Topacio vs Court of Appeals

– The spouses De Villa (parents-in-law of Topacio) were the former owners of a lot in
QC. It was previously mortgaged to Ayala Investment and Development Corp to secure an
obligation of P500k. For failure to pay, the mortgage was foreclosed and consequently, BPI
acquired the property as highest bidder.
– Topacio wanted to buy the property. He made an offer for P900k, but was asked to
improve it. Together, they arrived at P1.25M as the purchase price, with 30%
downpayment and the balance payable in cash upon execution of the Deed of Sale.
– Topacio paid the initial payment of P375k. – BPI wrote to Topacio and informed
him that he had until January 4, 1986 to pay the
balance of P875k. P. asked for extensions. BPI agreed to extend up to June 30. – Topacio
was unable to meet the deadline, so BPI wrote a letter to Topacio, where BPI declared
himself free to sell the property to other buyers and that Topacio could claim his
initial payment of P375k. – Topacio merely asked for more extensions. While BPI kept
telling Topacio that he could
claim the P375k back (in the form of a cashier’s check), Topacio declined. But BPI mailed
the check to him. The check remained with Topacio, uncashed. – BPI then told Topacio
that the property would be sold for P1.6M instead, so Topacio
reminded him of the original agreement (P1.25M), but BPI refused.– RTC: In favor of
Topacio, finding that there is a perfected contract of sale which is still enforceable because
BPI did not rescind either by judicial or notarial rescission.
– CA: Reversed. The contract is a contract to sell, not a contract of sale.
Issue: Contract to sell or contract of sale? Held: Contract of sale.
– The payment by Topacio of P375k was the operative act that gave rise to a perfect
contract of sale. It is considered earnest money (something of value to show that the
buyer was really in earnest, and given to the seller to bind the bargain). It is considered
part of the purchase price and proof of the perfection of the contract.
– The parties agreed on the object (house and lot in White Plains), and the price and
the manner of payment.
– Nowhere in the transaction indicates that BPI reserved its title on the property,
nor did it provide for any automatic rescission in case of default. So when
Topacio failed to pay the balance of P875k despite several extensions, BPI
could not validly rescind the contract w/o complying with the provision of Art
1592 or Art 1191 on notarial or judicial rescission respectively.

Equatorial Realty Development vs Mayfair Theater

– Carmelo owned a parcel of land in Manila. He leased it to Mayfair for a term of 20 years, for
use as a motion picture theater. Two years later, Carmelo leased to Mayfair another portion of his
property, also for 20 years.
○ Both contracts have the stipulation: “That if the lessor should desire to sell the leased
premises, the lessee shall be given 30 days exclusive option to purchase the same. In the event,
however, that the leased premises is sold to someone other than the lessee, the lessor is bound and
obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale thereof that the
purchaser shall recognize this lease and be bound by all the terms and conditions thereof.
– Mr. Pascal (of Carmelo) informed Yang (Mayfair’s president) that he wanted to sell the entire
property, and that a certain Araneta was offering to buy the whole property for $1.2M. Pascal asked
Yang if he was willing to buy the property for P6-7M.
– Mayfair informed Carmelo that they wanted to purchase the entire property and reminded
them of the stipulation in the lease, but Carmelo ignored the letter.
– Carmelo then sold its entire property to Equatorial for P11.3M. – Mayfair filed an action for
specific performance and annulment of the leased premises to Equatorial.
○ Carmelo and Equatorial claimed: that it had informed Mayfair of its desire but that Mayfair
had said it was only interested in buying the area under lease, which was impossible since the
property was not a condominium, and that the option to purchase invoked by Mayfair is null and void
for lack of consideration.
○ RTC: Dismissed Mayfair’s complaint. It reasoned that the option in the contract of lease was not
supported by a separate consideration, and without a consideration, the option is not binding on
Carmelo to sell the property to Mayfair. Cited Art 1479. Mayfair cannot compel Carmelo to comply
with the promise unless Mayfair establishes the existence of a distinct consideration. Also, Art 1354
(Although the cause is not stated in the contract, it is presumed that it exists and is lawful unless the
debtor proves the contrary), and consideration cannot be presumed, because when it comes to an
option it is governed particularly by Art 1479, whereby the promissee has the burden of proving the
existence of consideration. (This was the doctrine in the case of Sanchez.)
○ CA: The stipulation is a right of first refusal and not an option contract, which was the real
intention of the parties. The stipulation is certain as to the object (the sale of the leased premises) but
the price for which the object is ot be sold is not stated, so it isn’t an option contract. Also said that
the right of first refusal was limited to the leased promises and not the entire property itself.
Issue: Is the stipulation a right of first refusal or option contract? Held: Right of first
refusal.

The deed of option or the option clause in a contract, in order to be valid and enforceable, must,
among other things, indicate the definite price at which the person granting the option is willing to
sell.
Cited case of Ang Yu Asuncion: An unconditional mutual promise to buy and sell, as long as the object
is made determinate and the price is fixed, can be obligatory on the parties. An accepted unlitateral
promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable
consideration distinct and separate from the price, is what may properly be termed a perfect contract
of option, and this contract is legally binding.
The provision is a right of first refusal, and as such, the requirement of a separate consideration has
no applicability. An option is a contract granting a privilege to buy or sell within an agreed time and at
a determined price, and it is a separate and distinct contract from that which the parties may enter
into, and it must be supported by consideration. However, here the right of first refusal is an integral
part of the contracts of lease.

NORKIS DISTRIBUTORS, INC. vs. COURT OF APPEALS 193 SCRA

694, G.R. No. 91029 February 7,1991 GRINO-AQUINO, J.:
FACTS:
Petitioner Norkis Distributors, Inc. is the distributor of Yamaha motorcycles in Negros Occidental.
On September 20, 1979, private respondent Alberto Nepales bought trom the Norkis Bacolod
branch a brand new Yamaha Wonderbike motorcycle Model YL2DX. The price of P7,500.00 was
payable by means of a Letter of Guaranty from the DBP, which Norkis agreed to accept. Credit
was extended to Nepales for the price of the motorcycle payable by DBP upon release of his
motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the
motorcycle in favor of DBP. Petitioner issued a sales invoice which Nepales signed in conformity
with the terms of the sale. In the meantime, however, the motorcycle remained in Norkis'
possession. On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales,
allegedly the agent of Alberto Nepales. The motorcycle met an accident on February 3, 1980 at
Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that the unit was
being driven by a certain Zacarias Payba at the time of the accident. The unit was a total wreck
was returned.
On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis
in the total sum of P7,500. As the price of the motorcycle later increased to P7,828 in March,
1980, Nepales paid the difference of P328 and demanded the delivery of the motorcycle. When
Norkis could not deliver, he filed an action for specific performance with damages against Norkis in
the RTC of Negros Occidental. He alleged that Norkis failed to deliver the motorcycle which he
purchased, thereby causing him damages. Norkis answered that the motorcycle had already been
delivered to private respondent before the accident, hence, the risk of loss or damage had to be
borne by him as owner of the unit.

ISSUE:
Whether or not there has been a transfer of ownership of the motorcycle to Alberto Nepales
HELD:
No.
The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the
buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of
the thing sold and has been considered not a bill of sale. In all forms of delivery, it is necessary
that the act of delivery whether constructive or actual, be coupled with the intention of delivering
the thing. The act, without the intention, is insufficient.When the motorcycle was registered by
Norkis in the name of private respondent, Norkis did not intend yet to transfer the title or
ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP
for the release of the buyer's motorcycle loan. The Letter of Guarantee issued by the DBP reveals
that the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-requisite
for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would
not approve private respondent's loan application and, consequently, there would be no sale.
Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk
by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the
buyer," is applicable to this case, for there was neither an actual nor constructive delivery of the
thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner
and possessor of the motorcycle when it was wrecked. This is in accordance with the well known
doctrine of res perit domino.

BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF COMMERCE), vs. PERLA P.

MANALO and CARLOS MANALO, JR. G. R. No. 158149, February 9, 2006 CALLEJO,
SR., J.

FACTS:
Xavierville Estate, Inc. (XEI) sold to The Overseas Bank of Manila (OBM) some
residential lots in Xavierville subdivision. Nevertheless, XEI continued selling the residential
lots in the subdivision as agent of OBM.Carlos Manalo, Jr. proposed to XEI, through its
President Emerito Ramos, to purchase two lots in the Xavierville subdivision and offered as
part of the downpayment the P34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a
letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. In
the letter he also pegged the price of the lots at P348,060 with a 20% down payment of the
purchase price amounting to P69,612.00 (less the P34,887.66 owing from Ramos), payable
as soon as XEI resumes its selling operations; the corresponding Contract of Conditional Sale
would then be signed on or before the same date. Perla Manalo conformed to the letter
agreement. Thereafter, the spouses constructed a house on the property.
The spouses were notified of XEI’s resumption of selling operations. However, they did not
pay the balance of the downpayment because XEI failed to prepare a contract of conditional
sale and transmit the same to them. XEI also billed them for unpaid interests which they also
refused to pay.
XEI turned over its selling operations to OBM. Subsequently, Commercial Bank of
Manila (CBM) acquired the Xavierville Estate from OBM. CBM requested Perla Manalo to
stop any on-going construction on the property since it (CBM) was the owner of the lot and
she had no permission for such construction. Perla informed them that her husband had a
contract with OBM, through XEI, to purchase the property. She promised to send CBM the
documents. However, she failed to do so. Thus, CBM filed a complaint for unlawful detainer
against the spouses. But later on, CBM moved to withdraw its complaint because of the
issues raised. In the meantime, CBM was renamed the Boston Bank of the Philippines.
Then, the spouses filed a complaint for specific performance and damages against the
bank before the RTC. The spouses alleged that they had always been ready and willing to
pay the installments on the lots sold to them but no contract was forthcoming. The spouses
further alleged that upon their partial payment of the downpayment, they were entitled to the
execution and delivery of a Deed of Absolute Sale covering the subject lots. During the trial,
the spouses adduced in evidence the separate Contracts of Conditional Sale executed
between XEI and 3 other buyers to prove that XEI continued selling residential lots in the
subdivision as agent of OBM after the latter had acquired the said lots.
The trial court ordered the petitioner to execute a Deed of Absolute Sale in favor of the
spouses upon the payment of the spouses of the balance of the purchase price. It ruled that
under the August 22, 1972 letter agreement of XEI and the spouses, the parties had a
"complete contract to sell" over the lots, and that they had already partially consummated the
same. The Court of Appeals sustained the ruling of the RTC, but declared that the balance of
the purchase price of the property was payable in fixed amounts on a monthly basis for 120
months, based on the deeds of conditional sale executed by XEI in favor of other lot buyers.
Boston Bank filed a Motion for the Reconsideration of the decision alleging that there was no
perfected contract to sell the two lots, as there was no agreement between XEI and the
respondents on the manner of payment as well as the other terms and conditions of the sale.
Boston Bank also asserts that there is no factual basis for the CA ruling that the terms and
conditions relating to the payment of the balance of the purchase price of the property (as
agreed upon by XEI and other lot buyers in the same subdivision) were also applicable to the
contract entered into between the petitioner and the respondents. CA denied the MR.

ISSUES:
2.) Whether or not there was a perfected contract to sell the property
HELD
2.) NO. In a contract to sell property by installments, it is not enough that the parties agree on
the price as well as the amount of downpayment. The parties must, likewise, agree on the
manner of payment of the balance of the purchase price and on the other terms and
conditions relative to the sale. Even if the buyer makes a downpayment or portion thereof,
such payment cannot be considered as sufficient proof of the perfection of any purchase and
sale between the parties.
A contract of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and the price. 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.
We have meticulously reviewed the records, including Ramos’ February 8, 1972 and
August 22, 1972 letters to respondents and find that said parties confined themselves to
agreeing on the price of the property (P348,060.00), the 20% downpayment of the purchase
price (P69,612.00), and credited respondents for the P34,887.00 owing from Ramos as part
of the 20% downpayment. Based on these two letters, the determination of the terms of
payment of the P278,448.00 had yet to be agreed upon on or before December 31, 1972, or
even afterwards, when the parties sign the contract of conditional sale.
So long as an essential element entering into the proposed obligation of either of the parties
remains to be determined by an agreement which they are to make, the contract is
incomplete and unenforceable.

DELTA Development and Management Services, Inc. vs. Angeles Catherine

Enriquez and Luzon Development Bank G.R. No. 168666 January 12, 2011
FACTS
Ricardo De Leon and his spouse obtained a loan of 4, 000, 000 from Luzon
Development Bank (LDB) to develop Delta Development and Management Services,
Inc. (DELTA) Homes I. They executed a real estate mortgage over several of their
property, including Lot 4 owned by Ricardo. Later, the mortgage was amended by
increasing the loan to 8, 000, 000. The Real Estate Mortgage and the amendment were
annotated on TCT No. T 637183.
DELTA executed a Contract to Sell with Angeles Catherine Enriquez
(Enriquez) over Lot no. 4 for 614, 950. He made a downpayment of 114, 590. The
Contract to Sell provides that the failure to pay 3 successive monthly installments,
gives the owner the power to consider the Contract to Sell as void. Paid installments
are forfeited in favor of the owner as liquidated damages and to cover documentation
expenses.
DELTA defaulted on its loan to LDB. DELTA satisfied the loan by dation in
payment. It signed a deed of assignment over several properties, including Lot no. 4.
The dation in payment was not annotated on the TCT of Lot no. 4.
Enriquez filed a complaint against DELTA with the Housing and Land Use
Regulatory Board (HLURB) for violating the terms of its License to sell by:
1.) selling houses below the price prescribed by BP 220. 2.) failing to get clearance
for the mortgage from the HLURB
Enriquez sought a full refund of 301, 063 that she had already paid to DELTA
plus damages and administrative fines against the LDB and DELTA.

Issue: Whether or not a Contract to Sell conveys ownership over the Lot

Held: The Supreme Court held that a contract to sell does not transfer ownership.A
contract to sell is one where the prospective seller reserves the transfer of title to the
prospective buyer until the happening of an event, such as full payment of the
purchase price. What the seller obliges himself to do is to sell the subject property
only when the entire amount of the purchase price has already been delivered to him.
In this case, Enriquez has not fully paid the purchase price of the Lot. She does not
own the Lot. Therefore, DELTA's transfer of ownership over the lot to LDB is valid.
However, LDB is bound to respect the contract to sell with Enriquez. PD 957
provides thata contracts to sell registered by the seller with the Register of Deeds is
binding on third persons. While this particular contract was not registed with the
Register of Deeds by DELTA, this does not prejudice Enriquez or extinguish LDB's
obligation to respect the Contract to Sell. LDB cannot claim to be an innocent
purchaser as the Lot was clearly marked to be a part of the subdivision project of
Delta. While the general rule is that persons dealing with registered property can rely
on just the certificate of title, banks are covered by a special rule. Banks should know
that there is a risk in this dealing with this type of business because they might be
covered by existing contracts to sell
Finally, as to the effect of the dation in payment on the loan. While the lot
would have no value to the Bank if it is delivered to Enriquez, the intent of the parties
show that the dation was meant to extinguish the obligation fully, not just to the extent
of the value of the thing delivered.

THE HEIRS OF NICOLAS S. CABIGAS, NAMELY: LOLITA

ZABATE CABIGAS, ANECITA C. CANQUE, DIOSCORO
CABIGAS, FIDEL CABIGAS, AND RUFINO CABIGAS,
PETITIONERS, VS. MELBA L. LIMBACO, LINDA L. LOGARTA,
RAMON C. LOGARTA, HENRY D. SEE, FREDDIE S. GO,
BENEDICT Y. QUE, AWG DEVELOPMENT CORPORATION,
PETROSA DEVELOPMENT CORPORATION, AND UNIVERSITY
OF CEBU BANILAD, INC., RESPONDENTS.

THE FACTS

On February 4, 2003, the petitioners filed a complaint for the annulment

of titles of various parcels of land registered in the names of Melba
Limbaco, Linda Logarta, Ramon Logarta, Eugenio Amores, New Ventures
Realty Corporation, Henry See, Freddie Go, Benedict Que, AWG
Development Corporation (AWG), Petrosa Development Corporation
(Petrosa), and University of Cebu Banilad, Inc. (UCB) with the Regional
Trial Court (RTC) of Cebu City, docketed as Civil Case No. 28585.

The complaint alleged that petitioner Lolita Cabigas and her late husband,
Nicolas Cabigas, purchased two lots (Lot No. 742 [4] and Lot No. 953 [5])
from Salvador Cobarde on January 15, 1980. Cobarde in turn had
purchased these lots from Ines Ouano [6] on February 5, 1948.

Notwithstanding the sale between Ouano and Cobarde, and because the
two lots remained registered in her name, [7] Ouano was able to sell
these same lots to the National Airports Corporation on November
25, 1952 for its airport expansion project. The National Airports
Corporation promptly had the titles of these properties registered in its
name.

When the airport expansion project fell through, respondents Melba

Limbaco, Ramon Logarta, and Linda Logarta, the legal heirs of Ouano,
succeeded in reclaiming title to the two lots through an action for
reconveyance filed with the lower court; [8] the titles over these lots were
thereafter registered in their names. [9] They then subdivided the two lots
[10]
and sold them to New Ventures Realty Corporation, Eugenio Amores,
Henry See, Freddie Go, Benedict Que, Petrosa, and AWG. AWG, in turn,
sold one of the parcels of land to UCB. All the buyers registered the titles
over their respective lots in their names.

After the respondents had filed their individual Answers, respondents

Henry See, Freddie Go and Benedict Que filed a motion to set the case for
hearing on special affirmative defenses on July 8, 2004. On the other
hand, respondents AWG, Petrosa, and UCB filed a motion for summary
judgment on April 13, 2005, admitting as true the facts stated in the
petitioners' complaint, but claiming that the petitioners had no legal right
to the properties in question.

On August 23, 2005, the RTC issued a resolution, [11] granting the motion
for summary judgment filed by AWG, Petrosa and UCB, and dismissing the
petitioners' complaint. According to the RTC, while the petitioners alleged
bad faith and malice on the part of Ouano when she sold the same
properties to the National Airports Corporation, they never alleged bad
faith on the part of the buyer, the National Airports Corporation.

ISSUE

Whether the heirs of Ouano acted with good faith in recovering the
properties from the National Airports Corporation; and

c) Whether the subsequent buyers of the properties acted with good faith
in purchasing the properties from the heirs of Ouano.

HELD
A purchaser 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,
and pays a full and fair price for the same at the time of such purchase or
before he has notice of the claim of another person. [21] It is a well-
settled rule that a purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that
he acted in good faith under the belief that there was no defect in
the title of the vendor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the possibility of the existence of
a defect in his vendor's title, will not make him an innocent purchaser for
value, if it afterwards develops that the title was in fact defective, and it
appears that he had such notice of the defect as would have led to its
discovery had he acted with that measure of precaution which may
reasonably be required of a prudent man in a like situation.