Aguinaldo v. Esteban,
CA,
G.R. L-27289 April 15, 1985
Facts: Plaintiff Juan Aguinaldo in his complaint alleged, on June 23, 1958, Defendants, through
fraud procured the thumbmark of Jose Aguinaldo, father of plaintiff, to be affixed on subject contract
of mortgage called "Sanglaan ng Isang Lupa-Canaveral na Patuluyan Ipaaari". In their answer,
defendants claim absolute ownership of subject property upon the death of Jose Aguinaldo in
October 1960 on the theory that the document in controversy is one of sale and not one of mortgage.
Issue: whether the contract in question of the complaint, is one of mortgage or of sale.
Held: None, the contract is null and void. Plaintiff-appellant was not even a witness in the document
when his father who is of low intelligence, illiterate and could not even sign his name, affixed his
thumbmark in the document in question. Defendants-appellees took possession of the property on
March 26, 1955 when they started giving Jose Aguinaldo the fifty centavos (P0.50) a day. It would
appear then that the money which he has been receiving from the Estebans come from his own
property. In effect, there was no consideration for the transfer of the property - be it sale, mortgage
or Pacto Comisario.
NHA v. Grace Baptist Church,
G.R. 156437; March 1, 2004
Facts: Respondent Church manifested its interest in acquiring Lots of the General Mariano Alvarez
Resettlement Project in Cavite. Respondent entered into possession of the lots and introduced
improvements thereon. The NHA’s Board of Directors passed Resolution No. 2126, approving the
said sale at the price of P430, 500.00. The Church tendered to the NHA a manager’s check in the
amount of P55, 350.00 insisting that this was the price quoted to them by the NHA Field Office, as
shown by an unsigned piece of paper with a handwritten computation scribbled thereon.10 Petitioner
NHA refused to accept the check because it was insufficient. The Church instituted a complaint for
specific performance and damages against the NHA with the RTC.
Issue: Can the NHA be compelled to sell the subject lots to Grace Baptist Church in the absence of
any perfected contract of sale between the parties?
Held: No. The alleged contract involved is non-existent because the offer of the NHA to sell the
subject property, as embodied in Resolution No. 2126, was similarly not accepted by the respondent.
There being no concurrence of the offer and acceptance, it did not pass the stage of generation to
the point of perfection.25 As such, it is without force and effect from the very beginning or from its
incipiency, as if it had never been entered into, and hence, cannot be validated either by lapse of
time or ratification.26 Equity cannot give validity to a void contract,27 and this rule should apply with
equal force to inexistent contracts.
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Domingo v.
G.R. 127540; Oct. 17, 2001
Facts:In 1965, Paulina Rigonan allegedly sold the parcels of land to private respondents, the
spouses Rigonan through a deed of sale for only P850 together with a house and a warehouse.
Herein petitioners Domingo et al. allegedly took possession of the properties by means of stealth,
force and intimidation, and refused to vacate the same. Respondent Felipe Rigonan filed a complaint
for reinvindicacion against petitioners. According to defendants, the alleged deed of absolute sale
was void for being spurious as well as lacking consideration. As her nearest surviving kin within the
fifth degree of consanguinity, they inherited the three lots and the permanent improvements thereon
when Paulina died in 1966.
Issue: did private respondents sufficiently establish the existence and due execution of the Deed of
Absolute and Irrevocable Sale of Real Property
Held: No. The whole evidence on record does not show clearly that the fictitious P850.00
consideration was ever delivered to the vendor. The P850.00 consideration for the nine (9) parcels
of land including the house and bodega is grossly and shockingly inadequate, and the sale is null
and void ab initio. The unrebutted testimony of Zosima Domingo shows that at the time of the alleged
execution of the deed, Paulina was already incapacitated physically and mentally. There is in our
view sufficient reason to seriously doubt that she consented to the sale of and the price for her
parcels of land.
Dignos v. CA
G.R. L-59266; Feb. 29, 1988
Facts: The Dignos spouses sold the said parcel of land to respondent Jabil for the sum of P28, 000,
payable in two installments, with an assumption of indebtedness with the Bank in the sum of
P12,000, which was paid and acknowledged by the vendors in the deed of, and the next installment
in the sum of P4,000.00 to be paid on or before September 15, 1965. On November 25, 1965, the
Dignos spouses sold the same land in favor of defendants spouses, Cabigas, for the price of
P35,000. A deed of absolute sale was executed in favor of the Cabigas spouses, and which was
registered in the Office of the Register of Deeds. As the Dignos spouses refused to accept the
balance of the purchase price of the land from Jabil, and upon discovery of the second sale, Jabil
brought the present suit."
Issue: Whether or not subject contract is a deed of absolute sale or a contract to sell.
Held: It is a deed of absolute sale. A deed of sale is absolute in nature although denominated as a
"Deed of Conditional Sale" where nowhere in the contract in question is a stipulation to the effect
that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the contract. There was actual
delivery of the land sold as when the Dignos spouses delivered the possession of the land in
question to Jabil as early as March 27, 1965 so that the latter constructed thereon 3 beach resorts.
It is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners
of the same and the sale is null and void.
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 Quiroga v. Parsons,
38 Phil. 501 (1918)
Facts: A contract was entered into by and between the plaintiff Andres Quiroga and J. Parsons, the
latter granting the exclusive right to sell his beds in the Visayan Islands to J. Parsons under certain
conditions. The price agreed upon was the one determined by the plaintiff for the sale of these beds
in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be
made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so
preferred, and in these last two cases an additional discount was to be allowed for prompt payment.
Issue: whether the defendant was a purchaser or an agent of the plaintiff for the sale of his beds
Held: He was a purchaser and the contract by and between the defendant and the plaintiff is one
of purchase and sale. A contract is what the law defines it to be, and not what it is called by the
contracting parties. By virtue of the contract between the plaintiff and the defendant, the latter, on
receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
Ker & Co. v. Lingad,
38 SCRA 524 (1971)
Facts: Petitioner Ker & Co., Ltd. would have us reverse a decision of the Court of Tax Appeals,
holding it liable as a commercial broker under Section 194 (t) of the National Internal Revenue Code.
Such liability arose from a contract of petitioner with the United States Rubber International, the
former being referred to as the Distributor and the latter specifically designated as the Company.
Then came this crucial stipulation: "The Company shall from time to time consign to the Distributor
and the Distributor will receive, accept and/or hold upon consignment the products specified under
the terms of this agreement in such quantities as in the judgment of the Company may be necessary
for the successful solicitation and maintenance of business in the territory, and the Distributor agrees
that responsibility for the final sole of all goods delivered shall rest with him. All goods on
consignment shall remain the property of the Company until sold by the Distributor to the purchaser
or purchasers, but all sales made by the Distributor shall be in his name, in which the sale price of
all goods sold less the discount given to the Distributor by the Company in accordance with the
provision of paragraph 13 of this agreement, whether or not such sale price shall have been collected
by the Distributor from the purchaser or purchasers, shall immediately be paid and remitted by the
Distributor to the Company. It is further agreed that this agreement does not constitute Distributor
the agent or legal representative 4 of the Company for any purpose whatsoever. Distributor is not
granted any right or authority to assume or to create any obligation or responsibility, express or
implied, in behalf of or in the name of the Company, or to bind the Company in any manner or thing
whatsoever
Issue: whether the relationship thus created is one of vendor and vendee or of broker and principal.
Held: The relationship arising therefrom was not one of seller and purchaser. The Constantino
opinion could categorically affirm that the mere disclaimer in a contract that an entity like petitioner
is not "the agent or legal representative for any purpose whatsoever" does not suffice to yield the
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conclusion that it is an independent merchant if the control over the goods consigned is pervasive
in character. The decisive test, as therein set forth, is the retention of the ownership of the goods
delivered to the possession of the dealer, like herein petitioner, for resale to customers, the price
and terms remaining subject to the control of the firm consigning such goods.
Viloria v. Continental Airlines
G.R.188288 (1/16/2012)
Facts: Fernando claimed that CAI’s act of refusing him to use Lourdes’ ticket and in charging a
higher price for a round trip ticket to Los Angeles breached its undertaking under its March 24, 1998
letter. That CAI is liable for Margaret Mager’s ( a Holiday Travel agency employee) misrepresentation
in obtaining their consent in the purchase of the subject tickets. Spouses According to CAI, one of
the conditions attached to their contract of carriage is the non-transferability and non-refundability of
the subject tickets. Furthermore, contrary to Spouses Viloria’s claim, the contractual relationship
between Holiday Travel and CAI is not an agency but that of a sale.
Issue: Does a principal-agent relationship exist between CAI and Holiday Travel
Held: Yes. CAI is the one bound by the contracts of carriage embodied by the tickets being sold
by Holiday Travel on its behalf. It is undisputed that CAI and not Holiday Travel who is the party to
the contracts of carriage executed by Holiday Travel with third persons who desire to travel via
Continental Airlines, and this conclusively indicates the existence of a principal-agent relationship.
That the principal is bound by all the obligations contracted by the agent within the scope of the
authority granted to him is clearly provided under Article 1910 of the Civil Code and this constitutes
the very notion of agency.
The essential elements of agency are: (1) there is consent, express or implied of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third person;
(3) the agent acts as a representative and not for himself, and (4) the agent acts within the scope of
his authority.
In actions based on quasi-delict, a principal can only be held liable for the tort committed by its
agent’s employees if it has been established by preponderance of evidence that the principal was
also at fault or negligent or that the principal exercise control and supervision over them. CAI cannot
be liable to the fraudulent acts of the Holiday Travel’s employee without a modicum of evidence that
CAI exercised control over Holiday Travel’s employees or that CAI was equally at fault, no liability
can be imposed on CAI for Mager’s supposed misrepresentation.
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CONTRACT FOR A PIECE OF WORK
Inchausti v. Cromwell,
20 Phil. 34 (1911)
Facts: Ichausti and Co. firm for many years is engaged in the business of buying and selling at
wholesale hemp. It is customary to sell hemp in bales. It is contended by the Ichausti and Co. that
the tax assessed by the defendant Cromwell (collector of internal revenue) upon the aggregate sum
of said charges made against said purchasers of hemp by Inchausti, is illegal upon the ground that
the said charge does not constitute a part of the selling price of the hemp, but is a charge made for
the service of baling the hemp.
Issue: WON the service of baling the hemp is a contract of labor
Held: No. When a person stipulates for the future sale of articles which he is habitually making, and
which at the time are not made or finished, it is essentially a contract of sale and not a contract for
labor. The baling was performed for the general market and was not something done by plaintiff
which was a result of any peculiar wording of the particular contract between him and his vendee.
Del Monte Phils. v. Aragones
G.R.153033; June 23, 2005
Facts: Petitioner DMPI entered into an “Agreement" with MEGA-WAFF represented by Garcia,
whereby the latter undertook "the supply and installation of modular pavement" at DMPI's
condiments warehouse. MEGA-WAFF, as CONTRACTOR entered into a "Supply
Agreement" with Dynablock Enterprises, represented by herein respondent Aragones,
as SUPPLIER. The deadline for the installation of the pavement was not met and MEGA-WAFF was
penalized for the delay. After the installation, Aragones failed to collect the payment from Garcia.
Then, Aragones sent a letter to DMPI saying that instead of paying Garcia, DMPI should directly pay
him. But this did not happen. Hence Aragones filed a complaint for sum of money with damages
against Garcia and DMPI before RTC. RTC ruled in favor of Aragones, it held that DMPI and Garcia
are jointly and severally liable. Hence, DMPI filed this petition. It contends that the
supply agreement between Garcia and Aragones is a contract of sale to which DMPI was not privy,
hence DMPI cannot be held liable.
Issue: whether the supply agreement was one of sale or for a piece of work.
Held: The Supply Agreement was in the nature of a contract for a piece of work. Under Art. 1467 if
the goods are to be manufactured especially for the customer and upon his special
order, and not for the general market, it is a contract for a piece of work. The modular paving blocks
are not exactly what the plaintiff-appellee makes and keeps on hand for sale to anyone, but with
a modification that the same be "S" in shape. Hence, the agreement falls within the ambit of Article
1467 making Article 1729 likewise applicable in the instant case.
CRC, 2019
Co v. Coll. Of Internal Revenue
99 Phil. 841 (1956)
Facts: Celestino Co & Company is a duly registered general copartnership doing business under
the trade name of "Oriental Sash Factory". From 1946 to 1951 it paid percentage taxes of 7 per cent
on the gross receipts of its sash, door and window factory, in accordance with section one hundred
eighty-six of the National Revenue Code imposing taxes on sale of manufactured articles. However
in 1952 it began to claim liability only to the contractor's 3 per cent tax (instead of 7 per cent) under
section 191 of the same Code; imposing a tax on the sales of services; and having failed to convince
the Bureau of Internal Revenue, it brought the matter to the Court of Tax Appeals.
Issue: whether or not petitioner could be taxed with lesser strain and more accuracy as seller of its
manufactured articles under section 186 of the same code
Held: Yes. The business of manufacturing sash, door and window upon special orders of the
customers is not a contract on the sales of services nor does it make it a contractor that would
subject them to tax under Sec. 191 of the NIRC. Celestino Co & Company habitually makes sash,
windows and doors, as it has represented in its stationery and advertisements to the public. That it
"manufactures" the same is practically admitted by appellant itself. The fact that windows and doors
are made by it only when customers place their orders, does not alter the nature of the
establishment, for it is obvious that it only accepted such orders as called for the employment of
such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually
to manufacture. The Oriental Sash Factory does nothing more than sell the goods that it mass-
produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and
combining them in such forms as its customers may desire.
Comm. Of Int. Rev. v. Eng’g Equipment and Supply Co. and CTA
64 SCRA 590 (1975)
Facts
Engineering in its Petition claims that the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company a manufacturer and a seller of air conditioning units and parts or
accessories thereof and, therefore, it is subject to the 30% advance sales tax prescribed by Section
185(m) of the Tax Code, in relation to Section 194 of the same.
Issue: whether or not Engineering is a manufacturer of air conditioning units under Section
185(m), supra, in relation to Sections 183(b) and 194 of the Code, or a contractor under Section 191
of the same Code.
Held: We see that the 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. Therefore, we have but to affirm the conclusion of the Court of Tax
Appeals that Engineering is a contractor rather than a manufacturer
This compensating tax is not a tax on the importation of goods but a tax on the use of imported
goods not subject to sales tax. Engineering, should be held liable to the payment of 30%
compensating tax in accordance with Section 190 of the Tax Code in relation to Section 185(m) of
the same, but without the 50% mark up provided in Section 183(b).’
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 Gonzalo Puyat & Sons v. Arco Amusement
72 Phil 402 (1941)
Facts: The Arco Amusement brought an action against Puyat & Sons to secure a reimbursement
of certain amounts allegedly overpaid by it on account of the purchase price of sound reproducing
equipment and machinery ordered by Petitioner Puyat from the Starr Piano Company of USA. In
addition to the price of the equipment, a 10 % commission, plus all expenses will be given to Puyat
& Sons.
Issue: WON the contract was one of purchase and sale
Held: Yes. The contract is the law between the parties and should include all the things they are
supposed to have been agreed upon. What does not appear on the face of the contract should be
regarded merely as "dealer's" or "trader's talk", which cannot bind either party. The letters, in which
the respondent accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing
equipment subject of its contract with the petitioner, are clear in their terms and admit of no other
interpretation than that the respondent agreed to purchase from the petitioner the equipment in
question at the prices indicated which are fixed and determinate.
To hold the petitioner an agent of the respondent in the purchase of equipment and machinery, is
incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in
the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser.
The facts and circumstances indicated to not point to anything but plain ordinary transaction where
the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive
agent of the Starr Piano Company in the United States.
BARTER OR EXCHANGE
Fule V. CA
286 SCRA 698 (1998)
Facts: This petition for review on certiorari questions the affirmance by the CA of the decision 1 of
the RTC of San Pablo City, dismissing the complaint that prayed for the nullification of a contract of
sale of a 10-hectare property in Tanay, Rizal in consideration of the amount of P40, 000.00 and a
2.5 carat emerald-cut diamond. Petitioner Gregorio Fule, a banker by profession and a jeweler at
the same time, acquired a 10-hectare property in Tanay, Rizal.
Issue: whether or not the contract of sale should be nullified.
Held: No. The lower court further ruled that all the elements of a valid contract under Article 1458 of
the Civil Code were present. The same elements, were present despite the fact that the agreement
between petitioner and Dr. Cruz was principally a barter contract. Being a professional banker and
engaged in the jewelry business plaintiff is conversant and competent to detect a fake diamond from
the real thing. Petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil
Code within which to examine the jewelry as he in fact accepted them when asked by Dr. Cruz if he
was satisfied with the same.
Delpher Trades Corp. v. IAC
G.R. L-69259; January 26, 1988
Facts: Delfin Pacheco and his sister, co-owners of lot no. 1095 leased to Construction Components
International Inc. the property and providing for a right of first refusal to the lessee. The Lessee
assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines,
Inc. A deed of exchange was executed between lessors Pacheco and defendant Delpher Trades
CRC, 2019
Corp. whereby the former conveyed to the latter the leased property. In exchange for their properties,
the Pachecos acquired 2,500 original unissued no par value shares of stocks of the Delpher Trades
Corp. The Pachecos were given 2500 no par shares which in effect gave them a control of the
corporation. Respondent Hydro filed an amended complaint for reconveyance of Lot. No. 1095 in its
favor.
Issue: whether or not the "Deed of Exchange" of the properties executed by and between the
Pachecos and the Delpher Trades Corp. was meant to be a contract of sale which, in effect,
prejudiced the private respondent's right of first refusal over the leased property included in the "deed
of exchange.
Held: No. The "Deed of Exchange" of property between the Pachecos and Delpher Trades
Corporation cannot be considered a contract of sale. There was no transfer of actual ownership
interests by the Pachecos to a third party. The Pacheco family merely changed their ownership from
one form to another. The ownership remained in the same hands. Hence, the private respondent
has no basis for its claim of a right of first refusal under the lease contract.
The records do not point to anything wrong or objectionable about this "estate planning" scheme
resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise
could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted."
LEASE
Filinvest Credit Corp. v. CA
178 SCRA 188 (1989)
Facts: The private respondents, the spouses Jose Sy Bang and Iluminada Tan, were engaged in
the sale of gravel produced from crushed rocks and used for construction purposes. They entered
into a contract of lease of machinery with petitioner Filinvest Credit Corporation. The agreement
provides that the machinery be purchased in the petitioner's name; that it be leased (with option to
purchase upon the termination of the lease period) to the private respondents; and that the private
respondents execute a real estate mortgage in favor of the petitioner as security for the amount
advanced by the latter. After a month of usage, they found that contrary to the 20 to 40 tons per
hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons
of rocks and stones per hour. Subsequently, the private respondents stopped payment on the
remaining checks they had issued to the petitioner. The petitioner extra judicially foreclosed the real
estate mortgage. A complaint against the petitioner, for the rescission of the contract of lease,
annulment of the real estate mortgage, and for injunction and damages. The trial court rendered
decision in favor of the private respondents. The petitioner denies being the seller of the rock crusher
and only admits having financed its acquisition by the private respondents
Issue: WON the contract is one of lease
Held: No. The real intention of the parties should prevail. The nomenclature of the agreement
cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law
defines it and the parties intend it to be, not what it is called by the parties. It is apparent here that
the intent of the parties to the subject contract is for the so-called rentals to be the installment
payments. Upon the completion of the payments, then the rock crusher, subject matter of the
contract, would become the property of the private respondents.
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 DACION EN PAGO
PNB v. Pineda
197 SCRA 1 (1991)
Facts: In this petition petitioner PNB seeks to annul and set aside the orders of the CFI granting
private respondent Tayabas Cement Company, Inc.'s application for a writ of preliminary injunction
to enjoin the foreclosure sale of certain properties in Quezon City and Negros Occidental. TCC
claims that its obligation with PNB had been fully paid by reason of the latter's repossession of the
imported machinery and equipment.
The Arroyo spouses obtained a loan from PNB to purchase 60% of the subscribed capital stock, and
thereby acquire the controlling interest of private respondent TCC which was secured by a real
estate mortgage. TCC filed with petitioner bank an application and agreement for the establishment
of an 8 year deferred letter of credit (L/C) in favor of Toyo Menka Kaisha, Ltd. to cover the importation
of a cement plant machinery and equipment. The imported cement plant machinery and equipment
arrived from Japan and were released to TCC under a trust receipt agreement. Toyo Menka Kaisha,
Ltd. made the corresponding drawings against the L/C as scheduled. TCC, however, failed to remit
and/or pay the corresponding amount covered by the drawings. Pursuant to the trust receipt
agreement, PNB notified TCC of its intention to repossess, as it later did, the imported machinery
and equipment for failure of TCC to settle its obligations under the L/C.
Issue: WON the PNB's possession of the subject machinery and equipment amounts to dacion en
pago.
Held: No. Dation in payment takes place when property is alienated to the creditor in satisfaction of
a debt in money and the same is governed by sales. Dation in payment is the delivery and
transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation.20 As aforesaid, the repossession of the machinery and equipment in
question was merely to secure the payment of TCC's loan obligation and not for the purpose of
transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever
accomplished.
Phil Lawin Bus Co. vs. Court of Appeals
[G.R. No. 130972. January 23, 2002.]
Facts: Private respondent Advance Capital Corporation extended a loan to petitioner Philippine
Lawin Bus Co. in the amount of P8M and an additional loan of P2M. Despite the loan restructuring,
petitioner Lawin failed to pay the total amount of the loans. A suit for sum of money was then filed
against the petitioners. ,The plaintiff foreclosed the mortgaged buses. Petitioners asserted that there
was already an arrangement as to the full settlement of the loan obligation by way of sale of the nine
units of passenger buses, the proceeds of which will be credited against the loan amount as full
payment thereof. The trial court dismissed the complaint. On appeal, the Court of Appeals reversed
and set aside the trial court's decision.
Issue: whether there was dacion en pago between the parties upon the surrender or transfer of the
mortgaged buses to the private respondent.
Held: No Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of
dacion en pago. In this case, there was no meeting of the minds between the parties on whether the
CRC, 2019
loan of the petitioners would be extinguished by dacion en pago. The receipts show that the two
buses were delivered to respondent in order that it would take custody for the purpose of selling the
same. Such an agreement negates transfer of absolute ownership over the property to respondent,
as in a sale.
OPTION CONTRACT
De La Cavada vs. Diaz
[G.R. No. L-11668. April 1, 1918.]
Facts: This action was instituted by the plaintiff for the purpose of requiring the defendant to comply
with a certain "contract of option" to purchase a certain piece or parcel of land described in said
contract and for damages for a noncompliance with said contract. The defendant promised to convey
to the plaintiff the land in question as soon as the same was registered under the Torrens system,
and the plaintiff promised to pay to the defendant the sum of P70,000, under the condition named,
upon the happening of that event.
Issue: Whether or not there is a contract of option created.
Held: The said contract (Exhibits A and B) was not, in fact, an "optional contract" as that phrase in
generally used. It is clearly an absolute promise to sell a definite parcel of land for a fixed price upon
definite conditions. An optional contract is a privilege existing in one person, for which he had paid
a consideration, which gives him the right to buy, for example, certain merchandise of certain
specified property, from another person, if he chooses, at any time within the agreed period, at a
fixed price.
RIGHT OF FIRST REFUSAL
Rivera Filipina, Inc vs. Court of Appeals
380 SCRA 245 (2002)
Facts: This civil case is a suit instituted by Riviera Filipina, Inc. on to compel the defendants therein
Juan L. Reyes, now deceased, et al to transfer the title of a parcel of land for alleged violation of
Riviera’s right of first refusal. Respondent Reyes executed a Contract of Lease with Riviera for a
ten-year (10) renewable lease. The said land was subject of a Real Estate Mortgage in favor of
Prudential Bank which extrajudicially foreclosed the mortgage thereon. The mortgagee bank
emerged as the highest bidder. Realizing that he could not possibly raise in time the money needed
to redeem the subject property, Reyes decided to sell the same. Since paragraph 11 of the lease
contract provide for a right of first refusal, Reyes offered to sell the subject property to Riviera, for
P5,000.00 per square meter but Rievera always bargain for a smaller price.
Issue: Whether or not Rievera’s right of first refusal was violated
Held: A contract of sale entered into in violation of a right of first refusal of another person, while
valid, is rescissible. Reyes and Riviera, understood the lease provision "right of first refusal" to mean
simply that should the lessor Reyes decide to sell the leased property during the term of the lease,
such sale should first be offered to the lessee Riviera. And that is what exactly ensued between
Reyes and Riviera, a series of negotiations on the price per square meter of the subject property
with neither party, especially Riviera, unwilling to budge from his offer, as evidenced by the exchange
of letters between the two contender
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 Tuazon vs. Del Rosario-Suarez
Dec. 13, 2010
Facts: Respondent Lourdes Q. Del Rosario-Suarez was the owner of a parcel of land. Petitioner
Roberto D. Tuazon and Lourdes executed a Contract of Lease5 over the said parcel of land for a
period of three years. During the effectivity of the lease, Lourdes sent a letter to Roberto where she
offered to sell to the latter subject parcel of land. She pegged the price at ₱37M and gave him two
years to decide on the said offer. More than four months after the expiration of the Contract of Lease,
Lourdes sold subject parcel of land to her only child, her son-in-law and her two grandsons. The new
owners notified Roberto to vacate the premises. Roberto refused hence, the De Leons filed a
complaint for Unlawful Detainer which was favored by the Court.
Issue: whether the letter of Lourdes to Roberto involved an option contract or a contract of a right
of first refusal.
Held: The letter embodies an option contract as it grants Roberto a fixed period of only two years to
buy the subject property at a price certain of ₱37M. In a situation where the lessor makes an offer
to sell to the lessee a certain property at a fixed price within a certain period, and the lessee fails to
accept the offer or to purchase on time, then the lessee loses his right to buy the property and the
owner can validly offer it to another. The counter-offer of Roberto for a much lower price was not
accepted by Lourdes. There is therefore no contract that was perfected between them with regard
to the sale of subject property.
PUP vs. Golden Horizon Realty
March 15, 2010
Facts: NDC entered into a Contract of Lease with Golden Horizon Realty Corp (GHRC) over a
portion of the property, for a period of ten (10) years, renewable for another ten (10) years with
mutual consent of the parties. GHRC as lessee was granted the right of first refusal. GHRC
discovered that NDC had decided to secretly dispose the property to a third party. Then President
Corazon C. Aquino issued Memorandum Order No. 214, ordering the transfer of the whole NDC
Compound to the National Government, which in turn would convey the said property in favor of
PUP at acquisition cost. PUP also demanded that GHRC vacate the premises, insisting that the
latter’s lease contract had already expired
Issue: whether or not the option to purchase the portion lease to it was violated by the sale of the
NDC Compound in favor of PUP pursuant to Memorandum Order No. 214
Held: Yes. We have further stressed that not even the avowed public welfare or the constitutional
priority accorded to education, invoked by petitioner PUP in the Firestone case, would serve as
license for us, and any party for that matter, to destroy the sanctity of binding obligations. While
education may be prioritized for legislative and budgetary purposes, it is doubtful if such importance
can be used to confiscate private property such as the right of first refusal granted to a lessee of
petitioner NDC.
CRC, 2019
When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee not
to sell the leased property to anyone at any price until after the lessor has made an offer to sell the
property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to
exercise his right of first priority could the lessor sell the property to other buyers under the same
terms and conditions offered to the lessee, or under terms and conditions more favorable to the
lessor
CONTRACT TO SELL
Valenzuela vs. Kalayaan Dev. Corp.
G.R. No. 163244, June 22, 2009
Facts: Petitioners, Spouses Jose T. Valenzuela and Gloria Valenzuela (Gloria), occupied the
property owned by Kalayaan Development and Insudtrial Corpporation and introduced several
improvements thereon. The parties executed a Contract to Sell wherein they stipulated that
petitioners would purchase the subject property for ₱1,416,000.00. Petitioners initially gave
₱500,000.00 upon signing the contract and agreed to pay the balance of in twelve (12) equal monthly
installments. Kalayaan shall execute the corresponding deed of absolute sale over the subject
property only upon full payment of the total purchase price. After 3 installments, Petitioners failed to
pay the agreed monthly installments. Petitioners requested Kalayaan that they be issued a deed of
sale for the half of the purchase price had already been paid and that only half of the portion of the
lot is used by their house. The RTC rendered a Decision in favor of Kalayaan, rescinding the contract
between the parties.
Issue: Whether or not the court erred in allowing the rescission of the contract.
Held: Yes. Petitioners failed to pay the balance of the purchase price. Such payment is a positive
suspensive condition, failure of which is not a breach, serious or otherwise, but an event that
prevents the obligation of the seller to convey title from arising.27 The non-fulfillment by petitioners
of their obligation to pay, which is a suspensive condition for the obligation of Kalayaan to sell and
deliver the title to the property, rendered the Contract to Sell ineffective and without force and effect.
The parties stand as if the conditional obligation had never existed.28 Inasmuch as the suspensive
condition did not take place, Kalayaan cannot be compelled to transfer ownership of the property to
petitioners.
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 Visayan Sawmill vs. CA
G.R. No. 83851, March 3, 1993
Facts: plaintiff-appellee and defendants-appellants corporation entered into a sale involving scrap
iron located at the stockyard of the latter subject to the condition that plaintiff-appellee will open a
letter of credit in favor of defendant-appellant corporation on or before May 15, 1983. This is
evidenced by a contract entitled `Purchase and Sale of Scrap Iron' duly signed by both parties. On
May 17, 1983, plaintiff-appellee through his man, started to dig and gather and scrap iron at the
defendant-appellant's premises. Defendant-appellant Corporation is unwilling to continue with the
sale due to plaintiff-appellee's non-compliance with essential pre-conditions, among which is the
opening of an irrevocable and unconditional letter of credit on May 26, 1983 which is beyond May
15, 1983.
Issue: Whether or not the contract is one of sale or contract to sell
Held: It is a contract to sell. The petitioner corporation's obligation to sell is unequivocally subject to
a positive suspensive condition, i.e., the private respondent's opening, making or indorsing of an
irrevocable and unconditional letter of credit. The former agreed to deliver the scrap iron only upon
payment of the purchase price by means of an irrevocable and unconditional letter of credit. The
failure of the private respondent to comply with the positive suspensive condition cannot even be
considered a breach — casual or serious — but simply an event that prevented the obligation of
Petitioner Corporation to convey title from acquiring binding force.
The obligation of the petitioner corporation to sell did not arise; it therefore cannot be compelled by
specific performance to comply with its prestation. Article 1191 of the Civil Code does not apply; on
the contrary, pursuant to Article 1597 of the Civil Code, the petitioner corporation may totally rescind,
as it did in this case, the contract.
This permission or consent can, to dig and gather the scrap iron and stock the same for weighing is
by no stretch of the imagination, be construed as delivery of the scrap iron citing Article 1497 of the
Civil Code. In the first place, said Article 1497 falls under the Chapter 15 Obligations of the Vendor,
which is found in Title VI (Sales), Book IV of the Civil Code. As such, therefore, the obligation
imposed therein is premised on an existing obligation to deliver the subject of the contract. In the
instant case, in view of the private respondent's failure to comply with the positive suspensive
condition earlier discussed, such an obligation had not yet arisen. In the second place, it was a mere
accommodation to expedite the weighing and hauling of the iron in the event that the sale would
materialize. The private respondent was not thereby placed in possession of and control over the
scrap iron. Thirdly, We cannot even assume the conversion of the initial contract or promise to sell
into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron
because its action and conduct in the premises do not support this conclusion. Indeed, petitioners
demanded the fulfillment of the suspensive condition and eventually cancelled the contract
CRC, 2019
People’s Homesite & Housing Corp. vs. Court of Appeals
133 SCRA 777
Facts: The PHHC board of directors passed Resolution No. 513 wherein it stated "that subject to
the approval of the Quezon City Council of the Consolidation Subdivision Plan, Lot 4. containing,
4,182.2 square meters as it is hereby awarded to Spouses Rizalino Mendoza and Adelaida
Mendoza, P21.00 per square meter" and that this award shall be subject to the approval of the OEC
(PHHC) Valuation Committee and higher authorities". It was disapproved. The revised plan, which
included Lot 4, with a reduced area of 2,608.7, was approved by the city council. PHHC board of
directors passed a resolution recalling all awards of lots to persons who failed to pay the deposit or
down payment for the lots awarded to them. The Mendoza spouses asked for reconsideration of
the withdrawal of the previous award to them of Lot 4 and for the cancellation of the re-award of said
lot to Sto. Domingo and four others.
Issue: whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which
they can enforce against the PHHC by an action for specific performance.
Held: No. The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. In this case, we cannot say there was a
meeting of minds on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square
meter.
"In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes the condition.
There was no perfected sale of Lot 4. In 1964, when the plan with the area of Lot 4 reduced to
2,608.7 square meters was approved, the Mendozas should have manifested in writing their
acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its
purchase although the area was reduced and to obviate ally doubt on the matter. They did not do
so. The PHHC board of directors acted within its rights in withdrawing the tentative award.
7|Page
 Coronel et al. vs. Court of Appeals
G.R. No. 103577, Oct 7, 1996
Facts: Romulo Coronel, et al. executed a document entitled "Receipt of Down Payment" in favor of
plaintiff Ramona Patricia Alcaraz. The condition of the document states that The Coronels will cause
the transfer in their names of the title of the property registered in the name of their deceased father
upon receipt of the P 50,000 which is the downpayment. Upon said transfer, the Coronels will
execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole
balance of P1,190,000.00. Concepcion D. Alcaraz, mother of Ramona, paid P50, 000.00 and
thereafter the title of the land was transferred from the father to the seller. The Coronels sold the
property to Catalina B. Malanga for P1,580,000.00 after the latter has paid P300,000.00. Coronels
canceled and rescinded the contract with Ramona. Concepcion, et al., filed a complaint for specific
performance against the Coronels.
Issue: Whether or not Ramona Concepcion may file complaint for specific performance against
the Coronels.
Held: Yes. Judgment for specific performance is hereby rendered. The agreement could not have
been a contract to sell because the sellers herein made no express reservation of ownership or title
to the subject parcel of land. Furthermore, the circumstance which prevented the parties from
entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title
was not in their names) and not the full payment of the purchase price.
The parties had agreed to a conditional contract of sale, consummation of which is subject only to
the successful transfer of the certificate of title from the name of petitioners' father, Constancio P.
Coronel, to their names.
The sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale. Petitioner
Mabanag could not have in good faith, registered the sale entered into on February 18, 1985
because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer
certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale
sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the
same property had already been previously sold to private respondents, or, at least, she was
charged with knowledge that a previous buyer is claiming title to the same property.
CRC, 2019
Tan v. Benolirao
G.R. 153820 Oct. 16, 2009
Facts: The co-owners Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and
Norma Tannings co-owners of a parcel of land executed a Deed of Conditional Sale over the
property in favor of Delfin Tan. One of its stipulations states that, in case BUYER have complied with
the terms and conditions of this contract, then the SELLERS shall execute and deliver to the BUYER
the appropriate Deed of Absolute Sale. Tan delivered a check to the co-owners for the payment of
downpayment. Benolirao died intestate and a new certificate of title was created including his
children and widow together with the co-owners. Tan refused to pay the installments on the reason
that the annotation on the title, constituted an encumbrance on the property that would prevent the
vendors from delivering a clean title to him. He demanded the return of his down payment. This
prompted Tan to file a complaint for specific performance against the vendors.
Issue: Whether or not Tan was justified in refusing to pay the balance price since the vendors would
not have been able to comply with their obligation to deliver a "clean" title covering the property.
Held: Yes. The contract to sell was terminated when the vendors could no longer legally compel
Tan to pay the balance of the purchase price as a result of the legal encumbrance which attached
to the title of the property. Since Tan's refusal to pay was due to the supervening event of a legal
encumbrance on the property and not through his own fault or negligence, we find and so hold that
the forfeiture of Tan's down payment was clearly unwarranted.
Olivarez Realty v. Castillo
G.R. 196251; July 9, 2014
Facts: Under the deed of conditional sale, Benjamin Castillo agreed to sell his property to Olivarez
Realty Corporation. Olivarez Realty Corporation agreed to a down payment. As to the balance,
Olivarez Realty agreed to pay in 30 equal monthly installments every eighth day of the month
beginning in the month that the parties would receive a decision voiding the Philippine Tourism
Authority’s title to the property. After singing the contract, Olivarez Realty occupied the property.
Contrary to the agreement, the corporation did not file any action against the PTA, and only paid
P2.5M. Castillo prayed for rescission of contract.
Issue: Whether or not Castillo may rescind the contract
Held: No. Article 1191 of the Civil Code of the Philippines does not apply. The contract to sell is
instead cancelled, and the parties shall stand as if the obligation to sell never existed
There is a contract to sell, not a contract of conditional sale. In this case, Castillo reserved his
title to the property and undertook to execute a deed of absolute sale upon Olivarez Realty
Corporation’s full payment of the purchase price.122 Since Castillo still has to execute a deed of
absolute sale to Olivarez Realty Corporation upon full payment of the purchase price, the transfer of
title is not automatic. The contract in this case is a contract to sell.
We order the ₱2,500,000.00 forfeited in favor of Castillo as reasonable compensation for Olivarez
Realty Corporation’s use of the property for 14 years.
8|Page
 Romero v. CA
250 SCRA 223
Facts: A contract, denominated "Deed of Conditional Sale," was executed between petitioner Virgilio
Romero and Chua vda de Ongsiong for former’s construction of a central warehouse. It is stipulated
that if after 60 days from the date of the signing of this contract Ongsiong shall not be able to remove
the squatters from the property, the downpayment made by the buyer shall be returned by the
Vendor. That in the event that the VENDEE shall not be able to pay the VENDOR the balance of the
purchase price ONLY after 45 days from written notification to the VENDEE of the removal of the
squatters from the property being purchased, the downpayment shall be forfeited in favor of the
VENDOR. Private respondent sought to return the P50,000.00 she received from petitioner since,
she said, she could not "get rid of the squatters" on the lot. The private respondent, prompted by
petitioner's continued refusal to accept the return of the P50,000.00 advance payment, Civil Case
for rescission of the deed of "conditional" sale.
Ace Foods v. Micro Pacific Technology
G.R. 200602; Dec. 11, 2013
Facts: ACE Foods is a domestic corporation engaged in the distribution of consumer goods in
wholesale and retail bases,6 while MTCL is one engaged in the supply of computer hardware and
equipment.7ACE Foods issued Purchase Order for the subject products and MTCL delivered it to
ACE Foods. The fine print of the invoice states, inter alia, that "[t]itle to sold property is reserved in
MICROPACIFIC TECHNOLOGIES CO., LTD. until full compliance of the terms and conditions and
payment of the price". MTCL’s demands against ACE Foods to pay the purchase price, however,
remained unheeded for allegedly being defective and the latter’s breach of after delivery services.
Ace foods has been using the products for a period of nine (9) months.

Issue: May the vendor demand the rescission of a contract for the sale of a parcel of land for a
cause traceable to his own failure to have the squatters on the subject property evicted within the
contractually-stipulated period.
Held: No. The ejectment of the squatters by the private respondent is a condition the operative act
of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the
balance of the purchase price. Private respondent's failure "to remove the squatters from the
property" within the stipulated period gives petitioner the right to either refuse to proceed with the
agreement or waive that condition in consonance with Article 1545 of the Civil Code. 16 This option
clearly belongs to petitioner and not to private respondent.
United Muslim & Christian Urban Poor v. BRYC-V Devt
G.R.179653; July 31, 2009
Issue: whether ACE Foods should pay MTCL the purchase price for the subject products.
Held: Yes. The parties have agreed to a contract of sale and not to a contract to sell. Bearing in
mind its consensual nature, a contract of sale had been perfected at the precise moment ACE Foods,
as evinced by its act of sending MTCL the Purchase Order, accepted the latter’s proposal to sell the
subject products in consideration of the purchase price. From that point in time, the reciprocal
obligations of the parties– already arose and consequently may be demanded. Article 1475 of the
Civil Code makes this clear: The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.
Absent any clear indication that the title reservation stipulation was actually agreed upon,
the Court must deem the same to be a mere unilateral imposition on the part of MTCL which has no
effect on the nature of the parties’ original agreement as a contract of sale. Perforce, the obligations
arising thereto, among others, ACE Foods’s obligation to pay the purchase price as well as to
accept the delivery of the goods,40 remain enforceable and subsisting.1âwphi

Facts: Petitioners, together with other occupants of a portion of Lot 300, organized themselves into
an association, United Muslim Christian Urban Poor Association, Inc. (UMCUPAI), purposely to
negotiate for the acquisition of Lot 300 owned by Sea Foods Corporation Inc. (SFC). They entered
into an agreement denominated as "Letter of Intent to Sell by Landowner and Letter of Intent to
Purchase by the UMCUPAI. SFC sold to BRYC-V Development Corporation Lot 300-C where
petitioners had constructed their houses. was issued Transfer Certificate of Title in its name.
Respondent thus filed a complaint for unlawful detainer against petitioners

Issue: Whether or not the respondent UMCUPAI has a right to the subject land under a letter of
intent.

Held: No. The respondent,BRYC-V as the registered owner of Lot 300-C, is entitled to possess it to
the exclusion of petitioners whose occupation thereof is merely on the tolerance11 of the previous
owner SFC; and the Letter of Intent did not have the effect of transferring ownership and possession
of Lot 300 to petitioners, it being a mere manifestation of SFC's intention to sell it to UMCUPAI.

9|Page
CRC, 2019
 SUBJECT MATTER OF SALE Heirs of San Andres v. Rodriguez
337 SCRA 769 (2000)

Yu Tek & Co. v, Gonzales

Feb.1, 1915
Facts: Mr. Basilio Gonzalez received the sum of P3,000 from Messrs. Yu Tek and Co., in
consideration of 600 piculs of sugar of the first and second grade to be delivered by him to the latter.
That in case of failure by Mr. Gonzales to deliver the said sugar within the period of three months,
the contract shall be rescinded. Plaintiff proved that no sugar had been delivered to it under this
contract nor had it been able to recover the P3,000. Plaintiff prayed for judgment for the P3,000 and,
in addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000 only, and from
this judgment both parties appealed
Issue: Whether or not there was a perfected sale.
Facts: Juan San Andres sold a portion land of his land, to respondent Vicente S. Rodriguez. Upon
the death of Juan San Andres, Ramon San Andres was appointed judicial administrator of the
decedent's estate. Ramon San Andres engaged the services of a geodetic engineer to prepare a
consolidated plan of the estate. Engineer Peñero also prepared a sketch plan of the 345-square
meter lot sold to respondent. From the result of the survey, it was found that respondent had
enlarged the area which he purchased from the late Juan San Andres by 509 square meters. The
judicial administrator brought an action, in behalf of the estate of Juan San Andres, for recovery of
possession of the 509-square meter lot. Respondent alleged that Juan San Andres likewise sold to
him the following day the remaining portion of the lot consisting of 509 square meters, with both
parties treating the two lots as one whole parcel.

Held: None. The contract in the case at bar was merely an executory agreement; a promise of sale
and not a sale. There is a perfected sale with regard to the "thing" whenever the article of sale has
been physically segregated from all other articles. If called upon to designate the article sold, it is
clear that the defendant could only say that it was "sugar." He could only use this generic name for
the thing sold. There was no "appropriation" of any particular lot of sugar. Neither party could point
to any specific quantity of sugar and say: "This is the article which was the subject of our
contract." Hence there was no subject matter. The defendant having defaulted in his engagement,
the plaintiff is entitled to recover the P3,000 which it advanced to the defendant.
Issue: Whether or not the contract to sale of the 509 square meter parcel of land is invalid for lack
of object certain
Held: No. The contract of sale is valid. There is no dispute that respondent purchased a portion
of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-
B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt
as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the
"previously paid lot" on three sides thereof, the subject lot is capable of being determined without
the need of any new contract. The fact that the exact area of these adjoining residential lots is subject
to the result of a survey does not detract from the fact that they are determinate or determinable.

Compana de Tabacos v. CA

185 SCRA 284 (1990)

Facts: Gomez and Torres were the owners and holders of sugar quota appertaining to a
certain plantation. Later, they mortgaged certain real estate and personal property together
with all the buildings and sugar quota to a corporation. Meanwhile the sugar quota was
sold by Gomez and Torres to Theo H. Davies & Co. Petitioner was the latter’s successor in
interest.

Issue: Is the contract of sale covering the sugar quota valid?

Held: The sale is not valid. The intangible property that is the sugar quota in question should
be considered as real property by destination “as an improvement attaching to the land
thereto”. It is not possible to sell sugar quota of a particular number of piculs without
specifying the land to which it relates. The sale is void for lack of subject matter.

10 | P a g e
CRC, 2019
 Pichel vs. Alonzo
Jan. 30. 1982
Facts: This case originated as an action for the annulment of a "Deed of Sale" executed by
Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the
former by the Philippine Government under Republic Act No. 477. Plaintiff and his wife sold to
defendant an the fruits of the coconut trees which may be harvested in the land in question for the
period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00.
Issue: Is the deed of sale, the prohibited encumbrance contemplated in Section 8 of Republic Act
No. 477?
Held: The grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or
disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly
disallows is the encumbrance or alienation of the land itself or any of the permanent
improvements thereon. While coconut trees are permanent improvements of a land, their nuts are
natural or industrial fruits which are meant to be gathered or severed from the trees, to be used,
enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee
of Lot No. 21 from the Government, had the right and prerogative to sell the coconut fruits of the
trees growing on the property.
EDCA Publishing vs. Santos
184 SCRA 614 (1990)
Facts: A person identifying himself as Professor Jose Cruz placed an order with the petitioner
company for 406 book Cruz which was delivered upon Cruz’s issuance of personal check for
payment of the purchase price. Cruz sold 120 of the books to private respondent Leonor Santos
who, after verifying the seller's ownership from the invoice he showed her, paid him P1,700.00.
EDCA having become suspicious over a second order placed by Cruz even before clearing of his
first check, made inquiries with the De la Salle College where he had claimed to be a dean and was
informed that there was no such person in its employ. EDCA then went to the police, which set a
trap and arrested Cruz. With the help of the Police they seized the 120 books without warrant,
loading them in a van belonging to EDCA, and thereafter turned them over to the petitioner. The
private respondents sued for recovery of the books after demand for their return was rejected by
EDCA.
Issue: whether the petitioner has been unlawfully deprived of the books because the check issued
by the impostor in payment therefor was dishonored.
Held: The rule is that such ownership shall pass from the vendor to the vendee upon the
actual or constructive delivery of the thing sold even if the purchase price has not yet been
paid. Non-payment only creates a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks.
Actual delivery of the books having been made, Cruz acquired ownership over the books
which he could then validly transfer to the private respondents. The fact that he had not yet
paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by
the private respondents to the books.
CRC, 2019
Tagatac v. Jimenez
Facts: The plaintiff Trinidad Tagatac sold her car to Warner Feist, who sold it to Sanchez, who sold
it to Liberato Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the
plaintiff sued to recover the vehicle from Jimenez on the ground that she had been unlawfully
deprived of it by reason of Feist's deception.
In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been
unlawfully deprived of her car. At first blush, it would seem that she was unlawfully
deprived thereof, considering that she was induced to part with it by reason of the
chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is an
illegal method of deprivation of property. In a manner of speaking, plaintiff-appellant was
"illegally deprived" of her car, for the way by which Warner L. Feist induced her to part
with it is illegal and is punished by law. But does this "unlawful deprivation" come within
the scope of Article 559 of the New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable
contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either
ratification or annulment. If the contract is ratified, the action to annul it is extinguished
(Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396,
N.C.C.); if the contract is annulled, the contracting parties are restored to their respective
situations before the contract and mutual restitution follows as a consequence (Article
1398, N.C.C.).
However, as long as no action is taken by the party entitled, either that of
annulment or of ratification, the contract of sale remains valid and binding. When
plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said
voidable contract of sale, the title to the car passed to Feist. Of course, the title that
Feist acquired was defective and voidable. Nevertheless, at the time he sold the car to
Felix Sanchez, his title thereto had not been avoided and he therefore conferred a good
title on the latter, provided he bought the car in good faith, for value and without notice
of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on record that
Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith
11 | P a g e
 Quijada vs. Court of Appeals deed of donation which is subject to the possibility of reversion of ownership arising from the non-
fulfillment of the resolutory condition.

299 SCRA 695 (1998)

Facts: On April 5, 1956, Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against
private respondents for quieting of title, recovery of possession and ownership of parcels of land
with claim for attorney's fees and damages. Trinidad Quijada and her sisters executed a deed of
conditional donation in favor of the Municipality of Talacogon, the condition being that the land shall
be used exclusively for the construction of a provincial high school. Trinidad remained in possession
of the land despite the donation. On On July 29, 1962, Trinidad sold the land to respondent
Regalado Mondejar. The heirs of Trinidad, herein petitioners, filed a complaint for forcible entry
against the respondent. In 1987, The proposed campus did not materialize, and the Sangguniang
Bayan enacted a resolution donating back the land to the donor. In the meantime, respondent
Mondejar conveyed portions of the land to the other respondents.
Issue: Whether or not the sale of the subject property made by Trinidad Quijada to respondent
Mondejar is void, considering that at that time, ownership was already transferred to the Municipality
of Talacogon
Held: No. The sale between Quijada and Mondejar was valid as the former retained an inchoate
interest on the lots by virtue of the automatic reversion clause in the deed of donation.
Sale, being a consensual contract, is perfected by mere consent, which is manifested the
moment there is a meeting of the minds17 as to the offer and acceptance thereof on three (3)
elements: subject matter, price and terms of payment of the price. 18 Ownership by the seller on the
thing sold at the time of the perfection of the contract of sale is not an element for its perfection.
What the law requires is that the seller has the right to transfer ownership at the time the
thing sold is delivered.
The consummation, however, of the perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer when the seller or her
successors-in-interest subsequently acquires ownership thereof. Such circumstance
happened in this case when petitioners — who are Trinidad Quijada's heirs and successors-
in-interest — became the owners of the subject property upon the reversion of the ownership
of the land to them. Consequently, ownership is transferred to respondent Mondejar and
those who claim their right from him. Article 1434 of the New Civil Code supports the ruling
that the seller's "title passes by operation of law to the buyer." 21 This rule applies not only
when the subject matter of the contract of sale is goods,22 but also to other kinds of property,
including real property.

When the Municipality's acceptance of the donation was made known to the donor, the former
became the new owner of the donated property — donation being a mode of acquiring and
transmitting ownership 11 — notwithstanding the condition imposed by the donee. The donation is
perfected once the acceptance by the donee is made known to the donor.12 According, ownership
is immediately transferred to the latter and that ownership will only revert to the donor if the resolutory
condition is not fulfilled.

In this case, that resolutory condition is the construction of the school. It has been ruled that when a
person donates land to another on the condition that the latter would build upon the land a school,
the condition imposed is not a condition precedent or a suspensive condition but a resolutory one. 13

Thus, at the time of the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not
have sold the lots since she had earlier transferred ownership thereof by virtue of the deed of
donation. So long as the resolutory condition subsists and is capable of fulfillment, the donation
remains effective and the donee continues to be the owner subject only to the rights of the donor or
his successors-in-interest under the deed of donation. Since no period was imposed by the donor
on when must the donee comply with the condition, the latter remains the owner so long as he has
tried to comply with the condition within a reasonable period.

Such period, however, became irrelevant herein when the donee-Municipality manifested through a
resolution that it cannot comply with the condition of building a school and the same was made
known to the donor. Only then — when the non-fulfillment of the resolutory condition was brought to
the donor's knowledge — that ownership of the donated property reverted to the donor as provided
in the automatic reversion clause of the deed of donation.

The donor may have an inchoate interest in the donated property during the time that ownership of
the land has not reverted to her. Such inchoate interest may be the subject of contracts including a
contract of sale. In this case, however, what the donor sold was the land itself which she no longer
owns. It would have been different if the donor-seller sold her interests over the property under the

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 Sumaya et al vs. IAC The purpose of the notation is nothing more than to afford to the persons entitled to the
reservation, if any, due protection against any act of the reservor, which may make it
Sept. 2, 1991 ineffective .

Facts: Raul Balantakbo inherited a one-third (1/3) interest, pro-indiviso in a parcel of land in Civil
Case No. SC-956 from his father Jose Sr. and A one-seventh (1/7) interest pro-indiviso in ten (10) Consistent with the rule in reserva viudal where the person obliged to reserve (the widowed spouse)
parcels of registered lands in Civil Case No. SC-957 from his maternal grandmother, Luisa Bautista; had the obligation to annotate in the Registry of Property the reservable character of the property,
Raul died intestate leaving only his mother, Consuelo Joaquin Vda. de Balantakbo, as his sole in reserva troncal, the reservor (the ascendant who inherited from a descendant property which the
surviving heir to the real property. latter inherited from another descendant) has the duty to reserve and therefore, the duty to annotate
also.
Consuelo adjudicated unto herself the above described properties in an Affidavit. Consuelo sold the
property to Mariquita H. Sumaya. Sumaya sold it to Villa Honorio Development Corporation, Inc. The
The jurisprudential rule requiring annotation in the Registry of Property of the right reserved in real
latter assigned its rights over the property in favor of Agro-Industrial Coconut Cooperative, Inc.
property subject of reserva viudal insofar as it is applied to reserva troncal stays despite the abolition
of reserva viudal in the New Civil Code. This rule is consistent with the rule provided in the second
Consuelo Joaquin vda. de Balantakbo sold the properties described in the complaint in Civil Case
paragraph of Section 51 of P.D. 1529, which provides that: "The act of registration shall be the
No. SC-957 to Villa Honorio Development Corporation, Inc. The latter in turn transferred and
operative act to convey or affect the land insofar as third persons are concerned . . ."
assigned all its rights to the properties in favor of Laguna Agro-Industrial Coconut Cooperative, Inc.
(emphasis supplied)
which properties are presently in its possession.

The parties admit that the certificates of titles covering the above described properties do
not contain any annotation of its reservable character. Consuelo Joaquin vda. de Balantakbo
died.
Balantakbo, brothers in full blood of Raul Balantakbo and Luisa, Jose and Dolores, surviving children
of deceased Jose Balantakbo, Jr., another brother of the first named Balantakbos, filed the above
mentioned civil cases to recover the properties described in the respective complaints which they
claimed were subject to a reserva troncal in their favor.
Issue: Whether or not the respondents is entitled to the properties claiming such as subject to
reserve troncal
Held: In this case, the affidavit of self-adjudication executed by Consuelo vda. de Balantakbo which
contained a statement that the property was inherited from a descendant, Raul, which has likewise
inherited by the latter from another ascendant, was registered with the Registry of Property. The
failure of the Register of Deeds to annotate the reservable character of the property in the
certificate of title cannot be attributed to Consuelo. There is sufficient proof that the petitioners
had actual knowledge of the reservable character of the properties before they bought the same
from Consuelo.
The cause of action of the private respondents did not prescribe yet. The cause of action of the
reservees did not commence upon the death of the propositus Raul Balantakbo on June 13, 1952
but upon the death of the reservor Consuelo Vda. de Balantakbo on June 3, 1968. Relatives within
the third degree in whose favor the right (or property) is reserved have no title of ownership or of fee
simple over the reserved property during the lifetime of the reservor. Only when the reservor
should die before the reservees will the latter acquire the reserved property, thus creating a
fee simple, and only then will they take their place in the succession of the descendant of
whom they are relatives within the third degree.
Nonetheless, this right if not exercised within the time for recovery may prescribe in ten (10) years
under the old Code of Civil Procedure or in thirty years under Article 1141 of the New Civil Code.
The actions for recovery of the reserved property was brought by herein private respondents on
March 4, 1970 or less than two (2) years from the death of the reservor. Therefore, private
respondents' cause of action has not prescribed yet.

The affidavit of self-adjudication executed by Consuelo and registered with the Registry
would still be sufficient notice to bind them.

The obligation to reserve rests upon the reservor, Consuelo Joaquin vda. de Balantakbo. Article 891
of the New Civil Code on reserva troncal provides:

Art. 891. The ascendant who inherits from his descendant any property which the latter
may have acquired by gratuitous title from another ascendant or a brother or sister,
is obliged to reserve such property as he may have acquired by operation of law for the
benefit of relatives who are within the third degree and who belong to the line from which
said property came. (Emphasis supplied)

whether the reservation established by Article 811 (now Art. 891 of the New Civil Code) of the Civil
Code, for the benefit of the relatives within the third degree belonging to the line of the descendant
from whom the ascendant reservor received the property, should be understood as made in favor of
all the relatives within said degree and belonging to the line above-mentioned, without distinction
legitimate, natural and illegitimate ones not having the legal status of natural children.

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 Pajunar vs. Court of Appeals
July 18, 1989
Facts: This is a case of Recovery of Personal Property with a Writ of Replevin filed by one Arthur
and Invencia Pajunar as plaintiffs, against one Mauro and Teofila Eluna as defendants, tried and
decided by the Municipal Court of Siaton.
In 1969, Respondent Mauro Eluna bartered his three-year old male cow for one year old female
carabao then in the possession of Aurelio Enopia. The female carabao, which is the one in question,
bore the brand "ART" in her front and hind legs at the time she was acquired by Mauro. Said
respondent did not or could not register the transfer to him. In March, 1980, petitioner Arthur Pajunar
claiming that he was the original owner of the carabao which got lost in 1974, demanded her return.
He demanded also the delivery to him of the two offsprings of the carabao which were five years
and eight months old at the time they were registered in 1980
. When Eluna refused to do so despite repeated demands, petitioner went to court to recover
possession.
Issue: Whether or not the respondents acquired ownership of said carabao by prescription under
Article 1132 of the Civil Code
Held: No. The records show that respondent Mauro Eluna did not comply with this requirement
under Section 529 of the Revised Administrative Code which requires a registration before a valid
transfer may be done. Failure of a party to exercise precaution to acquaint himself with the defects
in the title of his vendor precludes him claiming possession in good faith. This duty to make a closer
inquiry into the certificate of registration of the female carabao which was the subject of the barter,
defendant Mauro Eluna should have performed but did not. Thus, his being in bad faith, in acquiring
the carabao from his vendor, Aurelio Enopia.
It is clear from the foregoing that possession in good faith for four (4) years is not applicable,
neither can possession in bad faith of eight (8) years benefit respondents, for when the owner
of a movable has lost or has been illegally deprived of his property he can recover the same
without need to reimburse the possessor, as provided in Art. 559 of the Civil Code.
Bautista vs. Jalandoni
Nov. 27, 2013
Facts: The controversy stemmed from a complaint for cancellation of titles with damages filed by
Spouses Jalandoni against Spouses Bautista et al.
The Spouses Jalandoni applied for a loan with a commercial bank and, as a security thereof, they
offered to constitute a real estate mortgage over their two lots. It was discovered that their titles over
the two lots had been cancelled and new TCT Nos. 206091 and 205624 were issued in the names
of Spouses Baustista. They found out that the bases for the cancellation of their titles were two
deeds of absolute sale, purportedly executed and signed by them in favor of Spouses Baustista.
Spouses Bautista claimed that, a certain Teresita Nasino offered to Eliseo Baustista (Eliseo) two
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parcels of land located in Muntinlupa City and told them that she would negotiate with the Spouses
Jalandoni.
Eliseo contracted a loan with Spouses Tongco using as a security the parcel of land covered by TCT
No. 205624; that he also contracted a loan with MCC in the amount of ₱3,493,3 79.82 and used as
a security the lot covered by TCT No. 206091; that they eventually paid the loan with the Spouses
Tongco, thus, the real estate mortgage was cancelled; and that since they were having difficulty
paying the interests of their loan with the MCC, they also mortgaged the lot covered by TCT No.
205624.
Issue: whether or not the Spouses Bautista were buyers in good faith and for value; and,
(2) in case they were not, whether or not Spouses Jalandoni have a better right than MCC
Held: The law requires a written authority when the sale of a piece of land is through an
agent, whether the sale is gratuitously or for a valuable consideration. Absent such authority
in writing, the sale is null and void (Art. 1878). In the case at bar, it is undisputed that the sale
of the subject lots to Spouses Bautista was void. Based on the records, Nasino had no written
authority from Spouses Jalandoni to sell the subject lots.
“A buyer in good faith is one who buys the property of another without notice that some other person
has a right to or interest in such property. He is a buyer for value if he pays a full and fair price at the
time of the purchase or before he has notice of the claim or interest of some other person in the
property.
To prove good faith, the following conditions must be present:
(a) The seller is the registered owner of the land;
(b) The owner is in possession thereof; and
(3) At the time of the sale, the buyer was not aware of any claim or interest of some other person in
the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to
the property.
All these conditions must be present, otherwise, the buyer is under obligation to exercise extra
ordinary diligence by scrutinizing the certificates of title and examining all factual circumstances to
enable him to ascertain the seller’s title and capacity to transfer any interest in the property.31
Spouses Bautista cannot be deemed purchasers in good faith. There were several
circumstances that should have placed them on guard and prompted them to conduct an
investigation that went beyond the face of the title of the subject lots. Their failure to take the
necessary steps to determine the status of the subject lots and the extent of Nasino’s
authority puts them into bad light.
Spouses Jalandoni had not been negligent in any manner and indeed had not performed any
act which gave rise to any claim by a third person. As a matter of fact, Spouses Jalandoni never
relinquished their title over the subject lots. They had in their possession the owner’s duplicate of
title all this time and they never handed it to anyone. Imagine their surprise when they learned that
the copy of their certificates of title with the Registry of Deeds had been cancelled and new ones
issued in the names of Spouses Bautista. Thus, whatever rights MCC may have acquired over
the subject lots cannot prevail over, but must yield to the superior rights of Spouses
Jalandoni as no one can acquire a better right that the transferor has.
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 Baretto vs. Santa Marina
Dec. 29, 1913
Facts: Plaintiff Antonio Barretto offered to sell his share or participation of P20,000 or 4/173 of the
whole in La Insular Cigar and Cigarette factory, a joint account association to defendant Jose Santa
Marina which result to the execution of Exhibit G on May 3, 1910. A committee of appraisers was
appointed to ascertain and fix the actual value of La Insular. The committee rendered its report,
fixing the net value at P4,428,194.44. In Exhibit J, which was executed on November 22, 1910, the
plaintiff acknowledged to have received from the defendant that amount. Demand was made by the
Barretto upon Santa Marina for his share of the profits from June 30, 1909, to November 22,
1910. This demand was refused and thereupon this action was instituted to recover said profits. The
plaintiff admits that if the agreement of May 3, 1910, was a perfected sale he cannot recover any
profits after that date; while on the other hand the defendant concedes that if said agreement was
only a promise to sell in the future it, standing alone, would not prevent recovery in this action.
ISSUE: Whether the agreement made by the parties on May 3, 1910 was a perfected contract of
sale.
Held: Yes. There are two indispensable requisites in a perfected sale: (1) There must be an
agreement upon the thing which is the object of the contract; and (2) the contracting parties must
agree upon the price. The object of the contract in the case at bar was the whole of the
plaintiff's right, title, and interest in La Insular which was 4/173 of the entire net value of the
business. The parties agreed that the price should be 4/173 of the total net value. The fixing of
such net value was unreservedly left to the judgment of the appraisers. As to the thing and
the price the minds of the contracting parties met, and all questions relating thereto were
settled. Nothing was left unfinished in so far as the contracting parties were
concerned. Neither party could withdraw from the contract without the consent of the other. The
result is that the two essential requisites necessary to constitute a perfected sale were
present.
When the parties used this for the purposes of the purchase and sale above mentioned."
they had in mind the purchase and sale which they had just made. Again, not only was the title of
the plaintiff's interest vested in the defendant on the execution of the contract of May 3 but the
possession of that interest was also then transferred to the defendant.
The parties did intend to include the profits in question in the purchase and sale, and the
appraisers did include said profits when they fixed the total net value of La Insular. All the authorities
agree that when the word "whole" is thus used it means the entire thing. That the profits were a part
of the plaintiff's interest is self-evident. That the appraisers in fixing the total net value included the
accumulated profits we think there can be no question. These profits formed for that purpose a part
of the assets. The appraisers could not distinguish the profits from the other personal property as
such profits had not at that time been set aside and the appraisers were instructed to ascertain and
fix the total net value so that the entire present value of the plaintiff's interest might be ascertained.
The contracts and the report of the appraisers are so clear and cover the entire subject matter
so fully that we are convinced that the subsequent demand for the profits in question was an
afterthought. Surely he does not expect to be paid twice for the same thing.
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Tan Tiah v. Yu
67 Phil 739
Facts: This is an appeal by way of certiorari taken by Tan Tiah wherein he prays for the affirmance
of the decision of Court of First Instance sentencing defendant Yu Jose to buy the house of Tan
Tiah or to sell to Tan Tiah the land on which the latter's house is.
Petitioner Tan Tiah and respondent Yu Jose entered into a contract of lease in the fifth clause of
which, pertinent to the question at issue, provides:
"5th. That upon termination of the period of this contract, namely, ten years, the lessor shall have
the option to buy the building or improvement which the lessee may have built upon the lots,
reimbursing the latter ninety per cent (90%) of the original net cost of the construction; but should
the lessor be unable or unwilling to buy said building or improvement, the income or rent derived
therefrom shall be equally divided between said lessor and lessee, and the latter shall no longer
have the obligation to pay the rent agreed upon for the lots in the second paragraph of this contract;
provided, however, that the present contract, with the modification just mentioned, with respect to
the income from the building and the rent from the lot, shall continue in force until the lessor buys
the building or improvement or the lessee buys the land."
Issue: whether plaintiff Tan Tiah, as lessee, has a right, by virtue of the fifth clause of the contract
of lease, to compel defendant Yu Jose, as lessor, to sell to him the land on which he built his house
in accordance with said contract.
Held: No Tan Tiah, the lessee cannot compel Yu Jose, the Lessor to sell the land leased to him.
The lessee is not given the option to buy the land. The grant of said right may not be inferred from
the conditional clause of paragraph 5 and from paragraph 4 of the contract since neither in the
conditional clause aforecited nor in the fourth paragraph of the contract is the lessor bound to sell
the questioned land to the lessee. Furthermore, in the said conditional clause the price which the
lessee would have to pay should he decide to buy the land is not fixed.
Toyota Shaw Inc. vs. CA
244 SCRA
Facts: Luna L. Sosa entered into a contract with the Toyota Shaw Inc. through its sales
representative Popong Bernardo to purchase a Toyota Lite Ace. Sosa emphasized that he needed
it not later than June 17, 1989 because his family and a balikbayan guest need it to go to Marinduque.
On June 15, 1989, Sosa delivered the down payment of P100,000 and signed a Vehicle Sales
Proposal stating that the balance of the purchase price would be paid by credit financing through
B.A. Finance with conditions that 1. This sale is subject to availability of unit.2. Stated Price is subject
to change without prior notice, Price prevailing and in effect at time of selling will apply. The vehicle
was not delivered on the said date because of the disapproval by B.A. Finance of the credit financing
application of Sosa. Toyota then gave Sosa the option to purchase the unit by paying the full
purchase price in cash but Sosa refused. Sosa asked that his down payment be refunded. Toyota
did so on the very same day by issuing a Far East Bank check for the full amount of P100, 000.00
the receipt of which was shown by a check voucher of Toyota, which Sosa signed with the
reservation, "without prejudice to our future claims for damages." Toyota alleged that no sale was
entered into between it and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its
behalf.
Issue: whether or not the standard vehicles sales proposal was the true and documented
understanding of the parties which would have led to the ultimate contract of sale.
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Held: No. The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows
that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him, and
its non-delivery did not cause any legally indemnifiable injury.
A definite agreement on the manner of payment of the price is an essential
element in the formation of a binding and enforceable contract of sale. This is so because the
agreement as to the manner of payment goes into the price such that a disagreement on the manner
of payment is tantamount to a failure to agree on the price. The VSP doesn’t mention about the full
purchase price and the manner the installments were to be paid.
Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa.
For one thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in
bold letters, viz., AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA
SHAW, INC. that he was not dealing with Toyota but with Popong Bernardo and that the latter did
not misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo was
only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon
Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's
authority as an agent.
Navarra vs. Planter’s Bank
G.R. No. 172674, July 12, 2007
Facts: The Planter’s bank foreclosed the mortgage of 5 parcels of land owned by the Navarras for
the latter’s failure to pay their loan. Co-petitioner RRRC Development Corporation (RRRC) is a real
estate company owned by the parents of Carmelita Bernardo Navarra. The Planter’s bank foreclosed
the properties of RRRC for failure to pay their loan but RRRC. The foreclosed properties of RRRC
were sold to third persons whose payments therefor, directly made to the Bank, were in excess by
₱300,000.00 for the redemption price. Jorge Navarra sent a letter to Planters Bank, proposing to
repurchase the five (5) lots earlier auctioned to the Bank, with a request that he be given until August
31, 1985 to pay the down payment of ₱300,000.00. It was approved. Planters Bank informed Jorge
Navarra that it could not proceed with the documentation of the proposed repurchase of the
foreclosed properties on account of his non- compliance with the Bank’s request for the submission
of the needed board resolution of RRRC authorizing him to negotiate for and its behalf and
empowering him to apply the excess amount of ₱300,000.00 in RRRC’s redemption payment as
down payment for the repurchase of the Navarras’ foreclosed properties. The Bank sent a notice to
the Navarrras demanding that they surrender and vacate the properties in question for their failure
to exercise their right of redemption. The Navarras filed their complaint for Specific Performance
with Injunction against Planters Bank.
Issue: Whether or not there was no perfected contract to repurchase the foreclosed properties.
Held: Yes. There was no perfected contract to repurchase the foreclosed properties. What
transpired between the parties was only a prolonged negotiation to buy and to sell, and, at the most,
an offer and a counter-offer with no definite agreement having been reached by them.
While the foregoing letters indicate the amount of ₱300,000.00 as down payment, they are,
however, completely silent as to how the succeeding installment payments shall be made.
This Court held that before a valid and binding contract of sale can exist, the manner of payment of
the purchase price must first be established since the agreement on the manner of payment goes
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into the price such that a disagreement on the manner of payment is tantamount to a failure to agree
on the price.
Too, the Navarras’ letter/offer failed to specify a definite amount of the purchase price for the
sale/repurchase of the subject properties. It merely stated that the "purchase price will be based
on The redemption value plus accrued interest at the prevailing rate up to the date of the sales
contract." The ambiguity of this statement only bolsters the uncertainty of the Navarras’ so-called
"offer" for it leaves much rooms for such questions, as: what is the redemption value? what prevailing
rate of interest shall be followed: is it the rate stipulated in the loan agreement or the legal rate?
when will the date of the contract of sale be based, shall it be upon the time of the execution of the
deed of sale or upon the time when the last installment payment shall have been made? To our
mind, these questions need first to be addressed, discussed and negotiated upon by the parties
before a definite purchase price can be arrived at.
Clearly, then, the lack of a definite offer on the part of the spouses could not possibly serve
as the basis of their claim that the sale/repurchase of their foreclosed properties was
perfected. The reason is obvious: one essential element of a contract of sale is wanting: the
price certain.
Further, the tenor of Planters Bank’s letter-reply negates the contention of the Navarras that
the Bank fully accepted their offer. The letter specifically stated that there is a need to
negotiate on the other details of the transaction8 before the sale may be formalized.
Significantly, the Navarras wrote in the same letter the following:
Maybe you can give us a long-term payment scheme on the basis of my brother’s annual savings of
roughly US$30,000.00 every time he comes home for his home leave. Again, the offer was not
clear insofar as concerned the exact number of years that will comprise the long-term
payment scheme.
The Navarras wrote another letter, this time requesting the Bank that the down payment of
₱300,000.00 be instead taken from the excess payment made by the RRRC in redeeming its own
foreclosed properties. As we see it, this request constitutes a new offer on the part of the Navarras,
which offer was again conditionally accepted by the Bank as in fact it even required the Navarras to
submit a board resolution of RRRC before it could proceed with the proposed sale/repurchase. The
eventual failure of the spouses to submit the required board resolution precludes the
perfection of a contract of sale/repurchase between the parties.
As earlier mentioned, contracts are perfected when there is concurrence of the parties’ wills,
manifested by the acceptance by one of the offer made by the other.9 Here, there was no
concurrence of the offer and acceptance as would result in a perfected contract of sale.
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 Ong vs. Ong
139 SCRA 133 (1985)
Facts: Imelda Ong, for and in consideration of One (P1.00) Peso and other valuable considerations,
executed in favor of private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed whereby
she transferred, released, assigned and forever quit-claimed to Sandra Maruzzo, her heirs and
assigns, all her rights, title, interest and participation in the ONE-HALF (½) undivided portion of the
parcel of land. Imelda Ong revoked the aforesaid Deed of Quitclaim and, donated the whole property
described above to her son, Rex Ong-Jimenez. Sandra Maruzzo, through her guardian Alfredo Ong,
filed an action against petitioners, for the recovery of ownership/possession and nullification of the
Deed of Donation over the portion belonging to her and for Accounting.
Issue: Whether or not the quitclaim is null and void
Held: No. The quitclaim is valid. Bad faith and inadequacy of the monetary consideration do not
render a conveyance inexistent, for the assignor's liberality may be sufficient cause for a valid
contract (Article 1350, Civil Code), whereas fraud or bad faith may render either rescissible or
voidable, although valid until annulled, a contract concerning an object certain entered into with a
cause and with the consent of the contracting parties, as in the case at bar.
"A careful perusal of the subject deed reveals that the conveyance of the one- half (½) undivided
portion of the above-described property was for and in consideration of the One (P 1.00) Peso and
the other valuable considerations. It is a legal presumption of sufficient cause or consideration
supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code of the
Philippines.) To the presumption of consideration the alleged lack of consideration must be shown
by preponderance of evidence in a proper action.
Even granting that the Quitclaim deed in question is a donation, Article 741 of the Civil Code provides
that the requirement of the acceptance of the donation in favor of minor by parents of legal
representatives applies only to onerous and conditional donations where the donation may have to
assume certain charges or burdens (Article 726, Civil Code). In simple and pure donation, the formal
acceptance is not important for the donor requires no right to be protected and the donee neither
undertakes to do anything nor assumes any obligation. The Quitclaim now in question does not
impose any condition.
CRC, 2019
Aguilar vs. Rubiato
40 Phil. 570 (1819)
Facts: Juan Rubiato is of somewhat ordinary intelligence and astuteness. He was the owner of
various parcels of land having a potential value of approximately P26,000. Rubiato through the
inducement of Manuel Gonzales villa et al signed the second page of a power of attorney in favor of
Manuel Villa in order to obtain a loan of not to exceed P1,000. Manuel Gonzalez Vila, formulated
the document, by which the lands of Rubiato were sold to Hilaria Aguilar of Manila, for the sum of
P800, with right of repurchase within one year. The one year mentioned in the pacto de retro having
expired without Hilaria Aguilar having received the principal nor any part of the lease rent, she began
action against Juan Rubiato and Manuel Gonzalez Vila to consolidate the eight parcels of land in
her name.
Issue: Whether or not Aguilar is entitled to have the parcels of land
Held: No. Rubiato is only responsible to the plaintiff for the loan of P800. The power of attorney
was in reality no power of attorney but a sham document. 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. It is an agreement which a reasonable man would neither directly
nor indirectly be likely to enter into or to consent to.
PNB vs. Gonzales
45 Phil 693
Facts: August 28, 1922, the court rendered judgment in favor of the bank and against the defendant,
Ernesto Gonzales requiring him within three months from the date to pay the plaintiff the amount of
the two mortgages in question. The property advertised for sale was evidenced by Torrens
Certificate of Title and described in Exhibits A, B and C. Exhibit B and C was sold to Saturnino
Lopez, the appellant here, for P15,000 being the highest bidder. The court granted the motion for
reconsideration filed by the defendant Gonzales. It set aside its previous confirmation of judicial
sale of 4 parcels of land although the requisites prescribed for the sale at public auction of the land
were complied with because it was sold in the amount of P 15,000 which in fact was found to be
P45, 940 in accordance with the certificate of the deputy municipal treasurer.
Issue: Whether or not the subject judicial sale should be set aside for inadequacy of price.
Held: No. A judicial sale of real estate will not be set aside for inadequacy of price, unless the
inadequacy be so great as to shock the conscience, or unless there be additional circumstances
against its fairness. In the instant case, there is no claim or pretense that there was any fraud or
collusion, or that in any way Gonzales was misled or deceived. The bank was personally represented
at the sale, and there is no showing whatever that, if the property was resold, it would sell for a
centavo more than the P15,000.
The judgment of the trial court, setting aside the confirmation of the sale, is reversed, and the sale
will stand affirmed as of the date of the original confirmation by the trial court, with costs in favor of
the appellant.
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 De Leon vs. Salvador
G.R. no. 31603, Dec. 28, 1970

Facts: The city sheriff levied on execution on two parcels of land each registered in the names of
Bernabe for the enforcement of the judgment in favor of Enrique De Leon. At the execution sale, the
city sheriff sold the said properties to herein petitioner, Aurora De Leon (sister of the judgment
creditor) as the highest bidder for the total sum of P30, 194.00. Just about two weeks before the
expiration of the one-year period to redeem the properties sold in execution, the judgment debtor
Bernabe filed a separate civil action against his judgment creditor Enrique de Leon and the sheriff
for the setting aside or annulment of the execution sale "for being anomalous and irregular," and for
the ordering of a new auction sale. The sheriff had allegedly sold the two parcels of land jointly
instead of separately, and that the total sales price of P30, 194.00 was shocking to the conscience,
alleging that the two parcels, if sold separately, could easily be sold at P235, 000.00 and
P150,000.00.

Issue: Whether or not the inadequacy of Price in a right to redeem can be invalidated.

Held: No. The applicable rule on forced sales where the law gives the owner the right of redemption
was thus stated by the Court in Velasquez v. Coronel: "However, while in ordinary sales for reasons
of equity a transaction may be invalidated on the ground of inadequacy of price, or when such
inadequacy shocks one’s conscience as to justify the courts to interfere, such does not follow
when the law gives to the owner the right to redeem, as when a sale is made at public auction,
upon the theory that the lesser the price the easier it is for the owner to effect the redemption.
And so it was aptly said: ‘When there is the right to redeem, inadequacy of price should not
be material, because the judgment debtor may reacquire the property or also sell his right to
redeem and thus recover the loss he claims to have suffered by reason of the price obtained
at the auction sale.’"

Vda. De Gordon vs. CA

Nov. 3, 1981

Facts: The two parcels of land in question were sold at public auction at the City Hall, Quezon City
under the direction and supervision of the City Treasurer of Quezon City after the proper procedures
and legal formalities had been duly accomplished; That a judicial sale was made to satisfy the taxes,
penalties and costs; the two parcels of land in question were sold to [Duazo] for the amount of
P10,500.00; The combined assessed value of the two parcels of land is P16,800.00. The residential
house on the land is assessed at P45,580.00.

Issue: whether the price is so grossly inadequate as to justify the setting aside of the public sale

Held: No. As the Court has held in Velasquez vs. Coronet 6 alleged gross inadequacy of price is
not material "when the law gives the owner the right to redeem as when a sale is made at public
auction, upon the theory that the lesser the price the easier it is for the owner to effect the
redemption." The price of P10,500.00 is about one sixth of the total assessed value of the two parcels
of land in question and the residential house thereon. It cannot be said, therefore, that the price of
P10,500.00 is so inadequate as to be shocking to the conscience of the court. As the Court further
stressed in the recent case of Tajonera vs. Court of Appeals, 7 the law governing tax sales for
delinquent taxes may be "harsh and drastic, but it is a necessary means of insuring the prompt
fcollection of taxes so essential to the life of the Government.

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 Heirs of Ureta vs. Heirs of Ureta
Sept. 14, 2011
Facts: Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato,
Prudencia, and Francisco, met at the house of Liberato. Francisco, who was then a municipal judge,
suggested that in order to reduce the inheritance taxes, their father should make it appear that he
had sold some of his lands to his children. Accordingly, Alfonso executed four (4) Deeds of Sale
covering several parcels of land in favor of Policronio,4 Liberato,5 Prudencia,6 and his common-law
wife, Valeriana Dela Cruz.7 The Deed of Sale executed on October 25, 1969, in favor of Policronio,
covered six parcels of land, which are the properties in dispute in this case. Since the sales were
only made for taxation purposes and no monetary consideration was given, Alfonso continued to
own, possess and enjoy the lands and their produce.
Believing that the six parcels of land belonged to their late father, and as such, excluded from the
Deed of Extra-Judicial Partition, the Heirs of Policronio sought to amicably settle the matter with the
Heirs of Alfonso. Earnest efforts proving futile, the Heirs of Policronio filed a Complaint for
Declaration of Ownership, Recovery of Possession, Annulment of Documents, Partition, and
Damages9 against the Heirs of Alfonso.
Issues:
(1) whether or not the Deed of Sale was valid
(2) Whether or not Heirs of Alfonso should have filed an action to declare the sale void prior
to executing the Deed of Extra-Judicial Partition.
(3) (3)Whether or not the sale cannot be assailed for being barred under Article 1421 of the
Civil Code which provides that the defense of illegality of a contract is not available to
third persons whose interests are not directly affected and Art. 1311. Contracts take
effect only between the parties, their assigns and heirs.
(4) Whether or not the Heirs of Alfonso having failed to first prove that the sale of Alfonso’s
properties to Policronio substantially diminished their successional rights or that their
legitimes would be unduly prejudiced under Article 842 of the Civil code should be
precluded from questioning the validity of the Deed of Sale.
(5) Whether or not the Heirs of Alfonso cannot recover the properties by reason of Art.
1412 which provides that if the act in which the unlawful or forbidden cause does not
constitute a criminal offense, and the fault is both on the contracting parties, neither may
recover what he has given by virtue of the contract nor demand the performance of the
other’s undertaking. As the Heirs of Alfonso alleged that the purpose of the sale was to
avoid the payment of inheritance taxes, they cannot take from the Heirs of Policronio
what had been given to their father.
(6) Whether or not since 21 years had already elapsed when the Heirs of Alfonso assailed
the validity of the Deed of Sale in 1996, prescription had set in accordance with Art.
(7) 1144 which provides for a 10 year prescription.
Held:
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(1) No. The Deed of Sale is null and void for being absolutely simulated. Alfonso simulated
a transfer to Policronio purely for taxation purposes, without intending to transfer
ownership over the subject lands. Since the Deed of Sale is void, the subject properties
were properly included in the Deed of Extra-Judicial Partition of the estate of Alfonso.
For lack of consideration, the Deed of Sale is once again found to be void. It is well-
settled in a long line of cases that where a deed of sale states that the purchase price
has been paid but in fact has never been paid, the deed of sale is null and void for lack
of consideration.28 Thus, although the contract states that the purchase price of
₱2,000.00 was paid by Policronio to Alfonso for the subject properties, it has been
proven that such was never in fact paid as there was no money involved. It must,
therefore, follow that the Deed of Sale is void for lack of consideration.
(2) No. A simulated contract of sale is without any cause or consideration, and is, therefore,
null and void; in such case, no independent action to rescind or annul the contract is
necessary, and it may be treated as non-existent for all purposes. It was not necessary
for the Heirs of Alfonso to first file an action to declare the nullity of the Deed of Sale
prior to executing the Deed of Extra-Judicial Partition.
(3) No. The right to set up the nullity of a void or non-existent contract is not limited to the
parties, as in the case of annullable or voidable contracts; it is extended to third persons
who are directly affected by the contract. Thus, where a contract is absolutely simulated,
even third persons who may be prejudiced thereby may set up its inexistence.
(4) This article refers to the principle of freedom of disposition by will. What is involved in
the case at bench is not a disposition by will but by Deed of Sale. Hence, the Heirs of
Alfonso need not first prove that the disposition substantially diminished their
successional rights or unduly prejudiced their legitimes.
(5) Article 1412 is not applicable to fictitious or simulated contracts, because they refer to
contracts with an illegal cause or subject-matter.42 This article presupposes the
existence of a cause, it cannot refer to fictitious or simulated contracts which are in reality
non-existent. As it has been determined that the Deed of Sale is a simulated contract,
the provision cannot apply to it.
(6) Granting that the Deed of Sale was not simulated, the provision would still not apply.
Since the subject properties were included as properties of Alfonso in the Deed of Extra-
Judicial Partition, they are covered by corresponding inheritance and estate taxes.
Therefore, tax evasion, if at all present, would not arise, and Article 1412 would again
be inapplicable.
(7) Art. 1410. The action for the declaration of the inexistence of a contract does not
prescribe. As the Deed of Sale is a void contract, the action for the declaration of its
nullity, even if filed 21 years after its execution, cannot be barred by prescription for it is
imprescriptible. Furthermore, the right to set up the defense of inexistence or absolute
nullity cannot be waived or renounced.45 Therefore, the Heirs of Alfonso cannot be
precluded from setting up the defense of its inexistence.
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Whether or not Deed of Extra-Judicial Partition is valid
Held: Yes. The deed of extra-judicial partition is valid.
This Court finds that Article 1878 (5) and (15) is inapplicable to the case at bench. It has been held
in several cases48 that partition among heirs is not legally deemed a conveyance of real property
resulting in change of ownership. It is not a transfer of property from one to the other, but rather, it
is a confirmation or ratification of title or right of property that an heir is renouncing in favor of another
heir who accepts and receives the inheritance. It is merely a designation and segregation of that
part which belongs to each heir. The Deed of Extra-Judicial Partition cannot, therefore, be
considered as an act of strict dominion. Hence, a special power of attorney is not necessary.
In fact, as between the parties, even an oral partition by the heirs is valid if no creditors are affected.
The requirement of a written memorandum under the statute of frauds does not apply to partitions
effected by the heirs where no creditors are involved considering that such transaction is not a
conveyance of property resulting in change of ownership but merely a designation and segregation
of that part which belongs to each heir.49
Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates the incapacity of a party to give
consent to a contract. What is involved in the case at bench though is not Conrado’s incapacity
to give consent to the contract, but rather his lack of authority to do so. Instead, Articles 1403
(1), 1404, and 1317 of the Civil Code find application to the circumstances prevailing in this case.
Therefore, Conrado’s failure to obtain authority from his co-heirs to sign the Deed of Extra-Judicial
Partition in their behalf did not result in his incapacity to give consent so as to render the contract
voidable, but rather, it rendered the contract valid but unenforceable against Conrado’s co-heirs for
having been entered into without their authority.
This Court notes other peculiarities in Conrado’s testimony. Despite claims of undue influence, there
is no indication that Conrado was forced to sign by his aunt, Prudencia Paradero. In fact, he testified
that he was happy to sign because his grandfather’s estate would be partitioned. Conrado, thus,
clearly understood the document he signed. It is also worth noting that despite the document being
brought to him on three separate occasions and indicating his intention to inform his siblings about
it, Conrado failed to do so, and still neglected to inform them even after he had signed the partition.
All these circumstances negate his claim of vitiated consent. Having duly signed the Deed of
Extra-Judicial Partition, Conrado is bound to it. Thus, it is enforceable against him.
Based on the foregoing, this Court concludes that the allegation of Conrado’s vitiated consent and
lack of authority to sign in behalf of his co-heirs was a mere afterthought on the part of the Heirs of
Policronio. It appears that the Heirs of Policronio were not only aware of the existence of the
Deed of Extra-Judicial Partition prior to June 30, 1995 but had, in fact, given Conrado
authority to sign in their behalf. They are now estopped from questioning its legality, and
the Deed of Extra-Judicial Partition is valid, binding, and enforceable against them.
Considering that the Deed of Sale has been found void and the Deed of Extra-Judicial
Partition valid, with the consent of all the Heirs of Policronio duly given, there is no need to
remand the case to the court of origin for partition.
CRC, 2019
Phil. Banking Corp. vs. Dy
Nov. 14, 2012
Facts: This Petition for Review on Certiorari the Decision1 of the Court of Appeals which directed
the Register of Deeds of Cebu City to cancel Transfer Certificate of Title in the names of respondents
Arturo Dy and Bernardo Dy and to issue the corresponding TCTs in the name of respondent Cipriana
Delgado.
Cirpriana and her husband, Jose Delgado, entered into an agreement with a certain Cecilia Tan
(buyer) for the sale of the said property for a consideration of P10.00/sq.m. It was agreed that the
buyer shall make partial payments from time to time and pay the balance when Sps. Delgado are
ready to execute the deed of sale and transfer the title to her. At the time of sale, the buyer was
already occupying a portion of the property where she operates a noodle factory while the rest was
occupied by tenants which Sps. Delgado undertook to clear prior to full payment. After paying the
total sum of P147,000.00 and being then ready to pay the balance, the buyer demanded the
execution of the deed, which was refused. Eventually, the buyer learned of the sale of the property
to the Dys and its subsequent mortgage to petitioner Philbank, prompting the filing of the
Complaint5 for annulment of certificate of title, specific performance and/or reconveyance with
damages against Sps. Delgado, the Dys and Philbank.
Issue: Whether or not the contract of sale between the spouses Delgado and Dy is null and void
for being merely simulated rendering the subsequent mortgage of the lots likewise void.
Held: The cancellation of the Dys' certificates of title over the disputed properties and the issuance
of new TCTs in favor of Cipriana must be upheld. However, Philbank's mortgage rights over the
subject properties shall be maintained. Philbank is entitled to have its mortgage carried over or
annotated on the titles of Cipriana Delgado over the said properties. While it is settled that a
simulated deed of sale is null and void and therefore, does not convey any right that could
ripen into a valid title,16 it has been equally ruled that, for reasons of public policy, 17 the
subsequent nullification of title to a property is not a ground to annul the contractual right
which may have been derived by a purchaser, mortgagee or other transferee who acted in
good faith.
The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with property
covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of
the title. This is in deference to the public interest in upholding the indefeasibility of a certificate of
title as evidence of lawful ownership of the land or of any encumbrance thereon. In the case of banks
and other financial institutions, however, greater care and due diligence are required since they are
imbued with public interest, failing which renders the mortgagees in bad faith. Thus, before
approving a loan application, it is a standard operating practice for these institutions to conduct an
ocular inspection of the property offered for mortgage and to verify the genuineness of the title to
determine the real owner(s) thereof. The apparent purpose of an ocular inspection is to protect the
"true owner" of the property as well as innocent third parties with a right, interest or claim thereon
from a usurper who may have acquired a fraudulent certificate of title thereto.
In this case, while Philbank failed to exercise greater care in conducting the ocular inspection of the
properties offered for mortgage,24 its omission did not prejudice any innocent third parties. In
particular, the buyer did not pursue her cause and abandoned her claim on the property. On the
other hand, Sps. Delgado were parties to the simulated sale in favor of the Dys which was intended
to mislead Philbank into granting the loan application. Thus, no amount of diligence in the
conduct of the ocular inspection could have led to the discovery of the complicity between
the ostensible mortgagors (the Dys) and the true owners (Sps. Delgado).1âwphi1 In fine,
Philbank can hardly be deemed negligent under the premises since the ultimate cause of the
mortgagors' (the Dys') defective title was the simulated sale to which Sps. Delgado were privies.
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 Lim vs. CA party has promised that the condition should happen or be performed, such
first mentioned party may also treat the nonperformance of the condition as
October 24, 1996 a breach of warranty.

Facts: Private respondent Liberty H. Luna sold the land to petitioners Vicente and Michael
Lim However, when Luna signed the receipt, she crossed out the bracketed portion in paragraph 3
providing for the payment by her of the amount of P100,000.00 as liquidated damages in the event
she failed to eject the squatter sixty (60) days after the signing of the agreement. A check for
P200,000.00 was given to Luna as earnest money, leaving a balance of P3,347,600 to be paid in
full after the squatters are ejected. Private respondent Luna failed to eject the squatters from the
land despite her alleged efforts to do so. It appears that private respondent asked the help of a
building official and a city engineer to effect ejectment. The parties met to negotiate a price increase
to facilitate the ejectment of the squatters. The parties agreed to an increase of P500.00 per square
meter.
Where the ownership in the things has not passed, the buyer may treat the
fulfillment by the seller of his obligation to deliver the same as described and
as warranted expressly or by implication in the contract of sale as a condition
of the obligation of the buyer to perform his promise to accept and pay for
the thing. (Emphasis added)
In this case, there is already a perfected contract. The condition was imposed only on the
performance of the obligation. Hence, petitioners have the right to choose whether to demand
the return of P200, 000.00 which they have paid as earnest money or to proceed with the sale.
They have chosen to proceed with the sale and private respondent cannot refuse to do so.

Luna tried to return the earnest money alleging her failure to eject the squatters. She claimed that
as a result of her failure to remove the squatters from the land, the contract of sale ceased to exist
and she no longer hand the obligation to sell and deliver her property to petitioners Lim. As
petitioners Lim had refused to accept the refund of the earnest money, private respondent Luna
wrote them that the amount would be deposited in court by consignation. Private respondent Luna
filed a complaint for consignation against petitioners Lim.
Issue: whether or not "the non-fulfillment of the condition of ejecting the squatters resulted in
defendants' losing the right to demand that plaintiff sell the land to them
Held: No. A sale is a consensual contract requiring only the consent of the parties on these two
points. In this case, the parties agreed on the subject the 1,013.6 square meter lot and on the
purchase price of P4, 000,000.00. No particular form is required for the validity of their contract and,
therefore, upon its perfection, the parties can reciprocally demand performance of their respective
obligations. 10
Indeed, private respondent is not the injured party. She cannot rescind the contract without
violating the principle of mutuality of contracts, which prohibits allowing the validity and
performance of contracts to be left to the will of one of the parties. 11 Thus in a case 12 on all
fours with this case, this Court held:
Under the agreement, private respondent is obligated to evict the squatters
on the property. The ejectment of the squatters is a condition the operative
act of which sets into motion the period of compliance by petitioner of his
own obligation, i.e., to pay the balance of the purchase price. Private
respondent's failure "to remove the squatters from the property" within the
stipulated period gives petitioner the right to either refuse to proceed with the
agreement or waive that condition in consonance with Article 1545 of the
Civil Code. This option clearly belongs to petitioner and not to private
respondent. 13
....

Indeed, the earnest money given is proof of the perfection of the contract. As Art. 1482 of the Civil In any case, private respondent's action for rescission is not warranted. She
Code states, "Whenever earnest money is given in a contract of sale, it shall be considered as part is not the injured party. The right of resolution of a party to an obligation under
of the price and as proof of the perfection of the contract." This perfected contract imposed reciprocal Article 1191 of the Civil Code is predicated on a breach of faith by the other
obligations on the parties. Petitioners' obligation was to pay the balance of the price, while private party that violates the reciprocity between them. It is private respondent who
respondent's obligation was to deliver the property to petitioners upon payment of the price. I is true has failed in her obligation under the
that private respondent undertook to eject the squatters before delivery of the property within a contract. 14
certain period and that for her failure to carry out her obligation she could be obliged to do so
depends on petitioners who can waive the condition and opt to proceed with the sale instead.

Private respondent Luna contends that as condition of ejecting the squatters was not met, she no
longer has an obligation to proceed with the sale of her lot. This contention is erroneous. Private
respondent fails to distinguish between a condition imposed on the perfection of the contract and a
condition imposed on the performance of an obligation. Failure to comply with first condition results
in the failure of a contract, while failure to comply with the second condition only gives the other party
the option either to refuse to proceed with the sale or to waive the condition. Thus, Art. 1545 of the
Civil Code states:

Art. 1545. Where the obligation of either party to a contract of sale is subject
to any condition which is not performed, such party may refuse to proceed
with the contract or her may waiver performance of the condition. If the other

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 Recio vs. Heirs of Altamirano

July 24, 2013

Facts: Nena Recio, the mother of Reman Recio (petitioner), leased from the respondents Alejandro
et al, all surnamed Altamirano a parcel of land. The Altamiranos through Alejandro entered into an
oral contract of sale with the petitioner Nena over the subject property. The petitioner made partial
payments to the Altamiranos. The petitioner offered in many instances to pay the remaining balance
of the agreed purchase price of the subject property, but Alejandro kept on avoiding the petitioner.
The petitioner demanded from the Altamiranos, the execution of a Deed of Absolute Sale in
exchange for the full payment of the agreed price. The petitioner filed a complaint for Specific
Performance with Damages. Pending the return of service of summons to the Altamiranos, the
petitioner discovered that the subject property has been subsequently sold to respondents Lauro
and Marcelina Lajarca. Thus, the petitioner filed an Amended Complaint impleading the Spouses
Lajarca and adding as a cause of action the annulment of the sale between the Altamiranos and the
Spouses Lajarca.

Issue: Whether or not the verbal contract of sale between Alejandro and the petitioner is valid;

Whether or not the Deed of Absolute Sale between the Altamiranos and the Spouses Lajarca
involving the subject property is valid.

Held: Insofar as the verbal contract of sale between Alejandro and the petitioner is concerned,
Alejandro’s disposition affects only his pro indiviso share, such that the transferee (the petitioner)
receives only what corresponds to Alejandro’s undivided share in the subject lot. Likewise, the CA
declared the deed of absolute sale between the Altamiranos and the Spouses Lajarca valid only
insofar as the aliquot shares of the other Altamiranos are concerned. Thus, in effect, the petitioner
and the Spouses Lajarca are co-owners of the subject property.

Absent the consent of Alejandro's co-owners, the Court holds that the sale between the other
Altamiranos and the petitioner is null and void there being no special power of attorney or written
authority to sell the real property pursuant to Art. 1874 and 1878.

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