SALES
 FACTS: Petitioner was the owner of a 8,015 square meter
parcel of land located in Mandaluyong (now a City), Metro Manila.  
Chapter 1
Nature and Form of Contracts
Art. 1458
Art. 1458. By the contract of sale 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.
A contract of sale may be absolute or conditional.
I. Nature and Characteristics
A. Definition
Sale is a contract where one party (seller or vendor) obligates
himself to transfer the ownership of and to deliver a
determinate thing, while the other party (buyer or vendee)
obligates himself to pay for said thing a price certain in money
or its equivalent.
Note that in harmony with Art. 1164, ownership of the thing sold
does not pass to the buyer until delivery. See Arts. 1475, 1477,
1496. Essential requisites are consent, object and price. No
special form is required. (Art. 1483)
a. Cases
1. Effect of offer and counter-offer
Manila Metal Container Corporation vs. PNB, G.R. No. 166862,
December 20, 2006
The property was covered by Transfer Certificate of Title (TCT) No.
332098 of the Registry of Deeds of Rizal. To secure a P900,000.00
loan it had obtained from respondent Philippine National Bank
(PNB), petitioner executed a real estate mortgage over the lot.  
Respondent PNB later granted petitioner a new credit
accommodation of P1,000,000.00; and, petitioner executed an
Amendment of Real Estate Mortgage over its property. The
petitioner was unable to pay its obligation to the said respondent.
In turn, the respondent filed for a petition for extrajudicial
foreclosure of the real estate mortgage and sought to have the
property sold at public auction. The petitioner was given a period
(expiration--Feb. 17, 1984) to redeem the property, but, failed to
do so. It caused the petitioner to ask for a one year extension to
redeem the said property. The respondent referred the matter to
Pasay City Branch for appropriate action and recommendation.
Some PNB Pasay City Branch personnel 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 petitioner’s obligation amounted to P1,574,560.47.
When apprised of the statement of account, petitioner
remitted P725,000.00 to respondent PNB as “deposit to
repurchase,”.
Petitioner declared that it had already agreed to the SAMD’s
offer to purchase the property for P1,574,560.47, and that
was why it had paid P725,000.00.
Respondent PNB informed petitioner that the PNB Board of
Directors had accepted petitioner’s 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, petitioner had no cause of action
for specific performance against respondent.  Both declared that
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respondent had rejected petitioner’s offer to repurchase the
property.  respective undertakings under the contract of sale, culminating
ISSUE: whether or not petitioner and respondent PNB had
entered into a perfected contract for petitioner to repurchase the
property from respondent.
SC RULED that 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.  FACTS: Luna L. Sosa, respondent, wanted to purchase a Toyota
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
sufficient to guarantee consent because any modification or
variation from the terms of the offer annuls the offer.  The
acceptance must be identical in all respects with that of the offer so
as to produce consent or meeting of the minds.
Stages of a contract of sale:
(1) negotiation, covering the period from the time the
prospective contracting parties indicate interest in the contract
to the time the contract is perfected;
(2) perfection, which takes place upon the concurrence of the
essential elements of the sale which are the meeting of the
minds of the parties as to the object of the contract and upon
the price; and
(3) consummation, which begins when the parties perform their
in the extinguishment thereof.
1. Effect of document denominated “Agreement between Mr. Sosa
& Popong Bernardo of Toyota Shaw, Inc.”
Toyota Shaw, Inc. vs. CA, L-11650, May 23, 1995
Lite Ace. He transacted business with Popong Bernardo, sales
representative of Toyota. A Vehicle Sales Proposal (VSP) was
accomplished and Mr. Sosa paid a down payment of P100,000.
On the scheduled date and time for the delivery of the car,
Toyota refused to release the car because the financing
company, B.A. Finance Corporation, refused to finance the
outstanding balance. Mr. Sosa demanded the return of the down
payment, which Toyota honored, without prejudice to future
claim for damages.
ISSUE: Was this document, executed and signed by the petitioner's
sales representative, a perfected contract of sale, binding upon
the petitioner, breach of which would entitle the private
respondent to damages and attorney's fees?
SC RULED that it is not a contract of sale. No obligation on the
part of Toyota to transfer ownership of a determinate thing to Sosa
and no correlative obligation on the part of the latter to pay
therefor a price certain appears therein.
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
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 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.
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.
B. Elements
a. Essential Elements (without which there can be no valid of sale)
1. Consent or meeting of the minds—consent to transfer ownership
in exchange for the price.
2. Determinate subject matter – includes generic objects that are
least determinable
*segregated/separated of the same class
3. Price certain in money or its equivalent
b. Natural Elements (those which are inherent in the contract, and
which in the absence of any contrary provision, are deemed to exist
in the contract)
1. warranty against eviction (deprivation of the property bought)
2. warranty against hidden defects
c. Accidental Elements (those which may be present or absent in the
stipulation, such as the place or time of payment, or the presence of
conditions)
Effects of Presence, absence, incomplete elements
-when all 3 elements are present - Perfected Contract
-if not present, there is no perfected contract
-if all the elements are present but there is a defect/illegal, the
contract is voidable/void
C. Characteristics
a. Consensual—perfected by mere consent.
b. Bilateral (reciprocal)—both parties are bound by obligations
dependent upon each other. The power to rescind is implied, neither
party incurs delay if the party does not comply, from the moment
one of the parties fulfills his obligation, the default by the other
begins w/out need of prior demand.
c. Onerous—valuable consideration must be given in order to acquire
rights.
d. Nominate—the Code refers to it by special designation or name,
that is, the contract of sale.
e. Principal—for the contract of sale to validly exist, there is no
necessity for it to depend upon the existence of another contract.
f. Commutative—the values exchanged are almost equivalent to each
other (general rule). By way of exception, some contracts of sale are
aleatory, that is, one receives may in time be greater or smaller that
what he has given, i.e. sale of genuine sweepstakes ticket.
g. delivery transfers ownership – ownership does not pass until
delivery.
C. Sale vs. Agency to sell (1466)
Art. 1466. 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. (n)
Cases:
1) effect of agreement for exclusive sale of beds where the other
party is entitled to commission, among others
Quiroga vs. Parsons Hardware co.
Facts:
The defendant was granted by the plaintiff of the exclusive right to
sell as an “agent” Quiroga beds in the Visayas at the invoice price in
Manila. The agreement was for the defendant to pay for the beds at
a discount from 20% to 25% as commission on the sales. The
defendant shall pay the plaintiff claims that the defendant is his
“agent” while defendant says he was merely a purchaser.
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Issue:
Is this a contract of sale or agency?
Held:
The Supreme Court declared that the contract by and between the
plaintiff and the defendant was one of purchase and sale, and that
the obligations the breach of which is alleged as a cause of action
are not imposed upon the defendant, either by agreement or by law.
In order to classify a contract, due regard must be given to its
essential clauses. In the contract in question, what was essential, as
constituting its cause and subject matter, is that the plaintiff was to
furnish the defendant with the beds which the latter might order, at
the price stipulated, and that the defendant was to pay the price in
the manner stipulated. There was the obligation on the part of the
plaintiff to supply the beds, and, on the part of the defendant, to
pay their price. These features exclude the legal conception of an
agency or order to sell whereby the mandatory or agent received the
thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it.
Sale vs. Lease of service or contract for a piece of work (1467)
Art. 1467. A contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business manufactures
or procures for the general market, whether the same is on hand at
the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order,
and not for the general market, it is a contract for a piece of work.
(n)
Cases:
1) Nature of transactions of company engaged in the design,
supply and installation of certain type of air conditioning
system.
Commissioner of Internal Revenue v. Engineering Equipment and
Supply Co.
Facts: Engineering Equipment and Supply Co., a domestic
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. Engineering is a contractor this subject
only to the 3% tax imposed on contractors.
• Contract of Sale v. Contract of Services; Test. — The
distinction between a contract of sale and one for work, labor
and materials is tested by the inquiry whether the thing
transferred is one not in existence and which never 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
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 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.
• A taxpayer is required by law to truly declare his importation
in the import entries and internal revenue declarations
before it is released. Thus, by requiring its foreign supplier to
change the nomenclature of air conditioning parts and
accessories, and misdeclaring its importation so as to make
them subject to the lower rate of 7% percentage tax under
Section 186 of the Tax Code, thereby evading the payment of
the 30% tax under Section 185(m) thereof, said taxpayer is
subject to the payment of the 50% fraud surcharge prescribed
by Section 183(a).
c. sales vs. Barter (1468)
Art. 1468. If the consideration of the contract consists partly in
money, and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such
intention does not clearly appear, it shall be considered a barter if
the value of the thing given as a part of the consideration exceeds
the amount of the money or its equivalent; otherwise, it is a sale.
-if the value of the thing is more than the value of the money or its
equivalent, the contract is a barter. If the value of the thing is less
than the value of the money, then the contract is a sale.
d. sale vs. dation in payment
-dation in payment implies that there is an existing obligation
whereas contract of sale, there is no prior obligation.
e. lease of things - in that delivery in this latter contract does not
involve a transfer of ownership
f. donation- in that this latter contract is gratuitous and requires
special formalities
E. Promise to sell: when binding (Art. 1479)
--a “bilateral promise to buy and sell” requires NO
CONSIDERATION distinct from the selling price
--only the “accepted unilateral promise to buy or sell” that
needs consideration distinct from the selling price
a. If bilateral
--a bilateral promise to buy or to sell a certain thing
for a price certain gives to the contracting parties
personal rights in that each has the right to demand
from the other the fulfillment of the obligation.
b. If unilateral
--the acceptance of a unilateral promise to sell must be plain, clear
and unconditional. Therefore, if there is qualified acceptance with
terms different from the offer there is no acceptance, that there is
no promise to buy and there is no perfected sale.
Cases:
1. Option defined
Eulogio vs. Apeles, G.R. No. 167884, January 20, 2009
Contract of Lease with an Option
An option is a contract by which the owner of the property
agrees with another person that the latter shall have the right to buy
the former’s property at a fixed price within a certain time. It is a
condition offered or contract by which the owner stipulates with
another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with
certain terms and conditions; or which gives to the owner of the
property the right to sell or demand a sale.
An option is not of itself a purchase, but merely secures the privilege
to buy. It is not a sale of property but a sale of the right to purchase.
It is simply a contract by which the owner of the property agrees
with another person that he shall have the right to buy his property
at a fixed price within a certain time. He does not sell his land; he
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does not then agree to sell it; but he does sell something, i.e., the
right or privilege to buy at the election or option of the other party.
Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the
consideration for the offer.
"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.
ii) Remedy of optionee
-Specific performance.
2. Right of First Refusal
-Right on the part of the owner that if he decides to sell the
property in the future, he would first negotiate its sale to the one he
promised.
Ang Yu Asuncion vs. CA
Facts:
On July 29, 1987 a Second Amended Complaint for Specific
Performance was filed by Ann Yu Asuncion and Keh Tiong, et al.,
against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the
Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058,
alleging, among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants described as
Nos. 630-638 Ongpin Street, Binondo, Manila; that they have
occupied said spaces since 1935 and have been religiously paying the
rental and complying 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; that plaintiffs
thereafter asked the defendants to put their offer in writing to
which request defendants acceded; that in reply to defendant's
letter, plaintiffs wrote them on October 24, 1986 asking that they
specify the terms and conditions of the offer to sell; that when
plaintiffs did not receive any reply, they sent another letter dated
January 28, 1987 with the same request; that since defendants failed
to specify the terms and conditions of the offer to sell and because
of information received that defendants were about to sell the
property, plaintiffs were compelled to file the complaint to compel
defendants to sell the property to them.
"After the issues were joined, defendants filed a motion for summary
judgment which was granted by the lower court. The trial court
found that defendants' offer to sell was never accepted by the
plaintiffs for the reason that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no
contract of sale at all. Nonetheless, the lower court ruled that
should the defendants subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will have the right of first
refusal.
Issue:
Whether or not there is perfected 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. Neither can the right of first refusal, understood in its normal
concept, per sebe brought within the purview of an option under the
second paragraph of Article 1479, aforequoted, or possibly of an
offer under Article 1319 9 of the same Code. An option or an offer
would require, among other things, 10 a clear certainty on both the
object and the cause or consideration of the envisioned contract. In
a right of first refusal, while the object might be made determinate,
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
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inconclusive) but by, among other laws of general application, the when there is no The full payment
pertinent scattered provisions of the Civil Code on human conduct. stipulation in the of the purchase
Even on the premise that such right of first refusal has been decreed contract that title to price partakes of a
under a final judgment, like here, its breach cannot justify the property remains s u s p e n s i v e
correspondingly an issuance of a writ of execution under a judgment with the seller until condition, and
that merely recognizes its existence, nor would it sanction an action full payment of the non-fulfillment of
for specific performance without thereby negating the indispensable purchase price the condition
element of consensuality in the perfection of contracts. 11 It is not prevents the
to say, however, that the right of first refusal would be obligation to sell
inconsequential for, such as already intimated above, an unjustified from arising.
disregard thereof, given, for instance, the circumstances expressed
in Article 19 12 of the Civil Code, can warrant a recovery for if there is no
damages. stipulation giving the
vendor the right to
Note: right of first refusal cannot be deemed a perfected sale cancel unilaterally
because it merely pertains to a specific property w/out containing the contract the
an agreement as to the price. moment the vendee
E. The Contract of Sale may be- fails to pay within a
fixed period
a. Absolute; or
Ramos vs. Heruela, G.R. No. 145330, Oct. 14, 2005
Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005
Facts: It is settled that a perfected contract of sale cannot be
Absolute Sale Conditional Sale challenged on the ground of the non-transfer of ownership of the
when title to the Ownership remains property sold at that time of the perfection of the contract, since it
property passes to with the vendor is consummated upon delivery of the property to the vendee.  It is
the vendee upon and does not pass through tradition or delivery that the buyer acquires ownership of
delivery of the thing to the vendee the property sold.  As provided in Article 1458 of the New Civil
sold until full payment Code, when the sale is made through a public instrument, the
of the purchase execution thereof is equivalent to the delivery of the thing which is
price. 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

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property, the respondents had been in actual possession of the Risk of loss is generally Risk of loss is generally
property and had designated Barte as their overseer. borne by the buyer borne by the seller
Although denominated a “Deed of Conditional Sale,” a sale is still
absolute where the contract is devoid of any proviso that title is Transfer of ownership
reserved or the right to unilaterally rescind is stipulated, e.g., until Absolute – upon delivery
or unless the price is paid.  Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g. by the execution of Conditional – ownership is reserved by the owner.
a public document) of the property sold.  Where the condition is d. Cases—Contract to sell vs. Contract of Sale
imposed upon the perfection of the contract itself, the failure of the
condition would prevent such perfection.  If the condition is imposed
on the obligation of a party which is not fulfilled, the other party Contract to Sell Contract of Sale
may either waive the condition or refuse to proceed with the sale. 
(Art. 1545, Civil Code) The payment in full of The non-payment of the
A deed of sale is considered absolute in nature where there is the price is a positive price is a RESOLUTORY
neither a stipulation in the deed that title to the property sold is suspensive condition. condition, i.e. the
reserved in the seller until full payment of the price, nor one giving Hence, if the price is not contract of sale may by
the vendor the right to unilaterally resolve the contract the moment paid, it is as if the such occurrence put an
the buyer fails to pay within a fixed period. obligation of the seller end to a transaction that
to deliver and to once upon a time existed
b. Conditional, which may in turn be— transfer ownership never
1. An executed contract, or – which property (ownership) in the became effective and
thing is transferred from seller to buyer, and nonpayment of the binding.
price is a negative resolutory condition.
Ownership is retained by Title over the property
2. An executory contract- ownership does not pass until some future the seller, regardless of generally passes to the
time delivery and is not pass buyer upon delivery
-the fulfillment of some condition, such as full payment of until fill payment of the
the purchase price. price
c. Distinctions Since the seller retains After delivery has been
ownership, despite made, the seller has lost
Executed Contract Executory Contract delivery, he is enforcing ownership and cannot
not rescinding the recover it unless the
Property ownership is No property is conveyed contract if he seeks to contract is resolved or
conveyed oust the buyer for rescinded
If buyer defaults, seller If buyer defaults, seller failure to pay.
may sue for the price is only entitled to
damages Contract to sell – a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property

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despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon
payment of full purchase price.
Contract of Sale- no reservation of ownership where the owner can
unilaterally rescind the contract if one of the party fails to fulfill its
duty.
1. Interpretation of document denominated “Agreement of
Purchase and Sale”
Ong vs. CA, G.R. No. 97347, July6, 1999
It is in the nature of a contract to sell.
In a contract of sale, the title to the property passes to the
vendee upon the delivery of the thing sold; while in a contract to
sell, ownership is, by agreement, reserved in the vendor and is not
to pass to the vendee until full payment of the purchase price. In
a contract to sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or
serious, but a situation that prevents the obligation of the vendor
to convey title from acquiring an obligatory force.
Spouses Robles, respondents in the case at bar bound
themselves to deliver a deed of absolute sale and clean title
covering the two parcels of land upon full payment by the buyer of
the purchase price of P2,000,000.00. This promise to sell was
subject to the fulfillment of the suspensive condition of full
payment of the purchase price by the petitioner. Petitioner,
however, failed to complete payment of the purchase price. The
non-fulfillment of the condition of full payment rendered the
contract to sell ineffective and without force and effect. It must
be stressed that the breach contemplated in Article 1191 of the
New Civil Code is the obligor's failure to comply with an obligation.
Failure to pay, in this instance, is not even a breach but merely an
event which prevents the vendor's obligation to convey title from
acquiring binding force. Hence, the agreement of the parties in the
case at bench may be set aside, but not because of a breach on the
part of petitioner for failure to complete payment of the purchase
price. Rather, his failure to do so brought about a situation which
prevented the obligation of respondent spouses to convey title
from acquiring an obligatory force.
2. Interpretation of document denominated “Receipt of Partial
Payment”
Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996
FACTS: Defendants Coronels issued a document, receipt of down
payment, in favor of Ramona. In the said document, it was
stipulated that the Coronels, upon receipt of the down payment in
the amount of 50k (1.24M total price) for their inherited house and
lot, bind themselves to the effect that they will transfer, from
their father, the transfer certificate title to their names. After the
TCT is under their name, they will execute immediately a deed of
absolute sale in favor of Ramona and she will pay the balance of
1.19M. The mother of Ramona, Concepcion, paid the 50k as down
payment. Thereafter, the Coronels transferred the said property in
their names.
Coronels sold the property to Catalina for the amount of 1.58M
after the latter paid a down payment of 300k. For this reason,
Coronels canceled and rescinded the contract with Ramona by
depositing the down payment paid by Concepcion in the bank in
trust for Ramona Patricia Alcaraz.
Concepcion et al. filed a case against specific performance. A
notice of lis pendens was annotated at the back of the title. An
adverse claim by Catalina was also annotated. The Coronels
executed a deed of absolute sale in favor of Catalina. Thus, a new
title was issued in the name of Catalina.
Both trial court and CA ruled in favor of Concepcion. It ordered the
specific performance of the agreement.
ISSUE: legal determination of the document, Receipt of
Downpayment
SC RULED that when the "Receipt of Down Payment" is considered in
its entirety, it becomes more manifest that there was a clear intent
on the part of petitioners to transfer title to the buyer, but since the
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transfer certificate of title was still in the name of petitioner's
father, they could not fully effect such transfer although the buyer
was then willing and able to immediately pay the purchase price.
This is a contract OF sale, SC affirmed the decision of CA.
In a contract of sale, the title passes to the vendee upon the delivery
of the thing sold; whereas in a contract to sell, ownership is not
transferred upon delivery of the property but upon full payment of
the purchase price. In the former, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or
rescinded; whereas in the latter, title is retained by the vendor until
the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from
becoming effective.
H. Contract to sell vs. Conditional sale
Conditional Sale – upon happening of the condition, title is
transferred. Seller cannot sell to another person.
Compared to Contract to sell
-ownership is transferred upon creation of necessary documents.
Coronel vs CA
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it
is conditioned upon the happening of a contingent event which may
or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite
and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]).
However, if the suspensive condition is fulfilled, the contract of sale
is thereby perfected, such that if there had already been previous
delivery of the property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
Nabus vs. Pacson
Facts:
The spouses Bate and Julie Nabus were the owners of parcels of land
with a total area of 1,665 square meters, situated in Pico, La
Trinidad, Benguet, duly registered in their names under TCT No.
T-9697 of the Register of Deeds of the Province of Benguet. The
property was mortgaged by the Spouses Nabus to the Philippine
National Bank (PNB), La Trinidad Branch, to secure a loan in the
amount of P30,000.00.
On February 19, 1977, the Spouses Nabus executed a Deed of
Conditional Sale 4 covering 1,000 square meters of the 1,665 square
meters of land in favor of respondents Spouses Pacson for a
consideration of P170,000.00, which was duly notarized on February
21, 1977. Their contract had the following condition:
THAT, as soon as the full consideration of this sale has been paid by
the VENDEE, the corresponding transfer documents shall be executed
by the VENDOR to the VENDEE for the portion sold;
THAT, it is mutually understood that in as much as there is a claim by
other persons of the entire property of which the portion subject of
this Instrument is only a part, and that this claim is now the subject
of a civil case now pending before Branch III of the Court of First
Instance of Baguio and Benguet, should the VENDOR herein be
defeated in the said civil action to the end that he is divested of
title over the area subject of this Instrument, then he hereby
warrants that he shall return any and all monies paid by the VENDEE
herein whether paid to the PNB, La Trinidad, Benguet Branch, or
directly received by herein VENDOR, all such monies to be returned
upon demand by the VENDEE;
THAT, [a] portion of the parcel of land subject of this instrument is
presently in the possession of Mr. Marcos Tacloy, and the VENDOR
agrees to cooperate and assist in any manner possible in the ouster
of said Mr. Marcos Tacloy from said possession and occupation to the
end that the VENDEE herein shall make use of said portion as soon as
is practicable;
Thereafter, respondents took possession of the subject property.
They constructed an 80 by 32-feet building and a steel-matting fence
around the property to house their truck body-building shop which
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they called the "Emiliano Trucking Body Builder and Auto Repair
Shop."
On December 24, 1977, before the payment of the balance of the
mortgage amount with PNB, Bate Nabus died. On August 17, 1978,
his surviving spouse, Julie Nabus, and their minor daughter, Michelle
Nabus, executed a Deed of Extra Judicial Settlement over the
registered land covered by TCT No. 9697. On the basis of the said
document, TCT No. T-17718 8 was issued on February 17, 1984 in the
names of Julie Nabus and Michelle Nabus.
During the last week of January 1984, Julie Nabus, accompanied by
her second husband, approached Joaquin Pacson to ask for the full
payment of the lot. Joaquin Pacson agreed to pay, but told her to
return after four days as his daughter, Catalina Pacson, would have
to go over the numerous receipts to determine the balance to be
paid. When Julie Nabus returned after four days, Joaquin sent her
and his daughter, Catalina, to Atty. Elizabeth Rillera for the
execution of the deed of absolute sale. Since Julie was a widow with
a minor daughter, Atty. Rillera required Julie Nabus to return in four
days with the necessary documents, such as the deed of extrajudicial
settlement, the transfer certificate of title in the names of Julie
Nabus and minor Michelle Nabus, and the guardianship papers of
Michelle. However, Julie Nabus did not return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of
the Province of Benguet and asked for a copy of the title of the land.
She found that it was still in the name of Julie and Michelle Nabus
After a week, Catalina Pacson heard a rumor that the lot was already
sold to petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went
to the Register of Deeds of the Province of Benguet, and found that
Julie Nabus and her minor daughter, Michelle Nabus, represented by
the former's mother as appointed guardian by a court order dated
October 29, 1982, had executed a Deed of Absolute Sale in favor of
Betty Tolero on March 5, 1984.
Issue:
2)Whether the Deed of Conditional Sale was a contract to sell or a
contract of sale.
Held:
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it
is conditioned upon the happening of a contingent event which may
or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated. However, if
the suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery of
the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not
automatically transfer to the buyer although the property may have
been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of
absolute sale.
It is not the title of the contract, but its express terms or
stipulations that determine the kind of contract entered into by the
parties. In this case, the contract entitled "Deed of Conditional Sale"
is actually a contract to sell. The contract stipulated that "as soon as
the full consideration of the sale has been paid by the vendee, the
corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold." 41 Where the vendor promises to
execute a deed of absolute sale upon the completion by the vendee
of the payment of the price, the contract is only a contract to sell."
42 The aforecited stipulation shows that the vendors reserved title
to the subject property until full payment of the purchase price.
As vendees given possession of the subject property, the ownership
of which was still with the vendors, the Pacsons should have
protected their interest and inquired from Julie Nabus why she did
not return and then followed through with full payment of the
purchase price and the execution of the deed of absolute sale. The
Spouses Pacson had the legal remedy of consigning their payment to
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the court; however, they did not do so. A rumor that the property
had been sold to Betty Tolero prompted them to check the veracity
of the sale with the Register of Deeds of the Province of Benguet.
They found out that on March 5, 1984, Julie Nabus sold the same
property to Betty Tolero through a Deed of Absolute Sale, and new
transfer certificates of title to the property were issued to Tolero.
Unfortunately for the Spouses Pacson, since the Deed of Conditional
Sale executed in their favor was merely a contract to sell, the
obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. 43 The full payment of the
purchase price is the positive suspensive condition, the failure of
which is not a breach of contract, but simply an event that
prevented the obligation of the vendor to convey title from acquiring
binding force. 44 Thus, for its non-fulfilment, there is no contract to
speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. 45 With this
circumstance, there can be no rescission or fulfilment of an
obligation that is still non-existent, the suspensive condition not
having occurred as yet.
Arts. 1459-1465
Art. 1459. The thing must be licit and the vendor must have a right
to transfer the ownership thereof at the time it is delivered. (n)
Art. 1460. A thing is determinate when it is particularly designated or
physical segregated from all other of the same class.
The requisite that a thing be determinate is satisfied if at the time
the contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further agreement
between the parties. (n)
Art. 1461. Things having a potential existence may be the object of
the contract of sale.
The efficacy of the sale of a mere hope or expectancy is deemed
subject to the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void. (n)
Art. 1462. The goods which form the subject of a contract of sale
may be either existing goods, owned or possessed by the seller, or
goods to be manufactured, raised, or acquired by the seller after the
perfection of the contract of sale, in this Title called "future goods."
There may be a contract of sale of goods, whose acquisition by the
seller depends upon a contingency which may or may not happen. (n)
Art. 1463. The sole owner of a thing may sell an undivided interest
therein. (n)
Art. 1464. In the case of fungible goods, there may be a sale of an
undivided share of a specific mass, though the seller purports to sell
and the buyer to buy a definite number, weight or measure of the
goods in the mass, and though the number, weight or measure of the
goods in the mass is undetermined. By such a sale the buyer becomes
owner in common of such a share of the mass as the number, weight
or measure bought bears to the number, weight or measure of the
mass. If the mass contains less than the number, weight or measure
bought, the buyer becomes the owner of the whole mass and the
seller is bound to make good the deficiency from goods of the same
kind and quality, unless a contrary intent appears. (n)
Art. 1465. Things subject to a resolutory condition may be the object
of the contract of sale. (n)
Arts. 1459-1465
I. OBJECT
• Licit – not contrary to law, morals, good customs, public order
or public policy, within the commerce of man; if illicit, contract is
void
• All rights which are not intransmissible or personal may also
be the object of sale (i.e. right of usufruct)
• Services cannot be the object of a contract of sale
Test of Determinability
a. Capacity to Segregate
b. No further agreement
A. Qualities – The object must be:
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a. Lawful (1459)
Art. 1459. The thing must be licit and the vendor must have a right
to transfer the ownership thereof at the time it is delivered. (n)
• Object must be licit
• Vendor must have the right to transfer ownership at the time
the object is delivered
Unlawful object:
i. Future inheritance
ii. Homestead (sale within 5 year prohibitory period)
Manalapat v. CA
Facts: In 1976, a free patent was issued in Manlapat’s name. In 1954,
before the subject lot was titled, he sold a portion to Ricardo
evidenced by a deed of sale. He conveyed another portion to Ricardo
in 1981. Leon Banaag (son-in-law of Manlapat) executed a mortgaged
with the subject lot as the collateral. Heirs of Ricardo sought to
obtain the title from petitioners which was in the custody of RBSP,
earlier surrendered as a consequence of the mortgage.
SC: Five-year prohibition against alienation or encumbrances under
the Public Land Act. Eduardo was issued a title in 1976 on the basis
of his free patent application. Such application implies the
recognition of the public dominion character of the land and, hence,
the 5-year prohibition imposed by the PLA against alienation or
encumbrance of the land covered by a free patent or homestead
should have been considered.
• The deed of sale which was executed in 1981 is obviously
covered by the proscription, the free patent having been issued in
1976. However, petitioners may recover the portion sold since the
prohibition was imposed in favor of the free patent holder.
• The sale executed 1954 was before the issuance of the patent
in 1976. Apparently, Eduardo disposed of the portion even before he
thought of applying for a free patent. Where the sale or transfer
took place before the filing of the free patent application, whether
by the vendor or the vendee, the prohibition should not be applied.
In such a situation, neither the prohibition nor the rationale
therefore which is to keep in the family of the patentee that portion
of the public land which the government has gratuitously given him,
by shielding him from the temptation to dispose of his landholding,
could be relevant. Precisely, he had disposed of his rights to the lot
even before the government could give the title to him.
• 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.
b. determinate or Determinable
- undivided interest can be subject to sale. The buyer will become a
co-owner.
a. before partition
b. in a mass of fungible goods.
Cases:
1) sale by co-heir of undivided portion of estate
Vagilidad v. Vagilidad
Facts:
4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died.
Subsequently son of Zolio, Loreto 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
which he later sold to Wilfredo Vagilidad. Likewise, a Deed of
Absolute Sale was also made by Loreto in favor of Wilfredo for the
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same portion of lot. Wlfredo mortgaged this property to obtain a
loan. Gabino and his wife filed petition for reconveyance.
• The requisite that a thing be determinate is satisfied if at the
time the contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further agreement
between the parties. Art. 1349 states that the object of every
contract must be determinate, as to its kind. The fact that the
quantity is not determinate shall not be an obstacle to the existence
of the contract, provided it is possible to determine the same,
without the need of a new contract between the parties. Art. 1460
defines that a thing is determinate when it is particularly designated
or physically segregated from all others of the same class. The
property sold by Loreto to Gabino was determinable.
• A co-owner has full ownership of his pro-indiviso share and
has the right to alienate, assign or mortgage it, and substitute
another person for its enjoyment. The subject parcel, being an
inherited property, is subject to the rules of co-ownership under the
Civil Code. Co-ownership is the right of common dominion which two
or more persons have in a spiritual part of a thing, not materially or
physically divided. Before the partition of the property held in
common, no individual or co-owner can claim title to any definite
portion thereof. All that the co-owner has is an ideal or abstract
quota or proportionate share in the entire property. LORETO sold the
subject property to GABINO as a co-owner. LORETO had a right, even
before the partition to transfer in whole or in part his undivided
interest in the lot even without the consent of his co-heirs. This right
is absolute. Thus, what GABINO obtained by virtue of the sale on
were the same rights as the vendor LORETO had as co-owner, in an
ideal share equivalent to the consideration given under their
transaction. Consequently, when LORETO purportedly sold to
WILFREDO the same portion of the lot, he was no longer the owner
said lot. Based on the principle that "no one can give what he does
not have," LORETO could not have validly sold to WILFREDO what he
no longer had.
2) Effect of agreement where the exact number of palay to be
sold was not fixed.
National Grains Authority v. IAC
Facts: Leon Soriano submitted the documents required by the NFA
for pre-qualifying as a seller. These were processed and he was given
a quota of 2,640 cavans of palay. On August 1979, Soriano delivered
630 cavans of palay. The palay delivered were not rebagged,
classified and weighed. When Soriano demanded payment, he was
informed that it was held in abeyance since Mr. Cabal was still
investigating on an information that Soriano was not a bona fide
farmer and the palay delivered was not produced from his farmland
but was taken from the warehouse of a rice trader, Ben de Guzman.
Petitioner wrote Soriano advising him to withdraw the 630 cavans.
Instead of withdrawing, Soriano insisted that the palay grains
delivered be paid. NFA was ordered to pay Soriano.
• Present case involves a perfected contract of sale. Soriano
initially offered to sell palay grains produced in his farmland to NFA.
When the latter accepted the offer by noting in Soriano’s Farmer’s
Information Sheet a quota of 2,640 cavans, there was already a
meeting of the minds between the parties. The object of the
contract, being the palay grains produced in Soriano’s farmland and
the NFA was to pay the same depending upon its quality. The
contention that – since the delivery were not rebagged, classified
and weighed in accordance with the palay procurement program of
NFA, there was no acceptance of the offer thus – this is a clear case
of an unaccepted offer to sell, is untenable.
• Quantity being indeterminate does not affect perfection of
contract; No need to create new contract. The fact that the exact
number of cavans of palay to be delivered has not been determined
does not affect the perfection of the contract. In the present case,
there was no need for NFA and Soriano to enter into a new contract
to determine the exact number of cavans of palay to be sold. Soriano
can deliver so much of his produce as long as it does not exceed
2,640 cavans. (It did not need a new contract to make 630 cavans a
determinate thing).
• Sale a consensual contract; Acceptance is on the offer and
not the goods delivered. Sale is a consensual contract, “there is
perfection when there is consent upon the subject matter and price,
even if neither is delivered.” (Obana vs. C.A., L-36249, March 29,
1985, 135 SCRA 557, 560). The acceptance referred to which
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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. 
 damages) of the deeds of sale executed by Lazaro in favor of private
From the moment the contract of sale is perfected, it is incumbent
upon the parties to comply with their mutual obligations or “the
parties may reciprocally demand performance” thereof. (Article
1475, Civil Code, 2nd par.)
c. Existing, Future, or contingent (1462)
Case:
1) Sale of Future Inheritance
Tanedo vs Ca
Facts:
On October 20, 1962, Lazaro Tañedo executed a notarized deed of
absolute sale in favor of his eldest brother, Ricardo Tañedo, and the
latter’s wife, Teresita Barera, private respondents herein, whereby
he conveyed to the latter in consideration of P1,500.00, “one
hectare of whatever share I shall have over Lot No. 191 of the
cadastral survey of Gerona, Province of Tarlac and covered by Title T-
l3829 of the Register of Deeds of Tarlac,” the said property being his
“future inheritance” from his parents (Exh. 1). Upon the death of his
father Matias, Lazaro executed an “Affidavit of Conformity” dated
February 28, 1980 (Exh. 3) to “re-affirm, respect. acknowledge and
validate the sale I made in 1962.” On January 13, 1981, Lazaro
executed another notarized deed of sale in favor of private
respondents covering his “undivided ONE TWELVE (1/12) of a parcel
of land known as Lot 191 x x (Exh. 4). He acknowledged therein his
receipt of P 10,000.00 as consideration therefor. In February 1981,
Ricardo learned that Lazaro sold the same property to his children,
petitioners herein, through a deed of sale dated December 29, 1980
(Exh. E). On June 7, 1982, private respondents recorded the Deed of
Sale (Exh. 4) in their favor in the Registry of Deeds and the
corresponding entry was made in Transfer Certificate of Title No.
166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus
respondents covering the property inherited by Lazaro from his
father.
Issue:
Is a sale of future inheritance valid?
Held:
“(n)o contract may be entered into upon a future inheritance except
in cases expressly authorized by law.”
Consequently, said contract made in 1962 is not valid and cannot be
the source of any right nor the creator of any obligation between the
parties.
Hence, the “affidavit of conformity” dated February 28, 1980,
insofar as it sought to validate or ratify the 1962 sale, is also useless
and, in the words of the respondent Court, “suffers from the same
infirmity.” Even private respondents in their memorandum concede
this.
d. Transferability of Ownership
Ownership
1. It need not exist at the perfection of the contract. Required
at the time of delivery
2. Subsequent acquisition of title by a vendor w/out title
validates the sale
3. Acquisition of title by the vendee may depend upon a
contingency (right of redemption)
• The seller must have the right to transfer the ownership of the
thing or right sold to the buyer at the time of delivery and not at the
time of the making of the contract.
• Nemo dat quod non habet, as an ancient Latin maxim says. One
cannot give what does not have.
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Note: When ownership is required –At the time of sale but ownership
may not be w/ the seller in case of future things.
Cases:
1. Sale by mortgagee of land not proper subject of mortgage
Cavite Development Bank v. Lim, 324 scra 346
Facts: Rodolfo Guansing obtained a fraudulent title by executing an
Extra-Judicial Settlement of the Estate With Waiver where he made
it appear that he and Perfecto Guansing were the only surviving heirs
entitled to the property, and that Perfecto had waived all his rights
thereto. Consequently he acquired title and used this to acquire a
loan. CDB foreclosed the mortgage and granted him the period of
redemption, which he did not exercise.
• It is not required that, at the perfection stage, the seller be
the owner of the thing sold or even that such subject matter of the
sale exists at that point in time. Thus, under Art. 1434 of the Civil
Code, when a person sells or alienates a thing which, at that time,
was not his, but later acquires title thereto, such title passes by
operation of law to the buyer or grantee. This is the same principle
behind the sale of "future goods" under Art. 1462 of the Civil Code.
However, under Art. 1459, at the time of delivery or consummation
stage of the sale, it is required that the seller be the owner of the
thing sold. Otherwise, he will not be able to comply with his
obligation to transfer ownership to the buyer. It is the consummation
stage where the principle of nemo dat quod non habet applies. In
this case, the sale by CDB to Lim of the property mortgaged in 1983
by Rodolgo Guansing must, therefore, be deemed a nullity for CDB
did not have a valid title to the said property. To be sure, CDB never
acquired a valid title to the property because the foreclosure sale,
by virtue of which the property had awarded to CDB as highest
bidder, is likewise void since the mortgagor was not the owner of the
property foreclosed.
• CDB cannot be considered a mortgagee in good faith. While
petitioners are not expected to conduct an exhaustive investigation
on the history of the mortgagor's title, CDB cannot be excused from
the duty of exercising the due diligence required of banking
institutions in ascertaining the validity of the title.
• That after the payment of the 10% “option money”, the Offer
to Purchase provides for the payment only of the balance of the
purchase price, implying that the "option money" forms part of the
purchase price. This is precisely the result of paying earnest money
under Art. 1482 of the Civil Code. It is clear then that the parties in
this case actually entered into a contract of sale, partially
consummated as to the payment of the price.
2. Conveyance of privilege to purchase land before it is awarded to
the tenant or occupant.
Hermosilla v. Remoquillo
Facts: Apolinario Hermosilla was occupying a lot in San Pedro
Tunasan Homesite, a land of the Republic. He divided the lot into 2.
The 1st portion was given to his son Salvador and the
other(questioned lot) to his grandson Jaime Remoquillo through a
Deed of Assignment. A law was passed prohibiting the transfer of
ownership of the said lot. Salvador and Jaime after made a
Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar
(Kasunduan) whereby Jaime transferred ownership of the 65 square
meters (the questioned property) in favor of Salvador. NHA awarded
Jaime title. Salvador and his heirs questioned the title stating they
have their house and in actual possession of the questioned lot.
• When the Kasunduan was executed in 1972 by Jaime in favor
of Salvador — petitioners' predecessor-in-interest — Lot 19, of which
the questioned property forms part, was still owned by the Republic.
Nemo dat quod non habet. Nobody can give what he does not
possess. Jaime could not thus have transferred anything to Salvador
via the Kasunduan.
• The transfer became one in violation of law and therefore
void ab initio. Hence, petitioners acquired no right over the lot from
a Void Kasunduan, for no rights are created. It is generally
considered that as between the parties to a contract, validity cannot
be given to it by estoppel if it is prohibited by law or is against
public policy.
• Since the property was previously a public land, petitioners
have no personality to impute violation of the law. If the title was in
fact fraudulently obtained, it is the State which should file the suit
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to recover the property through the Office of the Solicitor General.
Consequently, Jaime’s ownership was valid not being contrary to any
law and since there was no pending other application yet. That at
the time he applied for title, he was recogned as the actual
applicant / occupant.
Heirs of Arturo Reyes v. Beltran G.R. No. 176474
Facts: A big parcel of lot was originally owned by Spouses Laquian.
When the Spouses died, the property was left with the wife’s
siblings. Through an "Extrajudicial Settlement of the Estate of the
Deceased Constancia R. Socco (wife)," the parcel of land was
partitioned into 3 lots. Before the partition, Miguel Socco, 1 of the
heirs sold his share to Arturo Reyes as evidenced by the Contract to
Sell stating that he is to inherit a particular portion. But upon
partition, the said portion sold was adjudicated to respondent, Elena
Socco – Beltran, and not to Miguel Socco.
SC: Article 1459 of the Civil Code on contracts of sale, “The thing
must be licit and the vendor must have a right to transfer ownership
thereof at the time it is delivered.” The law specifically requires
that the vendor must have ownership of the property at the time it is
delivered. Petitioners claim that the property was constructively
delivered to them in 1954 by virtue of the Contract to Sell.
However, as already pointed out by this Court, it was explicit in the
Contract itself that, at the time it was executed, Miguel R. Socco
was not yet the owner of the property and was only expecting to
inherit it. Hence, there was no valid sale from which ownership of
the subject property could have transferred from Miguel Socco to
Arturo Reyes. Without acquiring ownership of the subject property,
Arturo Reyes also could not have conveyed the same to his heirs,
herein petitioners.
The law specifically requires that the vendor must have ownership of
the property at the time it is delivered. Petitioners cannot derive
title to the subject property by virtue of the Contract to Sell. It was
stated in the Contract that the vendor was not yet the owner of the
subject property and was merely expecting to inherit the same. It
was also declared that conveyance of the subject to the buyer was a
conditional sale. It is, therefore, apparent that the sale of the
subject property in favor of Arturo Reyes was conditioned upon the
event that Miguel Socco would actually inherit and become the
owner of the said property. Absent such occurrence, Miguel R. Socco
never acquired ownership of the subject property which he could
validly transfer to Arturo Reyes. Without acquiring ownership of the
subject property, Arturo Reyes also could not have conveyed the
same to his heirs, herein petitioners.
-assignment was done prior to the application.
ARTICLES 1469-1474
Art. 1469. In order that the price may be considered certain, it shall
be sufficient that it be so with reference to another thing certain, or
that the determination thereof be left to the judgment of a special
person or persons.
Should such person or persons be unable or unwilling to fix it, the
contract shall be inefficacious, unless the parties subsequently agree
upon the price.
If the third person or persons acted in bad faith or by mistake, the
courts may fix the price.
Where such third person or persons are prevented from fixing the
price or terms by fault of the seller or the buyer, the party not in
fault may have such remedies against the party in fault as are
allowed the seller or the buyer, as the case may be. (1447a)
Art. 1470. Gross inadequacy of price does not affect a contract of
sale, except as it may indicate a defect in the consent, or that the
parties really intended a donation or some other act or contract. (n)
Art. 1471. If the price is simulated, the sale is void, but the act may
be shown to have been in reality a donation, or some other act or
contract. (n)
Art. 1472. The price of securities, grain, liquids, and other things
shall also be considered certain, when the price fixed is that which
the thing sold would have on a definite day, or in a particular
exchange or market, or when an amount is fixed above or below the
price on such day, or in such exchange or market, provided said
amount be certain. (1448)
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Art. 1473. The fixing of the price can never be left to the discretion
of one of the contracting parties. However, if the price fixed by one
of the parties is accepted by the other, the sale is perfected. (1449a)
Art. 1474. Where the price cannot be determined in accordance with
the preceding articles, or in any other manner, the contract is
inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a question of fact
dependent on the circumstances of each particular case. (n)
I. Price – sum certain in money or its equivalent.
Case: General principles in the agreement as to price
Boston Bank of the Philippines v. Manalo, G. R. No. 158149,
February 9, 2006
FACTS:Boston Bank, now petitioner, filed the instant petition for
review on certiorari assailing the CA rulings. It maintains that, as
held by the CA, the records do not reflect any schedule of payment
of the 80% balance of the purchase price, or P278,448.00. Petitioner
insists that unless the parties had agreed on the manner of payment
of the principal amount, including the other terms and conditions of
the contract, there would be no existing contract of sale or contract
to sell.47
WON: Petitioner, as seller, forged a perfect contract to sell over a
real property to respondents, as buyer.
HELD: We agree with petitioner’s contention that, for a perfected
contract of sale or contract to sell to exist in law, there must be an
agreement of the parties, not only on the price of the property sold,
but also on the manner the price is to be paid by the vendee.
A definite agreement as to the price is an essential element of a
binding agreement to sell personal or real property because it
seriously affects the rights and obligations of the parties. Price is an
essential element in the formation of a binding and enforceable
contract of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price fixed by one of
the contracting parties, if accepted by the other, gives rise to a
perfected sale.57
It is not enough for the parties to agree on the price of the property.
The parties must also agree on the manner of payment of the price
of the property to give rise to a binding and enforceable contract of
sale or contract to sell. This is so because the agreement as to the
manner of payment goes into the price, such that a disagreement on
the manner of payment is tantamount to a failure to agree on the
price.58
In a contract to sell property by installments, it is not enough that
the parties agree on the price as well as the amount of
downpayment. The parties must, likewise, agree on the manner of
payment of the balance of the purchase price and on the other terms
and conditions relative to the sale. Even if the buyer makes a
downpayment or portion thereof, such payment cannot be
considered as sufficient proof of the perfection of any purchase and
sale between the parties.
We agree with the contention of the petitioner that, as held by the
CA, there is no showing, in the records, of the schedule of payment
of the balance of the purchase price on the property amounting to
P278,448.00
A. Requisites:
1. The price must be real (1471)
Art. 1471. If the price is simulated, the sale is void, but the act may
be shown to have been in reality a donation, or some other act or
contract.
-price is real- when at the perfection of the sale, there is legal
intention on the part of the buyer to pay the price and the legal
expectation on the part of the seller to receive such price as the
value of the subject matter he obligates himself to deliver.
-price is false- the contract is valid but subject to reformation to
indicate the real price upon which the minds of the parties have
met.
a.) Effect if price is simulated- produces no effect.
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Cruzado v. Bustos, G. R. No. 10244, February 29, 1916s
FACTS:Counsel for the plaintiff Santiago Cruzado filed a written
complaint on October 8, 1910, amended on September 25, 1913, in
which he alleged that plaintiff was the owner of certain rural
property situated in the barrio of Dolores, formerly San Isidro, of the
municipality of Bacolor, Pampanga, containing an area of 65 balitas
and bounded as set forth in the complaint; that Estafania Bustos,
during her lifetime, and now the administrator of her estate,
together with the other defendant, Manuel Escaler, had, since the
year 1906 up to the present, been detaining the said parcel of land,
and had refused to deliver the possession thereof to plaintiff and to
recognize his ownership of the same, notwithstanding the repeated
demands made upon them; that by such detention, the plaintiff had
suffered losses and damages to the amount of P3,500. He therefore
asked for judgment declaring plaintiff to be the owner of the said
parcel of land and ordering defendants to return it to plaintiff and to
pay the latter P3,500 for losses and damages, and the costs.
WON: The deed of sale of 65 balitas of land situated in the
municipality of Bacolor, Pampanga, executed by Estefania Bustos,
with the assistance of her husband Bernardino Dizon, in favor of
Agapito Geronimo Cruzado, for the sum of P2,200, was simulated.
HELD: The simulation of the said sale was effected by making a
pretended contract which bore the appearance of truth, when really
and truly there was no contract, because the contracting parties did
not in fact intend to execute one, but only to formulate a sale in
such a manner that, for the particular purposes sought by Bustos and
Cruzado, it would appear to have been celebrated solely that
Cruzado might hold his office of procurador on the strength of the
security afforded by the value of the land feignedly sold.
This action is of course improper, not only because the sale was
simulated, but also because it was not consummated. The price of
the land was not paid nor did the vendee take possession of the
property from the 7th of September, 1875, when the said sale was
feigned, until the time of his death; nor did any of his successors,
nor the plaintiff himself until the date of his claim, enter into
possession of the land.
That the contract of purchase and sale, as consensual, is perfected
by consent as to the price and the thing and is consummated by the
reciprocal delivery of the one and the other, the full ownership of
the thing sold being conveyed to the vendee, from which moment
the rights of action derived from this right may be exercised.
It is, then, of the utmost importance to examine whether in the said
sale the purchase price was paid and whether the vendee took
possession of the land supposed to have been sold.
b.) Effect if there is no consideration – null and void (non-
existence of the contract).
Doles v. Angeles, G. R. No. 149353, June 26, 2006
FACTS:On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed
with the RTC a complaint for Specific Performance with Damages
against Jocelyn B. Doles (petitioner), docketed as Civil Case No.
97-82716. Respondent alleged that petitioner was indebted to the
former in the concept of a personal loan amounting to P405,430.00
representing the principal amount and interest; that on October 5,
1996, by virtue of a "Deed of Absolute Sale", petitioner, as seller,
ceded to respondent, as buyer, a parcel of land, as well as the
improvements thereon, with an area of 42 square meters, covered by
Transfer Certificate of Title No. 382532,4 and located at a
subdivision project known as Camella Townhomes Sorrente in Bacoor,
Cavite, in order to satisfy her personal loan with respondent; that
this property was mortgaged to National Home Mortgage Finance
Corporation (NHMFC) to secure petitioner’s loan in the sum of
P337,050.00 with that entity.
WON: The contract of sale on the parcel of land was executed for a
cause.
HELD: Since the sale is predicated on that loan, then the sale is void
for lack of consideration.
In view of these anomalies, the Court cannot entertain the possibility
that respondent agreed to assume the balance of the mortgage loan
which petitioner allegedly owed to the NHMFC, especially since the
record is bereft of any factual finding that petitioner was, in the first
place, endowed with any ownership rights to validly mortgage and
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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.
b. In money or its equivalent (1458)
Torres vs CA
Facts:
Petitioners and respondent entered into a joint venture agreement
for the development of a parcel land located at Lapu-Lapu City
island of Mactan into a subdivision. Pursuant to the contract,
petitioners executed a deed of sale covering the said parcel of land
in favor of the respondent, who then had it registered in his name.
Thereafter, respondent mortgaged the property in the bank, and
according to the joint agreement, the money obtained amounting to
P40,000.00 was to be used for the development of the subdivision.
However, the project did not push through, and the land was
subsequently foreclosed by the bank. Because of this, petitioners
filed a civil case before the Regional Trial Court of Cebu City, which
was later dismissed by the trial court. On appeal, the Court of
Appeals affirmed the decision of the trial court. The appellate court
held that the petitioner and respondent had formed a partnership for
the development of the subdivision. Thus, they must bear the loss
suffered by the partnership in the same proportion as their share in
the profits stipulated in the contract. Aggrieved by the decision,
petitioner filed the instant petition contending that the Court of
Appeals erred in concluding that the transaction between the
petitioners and respondent was that of a joint venture/partnership.
SC: The Joint Venture Agreement clearly states that the
consideration for the sale was the expectation of profits from the
subdivision project. Its first stipulation states that petitioners did not
actually receive payment for the parcel of land sold to respondent.
Consideration, more properly denominated as cause, can take
different forms, such as the prestation or promise of a thing or
service by another. In this case, the cause of the contract of sale
consisted not in the stated peso value of the land, but in the
expectation of profits from the subdivision project, for which the
land was intended to be used. As explained by the trial court, "the
land was in effect given to the partnership as [petitioner's]
participation therein. . . . There was therefore a consideration for
the sale, the [petitioners] acting in the expectation that, should the
venture come into fruition, they [would] get sixty percent of the net
profits."
-expectations of profits from the subdivision projects is a valid form
of consideration.
-it is sufficient if it can be determined by the stipulations of the
contract made by the parties thereto/ by reference to an agreement
incorporated in the contract.
3. Certain or ascertainable (determinable)
a.) How determined
i. By a third person (1469, pars. 1, 2, 4)
aa) If the third person is unable or unwilling to fix the price,
the contract is inefficacious unless the parties come to an agreement
Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913
(***CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE
RELATED TO SALES NOT CLEARLY ESTABLISHED IN THE CASE……)
FACTS: The La Insular cigar and cigarette factory is a joint account
association with a nominal capital of P865,000, the plaintiff’s share
being P20,000, or 4/173 of the whole. On March 14, 1910, the
plaintiff’s attorneys wrote the defendant’s local representative a
letter offering to sell to the defendant plaintiff’s participation in the
factory. The result of the correspondence between the parties and
their representatives was that Exhibit G was duly executed on May 3,
1910. In accordance with the terms of this exhibit a committee of
appraisers was appointed to ascertain and fix the actual value of La
Insular. The committee rendered its report on November 14, 1910,
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fixing the net value at P4,428,194.44. Of this amount 4/173 part
represented the plaintiffs’s share on his P20,000 of the nominal
capital. In Exhibit J which was executed on November 22, 1910, the
plaintiff acknowledged to have received from the defendant that
amount.
Subsequently to the execution of Exhibit J, demand was made by the
plaintiff upon the defendant for his share of the profits from June
30, 1909, to November 22, 1910. This demand was refused and
thereupon this action was instituted to recover said profits. Upon the
evidence submitted at the hearing, the court below held: (1) That
the agreement of May 3, 1910, was by its terms a contract to sell in
the future and did not pass title and (2) that the sale of plaintiff’s
interest did not include the profits in question. Judgment was
rendered accordingly, with interest and cost. The defendant
appealed.
SC: It was the appraisers who were appointed to ascertain and fix
the total net value of the factory for the purpose of determining the
true present value of the interest.
- The appraiser was the one who determined the total net value of
the shares of the company and thereafter that of Bareto’s share.
ii. By the Courts (1469, par. 3) if there is bad faith or mistake of
the third party fixing the price
iii) By reference to a definite day, a particular exchange or
market (1472)
iv) By reference to invoices
McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904
FACTS:For the purpose of carrying into effect the said contract of
sale entered into with the other party hereto, said Francisco
Gonzalez y de la Fuente and Don Antonio la Puente y Arce, in the
name and on behalf of the mercantile partnership denominated R.
Aenlle & Co., by virtue of the powers conferred upon them and in
compliance with the instructions given them by Don Matias Saenz de
Vizmanos y Lecaros, the manager of the said partnership, solemnly
declare that they sell, absolutely and in fee simple, to E. C.
McCullough, the tobacco and cigarette factory known as "La Maria
Cristina," located at No. 36 Calle Echague, Plaza de Goiti, Santa Cruz
district, this city, said sale including the trade-mark "La Maria
Cristina," which was been duly registered, the stock of tobacco in
leaf and manufacture, machinery, labels, wrappers, furniture,
fixtures, and everything else belonging to the said factory, as shown
in the inventory to be drawn up for the purpose of making formal
delivery of the said property.
This sum is subject to modification, in accordance with the result
shown by the inventory to be drawn up. In this inventory the value of
each individual piece of furniture will be fixed at 10 per cent below
the price shown in the partnership inventory. The machinery and cost
of installing the same will also be fixed at 10 per cent below its
invoice price. The value of the tobacco, both in leaf and in process
of manufacture, boxes, labels, wrappers, cigars, cigarettes, and
paper mouthpieces for cigarettes will be fixed at the invoice price.
The value of tobacco made up into cigars will be fixed in accordance
with the price list of the partnership, less 20 per cent discount. The
cigars will be inventoried at the prices in the same list, less a
discount of 35 per cent. The P20,000 mentioned as the value of the
trade-mark will, however, remain unchanged.
In December, 1901, the plaintiff, with others, organized a
company, to which the plaintiff sold all the tobacco bought by him
from the defendant. The purchaser, the new company, on examining
these two lots, rejected them because the tobacco was not of the
quality indicated in the inventory. Thereupon the plaintiff, claiming
that the tobacco in these two lots was worthless, brought this action
against the defendant to recover what he paid.
WON: There was a perfected contract of sale entered into by the
parties on August 27,1901.
HELD: The document of August 27 was a completed contract of sale.
The articles which were the subject of the sale were definitely and
finally agreed upon. The appellee agreed to buy, among other things,
all of the leaf tobacco in the factory. This was sufficient description
of the thing sold. The price for each article was fixed. It is true that
the price of this tobacco, for example, was not stated in dollars and
cents in the contract. But by its terms the appellee agreed to pay
therefor the amount named in the invoices then in existence. The
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price could be made certain by a mere reference to those invoices.
By the instrument of August 27 the contract was perfected and
thereafter each party could compel the other to fulfill it. By its
terms the appellee was bound to take all the leaf tobacco then
belonging to the factory and to pay therefor the prices named in the
invoices. This obligation was absolute and did not depend at all upon
the quality of the tobacco or its value. The appellee did not, in this
contract, reserve the right to reject the tobacco if it were not of a
specific crop. He did not buy tobacco of a particular kind, class, or
quality. He bought all the tobacco which the appellant owned and
agreed to pay for it what the defendant had paid for it. The plaintiff
testified that this was the express agreement.
v) By reference to the application of known factors, e.g. “in
proportion to variations in calories and ash content of coal”2.)
Effect of indeterminability –contract is inefficacious
Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927
(Sale of Improvements introduced in Hacienda)
FACTS:This action was instituted in the Court of First Instance of
Occidental Negros by Zacarias Robles against Lizarraga Hermanos, a
mercantile partnership organized under the laws of the Philippine
Islands, for the purpose of recovering compensation for
improvements made by the plaintiff upon the hacienda "Nahalinan"
and the value of implements and farming equipment supplied to the
hacienda by the plaintiff, as well as damages for breach of contract.
Upon hearing the cause the trial court gave judgment for the
plaintiff to recover of the defendant the sum of P14,194.42, with
costs. From this judgment the defendant appealed.
WON: The petitioner is allowed to recover the value of the
improvements.
HELD: In the case before us the deed of conveyance purports to
transfer to the defendant only such interests in certain properties as
had come to the conveyors by inheritance. Nothing is said concerning
the rights in the hacienda which the plaintiff had acquired by lease
or concerning the things that he had placed thereon by way of
improvement or had acquired by purchase. The verbal contract
which the plaintiff has established in this case is therefore clearly
independent of the main contract of conveyance, and evidence of
such verbal contract is admissible under the doctrine above stated.
The rule that a preliminary or contemporaneous oral agreement is
not admissible to vary a written contract appears to have more
particular reference to the obligation expressed in the written
agreement, and the rule had never been interpreted as being
applicable to matters of consideration or inducement. In the case
before us the written contract is complete in itself; the oral
agreement is also complete in itself, and it is a collateral to the
written contract, notwithstanding the fact that it deals with related
matters.
A contract for the sale of goods, chattels or things in action, at a
price of not less than P100, shall be unenforceable unless the
contract, or some note or memorandum thereof shall be in writing
and subscribed by the party charged, or by his agent; and it is
insisted that the court erred in admitting proof of a verbal contract
over the objection of the defendant's attorney. But it will be noted
that the same subsection contains a qualification, which is stated in
these words, "unless the buyer accept and receive part of such goods
and chattels." In the case before us the trial court found that the
personal property, consisting of farming implements and other
movables placed on the farm by the plaintiff, have been utilized by
the defendant in the cultivation of the hacienda, and that the
defendant is benefiting by those things.
We are of the opinion that the stipulation with respect to the
appraisal of the property did not create a suspensive condition. The
true sense of the contract evidently was that the defendant would
take over the movables and the 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, it must
occur to any one, as the trial judge pointed out, that an unjust
enrichment of the defendant would result from allowing it to
appropriate the movables without compensating the plaintiff
thereof.
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The fourth assignment of error is concerned with the improvements.
Attention is here directed to the fact that the improvements placed
on the hacienda by the plaintiff became a part of the realty and as
such passed to the defendant by virtue of the transfer effected by
the three owner in the deed of conveyance (Exhibit B.). It is
therefore insisted that, the defendant having thus acquired the
improvements, the plaintiff should not be permitted to recover their
value again from the defendant. This criticism misses the point.
There can be no doubt that the defendant acquired the fixed
improvements when it acquired the land, but the question is
whether the defendant is obligated to indemnify the plaintiff for his
outlay in making the improvements. It was upon the consideration of
the defendant's promise so to indemnify the plaintiff that the latter
agreed to surrender the lease nearly two no doubt as to the validity
of the promise made under these circumstances to the plaintiff.
3) Effect of inadequacy of price (1470) does not affect the
contract, but may show vice of consent (1470). Refer to
inadequacy of cause in general, Art. 1355.
Art. 1470. Gross inadequacy of price does not affect a contract of
sale, except as it may indicate a defect in the consent, or that the
parties really intended a donation or some other act or contract.
-it does not affect the contract but may show vice of consent.
-the offended party may invoke Art. 19 of the NCC ( Abuse of Right
Principle)
Askay v. Cosolan
Facts: Askay obtained a title to the Mineral Claim which he allegedly
sold to Cosalan. It was alleged that there is inadequacy of the
consideration for transfer which, according to the deed of
conveyance, and to the oral testimony, consisted of P107.00 in cash,
a bill fold, one sheet, one cow and two carabaos.
Issue: WON the sale is valid.
Held: YES
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.
Aguilar v. Rubiato
Facts: 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.
Issue :Whether the contract was of sale or loan.
Held: 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.
4) Effect of Failure of Consideration
Sps. Buenaventura v. CA
Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of
petitioners. Petitioners assail the sale of several lands by their
parents to their other siblings (see p. 265 for complete list of sales
made) for being void ab initio based on the ff grounds:
1. no actual valid consideration
2. properties are more than 3x more valuable than the measly
purchase price (purchase price was grossly inadequate)
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3. deeds of sale do not reflect & express the true intent of the
parties
4. deliberate conspiracy designed to unjustly deprive the rest of the
compulsory heirs of their legitime.
Defense of the respondents:
1. no cause of action, requisite standing & interest
2. sales were w/sufficient considerations & made by their parents
voluntarily in good faith & w/full knowledge of the consequences
3. certificates of title were issued w/factual & legal basis.
Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled
in favor of the respondents & dismissed the complaint.
1. The right of the compulsory heirs to a legitime is contingent & it
only commences from the moment of the death of the decedent (CC
Art. 777). The value of the property left at the death of the testator
is the basis for determining the legitime (Art. 908). Plaintiffs cannot
claim an impairment of their legitime since their parents are still
alive.
2. Deeds of Sale were executed for valuable consideration.
CA affirmed Trial Court decision. In addition to the grounds stated by
the trial court, CA also mentioned that:
1. While still alive, parents are free to dispose of their properties
provided such is not done in fraud of creditors.
2. Petitioners are not parties in interest since they’re not parties to
the deeds of sale nor are they creditors of their parents.
Issues :
1.WON petitioners have a legal interest over the properties subject
of the Deeds of Sale. – NO.
The complaint betrays their motive for filing the case. They are
interested in obtaining the properties by hereditary succession but
they have failed to show any legal right to these properties.
Real party-in-interest is one who is either benefited or injured by the
judgment of the party entitled to the avails of the suit. This includes
parties to the agreement or are bound either principally/subsidiarily.
Parties must have a present substantial interest & not merely
expectancy/future contingent subordinate or consequential interest.
In this case, the petitioners only have an inchoate rt w/c vests only
upon the death of their parents. Besides, sale of the lots to their
siblings does not affect the value of their parents’ estate since the
lots are replaced with cash of equivalent value.
2. WON the deeds of sale are void for lack of consideration. – NO.
A contract of sale is not a real contract but a consensual contract.
It’s binding & valid upon the meeting of the minds as to the price
regardless of the manner of payment or breach of such. It’s still valid
even if the real price is not stated in the contract, making it subject
to reformation. But if the price is simulated, there is no meeting of
the minds, thus the contract is void (CC Art. 1471).
Act of payment of the price does not determine the validity of a
contract of sale. Failure to pay the consideration is different from
lack of consideration. The former results in a rt to demand
fulfillment or cancellation of the contract while the latter prevents
the existence of a valid contract.
Petitioners failed to show that the prices in the deeds of sale were
simulated. They don’t even know the financial capacity of their
siblings to buy these lots. Respondents’ minds met as to the purchase
price w/c was stated in the deeds of sale & the buyer siblings have
paid the price to their parents.
3. WON the Deeds of Sale are void for gross inadequacy of the price.
– NO.
CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY
OF CAUSE shall not invalidate a contract, unless there has been
fraud, mistake or undue influence.
CC Art. 1470: Gross inadequacy of price doesn’t affect a contract of
sale, except as may indicate a defect in the consent or that the
parties really intended a donation or some other act or contract.
Petitioners failed to prove any instance in the aforementioned
provisions that would invalidate the deeds of sale. There is no
requirement that the price be equal to the exact value of the
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property on sale. It only matters that all respondents believed that
they received the commutative value of what they gave.
Vales vs. Villa: Courts cannot be guardians of people who are not
legally incompetent. Courts operate not because a person has been
defeated/overcome by another, but because he has been defeated or
overcome ILEGALLY. There should be a violation of the law,
commission of what the law knows as an actionable wrong, before
the courts are authorized to lay hold of the situation & remedy it.
Note: Failure of consideration is different from the lack of
consideration, the former results in a right to demand the
fulfillment/ cancellation of the obligation under the existing valid
contract. This is different from lack of consideration w/c prevents
the existence of a valid contract.
B. Effect of earnest money (1482)
Art. 1482. Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the
perfection of the contract
a. It is considered part of the price, unless the contract is otherwise
b. It is proof of perfection of the contract
Earnest money- it is something of value that the buyer was really in
earnest and given after the perfection of the contract.
-part of the purchase price.
Option money- distinct consideration.
Oesmer v. Paraiso Devt Corp
Facts: Petitioners in this case are brothers and sisters and the co-
owners of undivided shared is parcels of land originally owned by
their parents. One the petitioners, Ernesto, met with the President
of Paraiso for purpose of brokering the sale of petitioners’ properties
to respondent corp. A contract to sell was the executed, signed by
the siblings except Adolfo and Jesus. An amount of P100,000 was also
given as option money. Later however, petitioners informed PAraiso
of their intention to rescind the Contract to sell and to return the
amount of P100,000 paid by the corporation. Their contention was
that the contract to sell was void because the signatures made by
the siblings were not for consent to sell the property, assuming the
signatures indicate consent, the contract was subject to a suspensive
condition which is the approval of the sale by all the co-owners
which did not occur because two of the siblings did not approve of
the sale; lastly, that it is void for it is a unilateral promise to sell
without consideration distinct from price.
Held: As to the last contention, the court ruled that the contract to
sell is not a unilateral promise to sell:
In the instant case, the consideration of P100,000.00 paid by
respondent to petitioners was referred to as "option money."
However, a careful examination of the words used in the contract
indicates that the money is not option money but earnest money.
"Earnest money" and "option money" are not the same but
distinguished thus: (a) earnest money is part of the purchase price,
while option money is the money given as a distinct consideration for
an option contract; (b) earnest money is given only where there is
already a sale, while option money applies to a sale not yet
perfected; and, (c) when earnest money is given, the buyer is bound
to pay the balance, while when the would-be buyer gives option
money, he is not required to buy, but may even forfeit it depending
on the terms of the option.20
The sum of P100,000.00 was part of the purchase price. Although the
same was denominated as "option money," it is actually in the nature
of earnest money or down payment when considered with the other
terms of the contract. Doubtless, the agreement is not a mere
unilateral promise to sell, but, indeed, it is a Contract to Sell as both
the trial court and the appellate court declared in their Decisions.
Manila Metal Container Corporation v. PNB
Facts: Petitioner was the owner of a parcel of land and to be able to
secure a loan from PNB, petitioner executed a real party mortgage
over the land. For its failure to pay, PNB foreclose the mortgaged
and sold at public auction for which PNB was the winning bidder,
with a one year period of redemption by the petitioner. Petitioner
requested that there be an extension of time to redeem the property
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and it allowed to repurchase the property on installment.
Meanwhile,the Special Assets Management Department had prepared
a statement of accountof the petitioner’s obligation to which
amounted to 1.5M. petitioner thereafter remitted thte amount of
800,000 as deposit to repurchase the property. When SAMD
recommended to the management of the PNB that petitioner be
allowed to repurchase the property at 1.5M, the management
rejected and suggested that the property be purchased at 2.7M
which was later reduced to 1.9M. But petitioner refused.
Petitioner now filed a case for delivery of title, annulment of
mortgage and specific performance with damages. It was its
contention that it already accepted the offer of SAMD to sell the
property at 1.5M, hence, PNB could no longer unilaterally withdraw
its offer to sell the property. Its acceptance of the offer resulted in a
perfected contract of sale.
Respondent contended that the parties never graduated for the
negotiation stage – all that transpires was an exchange of proposal
and counter-proposals and nothing more. There was still no
agreement as to the amount and the manner of payment. The
account made by SAMD cannot be classified as counter-offer because
it was merely recital of facts of the obligations of petitioners.
Issue: WON the P800,000 deposited is an earnest money.
Held -NO
The P800,000 could not be considered as an earnest money because
an earnest money forms part of the purchase price. In this case, it
did not. The P800,000 was merely a deposit that was accepted by
PNB on the condition that the purchase price is subject to the
approval of the PNB Board.
Note: absence of proof of the concurrence of all the essential
elements of a contract of sale, the giving of earnest money cannot
establish the existence of a perfected contract of sale.
Serrano v Caguiat G.R. No. 139173
Facts: Caguiat offered to buy the lot owned by spouses Serrano.
Respondent gave P100K as partial payment, in turn, petitioners gave
a receipt with a statement that respondent promised to pay the
balance of the purchase price. Respondents were leaving for abroad
and sought to cancel the transaction. Petitioners contend that there
is no perfected contract as there was no clear agreement between
the parties as to the amount of consideration.
SC: In holding that there is a perfected contract of sale, both courts
mainly relied on the earnest money given by respondent to
petitioners (Art. 1482). We are not convinced.
It is true that Article 1482 of the Civil Code provides that “Whenever
earnest money is given in a contract of sale, it shall be considered as
part of the price and proof of the perfection of the contract.”
However, this article speaks of earnest money given in a contract of
sale. In this case, the earnest money was given in a contract to sell.
The earnest money forms part of the consideration only if the sale is
consummated upon full payment of the purchase price. Now, since
the earnest money was given in a contract to sell, Article 1482,
which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the
balance by respondent) did not take place. Clearly, respondent
cannot compel petitioners to transfer ownership of the property to
him.
ARTICLES 1475-1488
I. RULES IN ORDINARY SALES
A. Form
a. General Rule (1483)
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. (n)
-written agreement is not essential
-sale is consensual contract
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 1. Verbal agreement of sale
Caoili v. CA
FACTS: Caoili was a lessee in the property of respondent.
Respondent borrowed money from Caoili in the amount of Php 30,000
which they stipulated would form part of their rentals. When rentals
was paid off, they entered into a “not formal or written contract” on
the sale of the property. They executed a "Receipt" denominated as
an "Addendum to Agreement dated August 8, 1990". It was stated
they received from petitioners the sum of P140,000.00, in addition
to the partial payment of P60,000.00, the "balance payable when the
good title in the name of herein vendor is delivered to the spouses."
Yet respondent refused to execute document. Respondent says that
the Php 140,000 was for improvements and the Php 60,000 served as
rental on the period they haven’t paying their rentals (amounts were
claimed as partial payments by Caoili. RTC and CA both decided in
favor of Caoili yet CA reduced the amount awarded.
Held:
• 1. (Not made in writing) The absence of a formal deed of sale
does not render the agreement null and void or without any effect.
The provision of Article 1358 of the Civil Code on the necessity of a
public document is only for convenience, not for validity or
enforceability. It does not mean that no contract has been perfected
so long as the essential requisites of consent of the contracting
parties, object, and cause of the obligation concur. Under the
agreement, private respondent was obligated to deliver a good title
to petitioners and this condition is the operative act which would
give rise to the corresponding obligation of petitioners to pay the
balance of the purchase price. Since it is not disputed that private
respondent has not delivered a good title, petitioners have by law
the right to either refuse to proceed with the agreement or to waive
that condition pursuant to Article 1545 of the Civil Code.
• 2. The Addendum being notarized is a prima facie evidence of
the facts stated therein.
2. Effect of lack of technical description in the contract
Naranja v. CA
Facts: 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. 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.
Issue:
W/N the sale was valid.
Held:
• To be valid, a contract of sale need not contain a technical
description of the subject property. Contracts of sale of real
property have no prescribed form for their validity; they follow the
general rule on contracts that they may be entered into in whatever
form, provided all the essential requisites for their validity are
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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.
b) Statute of Frauds applied
Statute of Frauds applies only in cases for
a) Specific performance, and
b) For damages based on breach of contract
Where the contract of sale has already been consummated, its
enforcement cannot be barred by the Statute of Frauds, which
applies on executory agreement .
c)When form is essential
1)Under the Statute of Frauds
• Realty- a sale of real property orally is valid. The buyer may
compel the seller to execute a formal deed of sale to be
enforceable.
• Goods and chattels at a price of not less than P 500.
2) Sale of land through an Agent (1874) – authority shall be in
writing.
B. Perfection of a contract of sale (Art. 1475)
- At the moment there is a meeting of the minds (consensual)
- The parties may reciprocally demand performance, subject to the
provisions of law governing the form of contracts
Requirements for perfection:
a. When parties are face to face – when an offer is accepted
without conditions nor qualifications
b. Thru correspondence or telegram – when the offeror has
knowledge of the acceptance
c. When sale is subject to a suspensive condition – from the
moment the condition is fulfilled
• Mere perfection of the contract does not necessarily transfer
ownership.
Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577,
October 7, 1996
FACTS: The Coronels sold their inherited house and lot to Ramona
Patricia Alcaraz, with the conditions that they will effect the
transfer of the title from their deceased father to their names upon
receipt of the down payment, and after the transfer they will
execute a Deed of Sale in favor of Alcaraz. The conditions were
embodied in a document labeled “Receipt of Down Payment.”
Alcaraz paid, and the title was transferred in the Coronels’ name.
However, the Coronels sold the property to Catalina Mabanag,
rescinded the contract with Alcaraz, and eventually executed a
Deed of Sale in favor of Mabanag. In the complaint for specific
performance filed against them, the Coronels contended that theirs
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was merely an executory contract to sell, hence there was no 2) Sale by description and/or sample (1481): The bulk of the
perfected contract of sale. goods must correspond to either or both.
HELD: The parties had agreed to a conditional contract of sale, b. Place of Perfection
consummation of which is subject only to the successful transfer of 1) where there was meeting of the minds
the certificate of title from the name of the petitioner’s father to
their names. 2) in case of acceptance through letter or telegram, in the place
where the offer was made.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioner’s names was fulfilled C. Expenses
on February 6, 1985, the respective obligations of the parties under a. Of Execution and Registration of the sale (1487) are borne by the
the contract of sale became mutually demandable. Seller
Note: even if document was denominated “ Receipt of down b. Of putting the goods in a deliverable state (1521, last par.)
payment” from that moment on, there was a perfected contract of are also borne by the Seller.
sale albeit conditional (i.e. transfer of title to heirs and payment of
balance of purchase price) II Rules on Special Sales
A.Sales at Auction
Manila Mining Corporation (MMC) vs. Miguel Tan G.R. No. 171702, a. Rules
February 12, 2009 a. Sales of separate lots are separate contracts of sale
FACTS: MMC ordered and received various electrical materials from b. When perfected – when the auctioneer announces its
Miguel Tan, and upon failure to pay the full amount despite several perfection by the fall of the hammer, or in other customary
demands, Tan filed a collection suit. MMC contended that the manner
absence of stamp marks on the original invoices and purchase
c. Before the fall of the hammer
orders negated the receipt of said documents by MMC’s
representatives, a requisite for payment. Having not received them • The bidder may retract his bid
thereby having no consent, their contract could not have been • The auctioneer may withdraw the goods from the sale
perfected.
EXCEPTION: If the auction has been announced to be without
HELD: The purchase orders constituted accepted offers when Tan reserve
supplied the electrical materials to MMC. Hence, petitioner cannot
evade its obligation to pay by claiming lack of consent to the d. Limitations of the seller:
perfected contracts of sale. The invoices furnished the details of 1. The seller himself cannot bid
the transactions.
2. He cannot employ or induce any person to bid on his
Note: the purchase orders constituted accepted offers when Tan behalf
supplied electrical materials to MMC.
EXCEPTION: If right to bid has been expressly reserved
1) The buyer has the right to a reasonable opportunity for
examination before acceptance (1584) except when a carrier e. Limitations of the auctioneer (if he is not the seller);
delivers “C.O.D.” 1. The auctioneer cannot bid

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 2. He cannot employ or induce to bid on behalf of the
seller
3. He cannot knowingly take any bid from the seller or
any person employed by him.
Cases:
The sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer or in other customary manner
(Case: Dizon vs. Dizon – Considering that the auction sale has been
perfected, a supplemental sale with higher consideration at the
instance of only one party(herein petitioner) could no longer be
validly executed)
- Before the hammer falls:
o 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
o The auctioneer may also withdraw the goods from the sale EXCEPT
if the auction has been announced to be WITHOUT RESERVE.
2) Auction Sale where the seller reserved the right to reject any and
all the bids
Case: Leoquinco vs. Postal Savings Bank
- Because of the expressed stipulation that PSB reserved to
themselves the right to reject any and all bids, the bid of petitioner
may be rejected. Petitioner’s participation in the auction means
submission or being bounded to the rules of auction whether the
purchaser knew the rules or not
- Limitations of the seller:
o The seller himself cannot bid
o 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”)
o 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)
o The auctioneer cannot bid
o He cannot employ or induce to bid on behalf of the seller
o 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 prescribed the manner, condition and terms of sale and
where these are reasonable and are made known to the buyer, they
are binding upon them.
Q: Why can’t the seller participate in the bidding?
A: He cannot bid because in doing such he can manipulate the
biddings of other participants
Note: it is the seller who will set the terms and condition of the sale.
If the seller will bid in the auction without reserving such right and
informing the public, the sales will be considered as fraudulent.
Q: Will such fraud affect the perfection of the contract?
A: Yes, the contract will be VOID with NO force and effect
B.Sales by sample and/ or description (1481)
Sales by Sample and/or Description (1481)
a. The bulk of the goods must correspond to either or both
b. The buyer must have an opportunity to compare
c. Effect: the contract may be rescinded at the option of the
buyer
PACIFIC COMMERCIAL COMPAN vs. ERMITA MARKET & COLD STORES,
INC.
Plaintiff contracted to sell to defendant an automatic refrigerating
machine as per description stated in the sales contract. The machine
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was delivered and by mutual agreement the vendor installed the
machine. The machine did not give the results expected from it, and
the defendant refused to pay the balance of its purchase price and
the cost of the installation of the machine. Thereupon plaintiff
brought this action.
Held: The fact that the defendant could not use the machine
satisfactorily in the three cold stores divisions cannot be attributed
to plaintiff's fault; the machine was strictly in accordance with the
written contract between the parties, and the defendant can hardly
honestly say that there was any deception by the plaintiff.
Sale of Personalty payable by Installments (Recto Law)
a. Alternative remedies in case of non-payment (1484)
1) To exact fulfillment of the obligation
2) Cancel the sale should the vendee fail to pay two or
more installments
i) This is an exception to 1191
3) Foreclose the chattel mortgage (if one was
constituted) should the vendee fail to pay two or more
installments. But there may be no further action to
recover the unpaid balance. A contrary stipulation is
void.
Cases:
1) Promissory note with chattel mortgage
MACONDRAY V DE SANTOS
Granting that there was a contract between the parties for the sale
of personal property payable in installments, which does not clearly
appear in the record before this court, the complaint does not allege
nor does it appear in the record that there was a failure to pay
twoor more installments. On the contrary the promissory note,
copied in the complaint, was executed January 11, 1934, and,
according to the complaint, on or about January 21, 1934,the
automobile, while in the possession of the defendant, was wrecked
and by reason of the failure of the defendant to replace said
automobile or to pay the value thereof the plaintiff foreclosed the
mortgage on what remained of the wrecked automobile and brought
this suit to recover the balance due on the promissory note executed
in its favor.
In order to apply the provisions of article 1454-A of the Civil Code it
must appear that there was a contract for the sale of personal
property payable in installments and that there has been a failure to
pay two or more installments.
2) Sale of car on straight term
LEVY HERMANOS V GERVACIO
In Macondray & Co. vs. De Santos (33 OG 2170), it was held that “in
order to apply the provisions of article 1454-A of the Civil Code it
must appear that there was a contract for the sale of personal
property payable in installments and that there has been a failure to
pay two or more installments.” The contract, in the present case,
while a sale of personal property, is not, however, one on
installments, but on straight term, in which the balance, after
payment of the initial sum, should be paid in its totality at the time
specified in the promissory note.
The transaction is not, therefore, the one contemplated in Act 4122
and accordingly the mortgagee is not bound by the prohibition
therein contained as to its right to the recovery of the unpaid
balance.
Theoretically, there is no difference between paying the price in two
installments and paying the same partly in cash and partly in one
installment, in so far as the size of each partial payment is
concerned; but in actual practice the difference exists, for,
according to the regular course of business, in contracts providing
for payment of the price in two installments, there is generally a
provision for initial payment.
A cash payment cannot be considered as a payment by installment,
and even if it can be so considered, still the law does not apply, for
it requires non-payment of two or more installments in order that its
provisions may be invoked. In the present case, only one installment
was unpaid.
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 3) Sale of Truck on installment where foreclosure was not
pursued
SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL
FAJARDO vs. ASIAN CONSUMER AND INDUSTRIAL FINANCE
CORPORATION and the HONORABLE COURT OF APPEALS,
Facts:
On 22 September 1982, the spouses Romulo de la Cruz and Delia de
la Cruz, and one Daniel Fajardo, petitioners herein, purchased on
installment basis one (1) unit Hino truck from Benter Motor Sales
Corporation (BENTER for brevity). To secure payment, they executed
in favor of BENTER a chattel mortgage over the vehicle 1 and a
promissory note for P282,360.00 payable in thirty (30) monthly
installments of P9,412.00. 2 On the same date, BENTER assigned its
rights and interest over the vehicle in favor of private respondent
Asian Consumer and Industrial Finance Corporation (ASIAN for
brevity). 3 Although petitioners initially paid some installments they
subsequently defaulted on more than two (2) installments.
Thereafter, notwithstanding the demand letter of ASIAN, 4
petitioners failed to settle their obligation.
On 26 September 1984, by virtue of a petition for extrajudicial
foreclosure of chattel mortgage, the sheriff attempted to repossess
the vehicle but was unsuccessful because of the refusal of the son of
petitioner, Rolando de la Cruz to surrender the same. Hence, the
return of the sheriff that the service was not satisfied. LLpr
On 10 October 1984, petitioner Romulo de la Cruz brought the
vehicle to the office of ASIAN and left it there where it was
inventoried and inspected. 5
On 27 November 1984, ASIAN filed an ordinary action with the court
a quo for collection of the balance of P196,152.99 of the purchase
price, plus liquidated damages and attorney's fees.
Petitioners take exception. They nevertheless insist that he should
not later be allowed to change course midway in the process,
abandon the foreclosure and shift to other remedies such as
collection of the balance, especially after having recovered the
mortgaged chattel from them and while retaining possession thereof.
HELD:
The instant case is covered by the so-called "Recto Law", now Art.
1484 of the New Civil Code, which provides: "In a contract of sale of
personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies: (1) Exact
fulfillment of the obligation, should the vendee fail to pay; (2)
Cancel the sale, should the vendee's failure to pay cover two or more
installments; (3) Foreclose the chattel mortgage on the thing sold, if
one has been constituted, should the vendee's failure to pay cover
two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the
price. Any agreement to the contrary shall be void." In this
jurisdiction, the three (3) remedies provided for in the "Recto Law"
are alternative and not cumulative; the exercise of one would
preclude the other remedies. Consequently, should the vendee-
mortgagor default in the payment of two or more of the agreed
installments, the vendor-mortgagee has the option to avail of any of
these three (3) remedies: either to exact fulfillment of the
obligation, to cancel the sale, or to foreclose the mortgage on the
purchased chattel, if one was constituted. (Pacific Commercial Co.
vs. De la Rama)
It is thus clear that while ASIAN eventually succeeded in taking
possession of the mortgaged vehicle, it did not pursue the
foreclosure of the mortgage as shown by the fact that no auction
sale of the vehicle was ever conducted. "Under the law, the delivery
of possession of the mortgaged property to the mortgagee, the
herein appellee, can only operate to extinguish appellant's liability if
the appellee had actually caused the foreclosure sale of the
mortgaged property when it recovered possession thereof.
Consequently, in the case before Us, there being no actual
foreclosure of the mortgaged property, ASIAN is correct in resorting
to an ordinary action for collection of the unpaid balance of the
purchase price.
4) MAGNA VS COLARINA
“Undoubtedly the principal object of the above amendment
(referring to Act 4122 amending
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Art. 1454, Civil Code of 1889) was to remedy the abuses committed
in connection with the foreclosure of chattel mortgages. This
amendment prevents mortgagees from seizing the mortgaged
property, buying it at foreclosure sale for a low price and then
bringing the suit against the mortgagor for a deficiency judgment.
The almost invariable result of this procedure was that the
mortgagor found himself minus the property and still owing
practically the full amount of his original indebtedness.”
In its Memorandum before us, petitioner resolutely declared that it
has opted for the remedy provided under Article 1484(3) of the Civil
Code, that is, to foreclose the chattel mortgage.
It is, however, unmistakable from the Complaint that petitioner
preferred to avail itself of the first and third remedies under Article
1484, at the same time suing for replevin. For this reason, the Court
of Appeals justifiably set aside the decision of the RTC. Perusing the
Complaint, the petitioner, under its prayer number 1, sought for the
payment of the unpaid amortizations which is a remedy that is
provided under Article 1484(1) of the Civil Code, allowing an unpaid
vendee to exact fulfillment of the obligation. At the same time,
petitioner prayed that Colarina be ordered to surrender possession of
the vehicle so that it may ultimately be sold at public auction, which
remedy is contained under Article 1484(3). Such a scheme is not only
irregular but is a flagrant circumvention of the prohibition of the
law. By praying for the foreclosure of the chattel, Magna Financial
Services Group, Inc. renounced whatever claim it may have under
the promissory note.
Article 1484, paragraph 3, provides that if the vendor has availed
himself of the right to foreclose the chattel mortgage, “he shall have
no further action against the purchaser to recover any unpaid
balance of the purchase price. Any agreement to the contrary shall
be void.” In other words, in all proceedings for the foreclosure of
chattel mortgages executed on chattels which have been sold on the
installment plan, the mortgagee is limited to the property included
in the mortgage.
D. Leases of personalty with option to buy.
Cases:
Elisco Tool and Manufacturing Corp. vs. CA
Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head
of its cash department. On January 9, 1980, he entered into an agreement with the
company, called lease with option to buy car within 5 years. That owner ship shall
retain with the company until full payment and all necessary expenses for
maintenance shall be borne by the employee. Subsequently the company has ceased
operation and the employee was laid off. It took the company 2 years to institute
proceedings.
• Sellers desirous of making conditional sales of their goods, but who do not
wish openly to make a bargain in that form, for one reason or another, have
frequently resorted to the device of making contracts in the form of leases
either with options to the buyer to purchase for a small consideration at
the end of term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title shall
thereupon vest in the lessee.  It is obvious that such transactions are leases
only in name.  The so-called rent must necessarily be regarded as
payment of the price in installments since the due payment of the
agreed amount results, by the terms of the bargain, in the transfer of
title to the lessee.
• The so-called monthly rentals are in truth form monthly amortization on
the price of the car. The contract being one of sale on installment, the
Court of Appeals correctly applied to it the following provisions of the Civil
Code:
Art. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise any of the following
remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to
pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or
more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two or
more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.
• The remedies provided for in Art. 1484 are alternative, not cumulative. 
The exercise of one bars the exercise of the others. limitation applies to
contracts purporting to be leases of personal property with option to buy by
virtue of Art. 1485. The condition that the lessor has deprived the lessee of
possession or enjoyment of the thing for 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)
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 years and eight (8) months, upon issuance by the Court of Appeals of a writ
of execution.
• The employee having found to have paid more than the value of the thing
P60,000 should be considered as payment of the full purchase price. It
further petitioner to pay private respondents the amount of P431.94 as
excess payment, as well as rentals at the rate of P1,000 a month for
depriving private respondents of the use of their car.
PCI Leasing and finance vs. Giraffe X
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.
Issue: Whether the underlying lease agreement are covered between 1484 and 1485
of the New Civil Code?
SC: Yes they are. 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.
E. Sale of Real Property on Installments ( Maceda Law, RA 6552)
Reality Installment Buyer Protection Act.
a. Applicability- Real estate bought on installment basis.
Transactions covered: sale/ financing of real estate on installment
payments, including residential condominium apartments but:
1. industrial lots
2. commercial bldg..
3. sales to tenants under RA 3844
b. Rules when the buyer has paid at least 2 years of installments.
1.) Rights of Buyers –
I. In case of default in payment Section 3 of R.A. No. 6552 provided
for the rights of the buyer in case of default in the payment of
succeeding installments, where he has already paid at least two (2)
years of installments, thus:
(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."
Right to update payments
Right to assign/ reinstate contract (must be in Public document)
Section 5. Under Section 3 and 4, the buyer shall have the right to
sell his rights or assign the same to another person or to reinstate
the contract by updating the account during the grace period and
before actual cancellation of the contract. The deed of sale or
assignment shall be done by notarial act.
1. The buyer has the right to sell/assign his right to another
person (must be done by notarial act)
2. The buyer has the right to reinstate the contract by upgrading
the account during the grace period and before actual
cancellation of the contract.
Right to advance payment w/out interest
"(a) To pay, without additional interest, the unpaid
installments due within the total grace period earned by him,
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 which is hereby fixed at the rate of one month grace period
for every one year of installment payments made; x x x
1. The buyer has the right to pay in advance any installment/
the full balance of the purchase price anytime w/out interest
and to have such full payment annotated in the certificate of
title.
Section 6. The buyer shall have the right to pay in advance any
installment or the full unpaid balance of the purchase price any time
without interest and to have such full payment of the purchase price
annotated in the certificate of title covering the property.
NOTE: to be refunded of the cash surrender value of his payments if
the contract is cancelled.
i) Actual cancellation takes place:
1)after 30 days from receipt of notice of cancellation by
notarial act.
2) upon full payment of cash surrender value.
Sale of real property on installments (Maceda Law [RA 6552])
a.When the buyer has paid at least two years of installments
1)Rights of buyer:
ii) Default in payment
aa) To pay without additional interest, the unpaid installments (cash
surrender value) within the grace period
bb) Grace period is one month for every year of installment
payments made
Limitation: The right can be exercised only once every 5 years
ii) Cancellation of sale
aa) Up to 5 years installments, refund of 50% of payments
bb) After 5 years of installments, additional 5%/year but shall
not exceed 90% of total payments made
When cancellation takes effect:
aa) After 30 days from receipt by the buyer of (notarized) notice of
cancellation; or
bb) After 30 days from receipt by the buyer of notarial demand for
rescission
*In both cases after full payment of cash surrender value
c. When the buyer has paid less than two years installments
1) The buyer has at least 60 days grace period within which to
pay the installment due
2) After the grace period, contract may be cancelled as in “B”
above
(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.)
Pagtalunan vs. De Manzano
(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.
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Petitioner claimed that respondent paid only P12,950. She allegedly
stopped paying after December 1979 due to personal problems with
the petitioner. Petitioner asserted that when respondent ceased
paying her installments, her status of buyer was automatically
transformed to that of a lessee. Therefore, she continued to possess
the property by mere tolerance of Patricio.
Issue: Whether the respondent has the right to occupy the premises?
SC: Yes, According to Republic Act No. 6552 -- "The Realty
Installment Buyer Protection Act," or more popularly known as the
Maceda Law
(b) If the contract is cancelled, the seller shall refund to the buyer
the cash surrender value of the payments on the property equivalent
to fifty percent of the total payments made and, after five years of
installments, an additional five percent every year but not to exceed
ninety percent of the total payments made: Provided, That the
actual cancellation of the contract shall take place after thirty days
from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer.9
The Court agrees with petitioner that the cancellation of the
Contract to Sell may be done outside the court particularly when the
buyer agrees to such cancellation.
However, the cancellation of the contract by the seller must be in
accordance with Sec. 3.
Firstly the demand letter made by the petitioner to vacate the
premises does not constitute notice of cancellation. Second
petitioner cannot insist on compliance with the requirement by
assuming that the cash surrender value payable to the buyer had
been applied to rentals of the property after respondent failed to
pay the installments due.
Therefore a deed of absolute sale shall be made after payment of
purchase price.
c. Rules when the buyer has paid less than 2 years of installments
( Refer to case below)
1) where the buyer paid less than 2 years installments
Ramos vs Heruela
Down payments, deposits or options on the contract shall be
included in the computation of the total number of installments
made.
Sec. 4.In case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less than sixty
days from the date the installment became due. If the buyer fails to
pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of
the contract by a notarial act.
In this case, the spouses Heruela paid less than two years of
installments. Thus, Section 4 of RA 6552 applies. However, there was
neither a notice of cancellation nor demand for rescission by notarial
act to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic
Travel Corp., 22 the Court ruled that the vendor could go to court to
demand judicial rescission in lieu of a notarial act of rescission.
However, an action for reconveyance is not an action for rescission.
The Court explained in Olympia:
The action for reconveyance filed by petitioner was predicated on an
assumption that its contract to sell executed in favor of respondent
buyer had been validly cancelled or rescinded. The records would
show that, indeed, no such cancellation took place at any time prior
to the institution of the action for reconveyance. . . .
xxx xxx xxx
. . . Not only is an action for reconveyance conceptually different
from an action for rescission but that, also, the effects that flow
from an affirmative judgment in either case would be materially
dissimilar in various respects. The judicial resolution of a contract
gives rise to mutual restitution which is not necessarily the situation
that can arise in an action for reconveyance. Additionally, in an
action for rescission (also often termed as resolution), unlike in an
action for reconveyance predicated on an extrajudicial rescission
(rescission by notarial act), the Court, instead of decreeing
rescission, may authorize for a just cause the fixing of a period. 23
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In the present case, there being no valid rescission of the contract to
sell, the action for reconveyance is premature. Hence, the spouses
Heruela have not lost the statutory grace period within which to pay.
The trial court should have fixed the grace period to sixty days
conformably with Section 4 of RA 6552.
2) Sale of subdivision lot on installments where the buyer defaulted.
Active Realty Corporation vs. Daroya
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a
Contract to Sell1 with respondent NECITA DAROYA whereby the latter
agreed to buy a 515 sq. m. lot for P224,025.00 in petitioner’s
subdivision to be paid in amortization within 5 years, valued at
P346,367.00, a figure higher than that stated as the contract price.
The buyer defaulted in three (3) monthly amortizations. Petitioner
sent respondent a notice of cancellation2 of their contract to sell.
When respondent offered to pay for the balance of the contract
price, petitioner refused as it has allegedly sold the lot to another
buyer. The respondent has already paid 4 years. already more than
the contract price.
Issue: Whether or not the petitioner can be compelled to refund to
the respondent the value of the lot or to deliver a substitute lot at
respondent’s option?
SC: Yes, According to Republic Act No. 6552 -- "The Realty
Installment Buyer Protection Act," or more popularly known as the
Maceda Law
More specifically, Section 3 of R.A. No. 6552 provided for the rights
of the buyer in case of default in the payment of succeeding
installments, where he has already paid at least two (2) years of
installments, thus:
"(a) To pay, without additional interest, the unpaid installments due
within the total grace period earned by him, which is hereby fixed at
the rate of one month grace period for every one year of installment
payments made; x 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, respondent
has the right to offer to pay for the balance of the purchase price,
without interest, which she did in this case. However since the lot
has been sold to another party it is only just and equitable that the
petitioner be ordered to refund to respondent the actual value of
the lot resold, i.e., P875,000.00, with 12% interest per annum.
F. PD No. 957
a. Important provisions
Sec. 4, 5, 7,18,23 ,24 ,25
Section 4. Registration of Projects The registered owner of a parcel
of land who wishes to convert the same into a subdivision project
shall submit his subdivision plan to the Authority which shall act upon
and approve the same, upon a finding that the plan complies with
the Subdivision Standards' and Regulations enforceable at the time
the plan is submitted. The same procedure shall be followed in the
case of a plan for a condominium project except that, in addition,
said Authority shall act upon and approve the plan with respect to
the building or buildings included in the condominium project in
accordance with the National Building Code (R.A. No. 6541).
The subdivision plan, as so approved, shall then be submitted to the
Director of Lands for approval in accordance with the procedure
prescribed in Section 44 of the Land Registration Act (Act No. 496, as
amended by R.A. No. 440): Provided, that it case of complex
subdivision plans, court approval shall no longer be required. The
condominium plan as likewise so approved, shall be submitted to the
Register of Deeds of the province or city in which the property lies
and the same shall be acted upon subject to the conditions and in
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accordance with the procedure prescribed in Section 4 of the
Condominium Act (R.A. No. 4726).
The owner or the real estate dealer interested in the sale of lots or
units, respectively, in such subdivision project or condominium
project shall register the project with the Authority by filing
therewith a sworn registration statement containing the following
information:
(a) Name of the owner;
(b) The location of the owner's principal business office, and if the
owner is a non-resident Filipino, the name and address of his agent
or representative in the Philippines is authorized to receive notice;
(c) The names and addresses of all the directors and officers of the
business firm, if the owner be a corporation, association, trust, or
other entity, and of all the partners, if it be a partnership;
(d) The general character of the business actually transacted or to
be transacted by the owner; and
(e) A statement of the capitalization of the owner, including the
authorized and outstanding amounts of its capital stock and the
proportion thereof which is paid-up.
The following documents shall be attached to the registration
statement:
(a) A copy of the subdivision plan or condominium plan as approved
in accordance with the first and second paragraphs of this section.
(b) A copy of any circular, prospectus, brochure, advertisement,
letter, or communication to be used for the public offering of the
subdivision lots or condominium units;
(c) In case of a business firm, a balance sheet showing the amount
and general character of its assets and liabilities and a copy of its
articles of incorporation or articles of partnership or association, as
the case may be, with all the amendments thereof and existing by-
laws or instruments corresponding thereto.
(d) A title to the property which is free from all liens and
encumbrances: Provided, however, that in case any subdivision lot or
condominium unit is mortgaged, it is sufficient if the instrument of
mortgage contains a stipulation that the mortgagee shall release the
mortgage on any subdivision lot or condominium unit as soon as the
full purchase price for the same is paid by the buyer.
The person filing the registration statement shall pay the registration
fees prescribed therefor by the Authority.
Thereupon, the Authority shall immediately cause to be published a
notice of the filing of the registration statement at the expense of
the applicant-owner or dealer, in two newspapers general
circulation, one published in English and another in Pilipino, once a
week for two consecutive weeks, reciting that a registration
statement for the sale of subdivision lots or condominium units has
been filed in the National Housing Authority; that the aforesaid
registration statement, as well as the papers attached thereto, are
open to inspection during business hours by interested parties, under
such regulations as the Authority may impose; and that copies
thereof shall be furnished to any party upon payment of the proper
fees.
The subdivision project of the condominium project shall be deemed
registered upon completion of the above publication requirement.
The fact of such registration shall be evidenced by a registration
certificate to be issued to the applicant-owner or dealer.
Section 5. License to sell. Such owner or dealer to whom has been
issued a registration certificate shall not, however, be authorized to
sell any subdivision lot or condominium unit in the registered project
unless he shall have first obtained a license to sell the project within
two weeks from the registration of such project.
The Authority, upon proper application therefor, shall issue to such
owner or dealer of a registered project a license to sell the project
if, after an examination of the registration statement filed by said
owner or dealer and all the pertinent documents attached thereto,
he is convinced that the owner or dealer is of good repute, that his
business is financially stable, and that the proposed sale of the
subdivision lots or condominium units to the public would not be
fraudulent.
Section 7. Exempt transactions. A license to sell and performance
bond shall not be required in any of the following transactions:
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(a) Sale of a subdivision lot resulting from the partition of land
among co-owners and co-heirs.
(b) Sale or transfer of a subdivision lot by the original purchaser
thereof and any subsequent sale of the same lot.
(c) Sale of a subdivision lot or a condominium unit by or for the
account of a mortgagee in the ordinary course of business when
necessary to liquidate a bona fide debt.
Section 18. Mortgages. No mortgage on any unit or lot shall be made
by the owner or developer without prior written approval of the
Authority. Such approval shall not be granted unless it is shown that
the proceeds of the mortgage loan shall be used for the development
of the condominium or subdivision project and effective measures
have been provided to ensure such utilization. The loan value of
each lot or unit covered by the mortgage shall be determined and
the buyer thereof, if any, shall be notified before the release of the
loan. The buyer may, at his option, pay his installment for the lot or
unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtedness secured by the particular lot
or unit being paid for, with a view to enabling said buyer to obtain
title over the lot or unit promptly after full payment thereto;
Section 23. Non-Forfeiture of Payments. No installment payment
made by a buyer in a subdivision or condominium project for the lot
or unit he contracted to buy shall be forfeited in favor of the owner
or developer when the buyer, after due notice to the owner or
developer, desists from further payment due to the failure of the
owner or developer to develop the subdivision or condominium
project according to the approved plans and within the time limit for
complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization interests
but excluding delinquency interests, with interest thereon at the
legal rate.
Section 24. Failure to pay installments. The rights of the buyer in
the event of this failure to pay the installments due for reasons
other than the failure of the owner or developer to develop the
project shall be governed by Republic Act No. 6552.
Where the transaction or contract was entered into prior to the
effectivity of Republic Act No. 6552 on August 26, 1972, the
defaulting buyer shall be entitled to the corresponding refund based
on the installments paid after the effectivity of the law in the
absence of any provision in the contract to the contrary.
Section 25. Issuance of Title. The owner or developer shall deliver
the title of the lot or unit to the buyer upon full payment of the lot
or unit. No fee, except those required for the registration of the
deed of sale in the Registry of Deeds, shall be collected for the
issuance of such title. In the event a mortgage over the lot or unit is
outstanding at the time of the issuance of the title to the buyer, the
owner or developer shall redeem the mortgage or the corresponding
portion thereof within six months from such issuance in order that
the title over any fully paid lot or unit may be secured and delivered
to the buyer in accordance herewith.
Cases:
Far East Bank & Trust Co vs. Marquez
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.
Issue: 1.)Whether or not the mortgage contract violated Section 18
of PD.957, hence void insofar as third persons are concerned.
2.)Who has a higher right the new buyer or the respondent?
SC: Yes violated Sec. 18. as provides as follows.
Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by
the owner or developer without prior written approval of the
authority. Such approval shall not be granted unless it is shown that
the proceeds of the mortgage loan shall be used for the development
of the condominium or subdivision project and effective measures
have been provided to ensure such utilization. The loan value of
each lot or unit covered by the mortgage shall be determined and
the buyer thereof, if any, shall be notified before the release of the
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loan. The buyer may, at his option, pay his installment for the lot or
unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtness secured by the particular lot or
unit being paid for , with a view to enabling said buyer to obtain
title over the lot or unit promptly after full payment thereof.
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.
2.) Respondent has a higher right over the property. Petitioner
cannot be considered as a buyer in good faith. He should have
considered that it was a town house that was already in progress.
The conversion of status from mortgagee to buyer will not lessen the
importance of such knowledge.
Tamayo vs. Huang
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 installments became
due. Later on the development of the subdivision was put to stop by
EAP, in effect petitioner stopped paying the monthly amortization.
The respondents sent the petitioner a demand letter, but after the
reply of the petitioner with an explanation of stop payment the
respondent was unheard of.. After 5 years the development was soon
in progress and petitioner offered to pay the full purchase price
which was already rejected by the respondent. Later on the property
was sold by the respondent to another person.
Issue: 1.)Did the petitioner have any legal basis for stop payment?
2.)Is the contract to sell between the parties rescinded?
SC: 1.) Yes.According Section 23 of PD 957
requires only due notice to the owner or developer for stopping
further payments by reason of the latter’s failure to develop the
subdivision according to the approved plans and within the time
limit.
Therefore the buyer had the right to stop payment due to the failure
of the developer to comply with the contract. He only needed to
give due notice to the owner(Huangs) or Developer to give it effect.
2.) Yes. Respondents sent no notarized notice or any notice of
cancellation at all. In fact, it was only after petitioner filed on July
24, 1997 the complaint before the HLURB that respondents offered
to reimburse petitioner of the total amount he had already paid.
The contract not having been cancelled in accordance with law, it
has remained valid and subsisting. It was, therefore, within
petitioner’s right to maintain his option to await the completion of
the development of and introduction of improvements in the
subdivision and thereafter, upon full payment of the purchase price,
without interest, compel respondents to execute a deed of absolute
sale, but since the property was sold to a buyer in good faith. The
respondents should refund the petitioner for the value of the
property when it was sold.
Cantemperante vs CRS realty
Facts:
Herein petitioners were among those who filed before the HLURB a
complaint 6 for the delivery of certificates of title against
respondents CRS Realty Development Corporation (CRS Realty),
Crisanta Salvador and Cesar Casal.
Petitioners averred that they had bought on an installment basis
subdivision lots from respondent CRS Realty and had paid in full the
agreed purchase prices; but notwithstanding the full payment and
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despite demands, respondents failed and refused to deliver the
corresponding certificates of title to petitioners. The complaint
prayed that respondents be ordered to deliver the certificates of
title corresponding to the lots petitioners had purchased and paid in
full and to pay petitioners damages.
In his answer, respondent Casal averred that despite his willingness
to deliver them, petitioners refused to accept the certificates of
title with notice of lis pendens covering the subdivision lots.
Respondents Ang and Cuason claimed in their answer with
counterclaim 16 that respondent Casal remained the registered
owner of the subdivided lots when they were transferred to them
and that the failure by petitioners to annotate their claims on the
title indicated that they were unfounded. Respondent CRS Realty and
the Heirs of Laudiza were declared in default for failure to file their
respective answers.
Issues:
Whether or not the absence of a license to sell has rendered the
sales void; (2) whether or not the subsequent sale to respondent
Cuason and Ang constitutes double sale;
Held:
Petitioners assail the Court of Appeals' ruling that the lack of the
requisite license to sell on the part of respondent CRS Realty
rendered the sales void; hence, neither party could compel
performance of each other's contractual obligations.
The only requisite for a contract of sale or contract to sell to exist in
law is the meeting of minds upon the thing which is the object of the
contract and the price, including the manner the price is to be paid
by the vendee. Under Article 1458 of the New Civil Code, in a
contract of sale, whether absolute or conditional, one of the
contracting parties obliges himself to transfer the ownership of and
deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.
In the instant case, the failure by respondent CRS Realty to obtain a
license to sell the subdivision lots does not render the sales void on
that ground alone especially that the parties have impliedly
admitted that there was already a meeting of the minds as to the
subject of the sale and price of the contract. The absence of the
license to sell only subjects respondent CRS Realty and its officers
civilly and criminally liable for the said violation under Presidential
Decree (P.D.) No. 957 30 and related rules and regulations. The
absence of the license to sell does not affect the validity of the
already perfected contract of sale between petitioners and
respondent CRS Realty.
As found by the Court of Appeals, in the case at bar, the
requirements of Sections 4 and 5 of P.D. [No.] 957 do not go into the
validity of the contract, such that the absence thereof would
automatically render the contract null and void. It is rather more of
an administrative convenience in order to allow a more effective
regulation of the industry.
Chapter 2
Capacity to Buy or Sell
Arts. 1489 – 1492
I. Parties and their Consent
A. Capacity in general (1489)
Art. 1489. All persons who are authorized in this Code to obligate
themselves, may enter into a contract of sale, saving the
modifications contained in the following articles.
Where necessaries are sold and delivered to a minor or other
person without capacity to act, he must pay a reasonable price
therefor. Necessaries are those referred to in article 290.
Note: A person who has both juridical capacity and capacity to act is
said to have full civil capacity. It is understood that he is of legal age
and suffers no restriction on his capacity to act, such person may
enter into any contract including sale.
B. Special Disqualifications to Buy
a. Between Spouses
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Case:
1) Effect of sale of land to one’s own spouse
Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940
Facts: There was a contract entered into between Uy Siu Pin and
Casimira and Blas, which the latter agreed to deliver the mortgaged
land and to enjoy the same with its improvements to the during the
period of 15 years on condition that Uy Siu Pin would pay El Hogar
Filipino the unpaid balance of the indebtedness of casimira and Blas,
together with all other expenses including realty taxes.
When the mortgage debtors, Casimira and Blas, failed to redeem the
land within the statutory period, a final deed of sale was issued in
favor of the mortgagee, El Hogar Filipino. The latter sold the land to
Uy Siu Pin and in turn sold the land to his wife Chua Hue.
Issues: Is the sale valid between Uy Siu Pin and Chua Hue?
Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is
null and void not only because theformer had no right to dispose of
the land in contorversy but because the sale comes within the
prohibition of Article 1458 of the Civil Code.
Note: The case did not extensively explicate the reason why the sale
between spouses are prohibited. However, Art 1490 provides that
“the husband and wife cannot sell property to each other, except:
(1) when a separation of property was agreed upon in the marriage
settlements; or (2) when there has been a judicial separation of
property under articel 191.
Rationale behind the prohibiton: (a) to prevent the stronger spouse
from exploiting the weaker spouse; (b) prevent donations disguised
as sales; (c) protect third persons, specially creditors, against fraud
through the transfer of the properties of one spouse to the other to
evade payment of obligations.
2) Transfer in common law relationship
Ching vs. Goyanko, G.R. No. 165879, November 10, 2006
FACTS: Respondents claim that their parents (Goyanko and Epifania)
acquired a 661 square meter property but they (the parents) were
Chinese citizens at the time, the property was registered in the
name of their aunt, Sulpicia Ventura. Sulpicia executed a deed of
sale over the property in favor of reespondent’s father Goyanko that
in turn executed a deed of sale over the same property in favor of
his common-law-wife-herein petitioner Maria B. Ching. It was only
after Goyanko’s death that they discovered the transfer of the said
property to Ching. Respondents thus filed with the RTC of Cebu City
a complaint for recovery of the property and the nullification of the
deed of sale.
ISSUE: Whether or not the sale of the property by Goyanko to Ching
is valid.
HELD:
The conveyance of Goyanko in favor of his common-law-wife-herein
petitioner, was null and void. Article 1409 of the Civil Code states
inter alia that contracts whose cause, object, or purpose is contrary
to law, morals, good customs, public order, or public policy are void
and inexistent from the very beginning. Article 1352 also provides
that: “Contracts without cause, or with unlawful cause, produce no
effect whatsoever. The cause is unlawful if it is contrary to law,
morals, good customs. Public order, or public policy.” Additionally,
the law emphatically prohibits the spouses from selling property to
each other subject to certain exceptions. Similarly, donations
between spouses during marriage are prohibited. And this is so
because if transfers or conveyances between spouses were allowed
during marriage, that would destroy the system of conjugal
partnership, a basic policy in civil law. It was also designed to
prevent the exercise of undue influence by one spouse over the
other, as well as to protect the institution of marriage, which is the
cornerstone of family law. The prohibitions apply to a couple living
as husband and wife without benefit of marriage, otherwise, “the
condition of those who incurred guild would turn out to be better
that those in legal union.”
b. By Spouse without consent of the other spouse - Void
C. Persons in Trust Relations
2. Sale to agent: Exception to prohibition against sale by
principal in favor of his agent.
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Pelayo vs. Perez, G.R. No. 141323, June 8, 2005
FACTS: David Pelayo, by a Deed of Absolute Sale, conveyed to Melki
Perez two parcels of agricultural land. Loreza, wife of David Pelayo,k
and another one whose signature is illegible witnessed the execution
of the deed. Loreza, however, signed only the third page. Perez
asked Loreza to sign on the first and second pages of the deed but
refused, hence, he instituted the instant complaint for specific
performance against the spouses. Petitioners, in adopting the trial
court’s narration of antecedent facts in their petition, admitted that
they authorized respondent to represent them in negotiations with
the “squatters” occupying the disputed property and, in
consideration of respondent’s services, they executed the subject
deed of sale. Defendant Pelayo claimed that the deed was without
his wife’s consent, hence, it is null and void.
ISSUE: Whether or not the deed of sale was null and void.
HELD: Petitioner Lorenza, by affixing her signature to the Deed of
Sale on the space provided for witnesses, is deemed to have given
her implied consent to the contract of sale. Sale is a consensual
contract that is perfected by mere consent, which may either be
express or implied. A wife’s consent to the husband’s disposition of
conjugal property does not always have to be explicit or set forth in
any particular document, so long as it is shown by acts of the wife
that such consent or approval was indeed given. In the present case,
although it appears on the face of the deed of sale that Lorenza
signed only as an instrumental witness, circumstances leading to the
execution of said document point to the fact that Lorenza was fully
aware of the sale of their conjugal property and consented to the
sale.
Under Article 173, in relation to Article 166, both of the New Civil
Code, when the deed in question was executed, the lack of marital
consent to the disposition of conjugal property does not make the
contract void ab initio but merely voidable. It has been held that the
contract is valid until the court annuls the same and only upon an
action brought by the wife whose consent was not obtained. In the
present case, despite respondent’s repeated demands for Lorenza to
affix her signature on all the pages of the deed of sale, showing
respondent’s insistence on enforcing said contract, Lorenza still did
not fle a case for annulment of the deed of sale. Thus, if the
transaction was indeed entered into without Lorenza’s consent, we
find it quite puzzling why for more than three and a half years,
Lorenza did nothing to seek the nullification of the assailed contract.
With regards to petitioner’s asservation that the deed of sale is
invalid under Article 1491 (2) of the New Civil Code, we find such
argument unmeritorious. Petitioners, by signing the Deed of Sale in
favor of respondent, are also deemed to have given their consent to
the sale of the subject property in favor of respondent, thereby
making the transaction an exception to the general rule that agents
are prohibited from purchasing the property of their principals.
2) Sale to guardians
Philippine Trust Co. vs Roldan
Facts: Parcels located in Guiguinto, Bulacan, were part of the
properties inherited by Mariano L. Bernardo from his father, Marcelo
Bernardo, deceased. In view of his minority, guardianship
proceedings were instituted, wherein Socorro Roldan was appointed
his guardian. She was the surviving spouse of Marcelo Bernardo, and
the stepmother of said Mariano L. Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship
proceedings (Special Proceeding 2485, Manila), a motion asking for
authority to sell as guardian the 17 parcels for the sum of P14,700 to
Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest
the money in a residential house, which the minor desired to have on
Tindalo Street, Manila. The motion was granted.
Socorro Roldan, as guardian, executed the proper deed of sale in
favor of her brother-in-law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos
executed in favor of Socorro Roldan, personally, a deed of
conveyance covering the same seventeen parcels, for the sum of
P15,000.
The Philippine Trust Company replaced Socorro Roldan as guardian,
on August 10, 1948. And this litigation, started two months later,
seeks to undo what the previous guardian had done. The step-mother
in effect, sold to herself, the properties of her ward, contends the
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plaintiff, and the sale should be annulled because it violates Article
1459 of the Civil Code prohibiting the guardian from purchasing
"either in person or through the mediation of another" the property
of her ward.
ISSUE:
Whether or not the sale was valid.
HELD:
As Guardianship is a trust of the highest order, the trustee cannot be
allowed to have any inducement to neglect his ward's interest; and
whenever the guardian acquires the ward's property through an
intermediary, he violates the provision of Article 1459 of the Civil
Code and such transaction and subsequent ones emanating therefrom
shall be annulled.
Even without proof that she had connived with Dr. Ramos.
Remembering the general doctrine that guardianship is a trust of the
highest order, and the trustee cannot be allowed to have any
inducement to neglect his ward's interest and in line with the court's
suspicion whenever the guardian acquires the ward's property 1 we
have no hesitation to declare that in this case, in the eyes of the
law, Socorro Roldan took by purchase her ward's parcels thru Dr.
Ramos, and that Article 1459 of the Civil Code applies.
3. Sale to public officers
Maharlika Broadcasting Corp. vs. Tagle
FACTS: The GSIS was the registered owner of a parcel of land that
was sold to petitioner Maharlika Publishing Corporation together with
the building thereon as well as the printing machinery and
equipment therein. Among the conditions of the sale are that
petitioner shall pay to the GSIS monthly installments until the total
purchase price shall be fully paid and that failure to pay any monthly
installment within 90 days from due date, the contract shall be
deemed automatically cancelled. Maharlika failed to pay the
installments for several months. This resulted to a public bidding of
this particular property. Petitioner submitted a letter-proposal that
reads: “I bid to match the highest bidder.” The bidding committee
rejected petitioner’s bid and accepted the private respondent Luz
Tagle’s bid. After approval and confirmation of the sale, the GSIS
executed a Deed of Conditional Sale in favor of Tagles. Luz Tagle is
the wife of Edilberto Tagle. Edilberto Tagle was the Chief, Retirment
Division, GSIS, from 1970 to 1978. He worked for the GSIS since 1952.
ISSUE: Whether or not the sale is valid.
HELD: In providing the prohibitions under Article 1491, the Code
tends to prevent fraud, or more precisely, tends not give occasion for
fraud, which is what can and must be done.
The point is that he is a public officer and his wife acts for and in his
name in any transaction with the GSIS. If he is allowed to participate
in the public bidding of properties foreclosed or confiscated by the
GSIS, there will always be the suspicion among other bidders and the
general public that the insider official had access to information and
connection with his fellow GSIS official as to allow him to eventually
acquire the property. It is precisely the need to forestall such
suspicions and to restore confidence in the public service that the
Civil Code now declares such transactions to be void from the
beginning and not merely voidable.
4. Sale/transfer to attorney
Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No.
58253) until her death. Thereafter, a special proceeding was
instituted to settle her estate. Under her will, the San Juan lot was
bequeathed to Pilar and Luis Gurrea, while 700,000 pesetas, ¼ of the
lot in Baguio and 1-hectare piece of land in Negros Occidental were
given to Ricardo Gurrea. Ricardo Gurrea, represented by and through
his counsel Atty. Enrique Suplico filed an Opposition in Special
Proceeding No. 7185. In consideration of said representation, Ricardo
Gurrea agreed to pay Atty. Suplico “a contigent fee of twenty (20%)
of whatever is due me, either real or personal property.” Later on,
Ricardo withdrew his Opposition. The properties adjudicated to
Ricardo based on the project of partition were the Baguio lot, San
Juan lot, and a parcel of land in Negros Occidental. As payment of
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his attorney’s fees, Ricarod Gurrea offered the San Juan lot to Atty.
Suplico who was hesitant to accept as the property was occupied by
squatters. However, in order not to antagonize his client, Atty.
Suplico agreed to Ricardo’s proposal with the further understanding
that he will receive an additional commission of 5% if he sells the
Baguio property. Thereafter, Atty. Suplico registered the deed of
Transfer of Rights and Interest and obtained the title to the San Juan
property under his name.
ISSUE: Whether or not the subject property is still the object of
litigation; If affirmative, whether or not the sale is void for being
violative of the provisions of Article 1491 (5) of the Civil Code.
HELD: The sale to Atty. Suplico is null and void.
A thing is said to be in litigation only if there is some contest or
litigation over it in court, but also from the moment that it becomes
subject to the judicial action of the judge. In the present case, there
is no proof to show that at the time the deed of Transfer of Rights
and Interest was executed, the probate court issued an order
granting the Motion for Termination of Proceeding and Discharge of
the Executor and Bond. Since the judge has yet to act on the above-
mentioned motion, if follows that the subject property which is the
subject matter of the deed of Transfer of Rights and Interest, is still
the object of litigation.
Having been established that the subject property was still the
object of litigation at the time the subject deed of Transfer of Rights
and Interest was executed, the assignment of rights and interest
over the subject property in favor of respondent is null and void for
being violative of the provisions of Article 1491 of the Civil Code
which expressly prohibits lawyers from acquiring property or rights
which may be the object of any litigation in which they may take
party by virtue of their profession.
C. Incapacity to sell
a. Homesteaders
Cases
1. Sale of portions of a parcel of land (1) prior to issuance and (2)
within 5 years from issuance of free patent
Manlapat vs. CA, G.R. No. 125585, June 8, 2005
FACTS: The controversy involves Lot No. 2204 that had been
originally in the possession of Jose Alvarez, Eduardo’s grandfather,
until his demise in 1916. It remained unregistered until October 8,
1976 when OCT No. P-153 was issued in the name of Eduardo
pursuant to a free patent issued in Eduardo’s name that was
entered in the Registry of Deed. Before the subject lot was titled,
Eduardo sold 533 sq.m. of the land to Ricardo on December 19,
1954. The sale is evidence by a deed of sale entitled “Kasulatan ng
Bilihang Tuluyan ng Lupang Walang Titulo” which was signed by
Eduardo himself as vendor and his wife Engracia Ancieto with a
certain Santiago Enriquez signing as witness. The Kasulatan was
registered with the Register of Deeds. On March 18, 1981, another
Deed of Sale conveyed another portion of the subject lot as right of
way was executed by Eduardo in favor of Ricardo. The deed was
notarized. Leon Banaag, as attorney-in-fact of his father-in-law
(Eduardo) mortgage with the Rural Bank for P100,000.00 with the
subject lot as collateral. Banaag deposited the owner’s duplicate
certificate of OCT No. P-153 with the bank. Ricardo and Eduardo
died.
The Cruzes, upon learning their right to the subject lot immediately
tried to confront petitioners mortgage and obtain the surrender of
the OCT. Having failed to physically obtain the title from
petitioners, the Cruzes went to RBSP which had custody of the
owner’s duplicate certificate of the OCT. They were able to secure a
clearance to borrow the title and was able to have the Register of
Deeds cancel the OCT and issue two separate titles in the name of
Ricardo andEduardo.
ISSUE: Whether or not the sale of the land is prohibited or not.
HELD: Free patent application implies the recognition of the public
dominion character of the land and, hence, the five year prohibition
imposed by the Public land Act against alienation or encumbrance of
the land covered by a free patent or homestead should have been
considered.
The deed of sale covering the 50 sq.m. right of way executed on
March 18, 1981 is obviously covered by proscription, the free patent
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having been issued on October 8, 1979. However, petitioners may
recover the portion sold since the prohibition was imposed in favor
of the free patent holder. Under the Public Land Act, the prohibition
to alienate is predicated on the fundamental policy of the State to
preserve and keep in the family of the homesteader that portion of
public land which the State has gratuitously given to him, and
recovery is allowed even where the land acquired under the Public
Land Act was sold and not merely encumbered, within the
prohibited period.
The sale of the 533 sq.m. was executed 22 years before the
issuance of the patent in 1976. Where the sale or transfer took
place before the filing of the free patent application, whether by
the vendor or the vendee, the prohibition should not be applied. In
such situation, neither the prohibition not the rationale therefor
which is to keep in the family of the patentee that portion of the
public land which the government has gratuitously given him, by
shielding him from the temptation to dispose of his landholdings,
could be relevant. Precisely, he had disposed of his rights to the lot
even before the government could give the title to him.
2. Effect of verbal sale within 5-year prohibitory period
Manzano vs. Ocampo, L-46850, June 20, 1940
Facts: Victoriano Manzano, now deceased, was granted a homestead
patent on June 25, 1934, and the land was registered in his name on
July 25, 1934 under Original Certificate of Title No. 4590. On January
4, 1938, he and respondent Rufino Ocampo agreed on the sale of said
homestead for the amount of P1,900.00, P1,100.00 of which was
paid by Ocampo to Manzano on the same day, and for the balance,
he executed a promissory note. Knowing, however, that any sale of
the homestead at that time was prohibited and void, the parties
likewise agreed that the deed of sale was to be made only after the
lapse of five years from the date of Manzano's patent. And to protect
the buyer Ocampo's rights in the agreed sale, Manzano executed in
his favor a "Mortgage of Improvements" over the homestead to secure
the amount of P1,100.00 already received as down payment on the
price.
• It is clear that a perfected contract of sale had already been
entered into by the parties within the period of prohibition. There
was nothing "futuristic" in this agreement, except that, being fully
aware of the prohibition, Manzano's title has not ripened into
absolute ownership.
• This execution of the formal deed after the expiration of the
prohibitory period did not and could not legalize a contract that was
void from its inception. Nor was this formal deed of sale "a totally
distinct transaction from the promissory note and the deed of
mortgagee for it was executed only in compliance and fulfillment of
the vendor's previous promise, under the perfected sale to execute
in favor of his vendee the formal act of conveyance after the lapse
of the period of inhibition of five years from the date of the
homestead patent.
• Sale in question is illegal and void for having been made
within five years from the date of Manzano's patent, in violation of
section 118 of the Public Land Law. Being void from its inception, the
approval thereof by the Undersecretary of Agriculture and Natural
Resources after the lapse of five years from Manzano's patent did not
legalize the sale. The result is that the homestead in question must
be returned to Manzano's heirs, who are, in turn, bound to restore to
Ocampo the, sum of P3,000.00 received by Manzano as the price
thereof.
D. When incompetent buys – he must pay a reasonable price for
necessaries delivered to him. The resulting sale is valid.
The above rule seems to be founded on quasi-contract
E. Effect of forbidden sales
a. Between husband and wife under the community regime, the sale is void
1) But strangers cannot assail the transfer
b. Between persons in trust relations, as regards –
1) Those based on public trust –
i) Public officers, employees, government experts (1491, par. 4), and
ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers (1491, par. 5) -
such sales are void (1409, No. 7)
2) Those based on private trust -
i) Guardians (1491, par. 1)
ii) Agents (1491, par. 2)
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ii) Executors and administrators (1491, par. 3) - such sales are voidable, not
void

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