that the balance of ₱1,000.00 shall be paid by Sumilhig
unto Mascunana as soon as the above-portions of Lot 124 shall have been surveyed in the
name of the Sumilhig and all papers pertinent and necessary to the issuance of a separate
Certificate of Title in the name of the Sumilhig shall have been prepared. Meanwhile,
Mascuñana died intestate on April 20, 1965 and was survived by his heirs.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property on a portion of Lot No.
124-B with an area of 469 square meters and the improvements thereon, in favor of Corazon
Layumas, the wife of Judge Rodolfo Layumas, for the price of ₱11,000.00. The spouses
Layumas, moreover, took possession of the property and caused the cutting of tall grasses
thereon. In January 1985, the spouses Layumas allowed Aquilino Barte to stay on a
portion of the property to ward off squatters.
On November 17, 1986, the heirs of Mascuñana filed a Complaint for recovery of possession
of Lot No. 124-B and damages with a writ of preliminary injunction, alleging that they owned
the subject lot by virtue of successional rights from their deceased father. They averred
that Barte surreptitiously entered the premises, fenced the area and constructed a
house thereon without their consent. In their answer, the spouses Layumas filed a Motion
for Leave to Intervene, alleging therein that they had a legal interest in Lot No. 124-B-1 as its
buyers from Sumilhig, who in turn purchased the same from Mascuñana. The petitioners
appealed the decision to the Court of Appeals. They claim that the contract between between
their father and Sumilhig was a mere contract to sell because at the time of the said sale, the
late Mascuñana was not yet the registered owner of Lot No. 124 or any of its portions. They
assert that Sumilhig could not have acquired any rights over the lot due to the fact that a
person can only sell what he owns or is authorized to sell, and the buyer can acquire no more
than what the seller can transfer legally. Finally, the petitioners insist that the document in
controversy was subject to a suspensive condition, not a resolutory condition, which is a
typical attribute of a contract of sale.
CA: the contract was denominated as a “Deed of Absolute Sale.” The stipulations in the
contract likewise revealed the clear intention on the part of the vendor Mascuñana to alienate
the property in favor of the vendee Sumilhig.
ISSUE:
Whether or not the contract of alienation of Lot No. 124-B in favor of Sumilhig in 1961 was a
contract of sale.
Held:
YES. A contract of sale, which can be absolute or conditional, has three elements, namely:
consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price; determinate subject matter; and price certain in money or its equivalent. In the
transaction between Jesus Mascunana and Diosdado Sumilhig, there was a meeting of the
minds between the vendor (Jesus Mascunana) and the vendee (Diosdado Sumilhig), when the
vendor undertook to deliver and transfer ownership over the property covered by the deed of
absolute sale to the vendee for the price of ₱4,690.00 of which ₱3,690.00 was paid by the
vendee to the vendor as down payment. The vendor undertook to have the property sold,
surveyed and segregated and a separate title therefore issued in the name of the vendee,
upon which the latter would be obliged to pay the balance of ₱1,000.00. There was no
stipulation in the deed that the title to the property remained with the vendor, or that the
right to unilaterally resolve the contract upon the buyer’s failure to pay within a fixed period
was given to such vendor. Patently, the contract executed by the parties is a deed of sale and
not a contract to sell.
Even if Sumilhig was not yet able to pay his balance of P 1,000, it does not
prevent the contract of sale to be of full force and effect. This is because, in the
contract, there is no reservation of ownership nor a stipulation providing for a
unilateral rescission by either party on the grounds of failure to pay this
balance.
As provided in Article 1458 of the New Civil Code, when the sale is made through a public
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 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 Layumas
family had been in actual possession of the property and had designated Barte as their
overseer.
It is settled that a perfected contract of sale cannot be challenged on the ground of
the non-transfer of ownership of the property sold at that time of the perfection of
the contract, since it is consummated upon delivery of the property to the vendee.
It is through tradition or delivery that the buyer acquires ownership of the property
sold.

10. Ursal vs. Court of Appeals, G.R. No. 142411, 14 Oct 2005
(nihunong syag bayad sa balay kay wa pa man gibalhin sa iya ang titulo)

FACTS: In January 1985, Winifreda Ursal and spouses Jesus and CristitaMoneset entered into
a “Contract to Sell Lot & House”. The amount agreed upon was P130, 000.00. Moreover, Ursal
is to pay P50, 000.00 as down payment and will continue to pay P3000.00 monthly starting
the next month until the balance is paid off. After 6 months, Ursal stopped paying the
Monesets for the latter failed to give her the transfer of certificate title.In November 1985,
the Monesets executed an absolute deed of sale with one Dr.Canora. Also, the Monesets
mortgaged the same property to the Rural Bank of Larena for P100, 000.00. Unfortunately,
the Monesets failed to pay the P100, 000; hence, the bank filed for foreclosure.
Trial ensued and the RTC ruled in favor of Ursal. The trial court ruled that there was fraud on
the part of the Monesets for executing multiple sales contracts. That the bank is not liable for
fraud, but preference to redeem should be given to Ursal. The Monesets are ordered to
reimburse Ursal plus to pay damages and fees. However, Ursal was not satisfied as she
believed that the bank was also at fault.
ISSUE: Whether or not the Contract to Sell vested ownership in Ursal.
RULING:
NO. A contract to sell is a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the purchase price.
Moreover, the prospective seller expressly reserves the transfer of title to the
prospective buyer, until the happening of an event, which in this case is the full
payment of the purchase price. What the seller agrees or obligates himself to do is
to fulfill his promise to sell the subjecvt property when the entire amount of the
purchase price is delivered to him.
Since the contract in this case is a contract to sell, the ownership of the property
remained with the Monesets even after petitioner had paid the down payment and
took possession of the property.

11. Carrascos, Jr. vs. Court of Appeals, G.R. Nos. 123672 & 164489, 14 Dec 2005

Facts:
El Dorado Plantation, Inc. executed a Deed of Sale with Fernando Carrascoso, Jr.
through its board member Lauro Leviste. The subject of the sale was a parcel of land
with an area of approximately 1,825 hectares. The petitioner was to pay P1.8M, P290,000
would be paid to PNB to settle the mortgage upon said land. The remaining balance of P1.3M
plus 10% interest would be paid over the next 3 years. The petitioner obtained a total of
P1.07M as mortgage and used the same to pay the down payment agreed upon the
stipulation of the contract. The petitioner failed his obligation which was supposed to be
settled on March 25, 1975. Lauro Leviste sent the petitioner letters to make good his end of
the contact, otherwise, petitioner will be litigated.
El Dorado filed a civil case against the petitioner where the RTC rule in favor of the latter.
The CA reversed the RTC ruling.
Issue:
Whether or not the contract of sale was valid?
SC Ruling:
YES. The Court held that the contract between El Dorado and Carrascoso was a contract of
sale. It was perfected by their consent or meeting of minds and was consummated by the
delivery of the property to the buyer. El Dorado already performed its obligation through the
execution of the Deed of Sale of Real Property which effectively transferred ownership of the
property to Carrascoso. The latter failed to perform his correlative obligation of paying in full
the contract price in the manner and within the period agreed upon. A contract of sale is a
reciprocal obligation. The seller obligates itself to transfer the ownership of land and deliver a
determinate thing, and the buyer obligates itself to pay therefor a price certain in money or
its equivalent. Such failure to pay the price in the manner prescribed by the contract of sale
entitles the unpaid seller to sue for collection or to rescind the contract
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 a contract of sale, the vendor has lost and cannot recover ownership
until and unless the contract is resolved or rescinded; whereas in a contract to
sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title
from becoming effective.
•In a conditional contract of sale, 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.
•Whereas in a contract to sell, upon fulfillment of the suspensive
condition, 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.

12. Keppel Bank Philippines, Inc. vs. Adao, G.R. No. 158227, 19 Oct 2005
(condo na gibalhin ang panag-iya sa lain, ang nagtag-iya papahawaon sa bag-
ong naka palit)
FACTS:
Project Movers Realty and Development Corporation assigned, transferred and conveyed to
Keppel Bank Philippines, Inc. twenty-five properties consisting of townhouses, condominium
units and vacant lots by way of dacion en pago by virtue of the court-approved Compromise
Agreement. This is to partially settle PMRDC’s two hundred million (200,000,000) outstanding
obligation with Keppel Bank. It later turns out that one of the 25 units was actually occupied
by respondent Philip Adao. Petitioner Keppel Bank then sent a written demand to respondent
on February 18, 2000 to vacate Unit 4 of Luxor Villas Townhouse within 30 days from receipt
of notice. Adao refused together with an offer to purchase the unit which did not come into
terms for the two parties.
An ejectment case was filed against respondet.
Adao, contested that he had a Contract to Sell with PRMDC and that he made payment of
three million thereof. He also added the fact that he to purchase the unit with the
consideration of 2.5 million pesos. The MeTC, RTC, and CA ruled in favor of the respondent.
The lower courts upheld that the petitioner give respect to the contract to sell between Adao
and PRMDC since the way of transfer was dacion en page, which meant that Keppel Bank is
merely filling in the shoes of PRMDC.
ISSUE:
Whether or not Keppel Bank is bound by the Contract to Sell between Adao and PRMDC.
RULING:
No. Keppel Bank is not bound by the Contract to Sell. While it may be true that
Keppel Bank is not a purchaser in good faith for banks are required to exercise more
care and prudence than private individuals and that they should have sent
representatives to examine the properties involved so that it would have discovered that
respondent was already occupying one of the condominium units and that a contract to
sell existed between respondent and PMRDC, the petitioner should not be bound by the
executed Contract to Sell between Adao and PRMDC.
The Court also laid out the difference between the Contract of Sale and Contract to Sell
wherein in the latter it mentioned that there is yet no actual sale nor any transfer of title,
until and unless, full payment is made. 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. Clearly, Adao must need to have fully-paid the price before he can
acquire title and retain ownership of the property. However, respondent failed
discharge the burden of proving payment. This manifests the mere tolerance of the
seller in his continuing possession of property and that the moment he received
demand to vacate, he should have left the property. When the respondent decided to do
the contrary, his stay in the unit became illegal.
Therefore, Keppel Bank is not bound to the Contract to Sell executed between
respondent and PRMDC and respondent is ordered to vacate the property.
CONTROLING DOCTRINE.
“With an option to buy or to sell is not supported by a consideration separate from the
purchase price, the option constitutes an offer to buyer to sell which may be withdrawn
by the offeror at any time prior to the communication of the offeree’s acceptance. When
the offer is duly accepted, the mutual promise to buy and sell a determinate thing for a
price is reciprocally demandable (Par. 1, Art. 1479)”
In PNOC vs. Keppel, reiterating Sanchez vs. Rigos - Even if there’s no consideration
given, for as long as acceptance is communicated to the offeror, he can no longer
withdraw.
Thus, when Keppel communicated its acceptance, the offer to purchase the Bauan land
stood, not having been withdrawn by PNOC. The offer having been duly accepted, a
contract to sell the land ensued which Keppel can rightfully demand PNOC to comply
with.
Option without separate consideration
• General Rule: When the offer is not supported by a separate consideration (being in the
form of money or its equivalent), the offer stands but, in the absence of a binding
contract, the offeror may withdraw it any time.
• Exception: Once the acceptance of the offer is duly communicated before the
withdrawal of the offer, a bilateral contract to buy and sell is generated which, in
accordance with the first paragraph of Article 1479 of the Civil Code, becomes
reciprocally demandable.

13. Sps. Edrada vs. Sps. Ramos, G.R. No. 154413, 31 Aug 2005
(sakyanan pandagat)
FACTS:
Spouses Ramos were the owners of two (2) fishing vessels, the “Lady Lalaine” and the
“Lady Theresa.”they executed an untitled handwritten document which acknowledged the
receipt of the fishing vessels to Spouses Edrada.
The same document also declared that the agreed price for the vessels was in the sum of
Nine Hundred Thousand Pesos (PHP900,000.00), Philippine currency, and that the papers
necessary will follow.
Upon the signing of the document, the petitioners delivered four (4) post-dated checks
which eventually was dishonored by reason of a “stop payment” order.
-the respondents filed before the RTC an action against the petitioners for specific
performance with damages, praying that the latter be obliged to execute a deed of sale
and to pay the balance of the vessels’ purchase price.
-The respondents asserted that the abovementioned document had duly evinced a contract
to buy. For their part, the petitioners contended that the original agreement was that the
vessels would be sold to them should they find the same profitable for business. The
petitioners claimed thay they were allowed them to manage or administer the fishing
vessels as a business on the understanding that should they find the business profitable,
the vessels would be sold to them that since the vessels were in dilapidated condition,
they had to spend a hefty sum on maintenance and repairs. This prompted them to back
out from having possession of the vessels.
 ISSUE/S Whether or not the untitled handwritten document executed by the parties
constituted a perfected contract of sale and had obligatory force.
HELD:
NOT A PERFECTED CONTRACT OF SALE
For lack of manifest agreement between the parties as to the terms of the sale of
the vessels, the Court ruled that the document in question was not a perfected
contract of sale and therefore had no obligatory force. A contract of sale is an
agreement whereby one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefore a price
certain in money or equivalent. There must be unequivocal consent on the part of the
seller to transfer and deliver, and on the part of the buyer to pay. In the case herewith,
the document in question merely (1) acknowledged the purchase price of the
vessels and the hand-over of the vessels to the petitioners, and (2) confirmed the
parties’ commitment to subsequently accomplish pertinent documents. These
subsequent documents would have formalized the transfer of ownership and
expressed the terms and period of payment; however, none were ever executed.
Hence, there was no unequivocal consent or agreement between the parties as to
their respective obligation to transfer ownership of the vessels and to pay for the
same. Although the document in question had in fact stipulated the vessels’ purchase
price, it still could not be considered tantamount to the perfection of a contract of
sale. Existing jurisprudence as in Swedish Match, AB v. Court of Appeals, emphasizes that
before a contract of sale can exist and be considered valid and binding, the manner and
period of payment must first be established. Further, the absence of such a period
indicated that at the time of the filing of the complaint, the obligation to pay was
not yet due and demandable, which therefore failed the requirement for the
judicial enforcement of an obligation. Accordingly, the absence of definite terms
of payment would preclude its judicial enforcement since a requisite for the
judicial enforcement of an obligation is that the same is due and demandable.
While the respondents averred that an agreement had been made for the payment of the
balance of the vessels’ purchase price on June 30, 1996, their filing of the Complaint before
the RTC on June 03, 1996 only proved the prematurity of their action. At that time, the
maturity date for the balance had not even arrived yet. Neither did the respondents avail of
the relief under Article 1197 of the Civil Code for the courts to fix the period of the
obligation in the absence of an agreement between the parties.

Subject matter (things & rights)

14. Philippine Free Press vs. CA
Facts:
Philippine Free Press Magazine, one of the widely circulated political magazines in the
Philippines purchased a parcel of land situated at No. 2249, Pasong Tamo Street, Makati
which had an area of 5,000 square meters as evidenced by . . . (TCT) No. 109767 issued by
the Register of Deeds of Makati.
Sometime during the middle of 1973, Locsin, Sr. was contacted by Brig. Gen. Hans
Menzi, the former aide-de-camp of then President Marcos concerning the sale of the
[petitioner]. Locsin, Sr. requested that the meeting be held inside the [petitioner]
Building and this was arranged by Menzi.
 On October 23, 1973, the parties [petitioner, as vendor and private respondent,
represented by B/Gen. Menzi, as vendee] met . . . and executed two (2) notarized Deeds of
Sale covering the land, building and the machineries of the [petitioner]. Menzi paid the
balance of the purchase price in the amount of . . . (P4,750,000.00) Pesos.
Petitioner contends, however, that the 4-year prescriptive period could not
have commenced to run on October 23, 1973, martial law being then in full swing.
Plodding on, petitioner avers that the continuing threats on the life of Mr. Teodoro
Locsin, Sr. and his family and other menacing effects of martial law - which should
be considered as force majeure - ceased only after the February 25, 1986 People
Power uprising.
On February 26, 1987, [petitioner] filed a complaint for Annulment of Sale against
[respondent] Liwayway and the PCGG before the Regional Trail Court of Makati, Branch 146
on the grounds of vitiated consent and gross inadequacy of purchase price.

Issue:

Held:

Lest it be overlooked, gross inadequacy of the purchase price does not, as a matter of civil
law, per se affect a contract of sale. Article 1470 of the Civil Code says so. It reads:

Article 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.

Following the aforequoted codal provision, it behooves petitioner to first prove "a defect in
the consent", failing which its case for annulment contract of sale on ground gross inadequacy
of price must fall. The categorical conclusion of the Court of Appeals, confirmatory of that of
the trial court, is that the price paid for the Free Press’ office building, and other physical
assets is not unreasonable to justify the nullification of the sale. This factual determination,
predicated as it were on offered evidence, notably petitioner’s Balance Sheet as of November
30, 1972 (Exh. 13), must be accorded great weight if not finality.

15. SPS. CRUZ VS. SPS. FERNANDO (G.R. NO. 145470, 09 DEC 2005) AUSTRIA-
MARTINEZ, J

FACTS:
Spouses Cruz are occupants of the front portion of a property located in Bulacan. On October
21, 1994, spouses Fernando filed before the RTC a complaint for accion publiciana against
petitioners, demanding the latter to vacate the premises and to pay the amount of P500.00
as monthly rental. Respondents alleged among others that they are the owners of the said lot
per a Deed of Sale executed on March 9, 1987 and that the offer to sell the rear portion of
the property by Clodualdo and Teresita Glorioso (Gloriosos) embodied in a “Kasunduan” in
favor of the spouses Cruz did not materialize.
Petitioners, on the other hand, contended that the Kasunduan is a perfected contract of sale,
that the agreement has already been partially consummated as they already relocated their
house from the rear portion of the lot to the front portion that was sold to them and that the
respondents are buyers in bad faith having bought that portion of the lot occupied by them
with full knowledge of the prior sale to them by the Gloriosos.
The RTC ruled in favor of respondents which was later affirmed by the Court of Appeals.
Hence, this instant petition.
ISSUE:
Whether or not the Kasunduan is a mere contract to sell and not a perfected contract of sale?
RULING:
The Kasunduan is a contract to sell. Under Article 1458 of the Civil Code, a contract of
sale is a contract by which one of the contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent. In a contract of sale, the title to the property passes to the vendee
upon the delivery of the thing sold, as distinguished from a contract to sell where ownership
is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment
of the purchase price.
The Kasunduan provides the following terms and conditions: (a) that the Gloriosos agreed to
sell to petitioners a portion of the property with an area of 213 meters at the price of P40.00
per square meter; (b) that in the title that will be caused to be issued, the aggregate area is
223 square meters with 10 meters thereof serving as right of way; (c) that the right of way
shall have a width of 1.75 meters from Lopez Jaena road going towards the back of the lot
where petitioners will build their house on the portion of the lot that they will buy; (d) that
the expenses for the survey and for the issuance of the title will be divided between the
parties with each party giving an amount of no less than P400.00; and (e) that petitioners will
definitely relocate their house to the portion they bought or will buy by January 31, 1984.
For one, the Kasunduan lacks the definite manner of payment (formal deed of
conveyance) which is an essential element before a valid and binding contract of
sale can exist. Second, there existed another suspensive condition that petitioners will
relocate their house to the rear portion which they will buy and which they failed to comply
with. Thus, no obligation on the part of the Gloriosos, the original owner to consider it as
having been sold because of the petitioner’s non-fulfillment of the suspensive condition.
Moreover, petitioners admit that they have not paid a single centavo due to the fact
that there is yet to be a survey made. However, a survey was indeed made six days after
the execution of the Kasunduan. Lastly, there is no need for judicial rescission for the
obligation is non-existent for the simple reason that the obligation of the Gloriosos to
transfer the property to petitioners has not yet arisen. Hence, petitioners have no
superior right of ownership over the property. In fact, they were just able to live and build
their house on the lot through the permission and kindness of the previous owner who was
their relative.
A person who occupies the land of another at the latter's forbearance or permission without
any contract between them is necessarily bound by an implied promise that he will vacate
upon demand.

16. Morales Dev. Co vs. CA

(gibaligya na nga yuta sa tag-iya nya gikwaan ug bag-ong titulo kay Nawala, sus
kay naa ra man diay ang titulo na una eh di gibaligya na sd niya usab ug lain.
Double Sale: gi mortgage pag ikaduha
Principle: Bad faith and inadequacy of the monetary consideration do not render a
conveyance inexistent, for the assignor's liberality may be sufficient cause for a valid
contract.
 Facts:
Lot No. 2488 used to belong to Enrique P. Montinola and was covered by TCT No. T-15687 of
the Register of Deeds in his name. Alleging that his owner's duplicate copy of said certificate
had been lost, Montinola succeeded in securing order for the issuance of a second owner's
duplicate, with which he managed to sell the lot to Pio Reyes. Upon registration of the deed of
sale to the latter, said TCT No. T15687 was cancelled and, in lieu thereof, TCT No. 21036, in
the name of Reyes. Sps Abella purchased the land from Reyes, whereupon the deed of
conveyance, executed by Reyes, was registered and the Abellas got TCT No. 21037 in their
name, upon cancellation of said TCT No. 21036. About seven (7) months later, the Abellas
sold the land, for P7,000, — of which P4,500 was then paid — to the Deseos, who
immediately took possession of the property. It appears, however, that the first owner's
duplicate of TCT No. T-15687 was either never lost or subsequently found by Montinola,
who, making use of it, mortgaged the lot in question to the Philippine National
Bank, for P700. Then, Montinola sold the property to Morales, for P2,000, from which the
sum due to the Bank was deducted. Upon presentation of the deed of sale in favor of Morales,
the latter was advised by the office of the Register of Deeds of Quezon that said TCT No. T-
15687 had already been cancelled and the property sold, first, to Pio Reyes, and, then, to the
Abellas. Thereupon, Morales filed a petition for the annulment and cancellation of the second
owner's copy of TCT No. T-15687. After due notice to Reyes and the Abellas, but not to the
Deseos. Having been unable to register the deed of conveyance executed by the Abellas, the
Deseos commenced, in the court aforementioned, the present action against Morales, for the
annulment of the subsequent sale thereto by Montinola, and the registration of said deed of
conveyance in their (Deseos) favor, alleging that the same enjoys preference over the sale to
Morales, the Deseos having, prior thereto, bought lot No. 2488 in good faith and for value,
and having been first in possession of said lot, likewise, in good faith. Upon the other hand,
Morales claimed to have a better right upon the ground that it had bought the property in
good faith and for value, relying upon the first owner's duplicate copy of TCT No. T-15687,
unlike the Deseos, whose predecessor in interest, Pio Reyes, had relied upon the second
owner's duplicate, which — Morales alleged had been secured fraudulently, and that the sale
to Reyes and that made by the latter to the Abellas are null and void, because both sales took
place under suspicious circumstances, so Morales concluded that they were not purchasers in
good faith and for value.
 
RTC Ruling: The court of first instance sustained the contention of Morales and rendered
judgment in its favor.
 
CA Ruling: Judgment appealed from is hereby reversed and another one entered in favor of
the plaintiffs (Deseos) and against the defendant (Morales) declaring said plaintiffs to be the
lawful and absolute owners; declaring the deed of sale executed by Enrique P. Montinola in
favor of defendant covering the same property as null and void;
 
Issues: 1. Whether or not inadequacy of price as consideration renders the sale rescissible
or voidable.
2. Whether or not petitioner has better title over the property in question against the private
respondents.
 
SC Ruling:
For Issue No. 1: The major premise thereof is based upon the fact that the consideration
stated in the deeds of sale in favor of Reyes and the Abellas is P1.00. It is not unusual,
however, in deeds of conveyance adhering to the Anglo-Saxon practice of stating that the
consideration given is the sum of P1.00, although the actual consideration may have been
much more. Moreover, assuming that said consideration of P1.00 is suspicious, this
circumstance, alone, does not necessarily justify the inference that Reyes and the Abellas
were not purchasers in good faith and for value. Neither does this inference warrant the
conclusion that the sales were null and void ab initio. Indeed, bad faith and inadequacy of
the monetary consideration do not render a conveyance inexistent, for the
assignor's liberality may be sufficient cause for a valid contract.
 
For Issue No. 2: Deseos had bought the land in question for value and in good faith, relying
upon the transfer certificate of title in the name of their assignors, the Abellas. The sale by
the latter to the former preceded the purchase made by Morales, by about eight (8) months,
and the Deseos took immediate possession of the land, which was actually held by them at
the time of its conveyance to Morales by Montinola, and is in the possession of the Deseos, up
to the present. Then, again TCT No. T-15687, in the name of Montinola, had been cancelled
over a year before he sold the property to Morales, who, in turn, was informed of this fact,
what it sought to register the deed of conveyance in its favor. It should be noted, also, that
TCT No. 21037, in the name of the Abellas, on which the Deseos had relied in buying the lot
in dispute, has not been ordered cancelled. Since the object of this litigation is a registered
land and the two (2) buyers thereof have so far been unable to register the deeds of
conveyance in their respective favor, it follows that "the ownership" of said lot pertains
to the Deseos, as the only party who took possession thereof in good faith.

17. Laperal vs. Rogers

(yuta na gibaligya sa mga hapon pero after pila ka years ana ang tag-iya wad aw to
nabayran)
Facts
Roberto Laperal was the owner of a residential lot and building which was situated at No.
1570 Arlegui St. San Miguel, Manila. He sold the said lot to the Republic of the Philippines
which was controlled by the Japanese Military for the sum of P500,000.00 in Japanese Military
war notes. Pursuant to Executive Order No. 9818 of the President of the United States, the
said property was transferred to the Philippine Alien Property Administrator to be held, used,
administered, liquidated, sold or otherwise dealt with. On April 27, 1947, Roberto Laperal filed
a claim for the property and hi sallegations were that in executing the deed of sale he was
under duress and the representative of the Japanese Administration had threatened him. The
consideration of P 500,000.00 was also grossly inadequate for the property.
The main oral evidence presented by appellee to prove the duress relied upon was his
testimony; that of his son Oliverio Laperal, and the deposition of Gen. Takagi Wachi, former
chief of the Japanese Military Administration in the Philippines during the Japanese
occupation. Summarized, it shows the following
 Issue
Whether or not the contract of sale was valid
 Ruling
During the second world war, the Japanese Army have occupied private properties in the City
of Manila and elsewhere in the country without the authority of their owners. In this case, the
property was acquired under duress and that the consideration was considered as grossly
inadequate. It was recognized by the trial court that there was a reasonable and well-
grounded fear for suffering a possible injury if the plaintiff had not sold his lot to the Japanese
Military. It would be a ground that there was no consent and the consent of the plaintiff was
vitiated. Also in Article 1470 of the Civil Code it states that gross inadequacy of price
does not affect a contract of sale, expect as it may indicate a defect in the consent,
or that the parties really intended a donation or some other act or contract. This
would mean that the contract may be annulled on the grounds that there is vitiated
consent and that if the price is so inadequate as to shock the conscience of the
Court, it will set aside. In the case, what was paid was just below half of what is the
real value of the property. Thus, the price is considered as grossly inadequate.
Wherefore, the decision appealed if affirmed.

18. De Leon vs. Salvador

Facts:
The court of Judge Fernando A. Cruz issued a Judgment in favor of Enrique de Leon the
amount 35,000 pesos worth of damages against Eusebio Bernabe and that a writ of execution
was issued for the two parcels of land of Eusebio Bernabe, sold at an execution sale which
was bought by Aurora De Leon for 30,194 pesos being the highest bidder which was held on
February 14 1967, the property being then subject to an existing mortgage lien in the amount
of 120,000. The sheriff executed the corresponding certificate of sale in her favor which was
registered on February 21 1967.
February 7 1968 two weeks before the expiration of the one-year period to redeem the
properties sold in execution, Bernabe filed a separate civil action against his judgment
creditor Enrique de leon, Aurora P. De leon and the sheriff for the purpose of setting aside the
execution sale for being anomalous and irregular before the Judge Serafin Salvador who
issued on February 19 1968 a writ of preliminary injunction enjoining the defendans,
particularly the sheriff to desist from taking further proceeding of the properties of defendant
and from issuing a sheriffs deed of sale at the expiration of the period of redemption on
February 21 1968 in favor defendant Aurora P. de Leon. Judge Salvador then issued on may
20 2969 an order granting two ex-parte motion of Bernabe and ordering the sheriff to allow
bernabe to redeem the two properties sold at public auction under the writ of execution
issued by Judge Cruz court in the first case. Thus an action for certiorari was filed by Aurora
and Bernabe also filed an action for certiorari impleading the sheriff for the annulment and
revocation of the questioned orders of Judge Cruz.
Issue: which court, Branch XII presided by Judge Cruz or Branch XIV presided by Judge
Salvador has exclusive jurisdiction to set aside for alleged irregularities the execution sale
held on February 14, 1967 by virtue of the writ for the execution of the final judgment in the
first case (No. C-189) issued by Judge Cruz’ court and to order a new auction sale — which
was the relief sought by the judgment debtor in the second case (No. C-1217) in Judge
Salvador’s court?
Ruling:
As to the alleged gross inadequacy of the price of P30, 194.00 paid by Aurora when according
to Bernabe the properties could have been easily sold for a total price of P385, 000.00,
Bernabe has admitted that there was an existing mortgage lien on the properties in the
amount of P120, 000,00 which necessarily affected their value. the applicable rule on forced
sales where the law gives the owner the right of redemption was thus stated by the Court in
Velasquez v. Coronel: "However, while in ordinary sales for reasons of equity a transaction
may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks
one’s conscience as to justify the courts to interfere, such does not follow when the law gives
to the owner the right to redeem, as when a sale is made at public auction, upon the theory
that the lesser the price the easier it is for the owner to effect the redemption. And so it was
aptly said: ‘When there is the right to redeem, inadequacy of price should not be material,
because the judgment debtor may reacquire the property or also sell his right to redeem and
thus recover the loss he claims to have suffered by reason of the price obtained at the auction
sale.

19. Velasco vs. Court of Appeals

One-liner / Principle:
The seller and the buyer need to have a definite agreement on the manner of
payment of the purchase price in order for the contract of sale to be binding.
Facts:
The petitioner and Magdalena Estate, Inc. had entered into a contract of sale by virtue of
which the defendant offered to sell the petitioner and the petitioner in turn agreed to buy
2,059 square meters of Lot 15, Block 7, Psd-6129, located in New Manila for the total
purchase price of P100,000.00.
The agreement was that the petitioner was to give a down payment of P10,000.00 to be
followed by P20,000.00 and the balance of P70,000.00 would be paid in installments, the
equal monthly amortization of which was to be determined as soon as the P30,000.00 down
payment had been completed. It is further alleged that the petitioner paid down payment of
P10,000.00 on November 29, 1962, and that when on January 8, 1964 he tendered to
Magdalena Estate, Inc. the payment of the additional P20,000.00 to complete the
P30,000.00, which Magdalena Estate, Inc. refused to accept and that eventually it likewise
refused to execute a formal deed of sale obviously agreed upon.
Magdalena Estate, Inc. denies that it has had any direct dealings or contractual relations with
the petitioner regarding the property in question. In addition, a portion of the property in
question was being leased by Socorro Velasco who indicated her desire to purchase the lot;
that Magdalena Estate, Inc. indicated its willingness to sell the property to her at the price of
P100,000.00. Socorro Velasco offered to pay P10,000.00 as initial payment instead of the
agreed P20,000.00 but because the amount was short of the alleged P20,000.00 the same
was accepted merely as deposited and upon request of Socorro Velasco the receipt was made
in the name of her brother-in-law the petitioner herein; that Socorro Velasco failed to
complete the down payment of P30,000.00 and neither has she paid any installments on the
balance of P70,000.00 up to the present time; that it was only on January 8, 1964 that
Socorro Velasco tendered payment of P20,000.00, which offer Magdalena Estate, Inc. refused
to accept because it had considered the offer to sell rescinded on account of her failure to
complete the down payment on or before December 31, 1962.
Lorenzo Velasco testified that Socorro Velasco is his sister-in-law and that he had he had
authorized her to negotiate with Magdalena Estate, Inc. with regards to the purchase of the
property in question since he was not fluent in English.
Issue:
Whether or not the talks between the Magdalena Estate, Inc. and Lorenzo Velasco
either directly or through Socorro Velasco ripened into a contract of sale.
 Ruling:
 NO. The minds of the parties did not meet in regard to the manner of payment. A
definite agreement on the manner of payment of the purchase price is an essential
element in the formation of a binding contract of sale.
 
The time within the full down-payment of the ₱ 30,000 was to be completed was not specified
by the parties.
  
The fact that the petitioners delivered to Magdalena Estates, Inc. the sum of ₱ 10,000 as part
of the down-payment that they had to pay cannot be considered as sufficient evidence of the
perfection of any purchase and sale agreement between the parties as the petitioners admit
in their affidavit that certain essential matters, such as the terms of payment, still had to be
mutually agreed.
 
Hence, SC denied the petition.

20. Martinez vs. Court of Appeals, G.R. No. L-31271, 29 Apr 1974
Facts:
This is a case brought about by a property which Spouses Romeo Martinez and Leonor Suarez
are registered owners. It turned out to be that one of the two parcels of fishpond property
which they bought was actually part of a creek. To resolve any legal impediments, the sought
the matter to the Committee on Rivers and Streams which gave them a favorable decision.
However, the municipal officials of Lubao, Pampanga refused to recognize the decision. In a
subsequent civil case where a writ of Preliminary Injunction was applied for, the court ruled in
favor of the petitioners and so proceeded to construct the dikes in the parcel of land. In 1958,
while the Civil case was still pending, the Secretary of Public Works and Highways ordered the
removal of the dikes on the strength of the authority vested in him by Republic Act No. 2056
approved on June 13, 1958, which gave the aforementioned secretary authority to remove
dikes in waterways. Another case was instituted, this time, for the acts of the secretary by
which the lower court ruled in favor of petitioners. In an apparent appeal by Department of
Public Works and Communications, the appellate court reversed the judgement of the lower
court which caused petitioners to file appeal by certiorari by alleging that Court of Appeals’
erred in declaring the property in litigation as a river and that the eventual cancellation of its
registration constitutes a collateral attack on a Torens Title, that the issue of the property
being a river is already res judicata and them, being the seventh of the innocent purchasers
relied on the principle that the persons dealing with registered land need not go behind the
register to determine the condition of the property.
Issue: Whether or not the spouses are innocent purchasers and are in good faith of the parcel
of land alleged to be a public river.
Ruling: No, petitioners cannot be deemed as purchasers for value and in good faith
because before purchasing a parcel of land, it cannot be that the vendees did not
know exactly the condition of the land that they were buying and the obstacles or
restrictions thereon that may be put up by the government in connection with their
project of converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully
and voluntarily assumed the risks attendant to the sale of said lot. One who buys
something with knowledge of defect or lack of title in his vendor cannot claim that he
acquired it in good faith. The Court further ruled that relying on the registry to determine if
there is no lien or encumbrances over the same, cannot be availed of as against the law
states that rivers are parts of the public domain for public use and not capable of private
appropriation or acquisition by prescription.
The nullification of its registration would be contrary to the law and to the applicable decisions
of the Supreme Court as it would destroy the stability of the title which is the core of the
system of registration. Appellants cannot be deemed purchasers for value and in good faith as
in the deed of absolute conveyance executed in their favor.
The ruling that a purchaser of a registered property cannot go beyond the record to make
inquiries as to the legality of the title of the registered owner, but may rely on the registry to
determine if there is no lien or encumbrances over the same, cannot be availed of as against
the law and the accepted principle that rivers are parts of the public domain for public use
and not capable of private appropriation or acquisition by prescription.

21. Pio Sian Melliza vs. City of Iloilo, G.R. No. L-24732, 30 Apr 1968
(Donated Lots, apil ba ang nahabilin?)
Facts:
Juliana Melliza donated to the City of Iloilo, 9,000 square meters of Lot 1214, to serve as site
for the municipal hall. The donation was however revoked by the parties because the area
donated was found inadequate to meet the requirements of the development plan of the City.
On November 15, 1932 Juliana Melliza executed an instrument in favor of Iloilo City without
any caption.
On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios  
Sian Villanueva who thereafter obtained her own registered title. Remedios in turn transferred
her rights to said portion of land to Pio Sian Melliza.
he City of Iloilo donated the city hall site together with the building thereon, to the  University
of the Philippines (Iloilo branch).
The University of the Philippines enclosed the site donated with a wire fence. Pio Sian  Melliza
thereupon made representations, thru his lawyer, with the city authorities for payment   of 
the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff,
the City did not have funds.
Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against Iloilo City  and
the University of  the Philippines for recovery of Lot 1214-B or of its value. ould render the
contract invalid because the law requires as an essential element of sale, a "determinate"
object (Art. 1445, now 1448, Civil Code).
The Court of First Instance rendered its decision dismissing the  complaint. Said court ruled
that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in the
conveyance Lot 1214-B.
Pio Sian Melliza appealed to the Court of Appeals.
 Issue:
Whether or not the conveyance by Juliana Melliza to Iloilo included that portion of Lot 1214
known as Lot 1214-B.
Ruling:
Yes, the conveyance by Juliana Melliza to Iloilo included that portion of Lot 1214.
There is no question that the paramount intention of the parties was to provide Iloilo City
with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its
avenues and parks. For this matter, a previous donation for this purpose between the
same parties was revoked by them because of the inadequacy of the area of the lot
donated.
Moreover, reading the public instrument in toto, shows that said instrument describes four
parcels of of land by their lot numbers and area; and then it goes on to further describe, not
only those lots already mentioned, but the lots object of the sale, by stating that said lots are
the ones needed for the construction of the city hall site. It is therefore reasonable
interpretation, to view it as describing those other portions of land contiguous to the lots
aforementioned that will be found needed for the purpose at hand, the construction of the
city hall site.
Such contention fails on several counts. The requirement of the law that a sale must
have for its object a determinate thing, is fulfilled as long as, at the time the
contract is entered into, the object of the sale is capable of being made determinate
without the necessity of a new or further agreement between the parties, reading
the public instrument in toto with special reference to the paragraphs describing the lots
included in the sale, shows that said instrument describes four parcels of land by their lot
numbers and area; and then it goes on to further describe, not only those lots already
mentioned, but the lots object of the sale, by stating that said lots are the ones needed for
the construction of the city hall site, avenues and parks  according to the Arellano plan. 

22. Gaite vs. Fonacier, G.R. No. L-11827, 31 Jul 1961

(abogado )FACTS:
Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop the
mining claims in question, and Gaite assented thereto subject to certain conditions. As a
result, a document entitled “Revocation of Power of Attorney and Contract” was executed on
December 8, 1954. 
To secure the payment of the P65,000.00 balance, Fonacier promised to execute in favor of
Gaite a surety bond. However, Gaite refused to sign said unless another bond underwritten by
a bonding company was put up by defendants to secure the payment of the P65,000.00
balance of the price of the iron ore in the stockpiles in the mining claims. Hence, a second
bond, also dated December 8, 1954, was executed, but it provided that the liability of the
surety company would attach only when there had been an actual sale of iron ore by the
Larap Mines & Smelting Co. for an amount of not less than P65,000.00, and that,
furthermore, the liability of said surety company would automatically expire on December 8,
1955. Both bonds were attached to the “Revocation of Power of Attorney and Contract”.
Up to December 8, 1955, when Fonacier and his sureties failed to pay as demanded by Gaite,
the latter filed the present complaint against them. Defendants claimed that the obligation
sued upon by Gaite was subject to a condition that the amount of P65,000.00 would be
payable out of the first letter of credit covering the first shipment of iron ore and/or the first
amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.;
that up to the time of the filing of the complaint, no sale of the iron ore had been made,
hence the condition had not yet been fulfilled; and that consequently, the obligation was not
yet due and demandable.
 ISSUE:
(1) Whether or not the obligation of Fonacier to pay Gaite the P65,000.00 is one with a
period or term and not one with a suspensive condition, and that the term expired on
December 8, 1955.
HELD:
 No. The court held that the obligation of the defendants to pay plaintiff the P65,000.00
balance of the price of the approximately 24,000 tons of iron ore was one with a term: i.e.,
that it would be paid upon the sale of sufficient iron ore by defendants, such sale to be
effected within one year or before December 8, 1955; that the giving of security was a
condition precedent to Gaite’s giving of credit to defendants; and that as the latter failed to
put up a good and sufficient security in lieu of the Far Eastern Surety bond which expired
on December 8, 1955, the obligation became due and demandable under Article 1198 of
the New Civil Code.
 The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides: “if the
contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of
interests.” and there can be no question that greater reciprocity obtains if the buyer’s
obligation is deemed to be actually existing, with only its maturity (due date) postponed or
deferred, that if such obligation were viewed as non-existent or not binding until the ore
was sold.
 The only rational view that can be taken is that the sale of the ore to Fonacier was a sale
on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk
of not being paid at all; and that the previous sale or shipment of the ore was not a
suspensive condition for the payment of the balance of the agreed price, but was intended
merely to fix the future date of the payment.

Characteristics
23. Gaite vs. Fonacier, supra.

Stages
24. Ainza vs. Spouses Padua, G.R. No. 165420, 30 Jun 2005
Facts:
Concepcion bough one-half of an undivided portion of the property of her daughter, Eugenia
and the latter’s husband, Antonio, for One Hundred Thousand Pesos (P100,000.00). No Deed
of Absolute Sale was executed to evidence the transaction, but cash payment was received by
the respondents, and ownership was transferred to Concepcion through physical delivery to
her attorney-in-fact and daughter.
Concepcion authorized Natividad and the latter’s husband to occupy the premises, and make
improvements on the unfinished building. Thereafter, Concepcion alleged that without her
consent, respondents caused the subdivision of the property into three portions and
registered it in their names in violation of the restrictions annotated at the back of the title.
The Regional Trial Court rendered judgment in favor of Concepcion. On appeal by the
respondents, the Court of Appeals reversed the decision of the trial court, and declared the
sale null and void. Hence this case.
Issue:
Whether the oral contract in the sale of the real property is legal and binding?
Held:
Yes, The SC upheld the ruling of the lower court that the sale between Eugenia and
Concepcion was consummated when both contracting parties complied with their
respective obligations. Eugenia transferred possession by delivering the property to
Concepcion who in turn paid the purchase price. It also declared that the transfer of
the property did not violate the Statute of Frauds because a fully executed contract
does not fall within its coverage. The verbal contract of sale between Eugenia and
Concepcion did not violate the provisions of the Statute of Frauds that a contract for
the sale of real property shall be unenforceable unless the contract or some note or
memorandum of the sale is in writing and subscribed by the party charged or his
agent. When a verbal contract has been completed, executed or partially
consummated, as in this case, its enforceability will not be barred by the Statute of
Frauds, which applies only to an executory agreement. Thus, where one party has
performed his obligation, oral evidence will be admitted to prove the agreement. In
the instant case, the oral contract of sale between Eugenia and Concepcion was
evidenced by a receipt signed by Eugenia. Antonio also stated that his wife admitted
to him that she sold the property to Concepcion.
25. Asuncion vs. Court of Appeals, supra.
26. Toyota Shaw, Inc. vs. Court of Appeals, supra.
27. Province of Cebu vs. Heirs of Morales, G.R. No. 170115, 19 Feb 2008
Facts:
Province of Cebu leased in favor of Rufina Morales a 210-square meter lot. The province
donated several parcels of land to the City of Cebu.
On July 19, 1965, the city sold Lot No. 646-A-3 as well as the other donated lots at public
auction in order to raise money for infrastructure projects. The highest bidder for Lot No.
646-A-3 was Hever Bascon but Morales was allowed to match the highest bid since she had
a... preferential right to the lot as actual occupant thereof.
Morales thus paid the required deposit and partial payment for the lot.
In the meantime,Province of Cebu filed an action for reversion of donation against the City of
Cebu
On May 7, 1974, petitioner and the City of Cebu entered into a compromise agreement
The agreement provided for the return of the donated lots to petitioner except those
that have already been utilized by the City of Cebu.
Quesada, together with the other nieces of Morales namely, respondents Nenita
Villanueva and Erlinda V. Adriano, as well as Morales' sister, Felomina V. Panopio, filed an
action for specific performance and reconveyance of property against... petitioner
Issues:
the award at public auction of the lot to Morales was a valid and binding contract
Ruling:
The City of Cebu was the owner of the lot when it awarded the same to... respondents'
predecessor-in-interest, Morales, who later became its owner before the same was
erroneously returned to petitioner under the compromise judgment.
The award is tantamount to a perfected contract of sale between Morales and
the City of Cebu, while partial... payment of the purchase price and actual
occupation of the property by Morales and respondents effectively transferred
ownership of the lot to the latter.
This is rue notwithstanding the failure of Morales and respondents to pay the balance of
the purchase price.
There is no merit in petitioner's assertion that there was no perfected contract of sale
because no "Contract of Purchase and Sale" was ever executed by the parties.
Subject to the provisions of the Statute of Frauds, a formal document is not necessary
for the sale transaction to acquire binding effect.
the fact that there was an agreed price... for the lot proves that a contract of sale was
indeed perfected between the parties. Failure to pay the balance of the purchase price did
not render the sale inexistent or invalid, but merely gave rise to a right in favor of the vendor
to either demand specific performance... or rescission of the contract of sale.
In this case, respondents' predecessor had undoubtedly commenced performing her
obligation by making a down payment on the purchase price.
respondents could still tender payment of the full purchase price as no demand for
rescission had been made upon them, either judicially or through notarial act.
Principles:
Whether Morales, as actual occupant and/or lessee of the lot, was qualified and had the right
to match the highest bid is... a foregone matter that could have been questioned when the
award was made. When the City of Cebu awarded the lot to Morales, it is assumed that she
met all qualifications to match the highest bid.
It does not matter that Morales merely matched the bid of the highest bidder at the said
auction... sale. The contract of sale was nevertheless perfected as to Morales, since she
merely stepped into the shoes of the highest bidder.
For as long as the essential elements of a contract of... sale are proved to exist in a given
transaction, the contract is deemed perfected regardless of the absence of a formal deed
evidencing the same.
The stages of a contract of sale are as follows: (1) negotiation, covering the period from the
time the prospective contracting parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place upon the concurrence... of the
essential elements of the sale which are the meeting of the minds of the parties as to the
object of the contract and upon the price; and (3) consummation, which begins when the
parties perform their respective undertakings under the contract of sale, culminating... in the
extinguishment thereof

Article 1592 allows the vendee to pay as long as no demand for rescission has been made.
28. First Optima Realty Corp. vs. Securitron Security Services, Inc., G.R. No. 199648, 28 Jan
2015-
(paliton ta ang pikas yuta nya nagpada na ug bayad through letter)
Facts:

Petitioner first Optima Realty Corporation is a domestic corporation engaged in the real
estate business. It is the registered owner of a 256-square meter parcel of land with
improvements located in Pasay City. Respondent Securitron Security Services, Inc., on the
other hand, is a domestic corporation with offices located beside the subject property.
Looking to expand its business and add to its existing offices, respondent through its
General Manager, Antonio Eleazar sent a letter addressed to petitioner through its Executive
Vice-President, Carolina T. Young offering to purchase the subject property at P6,000.00 per
square meter. Sometime thereafter, Eleazar personally went to petitioner’s office offering to
pay for the subject property in cash, which he already brought with him. However, Young
declined to accept payment, saying that she needed to secure her sister’s advice on the
matter. On February 4, 2005, respondent sent a Letter of even date to petitioner. It was
accompanied by Philippine National Bank Check No. 24677 issued for P100,000.00 and made
payable to petitioner. Respondent now raised the issue that there was already a contract of
sale because there was already money tendered and that petitioner must go over with the
sale.
Issue: Whether or not there was a contract of sale?
Ruling: The Court said there is none. The negotiations culminated in a meeting
between Eleazar and Young whereby the latter declined to enter into an agreement
to accept cash payment then being tendered by the former. Instead, Young
informed Eleazar during said meeting that she still had to confer wither her sister
and petitioner’s board of director; in turn, Eleazar told Young that the respondent
shall await the necessary approval.
Thus, the trial and appellate courts failed to appreciate that respondent’s offer to
purchase the subject property was never accepted by the petitioner at any instance,
even after negotiations were held between them. In a manner of speaking, respondent
cannot fault petitioner for not making a refund since it is equally to blame for making such
payment under false pretenses and irregular circumstances, and with improper motives.
Parties must come to court with clean hands, as it were.
Principles:
In a potential sale transaction, the prior payment of earnest money even before the
property owner can agree to sell his property is irregular, and cannot be used to bind the
owner to the obligations of a seller under an otherwise perfected contract of sale;
The property owner-prospective seller may not be legally obliged to enter into a sale
with a prospective buyer through the latter’s employment of questionable practices which
prevent the owner from freely giving his consent to the transactions; this constitutes a
palpable transgression of the prospective seller’s rights of ownership over his property, an
anomaly which the Court will certainly not condone.

The Contract of Sale may be:

Absolute
29. Sps. Ramos vs. Sps. Heruela, G.R. No. 145330, 14 Oct 2005
(4k ray gibayad ou of 15,300 nya gitaodan nag balay ang yuta)
The spouses Gomer and Leonor Ramos own a parcel of land, consisting of 1,883 square
meters.
On 18 February 1980, the spouses Ramos made an agreement with the spouses Santiago and
Minda Heruela covering 306 square meters of the land. According to the spouses Ramos, the
agreement is a contract of conditional sale. The spouses Heruela allege that the contract is a
sale on installment basis.
On 27 January 1998, the spouses Ramos filed a complaint for Recovery of Ownership with
Damages against the spouses Heruela. spouses Ramos allege that out of the P15,300
consideration for the sale of the land, the spouses Heruela paid only P4,000. The last
installment that the spouses Heruela paid was on 18 December 1981. The spouses Ramos
assert that the spouses Heruela’s unjust refusal to pay the balance of the purchase price
caused the cancellation of the Deed of Conditional Sale.
In June 1982, the spouses Ramos discovered that the spouses Heruela were already
occupying a portion of the land. Cherry and Raymond Pallori ("spouses Pallori"), daughter and
son-in-law, respectively, of the spouses Heruela, erected another house on the land.
he spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the
spouses Ramos.
Supreme Court Ruling
The sale is an installment sale. Applying the Maceda Law or R.A. 6552, which
involves sale on real property, in case where less than two years of installments
were paid, the vendor-respondent 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.
The spouses Heruela paid less than two years of installments. However, there was
neither a notice of cancellation nor demand for rescission by notarial act to the
spouses Heruela.
Thus, the spouses Heruela shall pay the spouses Ramos P11,300 as balance of the purchase
price plus interest at 6% (from the time demand was made in 1998). Upon payment, the
spouses Ramos shall execute a deed of absolute sale of the land and deliver the certificate of
title in favor of the spouses Heruela.
In case of failure to thus pay within 60 days from finality of this Decision, the spouses Heruela
and the spouses Pallori shall immediately vacate the premises without need of further
demand, and the down payment and installment payments of P4,000 paid by the spouses
Heruela shall constitute rental for the land.

30. Heirs of Mascuñana vs. Court of Appeals, supra.

Conditional, which may be:
An executed contract
An executory contract
Distinction

Contract of Sale vs. Contract to Sell

31. Ong vs. Court of Appeals, G.R. No. 97347, 16 Jul 1999
(gipsalit ang yuta na apil ang loan pero wa nabayran ang loan)
Facts: Petitioner Jaime Ong and respondents, Robles couple executed an “Agreement of
Purchase and Sale” with regard to 2 parcels of land, on which a rice mill and a piggery were
found and thus included.
The terms and conditions of the contract included an initial payment, payment for the loan of
the sellers including interest, and the balance to be satisfied in 4 equal quarterly installments.
As agreed, petitioner took possession of the subject property and everything else thereon
upon satisfaction of the initial payment. However, petitioner failed to comply with the
payment for the loan. Plus, the checks that the petitioner issued to the couple as payment for
the balance were dishonored due to insufficient funds.
To avoid foreclosure, the respondent couple sold the rice mill with the knowledge and
conformity of petitioner.
Respondents sought for rescission due to the latter’s failure to comply with the terms and
conditions of the contract.
RTC ruled in favor of the Robles couple and ordered the restitution of the properties. The
couple were also ordered to return an amount, as determined by the court, to Ong.
CA affirmed the decision in contemplation of Article 1191 of The New Civil Code

Supreme Court Ruling

The Contract entered into by the parties was a “Contract to Sell” which means that 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.
Respondents 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
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.
As to the issue on novation, in order for novation to take place, the concurrence of the
following requisites is indispensable: (1) there must be a previous valid obligation; (2) there
must be an agreement of the parties concerned to a new contract; (3) there must be the
extinguishment of the old contract; and (4) there must be the validity of the new contract.
The aforesaid requisites are not found in the case at bench.
The decision rendered by the Court of Appeals is hereby AFFIRMED with the MODIFICATION
that respondent spouses are ordered to return to petitioner the sum of P48,680.00 in addition
to the amounts already awarded

Ong vs. CA, G.R. No. 97347, July 6, 1999

• 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.

32. Coronel vs. Court of Appeals, G.R. No. 103577, 07 Oct 1996
(double sale)
Facts:
In 1985, Coronel executed a document entitled "Receipt of Down Payment" in favor of Alcaraz
for P50,000 downpayment of P1.24M as purchase price for an inherited house and lot
promising to execute a deed of absolute sale as soon as it has been transferred in their name.
The balance of P1.19M is due upon the execution of the deed.
When title to the property was finally transferred to their names, the Coronels sold the
property to Mabanag for P1.58M after she paid P300K downpayment. Because of this, they
cancelled and rescinded the contract with Alcaraz by returning the P50,000 downpayment.
Alcaraz filed a complaint for specific performance against the Coronels and caused the
annotation of a notice of lis pendens on the TCT.
Mabanag, on the other hand, caused the annotation of a notice of adverse claim with the RD.
However, the Coronels executed a Deed of Absolute Sale in favor Mabanag. RTC ruled in favor
of Alcaraz. CA affirmed.
Supreme Court Ruling
The receipt of down payment serves as a conditional contract of sale. The sale of the
subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6,
1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was
correctly upheld by both the courts below.
The agreement could not have been a contract to sell because the sellers herein made no
express reservation of ownership or title to the subject parcel of land.
Furthermore, the circumstance which prevented the parties from entering into an absolute
contract of sale pertained to the sellers themselves (the certificate of title was not in their
names) and not the full payment of the purchase price.
Under the established facts and circumstances of the case, the Court may safely presume
that, had the certificate of title been in the names of petitioners-sellers at that time, there
would have been no reason why an absolute contract of sale could not have been executed
and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to
sell the property to private respondent upon the fulfillment of the suspensive condition.
On the contrary, having already agreed to sell the subject property, they undertook
to have the certificate of title change to their names and immediately thereafter, to
execute the written deed of absolute sale.

33. Heirs of San Andres vs. Rodriguez, G.R. No. 135634, 31 May 2000
Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton, Naga City.
On September 28, 1964, he sold a portion thereof, consisting of 345 square meters, to
respondent Vicente S. Rodriguez for P2, 415.00. The sale is evidenced by a Deed of Sale.
Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed
judicial administrator of the decedent’s estate in Special Proceedings No. R-21, RTC, Branch
19, Naga City.
A survey was conducted on the lot abovementioned and it was found that respondent had
enlarged the area which he purchased from the late Juan San Andres by 509 square meters.
Thereafter, they sought for the recovery of the excess lot.. The respondent alleged that apart
from the 345-square meter lot which had been sold to him by Juan San Andres on
The latter likewise sold to him the following day the remaining portion of the lot consisting of
509 square meters, with both parties treating the two lots as one whole parcel with a total
area of 854 square meters.
Respondent alleged that the full payment of the 509-square meter lot would be effected
within five (5) years from the execution of a formal deed of sale after a survey is conducted
over said property. He further alleged that with the consent of the former owner, Juan San
Andres, he took possession of the same and introduced improvements thereon as early as
1964.
ISSUE: Whether or not the document (exhibit "2") is a contract to sell despite its lacking one
of the essential elements of a contract, namely, object certain and sufficiently described.
RULING: YES, it is a perfected contract of sale. As Art. 1475 of the Civil Code provides:
“The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. . . .” the contract of sale is
perfected and was confirmed by the former administrator of the estates, Ramon San
Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as
partial payment for the subject lot. The price is certain, which is P15.00 per square
meter. Evidently, this is a perfected contract of sale on a deferred payment of the
purchase price. Concomitantly, the object of the sale is certain and determinate.
Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time
the contract is entered into, the thing is capable of being determinate without
necessity of a new or further agreement between the parties. Appellee’s Exhibit "A"
(page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold
lies at the middle of Lot 1914-B-2 surrounded by the remaining portion of the said
Lot 1914-B-2 on three (3) sides, in the east, in the west and in the north. The
northern boundary is a 12 meter road. Conclusively, therefore, this is the only remaining
509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially purchased by
Rodriguez. It is quite defined, determinate and certain. Thus, all of the essential elements of
a contract of sale are present, i.e., that there was a meeting of the minds between the
parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to
deliver a determinate thing for a price certain in money. WHEREFORE, the decision of the
Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse
petitioners for the expenses of the survey.

34. Akang vs. Municipality of Isulan, G.R. No. 186014, 26 Jun 2013
Non-payment of the purchase price merely gave rise to a right in favor of the
petitioner to either demand specific performance or rescission of the contract of
sale.
Ali Akang (petitioner) is a member of the national and cultural community belonging to the
Maguindanaon tribe of Isula he sold a two-hectare portion of the property
to the Municipality of Isulan
Respondent immediately took possession of the property and began construction of the
municipal building.
Thirty-nine (39) years later, the petitioner and his wife led a civil action for Recovery of
Possession of Subject Property and/or Quieting Title and Damages against respondent. The
petitioner alleged that the agreement was one to sell, which was not consummated as the
purchase price was not paid.
In answer, respondent denied the petitioner’s allegations, claiming that petitioner’s cause of
action was already barred by laches; that the Deed of Sale was valid; and that it has been in
open, continuous and exclusive possession of the property for forty (40) years.
RTC rendered judgement in favor of the petitioner construing the Deed of Sale as a contract
to sell, based on the wording of the contract; payment of the purchbase price was also found
to have not been made by the respondent. By virtue of the RTC decision, respondent’s title
over the property was cancelled and a new one was issued in the name of the petitioner.
However, CA reversed the ruling of the RTC and sustained the respondent's arguments that
the petitioner is not entitled to recover ownership and possession of the property as the Deed
of Sale already transferred ownership thereof to the respondent. As regards the issue of
whether payment of the price was made, CA ruled that there was actual payment, as
evidenced by the Municipal Voucher, which the petitioner himself prepared and signed. The
CA held that the doctrines of estoppel and laches must apply against the petitioner for the
reasons that: (1) the petitioner adopted inconsistent positions; and (2) the petitioner did not
raise the nullity of the sale at the earliest opportunity and remained passive for 39 years.

Issue WHETHER OR NOT THE PETITIONER IS ENTITLED TO RECOVER OWNERSHIP AND

POSSESSION OF THE PROPERTY IN DISPUTE.
Ruling NO. The Deed of Sale executed by the petitioner and the respondent is a
perfected contract of sale, all its elements being present.
a. Consent There was mutual agreement between them to enter into the sale, as shown by
their free and voluntary signing of the contract. There was also an absolute transfer of
ownership of the property by the petitioner to the respondent as shown in the stipulation:
". . . I [petitioner] hereby sell, transfer, cede, convey and assign as by these presents do
have sold, transferred, ceded, conveyed and assigned, . . . ."
b. Determinate Subject Matter There was also a determinate subject matter, that is, the two-
hectare parcel of land as described in the Deed of Sale.
c. Price or Consideration
Lastly, the price or consideration is at Three Thousand Pesos (P3,000.00), which was to be
paid after the execution of the contract.
Asuming, arguendo, that the petitioner was not paid, such non payment is
immaterial and has no effect on the validity of the contract of sale.  A contract of sale
is a consensual contract and what is required is the meeting of the minds on the object
and the price for its perfection and validity. In this case, the contract was perfected
the moment the petitioner and the respondent agreed on the object of the sale – the
two-hectare parcel of land, and the price – Three Thousand Pesos (P3,000.00).  Non-
payment of the purchase price merely gave rise to a right in favor of the petitioner
to either demand specific performance or rescission of the contract of sale.

The petitioner's allegation of non-payment is of no consequence taking into account the

Municipal Voucher presented before the RTC, which proves payment by the respondent of
Three Thousand Pesos (P3,000.00). The petitioner, notwithstanding the lack of the Municipal
Treasurer's approval, admitted that the signature appearing on the Municipal Voucher was his
and he is now estopped from disclaiming payment. The fact that no express reservation of
ownership or title to the property can be found in the Deed of Sale bolsters the absence of
such intent, and the contract, therefore, could not be one to sell. Had the intention of the
petitioner been otherwise, he could have: (1) immediately sought judicial recourse to prevent
further construction of the municipal building; or (2) taken legal action to contest the
agreement. The petitioner did not opt to undertake any of such recourse. (3) Whether the
petitioner's claim is barred by laches YES. While the respondent may not be considered as
having acquired ownership by virtue of its long and continued possession, nevertheless, the
petitioner's right to recover has been converted into a stale demand due to the
respondent's long period of possession and by the petitioner's own inaction and
neglect

35. Dignos vs. Court of Appeals, G.R. No. 59266, 29 Feb 1988
Gibaligyag kaduha sa mga Dignos
An act of the vendor in delivering the possession of the property (land) to the
vendee contemporaneous with the contract (deed of sale in a private instrument)
was an indication that an absolute contract of sale was intended by the parties and
not a contract to sell.
FACTS: The Dignos spouses sold a parcel of land in Opon, Lapu-Lapu City on June 7, 1965, to
Atilano Jabil (Jabil) for the sum of P28,000.00, payable in 2 installments, with an assumption
of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid
and acknowledged by the vendors in the deed of sale (Exh. C), and the next installment in
the sum of P4,000.00 to be paid on or before September 15, 1965. Dignos spouses delivered
the possession of the land in question to Jabil as early as March 27,1965 so that the latter
could construct Sally's Beach Resort also known as Jabil's Beach Resort, and other resorts
subsequently. On November 25, 1965, the Dignos spouses sold the same land to Cabigas
spouses, for a price of P35,000.00 and executed a deed of absolute sale, which was
registered in the Office of the Register of Deeds. Refusal to accept payment of the balance
and knowledge of the second sale prompted Jabil to file a suit to declare null and void the
second sale made to Spouses Cabigas. CFI favored Jabil and declared null and void the
second sale, directing Dignos spouses to return the P35,000, and Jabil to pay the balance of
P4,000. Subsequently the Court of Appeals affirmed the decision of the lower court, and the
motion for reconsideration was denied as well for lack of merit. Thereafter, filed a petition for
a review on certiorari seeking reversal of the decision contending that there is absolutely
nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their
ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private
instrument and the absence of a formal deed of conveyance is a very strong indication that
the parties did not intend "transfer of ownership and title but only a transfer after full
payment"
ISSUE: Whether or the act of delivering the possession of the land,
contemporaneous with the contract (deed of sale in private instrument) is an
indication of a contract of sale.
RULING: YES, such act of delivering, contemporaneous with the contract which is in private
instrument is an indication of a contract of sale. Article 1477 of the Civil Code provides that
"The ownership of the thing sold shall be transferred to the vendee upon actual or
constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co.,
et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the
ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of the land sold in the case
at bar, as subject Deed of Sale is a private instrument, it is beyond question that there was
actual delivery thereof. As found by the trial court, the Dignos spouses delivered the
possession of the land in question to Jabil as early as March 27,1965 so that the latter
constructed thereon Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965;
Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1,
1965. Such facts were admitted by petitioner spouses Moreover, the Court of Appeals in its
resolution found that the acts of petitioners, contemporaneous with the contract, clearly
CIVIL LAW; CONTRACTS; DEED OF SALE; ABSOLUTE IN NATURE IS NO PROVISION THAT
TITLE IS RESERVED TO THE VENDOR OR UNILATERALLY GIVING THE VENDOR THE RIGHT TO
RESCIND CONTRACT. — It has been held that a deed of sale is absolute in nature although
denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a
proviso or stipulation to the effect that title to the property sold is reserved in the vendor until
full payment of the purchase price, nor is there a stipulation giving the vendor the right to
unilaterally rescind the contract the moment the vendee fails to pay within a fixed period
(Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co.,
Inc., 86 SCRA 305). A careful examination of the contract shows that there is no such
stipulation reserving the title of the property on the vendors nor does it give them the right to
unilaterally rescind the contract upon non-payment of the balance thereof within a fixed
period.
SALE; ELEMENTS. — On the contrary, all the elements of a valid contract of sale under
Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2)
determinate subject matter; and (3) price certain in money or its equivalent.
OWNERSHIP IS TRANSFERRED BY DELIVERY OF THE THING SOLD. — In addition, Article
1477 of the same Code provides that "The ownership of the thing sold shall be transferred to
the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v.
Pan Oriental Shipping Co., Et. Al. (12 SCRA 276), this Court held that in the absence of
stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual
or constructive delivery thereof.
ACTUAL DELIVERY IN CASE AT BAR. — While it may be conceded that there was no
constructive delivery of the land sold in the case at bar, as subject Deed of Sale is a
private instrument, it is beyond question that there was actual delivery thereof. As
found by the trial court, the Dignos spouses delivered the possession of the land in question
to Jabil as early as March 27, 1965 so that the latter constructed thereon Sally’s Beach Resort
also known as Jabil’s Beach Resort in March, 1965; Mactan White Beach Resort on January
15, 1966 and Bevirlyn’s Beach Resort on September 1, 1965. Such facts were admitted by
petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108).
SLIGHT DELAY IN THE PERFORMANCE OF OBLIGATION, NOT SUFFICIENT GROUND FOR
RESCISSION. — It has been ruled, however, that "where time is not of the essence of
the agreement, a slight delay on the part of one party in the performance of his
obligation is not a sufficient ground for the rescission of the agreement" (Taguba v.
Vda. de Leon, supra). Considering that private respondent has only a balance of
P4,000.00 and was delayed in payment only for one month, equity and justice
mandate as in the aforecited case that Jabil be given an additional period within
which to complete payment of the purchase price.

Contract to Sell vs. Conditional Sale

36. Coronel vs. Court of Appeals, supra.

37. Nabus vs. Pacson, G.R. No. 161318, 25 Nov 2009

( yuta na gibaligyag usab)
Spouses Bate and Julie Nabus were the owners of parcels of land situated in Pico, La Trinidad,
Benguet, duly registered in their names. The property was mortgaged by the Spouses Nabus
to the PNB, to secure a loan in the amount of P30,000.00. The Spouses Nabus executed a
Deed of Conditional Sale in favor of respondents Spouses Pacson for a consideration of
P170,000.00, which was duly notarized. Before the payment of the balance of the mortgage
amount with PNB, Bate Nabus died. The surviving spouse, Julie Nabus, and their minor
daughter, Michelle Nabus, executed a Deed of Extra Judicial Settlement over the registered
land. Meanwhile, respondents continued paying their balance, not in installments as agreed
upon, but in various, often small amounts for a period of almost seven years. Julie Nabus,
with her second husband, approached Joaquin Pacson to ask for the full payment of the lot.
Joaquin Pacson agreed to pay and sent Julie and his daughter, Catalina, to Atty. Elizabeth
Rillera for the execution of the deed of absolute sale. Julie Nabus was required to return in
four days with the necessary documents. However, Julie Nabus did not return. Getting
suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet and
found that the tile of land is 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.
Respondents Joaquin and Julia Pacson filed with the Regional Trial Court of La Trinidad,
Benguet (trial court) a Complaint for Annulment of Deeds, with damages and prayer for the
issuance of a writ of preliminary injunction. Julie and Michelle Nabus alleged that
respondent Joaquin Pacson did not proceed with the conditional sale of the subject
property when he learned that there was a pending case over the whole property,
and proposed that he would rather lease the property. Hence, he did not affix his
signature to the second page of a copy of the Deed of Conditional Sale. Julie Nabus alleged
that, due to her own economic needs and those of her minor daughter, she sold the property
to Betty Tolero, with authority from the court.
ISSUES: 1. Whether or not the Deed of Conditional Sale was converted into a contract of
lease. 2. Whether the Deed of Conditional Sale was a Contract to Sell or a Contract of Sale
RULING: 1) The court held that the Deed of Conditional Sale was not converted into a
contract of lease. The 364 receipts issued to the Spouses Pacson contained either the
phrase "as partial payment of lot located in Km. 4" or "cash vale", evidencing sale
under the contract and not the lease of the property. Further, as found by the trial
court, Joaquin Pacson’s non-signing of the second page of a carbon copy of the Deed of
Conditional Sale was through sheer inadvertence, since the original contract and the other
copies of the contract were all signed by Joaquin Pacson and the other parties to the contract.
2) The Court held that the contract entered into by the Spouses Nabus and
respondents was a contract to sell, not a contract of sale. A contract of sale is defined
in Article 1458 of the Civil Code, “By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing, and the
other to pay therefore a price certain in money or its equivalent. A contract of sale may be
absolute or conditional.” In Coronel v. Court of Appeals, “Sale, by its very nature, is a
consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following: a. Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; b. Determinate subject matter; and c. Price
certain in money or its equivalent.” Under this definition, a Contract to Sell may not be
considered as a Contract of Sale because the first essential element is lacking. In a contract
to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or consent
to transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill
his promise to sell the subject property when the entire amount of the purchase price is
delivered to him. In other words, the full payment of the purchase price partakes of a
suspensive condition, the non-fulfilment of which prevents the obligation to sell
from arising and, thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer. A contract to sell may thus be defined as a
bilateral contract whereby the prospective seller, while expressly reserving the ownership of
the subject property despite delivery thereof to the prospective buyer, binds himself to sell
the said property exclusively to the prospective buyer upon fulfillment of the condition agreed
upon, that is, full payment of the purchase price. It is not the title of the contract, but its
express terms or stipulations that determine the kind of contract entered into by the parties .
In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to
sell. The contract stipulated that "as soon as the full consideration of the sale has
been paid by the vendee the corresponding transfer documents shall be executed by
the vendor to the vendee for the portion sold." Where the vendor promises to
execute a deed of absolute sale upon the completion by the vendee of the payment
of the price, the contract is only a contract to sell." The aforecited stipulation shows
that the vendors reserved title to the subject property until full payment of the
purchase price. 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. The full payment
of the purchase price is the positive suspensive condition, the failure of which is not a breach
of contract, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force. Thus, for its non-fulfilment, there is no contract to speak of, the
obligor having failed to perform the suspensive condition which enforces a juridical relation.
With this circumstance there can be no rescission or fulfilment of an obligation that is still
non-existent, the suspensive condition not having occurred as yet. Emphasis should be made
that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s failure to
comply with an obligation already extant, not a failure of a condition to render binding that
obligation. Since the contract to sell was without force and effect, Julie Nabus validly
conveyed the subject property to another buyer, petitioner Betty Tolero, through a
contract of absolute sale, and on the strength thereof, new transfer certificates of
title over the subject property were duly issued to Tolero. The Spouses Pacson,
however, have the right to the reimbursement of their payments to the Nabuses,
and are entitled to the award of nominal damages. WHEREFORE, the petition is
GRANTED.

Arts. 1459-1465
Object - The object must be:

Lawful
38. Heirs of Eduardo Manlapat vs. Court of Appeals, G.R. No. 125585, 08 Jun 2005
The law requires that the subject matter must be licit or lawful, that is, it should not be
contrary to law, morals, good customs, public order, or public, and should not be impossible.
Facts: The controversy involves Lot No. 2204 located at Panghulo, Obando, Bulacan. The
property had been originally in the possession of Jose Alvarez, Eduardo’s grandfather. The lot
is adjacent to a fishpond owned by Ricardo Cruz, predecessor-in-interest of respondents
Consuelo Cruz and Rosalina Cruz-Bautista. Before the lot was titled, Eduardo sold a portion
with an area of 553 sqm to Ricardo. The sale is evidenced by a deed of sale which was signed
by Eduardo himself as vendor and his wife Engracia Aniceto with Santiago Enriquez signing as
witness. Another deed of sale covering 50sqm of the lot was executed by Eduardo in favor of
Ricardo. Later, Leon Banaag, Jr, as attorney-in-fact of his father-in-law Eduardo, executed a
mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP), for P100,000 with the
subject lot as collateral. The Cruzes, were not immediately aware of the consummated sale
between Eduardo and Ricardo. Eduardo himself died and was survived by his heirs. Neither
did the heirs of Eduardo inform the Cruzes of the prior sale in favor of Ricardo. Yet
subsequently, the Cruzes came to learn about the sale and the issuance of the OCT in the
name of Eduardo. Upon learning the sale, the Cruzes tried to confront petitioners on the
mortgage and obtain the surrender of the OCT. Petitioners, however, were unwilling to
surrender the OCT. Having failed to physically obtain the title from petitioners, the Cruzes
instead went to RBSP which had custody of the owner’s duplicate certificate of the OCT,
earlier surrendered as a consequence of the mortgage. The Cruzes sought to borrow the
owner’s duplicate certificate for the purpose of photocopying the same and thereafter showing
a copy thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the owner’s
duplicate certificate outside the bank premises when the latter showed the Kasulatan. They
then brought the copy of the OCT to Register of Deeds. After the Cruzes presented the
owner’s duplicate certificate, along with the deeds of sale and the subdivision plan, the
Register of Deeds cancelled the OCT and issued in lieu thereof covering the remaining 455
square meters in the name of Eduardo. The Cruzes went back to the bank and surrendered to
Salazar in the name of Eduardo and retrieved the title they had earlier given as substitute
collateral. After securing the new separate titles, the Cruzes furnished petitioners with a copy
of TCT No. 9327-P(M) through the barangay captain and paid the real property tax for 1989.
Banaag went to RBSP, intending to tender full payment of the mortgage obligation. It was
only then that he learned of the dealings of the Cruzes with the bank which eventually led to
the subdivision of the subject lot and the issuance of two separate titles thereon. In exchange
for the full payment of the loan, RBSP tried to persuade petitioners to accept TCT in the name
of Eduardo. After trial of the consolidated cases, the RTC of Malolos rendered a decision in
favor of the heirs of Eduardo. The trial court found that petitioners were entitled to the reliefs
of reconveyance and damages. It found that petitioners were complacent and unperturbed,
believing that the title to their property, while serving as security for a loan, was safely
vaulted in the impermeable confines of RBSP. To their surprise and prejudice, said title was
subdivided into two portions, leaving them a portion of 455 square meters from the original
total area of 1,058 square meters, all because of the fraudulent and negligent acts of
respondents and RBSP. It ruled that although the act of the Cruzes could be deemed
fraudulent, still it would not constitute intrinsic fraud. Neither the bank nor its manager had
business entrusting to strangers titles mortgaged to it by other persons for whatever reason.
It was a clear violation of the mortgage and banking laws, the trial court concluded.
Issue : Whether or not the first sale was valid

Held : No. It is not valid. 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 five (5)-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 fifty (50)-square
meter right of way executed by Eduardo on 18 March 1981 is obviously covered by the
proscription, the free patent having been issued on 8 October 1976. However, petitioners
may recover the portion sold since the prohibition was imposed in favor of the free patent
holder. While the law bars recovery in a case where the object of the contract is contrary to
law and one or both parties acted in bad faith, we cannot here apply the doctrine of in pari
delicto which admits of an exception. The sale of the 553 square meter portion is a different
story. It was executed in 1954, twenty-two (22) years 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 situation, neither the prohibition nor 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 landholding, could be relevant.
Precisely, he had disposed of his rights to the lot even before the government could
give the title to him. The mortgage executed in favor of RBSP is also beyond the
pale of the prohibition, as it was forged in December 1981 a few months past the
period of prohibition.

While the law bars recovery in a case where the object of the contract is contrary to
law and one or both parties acted in bad faith, we cannot here apply the doctrine
of in pari delicto which admits of an exception, namely, that when the contract is
merely prohibited by law, not illegal per se, and the prohibition is designed for the
protection of the party seeking to recover, he is entitled to the relief prayed for
whenever public policy is enhanced thereby. 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.60
The sale of the 553 square meter portion is a different story. It was executed in 1954,
twenty-two (22) years 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 situation, neither the prohibition
nor 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 landholding, could be relevant. Precisely, he had disposed of his
rights to the lot even before the government could give the title to him.
The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was
forged in December 1981 a few months past the period of prohibition.

Determinate or determinable
39. Vagilidad vs. Vagilidad, Jr., G.R. No. 161136, 16 Nov 2006
(yuta nga gibaligya ka vagilidad nya gimortgage sa nagbaligya)
4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died.
Subsequently, Loreto, the son of Zolio, sold to Gabino 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 filed petition of surrender of lot against Loreto, claiming that he is owner pursuant
to deed of Sale issued before the extra judicial settlement.
However, there seemed to be an amicable settlement between them, and the case was
sent to archives.
Gabino paid real estate taxes on the land he bought from Loreto. Loreto later sold the lot
to Wilfredo Vagilidad. ikewise, 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.
Supreme Court Ruling
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.
Can he sell his share?
• Yes.
Can he sell a definite portion of the property?
• He could have because his ownership is that of a co- ownership.
• What he did was he sold a particular portion of the property and after a certain period
of time he sold the same portion.
• SC’ Ruling: He can no longer sell the portion because he previously sold it.
Why was it legally possible for him to sell that definite portion?
• Because he became eventually the owner of the entire property, so he could sell any
portion of the lands.

40. National Grains Authority vs. Intermediate Appellate Court, G.R. No. 68741, 28 Jan 1988
Effect of agreement where the exact number of palay to be sold was not fixed.

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 only 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.
Supreme Court Ruling
The present case involves a perfected contract of sale. Soriano initially offered to sell palay
grains produced in his farmland to NFA.
When NFA 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.)
Was there a determinate subject matter?
• Yes.
Will the parties have to enter into another contract to determine how much does the
government oblige to pay?
• No. But the government did not want to pay.
• Soriano could deliver up to the maximum of 2,640 cavans of palay.
• Soriano only delivered 630 cavans of palay then the government is obliged and liable to
pay for the actual volume of palay that was delivered.
Note:
• Ownership is transferred to the buyer upon delivery. So, the ownership of the seller is
required at the time of the delivery.
• Ownership of the seller is not required at the time of the perfection of the contract,
because at the time of the perfection, the obligation of the seller is to deliver and transfer
ownership.
• In fact, the law says that subsequent acquisition of title by a seller validates the sale.
• The vendee or the buyer acquires ownership at the time of the delivery. But the
ownership or the title of the vendee can also be a subject of contingency. Meaning, he can be
dispossessed of title in a resolutory condition.
 Example: The happening or not happening of which determines whether a buyer
becomes the absolute owner of the property.
Existing, or future or contingent

41. Taredo vs. Court of Appeals, G.R. No. 104482, 22 Jan 1996
Sold first to brother then to his own children, a future inheritance from his
parents
On October 20, 1962, Lazaro Tañedo executed a notarized deed of absolute sale in favor of
his eldest brother, private respondents Ricardo Tañedo, and the latter’s wife, Teresita Barera,
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 P10,000.00 as consideration therefor.
In February 1981, Ricardo learned that Lazaro sold the same property to his children,
petitioners erein, 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.

Supreme Court Ruling

Is a sale of future inheritance valid? In multiple sales of the same real property, who has
preference in ownership? What is the probative value of the lower court's finding of good faith
in registration of such sales in the registry of property?

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.
Transferability of ownership

42. Cavite Development Bank vs. Sps. Lim, G.R. No. 131679, 01 Feb 2000
Sale by mortgagee of land not proper subject of mortgage
On June 16, 1988, private respondent Lolita Chan Lim paid CDB P30,000.00 as option money
for the sale of a mortgaged property. However, after some time Lim discovered that the
subject property was originally registered in the name of Perfecto Guansing, father
of mortgagor Rodolfo Guansing, Rodolfo succeeded in having the property
registered in his name under TCT No. 300809, the same title he mortgaged to CDB and
from which the latter’s title (TCT No. 355588) was derived.(another title was created by the
original owner)
Nevertheless, Perfecto,the son, was able to restore previous title and cancelling TCT
No. 300809 on the ground that the latter was fraudulently secured by Rodolfo.
Aggrieved by what was considered a serious misrepresentation by the CDB on their ability to
sell the subject property, an action for specific performance and damages against petitioners
in the Regional Trial Court was filed on August 29, 1989 by the Lim spouses and was
rendered a decision in their favor which was further affirmed by the Court of Appeals.
Supreme Court Ruling\
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 (no one can
give what he doesn't have) 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 o the payment of the price.
Private respondents are thus entitled to recover the P30,000.00 option money paid by
them. Moreover, since the filing of the action for damages against petitioners amounted to
a demand by respondents for the return of their money, interest thereon at the legal rate
should be computed from August 29, 1989, the date of filing of Civil Case No. Q-89-2863,
not June 17, 1988, when petitioners accepted the payment.
In a void sale, the seller has no right whatsoever to keep the money paid by
virtue thereof and should refund it, with interest at the legal rate, computed from
the date of filing of the complaint until fully paid. Indeed, Art. 1412(2) which
provides that the non- guilty party "may demand the return of what he has given" clearly
implies that without such prior demand, the obligation to return what was given does not
become legally demandable.
```Who was the highest bidder in the foreclosure sale? Being the highest bidder, what did
he do over the property? Was the contract executed?
The bank, CDB. They then sold it to Lim.
````Was there a subject matter of the sale?
• No.
````Why the court said that there was no sale? Who fraudulently obtained the title?
• 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.
`````How did he fraudulently acquire the title over that parcel of land?
• 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.
`````For the father, did the court grant his prayer for the reversion of the title?
• Yes.
Note:
 • CDB did not acquire a smooth title over the property. Why?
– Because the mortgagor had no title of the first place.
• Second requisite for a valid mortgage – the mortgagor must be the absolute
owner of the property. In relation to the case, the mortgagor did not acquire title
of the property. It was his father the real owner of the property.
````Banks Are Vested with Public Interest and Obligation to Exercise Extraordinary
Diligence
• A banking institution is expected to exercise due diligence before entering into a
mortgage contract, and the ascertainment of the statute or condition of a proper offered to
it as security for a loan must be a standard and indispensable part of its operations; and it
cannot simply rely upon reviewing the title to the property offered for mortgage.

43. Heirs of Salvador Hermosilla vs. Sps. Remoquillo, G.R. No. 167320, 30 Jan 2007
Conveyance of privilege to purchase land before it is awarded to the tenant or
occupant.
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.

Supreme Court Ruling

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 recognized as
the actual applicant / occupant.

44. Heirs of Arturo Reyes vs. Socco-Beltran, G.R. No. 176474, 27 Nov 2008
Contract to Sell (by heir prior to partition)- cannot be sold bec he doesn’t own the
property after partition

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.
Supreme Court Ruling
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.
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.
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.
What was the condition of the contract to sell before they can forge a contract of sale?
• The law specifically requires that the vendor must have ownership of the
property at the time it is delivered.

Note:
• Miguel Soco entered into a contract to sell with Reyes over this particular property
(Property B), on the condition that he will inherent the property. Actually, he already
inherited the property, but he co-owned this property with other heirs.
• He agreed to sell if he becomes the owner of the entire property. But when the estate
was settled, what was adjudicated to him was the other property.
• The other property was adjudicated to Beltran, another heir. The SC said no,
because the subject property was not adjudicated to Soco.
• Further question not in the case, can Soco be compelled to sell the other property
because he had a contract to sell agreement with Reyes? No, because this was not the
subject matter of the contract to sell.

Arts. 1466-1468
A. Distinction of sale from:

Agency to sell (Art. 1466)

45. Quiroga vs. Parsons Hardware, Co., G.R. No. 11491, 23 Aug 1918
Plaintiff is Don Andres Quiroga, a manufacturer of beds, granted the defendant, J. Parsons,
the right to sell as an “agent” of Quiroga beds in the Visayas. The contract entered into by the
parties is in the following tenor:
Parsons obliged to pay for the beds, at a discount of 25% as his commission on the future
sales of said beds. The payment had to be made whether or not the defendant was able to
sell the beds.
The plaintiff filed a complaint on the alleged violations of the contract, among others, that
Parsons sold the beds at higher prices than that agreed upon in the invoices. In addition, the
plaintiff alleged that the Parsons is to conduct himself as a mere agent/agency for the sale of
Quiroga's beds in Iloilo, and that said obligations are implied in a contract of commercial
agency (agency to sell).
ISSUE: Whether the contract entered into between Quiroga & Parsons is a contract of sale, or
an agency to sell?
HELD:
Clearly, the contract is a Contract of Sale. The law provides that in construing a contract
containing provisions characteristic of both the contract of sale and of the contract of agency
to sell, the essential clauses of the whole instrument shall be considered. (Art. 1466)

Careful inspection on the given facts reveal, that there is an obligation to supply the beds,
and a reciprocal obligation to pay their price. An "agent/agency" does not pay the price, he
merely delivers it. If he is not able to sell, he returns the goods. This is not true in the present
contract, for a price was fixed and there was a duty to pay the same regardless as to whether
or not the defendant had sold the beds. The phrase “commission on sales” means nothing
more than a mere discount on the invoice price. The word “agent” simply means that the
defendant was the only one who could sell the plaintiff’s beds in the Visayas.

Finally, it is to be remembered that a contract is what the law defines it to be, and not
what it is called by the contracting parties.
On 24 January 1911, in Manila, a contract was entered into by and between Quiroga and J.
Parsons for the exclusive sale of Quiroga Beds in the Visayan Islands.
The Supreme Court held 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 upon the defendant, either by
agreement or by law.
By virtue of the contract between Quiroga and Parson, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term fixed, without any other consideration
and regardless as to whether he had or had not sold the beds.
Only the acts of the contracting parties, subsequent to, and in connection with, the execution
of the contract, must be considered for the purpose interpreting the contract, when such
interpretation is necessary, but not when, as in the instant case, its essential agreements are
clearly set forth and plainly show that the contract belongs to a certain kind and not to
another.

Why did the court not grant Quiroga’s prayer? What was Quiroga’s claiming?
 Quiroga was to deliver beds to Parsons, which Parsons was to sell at a certain
price less 25% which is his commission and which Parsons was obliged to pay within
60 days from shipment, not from the delivery.

46. Dino vs. Court of Appeals, G.R. No. 113564, 20 Jun 2001
Petitioners Spouses D are engaged in the manufacturing and selling of shirts. Respondent S,
in turn, is part owner and general manager of a manufacturing corporation.
Petitioners and respondent entered into a contract whereby the latter would manufacture for
the petitioners some 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl moose heads
which were intended to be attached to the shirts which petitioners would manufacture and
sell.
Respondent S delivered in installments the 40,000 vinyl products, the last being made on
September 28, 1988. Petitioners fully paid the agreed price.
Subsequently, however, petitioners returned to respondent some 29,772 pieces of the vinyl
products for failure to comply with the approved samples. The date of the return of the last
batch of rejected items was on January 17, 1989.
Petitioners then demanded for a refund amounting to P208, 404.00. Respondent refused.
Petitioners sued sometime on July 24, 1989.
The RTC ruled in favor of petitioners and directed respondent to pay to petitioners the sum of
P208, 404.00 with legal interest plus P20, 000.00 attorney’s fees. The CA initially affirmed the
RTC’s decision.
On Motion for Reconsideration, respondent argued that petitioners’ action for collection of
sum of money based on breach of warranty had already prescribed. The CA rendered an
Amended Decision and reversed the RTC’s decision. Hence the appeal to the SC.

The SC sustained the CA’s decision holding that what was involved was essentially a
contract for a piece of work and that the action filed with the RTC
was one for breach of warranty and refund of the purchase price.
“As this Court ruled in Engineering & Machinery Corporation Court of Appeals, et al., 252
SCRA 156 (1996), a contract for a piece of work, labor and materials may be distinguished
from a contract of sale by the inquiry as to whether the thing transferred is one
not in existence and which would never have existed but for the order of the person desiring
it. In such case, the contract is one for a piece of work, not a sale.

On the other hand, if the thing subject of the contract would have existed and been the
subject of a sale to some other person even if the order had not been given then the contract
is one of sale. The contract between the petitioners and respondent stipulated that
respondent would manufacture upon the order of the petitioners 20,000 pieces of vinyl frogs
and 20,000 vinyl mooseheads according to the samples specified and
approved by the petitioners. Respondent Sio did not ordinarily manufacture these
products, but only upon order of the petitioners and at the price agreed upon.
Clearly, the contract executed by and between the petitioners and the respondent
was a contract for a piece of work.”
Applying the provisions on hidden defects, in particular Art. 1571, NCC, the SC held that
petitioners had six (6) months from last delivery of the thing sold within which to file suit. The
last delivery of the vinyl products was on September 28, 1988. So the suit was filed out of
time on July 24, 1989 or more than nine (9) months from the date of last delivery.
As to respondent’s argument that the defense of prescription was filed for
the first time on Motion for Reconsideration before the CA, the SC held:
”In Aldovino, et al. v. Alunan, et al., the Court en banc reiterated the Garcia v. Mathis
doctrine cited in the Gicano case (157 SCRA 140) that when the plaintiff’s
own complaint shows clearly that the action has prescribed, the action may be dismissed
even if the defense of prescription was not invoked by the defendant.

47. Gonzalo Puyat & Sons, Inc. vs. Arco Amusement Co., G.R. No. 47538,20 Jun 1941
(nagpapalit sila gikan gawas)
FACTS:
Arco Amusement Company is engaged in the business of cinematography. The latter desiring
to equipt its cinematograph with sound reproducing devices, approached Gonzalo Puyat &
Sons, Inc. to order sound reproducing equipments from Starr Piano Company of Indiana, USA
to which the former was acting as exclusive agents of the Philippines. After some
negotiations, it was agreed between the parties that Arco would pay the defendant, in
addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as,
freight, insurance, banking charges, cables, etc. Three years later, Arco discovered that
the price given to them was not the net price but rather the list price which thereby
convinced them that the prices charged to them were too high including the out of
pocket expenses. For these, they sought to obtain for a reduction and
reimburesement but has failed and thereby brought action against Gonzalo and
Sons, Inc..
The latter now claims that the appellate court erred in deciding the case in favor of Arco
Company. A petition for issuance of a Writ of Certioari was then filed by Gonzalo Puyat and
Sons contending that the transaction between the parties was that of a Contract of Sale and
not that of an Agency to Sell.
ISSUE:
Whether or not the contract between the parties was one of Purchase and Sale and not
Agency.
HELD:
Yes. The transaction was that of a Conract of Purchase and Sale. The contract is the
law between the parties and should include all the things they are supposed to have been
agreed upon. What does not appear on the face of the contract should be regarded merely as
"dealer's" or "trader's talk", which can not bind either party. Toold Gonzalo Puyat and Sons,
Inc. responsible for the reduction and reimburement is incompatible with the pretended
relation of agency between the parties. In the Agency to Sell, the agent is exempted from all
liability in the discharge of his commission provided he acts in accordance with the
instructions received from his principal and the principal must indemnify the agent for all
damages which the latter may incur in carrying out the agency without fault or imprudence
onhis part. While the petitioner was to receive ten per cent (10%) commission, this does not
necessarily make the petitioner an agent of the respondent, as this provision is only an
additional price which the respondent bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale.
Also, to hold the petitioner an agent of the respondent in the prchase of equipment and
machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the
admitted fact that the petitioner is the exclusive agent of the same company in the
Philippines. It is out of the ordinary for one to be the agent of both the vendor and the
purchaser. The facts and circumstances indicated do not point to anything but plain ordinary
transaction where the respondent enters into a contract of purchase and sale with the
petitioner, the latter as exclusive agent of the Starr Piano Company in the United States.

48. Ker & Co., Ltd. vs. Lingad, G.R. No. L-20871, 30 Apr 1971
(ASSESMENT SA KOMPANYA)\
FACTS:
Melecio R. Domingo, then Commissioner of Internal Revenue assessed Ker & Co. and found
the sum of P20,272.33 as the commercial broker’s percentage tax, surcharge, and
compromise penalty for the period from July 1, 1949 to December 31, 1953. Ker & Co
petitioned that the request be cancelled, but the petitioned was turned down. Kr & Co. then
filed a petition for review with the Court of Tax Appeals. Commissioner Domingo maintained
his stand that the petitioner should be taxed in such amount as a commercial broker. The
liability arose from a contract that Ker & Co. had with the United States Rubber International,
where Ker & Co. was designated as the distributor and United States Rubber International as
the company. Ker & Co., as Distributor, is required to exert every effort to have the shipment
of the products in the maximum quantity and to promote in every way the sale thereof. The
prices, discounts, terms of payment, terms of delivery and other conditions of sale were
subject to change in the discretion of United States Rubber International. All specifications for
the goods ordered were subject to acceptance of United States Rubber International and
required to accept such goods shipped as well as to clear the same through customs and to
arrange for delivery in its warehouse in Cebu City.
ISSUE:
Whether or not the relationship created between Ker & Co. and United States Rubber
International is one of vendor and vendee or broker and principal.
RULING:
The relationship between Ker & Co. is one of brokerage or agency. According to the
National Internal Revenue Code, a commercial broker “includes all persons, other than
importers, manufacturers, producers, or bona fide employees, who, for compensation or
profit, sell or bring about sales or purchases of merchandise for other persons or bring
proposed buyers and sellers together, or negotiate freights or other business for owners of
vessels or other means of transportation, or for the shippers, or consignors or consignees of
freight carried by vessels or other means of transportation. The term includes commission
merchants.” In the language of Justice J. B. L. Reyes, who penned the opinion: “Since the
company retained ownership of the goods, even as it delivered possession unto the
dealer for resale to customers, the price and terms of which were subject to the
company’s control, the relationship between the company and the dealer is one of
agency.” The relationship between Ker & Co. and United States Rubber
International was not one of seller and purchaser, if that was the intention, then it
would not have included covenants which in their totality would negate the concept
of a firm acquiring as vendee goods from another. Instead, the stipulations were so
worded as to lead to no other conclusion than that the control by the United States Rubber
International over the goods in question is, in the language of the Constantino opinion,
“pervasive”.

Lease of service or contract for a piece of work

49. Commission of Internal Revenue vs. Engineering Equipment & Supply Co., G.R. No. L-
27044, 30 Jun 1975
(ASSESMENT IF CONTRACTOR BA ANG KOMPANYA)
Engi…. corporation, is engaged in the design and installation 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 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
tax.

Supreme Court Ruling

Engineering is a contractor this subject only to the 3% tax imposed on contractors.
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 would have existed but for the order of the party desiring to acquire it,
or a thing which would have existed but has been the subject of sale to some other
persons even if the order had not been given.
If the article ordered by the purchaser is exactly such as the seller makes and keeps on hand
for sale to anyone, and no change or 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.
Engineering is a contractor rather than a manufacturer. Supply of air conditioning units to
Engineer's various 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 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
the general public.
Moreover, it advertises itself as a contractor and pays the contractor's tax for design
and construction of central type air conditioning systems, and does not have ready-made air-
conditioning units for sale, but must design and construct each unit to meet the particular
requirements of its customers, said taxpayer 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 the Tax Code, but is a
contractor subject to the 3% tax imposed by Section 191 of the same Code.

50. Commissioner of Internal Revenue vs. Arnoldus Carpentry Shop, Inc., G.R. No. 71122, 25
Mar 1988
Principle:
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. (Article 1467 of
the New Civil Code)

Facts:
Arnoldus Carpentry Shop, Inc. (private respondent) is a domestic corporation engaged in
"preparing, processing, buying, selling, exporting, importing, manufacturing, trading and
dealing in cabinet shop products, wood and metal home and office furniture, cabinets, doors,
windows, etc., including their component parts and materials, of any and all nature and
description". These furniture, cabinets and other woodwork were sold locally and exported
abroad.
For this business venture, private respondent kept samples or models of its woodwork on
display from where its customers may refer to when placing their orders.
Petitioner Commissioner of Internal Revenue conducted an investigation of the business tax
liabilities of private respondent pursuant to Letter of Authority. As per the examination, the
total gross sales of private respondent for the year 1977 from both its local and foreign
dealings amounted to P5,162,787.59. From this amount, private respondent reported in its
quarterly percentage tax returns P2,471,981.62 for its gross local sales. The balance of
P2,690,805.97, which is 52% of the total gross sales, was considered as its gross export
sales.
Based on such an examination, BIR examiners made a report to the Commissioner classifying
private respondent as an "other independent contractor"
As a result thereof, the examiners assessed private respondent for deficiency tax in the
amount of EIGHTY EIGHT THOUSAND NINE HUNDRED SEVENTY TWO PESOS AND
TWENTY THREE CENTAVOS ( P88,972.23 ). Private respondent received a letter/notice of
tax deficiency assessment inclusive of charges and interest for the year 1977 in the amount
of ONE HUNDRED EIGHT THOUSAND SEVEN HUNDRED TWENTY PESOS AND NINETY TWO
CENTAVOS ( P 108,720.92 ). This tax deficiency was a consequence of the 3% tax imposed
on private respondent's gross export sales which, in turn, resulted from the examiners'
finding that categorized private respondent as a contractor.

Against this assessment, private respondent filed a protest with the petitioner Commissioner
of Internal Revenue. In the protest letter, private respondent's manager maintained that
the carpentry shop is a manufacturer and therefor entitled to tax exemption on its
gross export sales under Section 202 (e) of the National Internal Revenue Code. He
explained that it was the 7% tax exemption on export sales which prompted private
respondent to exploit the foreign market which resulted in the increase of its
foreign sales to at least 52% of its total gross sales in 1977.
Issue:
Whether or not private respondent is a manufacturer or a contractor.

SC Ruling:
MANUFACTURER

Neither can Article 1467 of the New Civil Code help petitioner's cause. Article 1467 states:
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.

As the Court of Tax Appeals did not err in holding that private respondent is a
"manufacturer," then private respondent is entitled to the tax exemption under See. 202 (d)
and (e) mow Sec. 167 (d) and (e)] of the Tax Code which states:
Sec. 202. Articles not subject to percentage tax on sales. The following shall be exempt from
the percentage taxes imposed in Sections 194, 195, 196, 197, 198, 199, and 201:
In the present case the respondent Tax Court did not err in classifying private respondent as
a "manufacturer". Clearly, the 'latter falls with the term 'manufacturer' mentioned in Art. 202
(d) and (e) of the Tax Code. As the only question raised by petitioner in relation to this tax
exemption claim by private respondent is the classification of the latter as a manufacturer,
this Court affirms the holding of respondent Tax Court that private respondent is entitled to
the percentage tax exemption on its export sales.
There is nothing illegal in taking advantage of tax exemptions. When the private respondent
was still exporting less and producing locally more, the petitioner did not question its
classification as a manufacturer. But when in 1977 the private respondent produced
locally less and exported more, petitioner did a turnabout and imposed the
contractor's tax. By classifying the private respondent as a contractor, petitioner
would likewise take away the tax exemptions granted under Sec. 202 for
manufacturers. Petitioner's action finds no support in the applicable law.
Lease with option to purchase
51. PCI Leasing and Finance, Inc. vs. Giraffe-X Creative Imaging, Inc., G.R.
No. 142618, 12 Jul 2007

Giraffe entered into an agreement with PCI leasing over 2 machines worth P8,000,000.
Giraffe agreed to pay P116,878.21 monthly and P181,362 for the other machine. It has also
remitted the amount of P3,120,000 as goodwill.
A year into the life of the lease agreement, respondent defaulted in paying the monthly
rentals. PCI Sued Giraffe for possession of the machineries and for payment of the remaining
term.
(Note: In this case, there was a Disclosure Statement.)

Supreme Court Ruling

Evidently the contract above is in reality an option to purchase the equipment.
The Recto Law. 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 ….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 contrary shall be void.
Art. 1485. The preceding article shall be applied to contract purporting to be leases of
personal property with the option to buy, when the leasor deprived the lesee of the
possession or enjoyment of the thing. 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.

Note:
If you sue for recovery, no more back rentals.

demand made by a lessor which fashioned its claim in alternative, such as “Payment
of the
remaining amount, OR Surrender the financed assets” was interpreted to reveal
that the lessee had an
option to purchase the property leased..

A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment
obligations.
And following a three-month default, PCI LEASING, through one Atty. Florecita R. Gonzales,
addressed a formal pay-or-surrender-equipment type of demand letter dated February 24,
1998 to GIRAFFE stated below:
“Demand is hereby made upon you to pay in full your outstanding balance in the amount of
P8,248,657.47 on or before March 04, 1998 OR to surrender to us the one (1) set Silicon
HighImpact Graphics and one (1) unit Oxberry Cinescan 6400-10”
Such demand was left unheeded, PCI LEASING instituted the instant case against GIRAFFE,
which was favored by the RTC, declaring the petitioner the entitled to the possession of the
subject properties, as well as payment of rental balances for P8+ Million, plus litigation costs.
Subsequently, a motion to dismiss was filed by GIRAFFE, and argues that pursuant to Art.
1484 of the Civil Code, PCI is barred from pursuing any claim, adding that in reality the lease
agreement was a lease in of movables with an option to buy based on Art. 1485 as
supplemented by the schedule documents. Of course PCI maintains its stand that it is just a
straight lease agreement and rejects the applicability of the said provision.
The motion to dismiss filed by GIRRAFE was considered by trial court for having relinquished
any claim
to the personal properties which is in PCI’s possession already. Subsequently, PCI’s motion
for
reconsideration was denied.
Hence, PCI has directly petitioned for review raising the sole issue below.
ISSUE: Whether or not the underlying Lease Agreement, Lease Schedules and the Disclosure
Statements that embody the financial leasing arrangement between the parties are covered
by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code
RULING:
YES. 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: (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 contrary shall be void.
Art. 1485. The preceding article shall be applied to contract purporting to be leases of
personal property with the option to buy, when the leasor deprived the lessee of the
possession or enjoyment of the thing.
On the whole, then, we rule, as did the trial court, that the 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

-On  December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement, whereby
the former leased out to the latter one (1) set of Silicon High Impact Graphics and  accessories worth P3,900,00.00
and one (1) unit of Oxberry Cinescan 6400-10 worth P6,500,000.00.
- A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment obligations. And
following a three-month default, PCI LEASING addressed a formal pay-or-surrender-equipment type of demand letter
dated February 24, 1998 to GIRAFFE.
- The demand went unheeded.
- PCI Leasing instituted a case against GIRAFFE. PCI prayed for the issuance of a writ of replevin for the recovery of
the leased property
- Upon PCI LEASING’s posting of a replevin bond, the trial court issued a writ of replevin, paving the way for PCI
LEASING to secure the seizure and delivery of the equipment covered by the basic lease agreement.
 - Instead of an answer, GIRAFFE filed a Motion to Dismiss,arguing that the seizure of the two (2) leased equipment
stripped PCI LEASING of its cause of action.  
-GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on installment sales of personal property, PCI
LEASING is barred from further pursuing any claim arising from the lease agreement and the companion contract
documents, adding that the agreement between the parties is in reality a lease of movables with option to buy.
-GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by the
application to the case of Articles 1484 and 1485, supra, of the Civil Code.
- PCI Leasing on the other hand maintains that its contract with GIRAFFE is a straight lease without an option to buy.
- petitioner contends that the financial leasing arrangement it concluded with the respondent represents a straight
lease covered  by  R.A. No. 5980,  the Financing Company Act, as last amended by R.A. No. 8556, otherwise known
as Financing Company Act of 1998, and is outside the application and coverage of the Recto Law. To the petitioner,
R.A. No. 5980  defines and authorizes its  existence and business. 
-the trial court granted GIRAFFE’s motion to dismiss
- motion for reconsideration was denied, hence this petition for review.

Issue:

Whether the agreement between PCI Leasing and GIRAFFE is governed by Articles 1484 and 1485 of the Civil Code?

Held:

Petition denied. Trial Court’s decision affirmed

Ratio:
-The 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.
- The present case reflects a situation where the financing company can withhold and conceal - up to the last moment
- its intention to sell the property subject of the finance lease, in order that the provisions of the Recto Law may be
circumvented. It may be, as petitioner pointed out, that the basic “lease agreement” does not contain a “purchase
option” clause. The absence, however, does not necessarily argue against the idea that what the parties are into is
not a straight lease, but a lease with option to purchase. This Court has, to be sure, long been aware of the practice of
vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the
ownership of the object of the sale from passing to the vendee until and unless the price is fully paid.
-Being leases of personal property with option to purchase as contemplated in the above article, the contracts in
question are subject to the provision that when the lessor in such case “has chosen to deprive the lessee of the
enjoyment of such personal property,” “he shall have no further action” against the lessee “for the recovery of any
unpaid balance” owing by the latter, “agreement to the contrary being null and void.”
-In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the petitioner waived
its right to bring an action to recover unpaid rentals on the said leased items. Paragraph (3), Article 1484  in relation to
Article 1485 of the Civil Code, which we are hereunder re-reproducing, cannot be any clearer.
 
 
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:
 
xxx       xxx       xxx
 
(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.

      ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with
option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.
 
-As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals, the remedies provided for in Article 1484 of
the Civil Code are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation
applies to contracts purporting to be leases of personal property with option to buy by virtue of the same Article 1485.
The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of
applying Article 1485 was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer
for replevin to recover possession of the office equipment. By virtue of the writ of seizure issued by the trial court, the
petitioner has effectively deprived respondent of their use, a situation which, by force of the Recto Law, in turn
precludes the former from maintaining an action for recovery of “accrued rentals” or the recovery of the balance of the
purchase price plus interest.
 
The imperatives of honest dealings given prominence in the Civil Code under the heading: Human Relations, provide
another reason why we must hold the petitioner to its word as embodied in its demand letter. Else, we would witness a
situation where even if the respondent surrendered the equipment voluntarily, the petitioner can still sue upon its
claim. This would be most unfair for the respondent. We cannot allow the petitioner to renege on its word. Yet more
than that, the very word “or” as used in the letter conveys distinctly its intention not to claim both the unpaid balance
and the equipment. It is not difficult to discern why: if we add up the amounts paid by the respondent, the residual
value of the property recovered, and the amount claimed by the petitioner as sued upon herein (for a total of
P21,779,029.47), then it would end up making an instant killing out of the transaction at the expense of its client, the
respondent. The Recto Law was precisely enacted to prevent this kind of aberration. Moreover, due to considerations
of  equity,  public  policy and justice, we cannot allow this to happen. Not only to the respondent, but those similarly
situated who may fall prey to a similar scheme.

52. Elisco Tool Manufacturing Corp. vs. Court of Appeals, G.R. No. 109966, 31 May 1999
EASES OF PERSONALTY WITH OPTION TO BUY (sakyanan na nabayran na pag
utang gipangan under sa companya pero natangtang na sya)
Note:
• Lantan was an employee of Elisco.
• There was a car plan, granted by certain employees.
• The rentals for the car deducted from the salary, but Elisco closed shop. So
Lantan was laid-off, termination of service with cause.
• Lantan continued using the car, he did not return the car to the company. He
paid the rentals although not in a regular basis.
• During audit, they found out in their records, there this car leased to Lantan.
• Elisco filed an action to recover the car.
• During the trial, it was found out that Lantan was already fully paid.
• Initially, the trial court granted the writ of replevin, the court finally ruled that
the car should be returned to that man. The car is his already.

FACTS: Private respondent 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 which provided as follows:
- that, Elisco Tool Manufacturing Corp is the owner of a car which for and in
consideration of a monthly rental of P 1010.65 will be leased to Rolando Lantan for 5 years
- That, Rolando Lantan shall pay the lease thru salary deduction from his monthly
remuneration in the amount as above specified for a period of FIVE (5) years;
- That, he shall for the duration of the lease contract, shoulder all expenses and costs of
registration, insurance, repair and maintenance, gasoline, oil, part replacement inclusive of all
expenses necessary to maintain the vehicle in top condition
-That, at the end of FIVE (5) year period or upon payment of the 60th monthly rental, Lantan
may exercise the option to purchase the motor vehicle from Elisco and all monthly rentals
shall be applied to the payment of the full purchase price of the car and further, should
Lantan desire to exercise this option before the 5-year period lapse, he may do so upon
payment of the remaining balance on the five year rental unto Elisco, it being understood
however that the option is limited to the EMPLOYEE;
-That, in case of default in payment THREE (3) accumulated monthly rentals, Elisco shall have
the full right to lease the vehicle to another EMPLOYEE;
-That, in the event of resignation and or dismissal from the service, Lantan shall return the
subject motor vehicle to the EMPLOYER in good working and body condition.
• On the same day, January 9, 1980, private respondent executed a promissory note
which states his promise to pay P 1,010.65 without the necessity of notice or demand in
accordance with the schedule of payment
After taking possession of the car, Lantan installed accessories worth P15,000.00
In 1981, Elisco Tool ceased operations, as a result of which private respondent Rolando
Lantan was laid off. Nonetheless, as of December 4, 1984, private respondent was able to
make payments for the car in the total amount of P61,070.94.
• On June 6, 1986, petitioner filed a complaint, entitled “replevin plus sum of money,”
against private respondent Rolando Lantan, his wife Rina, and two other persons.
• Upon the posting of the bond, the sheriff took possession of the car and after 5 days
turned it over to the petitioner
Private respondents claim that their agreement was to buy and sell and not lease
with option to buy the car
In its reply, petitioner maintained that the contract was one of lease with option to
purchase and that the promissory note was merely a “nominal security” for the
agreement.

Supreme Court Ruling

Under a typical car plan, the company advances the purchase price of a car to be paid back
by the employee through monthly deductions from his salary. The company retains ownership
of the motor vehicle until it shall have been fully paid for.
However, retention of registration of the car in the company’s name is only a form of a lien on
the vehicle in the event that the employee would abscond before he has fully paid for it.
This Court has long been aware of the practice of vendors of personal property of
denominating a contract of sale on installment as one of lease to prevent the ownership of the
object of the sale from passing to the vendee until and unless the price is fully paid.
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise
of one bars the exercise of the others. This 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 the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the
complaint for replevin 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 not
returned to private respondent until April 16, 1989, after two (2) years and eight (8) months,
upon issuance by the Court of Appeals of a writ of execution.
Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the
amount that they were supposed to pay as of May 1986, plus interest at the legal rate. At the
same time, it prayed for the issuance of a writ of replevin or the delivery to it of the motor
vehicle “complete with accessories and equipment.” In the event the car could not be
delivered to petitioner, it was prayed that private respondent Rolando Lantan be made to pay
petitioner the amount of P60,000.00, the “estimated actual value” of the car, “plus accrued
monthly rentals thereof with interests at the rate of fourteen percent

(14%) per annum until fully paid.” This prayer of course cannot be granted, even assuming
that private respondents have defaulted in the payment of their obligation. This led the trial
court to say that petitioner wanted to eat its cake and have it too.
Both the trial court and the Court of Appeals correctly ruled that private respondents could no
longer be held liable for the amounts of P39,054.86 or P60,000.00 because private
respondents had fulfilled their part of the obligation. The agreement does not provide for the
payment of interest on unpaid monthly “rentals” or installments because it was entered into
in pursuance of a car plan adopted by the company for the benefit of its deserving
employees. As the trial court correctly noted, the car plan was intended to give additional
benefits to executives of the Elizalde group of companies.
What is rent-to-own?
• Lease for a certain period, after a certain period, if you decide to purchase the car, the
rentals will be applied as installment payments, you will be required to pay only a small
amount for the price.
That arrangement is installment sale of personal property.
Situation:
If it’s a sale of personal property, if you rent a car of a rent-to- own scheme, meaning lease
contracts with option to buy. If you default on the payment of rentals, and the lessor recovers
possession of the vehicle, you are no longer obliged to pay the unpaid balance. It’s like
foreclosing of a chattel mortgage. No right to recover the deficiency.

Barter
Loan
Dation in payment

Arts. 1469-1474
Price

General principles in agreement as to price

53. Boston Bank of the Philippines vs. Manalo, G. R. No. 158149, 09 Feb 2006

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.

Supreme Court Ruling

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.
It is not enough for the parties to agree on the price of the property. The parties must also
agree on the manner of payment of the price of the property to give rise to a
binding and enforceable contract of sale or contract to sell.
This is so because the agreement as to the manner of payment goes into the price, such that
a disagreement on the manner of payment is tantamount to a failure to agree on the
price.
In a contract to sell property by installments, it is not enough that the parties agree on the
price as well as the amount of 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

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as
the Xavierville Estate Subdivision. Which was then offered for sale to individual lot buyers. On
September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The
Overseas Bank of Manila (OBM), as vendee, executed a "Deed of Sale of Real Estate.
Nevertheless, XEI continued selling the residential lots in the subdivision as agent of OBM.
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr.
Carlos Manalo, Jr. who was in business of drilling deep water wells and installing pumps.
Manalo, Jr. installed a water pump at Ramos’ residence. Manalo, Jr. then proposed to XEI,
through Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the
downpayment the ₱34,887.66 Ramos owed him. XEI, through Ramos, agreed. Ramos
requested Manalo, Jr. to choose which lots he wanted to buy so that the price of the lots and
the terms of payment could be fixed and incorporated in the conditional sale.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the
lots. He also pegged the price of the lots at ₱200.00 per square meter, or a total of
₱348,060.00, with a 20% down payment of the purchase price amounting to ₱69,612.00 less
the ₱34,887.66 owing from Ramos. the corresponding Contract of Conditional Sale would
then be signed on or before the same date, but if the selling operations of XEI resumed after
December 31, 1972, the balance of the downpayment would fall due then, and the spouses
would sign the aforesaid contract within five (5) days from receipt of the notice of resumption
of such selling operations. It was also stated in the letter that, in the meantime, the spouses
may introduce improvements thereon subject to the rules and regulations imposed by XEI in
the subdivision
The spouses Manalo took possession of the property on September 2, 1972, constructed a
house thereon, and installed a fence around the perimeter of the lots.
The spouses Manalo were notified of the resumption of the selling operations of XEI.9
However, they did not pay the balance of the downpayment on the lots because Ramos failed
to prepare a contract of conditional sale and transmit the same to Manalo for their signature,
the spouses were also informed that they were being billed for said unpaid interests.
Manalo, Jr. stated they had not yet received the notice of resumption of Lei’s selling
operations, and that there had been no arrangement on the payment of interests; hence,
they should not be charged with interest on the balance of the downpayment on the
property.14 Further, they demanded that a deed of conditional sale over the two lots be
transmitted to them for their signatures. However, XEI ignored the demands. Consequently,
the spouses refused to pay the balance of the downpayment of the purchase price
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from
OBM
CBM filed a complaint27 for unlawful detainer
CBM claimed that the spouses had been unlawfully occupying the property without its consent
and that despite its demands, they refused to vacate the property.
RTC ruled in favor of sps Manalo, which was affirmed by CA
Hence this petition.

ISSUE:
WON there is a contract of sale or contract to sell

RULING:
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.
Supreme Court agrees 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.

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. A contract of sale is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and the price. From the averment of
perfection, the parties are bound, not only to the fulfillment of what has been expressly
stipulated, but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. On the other hand, when the contract of sale or to
sell is not perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation between the parties.
A definite agreement as to the price is an essential element of a binding agreement to sell
personal or real property because it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and enforceable contract of sale.
The fixing of the price can never be left to the decision of one of the contracting parties. But a
price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected
sale.

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

Requisites
Must be real (Art. 1471)
54. Cruzado vs. Bustos, G.R. No. L-10244, 29 Feb 1916
Effect if price is simulated - produces no effect
Facts: Agapito Cruzado was a poor man living in Pampanga, he had a job in court but was
still not enough to support his family. He aspired to hold the office of procurador in the CFI of
Pampanga but he was unable to give the required bond, an indispensable condition for his
appointment.
Since Cruzado was friends with Bustos, a rich woman in their place. He begged the
latter to simulate a mortgage deed of a certain property and have it executed in
court in his favor only to pose that he has real property to enable him to qualify to
such position of procurador.
In truth, the said mortgage was a front and fraudulent but was effected by making a pretend
contract which bore the appearance of truth.
It is unquestionable that the contract of sale was perfect and binding upon both contracting
parties since their names both appear in that instrument to have agreed upon the thing sold.
But it is also undeniable that the said contract was not consummated. (1) Cruzado did not
pay the purchase price of P2,200 (2) He never took possession of the land apparently sold in
the said deed.
All that the vendee did was to pledge the land as a security for the faithful
discharge of the duties of his office.
Santiago Cruzado, the son, brought an action for recovery of possession, founded on the right
transmitted to him by his father at his death – a right arising from the said simulated deed of
sale of the land in question.
Supreme Court Ruling
Under the law, 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.
Full ownership of the thing sold being conveyed to the vendee, from which moment the right
of action derived from this right may be exercised.
The record discloses that there was no payment made by Cruzado to Bustos, thus, rendering
the contract not to be consummated.
Art 1164 states that, a creditor has a right to the fruits at the time the obligation to deliver it
arise. However, he shall not acquire a property right thereto until it has been delivered to
him. Besides the failure to pay the purchase price, neither the vendee nor his heirs, had, at
any time, taken possession of the land.
Seven witnesses attest to the fact, Bustos and her husband while still living, continued to
possess the said land supposedly sold to Agapito Cruzado and cultivated it, as she had done
long before the sale of September 1875 to September 1891, the date of complaint by
Santiago Cruzado.

Note:
• The buyer of the parcel of land from the kumadre was very generous and of course
they executed a deed of sale without a legal expectation to receive the price. In fact,
Estafania continued the possession. There was a tenant working on the property. But,
Bustos never took possession of the property.
• They were so close that their children even got married. Santiago demanded from the
mother in law the delivery of the property.
• Is there a contract of sale? It is an absolute simulated contract of sale
because of the absence of the consideration. There was no price paid. Even if the
price was expressly stated in the contract.
• SC’s Ruling: The sale between Bustos and the elder son was simulated. The
price of the land was not paid and the vendee or his heirs did not at any particular
point of time came possession of the property.

55. Doles vs. Angeles, G.R. No. 149353, 26 Jun 2006

Effect if there is no consideration – null and void (non- existence of the
contract)
Petitioner executed a Deed of Absolute Sale ceding a parcel of land in favor of respondent
to satisfy the alleged indebtedness of the former in the amount of P405,430.00.
Since the said land was mortgaged to the National Home Mortgage Finance Corporation,
they further agreed that respondent would assume the remaining balance of the loan.
Learning that the petitioner still has arrearages, respondent demanded that the arrearages
be paid first. Petitioner did not heed; thus, a case was filed by the respondent.
In answer, the petitioner alleged that sale was void for lack of consideration and that she
was not indebted to the respondent as she only referred her friends to respondent whom
she knew to be engaged in the business of lending money in exchange for personal checks
through her capitalist Arsenio Pua.
Further petitioner contended that since the respondent is also an agent, she does not have
the capacity to sue her.
It is an admitted fact by both petitioner and defendant, based on their testimonies, that
respondent knew that the money will be used by the friends of the petitioner; that
the respondent was merely representing Arsenio Pua; and that before the
supposed friends of the petitioner defaulted in payment, each issued their
personal checks in the name of Arsenio Pua for the payment of their debt.

Supreme Court Ruling

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.
In this case, petitioner knew that the financier of the respondent is Pua, and
respondent knew that the borrowers are friends of petitioner.
It is sufficient that petitioner disclosed to respondent that the former was acting in behalf
of her principals, her friends. For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent interacts.
Here, both petitioner and respondent have undeniably disclosed to each other that they are
representing someone else and so both of them are estopped to deny the same.
That both parties acted as mere agents is shown by the undisputed fact that the friends of
the petitioner issued checks in payment of the loan in the name of Arsenio Pua.

Why there was no consideration?

Was there a document signed by the parties for the sake of certain property?
Who’s the seller? - Doles
What was sold by Doles to Angeles? – Parcel of land What was supposed to be the
consideration of the sale?
SC’s ruling:
There was no consideration in this case. The two are merely agents; they don’t owe
each other any amount. Doles did not owe Angeles. So if the consideration of thesale is the
unpaid loan, then it’s not only for Angeles.
The sale therefore is void because there’s no consideration for the transfer of
ownership of a land to Angeles. This is absence of consideration.

In comparison:
• Cruzado vs. Bustos – It is an absolutely simulated sale. There is no intention to transfer
ownership.
• Doles vs. Angeles – There was intention to transfer ownership but there was no
consideration, because the consideration was a sum of money to be paid by Angeles.

In money or its equivalent

56. Torres vs. Court of Appeals, G.R. No. 134559, 09 Dec 1999
Expectations of profits from the subdivision projects is a valid form of
consideration.
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.
According to petitioners, the project failed because of respondent’s lack of funds or means
and skills. They add that respondent used the loan not for the development of the
subdivision, but in furtherance of his own company, Universal Umbrella Company.
Because of this, petitioners filed a civil case before the Regional Trial Court of Cebu City,
which was later dismissed by the trial court.
 n 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.

Supreme Court Ruling

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.

Note:
• The consideration from the sale for the transfer of the property was not a sum of
money. It stated a particular amount.
• What was the consideration for the sale? The expected practice that if they will earn,
once the property was fully developed into a new housing project. But of course, the
project did not push through. Because certain relatives where claiming ownership over the
property.
• The SC said, there was a consideration, the expectation of profits from the subdivision
project.

57. Bagnas vs. Court of Appeals, G.R. No. L-38498, 10 Aug 1989
(man who died leaving properties, was said to have been sold to his relatives)

Facts: Hilario Mateum of Kawit, Cavite, died on 11 March 1964, single, without ascendants or
descendants, and survived only by collateral relatives, of whom Isaac, Encarnacion, Silvestre,
Maximina, and Sixto Bagtas, and Agatona Encarnacion, his first cousins, were the nearest.
Mateum left no will, no debts, and an estate consisting of 29 parcels of land in Kawit and
Imus, Cavite, 10 of which are involved in the case. On 3 April 1964, Rosa L. Retonil, Teofilo
Encarnacion and Jose B. Nambayan, themselves collateral relatives of Mateum though more
remote in degree, registered with the Registry of Deeds for the Province of Cavite 2 deeds of
sale purportedly executed by Mateum in their favor covering 10 parcels of land. Both deeds
were in Tagalog, save for the English descriptions of the lands conveyed under one of them;
and each recited the reconsideration of the sale to be P1, services rendered and to be
rendered for Mateum’s benefit. One deed was dated 6 February 1963 and covered 5 parcels
of land, and the other was dated 4 March 1963, covering 5 other parcels, both, therefore,
antedating Mateum’s death by more than a year. It is asserted by the Bagtas, et.al., but
denied by Retonil, et.al., that said sales notwithstanding, Mateum continued in the possession
of the lands purportedly conveyed until his death, that he remained the declared owner
thereof and that the tax payments thereon continued to be paid in his name. Whatever the
truth, however, is not crucial; what is not disputed is that on the strength of the deeds of
sale, Retonil, et.al. were able to secure title in their favor over 3 of the 10 parcels of land
conveyed thereby. On 22 May 1964, Bagtas et.al. commenced suit against Retonil, et.al. in
the CFI Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or,
alternatively, as donations void for want of acceptance embodied in a public instrument.
Claiming ownership pro indiviso of the lands subject of the deeds by virtue of being intestate
heirs of Hilario Mateum, Bagtas, et. al. prayed for recovery of ownership and possession of
said lands, accounting of the fruits thereof and damages.

The Supreme Court reversed the appealed Decision of the Court of Appeals, and declared the
questioned transfers void and of no force or effect. The Court ordered the annulment of such
certificates of title Retonil, et.al. may have obtained over the properties subject of said
transfers, and ordered them to return to Bagtas, et.al. possession of all the properties
involved in the action, to account to the latter for the fruits thereof during the period of their
possession, and to pay the costs
1. Void contracts: Cause not existing at time of transaction and contract without or with false
cause (where no hidden cause is proved) Under the Civil Code of the Philippines, Article 1409,
paragraph 3, Contracts, with a cause that did not exist at the time of the transaction are in
existent and void from the beginning. The same is true of contracts stating a false cause
(consideration) unless the persons interested in upholding the contract should prove that
there is another true and lawful consideration therefor. (Article 1353).
2. Intestate heirs have legal standing; Property subject of void contract does not leave
patrimony of transferor and recoverable by the heirs or the estate administrator The heirs
intestate have legal standing to contest the conveyance made by the deceased if the same
were made without any consideration, or for a false and fictitious consideration. If therefore
the contract has no causa or consideration, or the causa is false and fictitious (and no true
hidden causa is proved) the property allegedly conveyed never really leaves the patrimony of
the transferor, upon the latter’s death without a testament, such property would passed to
the transferor’s hairs intestate and be, recoverable by them or by the Administrator of the
transferor’s estate.
3. Armentia ruling clarified Concepcion and Solis rulings; False cause without hidden cause
now not merely voidable, but void ab initio The Armentia ruling does not reject, and is not to
be construed as rejecting, the Concepcion and Solis rulings (Concepcion vs. Sta. Ana, 87 Phil.
787 and Solis vs. Chua Pua Hermanos, 50 Phil. 536) as outrightly erroneous. On the contrary,
those rulings undoubtedly read and applied correctly the law extant in their time: Article 1276
of the Civil Code of 1889 under which the statement of a false cause in a contract rendered it
voidable only, not void ab initio. The fact that the law as it is now (during the time of
Armentia) no longer deems contracts with a false cause, or which are absolutely simulated or
fictitious, merely voidable, but declares them void, i.e., inexistent (“nulo”) unless it is shown
that they are supported by another true and lawful cause or consideration.
4. Armentia case; Effect of the change in the juridical status of contracts based on false cause
A logical consequence of that change is the juridical status of contracts without, or with a
false, cause is that conveyances of property affected with such a vice cannot operate to divest
and transfer ownership, even if unimpugned. If afterwards the transferor dies the property
descends to his heirs, and without regard to the manner in which they are called to the
succession, said heirs may bring an action to recover the property from the purported
transferee. Such an action is not founded on fraud, but on the premise that the property
never leaves the estate of the transferor and is transmitted upon his death to heirs, who
would labor under no incapacity to maintain the action from the mere fact that they may be
only collateral relatives and bound neither principally or subsidiarily under the deed / contract
of conveyance.
5. Armentia case; Conveyance merely annullable as action based on fraud vitiating
conveyance In Armentia, the Court determined that the conveyance questioned was merely
annullable, not void ab initio, and that the action was based on fraud vitiating said
conveyance. The court found that Marta Armentia executed the document, a fact
uncontroverted by the case’s plaintiff. Also, the vendees, being minors, makes the contract,
at worst, only annullable by them. Moreover, inadequacy of consideration does not imply total
want of consideration. Further, the purported acts of Marta Armentia after the sale did not
indicate that the said sale was void from the beginning. Thus, in essence the plaintiffs’ case is
bottomed on fraud, which renders the contract merely voidable. Sales, 2003 ( 35 ) Haystacks
(Berne Guerrero)
6. Armentia case applies to voidable contracts obtained or made fraudulently; does not apply
to transfers which are void for lack or falsity of consideration As a precedent, Armentia only
ruled that transfers made by a decedent in his lifetime, which are voidable for having been
fraudulently made or obtained, cannot be posthumously impugned by collateral relatives
succeeding to his estate who are not principally or subsidiarily bound by such transfers. That
ruling is not extendible to transfers which, though made under closely similar circumstances,
are void ab initio for lack or falsity of consideration.
7. False and fictitious consideration, without any alternative true or lawful cause presented,
renders contract void Upon the consideration alone that the apparent gross, not to say
enormous, disproportion between the stipulated price in each deed of P1 plus unspecified and
unquantilled services and the undisputably valuable real estate allegedly sold (worth at least
P10,500.00 going only by assessments for tax purposes which, it is well-known, are
notoriously low indicators of actual value) plainly and unquestionably demonstrates that they
state a false and fictitious consideration, and no other true and lawful cause having been
shown, the Court finds both said deeds, insofar as they purport to be sales, not merely
voidable, but void ab initio.
10. Donations of immovable property must be made and accepted in a public document;
Liberality as cause denied The validity of the conveyances cannot be defended on the theory
that their true causa is the liberality of the transferor and they may be considered in reality
donations, because the law also prescribes that donations of immovable property, to be valid,
must be made and accepted in a public instrument, and it is not denied by Retonil, et. al. that
there has been no such acceptance which they claim is not required.
11. Properties remained as part of estate of Mateum, and thus recoverable The transfers in
question being void, it follows as a necessary consequence and conformably to the concurring
opinion in Armentia, with which the Court fully agrees, that the properties purportedly
conveyed remained part of the estate of Hilario Mateum, said transfers notwithstanding,
recoverable by his intestate heirs, i.e. Bagtas, et.al., whose status as such is not challenged.
OBLIGATIONS AND CONTRACTS; SALE; CONSIDERATION; ONE PESO (P1.00)
CONSIDERATION FOR REAL PROPERTY WORTH AT LEAST P10,500. A FALSE AND
FICTITIOUS CONSIDERATION, SALE VOID AB INITIO. — Without necessarily according all
these assertions its hill concurrence, but upon the consideration alone that the apparent
gross, not to say enormous, disproportion between the stipulated price (in each deed) of
P1.00 plus unspecified and unquantilled services and the undisputably valuable real estate
allegedly sold — worth at least P10,500.00 going only by assessments for tax purposes
which, it is wall-known, are noteriously low indicators of actual value — plainly and
unquestionably demonstrates that they state a false and fictitious consideration, and no
other true and lawful cause having been shown, the Court finds both said deeds, insofar as
they purport to be sales, not merely voidable, but void ab initio.

DONATION; TO BE VALID MUST BE MADE AND ACCEPTED IN A PUBLIC INSTRUMENT. —

Neither can the validity of said conveyances be defended on the theory that their true
causa is the liberality of the transferor and they may be considered in reality donations,
because the law also prescribes that donations of immovable property, to be valid, must be
made and accepted in a public instrument, and it is not denied by the respondents that
there has been no such acceptance which they claim is not required.

58. Dantis vs. Maghinang, Jr., G.R. No. 191696, 10 Apr 2013
Facts:
It held that Exhibit "4" was an indubitable proof of the sale of the 352-square meter lot
between Emilio and Julio, Sr. It also ruled that the... partial payment of the purchase price,
coupled with the delivery of the res, gave efficacy to the oral sale and brought it outside the
operation of the statute of frauds. Finally, the court a quo declared that Julio, Jr. and his
predecessors-in-interest had an equitable claim... over the subject lot which imposed on
Rogelio and his predecessors-in-interest a personal duty to convey what had been sold after
full payment of the selling price. The decretal portion of the CA decision reads:
IN VIEW OF THE FOREGOING, the decision appealed from is reversed. The heirs of Julio
Maghinang Jr. are declared the owners of the 352-square meter portion of the lot covered by
TCT No. T-125968 where the residence of defendant Julio Maghinang is located, and the...
plaintiff is ordered to reconvey the aforesaid portion to the aforesaid heirs, subject to by
agreement or action to determine the exact metes and bounds and without prejudice to any
legal remedy that the plaintiff may take with respect to the unpaid balance of the... price.
SO ORDERED.[11]
Issues:
The fundamental question for resolution is whether there is a perfected contract of sale
between Emilio and Julio, Sr. The determination of this issue will settle the rightful ownership
of the subject lot.
Ruling:
WHEREFORE, the petition is GRANTED. The assailed January 25, 2010 Decision and the March
23, 2010 Resolution of the Court Appeals, in CA-G.R. CV No. 85258, are REVERSED and SET
ASIDE. The March 2, 2005 Decision of the Regional Trial Court of Malolos,... Bulacan, Branch
18, in Civil Case No. 280-M-2002, is REINSTATED.
SO ORDERED.
Principles:
Simply put, he who alleges the affirmative of the issue has the burden of proof, and upon the
plaintiff in a civil case, the burden of proof never parts. However, in the course of trial in a
civil case, once plaintiff makes out a prima facie case in his favor, the... duty or the burden of
evidence shifts to defendant to controvert plaintiff's prima facie case, otherwise, a verdict
must be returned in favor of plaintiff. Moreover, in civil cases, the party having the burden of
proof must produce a preponderance of evidence thereon, with... plaintiff having to rely on
the strength of his own evidence and not upon the weakness of the defendant's. The concept
of "preponderance of evidence" refers to evidence which is of greater weight, or more
convincing, that which is offered in opposition to it; at bottom, it means... probability of truth.
[

By the contract of sale, one of the contracting parties obligates himself to transfer the
ownership of, and to deliver, a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.[32] A contract of sale is a consensual contract and, thus,
is perfected by mere consent which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract.[33] Until the
contract of sale is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation between the parties.[34] The essential elements of a contract of sale
are: a) consent or meeting of the minds, that is, consent to transfer ownership in exchange
for the price; b) determinate subject matter; and c) price certain in money or its equivalent.
[35] The absence of any of the essential elements shall negate the existence of a perfected
contract of sale.[36]

Seemingly, Julio, Jr. wanted to prove the sale by a receipt when it should be the receipt that
should further corroborate the existence of the sale. At best, his testimony only alleges but
does not prove the existence of the verbal agreement. Julio, Jr. miserably failed to establish
by preponderance of evidence
that there was a meeting of the minds of the parties as to the subject matter and the
purchase price.
59. Velasco vs. Court of Appeals, supra.
60. San Miguel Properties Phils., Inc. vs. Sps. Huang, G.R. No. 137290, 31 Jul 2000
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the
purchase and sale of real properties. In February, the properties were offered for sale for
P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for
respondent spouses as undisclosed principals.
. Atty. Dauz, acting in behalf of Spouses Huang, wrote a letter proposal in interest of
purchasing the property. In the said letter, it was agreed that spouses Huang will pay a sum
of 1,000,000.00 pesos as earnest money in exchange of exclusive option to purchase the
property. It was also agreed that if the parties will come into a final agreement, the earnest
money shall be returned to the spouses.
The parties didn’t reach an agreement resulting the petitioners to return the earnest
money. Atty. Dauz and spouses Huang as for execution of the sale and initiated returning the
earnest money back to the petitioners but the petitioners rejected.
Respondents filed a complaint for specific performance. They contend that the sale has
been perfected because an earnest money has been delivered and accepted to the
petitioners. They contend that the sale is perfected and used as legal basis Art. 1482 of the
Civil Code which provides that "whenever earnest money is given in a contract of sale, it shall
be considered as part of the price and as proof of the perfection of the contract." RTC and CA
Ruled in favor of the respondents. Thus, this case filed by the petitioners in the Supreme
Court.
The Petitioners contend that there is no perfection of the sale. The letter of
respondents, which petitioner accepted, merely resulted in an option contract, albeit it was
unenforceable for lack of a distinct consideration. Petitioner argues that the absence of
agreement as to the mode of payment was fatal to the perfection of the contract of sale.

ISSUE: Whether or not the money deposited is considered an earnest money.

RULING: No, the money deposited is not an earnest money. Art. 1479, an accepted unilateral
promise to buy or sell a determinate thing for a price certain is binding upon the prior only if
the promise is supported by a distinct consideration.

In the case at bar, the P1 million “earnest money” cannot be considered as distinct
consideration and cannot be considered as an earnest money. The Proposal letter
submitted by Atty. Dauz to the Petitioner is an Option Contract and therefore they
are still in negotiation phase. An options contract is an agreement between a buyer
and seller that gives the purchaser of the option the right to buy or sell a particular
asset at a later date at an agreed upon price but it is not a contract of sale. The
stipulation in the contract entails that they are still in a negotiation phase and there
is no meeting of the minds yet. The parties not passing the negotiation phase, there
is no perfection of the contract and the P1 million cannot be
considered as an earnest money. Thus, the specific performance is unenforceable.

Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real
properties. Parts of its inventory are two parcels of land totaling to 1, 738 square meters at the corner of Meralco
Avenue and Gen. Capinpin St., Barrio Oranbo, Pasig City.

On February 21, 1994, the properties were offered for sale for ₱52,140,000 in cash. The offer was made to
Atty. Helena Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March 24, 1994,
Atty. Dauz signified her clients’ interest in purchasing the properties for the amount for which they were offered by
petitioner, under the following terms: the sum of ₱500,000 would be given as earnest money and the balance would
be paid in 8 equal monthly installments from May to December 1994. However, petitioner refused the counter-offer.

Atty. Dauz thus wrote San Miguel expressing the interest of respondent spouses, subject to the following
conditions:

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

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

3. In the event that we do not come to an agreement on this transaction, the said amount of ₱1,000,000 shall be
refundable to us in full upon demand.”

On July 7, 1994, San Miguel, through its president, Federico Gonzales, wrote Atty. Dauz informing her that
because the parties failed to agree on the terms and conditions of the sale despite the extension granted by San
Miguel, it is already returning the amount of ₱1 Million given as “earnest-deposit”.

Respondent spouses, through their counsel, demanded the execution of the Deed of Sale and attempted to
return the earnest-deposit but SMPPI refused to accept it on the ground that the option to purchase had already
expired.

Thus on August 16, 1994, respondent spouses filed a complaint for specific performance against SMPPI but
the latter moved to dismiss said complaint alleging that: 1. the alleged “exclusive option” of respondent spouses lacked
a consideration separate and distinct from the purchase price and was thus unenforceable; and 2. the complaint did
not allege a cause of action because there was no meeting of the minds between the parties and therefore, no
perfected contract of sale. This motion was opposed by respondent spouses.
 RTC granted the motion to dismiss but the CA reversed it on appeal and held that all the requisites of a
perfected contract of sale had been complied with as the offer made in connection with which the earnest money in the
amount of ₱1 Million was tendered by respondent spouses had already been accepted by SMPPI. The court cited Art.
1482 of the Civil Code which provides that “whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and proof of the perfection of the contract.”

Issue: Whether or not the contract of sale was perfected.

Ruling:

The contract of sale was not perfected. In holding that there is perfected contract of sale, the CA relied on the following
findings: (1) earnest money was allegedly given by respondents and accepted by SMPPI through its vice-president
and operations manager, Isidro Sobrecarey; and (2) the documentary evidence in the records show that there was
perfected contract of sale.

With regard to the alleged payment and acceptance of the earnest money, the SC holds that respondents did
not give the ₱1 Million as earnest money as contemplated in Art. 1482. Respondents presented the amount merely as
deposit of what would eventually become earnest money or down payment should a contract of sale be made by
them. The amount was thus given not as part of the purchase price and proof of the perfection of the contract of sale
but only as guarantee that respondents would not back out of the sale. They even described it as “earnest-deposit”.

All that respondents had was just an option to buy the properties which privilege was not exercised by them
because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by
respondents.

61. Toyota Shaw, Inc. vs. Court of Appeals, supra.

Certain or ascertainable (determinable)

62. Pio Sian Melliza vs. City of Iloilo, supra.
63. Heirs of San Andres vs. Rodriguez, supra.

64. Carabeo vs. Sps. Dingco, G.R. No. 190823, 04 Apr 2011
(wa dawata iya tang bayad una2
Facts:
Domingo Carabeo (petitioner) entered into a contract (kasunduan) with spouses Norberto and
Susan Dingco (respondent) whereby petitioner agreed to sell his rights over a 648-square
meter parcel of unregistered land situated in Purok III, Tugatog, Orani, Bataan to
respondents for Php 38,000.
Upon signing the contract, respondent tendered an initial payment of Php 10,000. When they
were about to hand in the balance of the purchase price, petitioner did not accept it as he was
yet to settle an "on-going squabble" over the land. Nevertheless, the petitioner still requested
that respondent to hand over small sums of money from time to time which totaled to Php
9,100.
Petitioner insisted of paying the remaining balance of Php 18,900, but respondent refused
reasoning out that he would register the land first. However, when the alleged "squabble" had
already been settled and the registration of the land was made, the petitioner still declined to
accept the payment, prompting the respondent to file a complaint in the Katarungan
Pambarangay. No settlement was reached, hence, respondent filed a complaint for specific
performance before the RTC.
In the petitioner's answer to the complaint, he alleged that the sale was void for lack of object
certainty, the kasunduan not having specified the metes and bounds of the land.
Issue:
Whether or not an object certain is present in the case
Ruling:
Yes.
 The pertinent portion of the kasunduan reads:
xxxx
Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan,
na may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa ay may sakop na dalawang
punong santol at isang punong mangga, kaya’t ako ay nakipagkasundo sa mag-asawang
Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa sa
halagang ₱38,000.00.
xxxx
That the kasunduan did not specify the technical boundaries of the property did not
render the sale a nullity. The requirement that a sale must have for its object a
determinate thing is satisfied as long as, at the time the contract is entered into, the
object of the sale is capable of being made determinate without the necessity of a
new or further agreement between the parties. As the above-quoted portion of the
kasunduan shows, there is no doubt that the object of the sale is determinate.

65. Vda. de Maglana vs. Consolacion, G.R. No. 60506, 06 Aug 1992
(NAAKSIDENTE NYA WA BAYRIS INSURANCE)
Facts:
On December 20, 1978 Lope Maglana Sr., while on his way to his work station met an
accident that resulted in his death. The heirs of Maglana sr., herein petitioners filed an action
for damages and attorney’s fees against Patricio and the Afisco Insurance Corporation before
the CFI of Davao.
On December 14, 1981, the lower court rendered a decision finding that Destrajo had
not exercised sufficient diligence as the operator of the jeepney. In the 2nd paragraph of
the dispositive portion of the decision, the lower court awarded the plaintiffs the sum of
P28,000.00 for loss of income, among others.
Petitioners contend that the insurance company is directly and solidarily liable with the
negligent operator up to the extent of its insurance coverage. Respondents on the other
hand argued that since the Insurance Code does not expressly provide for a solidary
obligation, the presumption is that the obligation is joint.
issue:
Whether or not the lower court was correct in the computation for the loss of income.
Ruling:
The petition is granted. While the petition seeks a definitive ruling only on the nature of
AFISCO's liability, we noticed that the lower court erred in the computation of the
probable loss of income. Using the formula: 2/3 of (80-56) x P12,000.00, it awarded
P28,000.00. Upon recomputation, the correct amount is P192,000.00. Being a "plain
error," we opt to correct the same.

Under Art. 1469(3) of the New Civil Code, if the third person or persons acted in bad faith or
by mistake, the courts may fix the price.

Although the insurance policy clearly provides that AFISCO can be held directly liable by petitioners on the basis
of the insurance contract, nonetheless, AFISCO may not be held solidarily liable with Destrajo since their
respective liabilities are based on different grounds. The liability of the insurer is based on contract; that of the
insured is based on tort. As such, petitioners have the option either to claim from AFISCO to the extent agreed
upon in the contract and the balance from Destrajo or enforce the entire judgment from Destrajo subject to
reimbursement from AFISCO to the extent of the insurance coverage

How determined:
66. Barretto vs. Sta. Marina, G.R. No. L-8238, 02 Dec 1913
Note:
• The amount of his investment is determined.
• Barreto’s interest in the business was determined. He would not sell his interest, because the
business has grown.
• How did they agree to determine the price? – By appraisers.
• Did the appraisers determine the price? – No.
• What did they determine? – The net value of the business.
Facts:
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 net value was at P4,428,194.44. Of this amount 4/173 part represented the plaintiff‘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.
The plaintiff admits that if the agreement of May 3, 1910, was a perfected sale he cannot
recover any profits after that date; while on the other hand defendant concedes that if the
said agreement was only a promise to sell in the future it, standing alone, would not prevent
recovery in this action.

Supreme Court Ruling

The agreement executed by both parties on May 03, 1910 was a perfected contract of sale.
Article 1450 of the Civil Code reads: "The sale shall be perfected between vendor and
vendees and shall be binding on both of them, if they have agreed upon the thing which is
the object of the contract and upon the price, even when neither has been delivered."
This is supplemented by article 1447 of the Code which reads as follows: "In order that the
price may be considered fixed, it shall be sufficient that it be fixed with regard to another
determinate thing also specific, or that the determination of the same be left to the judgment
of a specified person."
Under article 1450, there are two indispensable requisites in a perfected sale: (1) There must
be an agreement upon the thing which is the object of the contract; and (2) the contracting
parties must agree upon the price.
The object of the contract in the case at bar was the whole of the plaintiff's right,
title, and interest in La Insular. This whole was 4/173 of the entire net value of the
business.
The parties agreed that the price should be 4/173 of the total net value. The fixing of such
net value was unreservedly left to the judgment of the appraisers.
As to the thing and the price the minds of the contracting parties met, and all questions
relating thereto were settled.
Nothing was left unfinished in so far as the contracting parties were concerned. Neither party
could withdraw from the contract without the consent of the other.
The result is that the two essential requisites necessary to constitute a perfected sale were
present.
Did Barreto and Sta. Marina agree on the amount of the price?
• Yes

67. E.C. McCulough vs. R.Aenlle & Co., G.R. No. 1300, 03 Feb 1904
By reference to invoices(price)
The plaintiff and defendant entered into an agreement August 27, 1901, for the purchase by
 the plaintiff and sale by the defendant of certain real property, the tobacco and cigarette
factory known as "La Maria Cristina," 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.
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.
On August 27, 1901, the parties herein executed a written contract of the
sale of a tobacco and cigarette company “La Maria Cristina” which includes the trademark,
stock of tobacco, machinery and fixtures that belongs to the factory. On September 30, the
parties executed another contract in which the defendant acknowledge the receipt
at the time of the full purchase price of sale. These items were placed in 2 lots. In
the first lot it is composed of 221 bales of fourth-class superior tobacco and of crop 1899 from
Angadanan and on the second lot it is composed of 76 bales of first, second and third class
crops from Isabela. In December 1901, plaintiff with others, organized a company to which
the plaintiff sold all the tobacco which he bought from the defendant. Upon examination the
new company found out that the tobacco was not the quality indicated in the inventory. The
plaintiff claimed that the tobacco in the two lots was worthless and filed a case to recover
what he had paid.
Issue:
Whether or not the plaintiff can recover the amount he paid for the tobacco
Ruling:
No, he cannot recover the amount. The plaintiff was the owner of another business in which
he testified that he is planning to move his business in the building with the cigar factory of
the defendant. It would be impossible for him to get the building without buying the tobacco
from the defendant. In the document agreed by the parties in August 1901, it is considered a
completed contract of sale. In the case of Mascunana vs. Court of Appeals, G.R. No. 15864, it
provided the essential elements of the contract or sale with the consent or meeting or mind
as the first element. There must be a determinate subject matter and lastly the price certain
in money or its equivalent. In the case there was a meeting of minds and the subject was
determinate being the building with the tobacco. The price was also agreed by both parties. It
is agreed that the plaintiff would buy among other things, all the tobacco in the factory. He is
also bound to take all the tobacco belonging to the factory and pay the defendant. It is not a
conditional contract but it is considered to be and absolute contract in which the plaintiff is
obligated to pay the amount of tobacco.

Supreme Court Ruling

Under the terms of the agreement, the price of the property sold be considered certain. 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.
he 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.
Note:
• The price of the business was based on some at cost, some at a certain discount, in an
invoice. Is that a valid way of determining the price? Yes.
Example: I can sell my 1,000 common shares in PLDT. For how much?
• Whatever is the opening price tomorrow on the start ofexchange market. That’s perfectly
valid.

Effect of indeterminability

68. Robles vs. Hermanos, G.R. No. L-26173, 13 Jul 1927

A parcel of land was originally owned by the parents of the present plaintiff, Zacarias Robles.
Upon the death of his father, plaintiff leased the parcel of land from the administrator with the
stipulation that any permanent improvements necessary to the cultivation and exploitation of
the hacienda should be made at the expense of the lessee without right to indemnity at the
end of the term.
As the place was in a run-down state, and it was foreseen that the lessee would be put to
much expense inbringing the property to its productive capacity, the annual rent was fixed at
the moderate amount of P2,000 per annum.
The plaintiff made various improvements and additions to the plant. The firm of Lizarraga
Hermanos was well aware of the nature and extent of these improvements.
When the plaintiff’s mother died, defendant came forward with a proposal to buy the heirs’
portion of the property. In consideration that the plaintiff should shorten the term of his lease
to the extent stated, the defendant agreed to pay him the value of all betterments that he
had made on the land and furthermore to purchase from him all that belonged to him
personally on the land. The plaintiff agreed to this.
On the ensuing instrument made, no reference was made to the surrender of the plaintiff’s
rights as lessee, except in fixing the date when the lease should end; nor is anything said
concerning the improvements which the plaintiff had placed. At the same time the promise of
the defendant to compensate for him for the improvements was wanting. Accordingly, the
representative of the defendant explained that this was unnecessary in view of the confidence
existing between the parties.
On the part of the defendant it was claimed that the agreement with respect to compensating
the plaintiff for improvements and other things was never in fact made.

Supreme Court Ruling

The appreciation value can be used to determine the price. 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 improvements at an appraised valuation, and the defendant obligated itself
to promote the appraisal in good faith.
As the defendant partially frustrated the appraisal, it violated a term of the contract and
made itself liable for the true value of the things contracted about, as such value may be
established in the usual course of proof.
Furthermore, an unjust enrichment of the defendant would result from allowing it to
appropriate the movables without compensating the plaintiff thereof.

C. Effect of Inadequacy of Price

69. Askay vs. Cosalan, G.R. No. 21943, 15 Sep 1924
Note:
• Askay is an Igorot and uneducated.
• There’s this man, his nephew in law, to sell this property for 1 peso. Askay was paid
consisted of P107.00 in cash, a billfold, one sheet, two carabaos, and one cow.
• The SC said, that’s not a valid and sufficient reason for us to declare the contract as
void.
• The fact that the bargain is a hard one, coupled with mere inadequacy of price when
both parties are in a position to form an independent judgment concerning the
transaction, is not sufficient ground for the cancellation of a contract.

Facts:
Askay, an illiterate Igorrote between 70 and 80 years of age, residing in the municipal district
of Tublay, Province of Benguet, who at various times has been the owner of mining property.
The defendant is Fernando A. Cosalan, the nephew by marriage of Askay, and municipal
president of Tublay, who likewise has been interested along with his uncle in mining
enterprises.
About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay, Benguet.
On November 23, 1914, if we are to accept defendant's Exhibit 1, Askay sold this claim to
Cosalan.
Nine years later, in 1923, Askay instituted action in the Court of First Instance of Benguet to
have the sale of the Pet Kel Mineral Claim adhered null, to secure possession of the mineral
claim, and to obtain damages from the defendant in the amount of P10,500.
Following the presentation of various pleadings including the answer of the defendant, and
following trial before Judge of First Instance Harvey, judgment was rendered dismissing the
complaint and absolving the defendant from the same, with costs against the plaintiff.
On being informed of the judgment of the trial court, plaintiff attacked it on two grounds: The
first, jurisdiction, and the second, formal. Both motions were denied, and an appeal was
perfected.

Supreme Court Ruling

In our judgment, the plaintiff has failed to establish his claim. Fraud must be both alleged and
proved.
One fact exists in plaintiff's favor, and this is the age and ignorance of the plaintiff who could
be easily duped by the defendant, a man of greater intelligence.
Another fact is the inadequacy of the consideration for the transfer which, according
to the conveyance, consisted of P1 and other valuable consideration, and which,
according to the oral testimony, in reality consisted of P107 in cash, a bill fold, one
sheet, one cow, and two carabaos.
Gross inadequacy naturally suggests fraud and is some evidence thereof, so that it may be
sufficient to show it when taken in connection with other circumstances, such as ignorance or
the fact that one of the parties has an advantage over the other.
But the fact that the bargain was a hard one, coupled with mere inadequacy of price when
both parties are in a position to form an independent judgment concerning the transaction, is
not a sufficient ground for the cancellation of a contract.
What if the price is inadequate or much lower than the subject of the sale?
The law says, it does not affect the contract, but it may show a vitiated consent.

70. Aguilar vs. Rubiato, G.R. No. L-14823, 09 Dec 1919

Note:
• Rubiato owned parcels of land at the time valued at 26,000 pesos. Here comes a
man, Manuel, convinced him to sign a special power of attorney, authorizing this
attorney- in- fact to obtain a loan for 4,000 pesos.
• What did this guy do? Sold the property under the right to repurchase.
• How many parcels of land were sold under the right to repurchase? 8 parcels of land
 for 800pesos for 1 year.
• The SC acknowledges that when you sell a property in “right to repurchase” the
price is always much lower than the prevailing market price. Why? Because the
right of the seller to redeem the property.
• The SC said that the transaction was a loan and the sale was an equitable mortgage.
Rubiato was still obliged to pay the loan with interest. It is — that the inadequacy of
the price, which Vila obtained for the eight parcels of land belonging to Rubiato, is
so great that the minds revolt at it.

Rubiato was the owner of parcels of land and was desirous of obtaining a loan.
He thereafter signed a power of attorney in favor of a certain Vila to secure a loan and to
execute any writing for the mortgage of land.
Vila, pursuant to the power of attorney, then sold the land to Aguilar, with the right of
repurchase within one year and Rubiato was to remain in possession of the land as lessee.
One year expired and Aguilar filed a case to consolidate ownership over the lands.
Supreme Court Ruling
• It was a contract of loan. In addition to the evidence, there is one very cogent reason which
impels us to the conclusion that Rubiato is only responsible to the plaintiff for a loan.
• It is — that the inadequacy of the price which Vila obtained for the eight parcels of land
belonging to Rubiato is so great that the minds revolts at it.
• Xxx The members of this court after most particular and cautious consideration, having in
view all the facts and all the naturals tendencies of mankind, consider that Rubiato is only
responsible to the plaintiff for the loan of P800.

71. Bautista vs. Court of Appeals, G.R. No. 158015, 11 Aug 2004
(anak sa gawas nikalit ug angkon)
Facts: This parcel of land was previously owned and registered in the name of the late
Cesar Morelos under Transfer Certificate of Title No. 27604. Cesar is the uncle of
petitioner Laura Morelos Bautista, being the brother of her mother, Rosario Morelos. 3
Cesar, who was married to Rosario Duran, did not have any children. Rosario died in
1972. Cesar died of cardiac arrest on April 15, 1982. During his lifetime, Cesar sold and
conveyed the above-mentioned parcel of land in favor of petitioner Laura Morelos
Bautista, as evidenced by a "Deed of Absolute Sale" notarized by Luis M. de
Guzman. Accordingly, Transfer Certificate of Title No. 254843 was issued in the name of
petitioner Laura Bautista. 4
Respondent Fernando Morelos, claiming to be the illegitimate child of Cesar
Morelos with Angelina Lim-Gue, instituted a complaint for the declaration of nullity
of sale and title with damages, docketed as Civil Case No. 83-17900, before the
Regional Trial Court of Manila, Branch VII. At the trial, he presented testimonies of expert
witnesses who claimed that the signature of Cesar Morelos on the Deed of Absolute Sale
and the fingerprint appearing on his Residence Certificate were not his. 5
RTC- valid
CA-reversed.
ISSUE:WHETHER OR NOT THE DEED OF ABSOLUTE SALE is VALID.
HELD: Petitioner asserts the validity of the Deed of Absolute Sale and invokes the
testimony of Carmelita Marcelino, the instrumental witness to the signing of the document,
who confirmed that it was the decedent Cesar Morelos who affixed his signature to the
document.
On the other hand, respondent contends that the decedent's signature on the Deed
was forged.
 It is well-settled that a duly notarized contract enjoys the prima facie presumption of
authenticity and due execution as well as the full faith and credence attached to a public
instrument. 11 To overturn this legal presumption, evidence must be clear, convincing and
more than merely preponderant to establish that there was forgery that gave rise to a
spurious contract.
In the case at bar, the presumption of validity and regularity prevails over allegations
of forgery and fraud. As against direct evidence consisting of the testimony of a witness
who was physically present at the signing of the contract and who had personal knowledge
thereof, the testimony of an expert witness constitutes indirect or circumstantial evidence at
best. Carmelita Marcelino, the witness to the Deed of Absolute Sale, confirmed the
genuineness, authenticity and due execution thereof. 15 Having been physically present to
see the decedent Cesar Morelos and petitioner Laura Bautista affix their signatures on the
document, the weight of evidence preponderates in favor of petitioners.
Besides, a notarial document is evidence of the facts in the clear unequivocal
manner therein expressed and has in its favor the presumption of regularity. 19 The
authenticity and due execution of the Deed of Absolute Sale must therefore be
upheld.
As to the alleged insufficient consideration of the sale of the property, the mere
inadequacy of the price does not affect its validity when both parties are in a position to
form an independent judgment concerning the transaction, 20 unless fraud, mistake or
undue influence indicative of a defect in consent is present. 21 A contract may
consequently be annulled on the ground of vitiated consent and not due to the inadequacy
of the price. In the case at bar, however, no evidence to prove fraud, mistake or undue
influence indicative of vitiated consent was presented other than the respondent's self-
serving allegations.

Effect of failure of consideration

72. Sps. Buenaventura vs. Court of Appeals, G.R. No. 126376, 20 Nov 2003
(ginikanan na gusto ipa cancel ang pagbaligya sa ilang yuta na gibaligyas ilang
anak.
Joaquin and Landrito are the parents of the plaintiffs and the defendants. They would like to
be declared null and void ab initio certain deeds of sale of real property executed by Joaquin
and Landrito in favor of their co- defendants.
• Petitioners aver that the deeds are simulated and therefore null and void ab initio
because firstly, there was no actual valid consideration for the deeds of sale over the
properties, secondly, assuming that there was consideration in the sums reflected in the
questioned deeds, the properties are more than three-fold times more valuable than the
measly sums appearing therein, thirdly, the deed of sale do not reflect and express the true
intent of the parties [vendors and vendees], fourthly, the purported sale of the properties in
litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the
compulsory heirs of their legitimate.

Supreme Court Ruling

Yes. There is a valid contract .No, the deeds of sale are not void for lack of consideration. A
contract of sale is not a real contract, but a consensual contract
As a consensual contract, a contract of sale becomes binding and valid contract upon the
meeting of the minds as to price.
If there is a meeting of the minds of the parties as to the price, the contract of sale is valid,
despite the manner of payment, or even the breach of that manner of payment.
If the real price is not stated in the contract, then the contract of sale is valid but
subject to reformation.
If there is no meeting of the minds of the parties as to the price, because the price
stipulated in the contract is simulated, then the contract is void. Article 1471 of the
 Civil Code states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of
sale. Payment of the price has nothing to do with the perfection of the contract.
Payment of the price goes into the performance of the contract.
Failure to pay the consideration is different from lack of consideration. The former results in a
right to demand the fulfillment or cancellation of the obligation under an existing valid
contract while the latter prevents the existence of a valid contract.

Effect of non-payment
73. Balatbat vs. Court of Appeals, G.R. No. 109410, 28 Aug 1996

Facts:

A parcel of land was acquired by plaintiff Aurelio Roque and Maria Mesina during their
conjugal union. Maria died on August 28, 1966. On June 15, 1977, Aurelio filed a case
for partition. The trial court held that Aurelio is entitled to the ½ portion at his share in
the conjugal property, and 1/5 of the other half which formed part of Maria’s estate,
divided equally among him at his 4 children. The decision having become final and
executory, the Register of Deeds of Manila issued a transfer certificate of title on
October 5, 1979 according to the ruling of the court. On April 1, 1980, Aurelio sold his
6/10 share to spouses Aurora Tuazon-Repuyan and Jose Repuyan, as evidenced by a
deed of absolute sale. On June 21, 1980, Aurora caused the annotation of her affidavit of
adverse claim. On August 20, 1980, Aurelio filed a complaint for rescission of contract
grounded on the buyers’ failure to pay the balance of the purchase price. On February 4,
1982, another deed of absolute sale was executed between Aurelio and his children, and
herein petitioner Clara Balatbat, involving the entire lot. Balatbat filed a motion for the
issuance of writ of possession, which was granted by the court on September 20, 1982,
subject to valid rights and interests of third persons. Balatbat filed a motion to
intervene in the rescission case, but did not file her complaint in intervention. The court
ruled that the sale between Aurelio and Aurora is valid.

Issues:

(1) Whether the alleged sale to private respondents was merely executory

(2) Whether there was double sale

(3) Whether petitioner is a buyer in good faith and for value

Held:

(1) Contrary to petitioner's contention that the sale dated April 1, 1980 in favor of
private respondents Repuyan was merely executory for the reason that there was no
delivery of the subject property and that consideration/price was not fully paid, we find
the sale as consummated, hence, valid and enforceable. The Court dismissed vendor's
Aurelio Roque complaint for rescission of the deed of sale and declared that the Sale
dated April 1, 1980, as valid and enforceable. No appeal having been made, the decision
became final and executory.

The execution of the public instrument, without actual delivery of the thing, transfers
the ownership from the vendor to the vendee, who may thereafter exercise the rights of
an owner over the same. In the instant case, vendor Roque delivered the owner's
certificate of title to herein private respondent. The provision of Article 1358 on the
necessity of a public document is only for convenience, not for validity or enforceability.
 It is not a requirement for the validity of a contract of sale of a parcel of land that this be
embodied in a public instrument. A contract of sale being consensual, it is perfected by
the mere consent of the parties. Delivery of the thing bought or payment of the price is
not necessary for the perfection of the contract; and failure of the vendee to pay the
price after the execution of the contract does not make the sale null and void for lack of
consideration but results at most in default on the part of the vendee, for which the
vendor may exercise his legal remedies.

(2) Article 1544 of the Civil Code provides that in case of double sale of an immovable
property, ownership shall be transferred (1) to the person acquiring it who in good faith
first recorded it in the Registry of Property; (2) in default thereof, to the person who in
good faith was first in possession; and (3) in default thereof, to the person who presents
the oldest title, provided there is good faith. In the case at bar, vendor Aurelio Roque
sold 6/10 portion of his share to private respondents Repuyan on April 1, 1980.
Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his
children (4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39 of the
Rules of Court, on February 4, 1982. Undoubtedly, this is a case of double sale
contemplated under Article 1544 of the New Civil Code.

Evidently, private respondents Repuyan's caused the annotation of an adverse claim on

the title of the subject property on July 21, 1980. The annotation of the adverse claim in
the Registry of Property is sufficient compliance as mandated by law and serves notice
to the whole world. On the other hand, petitioner filed a notice of lis pendens only on
February 2, 1982. Accordingly, private respondents who first caused the annotation of
the adverse claim in good faith shall have a better right over herein petitioner. As
between two purchasers, the one who has registered the sale in his favor, has a
preferred right over the other who has not registered his title even if the latter is in
actual possession of the immovable property. Further, even in default of the first
registrant or first in possession, private respondents have presented the oldest title.
Thus, private respondents who acquired the subject property in good faith and for
valuable consideration established a superior right as against the petitioner.

(3) Petitioner cannot be considered as a buyer in good faith. If petitioner did investigate
before buying the land on February 4, 1982, she should have known that there was a
pending case and an annotation of adverse claim was made in the title of the property
before the Register of Deeds and she could have discovered that the subject property
was already sold to the private respondents. It is incumbent upon the vendee of the
property to ask for the delivery of the owner's duplicate copy of the title from the
vendor. One who purchases real estate with knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired title thereto in good faith as against the true
owner of the land or of an interest therein; and the same rule must be applied to one
who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his
vendor. Good faith, or the want of it is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judged of by actual or
fancied tokens or signs.

74. Heirs of Escanlar vs. Court of Appeals, G.R. Nos. 119777 & 120690, 23 Oct 1997
Spouses Nombre and Cari-an died without a child. Nombre’s heirs include his nephews
and grandnephews. Two parcels of land formed part of the estate of Nombre and Cari-
 an. The Private Respondents, heirs of Cari-an executed a Deed of Sale in favor of
petitioners Escanlar and Holgado. Petitioners paid P50,000.00 as a form of
downpayment, but was unable to pay the remaining balance (paid only 12 installments).
Being former lessees, petitioners continued in possession of the said lots, and
continued to pay rent. Private Respondent later sold the said lots to the Chua spouses.
Private Respondent then filed an action for cancellation of sale against petitioners, for
failure to pay the balance. Petitioners however, sold their rights and interests over the
said lots to Jayme, and turned over possession.

The Regional Trial Court ruled that the Sale to petitioners was nullified since all the
properties of the estate had been transferred and titled to in the name of the Chua
spouses. On appeal, the Court of Appeals affirmed, questioned deed of sale (one with
petitioners) is a contract to sell because it shall become effective only upon approval by
the probate court and upon full payment of the purchase price.

Issue:
Whether or not the sale was a contract to sell and therefore, private respondents may
rescind the contract the moment the buyer fails to pay.
Held:
The sale of rights, interests and participation as to 1/2 portion pro indiviso of the two
subject lots is a contract of sale for the following reasons:
First, private respondents as sellers did not reserve unto themselves the ownership of
the property until full payment of the unpaid balance of P225,000.00.

Second, there is no stipulation giving the sellers the right to unilaterally rescind the
contract the moment the buyer fails to pay within the fixed period. Prior to the sale,
petitioners were already in possession of the subject property as lessees. Upon sale to
them of the rights, interests and participation as to the 1/2 portion pro indiviso, they
remained in possession, not in concept of lessees anymore but as owners through
symbolic delivery known as traditio brevi manu.

Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the
vendee upon actual or constructive delivery thereof. In a contract of sale, the non-
payment of the price is a resolutory condition which extinguishes the transaction that,
for a time, existed and discharges the obligations created thereunder. The remedy of an
unpaid seller in a contract of sale is to seek either specific performance or rescission. In
contracts to sell, ownership is retained by the seller and is not to pass until the full
payment of the price. Such payment is a 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. To illustrate, although a deed of
conditional sale is denominated as such, absent a proviso that title to the property sold
is reserved in the vendor until full payment of the purchase price nor a stipulation giving
the vendor the right to unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period, by its nature, it shall be declared a deed of absolute sale.

Earnest money
75. Manila Metal Container Corp. vs. PNB, supra.

76. Sps. Serrano vs. Caguiat, G.R. No. 139173, 28 Feb 2007
 Caguiat offered to buy the lot owned by spouses Serrano. Caguiat gave P100K as partial
payment, in turn, sps. Serrano gave a receipt with a statement that respondent promised to
pay the balance of the purchase price. Sps. Serrano were leaving for abroad and sought to
cancel the transaction. Sps. Serran then contends that there is no perfected contract as there
was no clear agreement between the parties as to the amount of consideration.

Issue: Whether or not there was a perfected contract of sale between the parties Whether or
not the document entitled "Receipt for Partial Payment" signed by both parties earlier
mentioned is a contract to sell or a contract of sale. Ruling
(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 "Receipt for Partial Payment"
shows that the true agreement between the parties is 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. Earnest money- it is
something of value that the buyer was really in earnest and given after the perfection of the
contract. (part of the purchase price.)
77.

Supreme Court Ruling

The transaction was a contract to sell. 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.
• A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain
event, so that if the suspensive condition does not take place, the parties would stand as if
the conditional obligation had never existed. The suspensive condition is commonly full
payment of the purchase price.
• 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.

78. Escueta vs. Lim, G.R. No. 137162, 24 Jan 2007

Facts: Respondent Rufina Lim bought the hereditary shares (consisting of 10 lots) of
Ignacio Rubio [and] the heirs of Luz Baloloy through VIRGINIA , namely: Alejandrino,
Bayani, and other co-heirs; that said vendors executed a contract of sale dated April 10,
1990 in her favor; that Ignacio Rubio and the heirs of Luz Baloloy received [a down
payment] or earnest money in the amount of P102,169.86 and P450,000, respectively;
that it was agreed in the contract of sale that the vendors would secure certificates of title
covering their respective hereditary shares; that the balance of the purchase price would be
paid to each heir upon presentation of their individual certificate[s] of [title]; that Ignacio
Rubio refused to receive the other half of the down payment which is P[100,000]; that
Ignacio Rubio refused and still refuses to deliver to [respondent] the certificates of title
covering his share on the two lots; that with respect to the heirs of Luz Baloloy, they also
refused and still refuse to perform the delivery of the two certificates of title covering
their share in the disputed lots; that respondent was and is ready and willing to pay Ignacio
Rubio and the heirs of Luz Baloloy upon presentation of their individual certificates of title,
free from whatever lien and encumbrance;
Escueta, in spite of her knowledge that the disputed lots have already been sold by
Ignacio Rubio to respondent, it is alleged that a simulated deed of sale involving said
lots was effected by Ignacio Rubio in her favor;
RTC and CA- second sale valid

ISSUE: THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E. RUBIO AND

CORAZON L. ESCUETA IS VALID.
HELD: Sale by Virginia to respondent is not binding. Petitioner Rubio did not
authorize Virginia to transact business in his behalf pertaining to the property. The
Special Power of Attorney was constituted in favor of Llamas, and the latter was not
empowered to designate a substitute attorney-in-fact. Llamas even disowned her
signature appearing on the "Joint Special Power of Attorney," which constituted
Virginia as her true and lawful attorney-in-fact in selling Rubio's properties.
Dealing with an assumed agent, respondent should ascertain not only the fact of
agency, but also the nature and extent of the former's authority. Besides,
Virginia exceeded the authority for failing to comply with her obligations under the "Joint
Special Power of Attorney."
The amount encashed by Rubio represented not the down payment, but the
payment of respondent's debt. His acceptance and encashment of the check was not a
ratification of the contract of sale.
, the contract between respondent and Virginia is a contract to sell, not a
contract of sale. The real character of the contract is not the title given, but the
intention of the parties. They intended to reserve ownership of the property to
petitioners pending full payment of the purchase price. Together with taxes and
other fees due on the properties, these are conditions precedent for the perfection
of the sale. Even assuming that the contract is ambiguous, the same must be
resolved against respondent, the party who caused the same.
Respondent failed to faithfully fulfill her part of the obligation. Thus, Rubio had the
right to sell his properties to Escueta who exercised due diligence in ascertaining
ownership of the properties sold to her. Besides, a purchaser need not inquire beyond
what appears in a Torrens title.
The petition lacks merit. The contract of sale between petitioners and respondent is
valid.
Article 1892 of the Civil Code provides:
Art. 1892. The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts of the
substitute:
(1) When he was not given the power to appoint one . . . .
Applying the above-quoted provision to the special power of attorney executed by
Ignacio Rubio in favor of his daughter Patricia Llamas, it is clear that she is not prohibited
from appointing a substitute. By authorizing Virginia Lim to sell the subject properties,
Patricia merely acted within the limits of the authority given by her father, but she will have
to be "responsible for the acts of the sub-agent," 19 among which is precisely the sale of the
subject properties in favor of respondent.
Even assuming that Virginia Lim has no authority to sell the subject properties,
the contract she executed in favor of respondent is not void, but simply
unenforceable, under the second paragraph of Article 1317 of the Civil Code which
reads:
Art. 1317. . . .
A contract entered into in the name of another by one who has no authority
or legal representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other contracting party.
Ignacio Rubio merely denies the contract of sale. He claims, without substantiation,
that what he received was a loan, not the down payment for the sale of the subject
properties. His acceptance and encashment of the check, however, constitute ratification of
the contract of sale and "produce the effects of an express power of agency." 20 "[H]is
action necessarily implies that he waived his right of action to avoid the contract, and,
consequently, it also implies the tacit, if not express, confirmation of the said sale effected"
by Virginia Lim in favor of respondent.
Similarly, the Baloloys have ratified the contract of sale when they accepted and
enjoyed its benefits. "The doctrine of estoppel applicable to petitioners here is not only that
which prohibits a party from assuming inconsistent positions, based on the principle of
election, but that which precludes him from repudiating an obligation voluntarily assumed
after having accepted benefits therefrom. To countenance such repudiation would be
contrary to equity, and would put a premium on fraud or misrepresentation." 21
Indeed, Virginia Lim and respondent have entered into a contract of sale. Not
only has the title to the subject properties passed to the latter upon delivery of the
thing sold, but there is also no stipulation in the contract that states the ownership
is to be reserved in or "retained by the vendor until full payment of the price." 22
Applying Article 1544 of the Civil Code, a second buyer of the property who may
have had actual or constructive knowledge of such defect in the seller's title, or at least
was charged with the obligation to discover such defect, cannot be a registrant in good
faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property subject of the
sale. 23 Even the argument that a purchaser need not inquire beyond what appears in a
Torrens title does not hold water. A perusal of the certificates of title alone will reveal that
the subject properties are registered in common, not in the individual names of the heirs.
Nothing in the contract "prevents the obligation of the vendor to convey title from
becoming effective" 24 or gives "the vendor the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed period." 25 Petitioners themselves have failed
to deliver their individual certificates of title, for which reason it is obvious that respondent
cannot be expected to pay the stipulated taxes, fees, and expenses.
In fact, earnest money has been given by respondent. "[I]t shall be considered as
part of the price and as proof of the perfection of the contract. 28 It constitutes an advance
payment to "be deducted from the total price." 29
Article 1477 of the same Code also states that "[t]he ownership of the thing sold
shall be transferred to the vendee upon actual or constructive delivery thereof." 30 In the
present case, there is actual delivery as manifested by acts simultaneous with and
subsequent to the contract of sale when respondent not only took possession of the
 subject properties but also allowed their use as parking terminal for jeepneys and buses.
Moreover, the execution itself of the contract of sale is constructive delivery.
Consequently, Ignacio Rubio could no longer sell the subject properties to
Corazon Escueta, after having sold them to respondent. "[I]n a contract of sale, the
vendor loses ownership over the property and cannot recover it until and unless the
contract is resolved or rescinded . . . ." 31 The records do not show that Ignacio Rubio
asked for a rescission of the contract. What he adduced was a belated revocation of the
special power of attorney he executed in favor of Patricia Llamas. "In the sale of
immovable property, even though it may have been stipulated that upon failure to pay the
price at the time agreed upon the rescission of the contract shall of right take place, the
vendee may pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by a notarial act." 32
|||

79. Villonco Realty Co. vs. Bormaheco, Inc., supra.

80. Sps. Doromal vs. Court of Appeals, supra.

81. Philippine National Bank vs. Court of Appeals, G.R. No. 119580, 26 Sep 1996

Facts: "The subject matter of the case is a parcel of land containing a net area of 1,190.72
square meters (1391.70 square meters minus 200.98 square meters reserved for road
widening and Light Rail Transit) situated at the corner of Carlos Palanca and Helios Streets,
Sta. Cruz, Manila, covered by and embraced in Transfer Certificate of Title No. 134695 of the
Registry of Deeds of Manila . . . owned and registered in the name of . . . the Philippine
National Bank . . .
On July 14, 1983 Lapaz made a formal offer to purchase the parcel of land consisting of
1,250.70 [square meters] located at the corner of Carlos Palanca and Helios Streets, Sta.
Cruz, Manila, owned by and registered in the name of . . . PNB . . . PNB advised Lapaz of its
approval of the latter's offer to purchase the subject property subject to the terms and
conditions stated in its official communication to the plaintiff [private respondent] dated
September 8, 1983, viz:
Issue : whether or not from the undisputed facts there was entered between the Philippine
National Bank and Lapaz Kaw Ngo a perfected contract of sale of prime real property located
in the heart of downtown Manila.

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; SALES; CONTRACT TO SELL AND A

CONTRACT OF SALE; DISTINGUISHED. — The differences between a contract to sell and a
contract of sale are well-settled in jurisprudence. As early as 1951, we have held that: ". . .
[a] distinction must be made between a contract of sale in which title passes to the buyer
upon delivery of the thing sold and a contract to sell . . . where by agreement the ownership
is reserved in the seller and is not to pass until the full payment of the purchase price is
made. In the first case, non-payment of the price is a negative resolutory condition; in the
second case, full payment is a positive suspensive condition. Being contraries, their effect in
law cannot be identical. In the first case, the vendor has lost and cannot recover the
ownership of the land sold until and unless the contract of sale is itself resolved and set aside.
In the second case however, the title remains in the vendor if the vendee does not comply
with the condition precedent of making payment at the time specified in the contract." In
other words, in a contract to sell, ownership is retained by the seller and is not to pass to the
buyer until full payment of the price or the fulfillment of some other conditions either of which
is a future and uncertain event the non-happening of which is not a breach, casual or serious,
but simply an event that prevents the obligation of the vendor to convey title from acquiring
binding force.

2. ID; IN CASE AT BAR, THE TRANSACTION CONTEMPLATED UNDER THE LETTER-

AGREEMENTS WAS A CONTRACT TO SELL OR A CONDITIONAL SALE. — No less
revealing is the fact that the letter-agreements are not deeds of sale, thereunder no title
 having been passed from petitioner to private respondent. Herein lies another important
distinction between a contract to sell and a contract of sale. ". . . The distinction between the
two is important for in a contract of sale, the title passes to the vendee upon the delivery of
the thing sold, whereas in a contract to sell, by agreement, ownership is reserved in the
vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor
has lost and cannot recover ownership until and unless the contract is resolved or rescinded,
whereas in a contract to sell, title is retained by the vendor until the full payment of the price,
such payment being a positive suspensive condition, failure of which is not a breach but an
event that prevented the obligation of the vendor to convey title from becoming effective."
We have often stated that it is not enough to say that the contract of sale, being consensual,
became automatically and immediately effective. In the instant case, there was apparently no
transfer of title, not even mention of such a transfer in the future, considering that all the
parties were aware of the occupancy of the subject property by third persons. This
circumstance all the more reinforces our finding that the transaction contemplated under the
letter-agreements was a contract to sell or a conditional sale which absolutely depends, for its
efficacy, upon the happening of the conditions specified in the said letter-agreements.

3. ID.; EARNEST MONEY; THE INITIAL DEPOSITS UNDER THE TWO LETTER-AGREEMENTS
SHOULD BE CONSTRUED, NOT STRICTLY AS EARNEST MONEY, BUT AS PART OF THE
CONSIDERATION FOR PETITIONER'S PROMISE TO RESERVE THE SUBJECT PROPERTY FOR
PRIVATE RESPONDENT. — Indeed under Article 1482 of the Civil Code, earnest money given
in a sale transaction is considered part of the purchase price and proof of the perfection of the
sale. This provision, however, gives no more than a disputable presumption that prevails in
the absence of contrary or rebuttal evidence. In the instant case, the letter-agreements
themselves are the evidence of an intention on the part of herein private parties to enter into
negotiations leading to a contract of sale that is mutually acceptable as to absolutely bind
them to the performance of their obligations thereunder. The letter-agreements are replete
with substantial condition precedents, acceptance of which on the part of private respondent
must first be made in order for petitioners to proceed to the next step in the negotiations. The
initial deposits under the two letter-agreements, therefore, should rather be construed, not
strictly as earnest money, but as part of the consideration for petitioner's promise to reserve
the subject property for private respondent. Certainly in excluding all other prospective
buyers from bidding for the subject property, petitioner was in effect giving up what may
have been more lucrative offers or better deals.

82. Goldenrod, Inc. vs. Court of Appeals, supra.

83. San Miguel Properties Phils., Inc. vs. Sps. Huang, supra.

Earnest money vs. option Contract

84. San Miguel Properties Phils., Inc. vs. Sps. Huang, supra.
85. Tuazon vs. Del Rosario-Suarez, G.R. No. 168325, 13 Dec 2010
(yuta nga gibaligya sa iyang anak after wa palita sa nasg-abang)

Facts: Respondent Lourdes Q. Del Rosario-Suarez was the owner of a parcel of land.
Petitioner Roberto D. Tuazon and Lourdes executed a Contract of Lease over the parcel of
land for a period of three years.
During the effectivity of the lease, Lourdes sent a letter to Roberto where she offered to sell
to the latter subject parcel of land. She gave him two years from January 2, 1995 to decide
on the said offer.
On June 19, 1997, or more than four months after the expiration of the Contract of Lease,
Lourdes sold subject parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law
Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and Rommel S. De Leon as
evidenced by a Deed of Absolute Sale executed by the parties. The new owners through their
attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the premises.
Roberto refused hence, the De Leons filed a complaint for Unlawful Detainer before the MeTC
 againsthim.
TheMeTC rendered a Decision ordering Roberto to vacate the property for non-payment of
rentals and expiration of the contract.
While the ejectment case was on appeal, Roberto filed with the RTC a Complaint for
Annulment of Deed of Absolute Sale, Reconveyance, Damages and Application for Preliminary
Injunction against Lourdes and the De Leons.
On November 13, 2000, Roberto filed a Notice of Lis Pendens with the Registry of Deeds of
Quezon City.
The RTC rendered a Decision declaring the Deed of Absolute Sale made by Lourdes in favor of
the De Leons as valid and binding.
On appeal, the CA affirmed the Decision of the RTC.
ISSUE:
Whether or not Lourdes violated Roberto’s right to buy the subject property under the
principle of right of first refusal by not giving him notice and the opportunity to buy the
property under the same terms and conditions.
HELD:
No. The Court of Appeals' decision is affirmed.
An option contract is entirely different and distinct from a right of first refusal in that in the
former, the option granted to the offeree is for a fixed period and at a determined price.
Lacking these two essential requisites, what is involved is only a right of first refusal.
It is clear from the provision of Article 1324 that there is a great difference between the
effects of an option which is without a consideration from one which is founded upon a
consideration.
If the option is without any consideration, the offeror may withdraw his offer by
communicating such withdrawal to the offeree at anytime before acceptance;
If it is founded upon a consideration, the offeror cannot withdraw his offer before the lapse of
the period agreed upon. The second paragraph of Article 1479 declares that an accepted
unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price.

In this case, it is undisputed that Roberto did not accept the terms stated in the
letter of Lourdes as he negotiated for a much lower price. Roberto’s act of
negotiating for a much lower price was a counter-offer and is therefore not an
acceptance of the offer of Lourdes. Article 1319 of the Civil Code provides:
“Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the acceptance
absolute.
A qualified acceptance constitutes a counter-offer.”
The counter-offer of Roberto for a much lower price was not accepted by Lourdes. There is
therefore no contract that was perfected between them with regard to the sale of subject
property.
Roberto, thus, does not have any right to demand that the property be sold to him at the
price for
which it was sold to the De Leons neither does he have the right to demand that said sale to
the De Leons be annulled

86. Sps. Villamor vs. Court of Appeals, G.R. No. 97332, 10 Oct 1991
(gibawi ilang pagpamaligya mao to niingon ang gibawian na pwede by na namo
paliton ang nahabilin)

Facts: Macaria Reyes sold a portion of 300 square meters lot to the Spouses Villamor. Macaria
executed a "Deed of Option" in favor of Villamor in which the remaining portion of the lot
would be sold to Villamor under the conditions stated. The document states that the Reyes
sold one-half to the spouses Villamor, which was greatly higher than the actual
reasonable prevailing value of lands in that place at the time and that the only
reason why the Spouses-vendees agreed to buy the said one-half portion because
the Reyeses have agreed to sell and convey to them the remaining one-half portion
still owned.
 According to the Reyeses, they offered to repurchase the lot sold by them to the
Villamor spouses but Marina Villamor refused and reminded them instead that the
Deed of Option in fact gave them the option to purchase the remaining portion of
the lot. Villamors claimed that they had expressed their desire to purchase the remaining
portion of the lot but the Reyeses had been ignoring them. Villamor filed a complaint for
specific performance against the Reyes.
Issue: whether or not the Deed of Option is void for lack of consideration.
Ruling: The "deed of option" entered into by the parties in this case had unique features.
Ordinarily, an optional contract is a privilege existing in one person, for which he had paid a
consideration and which gives him the right to buy, for example, certain merchandise or
certain specified property, from another person, if he chooses, at any time within the agreed
period at a fixed price (Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look closely at the
"deed of option" signed by the parties, We will notice that the first part covered the statement
on the sale of the 300 square meter portion of the lot to Spouses Villamor at the price of
P70.00 per square meter "which was higher than the actual reasonable prevailing value of the
lands in that place at that time (of sale)." The second part stated that the only reason why
the Villamor spouses agreed to buy the said lot at a much higher price is because the vendor
(Reyeses) also agreed to sell to the Villamors the other half-portion of 300 square meters of
the land. Had the deed stopped there, there would be no dispute that the deed is really an
ordinary deed of option granting the Villamors the option to buy the remaining 300 square
meter-half portion of the lot in consideration for their having agreed to buy the other half of
the land for a much higher price. But, the "deed of option" went on and stated that the sale of
the other half would be made "whenever the need of such sale arises, either on our (Reyeses)
part or on the part of the Spouses Julio Villamor and Marina V. Villamor.
 It appears that while the option to buy was granted to the Villamors, the Reyeses were
likewise granted an option to sell. It was not only the Villamors who were granted an
option to buy for which they paid a consideration; the Reyeses as well were granted an
option to sell should the need for such sale on their part arise.
 The option offered by private respondents had been accepted by the petitioner, the
promise, in the same document. The acceptance of an offer to sell for a price certain
created a bilateral contract to sell and buy and upon acceptance, the offer, ipso facto
assumes obligations of a vendee (See Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil.
948). Demandabilitiy may be exercised at any time after the execution of the deed.
 However, the Deed of Option did not provide for the period within which the parties
may demand the performance of their respective undertakings in the instrument. The
parties could not have contemplated that the delivery of the property and the payment
thereof could be made indefinitely and render uncertain the status of the land. The
failure of either parties to demand performance of the obligation of the other for an
unreasonable length of time renders the contract ineffective.

87. Bible Baptist Church vs. Court of Appeals, G.R. No. 126454, 26 Nov 2004
(advance bad daw to sa abang ang gibayad or part sa option money)

Facts: On June 7, 1985, petitioner Bible Baptist Church entered into a contract of lease with
respondents Mr. & Mrs. Elmer Tito Medina Villanueva who own the subject property located at
No. 2436 Leon Guinto St., Malate, Manila. The pertinent stipulations in the lease contract
were:

That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15)
years. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty
Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be paid directly to the
Rural Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is
mortgaged by the LESSOR.

Petitioner seeks to buy the leased premises from the spouses Villanueva, under the option
given to them. Petitioners claim that they (Baptist Church) agreed to advance the large
amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to
grant it a long term lease and an option to buy the property for P1.8 million. However, the
respondents did not agree saying that there is no separate consideration.
In this hand, the petitioners argue that there is a consideration — the consideration
supporting the option was their agreement to pay off the Villanuevas P84,000 loan with the
bank, thereby freeing the subject property from the mortgage encumbrance. That they would
not have agreed to advance such a large amount as it did to rescue the property from bank
foreclosure had it not been given an enforceable option to buy that went with the lease
agreement.
The Baptist Church states that [t]rue, the Baptist Church did not pay a separate and specific
sum of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance
should be deemed consideration for the one contract they entered into the lease with option
to buy. Petitioners further insist that a consideration need not be a separate sum of money.
They posit that their act of advancing the money to rescue the property from mortgage and
impending foreclosure, should be enough consideration to support the option.
On the other hand, Respondents argue that the amount of P84,000 has been fully exhausted
and utilized by their occupation of the premises and there is no separate consideration to
speak of which could support the option.
The RTC and CA agree with the respondent.

ISSUE: WON there is a separate consideration that would render the option contract valid and
binding.

HELD:
No, there was no separate consideration.
An option contract, to be valid and binding, needs to be supported by a separate
consideration. The consideration need not be monetary but could consist of other
things or undertakings. However, if the consideration is not monetary, these must
be things or undertakings of value, in view of the onerous nature of the contract of
option. Furthermore, when a consideration for an option contract is not monetary,
said consideration must be clearly specified as such in the option contract or clause.

Petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas
property from the mortgage should be deemed the separate consideration to support the
contract of option. It must be pointed out that said amount was in fact apportioned into
monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire
period of June 1985 to May 1986, petitioner Baptist Churchs monthly rent had already been
paid for, such that it only again commenced paying the rentals in June 1986. This is shown by
the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance
rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from
1985 to 1986 the Baptist Church did not pay monthly rent.

First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside
from the amount of P84,000 which was in fact eventually utilized as rental payments. Second,
there is no document that contains an agreement between the parties that petitioner Baptist
Churchs supposed rescue of the mortgaged property was the consideration which the parties
contemplated in support of the option clause in the contract. As previously stated, the amount
advanced had been fully utilized as rental payments over a period of one year. While the
Villanuevas may have them to thank for extending the payment at a time of need, this is not
the separate consideration contemplated by law.
This Court also notes that in the present case both the Regional Trial Court and the
Court of Appeals agree that the option was not founded upon a separate and
distinct consideration and that, hence, respondents Villanuevas cannot be
compelled to sell their property to petitioner Baptist Church.

Having found that the option to buy granted to the petitioner Baptist Church was not founded
upon a separate consideration, and hence, not enforceable against respondents, this Court
finds no need to discuss whether a price certain had been fixed as the purchase price.

WHEREFORE, the Decision and Resolution of the Court of Appeals subject of the petition are
hereby AFFIRMED.
 Arts. 1475-1488
Promise to Sell: when binding (Art. 1479)

If bilateral

If unilateral
Option
Definition

88. Eulogio vs. Sps. Apeles, G.R. No. 167884, 20 Jan 2009
There was only acceptance but no separate consideration
Summary: For an option contract to be valid and enforceable against the promisor,
there must be a separate and distinct consideration that supports it. Without such
consideration, an option contract cannot be enforced. In other words, the option can
still be withdrawn, even if accepted, if the same is not supported by any consideration. It can
therefore be withdrawn notwithstanding the promisee’s decision to exercise his option.

The spouses Apeles and Enrico Eulogio allegedly entered into a Contract of Lease with Option to
Purchase involving a house and lot.
The contract purportedly afforded Enrico, before the expiration of the three-year lease period,the
option to purchase the subject property.
Before expiration of the lease, Enrico exercised his option to purchase the subject
property, but the spouses Apeles supposedly ignored Enrico's manifestation.
Hence, Enrico filed a Complaint for Specific Performance to compel the spouses to sell the
subject property to him.
Supreme Court Ruling
For an option contract to be valid and enforceable against the promissor, there must be a
separate and distinct consideration that supports it.
In other words, "an accepted unilateral promise" can only have a binding effect if
supported by a consideration, which means that the option can still be withdrawn, even if
accepted, if the same is not supported by any consideration.
Here, it is not disputed that the option is without consideration. It can therefore be withdrawn
notwithstanding the acceptance made of it by the promisee.
Without consideration that is separate and distinct from the purchase price, an option
contract cannot be enforced.

89. Diamante vs. Court of Appeals, G.R. No. 51824, 07 Feb 1992
FACTS:

A fishery lot wasissued in the name of Anecita Dionio. Upon Anecita’s death, her heirs, petitioner Diamante and
Primitivo Dafeliz, inherited the property which they later divided between themselves; petitioner got 4.4. hectares
while Dafeliz got 5 hectares. It is the petitioner’s share that is the subject of the present controversy. Primitivo
Dafeliz later sold his share to private respondent.

petitioner sold to private respondent his leasehold rights over the property in question for P8,000.00 with the
right to repurchase the same within three (3) years from said date. On 16 August 1960, private respondent filed
an application with the Bureau of Fisheries, for a fishpond permit and a fishpond lease agreement over the entire
lot, submitting therewith the deeds of sale executed by Dafeliz and the petitioner. Later on, petitioner sold all his
remaining rights over the property in question to the private respondent for P4,000.00. On 25 October 1960,
private respondent, with his wife’s consent, executed in favor of the petitioner an Option to Repurchase the
property in question within ten (10) years from said date, with a ten-year grace period.

Private respondent submitted to the Bureau of Fisheries the definite deed of sale; he did not, however,
submit the Option to Repurchase. petitioner, contending that he has a valid twenty-year option to repurchase
 the subject property, requested the Bureau of Fisheries to nullify FLA No. 1372 insofar as the said property is
concerned. On 18 December 1964, his letter-complaint was dismissed.

ISSUE:Whether or not conventional redemption applies to this case.

RULING:

The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the
instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right
thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some
other right like the option to buy in the instant case. . . .

 ID.; RIGHT TO REPURCHASE; BECOMES A PROMISE TO SELL WHEN MADE AFTER THE SALE. — In the
earlier case of Ramos, et al. vs. Icasiano, et al., (51 Phil. 343) decided in 1927, this Court had already ruled that
"an agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is
made without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants
the vendor the right to repurchase, it is a new contract entered into by the purchaser, as absolute owner already
of the object. In that case the vendor has not reserved to himself the right to repurchase."

4. ID.; PROMISE TO SELL; NOT BINDING UPON PROMISSOR IN THE ABSENCE OF EITHER OR BOTH
ACCEPTANCE AND SEPARATE CONSIDERATION. — The Option to Repurchase executed by private
respondent in the present case, was merely a promise to sell, which must be governed by Article 1479 of
the Civil Code which reads as follows: "ART. 1479. — A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by a consideration distinct from
the price." A copy of the so-called Option to Repurchase is neither attached to the records nor quoted in any of
the pleadings of the parties. This Court cannot, therefore, properly rule on whether the promise was accepted
and a consideration distinct from the price, supports the option. Undoubtedly, in the absence of either or both
acceptance and separate consideration, the promise to sell is not binding upon the promissor (private
respondent).

5. ID.; UNILATERAL PROMISE TO BUY OR SELL; EFFECT OF ABSENCE OF ACCEPTANCE AND DISTINCT
CONSIDERATION. — A unilateral promise to buy or sell is a mere offer, which is not converted into a
contract except at the moment it is accepted. Acceptance is the act that gives life to a juridical obligation,
because, before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance,
however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the obligations of a
purchaser; the offeror, on the other hand, would be liable for damages if he fails to deliver the thing he had
offered for sale. Even if the promise was accepted, private respondent was not bound thereby in the absence of
a distinct consideration.

6. ID.; CONTRACT OF OPTION, DEFINED. — The contract of option is a separate and distinct contract from the
contract which the parties may enter into upon the consummation of the option, and a consideration for an
optional contract is just as important as the consideration for any other kind of contract. Thus, a distinction
should be drawn between the consideration for the option to repurchase, and the consideration for the contract
of repurchase itself."

Remedy of the optionee for breach

Right of first refusal
90. Asuncion vs. Court of Appeals, supra.
91. Guerrero vs. Yñigo, G.R. No. L-5572, 26 Oct 1954
Principle:
In a right of first refusal, the holder of the property or asset has a contractual right to
have the option to enter into a business transaction with the owner of the asset, according to
specified terms before the owner can enter into such business transaction with another.
Facts:
To secure a loan of ₱ 5,000, Catabona executed in respondent’s favor a mortgage with
 conditional sale on a piece of land with a clause providing that he reserved the right to
redeem the property after 5 years after the date of execution and that on his failure to do so,
title thereto shall pass to and become vested in the private respondent. The mortgage was
registered.
Catabona sold ½ of the same land to Guerrero after Yñigo said the latter (Yñigo)
cannot afford the price set by Catabona, and after he said to Guerrero that he will not resent
it if Guerrero bought the land provided that the obligation towards him would be paid.
In an action by Guerrero, the Court of First Instance adjudged him owner of ½ of the
land. However, the Court of Appeals reverted this judgment and declared that, as the parcel
of land was sold with pacto de retro and the deed of sale was executed and registered prior to
Guerrero’s purchase, Yñigo had a better right.
Issue:
Whether or not Yñigo had a right of first refusal.
Ruling:
YES. The right of first refusal is a contractual right that gives its holder the option to
enter a business transaction with the owner of something, according to specified terms,
before the owner is entitled to enter into that transaction with a third party. This right can
cover almost any sort of asset, including real estate. The owner can only offer the property to
other properties when the holder turns it down.
Yñigo has a right of first refusal over the land because their contract with Catabona
stated that he shall sell the land to no other except to the Yñigo spouses, and that should he
sell it to others, the Yñigos may sue him for damages plus reasonable Attorney’s fees.
Hence, SC reversed the judgment of the Court of Appeals and declared Guerrero as the
lawful owner of one-half of the parcel of land (the western part) described in transfer
certificate of title No. 19251, subject to a mortgage to secure the payment of P1,847.22 in
favor of the spouses Serapion D. Yñigo and Francisca D. Batañgan payable within such period
of time as may be fixed by the Court upon petition.

92. Guzman, Bocaling & Co. vs. Bonnevie, G.R. No. 86150, 02 Mar 1992
(yuta na gi abangan na gibaligya daw after wa nitubag ang nag abang kun ila paliton or di)
Facts:
Africa Valdez de Reynoso, is the administratrix of a parcel of land around 600sqm. belonging
to Intestate Estate of Jose L. Reynoso.

This property was leased to Raoul S. Bonnevie and Christopher Bonnevie for a period of one
year with the stipulation;

20. — In case the LESSOR desire or decides to sell the lease property, the
LESSEES shall be given a first priority to purchase the same, all things and
considerations being equal.

On November 3, 1976 according to Reynoso, she notified the private respondents by

registered mail that she was selling the leased premises for P600.000.00 less a mortgage
loan of P100,000.00, and was giving them 30 days from receipt of the letter within which to
exercise their right of first priority to purchase the subject property. She said that in the
event that they did not exercise the said right, she would expect them to vacate the property
not later then March, 1977.
 On March 7, 1977, the leased premises were formally sold to petitioner Guzman, Bocaling &
Co.

On April 12, 1977, Reynoso wrote a letter to the private respondents demanding that they
vacate the premises within 15 days for their failure to pay the rentals for four months.

On April 29, 1980, while the ejectment case was pending in the City Court, the private
respondents filed an action for annulment of the sale between Reynoso and herein petitioner
Guzman, Bocaling & Co. and cancellation of the transfer certificate of title in the name of the
latter. They also asked that Reynoso be required to sell the property to them under the same
terms ands conditions agreed upon in the Contract of Sale in favor of the petitioner.

City Court Decision for ejectment case:

In favor of Reynoso

CFI Decision:
1. Ejectment case was affirmed but modified.
2. Case filed by respondent to annul the sale between Reynoso & Bocaling, cancellation of
corresponding TCT and requiring Reynoso to sell the property to them was awarded in
favor of the respondent.

CA Decision:
Affirmed the decision of CFI in the case filed by the respondent.

Issue:

Whether or not CA erred in ruling that the grant of first priority to purchase the subject
properties needed no judicial authority by the administratrix from the probate court?

Held: No
Reynoso claimed to have sent the November 3, 1976 letter by registered mail, but the
registry return card was not offered in evidence. A copy of the other side of the card showing
the signature of the person who received the letter and the data of the receipt was not
submitted. There is thus no satisfactory proof that the letter was received by the Bonnevies.

The Court agrees with the respondent court that it was not necessary to secure the approval
by the probate court of the Contract of Lease because it did not involve an alienation of real
property of the estate nor did the term of the lease exceed one year so as to make it fall
under Article 1878(8) of the Civil Code. Only if Paragraph 20 of the Contract of Lease was
activated and the said property was intended to be sold would it be required of the
administratrix to secure the approval of the probate court pursuant to Rule 89 of the Rules of
Court.

Even if the order of the probate court was valid, the private respondents still had a right to
rescind the Contract of Sale because of the failure of Reynoso to comply with her duty to give
them the first opportunity to purchase the subject property as expressed in the following
stipulation;

In case the LESSOR desire or decides to sell the lease property, the LESSEES shall be given a
first priority to purchase the same, all things and considerations being equal.

Petition is denied. The challenged decision is affirmed.

93. Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc.,G.R. No. 133879, 21 Nov 2001
FACTS:

Mayfair Theater, Inc. was a lessee of portions of a building owned by Carmelo & Bauermann,
Inc. Their lease contracts of 20 years (1. which covered a portion of the second floor and
mezzanine of a two-storey building with about 1,610 square meters of floor area, which
respondent used as a movie house known as Maxim Theater 2. two store spaces on the
ground floor and the mezzanine, with a combined floor area of about 300 square meters also
used as a movie house “Miramar Theater”)
Lease contracts contained a provision granting Mayfair a right of first refusal to purchase the
subject properties.
However, before the contracts ended, the subject properties were sold for P11,300 by
Carmelo to Equatorial Realty Development, Inc.
This prompted Mayfair to file a case for the annulment of the Deed of Absolute Sale between
Carmelo and Equatorial, specific performance and damages.
In 1996, the Court ruled in favor of Mayfair.
Barely five months after Mayfair had submitted its Motion for Execution, Equatorial filed an
action for collection of sum of money against Mayfair claiming payment of rentals or
reasonable compensation for the defendant’s use of the subject premises after its lease
contracts had expired.
Maxim Theater contract expired on May 31, 1987, while the Lease Contract covering the
premises occupied by Miramar Theater lapsed on March 31, 1989.
The lower court debunked the claim of Equatorial for unpaid back rentals, holding that the
rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial any
vested or residual propriety rights, even in expectancy.
It further ruled that the Court categorically stated that the Deed of Absolute Sale had been
rescinded subjecting the present complaint to res judicata.
Hence, Equatorial filed the present petition.

ISSUE: whether Equatorial was the owner of the subject property and could thus enjoy the
fruits or rentals therefrom

HELD: NO.

CIVIL LAW; PROPERTY; CIVIL FRUIT OF OWNERSHIP; RENTALS. — Rent is a civil fruit that
belongs to the owner of the property producing it by right of accession. Consequently and
ordinarily, the rentals that fell due from the time of the perfection of the sale to petitioner
until its rescission by final judgment should belong to the owner of the property during that
period.

SALES; OWNERSHIP OF THE THING SOLD IS TRANSFERRED, NOT BY CONTRACT ALONE, BUT
BY TRADITION OR DELIVERY. — By a contract of sale, “one of the contracting parties
obligates himself to transfer ownership of and to deliver a determinate thing and the other to
pay therefor a price certain in money or its equivalent.” Ownership of the thing sold is a real
right, which the buyer acquires only upon delivery of the thing to him “in any of the ways
specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee.” This right is transferred, not by
contract alone, but by tradition or delivery. Non nudis pactis sed traditione dominia rerum
transferantur.

THERE IS DELIVERY WHEN THE THING SOLD IS PLACED UNDER THE CONTROL AND
POSSESSION OF THE VENDEE. — [T]here is said to be delivery if and when the thing sold “is
placed in the control and possession of the vendee.” Thus, it has been held that while the
execution of a public instrument of sale is recognized by law as equivalent to the delivery of
the thing sold, such constructive or symbolic delivery, being merely presumptive, is deemed
negated by the failure of the vendee to take actual possession of the land sold. Delivery has
been described as a composite act, a thing in which both parties must join and the minds of
both parties concur. It is an act by which one party parts with the title to and the possession
of the property, and the other acquires the right to and the possession of the same. In its
natural sense, delivery means something in addition to the delivery of property or title; it
means transfer of possession. In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate “the absolute giving up of the control
and custody of the property on the part of the vendor, and the assumption of the same by the
vendee.”
ID.; NOT PRESENT IN CASE AT BAR. — [T]heoretically, a rescissible contract is valid until
rescinded. However, this general principle is not decisive to the issue of whether Equatorial
ever acquired the right to collect rentals. What is decisive is the civil law rule that ownership
is acquired, not by mere agreement, but by tradition or delivery. Under the factual
environment of this controversy as found by this Court in the mother case, Equatorial was
never put in actual and effective control or possession of the property because of Mayfair’s
timely objection.

ID.; EXECUTION OF CONTRACT OF SALE AS FORM OF CONSTRUCTIVE DELIVERY HOLDS

TRUE ONLY WHEN THERE IS NO IMPEDIMENT THAT MAY PREVENT THE PASSING OF THE
PROPERTY FROM THE VENDOR TO THE VENDEE. — From the peculiar facts of this case, it is
clear that petitioner never took actual control and possession of the property sold, in view of
respondent’s timely objection to the sale and the continued actual possession of the property.
The objection took the form of a court action impugning the sale which, as we know, was
rescinded by a judgment rendered by this Court in the mother case. It has been held that the
execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds true
only when there is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. When there is such impediment, “fiction yields
to reality — the delivery has not been effected.” Hence, respondent’s opposition to the
transfer of the property by way of sale to Equatorial was a legally sufficient impediment that
effectively prevented the passing of the property into the latter’s hands.

ID.; EXECUTION OF PUBLIC INSTRUMENT GIVES RISE ONLY TO A PRIMA FACIE

PRESUMPTION OF DELIVERY. — The execution of a public instrument gives rise, . . . only to a
prima facie presumption of delivery. Such presumption is destroyed when the instrument
itself expresses or implies that delivery was not intended; or when by other means it is shown
that such delivery was not effected, because a third person was actually in possession of the
thing. In the latter case, the sale cannot be considered consummated.

ID.; OBLIGATIONS AND CONTRACTS; RESCISSIBLE CONTRACTS; NOT ONLY THE LAND AND
BUILDING SOLD SHALL BE RETURNED TO THE SELLER BUT ALSO THE RENTAL PAYMENTS
PAID, IF ANY. — [T]he point may be raised that under Article 1164 of the Civil Code,
Equatorial as buyer acquired a right to the fruits of the thing sold from the time the obligation
to deliver the property to petitioner arose. That time arose upon the perfection of the
Contract of Sale on July 30, 1978, from which moment the laws provide that the parties to a
sale may reciprocally demand performance. Does this mean that despite the judgment
rescinding the sale, the right to the fruits belonged to, and remained enforceable by,
Equatorial? Article 1385 of the Civil Code answers this question in the negative, because
“[r]escission creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest; . . . .” Not only the land and building
sold, but also the rental payments paid, if any, had to be returned by the buyer.

ID.; SALES; CONTRACT OF SALE; RENTAL PAYMENTS MADE SHOULD NOT BE CONSTRUED AS
A RECOGNITION OF THE BUYER AS NEW ORDER BUT MERELY TO AVOID IMMINENT
EVICTION; CASE AT BAR. — The fact that Mayfair paid rentals to Equatorial during the
litigation should not be interpreted to mean either actual delivery or ipso facto recognition of
Equatorial’s title. The CA Records of the mother case show that Equatorial — as alleged buyer
of the disputed properties and as alleged successor-in-interest of Carmelo’s rights as lessor —
submitted two ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of Manila,
the first was docketed as Civil Case No. 121570 on July 9, 1987; and the second, as Civil
Case No. 131944 on May 28, 1990. Mayfair eventually won them both. However, to be able to
maintain physical possession of the premises while awaiting the outcome of the mother case,
it had no choice but to pay the rentals. The rental payments made by Mayfair should not be
construed as a recognition of Equatorial as the new owner. They were made merely to avoid
imminent eviction.

STATUTORY CONSTRUCTION; GENERAL PROPOSITIONS DO NOT DECIDE SPECIFIC CASES. —

As pointed out by Justice Holmes, general propositions do not decide specific cases. Rather,
“laws are interpreted in the context of the peculiar factual situation of each case. Each case
 has its own flesh and blood and cannot be decided on the basis of isolated clinical classroom
principles.”

CIVIL LAW; SALES; VALID FROM INCEPTION BUT JUDICIALLY RESCINDED BEFORE IT COULD
BE CONSUMMATED; CASE AT BAR. — [T]he sale to Equatorial may have been valid from
inception, but it was judicially rescinded before it could be consummated. Petitioner never
acquired ownership, not because the sale was void, as erroneously claimed by the trial court,
but because the sale was not consummated by a legally effective delivery of the property
sold.

ID.; ID.; BUYER IN BAD FAITH; NOT ENTITLED TO ANY BENEFIT; ENTITLED SOLELY TO THE
RETURN OF THE PURCHASE PRICE; MUST BEAR ANY LOSS. — [A]ssuming for the sake of
argument that there was valid delivery, petitioner is not entitled to any benefits from the
“rescinded” Deed of Absolute Sale because of its bad faith. This being the law of the mother
case decided in 1996, it may no longer be changed because it has long become final and
executory. . . . Thus, petitioner was and still is entitled solely to the return of the purchase
price it paid to Carmelo; no more, no less. This Court has firmly ruled in the mother case that
neither of them is entitled to any consideration of equity, as both “took unconscientious
advantage of Mayfair.” In the mother case, this Court categorically denied the payment of
interest, a fruit of ownership. By the same token, rentals, another fruit of ownership, cannot
be granted without mocking this Court’s en banc Decision, which has long become final.
Petitioner’s claim of reasonable compensation for respondent’s use and occupation of the
subject property from the time the lease expired cannot be countenanced. If it suffered any
loss, petitioner must bear it in silence, since it had wrought that loss upon itself. Otherwise,
bad faith would be rewarded instead of punished.

ID.; ID.; ID.; ID.; APPLICABLE IN CASE AT BAR. — Suffice it to say that, clearly, our ruling in
the mother case bars petitioner from claiming back rentals from respondent. Although the
court a quo erred when it declared “void from inception” the Deed of Absolute Sale between
Carmelo and petitioner, our foregoing discussion supports the grant of the Motion to Dismiss
on the ground that our prior judgment in GR No. 106063 has already resolved the issue of
back rentals. On the basis of the evidence presented during the hearing of Mayfair’s Motion to
Dismiss, the trial court found that the issue of ownership of the subject property has been
decided by this Court in favor of Mayfair. . . . Hence, the trial court decided the Motion to
Dismiss on the basis of res judicata, even if it erred in interpreting the meaning of “rescinded”
as equivalent to “void.” In short, it ruled on the ground raised; namely, bar by prior
judgment. By granting the Motion, it disposed correctly, even if its legal reason for nullifying
the sale was wron

In Equatorial vs. Mayfair Theater: Option contract vs. right of first refusal. SC said that if right
of first refusal is violated, the second contract is rescissible. If you do not contest, that the
second contract will be perfectly valid.
Right of first refusal does not need independent consideration because the consideration is
actually what the lessee paid by way of rentals. On the other hand, option is a separate and
distinct contract
94. Sen Po Ek Marketing Corp. vs. Martinez, G.R. No. 134117, 09 Feb 2000
FACTS: Sofia Martinez was the registered owner of 2 parcels of land who leased the lots to Yu
Siong, father of the president and stockholders of petitioner Sen Po Ek for a period of 10
years. When the lease expired it was later renewed several times, the last renewal being on
March 1982 which is to expire on Jan. 1987. In the meantime, Sofia sold the lots and the
building to her daughter, respondent Teodora Martinez. After the lease contract expired in
Jan. 1987, it was no longer renewed by the parties. Sen Po Ek, however, continued to
possess and occupy the leased properties, and regularly paid the monthly rentals to Sofia
until her death, and then to her heirs through Teodora. On November 11, 1989, Teodora sent
a letter to petitioner Sen Po Ek informing it of her intention to sell the leased premises and
authorizing a broker to negotiate the sale "with any and all interested parties." Sen Po Ek
offered to purchase the poperty. Another buyer, Tiu Uyping, was also interested. Sen Po Ek
then filed a complaint for the annulment of the sale executed by Sofia in favor of Teodora.
Days later, the property was sold to Tiu Uyping. Sen Po Ek amended its complaint, praying for
 the nullity of the second sale transaction.
ISSUE: Were the two disputed sale transactions valid?
HELD: The first sale is void. The second sale, however, is valid and binding. The first sale
between Sofia and Teodora was void for being fictitious. Under Art. 1409 (2), NCC, one type
of contract which can be declared void and inexistent is that which is absolutely simulated or
fictitious, and this was established by several badges of simulation proving that the sale
between Sofia and Teodora was not intended to have any legal effect between them. The
combination of all of these events leads one to the inescapable conclusion that the first sale
transaction was absolutely simulated, hence void. Nonetheless, the sale between Teodora and
the Tiu Uyping, is valid. Teodora, as only one of the co-heirs of Sofia, had no authority to sell
the entire lot to the Tiu Uyping. She can only sell her undivided portion of the property. Thus,
when she sold the leased premises to Tiu Uyping, the sale is unenforceable having been
entered into by Teodora in behalf of her co-heirs who, however, gave no authority or legal
representation. However, such a contract is susceptible of ratification. In this case, the
ratification came in the form of "Confirmation of Sale of Land and Improvements” executed
by the other heirs of Sofia. Since the sale by Teodora of the leased premises to Tiu Uyping
was ratified by her co-heirs, then the sale is considered valid and binding.
95. Parañaque Kings Enterprises, Inc. vs. Court of Appeals, G.R. No. 111538, 26 Feb 1997
FACTS:
Catalina L. Santos owns 8 parcels of land which she leased to Frederick Chua who then
later assigned all his rights and interest and participation in the leased property to Lee Ching
Bing with the conformity of Santos. Lee Ching Bing also assigned all his rights and interest in
the leased property to Paranaque Kings Enterprises, Inc. On September 21, 1988, Santos sold
the property to defendant David Raymundo which was opposed by Paranaque King since the
said sale is in contravention of the lease contract, for the first option or priority to buy was
not offered to them. Subsequently, Santos reconveyed the property for the same
consideration of 5M and then Santos offered it to Paranaque King for 15M which was way
higher than the 5M selling price with Raymundo. She gave them a period to make a good
offer but before they could replied to the offer to purchase, Santos, in a second deed of sale,
finally sold the property to Raymundo for 9M. Thus, petitioner filed a complaint to annulled
the Deed of Sale between Santos and Raymundo and the leased properties be sold to them.
Instead of filing their respective answers, respondents filed motions to dismiss the complaint
by the petitioner which the trial court had granted.

ISSUE:
Whether or not the complaint alleging breach of the contractual right of
first option to buy states a valid cause of action?
HELD:
Yes, SC held that in order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the amount of P9 million,
the price for which they were finally sold to respondent Raymundo, should have likewise been
first offered to petitioner.
Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the
latter was granted the first option or priority to purchase the leased properties in case Santos
decided to sell. If Santos never decided to sell at all, there can never be a breach, much less
an enforcement of such right. But on September 21, 1988, Santos sold said properties to
Respondent Raymundo without first offering these to petitioner. Santos indeed realized her
error, since she repurchased the properties after petitioner complained. Thereafter, she
offered to sell the properties to petitioner for P15 million, which petitioner, however, rejected
because of the ridiculous price.  But Santos again appeared to have violated the same
provision of the lease contract when she finally resold the properties to respondent Raymundo
for only P9 million without first offering them to petitioner at such price.
The basis of the right of the first refusal must be the current offer to sell of the seller or
offer to purchase of any prospective buyer. Only after the grantee fails to exercise its right of
first priority under the same terms and within the period contemplated, could the owner
validly offer to sell the property to a third person, again, under the same terms as offered to
the grantee.
96. Polytechnic University of the Philippines vs. Golden Horizon Realty Corp., G.R. Nos. 183612 &
184260, 15 Mar 2010
Facts:
National Development Company is a government-owned and controlled corporation
created under Commonwealth Act. Petitioner Polytechnic University of the Philippines is a
public, non-sectarian, non-profit educational institution created by Presidential Decree.
In the early sixties, NDC entered and had its disposal a ten hectare property located
along Pureza St. Sta. Mesa Manila. Covered by Transfer Certificate of Title.
On September 7, 1977, NDC entered into a Contract of Lease with Golden Horizon Realty
Corporation over a portion of the property with an area of 2, 407 square meters for a period
of ten years, renewable for another ten years.
On May 4, 1978, a second contract of Lease was executed between NDC and GHRC
covering 3, 222.80 square meters, also renewable upon mutual consent after the expiration
of the ten years lease period. GHRC as lease was granted the option to purchase the area
leased, the price to be negotiated and determined at the time the option to purchase is
exercise.
Under the leased agreements, GHRC was obliged to construct at its own expense buildings of
strong material at no less than the stipulated cost, and other improvements which shall
automatically belong to the NDC as lessor upon the expiration of the lease period. GHRC
introduced permanent improvements and structures as required by the terms of the contract.
After the completion of the industrial complex project for which GHRC spent 5 million pesos.
On June 13, 1988, before the expiration of the ten year period under the second lease
contract, GHRC wrote a letter to NDC indicating its exercise of the option to renew the lease
for another ten years.
Sometime after September 1988, GHRC discovered that NDC had decided to secretly
dispose the property to a third party. On October 21, 1988, GHRC filed in the RTC a
complaint.

Issue:
Whether or not the right of first refusal under the lease contract was violated by the
sale of the property to PUP without NDC having first offered to sell the same to GHRC?

Held:
No, the right of first refusal was not violated. Because the respondent did not offer any
amount to petitioner NDC and neither disputed the 1, 500.00 pesos per square meter actual
value of NDC’s property. Therefore, the petitions in this case are denied. The Decision dated
November 25, 2004 of the Regional Trial Court of Makati City, Branch 144 as affirmed by the
Court of Appeals in its Decision is Affirmed with Modification.

What PUP and NDC assail is the conclusion that such right of first refusal subsisted even after
the expiration of the original lease period when GHRC was allowed to continue staying in the
leased premises under an implied renewal of lease.They argue that the right of first refusal
provision was not carried over to such month-to-month lease. The court found thisposition
untenable. Evidence shows that at the time NDC began negotiating for the transfer of the
land to PUP, the right offirst refusal was subsisting. Hence, whether or not the right of first
refusal was carried over to the implied lease, isirrelevant.

97. Sadhwani vs. Court of Appeals, G.R. No. 128119, 17 Oct 1997
Respondent Homobono Sawit was the registered owner of a 2,030-sq. m. lot on
which two buildings were built. Sawit leased the properties to respondent Orient
Electronics Corporation. In their contract of lease, the lessor expressly granted the lessee
the right of first refusal in the event the lessor decided to sell his property. In addition,
respondent Orient was granted the right to sublease the property. Accordingly, Orient
entered into a sublease contract with petitioners Sadhwanis. Before the expiration of the
lease and sublease contracts, Sawit sold his property to respondent Silver Swan
Manufacturing Co., Inc. Petitioners protested the sale, claiming that they had the right of
first refusal because their contract of sublease with Orient expressly incorporated the
Sawit-Orient lease contract as "integral part" of their contracts. Petitioners brought an
action against Orient, Sawit and Silver Swan Mfg. in the Regional Trial Court of Pasig. The
trial court rendered judgment sustaining petitioners' claim of the right of first refusal. Orient,
however, was absolved from civil liabilities to the petitioners. Respondents' Sawit and
Silver Swan Mfg. appealed to the Court of Appeals, which reversed the decision of the trial
court and dismissed the complaint of the petitioners. The appellate court ruled that there
was no assignment of Orient's right of first refusal to the petitioners. The Court of Appeals
also stated that even if there was such assignment of right, such right was forfeited when
the petitioners made a counter-offer of P3.5 million instead of paying unconditionally the
offered amount of P4 million. Hence this petition for review.  DASCIc

The Supreme Court denied the petition of the Sadhwanis' and affirmed the decision
of the Court of Appeals. The right of first refusal was embodied in the contract of lease
between Sawit and Orient. Petitioners herein, however, were not parties to the contract. In
this case, there is no proof that respondent Sawit consented to an assignment of the lease
to the petitioners. What Sawit agreed to was simply to give Orient the right to sublease the
property. The rule, however, is different with respect to assignments of lease. The consent
of the lessor is necessary because the assignment of lease would involve the transfer not
only of rights but also of obligations. Such assignment would constitute novation by the
substitution of one of the parties, i.e., the lessee. Petitioners have not cited any provision
of the contract of lease between Sawit and Orient giving Orient the right to assign the
contract. Petitioners' efforts to bind Sawit in their contracts with Orient must fail as Sawit
was not a party to those contracts.  caTESD

SYLLABUS

1. REMEDIAL LAW; ACTION; APPEAL; RECORDS ON APPEAL; WHEN

REQUIRED. — The provision in question is not new, being Rule 46, §16(h) of the 1964
Rules of Court. The only difference between the present provision and its counterpart in
the 1964 Rules being as to the cases in which appeal was "not brought by record on
appeal." Under the 1964 Rules, in the generality of cases, the appeal was by record on
appeal. The only instances where appeal was not by record on appeal were (1)
in certiorari, prohibition, mandamus, quo warranto and employee's liability cases, (2)
in habeas corpus cases and (3) in cases decided by the Social Security Commission and
the then Court of Agrarian Relations. In such cases, instead of a record on appeal, the
original record of the case was transmitted to the appellate court. When the Judiciary
Reorganization Act of 1980 took effect on August 14, 1981, the rule was reversed. Instead
of record on appeal, the general requirement is that the original record shall be transmitted.
The only instances in which records on appeal in lieu of the original records are filed in the
Court of Appeals are in appeals in special proceedings and in cases where multiple
appeals are allowed. But whether under the 1964 Rules or the present one, a copy of the
appealed decision is made available to the appellate court because it is contained either in
the record on appeal or in the original record transmitted to it.
2. CIVIL LAW; CONTRACT; BINDS ONLY THE PARTIES THEREOF;
APPLICATION IN CASE AT BAR. — To begin with, it is a fundamental principle in contract
law that a contract binds only the parties to it (Civil Code, Art. 1311). The right of first
refusal was embodied in the contract of lease between respondents Sawit and Orient
Electronics. Petitioners were not parties to that contract. While their contracts with
respondent Orient Electronics made the lease contract "an integral part" of the contracts of
sublease, there is no proof that respondent Sawit consented to an assignment of the lease
to the petitioners. What Sawit had agreed to was simply to give Orient Electronics the right
to sublease the property. For that matter, Sawit did not have to give his consent to the
sublease because under Art. 1650 of the Civil Code, when in the contract of lease there
is no express prohibition, the lessee may sublease the thing leased.
3. ID.; ID.; LEASE; LESSEE CANNOT ASSIGN THE LEASE WITHOUT THE
CONSENT OF THE LESSOR; EXCEPTION NOT APPLICABLE IN CASE AT BAR. — The
rule is different with respect to assignments of lease. Art. l649 provides that "the lessee
cannot assign the lease without the consent of the lessor, unless there is a stipulation to
the contrary." Petitioners have not cited any provision of the contract of lease between
respondents Homobono Sawit and Orient Electronics giving Orient Electronics the right to
assign the contract. Petitioners' efforts to bind respondent Sawit by invoking a whereas
clause in their contracts with Orient Electronics must thus fail. For the fact is that
respondent Sawit is not a party to those contracts. Indeed, the consent of the lessor is
necessary because the assignment of lease would involve the transfer not only of rights
but also of obligations. Such assignment would constitute novation by the substitution of
one of the parties, i.e., the lessee. There is no evidence in this case to show that
respondent Sawit subsequently agreed to a substitution of petitioners in place of
respondent Orient Electronics as lessees of the premises.
4. ID.; ID.; ID.; RIGHT OF FIRST REFUSAL; WHEN NOT APPLICABLE; CASE AT
BAR. — In the case of Equatorial Development, Inc. vs. Mayfair Theater, G.R. No. 106063,
November 21, 1996, the Court upheld the right of first refusal expressly granted to Mayfair
Theater as lessee of a property after finding that the property had been improperly sold by
the owner-lessor, Carmelo and Bauermann, Inc. to a third party (Equatorial Development,
Inc.). But in that case, there was no dispute as to the existence of the right of first refusal of
Mayfair Theater. On the other hand, in this case, the existence of the right is doubtful.
There was no assignment to the petitioners of either the Sawit-Orient lease contract or the
right of first refusal which was solely granted to respondent Orient Electronics. Hence, the
remedy of rescission, which was successfully invoked by Mayfair Theater in that case, is
not available to herein petitioners. It is noteworthy that the party to whom the right of first
refusal was given in this case (Orient Electronics) did not invoke this right or seek the
rescission of the sale to respondent Silver Swan Mfg. nor did it join cause with petitioners
in bringing this case. 
DHcTaE

|||

Rules on ordinary sales

Form
General rule

91. Sps. Caoili vs. Court of Appeals, G.R. No. 128325, 14 Sep 1999
Verbal agreement of sale
Caoili was a lessee in the property of respondent Santiago. Respondent borrowed money from
Caoili in the amount of P30,000 which they stipulated would form part of their rentals.
When rentals were 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" agreeing that if the title to said premises is not good and cannot be made
good within a reasonable time then this agreement shall be null and void and the above
amount in double the amount shall be refunded and paid to the vendee.
The addendum 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 P140,000 was for
improvements and the P60,000 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.

Supreme Court Ruling

 (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.
The Addendum being notarized is a prima facie evidence of the facts stated therein.
What was the original arrangement between Santiago and Sps. Caoili?
• Lease agreement
Who was the lessor?
• Santiago
Who were the lessees?
• Sps. Caoili
What happened in the course of the lease?
• The obtained a loan.
Who secured a loan from whom?
• Santiago borrowed from Caoili
And eventually, they agreed on?
• A “not formal or written” Deed of Absolute Sale
But they could not execute the Deed of Absolute Sale, because?
• There was no formal document of the sale transaction.
In whose name was the title of that certificate of title over the property?
• Still in the name of husband. She has yet to settle the estate.
What was her reason in claiming that there was no sale?
• There was no document.
Note:
• Ownership does not depend upon the transfer of the certificate of title with the
owner’s name. It’s just a formality.
• The SC said, 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. All
of the essential elements of the contract are present: Consent, Object and Consideration.

92. Naranja vs. Court of Appeals, G.R. No. 160132, 17 Apr[ 2009
Effect of lack of technical description in the contract
Roque Naranja was the registered owner of a parcel of land, denominated as Lot No. 4 in
Consolidation- 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 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, herein petitioners.
Lot No. 2 is covered by TCT No. T-18762 in the names of Roque, Gabino and the said children
of Placido. TCT No. T- 18762 remained even after Gabino died. The other petitioners —
Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos — are the children of Gabino.
Roque had no other source of income except for the P200.00 monthly rental of his two
properties and he lived with half-sister Belardo.
To show his 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 reads: I, ROQUE NARANJA, of legal age, single, Filipino and a resident of
Bacolod City, do hereby declare that I am the registered owner of Lot No. 4 of the Cadastral
Survey of the City of Bacolod, consisting of 136 square meters, 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-18762 and my share in the aforesaid Lot No. 2 is one-third share.
Unknown to Belardo, petitioners, the children of Placido and Gabino Naranja, executed an
Extrajudicial Settlement Among Heirs on October 11, 1985, adjudicating among themselves
Lot No. 4
• On June 23, 1992, Belardo, through her daughter and attorney-in-fact, Rebecca
Cordero, instituted a suit for reconveyance with damages. The complaint prayed that
judgment be rendered declaring Belardo as the sole legal owner of Lot No. 4, declaring null
and void the Extrajudicial Settlement Among Heirs, and TCT No. T-140184, and ordering
petitioners to reconvey to her the subject property and to pay damages.

Supreme Court Ruling

• 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 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, 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.
One who alleges any defect, or the lack of consent to a contract by reason of fraud or undue
influence, must establish by full, clear and convincing evidence, such specific acts that
vitiated the party’s consent.
Petitioners adduced no proof that Roque had lost control of his mental faculties at the time of
the sale. Undue influence is not to be inferred from age, sickness, or debility of body, if
sufficient intelligence remains.
The Deed of Sale which states “receipt of which in full I hereby acknowledge to my entire
satisfaction” is an acknowledgment receipt in itself.
Moreover, the presumption that a contract has sufficient consideration cannot be overthrown
by a mere assertion that it has no consideration.
Heirs are bound by contracts entered into by their predecessors-in-interest. Having been sold
already to Belardo, the two properties no longer formed part of Roque’s estate which
petitioners could have inherited.

If a contract of sale over a real property the technical description is not indicated in the
document of sale, would that affect the validity of the sale?
• No, as form is not essential for the validity of the contract.
Statute of frauds applied

93. Paredes vs. Espino, G.R. No. L-23351, 13 Mar 1968

Facts:
Cirilo Paredes had filed action to compel defendant- appellee Jose L. Espino to execute a deed
of sale and to pay damages. The complaint alleged that the defendant "had entered into the
sale" to plaintiff of Lot No. 67 of the Puerto Princesa Cadastre at P4.00 a square meter. The
deal had been "closed by letter and telegram" but the actual execution of the deed of sale and
payment of the price were deferred to the arrival of defendant at Puerto Princesa. The
defendant upon arrival had refused to execute the deed of sale although plaintiff was able and
willing to pay the price, and continued to refuse despite written demands of plaintiff. As a
result, plaintiff had lost expected profits from a resale of the property, and caused plaintiff
mental anguish and suffering, for which reason the complaint prayed for specific performance
and damages.
Defendant filed a motion to dismiss upon the ground that the complaint stated no cause of
action, and that the plaintiff’s claim upon which the action was founded was unenforceable
under the Statute of Frauds. Plaintiff opposed in writing the motion to dismiss and annexed to
his opposition a copy of a letter purportedly signed by defendant.
Issue:
Whether or not the enforcement of the contract pleaded in the complaint is barred by the
Statute
of Frauds.
Ruling:
No, the contract is not barred by the Statute of Frauds. The Statute of Frauds, embodied in
Article 1403 of the Civil Code of the Philippines, does not require that the contract itself be in
writing. The plain text of Article 1403, paragraph (2) is clear that a written note or
memorandum, embodying the essentials of the contract and signed by the party
charged, or his agent, suffices to make the verbal agreement enforceable. In the case
at bar, the complaint in its paragraph 33 pleads that "the deal had been closed by letter and
telegram". This letter, constitute an adequate memorandum of the transaction. The Court
also ruled in Berg v. Magdalena Estate Inc., that a sufficient memorandum may be contained
in two or more documents. All of the
essential terms of the contract are present, and they satisfy the requirements of the Statute
of
Frauds.
Under, 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.

As a general rule, a contract may be entered into in any form provided all the
essential requisites for its validity are present. . — The Statute of Frauds, embodied in
Article 1403, Civil Code of the Philippines, does not require that the contract itself be in
writing. The plain text of Art. 1403, paragraph (2) is clear that a written note or
memorandum, embodying the essentials of the contract and signed by the party charged,
or his agent, suffices to make the verbal agreement enforceable, taking it out of the
operation of the statute.
2. ID,, ID.; COMPLIANCE WITH STATUTE OF FRAUDS. — The letter, sent by
defendant-appellee marked as annex "A" coupled with that one marked as appendix B,
constitute an adequate memorandum of the transaction. They are signed by the
defendant-appellee; refer to the property sold as a lot in Puerto Princesa, Palawan,
covered by T.C.T. No. 62; give its area as 1026 square meters and the purchase price
of four (P4) pesos per square meter payable in cash. We have in them, therefore, all the
essential terms of the contract, and they satisfy the requirements of the Statute of
Frauds. We have ruled that a sufficient memorandum may be contained in two or more
documents. (Berg vs. Magdalena Estate, Inc., 92 Phil., 110, 115).
|||  (Paredes v. Espino, G.R. No. L-23351, [March 13, 1968], 131 PHIL 94-98)

94. Iñigo vs. Estate of Maloto, G.R. No. L-24384, 28 Sep 1967
Doctrine: Statute of Frauds is applicable only to executory contracts — not to
consummated or partially performed contracts. Thus, where the facts alleged in the
complaint are constitutive of a consummated contract, it matters not that neither
the receipt for the consideration nor the sale itself was in writing, because oral
evidence of the alleged consummated sale of the land is not forbidden by the
Statute of Frauds and may not be excluded in court.

FACTS:
On March 29, 1963, in pursuant of a previous verbal understanding plaintiff paid Adriana
Maloto P10,000.00 as purchase price for the disputed house and lot of 453 square meters,
located in Iloilo City. The deed of sale was to be executed later on.
Margarita Inigo did not press Adriana Maloto for a receipt for the money paid considering the
"almost filial relationship" between the two (plaintiff is a niece of Adriana's deceased
husband), and because plaintiff was told by Adriana that the matter of the preparation of the
said receipt and the deed of sale was to be referred to the latter's lawyer. Meanwhile, plaintiff
"began to exercise ownership and dominion over the said property by improving the same
and constructing a retail store in front thereof." On two occasions, in September and in
October, 1963, on Adriana's instructions, plaintiff went to see Atty. Palma for the preparation
of a deed of sale. She was without success because Palma then was on the campaign trail as
a candidate for councilor of Iloilo City. On October 20, 1963, Adriana died. Thereafter, the
Torrens title to the property was transferred in the name of the present defendants, nephews
and niece of Adriana Maloto, after settlement of the latter's estate. Formal demand for the
execution of a deed of sale by said defendants was rejected by them.

ISSUE:
WON the contract of sale is unenforceable?

RULING:
No…. Under the civil code, a verbal agreement of sale is unenforceable unless
ratified. However, this rule is only applicable to fully executory contracts not to
contracts which are totally or practically performed. In this case, Inigo paid the
purchase price and performed acts of ownership over the property (house and lot). These
shows that the contract was already consummated. Therefore, the contract of sale is not
within the ambit of statute of frauds and it does not matter whether the receipt or the sale
was in writing.

95. Cuyugan vs. Santos, G.R. No. 10265, 03 Mar 1916

FACTS:
• The plaintiff is the sole heir of his mother, Guillerma Cuyugan y Canda, deceased;
• that in the year 1895 she borrowed the sum of P3,500 from the defendant and executed, at
the same time, the document, , which purports on its face to be a deed of sale of the land
described therein, with a reservation in favor of the vendor of the right to repurchase for the
sum of P3,500;
• that although the instrument purports on its face to be a deed of sale, it was
intended by the parties merely to evidence the loan of the nominal purchase price
and to serve as a security for the repayment of the amount of the loan;
ISSUE: WON the parol evidence should be admitted in support of allegations versus that of an
instrument in writing
HELD: YES.
PAROL EVIDENCE AFFECTING WRITINGS; ALLEGED “PACTO DE RETRO”. — Parol evidence is
competent and admissible in support of allegations that an instrument in writing, purporting
on its face to transfer the absolute title to property, or to transfer the title with a mere right
to repurchase under specified conditions reserved to the vendor, was in truth and in fact
given merely as a security for the repayment of a loan; and upon proof of the truth of such
allegations, the courts in this jurisdiction have power to enforce the agreement or
understanding in this regard, in accord with the true intent of the parties at the time when it
was executed.
UNITED STATES DOCTRINE. — The doctrine which must be applied in such cases in this
jurisdiction “does not differ materially” from the equitable doctrine frequently announced and
applied by the Supreme Court of the United States in the numerous cases in which similar
questions have come to it from the various States and Territories within its jurisdiction
MORTGAGE CLAIMED TO BE A SALE. — That court has held that: “To insist on what was really
a mortgage, as a sale, is in equity a fraud, which cannot be successfully practiced, under the
shelter of any written papers, however precise and complete they may appear to be.”
CONTRACT OF LOAN ON SECURITY; LOAN ALLEGED TO BE PURCHASE MONEY. — Also that:
“When it is alleged and proved that a loan on security was really intended, and the defendant
sets up the loan as a payment of purchase money, and the conveyance as a sale, both fraud
and a vice in the consideration are sufficiently averred to require a court of equity to hold the
transaction to be a mortgage.”
“PACTO DE RETRO;” AGREEMENT TO CONSIDER IT AS SECURITY FOR LOAN. — If the parties
actually enter into such an agreement, the lender of the money is legally and morally bound
to fulfill it. Of course, such an oral contract does not give the borrower a real right in the
lands unless it is executed in compliance with the formalities prescribed by law. If entered
into orally, it creates a mere personal obligation which in no wise affects the lands, and if the
lender conveys the lands to innocent third persons, the borrower must content himself with a
mere right of action for damages against the lender, for failure to comply with his agreement.
But so long as the land remains in the hands of the lender, the borrower may demand the
fulfillment of the agreement, and a mere lack of any of the formalities prescribed under the
Spanish Code for the execution of contracts affecting real estate will not defeat his right to
have the contract fulfilled, as the lender may be compelled in appropriate proceedings to
execute the contract with the necessary prescribed formalities.
ORAL CONTRACTS AFFECTING LANDS; REQUISITES UNDER SPANISH CODES. — Under the
Spanish Codes an oral contract affecting lands, even an oral contract for the sale of lands,
was valid and enforceable, provided none of the essential requisites of all valid contracts are
lacking, that is to say, (1) consent, (2) definite object, and (3) cause or consideration. The
lack of the formal requisites prescribed by the Code in order that such contracts may become
effective to bind or convey the property, such as their execution in public instruments and the
like, does not invalidate them as personal obligations, as “either party may compel the other
to comply with such formalities” from the moment the valid personal obligation has been
entered into.
“PACTO DE RETRO;” ACCEPTANCE OF PARTIAL PAYMENTS; EFFECT. — Where a sale of lands
has been made reserving to the vendor a right to repurchase under stipulated conditions, and
one or more partial payments have been made by the vendor and accepted by the purchaser,
the acceptance of such partial payments is absolutely incompatible “with the idea of
irrevocability of the title of ownership of the purchaser” at the expiration of the term
stipulated in the original contract for the exercise of the right of repurchase.
In the light of these elementary and basic principles of the Code there can be no question, in
the absence of express statutory prohibition, as to the validity of an agreement or
understanding whereby the lender of money, who as security for the repayment of the loan
has taken a deed to land, absolute on its face or in the form of a deed reserving a mere right
of repurchase to the vendor, obligates himself to hold such deed, not as evidence of a
contract of sale but by way of security for the repayment of the debt; and that unless the
rights of innocent third persons have intervened the lender of the money may be compelled
to comply specifically with the terms of such an agreement, whether it be oral or written; and
further, that he will not be permitted, in violation of its terms, to set up title in himself or to
assert a claim of absolute ownership

96. Sps. Dalion vs. Court of Appeals, G.R. No. 78903, 28 Feb 1990
Facts:
On May 28, 1973, Sabejase sued Dailon to recover ownership of a land, which was based on a
document of absolute sale which was dated July 1, 1965. Dalion however denied the fact of
sale and contends that the document was fictitious, his signature was forged and that the said
land was a conjugal property which he and his wife acquired in 1960 from Saturnina
Sabejase. Dailon denied claims of Sabejase after executing a deed of sale over the land and
that they had pleaded Sabejase to be allowed to administer the land because Dailon did not
have any means of livelihood. They have also admitted of administering lands in Sogod,
Leyte, which belonged to the grandfather of Sabejase. They claim that they have never
received the 10% to 15% commission from the sale of copra and abaca and that Sabejase
was just suing them to forestall the threat of Dailon to sue over the unpaid commission.
Issue:
Whether of not there was a valid contract of sale for the parcel of land
Ruling:
A contract of sale is a consensual contract. This means that it is perfected by mere consent
and there is no particular form that is required for its validity. Upon perfection, the parties
may reciprocally demand performance. Article 1475 of the Civil Code, gives the parties to a
perfected contract of sale the right to reciprocally demand the performance. In Sabejase’s
complaint it was sufficient to allege a cause of action in order to compel Dailon to execute a
formal deed of sale and the suit for recovery of ownership which was premised on the effect
and validity of the parties in the contract of sale which merely seeks consummation of the
contract. Accordingly, the petition was denied.

98. Yuvienco vs. Dacuycuy, G.R. No. L-55048, 27 Mar 1981

Respondents' telegram which simply says "We agree to buy property" does not
necessarily connote acceptance of the price but instead suggests that the details
 were to be subject of negotiation. That respondents were all the time agreeable
to buy the property may be conceded, but what impresses the Supreme Court is
that instead of "absolutely" accepting the "certain" offer — if there was one — of
the petitioners, they still insisted on further negotiation of details

FACTS:
Petitioners own a property in Tacloban City which they intend to sell for 6.5M. They gave the
respondents the right to purchase the property nut only until July 31, 1978. Respondents
replied that they agree to buy the property and they will negotiate for details. Petitioner sent
another telegram informing respondents that their proposal is accepted and a contract will be
prepared.
Lawyer of defendant, Atty. Gamboa sent a letter to Yao King Ong stating the willingness to
sell the land to latter. It brought a contact with an altered mode of payment which says that
the balance payment should be paid withing 30 days instead of the former 90 days. (Otiginal
terms: 2M payment upon execution. 4.5M after 90 days) Yao King Ong replied by telegram
with the following words “we agree to buy proceed to Tacloban to negotiate details”. Yao King
Ong filed a suit for specific performance against the petitioners. Petitioners contended that
the contract of sale is unenforceable under the Statute of Frauds and there was no absolute
acceptance made by the respondents. Hence, there was no perfected contract of sale.

ISSUE:
WON there was a perfected contract of sale?

HELD:
The court ruled that the acceptance was not absolute under Article 1319 of the Civil Code.
There was no perfected contract of sale yet because both parties are still under negotiation
and hence, no meeting of the minds. Mr.Gamboa even went to the respondents to negotiate
for the sale. Even though there was an agreement on the terms of payment, there was no
absolute acceptance because respondents still insisted on further details.
With regard to the alleged violation of terms of payment, there was no written document to
prove that the respondents agreed to pay not in cash but in installment. In sale of real
property, payment of installment must be in requisite of a note under the statute of frauds.

99. Vda. de Jomoc vs. Court of Appeals, G.R. No. 92871, 92860, 02 Aug 1991
(double sale of a land which was allegesly fictitiously sold)
FACTS
The lot in Cagayan de Oro City of the late Pantaleon Jomoc was fictitiously sold and
transferred to third persons. Maria P. Vda. Jomoc, as administratrix of the estate filed suit
to recover the property. The case was decided in favor of Jomoc and was accordingly
appealed by Mariano So and Gaw Sur Cheng. Pending the appeal, Jomoc executed a Deed
of Extrajudicial Settlement aid Sale of Land with private respondent. The document was
not yet signed by all the parties nor authorized but in the meantime, Maura So had made
partial payments.In 1983, Mariano So, agreed to settle the case by executing a Deed of
Reconveyance of the land in favor of Pantaleon Jomoc. On February 28, 1983, the heirs of
Jomoc executed another extrajudicial settlement with absolute sale in favor of Lim Leong
Kang and Lim Pue king. Later, Maura So demanded from the Jomoc family the execution
of the final deed of conveyance. They ignored the demand. Thus, Maria So sued the Jomoc
heirs for specific performance to execute and deliver the proper registrable deed of sale
over the lot. So then filed a notice of lis pendens. According to the Jomocs, they believed
that Maura So had backed out from the transaction as evidenced by an oral testimony that
she did where she expressed frustration in evicting squatters who demanded large sums
as a condition for vacating. Hence, they executed the other extrajudicial settlement with
sale of registered land in favor of the spouses Lim. The spouses Lim, however, registered
their settlement and sale only on April 27, 1983. The lower court, found that (1) the case
is one of double sale; and (2) the spouses Lim are registrants in bad faith. On appeal, the
trial court’s decision was affirmed.
ISSUE
Whether the contract of sale by Maria P. Jomoc with private respondent is unenforceable
 under the Statute of Frauds.
HELD
No. The contract is enforceable. The meeting of the minds and the delivery of sums as partial
payment is clear and this is admitted by both parties to the agreement. Hence, there was
already a valid and existing contract, not merely perfected as the trial court saw it, but
partly executed. It is of no moment whether or not it is enforceable under the Statute of
Frauds, which rule we do not find to be applicable because of partial payment of the
vendee’s obligation and its acceptance by the vendors-heirs. The contract of sale of real
property even if not complete in form, so long as the essential requisites of consent of the
contracting parties, object, and cause of the obligation concur and they were clearly
established to be present is valid and effective as between the parties.
The two courts correctly ruled that the spouses Lim do not have a better right.
They purchased the land with full knowledge of a previous sale to private
respondent and without requiring from the vendor-heirs any proof of the prior
vendee’s revocation of her purchase. They did so in bad faith or on the belief that a
registration may improve their position being subsequent buyers of the same lot.

100. Santos vs. Manalili, G.R. No. 157812, 22 Nov 2005

(application to purchase property na nabayran na unya gi contest after 9 years sa laing
tao)

At the core of the controversy is a 4,608 square-meter parcel of land in the District of Toril,
Davao City. On August 6, 1970, Reynaldo Manalili, predecessor-in-interest of respondent
Ronald C. Manalili, filed with the Bureau of Land an application to purchase the
subject property, attaching therewith his Occupants Affidavit. The application was favorably
acted upon and on March 27, 1972, the BOL required Manalili to pay the downpayment of
10% of the purchase price or P1,865.28. Thereafter, Manalili declared the land for taxation
purposes. On March 25, 1981, after the lapse of nine (9) years and even as the BOL had
already issued a Certification of Full Payment endorsing the approval of the sale of the land in
question to applicant Reynaldo Manalili, herein petitioner Rodolfo Santos wrote an undated
letter to the BOL protesting Manalilis application.
On December 16, 1981, following Manalilis compliance with other requirements, the BOL
issued to him the corresponding Deed of Absolute Sale which was duly approved by the Office
of the President on December 21, 1981. On April 26, 1982, petitioner filed the
aforementioned complaint for Reconveyance, Damages, Attorneys Fees and/or Annulment of
Title against the BOL and the Manalilis.

Issue:
Whether or not Manalili has the better right of possession over the lot in question?

Held:
The Court answered in the affirmative. It affirmed the BOLs finding that the Manalilis had a
better right of possession thereto. Preponderant evidence of respondent have sufficiently
established that as early as 1970, Reynaldo Manalili, respondents predecessor-in-interest,
had already filed an Affidavit of Occupancy with the BOL, the government agency tasked to
administer it; that the Manalilis administered the land before they left for Manila in 1972; that
after they moved to Manila they appointed an administrator to oversee the land and the
improvements and crops they have planted thereon, such as bananas and coconut trees; and
that the Manalilis have been paying the real estate taxes for the subject land even before the
sale thereof to them.
The circumstance that after the sale, the Manalilis resided in Manila and Pangasinan is of no
moment. As it is, possession may be exercised in ones own name or in that of another. It is
not necessary that the owner or holder of the thing exercise personally the rights of
possession. Rights of possession may be exercised through agents.

ALE; PETITIONER'S CLAIM OF OWNERSHIP LACKS BASIS; A SALE OF A PIECE OF LAND

APPEARING IN A PRIVATE DEED CANNOT BE CONSIDERED BINDING ON THIRD PERSONS IF
IT IS NOT EMBODIED IN A PUBLIC DOCUMENT AND RECORDED IN THE REGISTRY OF DEEDS.
— In contrast, petitioner's claim of having bought the land from a certain Ernesto Abalahin
who, in turn, bought it from one Col. Agsalud, allegedly a guerrilla veteran who occupied the
lot from 1956 to 1959, is without basis. For one, no proof has been presented by petitioner as
to the alleged title of Col. Agsalud or the transfer of any rights from the latter to Ernesto
Abalahin, petitioner's alleged immediate transferor. For another, the supposed Deed of
Absolute Sale between petitioner and Ernesto Abalahin does not even sufficiently identify the
lot which was the subject of the sale. Worse, that same deed is not notarized and is
unregistered. A sale of a piece of land appearing in a private deed cannot be considered
binding on third persons if it is not embodied in a public instrument and recorded in the
Registry of Deeds. Verily, it was only in 1981 that Abalahin entered the subject land without
permission, and that in 1982, petitioner, together with Abalahin and one Lumaad, illegally cut
trees on the land, thereby prompting the Manalilis to report their unlawful entry to the local
barrio captain.

3. ID.; ID.; ID.; FRAUD MUST BE ESTABLISHED BY CLEAR AND CONVINCING EVIDENCE;
PETITIONER'S EVIDENCE DO NOT SUPPORT HIS AS ALLEGATION OF FRAUD. — True, there is
petitioner's claim that the BOL's sale of the land to Reynaldo Manalili was fraudulent. Basic it
is in the law of evidence, however, that mere assertion of an alleged fact is not enough. It
behooves petitioner to substantiate his claim by credible evidence, of which there is none,
more so, because the law presumes BOL to have acted regularly in recommending the sale of
the disputed land to Manalili and the Office of the President, in approving the sale. As it is,
petitioner's evidence do not support his allegation of fraud. It is a matter of record that
petitioner's protest, filed nine (9) years after Reynaldo Manalili filed his application with
attached occupant's affidavit, and after the BOL had already issued a Certification of Final
Payment in Manalili's favor, was duly investigated by the BOL, after which it recommended
the sale of the land to Manalili, which recommendation was formally acted upon by the Office
of the President which ultimately approved the Deed of Sale for Manalili. It is well-settled that
fraud must be established by clear and convincing evidence. Petitioner failed in this venture.

When form is essential

Perfection
100. Sps. Dalion vs. Court of Appeals, supra.

General rule
101. Coronel vs. Court of Appeals, supra.
102. Manila Mining Corp. vs. Tan, G.R. No. 171702, 12 Feb 2009
Manila Mining Corporation (MMC) ordered and received various electrical materials from Tan
valued at P2,347,880. MMC agreed to pay the purchase price within 30 days from delivery, or
be charged interest of 18% per annum, and in case of suit to collect the same, to pay
attorney’s fees equal to 25% of the claim.
MMC made partial payments in the amount of P464,636. But despite repeated demands, it
failed to give the remaining balance of P1,883,244, which was covered by nine invoices.
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 requisite for
payment. Having not received them thereby having no consent, their contract could not have
been perfected.

Supreme Court Ruling

In this case, 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 invoices furnished the details of the
transactions.
• As regards respondent’s failure to present the original documents, suffice it to say that
the best evidence rule applies only if the contents of the writing are directly in issue. Where
the existence of the writing or its general purport is all that is in issue, secondary evidence
may be introduced in proof.
• MMC did not deny the contents of the invoices and purchase orders. Its lone contention
was that Tan did not submit the original copies to facilitate payment.
• But we are in agreement that photocopies of the documents were admissible in
evidence to prove the contract of sale between the parties.
Place of perfection

Expenses
Of execution and registration of sale
Of putting the goods in a deliverable state

Rule in special sales

Sales at auction (Art. 1476)

Rules

104. Dizon vs. Dizon, G.R. No. 156539, 05 Sep 2007

Validity of supplemental minutes on sheriff’s sale
Note:
• He was the highest bidder in the auction sale over the property owned by the
judgment debtor.
• 45 Minutes after the auction sale, the lawyer for the judgment creditor went
to the sheriff and increase the bid, because the winning bid was under 180,000
pesos, he increased the bid to P1,690,074.41.

Can the bidder increase the bid after the auction sale?
• No, because the contract has already been perfected. Any of the parties can
no longer change the conditions of the sale, unless both of them agreed.
• In fact, after the fall of the hammer, the win bidder can no longer retract his
bid.
• Before the fall of the hammer, a bidder can always retract his bid.

Dizon purchased from his nephew, Elpidio Dizon a house and lot located in Tondo, Manila.
Respondent failed to deliver the house and lot to petitioner. Co-owner of the lot, Elpidio’s
brother Ricardo, did not give said respondent a written authority to sell his ½ share.
• Petitioner then filed with the RTC a complaint for specific performance and sum of
money with damages against respondent.
• RTC rendered a decision rescinding the contract between the parties. The trial court
issued a writ of execution implemented by sheriff Cesar Cabildo, who then scheduled the
auction sale of respondent’s properties.
• Petitioner’s attorney-in-fact as well as respondent and counsel participated. Petitioner
was the highest bidder having offered P180,000.00.
In the afternoon of said auction date, the sheriff went to respondent’s house and showed
“Supplemental Minutes on Sheriff’s Sale” offering a new bid at P1,690,074.41 in lieu of the
earlier bid.
Respondent refused to sign contending that it would be difficult for him to redeem
the property and besides, the auction sale had already been perfected and the
subsequent sale is a new or second sale.

Supreme Court Ruling

Article 1476 (2) of the Civil Code provides: xxx (2) A sale by auction is perfected when the
auctioneer announces its perfection by the fall of the hammer, or in other customary manner.
Until such announcement is made, any bidder may retract his bid; and the auctioneer may
withdraw the goods from the sale unless the auction has been announced to be without
reserve.
During the public auction conducted, which began at 10:25 AM and ended at 10:45 AM, the
sheriff declared petitioner as the highest bidder.
Considering that the auction sale had already been perfected, a supplemental sale with the
higher consideration at the instance of only one party could no longer be validly executed.

Before the hammer falls:

• 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
• The auctioneer may also withdraw the goods from the sale EXCEPT if the auction has
been announced to be WITHOUT RESERVE.

105. Leoquinco vs. Postal Service Bank, G.R. No. L-23630, 25 Aug 1925

Bank who did not accept tendered patment. Auction Sale where the seller reserved
the right to reject any and all the bids

This is a case involving of a piece or parcel of land belonging to the Bank, situated at
Navotas, Province of Rizal, having offered P27,000 for said property.
The Plaintiff herein alleged that he was the highest bidder at a public auction held by Postal
Savings Bank on March 31, 1924. Then he wrote a letter to the defendants on May 9, 1924,
advising that he was ready to tender payment for the land as soon as the deed of sale
of the same in his favor is executed and delivered by the defendants.
Postal Savings Bank refused to execute the deed inspite of requests made therefor by him
and that said refusal caused him damages in the sum of P25,000 more or less.
Plaintiff prayed that said defendants be ordered to execute and deliver the deed of sale of
said land in his favor, and to pay him damages amounting to P25,000, and the costs.

Supreme Court Ruling

In a resolution adopted by the board of directors authorizing the sale at public auction of the
property in question, as well as in the notice announcing said sale, the defendants expressly
reserved to themselves "the right to reject any and all bids.”
By taking part in the auction and offering, Leoquinco voluntarily submitted to the terms and
conditions of the auction sale as announced in the notice and has clearly acknowledged the
right to reserve to the PSB. Petitioner’s participation in the auction means submission or
being bounded to the rules of auction whether the purchaser knew the rules or not
Clearly, Leoquinco has no ground of action to compel the PSB to execute a deed of sale of the
land in his favor nor to comply his bid and offer.
The owner of the property offered to sale in auction has the right to prescribe the manner.

Can the seller reject any of the bids as a matter of right?

• Yes, that is provided by law.
• The seller can reject all of the bids unless the auction is announced without reserve.
• In actual practice, the sellers would reserve the right to reject the bids, which is not
actually necessary.

Voluntary Auction Sales:

Why can’t the seller participate in the bidding?
• He cannot bid because in doing such he can manipulate the biddings of other
participants.

Can the seller bid as a matter of right?

• The seller himself may bid provided that the following conditions are present:
 The right to bid has been expressly reserved, and
 it has been made known to the prospective bidders.
• Otherwise, if the seller bids without notifying the prospective bidders, then the winning
bidder can consider the sale as fraudulent.

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.
Will such fraud affect the perfection of the contract?
• Yes, the contract will be VOID with NO force and effect

Limitations of the seller:

• 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 themselves bound, are called “by-bidders” or “puffers”)
• Exception: If right to bid has been expressly reserved and that notice of such was
given

Limitations of the auctioneer (if he is not the seller)

• 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

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.

Sales by sample and/or description

106. Pacific Commercial Co. vs. Ermita Market & Cold Stores, Inc., G.R. No.L-34727, 09 Mar
1932
(Not serving its purpose daw lage ila pinait na ref)

On September 14, 1927, the Pacific Commercial Co., sold to the Ermita Market & Cold Stores,
Inc., the defendant herein, an automatic refrigerating machine.
The parties signed the usual printed sales-contract form of the plaintiff company, the
purchase price, payable by installments as stated in the sales contract.
By mutual agreement, the said machine was installed by the plaintiff, to be paid by the
defendant, in favor of the plaintiff.
Complying with the terms of the sales contract, the defendant paid the plaintiff an initial
amount f the purchase price of the machine, leaving a balance.
• A few days after installation, the defendant advised the plaintiff that the
machine was not serving the purpose for which it was sold and that it was lacking
ammonia receiver and oil separator, and further alleges that the temperature in the
refrigerating rooms did not reach, and had never reached, owing to the negligence of
the plaintiff in not repairing or putting in good working condition the said refrigerating
machine, the defendant had been forced to close its establishment and for which reason the
defendant claimed damages against the plaintiff.
• The plaintiff denied generally and specifically each and every and every allegation in
the said cross-complaint and by way of special defense, alleged that whatever defects or
deficiency there might have been in the temperature in the refrigerating rooms of defendant's
establishment, or in the functioning of the machine, these were due to the defects and
imperfections of the coils which were supplied and installed by the defendant itself, as well as
to the incompetency and inefficiency of the defendant's personnel to operate the machine.
• CFI ordered defendant to pay.

Supreme Court Ruling

• After a careful examination of the record, we see that the plaintiff delivered the
machine as described in the sales contract, and the fact that the defendant could
not use it satisfactorily in the three cold stores division cannot be attributed to
plaintiff's fault.
• As far as we can see, 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.
• It is clear that the defendant company did not fully understand the use of the motor. It
complains that the machine would not properly refrigerate the refrigerating rooms, but it is
evident that the machine could not operate automatically when the defendant had three
refrigerating rooms which it expected to maintain at three different temperatures.
• The defendant also complained that the machine was not equipped with a thermostat
and that the lack of its obstructed the work of the refrigerating. In the first place, the
thermostat was not included in the sales contract and in the second place it would not have
been of any service to defendant because it could not possibly operate automatically at three
different temperatures with the defendant's insufficient equipment.
• The defendant's complaint that the machine did not contain an oil separator is not true;
the oil separator is combined with the receiver and condenser in a single combined piece in
the machine.
What was delivered by Pacific?
• Exactly as ordered by Ermita.
Note:
• But Ermita wanted to use it for the purpose that is not the purpose of which the
refrigeration machine was fabricated. It could not use the thing for the purpose intended,
because it was not meant to be for the purpose that it is intended.
• There was no breach of contract committed by Pacific. Thus, they can compel Ermita to
pay for the balance of the purchase price.

Sale of personal property payable by installments (Recto Law)

Alternative remedies in case of non-payment (Art. 1484)

107. Macondray & Co., Inc. vs. De Santos, G.R. No. L-42416, 09 Apr 1935
In this case, there’s an obligation to pay a sum of money that constituted a mortgage over
the car. (a chattel mortgage which was destroyed in an accident)

On January 11, 1934, Praxedes R. De Santos executed and delivered to the plaintiff
Macondray & Co. a promissory note for the sum of P1,000, with interest rate of 12 per cent
per annum, payable in installments and in case of default in the payment of the principal or
interest an additional sum equal to 20 per cent of the total amount due was to be paid as
attorney's fees
To guarantee the payment of this note, the defendant executed a chattel mortgage on an
automobile; if the mortgaged property be lost, destroyed or damages, the mortgage would
immediately have the right to foreclose and declare the whole amount of the principal and
interest, secured by said mortgage, due and payable
On January 21, 1934, the mortgaged automobile, while in possession of the
defendant, met with an accident resulting in its total wreck and loss; by reason of
the failure of the defendant to replace or to restore the automobile or to pay the
value thereof plaintiff foreclosed its mortgage and what remained of the wrecked automobile
was sold at public auction for the sum of P50;
• After applying this amount to the account of defendant, there was an unpaid
balance of P980.39 plus interest at 12 per cent per annum from March 24, 1934, and 20 per
cent of the amount due as attorney's fees, which defendant refused to pay.
• As an alternative cause of action, the plaintiff reproduces the allegations
contained in the first cause of action and prays that defendant be sentenced to pay the
plaintiff the above-mentioned amount with interest.
• The defendant, as the only ground of her demurrer, alleges that under the
provisions of Act No. 4122, article 1454-A of the Civil Code, there is no cause of action
against her.

Supreme Court Ruling

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 two
or 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.
Was there a chattel mortgage here?
• Yes.
What was the principal obligation secured by a mortgage here?
• An obligation to pay a sum of money (Promissory note – was indicated in the
case); not necessarily a loan because when you purchase a car when you sign a promissory
note to pay on installments it’s not a loan, the obligation is to pay the price on installments.
• In this case, there’s an obligation to pay a sum of money that constituted a
mortgage over the car.
Who foreclosed the mortgage?
• Mortgagee: always the creditor
Who constitutes the mortgage?
• Mortgagor: can be a third person who is not the debtor.
What was the reason of de Santos when he refused to pay the deficiency?
• He invoked the Recto Law. Claiming that, the seller forecloses the mortgage then
he can no longer recover the deficiency.
But is the Recto Law is applicable here?
• No, because it’s not a sale of personal property on installments. What
was secured here was an obligation evidenced by a promissory note.
Note:
• In many instances, the mortgagor is also the debtor. But it does not always
happen.
• Third person can also be a mortgagor for as long as he’s the absolute owner of
the property and he has free disposal of the property. He can be a mortgagor; he can secure
the obligation of another person.
• You cannot constitute a valid mortgage if there’s no principal obligation. That’s
the first requisite for a valid mortgage.

108. Levy Hermanos, Inc. vs. Gervacio, G.R. No. L-46306, 27 Oct 1939
(Remaining unpaid balance is not on installment, mere 1k plus)

Levy Hermanos, Inc. sold a car to defendant Lazaro Blas Gervacio. Gervacio made a down
payment for the car and then executed a promissory note for the balance in favor of Levy
Hermanos, Inc.

In order to secure payment of the note for the balance of P2,400.00, the former (Gervacio)
mortgaged the car to the latter (Levy Hermanos). After Gervacio failed to pay the note upon
its maturity, Levy Hermanos foreclosed the mortgage.

The car was sold at a public auction where it was bought for P1,800.00 by Levy Hermanos for
being the highest bidder.

Despite having already bought the car at the public auction, plaintiff instituted an action
before the CFI of Manila against defendant for the collection of the balance of the P1,600.00
and interest.

The CFI, applying the provisions of Act No. 4122, inserted as Article 1454-A of Civil Code,
rendered judgment in favor of Gervacio. Levy Hermanos, Inc. appealed the judgment.

ISSUE: Whether plaintiff is entitled to the collection of the balance of P1,600.00 and interest.
HELD: The Supreme Court says YES. Judgment of the CFI reversed.

The contract, in the instant 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 is not, therefore, the one contemplated in Act No. 4122 and
accordingly the mortgagee is not bound by the prohibition therein contained as to
the right to the recovery of the unpaid balance.

          Undoubtedly, the law is aimed at those sales where the price is payable in several
installments, for, generally, it is in these cases that partial payments consist in relatively
small amounts, constituting thus a great temptation for improvident purchasers to buy
beyond their means. There is no such temptation where the price is to be paid in cash, or, as
in the instant case, partly in cash and partly in one term, for, in the latter case, the partial
payments are not so small as to place purchasers off their guard and delude them to a
miscalculation of their ability to pay.

Theoretically, perhaps, there is no difference between paying the price in two

installments, 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.
But all these considerations are immaterial, the language of the law being so clear as to
require no construction at all.
phi1.nêt
          The suggestion that the cash payment made in this case should be considered
as an installment in order to bring the contract sued upon under the operation of
the law, is completely untenable. 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. Here, only one installment was unpaid.

The contract, in the instant 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 No. 4122 and accordingly the mortgagee is not bound by the prohibition
therein contained as to its right to the recovery of the unpaid balance.
Undoubtedly, the law is aimed at those sales where the price is payable in
several installments, for, generally, it is in these cases that partial payments consist in
relatively small amounts, constituting thus a great temptation for improvident purchasers
to buy beyond their means. There is no such temptation where the price is to be paid in
cash, or, as in the instant case, party in cash and partly in one term, for, in the latter
case, the partial payments are not so small as to place purchasers off their guard and
delude them to a miscalculation of their ability to pay. Theoretically, perhaps, 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. But all these considerations are
immaterial, the language of the law being so clear as to require no construction at all.
|||  
 109. Sps. Dela Cruz vs. Asian Consumer of Industrial Finance Corp., G.R. 94828, 20
Sep 1992
Foreclose the chattel mortgage on the thing sold,; EFFECT OF FAILURE OF
VENDOR TO FORECLOSE THE MORTGAGED PROPERTY. — 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. It is worth noting that it is the fact of foreclosure and actual
sale of the mortgaged chattel that bar recovery by the vendor of any balance of the
purchaser's outstanding obligation not satisfied by the sale ., 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.
POSSESSION OF MORTGAGED PROPERTY SHOULD BE RETURNED TO
MORTGAGEE-VENDEE UPON PAYMENT OF UNPAID BALANCE; CASE AT BAR. —
We note however that the trial court, as well as the Court of Appeals failed to consider that
the vehicle was already in the possession of ASIAN when it directed petitioners herein to
pay P184,466.67 representing the balance of the purchase price of the mortgaged
property. Law and equity will not permit ASIAN to have its cake and eat it too, so to speak.
By allowing ASIAN to retain possession of the vehicle and then directing petitioners to pay
the unpaid balance would certainly result in unjust enrichment of the former. Accordingly,
the ownership and possession of the vehicle should be returned to petitioners by ASIAN in
the condition that it was when delivered to it, and if this be no longer feasible, to deduct
from the adjudged liability of petitioners the amount of P60,000.00, its corresponding
appraised value.
|||  (FACTS)
Petitioner purchased on installment a truck from BENTER motor sales Corp. And to secure
payment, petitioners executed in favor of BENTER a chattel mortgage over the vehicle
and a promissory note.
BENTER then assigned its rights and interest over the vehicle in favor of private respondent
ASIAN consumer and industrial finance corp.

Petitioners initially paid some installment but subsequently defaulted for more than 2
installments. A demand letter was sent by respondent corporation to petitioner, but the latter
failed to settle their obligation.
Subsequently, by virtue of a petition for extrajudicial foreclosure, the sheriff attempted to
repossess vehicle but was unsuccessful because of the refusal of the son of petitioner to turn
over the same.
Some 2 weeks later, the petitioner brought the vehicle to the office of respondent corp. and
left it there for inventory and inspection.
Respondent thereafter filed an ordinary action for the collection of the balance of the
purchase price. The trial court rendered judgment in favor of respondent. CA affirmed the
judgment on appeal.

Supreme Court Ruling

The Supreme Court, citing several pertinent cases, have stated in the wise: ”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. It is worth
noting that it is the fact of foreclosure and actual sale of the mortgaged chattel that bar
recovery by the vendor of any balance of the purchaser’s
outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article 1484).”
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.
Consequently, 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.
While it is true that under par. 3 of 1484, the vendor, after he decides to foreclose
the mortgage upon the thing sold, is precluded from instituting any further action
against the purchaser to recover any unpaid balance of the price, it is the fact of
foreclosure and actual sale of the mortgaged chattel that bar recovery by the
vendor of any balance of the purchaser’s outstanding obligation not satisfied by the
sale
Was there a sale of personal property on installments?
• Yes
Was payment of the installments secured by a mortgage?
• Yes.
Was there a default?
• Yes. More than 2 installments.
Was Asian Consumer the seller here?
• No
Who is the seller?
• Benter
Why is the Asian Consumer, the party which instituted the foreclosure proceedings?
• Asian initiated the foreclosure proceedings, demanded the return of the truck.
Did the buyers voluntarily surrender the truck?
• No, they did not. They only surrendered on Oct. 10, 1984.
Note:
• Note that the item must be returned first before foreclosure. The seller cannot foreclose
if it doesn’t have possession.
• If upon demand, the buyer refuses to surrender. Usually, the demand letter by the
lawyer would say that there is a demand made upon you to pay this amount OR voluntarily
surrender the vehicle.
• If the buyer refuses to pay and surrender the vehicle, the seller opts to foreclose the
mortgage, it cannot just sell the movable without first taking concession of the movable.
• It has to have possession to the movable, because during the foreclosure sale it would
be immediately delivered to the highest bidder. That’s the first thing of the seller to do, to
recover possession of the property.
• In the case, the buyers refused to voluntarily surrender. They only surrendered after a
certain period. Maybe Asian determined that if they pursue foreclosure, the proceeds would
not be enough to pay the balance of the purchase price.
• Instead of pursuing foreclosure, they sued for specific performance. Then Dela Cruz
said, you couldn’t do that because you opted for foreclosure under Art. 1483 (3), if you opt
for foreclosure, then you cannot sue for specific performance.
• SC’s ruling: There was a timely desistance on the part of Asian. Foreclosure
proceedings did not push through.

110. Magna Financial Services Group, Inc. vs. Colarina, G.R. No. 158635, 09 Dec 2005
(they asked for the return of the property and still asked for payment)
Note:
• It involves a sale of a vehicle on installments.
• The buyer also defaulted in the payment of at least 2 installments.
• Magna Financial initiated foreclosure proceedings.
• Magna Financial prays for specific performance.
• Magna demanded for the return of the car or payment of the unpaid
obligation.
• The subject vehicle is already in the possession of Magna.
• But Magna still sued for specific performance.
• Actually, this case reached the SC because of the fault of the trial court.
Because the trial court, ordered the recovery of the car and payment of the unpaid
price.
• SC said, no you cannot sue for specific performance. You must pursue
foreclosure.
• From the start, Magna has been consistent in pursuing foreclosure. SC said,
pursue foreclosure up to the sale. But you cannot recover the balance of the unpaid
price.

How this differs from Asian Consumer case?

• The buyers did not voluntarily surrender.
• Asian timely desisted from pursuing foreclosure

• Private respondent Elias Colarina bought on installment from Petitioner Magna Financial
Services Group, Inc., one (1) unit Suzuki Multicab.
To secure payment thereof, Colarina executed an integrated promissory note and
deed of chattel mortgage over the motor vehicle.
Colarina failed to pay the complete monthly amortization and despite repeated demands from
Magna, the former failed to make the necessary payment.
• Magna then instituted a complaint for foreclosure of chattel mortgage with replevin
before the MTCC of Legaspi City.
• In its complaint, Magna prayed for both 1.) the payment of the principal sum with
penalty charges plus liquidated damages, and 2.) for Colarina to surrender possession of the
Multicab.
• MTCC and RTC granted foreclosure AND specific performance,

Supreme Court Ruling

• It is unmistakable 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 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.
• 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.
• In sum, since the petitioner has undeniably elected a remedy of foreclosure under
Article 1484(3) of the Civil Code, it is bound by its election and thus may not be allowed to
change what it has opted for nor to ask for more.
• In the case at bar, there is no dispute that the subject vehicle is already in the
possession of the petitioner, Magna Financial Services Group, Inc. However, actual
foreclosure has not been pursued, commenced or concluded by it.
• Where the mortgagee elects a remedy of foreclosure, the law requires the actual
foreclosure of the mortgaged chattel. As held in the case Manila Motor Co. v. Fernandez, it is
actual sale of the mortgaged chattel in accordance with Sec. 14 of Act No. 1508 that would
bar the creditor (who chooses to foreclose) from recovering any unpaid balance. And it is
deemed that there has been foreclosure of the mortgage when all the proceedings of the
foreclosure, including the sale of the property at public auction, have been accomplished.

Leases of personal property with option to buy

111.Elisco Tool Manufacturing Corp. vs. Court of Appeals, supra.

112. PCI Leasing and Finance, Inc. vs. Giraffe-X Creative Imaging, Inc.,
supra.

Sale of real property on installment (R.A. No. 6552 or the Realty Installment Buyer Protection
Act, aka “Macdeda Law”)
Applicability
Rules when the buyer has paid at least two years of installment
Rights of buyer
In case of cancellation of sale; when cancellation takes effect

113. Pagtalunan vs. De Manzano, G.R. No. 147695, 13 Sep 2007

we ruled that there is no valid cancellation of the Contract to Sell in the absence of
a refund of the cash surrender value.

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.

Supreme Court Ruling

• The CA correctly ruled that R.A No. 6552 (Maceda Law), which governs sales of real
estate on installment, is applicable in the resolution of this case.
• 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, such cancellation must be done in accordance with the law.
• Here, the Contract to Sell was not validly cancelled or rescinded under Sec. 3
(b) of the Maceda Law. First, Patricio, the vendor in the Contract to Sell, died on
September 17, 1992 without canceling the Contract to Sell. Second, petitioner also
failed to cancel the Contract to Sell in accordance with law.
• Meanwhile, petitioner asserts that his demand letter should be considered as the notice
of cancellation or demand for rescission by notarial act and that the cash surrender value of
the payments on the property has been applied to rentals for the use of the house and lot
after respondent stopped payment after January 1980.
• The Court, however, found that the letter merely made formal demand upon
respondent to vacate the premises in question. Clearly, the demand letter is not the
same as the notice of cancellation or demand for rescission by a notarial act
required by the Maceda Law.
• Moreover, 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. Sec. 3 (b) of the Maceda Law
does not provide a different requirement for contracts to sell which allow possession of the
property by the buyer upon execution of the contract like the instant case but the refund of
the cash surrender value of the payments on the property to the buyer before cancellation of
the contract.
• Consequently, it is only right and just, under the Maceda Law, to allow respondent to
pay her arrears and settle the balance of the purchase price, subject to interests.

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, the 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.

Other Rights of the Defaulting Buyer:

• To assign his right over the property.

Rules when buyer has paid less than two years installments
Where the buyer paid less than two years installments
114. Sps. Ramos vs. Sps. Heruela, supra.

Sale of subdivision lot on installments where the buyer defaulted

115. Active Realty & Development Corp. vs. Daroya, G.R. No. 141205, 09 May 2002
Note:
• The buyer almost completed the payment of the installments, and then she
defaulted. When she offered to pay, it was refused by Active, because after she
defaulted,
• Active sold the property to another buyer at a higher price. So, the court can
no longer order continuation of the payment of the installments, because there’s no
more object of sale.

What was the equitable solution ordered by the court?

• Since Active already sold the property to another, you return to Daroya the
price that you collected from the new buyer.
• Active was ordered to pay P875,000.
• Way lusot si seller.

FACTS:
• Active Realty & Development Corporation entered into a Contract to Sell 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 cancellation 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 for a total of P314,860.76 or P90,835.76 more than the
contract price of P224,035.00

Supreme Court Ruling

• Sec. 3 of the Maceda Law provides 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 x x
(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, the buyer 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.

Summary of cases:
• Gatchalian case – The term (2 years payment or less than 2 years) means the
total number of installments. It’s not 2 years from year 1 to 2 years. (Even the
installments are not paid within 2 years, for as long as 24 months of installments
are paid, that’s equivalent to 2 years of payment). Provided that the agreement is
monthly installment.
• Pagtalunan case – There was merely a demand letter. The court said, it does
not comply with the twin requirement of notarial notice or notarial demand of
rescission. The court allowed the buyer to continue paying the installments from
April 1997, but she defaulted by 1980. The SC said, there was no valid rescission of
the contract, because the seller failure to comply with the twin requirements.
• Ramos vs. Heruela – Payment was less than 2 years here. There was no
notarial notice of rescission (seller’s failure to comply with the twin requirements).
The buyers were allowed to continue paying the installments to the seller.
• Active Realty case – The buyer almost completed the payment of the
installments, and then she defaulted. When she offered to pay, it was refused by
Active, because after she defaulted, Active sold the property to another buyer at a
higher price. Since the court can no longer order continuation of the payment of the
installments, because there’s no more object of sale, the seller was asked to pay the
buyer the amount collected from the resale of the property

f. P.D. No. 957 (Secs. 4, 5, 7, 18, 23, 24, 25)

SALE OF SUBDIVISION LOTS AND CONDOMINIUMS, PROVIDING PENALTIES FOR VIOLATIONS
THEREOF

116. Far Eastern Bank & Trust Co. vs. Marquez, G.R. No. 147964, 20 Jan 2004
Marquez entered into a contract to sell with TSE involving a 52.5 sqm lot and a three storey
townhouse for P800,000. Later respondent was able to pay a total of P600,000.
• TSE then mortgaged the whole property to Far East Bank.
• TSE was unable to pay, and the property was foreclosed and sold in favor of Far East
Bank.

Supreme Court Ruling

• The mortgage contract violated Section 18 of PD.957, hence void insofar as third
persons are concerned.
• Since TSE did not obtain prior approval from the NHA the mortgage is void as regarding
to the property to the respondent as he has no standing to question the validity of the other
property.
• Marquez has a higher right than the new buyer 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 mortgagee to buyer will not lessen the
importance of such knowledge.

117. Tamayo vs. Huang, G.R. No. 164136, 25 Jan 2006

• Respondents Huang, registered owners of four parcels of land located in Barangay
Matina, Davao City executed a contract of "Indenture" with EAP Development Corporation
(EAP) under which EAP undertook to manage and develop said parcels of land into a first
class subdivision and sell the lots therein in, Doña Luisa Village (the subdivision).
• 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 instalents 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?

Supreme Court Ruling

• The petitioner had legal basis to stop payment. 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.
• 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.
• However, 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.

118. Cantemprate vs. CRS Realty Development Corp., G.R. No. 171399, 08 May 2009
The absence of the license to sell became the reason why certificates of title were
not given

• Herein petitioners were among those who filed before the HLURB a complaint 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.

Supreme Court Ruling

• 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 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.
• 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 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.

Summary of cases:
• Far East Bank case – The court did not declare the mortgage as void, because
there was only one complainant. Only that portion (the townhouse), purchased by
Marquez. Not the entire mortgage.
• Tamayo – Failure of owner and developer to provide necessary forms of
development.
• Cantemprate – Failure of the developer to secure a license to sell. The court
said that it will not invalidate the sale, but the officers are subject to civil and
criminal liabilities.

Jurisdiction
119. Geronimo vs. Sps. Calderon, G.R. No. 201781, 10 Dec 2014
120. Moran, Jr. vs. Office of the President of the Phils., G.R. No. 192957, 29 Sep 2014
One-liner statement of the decision of the case: “A decision or order issued by a
department or agency need not be appealed to the Office of the President when there is a
special law that provides for a different mode of appeal.”

FACTS:
On February 2, 2004, the late Emmanuel B. Moran, Jr. filed with the Consumer Arbitration
Office (CAO) a verified complaint against private respondent PGA Cars, Inc. pursuant to the
relevant provisions of Republic Act 7394 (RA 7394), otherwise known as the Consumer Act of
the Philippines. The complaint alleged that the private respondent should be held liable for
the product imperfections of a BMW car which it sold to complainant.

The CAO rendered a Decision in favor of complainant. Consequently, the private respondent
sought reconsideration of the Decision but the CAO denied the motion. Thus, the private
respondent appealed to the Secretary of the Department of Trade and Industry (DTI), the
quasi-judicial agency designated by Article 165 of RA 7394 to entertain appeals from the
adverse decisions and orders of the CAO.

However, the DTI Secretary dismissed the appeal of the private respondent who then filed an
appeal with the herein public respondent, Office of the President (OP).

The OP granted the appeal, reversed the DTI Secretary’s Resolution, and dismissed the
complaint on the ground that the DTI erred in holding the private respondent liable for
product defects. The complainant filed a motion for reconsideration with the OP but it was
denied. So, a petition for certiorari was filed with the Court of Appeals and alleged lack of
jurisdiction on the part of the OP for ruling cases involving a violation of RA 7394.

However, the CA dismissed the petition for certiorari on the ground that it was a wrong mode
of appeal. CA likewise denied the motion for reconsideration filed by the petitioner. Since the
original complainant Emmanuel Moran, Jr. passed away, his widow, Concordia Moran filed the
present petition for review on certiorari.
ISSUE:
Whether or not there is an error of jurisdiction on the part of the Office of the President?

RULING:

Yes, there is an error of jurisdiction on the part of the Office of the President.

The procedure for appeals to the Office of the President is governed by Administrative Order
No. 18, Series of 1987. Section 1 thereof provides:

SECTION 1.  Unless otherwise governed by special laws, an appeal to the Office of the
President shall be taken within thirty (30) days from receipt by the aggrieved party of the
decision/resolution/order complained of or appealed from . . . (Emphasis supplied.)
Furthermore, in the case of Phillips Seafood (Philippines) Corporation vs. The Board of
Investments, the Court held that “a decision or order issued by a department or agency need
not be appealed to the Office of the President when there is a special law that provides for a
different mode of appeal.”

In this case, a special law, RA 7394 expressly provided for immediate judicial relief from
decisions of the DTI Secretary by filing a petition for certiorari with the proper court.

Chapter 2
Capacity to Buy or Sell

Arts. 1489-1492
Capacity in general (Art. 1489)
Special disqualification
Between spouses
121. Uy Siu Pin vs. Cantollas, G.R. No. L-46850, 20 Jun 1940
• A contract was 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.

Supreme Court Ruling

• The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because
the former had no right to dispose of the land in controversy, 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 article 191.
• Rationale behind the prohibition: (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.

122. Ching vs. Goyanko, Jr., G.R. No. 165879, 10 Nov 2006
• 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 respondent’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.

Supreme Court Ruling

• 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.”

By spouse without consent of the other spouse

Persons in trust relations

123. Pelayo vs. Perez, G.R. No. 141323, 08 Jun 2005
Note:
• The principals themselves (the spouses) sold the property to the agent.
Although, the wife trying to assail the sale by claiming that she did not sign the deed of sale,
she only signed as a witness.
• The fact that she signed as witness means that she knew the contract.

Situation: If agents are prohibited from acquiring property from the principal, can real
estate brokers acquire property of a developer or the owner of the property or the seller?
• Yes.

Are they considered as Agents of the sellers?

• No, they are merely intermediaries. They are considered as agents for both
buyer and the seller. The purpose of the broker is to bring the parties together.

David Pelayo, by a Deed of Absolute Sale, conveyed to Melki Perez two parcels of
agricultural land. Loreza, wife of David Pelayo, 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.

Supreme Court Ruling

 The wife, 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 file 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 assertion 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.

124. Philippine Trust Co. vs. Roldan, G.R. No. L-8477, 31 May 1956

To whom did the court appointed guardian to sell the property?

• To the brother-in-law.
• Immediately after the court approved the sale, the brother-in-law sold
the property to the guardian.
Note:
• Even if the court approved the sale, still void. The guardian here sought
permission from the court to sell the property of the ward, to purchase a
residential property for the benefit of the ward.
• The court declared the contract as void.
• Contracts that entered into in violation of the trust are sometimes
declared by the court as voidable. But in the Phil. Trust case they declared it
as void.

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.
Socorro Roldanfiled 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.

Supreme Court Ruling

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 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.

125. Maharlika Publishing Corp. vs. Sps. Tagle, G.R. No. L-65594, 09 Jul 1986
Note:
• Properties sold by GSIS.
• Husband – an employee in GSIS. He knew that he could not acquire the
property. He asked his wife to do the bidding for him.

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, Retirement Division,
GSIS, from 1970 to 1978. He worked for the GSIS since 1952.

Supreme Court Ruling

• 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.

126. De Guerrea vs. Suplico, G.R. No. 144320, 26 Apr 2006

Note:
• Proscriptions against lawyer acquiring property in litigation.
• Estate proceeding.
• The estate was already distributed.
• The last act to be done by the court was to act on a motion to terminate the
proceedings. To declare close the proceedings. But which was not done, that was
the pending incident that properties were already distributed to the heirs.
• Before the case was declared closed, he demanded that the property would be
delivered to him.
• SC’s Ruling: Declared the transaction as null and void.

Adelina Gurrea continued to be the owner of the lot (TCT No. 58253) until her death.
Under her will, the San Juan lot was bequeathed to Pilar and Luis Gurrea, while 700,000
setas, 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.

Supreme Court Ruling

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
127. Heirs of Eduardo Manlapat vs. Court of Appeals, supra.
128. Manzano vs. Ocampo, G.R. No. L-14778, 28 Feb 1961

(gibaligya niya ang iya yyuta na gigrant as patent pero gipakita nga gihimo 5 years
after the prohibition period)

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.

Supreme Court Ruling

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

Effect of forbidden sales

Chapter 3
Effects of the Contract When the Thing Sold has been Lost

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