POLYTECHNIC UNIVERSITY OF PHILIPPINES v. CA, GR No.

143513, 2001-11-14
FACTS:
In the early sixties, petitioner National Development Corporation (NDC), a government owned
and controlled corporation created under CA 182 as amended by CA 311 and PD No. 668, had
in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila.
Sometime in May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested
its desire to lease a portion of the property for its ceramic manufacturing business.
The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,
cognizant of the impending expiration of their lease agreement with NDC, informed the latter
through several letters and telephone calls that it was renewing its lease over the property.
IRESTONE's predicament worsened when rumors of NDC's supposed... plans to dispose of the
subject property in favor of petitioner Polytechnic University of the Philippines (PUP) came to its
knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the
property in the exercise of its contractual right of first... refusal.

ISSUE:
Won there is a contract of sale between NDC and PUP. Yes

HELD:
A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates
himself to transfer the ownership of and to deliver a determinate thing to the other or others who
shall pay therefore a sum certain in money or its equivalent. [32] It is therefore a general requisite
for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e.,
there should be a concurrence of the promise of the vendor to sell a determinate thing and the
promise of the vendee to receive and pay for the property so delivered and transferred. The
Civil Code provision is, in effect, a "catch-all" provision which effectively brings within its grasp a
whole gamut of transfers whereby ownership of a thing is ceded for a consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the
questioned transaction.Petitioners NDC and PUP have their respective charters and therefore
each possesses a separate and distinct individual personality.[33] The inherent weakness of
NDCs proposition that there was no sale as it was only the government which was involved in
the transaction thus reveals itself. Tersely put, it is not necessary to write an extended
dissertation on government owned and controlled corporations and their legal
personalities. Beyond cavil, a government owned and controlled corporation has a personality of
its own, distinct and separate from that of the government. [34] The intervention in the transaction
of the Office of the President through the Executive Secretary did not change the independent
existence of these entities. The involvement of the Office of the President was limited to
brokering the consequent relationship between NDC and PUP. But the withdrawal of the appeal
by the Executive Secretary is considered significant as he knew, after a review of the records,
that the transaction was subject to existing liens and encumbrances, particularly the priority to
purchase the leased premises in favor of FIRESTONE.
True that there may be instances when a particular deed does not disclose the real intentions of
the parties, but their action may nevertheless indicate that a binding obligation has been
undertaken. Since the conduct of the parties to a contract may be sufficient to establish the
existence of an agreement and the terms thereof, it becomes necessary for the courts to
examine the contemporaneous behavior of the parties in establishing the existence of their
contract.
The preponderance of evidence shows that NDC sold to PUP the whole NDC compound,
including the leased premises, without the knowledge much less consent of private respondent
FIRESTONE which had a valid and existing right of first refusal.
All three (3) essential elements of a valid sale, without which there can be no sale, were
attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of the
parties, determinate subject matter, and consideration therefor.
Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which
explicitly states the acquiescence of the parties to the sale of the property -
WHEREAS, PUP has expressed its willingness to acquire said NDC properties and NDC has
expressed its willingness to sell the properties to PUP (underscoring supplied).[35]
PETITIONER: Asuncion Atilano, Cristina Atilano, Rosario Atilano
RESPONDENT: Ladislao Atilano and Gregorio Atilano

SUMMARY: Eulogio Atilano I bought a parcel land, subdivided it into 5 and built his house on one of the portions. He sold one
portion to his brother Eulogio Atilano II upon which the latter also built his house. The titles to the lots were obtained at once.
However, it was discovered many years later that the title of Atilano I’s lot pertained to the lot sold to Atilano II, and the latter’s
title conversely pertained to the lot of Atilano I which had a much bigger area. Atilano II’s family sought to obtain the land on the
force of the title. The Court denied their plea. It held that the families are in possession of the lots which the contracting parties
have intended. There was only a mistake with the content of the instruments thus reformation may be sought; however, this is no
longer needed since the intent of the parties have already been carried out. The parties must only convey to each other a document
reflecting the correct description of their lots.

DOCTRINE: When one sells or buys real property, one sells or buys the property as he sees it, in its actual setting and by its
physical metes and boungs, and not by the mere lot number assigned to it in the certificate of title. Reformation can only be sought
pending the enforcement of the contract but not when the intended consideration or obligations have already been carried out.

Furthermore, the cancellation of NDC's liabilities in favor of the National Government in the
amount of P57,193,201.64 constituted the "consideration" for the sale.

Atilano v. Atilano
May 21, 1969 | Makalintal, J. | Reformation of Instruments; Procedure for
reformation (Art. 1369)

FACTS: covering lot No. 535A, in favor of the plaintiffs.

1. In 1916, Eulogio Atilano I (Atilano 1) acquired
by purchase from one Gerardo Villanueva lot No.
535.
2. In 1920, Atilano I subdivided land he owned into
five parcels, identifying them as Lots 535-A to
535-E.
3. He sold one parcel, designated as No. 535-E, to
his brother Eulogio Atilano II (Atilano 2) for
P150. Lots 535-B, C and D were sold to other
people, while he kept the remaining portion of
land, presumably covered by title 535-A for
himself, which passed to defendant Ladislao
Atilano after Eulogio I passed away.
4. In 1952, after his wife died, Atilano 2 wanted to
partition Lot 535-A among himself and his
children. They had the land resurveyed, only to
find out their lot was actually 535- E, and not
535-A, while the land that Ladislao had inherited
from Atilano 1 was 535-A, and not 535-E. (The
titles on their respective deeds of sale were mixed
up.)
5. Atilano 2 died, so his heirs instituted an action
against Ladislao offering up 535-A to Ladislao in
exchange for 535-E, which they alleged was what
was written in their deed of sale (Since 535-E had
a bigger area than 535-A, 2,612 sqm compared to
1,808 sqm).
6. Ladislao’s defense was that the 1920 deed of sale
to Atilano 2 was an involuntary error, and that the
intention of the parties to that sale (Atilano 1 and
Atilano 2) meant to convey the lot correctly
identified as 535-A, even if the deed stated 535-
E, on the basis that Atilano 1 had built a house on
this lot and had even increased its area while it
was in his possession by purchasing a lot next to
it, before it passed to Ladislao.
7. Ladislao then interposed a counterclaim that
Atilano 2 execute in his favor the corresponding
deed of transfer with respect to 535-E.

ISSUE/S:
1. WON the heirs of Atilano 2 are entitled to the real
535-E, as stated in his deed of sale - NO

RULING: Judgment is affirmed. The plaintiffs are

ordered to execute a deed of conveyance of lot No.
535E in favor of the defendants, and the latter, in
turn, are ordered to execute a similar document,
 buyer does not assume the risk of loss of
a generic subject matter under a valid sale
until the object is made determinate, either
RATIO:
1. When one sells or buys real property — a by physical segregation or particular
piece of land, for example — one sells or buys designation.
the property as he sees it, in its actual setting and
by its physical metes and bounds, and not by the
mere lot number assigned to it in the certificate
of title.
1. In this case, the portion correctly referred to as
lot No. 535- A was already in the possession of
the Atilano 2, who had built a house on it even
before Atilano 1 had sold it to him. Atilano 1
had built a house for himself on the real 535-E,
and both brothers had lived on their respective
lands for years until the mistake was discovered
in 1959.
2. The real issue here is not adverse possession,
but the real intention of the parties to that sale.
From all the facts and circumstances, the object
of the sale between the Atilano brothers was
535-A, even if the deed referred to it as 535- E,
which was a simple mistake in the drafting of
the document. The mistake did not vitiate the
consent of the parties or affect the validity and
binding effect of the contract between them.
3. The proper remedy to such mistake is
reformation of the instrument. This remedy is
available when, there having been a meeting of
the funds of the parties to a contract, their true
intention is not expressed in the instrument
purporting to embody the agreement by reason
of mistake, fraud, inequitable conduct on
accident (Art. 1359, et seq.) In this case, there is
no need to reform the 1920 deed of sale since the
parties retained possession their respective
properties conformably to the real intention of
the parties to that sale, and all they should do is
to execute mutual deeds of conveyance.

In Yu Tek & Co. v. Gonzales, The

Court held Gonzales liable for breach of
contract (which meant there was a valid
Ong Jang Chuan v. Wise
underlying sale) although it held that the
defense of force majeure was unavailing
since the contract was not perfected as to FACTS:
the particular subject matter for
determining loss, until the quantity · This is an appeal from the judgment of the
agreed upon has been selected and is Court of First Instance in Manila condemning
capable of being physically designated or defendant (Wise & Co.) to pay plaintiff (Ong
appropriated. The Court ruled that the
 Jang Chuan) P 1, 237.50 with interests and
damages for breach of contract.
· Wise & Co. and Ong Jang Chuan entered into
a contract wherein it was stated that the
former sold 1000 sacks of flour, “Mano”
brand, at the net price of P11.05 per barrel,
the expenses of transportation to be borne
by purchaser (Ong Jang Chuan). 500 sacks to
be delivered in September and 500 in
October. Payment be made within 30 days
from the date of the delivery.
· Wise & Co. failed to deliver the sacks of flour.
· In the trial court, it has been established by a
preponderance of evidence that the reason
for the nonfulfillment of the contract was
that the “Mano” brand of flour which was
bound to be delivered had to come from
Australia, and at the time of the execution of
the contract, Wise & Co. did not have the
sufficient stock of the said brand of flour.
· It was also found that at that time, Australia
prohibited the exportation of flour because
of the scarcity of grain in such country due to
a war between Great Britain(which Australia
is an integral part thereto) and Germany.
· In this appeal, it is urged that the trial court
erred that the contract was an agreement to
sell and not a perfected sale.
ISSUE:
WON the contract was a perfected sale
HELD:
· The flour mentioned in the contract was not
"physically segregated from all other
articles." In fact, the defendant did not have
in its possession in Manila, at the time the
contract was entered into, the 1,000 sacks of
flour which it agreed to deliver in September
and October.
· Under the rule laid down in the case of Yu
Tek & Co., and the cases cited in that
opinion, it is clear that the sale here in
question was not a perfected one.  mention of some of the lots covered by the
Melliza v. City of Iloilo
23 SCRA 477
ISSUE:
Whether or not the conveyance by Juliana
Melliza to Iloilo municipality included that
portion of Lot 1214 known as Lot 1214-B.
RULING:
First of all, there is no question that the
paramount intention of the parties was to
provide Iloilo municipality with lots sufficient
or adequate in area for the construction of the
Iloilo City hall site, with its avenues and
parks.
Secondly, reading the public instrument in
toto, with special reference to the paragraphs
describing the lots included in the sale, shows
that said instrument describes four parcels of
land by their lot numbers and area; and then
it goes on to further describe, not only those
lots already mentioned, but the lots object of
the sale, by stating that said lots are the ones
needed for the construction of the city hall
site, avenues and parks according to the
Arellano plan. If the parties intended merely
to cover the specified lots — Lots 2, 5, 1214-
C and 1214-D, there would scarcely have
been any need for the next paragraph, since
these lots are already plainly and very clearly
described by their respective lot number and
area. Said next paragraph does not really add
to the clear description that was already given
to them in the previous one.
The requirement of the law that a sale must
have for its object a determinate thing, is
fulfilled as long as, at the time the contract is
entered into, the object of the sale is capable
of being made determinate without the
necessity of a new or further agreement
between the parties. The specific mention of
some of the lots plus the statement that the
lots object of the sale are the ones needed for
city hall site, avenues and parks, according to
the Arellano plan, sufficiently provides a
basis, as of the time of the execution of the
contract, for rendering determinate said lots
without the need of a new and further
agreement of the parties.
Appellant however fails to consider that the
area needed under that plan for city hall site
was then already known; that the specific
sale in effect fixed the corresponding location
of the city hall site under the plan; that,
therefore, considering the said lots
specifically mentioned in the public
instrument Exhibit “D”, and the projected city
hall site, with its area, as then shown in the
Arellano plan (Exhibit 2), it could be
determined which, and how much of the
portions of land contiguous to those
specifically named, were needed for the
construction of the city hall site.
And, moreover, there is no question either
that Lot 1214-B is contiguous to Lots 1214-C
and 1214-D, admittedly covered by the
public instrument. It is stipulated that, after
execution of the contract , the Municipality of
Iloilo possessed it together with the other lots
sold. It sits practically in the heart of the city
hall site.
Furthermore, Pio Sian Melliza, from the
stipulation of facts, was the notary public of
the public instrument. Said instrument was
also registered with the Register of Deeds
and such registration was annotated at the
back of the corresponding title certificate of
Juliana Melliza. From these stipulated facts,
it can be inferred that Pio Sian Melliza knew
of the aforesaid terms of the instrument or is
chargeable with knowledge of them; that
knowing so, he should have examined the
Arellano plan in relation to the public
instrument Exhibit “D”; that, furthermore, he
should have taken notice of the possession
first by the Municipality of Iloilo, then by the
City of Iloilo and later by the University of the
Philippines of Lot 1214-B as part of the city
hall site conveyed under that public
instrument, and raised proper objections
thereto if it was his position that the same
was not included in the same. The fact
remains that, instead, for twenty long years,
Pio Sian Melliza and his predecessors-in-
interest, did not object to said possession,
nor exercise any act of possession over Lot
1214-B. Applying, therefore, principles of civil
law, as well as laches, estoppel, and equity,
said lot must necessarily be deemed
included in the conveyance in favor of Iloilo
municipality, now Iloilo City.
WHEREFORE, the decision appealed from
is affirmed insofar as it affirms that of the
Court of First Instance, and the complaint in
this case is dismissed.
The controlling doctrine in National
Grains Authority is that specific quantity
of the subject matter is not important when
it is still possible to determine the quantity
“without the need of a new contract
between the parties,” and therefore
complies with the requisite of being
determinable.
The foregoing rulings in effect
support the doctrine that certain generic
objects may be the proper object of a
contract of sale, provided that they fulfill
the characteristic of being “determinable”
at the point of perfection. Thus, even
when the exact quantity of the subject
matter of the contract of sale has not been
agreed upon, but the parties have in fact
come into an agreement as to the quality
thereof and the price, and terms of
payment, there is already a valid and
binding contract.
Schuback & Sons vs. CA
Facts:
On October 16, 1981, defendant submitted to
plaintiff the list of bus spare parts he wanted
to purchase to its counterpart in Hamburg.
Plaintiff sent an offer on the items listed. On
December 4, 1981, defendant informed
plaintiff that he preferred genuine to
replacement parts, and requested a 15%
discount. On December 17, plaintiff submitted
its formal offer. On December 24, defendant
submitted a purchase order, and submitted
the quantity on December 29. Plaintiff
immediately ordered the items from
Schuback Hamburg, which thereafter ordered
the same from NDK, a supplier in Germany.
Plaintiff sent a pro-forma invoice to be used in
applying for letter of credit. On February 16,
1982, plaintiff reminded defendant to open a
letter of credit to avoid delay in shipment.
Defendant mentioned the difficulty he was
encountering in procuring the same. Plaintiff
continued receiving invoices and partial
deliveries from NDK. On October 18, 1982,
plaintiff again reminded the defendant to
open a letter of credit. Defendant replied that
he did not make a valid purchase order and
that there was no definite contract between
him and the plaintiff. Plaintiff sent a rejoinder
explaining that there is a valid Purchase
Order and suggesting that defendant either
proceed with the order and open a letter of
credit or cancel the order and pay the
cancellation fee of 30% of F.O.B. value, or
plaintiff will endorse the case to its lawyers.
Demand letters sent to defendant by
plaintiff's counsel dated March 22, 1983 and
June 9, 1983 were to no avail. Consequently,
petitioner filed a complaint for recovery of
actual or compensatory damages, unearned
profits, interest, attorney's fees and costs
against private respondent.
Issue:
Whether or not a contract of sale has been
perfected between the parties
Held:
Article 1319 of the Civil Code states:
"Consent is manifested by the meeting of the
offer and acceptance upon the thing and the
cause which are to constitute the contract.
The offer must be certain and the
acceptance absolute. A qualified acceptance
constitutes a counter offer." The facts
presented to us indicate that consent on both
sides has been manifested. The offer by
petitioner was manifested on December 17,
1981 when petitioner submitted its proposal
containing the item number, quantity, part
number, description, the unit price and total
to private respondent. On December 24,
1981, private respondent informed petitioner
of his desire to avail of the prices of the parts
at that time and simultaneously enclosed its
Purchase Order. At this stage, a meeting of
the minds between vendor and vendee has
occurred, the object of the contract: being
the spare parts and the consideration, the
price stated in petitioner's offer dated
December 17, 1981 and accepted by the
respondent on December 24, 1981.
Lately, however, in Nool v. Court of
Appeals,62 the Court held that sale by
one who is not the owner of the subject
matter is void, and consequently, the right
to repurchase attached to the sale would
also be void. The Court held that although
a situation (where the sellers were no
longer owners) does not appear to be one
of the void contracts enumerated in Article
1409 of the Civil Code, and under Article
1402 the Civil Code itself recognizes a
sale where the goods are to be “acquired
x x x by the seller after the perfection of
the contract of sale” clearly implying that a
sale is possible even if the seller was not
the owner at the time of sale, provided he
acquires title to the property later on,
nevertheless it held —
In the present case
however, it is likewise clear
that the sellers can no longer
deliver the object of the sale to
the buyers, as the buyers
themselves have already
acquired title and delivery
thereof from the rightful
owner, the DBP. Thus, such
contract may be deemed to be
inoperative and may thus fall,
by analogy, under item no. 5
of Article 1409 of the Civil
Code: “Those which
contemplate an impossible
service.” Article 1459 of the
Civil Code provides that “the
vendor must have a right to
transfer the ownership thereof
[object of the sale] at the time
it is delivered.” Here, delivery
of ownership is no longer
possible. It has become
impossible.
In fact, the earlier decision in Noel v.
Court of Appeals,64
invoked the principle that —
In a contract of sale, it is
essential that the seller is the
owner of the property he is
selling. The principal
obligation of a seller is “to
transfer the ownership of” the
property sold (Civil Code of
the Philippines, Art. 1458).
This law stems from the
principle that nobody can
 dispose of that which does
not belong to him ...65 NEMO
DAT QUOD NON HABET.
These principles have been
summarized in Quijada v. Court of
Appeals,67 thus — Sale, being a
consensual contract, is perfected by mere
consent, which is manifested the moment
there is a meeting of the minds as to the offer
and acceptance thereof on three (3)
elements: subject matter, price and terms of
payment of the price. Ownership by the seller
on the thing sold at the time of perfection of
the contract of sale is not an element for its
perfection. What the law requires is that the
seller has the right to transfer ownership at
the time the thing sold is delivered. Perfection
per se does not transfer ownership which
occurs upon the actual or constructive
delivery of the thing sold. A perfected
contract of sale cannot be challenged on the
ground of non-ownership on the part of the
seller at the time of its perfection; hence, the
sale is still valid.