Gaite v.
Fonacier the risk of losing his right over the ore without getting
Facts:
Gaite was appointed by Fonacier as attorney-in-fact to
contract any party for the exploration and development
of mining claims. Gaite executed a deed of assignment in
favor of a single proprietorship owned by him. For some
reasons, Fonacier revoked the agency, which was acceded
to by Gaite, subject to certain conditions, one of which
being the transfer of ores extracted from the mineral
claims for P75,000, of which P10,000 has already been
paid upon signing of the agreement and the balance to be
paid from the first letter of credit for the first local sale of
the iron ores. To secure payment, Fonacier delivered a
surety agreement with Larap Mines and some of its
stockholders, and another one with Far Eastern Insurance.
When the second surety agreement expired with no sale
being made on the ores, Gaite demanded the P65,000
balance. Defendants contended that the payment was
subject to the condition that the ores will be sold.
Issue:
(1) Whether the sale is conditional or one with a period
(2) Whether there were insufficient tons of ores
Held:
(1) The shipment or local sale of the iron ore is not a
condition precedent (or suspensive) to the payment of
the balance of P65,000.00, but was only a suspensive
period or term. What characterizes a conditional
obligation is the fact that its efficacy or obligatory force
(as distinguished from its demandability) is subordinated
to the happening of a future and uncertain event; so that
if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had
never existed.
A contract of sale is normally commutative and onerous:
not only does each one of the parties assume a correlative
obligation (the seller to deliver and transfer ownership of
the thing sold and the buyer to pay the price),but each
party anticipates performance by the other from the very
start. While in a sale the obligation of one party can be
lawfully subordinated to an uncertain event, so that the
other understands that he assumes the risk of receiving
nothing for what he gives (as in the case of a sale of hopes
or expectations, emptio spei), it is not in the usual course
of business to do so; hence, the contingent character of
the obligation must clearly appear. Nothing is found in the
record to evidence that Gaite desired or assumed to run
paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that
Gaite insisted on a bond a to guarantee payment of the
P65,000.00, an not only upon a bond by Fonacier, the
Larap Mines & Smelting Co., and the company's
stockholders, but also on one by a surety company; and
the fact that appellants did put up such bonds indicates
that they admitted the definite existence of their
obligation to pay the balance of P65,000.00.
The appellant have forfeited the right court below that
the appellants have forfeited the right to compel Gaite to
wait for the sale of the ore before receiving payment of
the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or
else replace it with an equivalent guarantee. The
expiration of the bonding company's undertaking on
December 8, 1955 substantially reduced the security of
the vendor's rights as creditor for the unpaid P65,000.00,
a security that Gaite considered essential and upon which
he had insisted when he executed the deed of sale of the
ore to Fonacier.
(2) The sale between the parties is a sale of a specific
mass or iron ore because no provision was made in their
contract for the measuring or weighing of the ore sold in
order to complete or perfect the sale, nor was the price of
P75,000,00 agreed upon by the parties based upon any
such measurement.(see Art. 1480, second par., New Civil
Code). The subject matter of the sale is, therefore, a
determinate object, the mass, and not the actual number
of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to
his buyer all of the ore found in the mass,
notwithstanding that the quantity delivered is less than
the amount estimated by them.
ACAP vs. COURT OF APPEALS
FACTS:
Felixberto, an only son, inherited from his parents a lot.
He executed a duly notarized document entitled
"Declaration of Heirship and Deed of Absolute Sale" in
favor of Pido. When ownership was transferred, Acap
continued to be the tenant of a portion of the said land
and religiously paid his leasehold rentals to Pido. When
Pido died intestate his surviving heirs executed a
notarized Declaration of Heirship and Waiver of Rights of
the said lot to de los Reyes. De los Reyes informed Acap
that, as the new owner, the lease rentals should be paid
to him. When petitioner refused and failed to pay any
further lease rentals after repeated demands, he filed a
complaint for recovery of possession and damages. The
lower court rendered a decision in favor of private
respondent which was eventually affirmed by the Court of
Appeals (CA).Hence, this present petition.
ISSUES:
1.WON the subject Declaration of Heirship and Waiver of
Rights is a recognized mode of acquiring ownership by
private respondent over the lot in question.
2.WON the said document can be considered as Deed of
Sale in favor of private respondent of the lot in question.
HELD:
The Court GRANTS the petition and SET ASIDE the
decision of the CA.
1. No. Private respondent cannot conclusively claim
ownership over the subject lot on the sole basis of the
waiver document. Under Article 712 of the Civil Code,
the modes of acquiring ownership are generally
classified into 2 classes:
(1) original mode - (i.e., occupation, acquisitive
prescription, law or intellectual creation) and
(2) the derivative mode (i.e., through succession,
mortis causa, or tradition as a result of certain
contracts, such as sale, barter, donation,
assignment or mutuum).In a contract of sale, one
of the contracting parties obligates himself to
transfer the ownership of and to deliver a
determinate thing, and the other party to pay a
price certain in money or its equivalent. Whereas,
a declaration of heirship and waiver of rights
operates as a public instrument when filed with
the Registry of Deeds whereby the intestate heirs
adjudicate and divide the estate left by the
decedent among themselves as they see fit.
Hence, private respondent, being then a stranger
to the succession of Pido, cannot conclusively
claim ownership over the subject lot on the sole
basis of the waiver which neither recites the
elements of either a sale, or a donation, or any
other derivative mode of acquiring ownership.
2. No. A notice of adverse claim was filed with the
Registry of Deeds which contained the Declaration of
Heirship with Waiver of rights and was annotated at
the back of the Original Certificate of Title (OCT) to
the land in question. This said notice, by its nature,
does not however prove private respondent's
ownership over the tenanted lot. The Court
emphasized that while the existence of said adverse
claim was duly proven, there was no evidence
whatsoever that a deed of sale was executed
between the parties transferring the rights in favor of
private respondent. An adverse claim cannot by itself
be sufficient to cancel the OCT to the land and title
the same in private respondent's name.
Dizon v. Court of Appeals
G.R. No. 122544, 28 January 2003
FACTS:
Private respondent Overland Express Lines, Inc. (lessee)
entered into a Contract of Lease with Option to Buy with
petitioners (lessors) involving a parcel of land. The term of
the lease was for one (1) year commencing from May 16,
1974 up to May 15, 1975. During this period, private
respondent was granted an option to purchase for the
amount of P3,000.00 per square meter. Thereafter, the
lease shall be on a per month basis with a monthly rental
of P3,000.00.
For failure of private respondent to pay the increased
rental of P8,000.00 per month, petitioners filed an action
for ejectment. It also concluded that there was a
perfected contract of sale between the parties on the
leased premises and that pursuant to the option to buy
agreement, private respondent had acquired the rights of
a vendee in a contract of sale. It opined that the payment
by private respondent of the partial payment for the
leased property, which petitioners accepted (through
Alice A. Dizon) and for which an official receipt was
issued, was the operative act that gave rise to a perfected
contract of sale, and that for failure of petitioners to deny
receipt thereof, private respondent can therefore assume
that Alice A. Dizon, acting as agent of petitioners, was
authorized by them to receive the money in their behalf.
ISSUE:
Whether or not Alice Dizon was an authorized agent of
the petitioners to receive payment from the respondents.
RULING:
No. There was no valid consent by the petitioners (as co-
owners of the leased premises) on the supposed sale
entered into by Alice A. Dizon, as petitioners’ alleged
agent, and private respondent. The basis for agency is
representation and a person dealing with an agent is put
upon inquiry and must discover upon his peril the
authority of the agent. As provided in Article 1868 of the
New Civil Code, there was no showing that petitioners
consented to the act of Alice A. Dizon nor authorized her
to act on their behalf with regard to her transaction with
private respondent. The most prudent thing private
respondent should have done was to ascertain the extent
of the authority of Alice A. Dizon. Being negligent in this
regard, private respondent cannot seek relief on the basis
of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals, we explained
the rule in dealing with an agent: Every person dealing
with an agent is put upon inquiry and must discover upon
his peril the authority of the agent. If he does not make
such inquiry, he is chargeable with knowledge of the
agent’s authority, and his ignorance of that authority will
not be any excuse. Persons dealing with an assumed
agent, whether the assumed agency be a general or
special one, are bound at their peril, if they would hold
the principal, to ascertain not only the fact of the agency
but also the nature and extent of the authority, and in
case either is controverted, the burden of proof is upon
them to establish it.
Antonio De Santos vs City of Manila
GR L-211677
Facts:
1) A Contract of Exchange was executed between City of
Manila and Arellano University. Five parcels of land of City
of Manila, 2,400 sq. meters in exchange for 3 parcels of
land of Arellano University.
2) The parcels of land of Arellano were needed for the
Azcarraga Extension.
3) Antonio de Santos went forward and asked that such
contract be declared null and void because he has a claim
over Lot 1. In his claim, he also asked that he be given the
right to preemption and redemption.
4) The predecessor in interest of de Santos is Lopez.
Lopez’ land, lot 4 was a subject of expropriation because
of the Legarda widening. Lopez be requested that he be
given the estero adjoining Lot 4 instead. The request was
however held in abeyance when the Legarda widening
project was stopped.
5) The lower court ruled in favor of the City of Manila. The
same was affirmed by CA.
Issue:
Whether or not de Santos has the right to preemption or
redemption
Held:
De Santos has no right to pre emption or redemption.
There is no element under Article 1622 that was proven
by de Santos. He did not acquire any right to Lot 1 when
Lopez sold him Lot 4, at most he only acquired the right to
the latter’s claim.
Celestino vs CIR
99 Phil. 841 August 31, 1956
Facts:
Celestino is the owner of Oriental Sash Factory. It paid 7%
on the gross sales of their sales. In 1952, they began to
pay only 3% tax. Petitioner claims that it does not
manufacture ready-made doors, sash and windows for
the public, but only upon special orders from the
customers, hence, it is not engaged in manufacturing
under sec 186, but only in sales of services covered by sec
191. Having failed to convince BIR, petitioner went to the
Court of Tax Appeal where it also failed. CTA, in its
decision, holds that the “petitioner has chosen for its
tradename and has offered itself to the public as a
“Factory”, which means it is out to do business, in its
chosen lines on a big scale. As a general rule, sash
factories receive orders for doors and windows of special
design only in particular cases but the bulk of their sales is
derived from a ready-made doors and windows of
standard sizes for the average home.
Issue:
Whether the petitioner company provides special services
or is engaged in manufacturing.
Ruling:
The Oriental Sash Factory is engaged in manufacturing.
The company habitually makes sash, windows and doors
as it has been represented to the public.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.
Commissioner on Internal Revenue vs Engineering
Equipment G.R. No. L-27044 June 30, 1975
Facts:
· Engineering Equipment and Supply Co. (Engineering
for short), a domestic corporation, is an engineering and
machinery firm. As operator of an integrated engineering
shop, it is engaged, among others, in the design and
installation of central type air conditioning system,
pumping plants and steel fabrications.
· On July 27, 1956, one Juan de la Cruz, wrote the then
Collector, now Commissioner, of Internal Revenue
denouncing Engineering for tax evasion by misdeclaring
its imported articles and failing to pay the correct
percentage taxes due thereon in connivance with its
foreign suppliers. Engineering was likewise denounced to
the Central Bank (CB) for alleged fraud in obtaining its
dollar allocations. Acting on these denunciations, a raid
and search was conducted by a joint team of Central
Bank, (CB), National Bureau of Investigation (NBI) and
Bureau of Internal Revenue (BIR) agents on September
27, 1956, on which occasion voluminous records of the
firm were seized and confiscated
· On September 30, 1957, revenue examiners Quesada
and Catudan reported and recommended to the then
Collector, now Commissioner, of Internal Revenue that
Engineering be assessed for P480,912.01 as deficiency
advance sales tax on the theory that it misdeclared its
importation of air conditioning units and parts and
accessories thereof which are subject to tax under Section
185(m) of the Tax Code,
· On March 3, 1959. the Commissioner assessed
against, and demanded upon, Engineering payment of the
increased amount and suggested that P10,000 be paid as
compromise in extrajudicial settlement of Engineering's
penal liability for violation of the Tax Code. The firm,
however, contested the tax assessment and requested
that it be furnished with the details and particulars of the
Commissioner's assessment
· Engineering appealed to the Court of Tax Appeals.
CTA rendered a decision in favor of Engineering, declared
exempt from the deficiency manufacturers sales tax
covering the period from June 1, 1948. to September 2,
1956. However, petitioner is ordered to pay respondent,
or his duly authorized collection agent, the sum of
P174,141.62 as compensating tax and 25% surcharge for
the period from 1953 to September 1956. With costs
against petitioner.
Issue:
W/ON 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: Contractor. The distinction between a contract of
sale and one for work, labor and materials is tested by the
inquiry whether the thing transferred is one not in
existence and which never would have existed but for the
order of the party desiring to acquire it, or a thing which
would have existed and has been the subject of sale to
some other persons even if the order had not been given.
The word "contractor" has come to be used with special
reference to a person who, in the pursuit of the
independent business, undertakes to do a specific job or
piece of work for other persons, using his own means and
methods without submitting himself to control as to the
petty details. The true test of a contractor, would seem to
be that he renders service in the course of an
independent occupation, representing the will of his
employer only as to the result of his work, and not as to
the means by which it is accomplished.
Engineering, in a nutshell, fabricates, assembles, supplies
and installs in the buildings of its various customers the
central type air conditioning system; prepares the plans
and specifications therefor which are distinct and
different from each other; the air conditioning units and
spare parts or accessories thereof used by petitioner are
not the window type of air conditioner which are
manufactured, assembled and produced locally for sale to
the general market; and the imported air conditioning
units and spare parts or accessories thereof are supplied
and installed by petitioner upon previous orders of its
customers conformably with their needs and
requirements.
Quiroga vs Parsons
G.R. No. L-11491
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts:
On Jan 24, 1911, plaintiff and the respondent entered into
a contract making the latter an “agent” of the former. The
contract stipulates that Don Andres Quiroga, here in
petitioner, grants exclusive rights to sell his beds in the
Visayan region to J. Parsons. The contract only stipulates
that J.Parsons should pay Quiroga within 6 months upon
the delivery of beds.
Quiroga files a case against Parsons for allegedly violating
the following stipulations: not to sell the beds at higher
prices than those of the invoices; to have an open
establishment in Iloilo; itself to conduct the agency; to
keep the beds on public exhibition, and to pay for the
advertisement expenses for the same; and to order the
beds by the dozen and in no other manner. With the
exception of the obligation on the part of the defendant
to order the beds by the dozen and in no other manner,
none of the obligations imputed to the defendant in the
two causes of action are expressly set forth in the
contract. But the plaintiff alleged that the defendant was
his agent for the sale of his beds in Iloilo, and that said
obligations are implied in a contract of commercial
agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of
the contract hereinbefore transcribed, was a purchaser or
an agent of the plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of
sale.
Held:
In order to classify a contract, due attention must be
given to its essential clauses. In the contract in question,
what was essential, as constituting its cause and subject
matter, is that the plaintiff was to furnish the defendant
with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in
the manner stipulated. 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. These are precisely the essential features of a
contract of purchase and sale. There was the obligation
on the part of the plaintiff to supply the beds, and, on the
part of the defendant, to pay their price. These features
exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to
sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to
a third person, and if he does not succeed in selling it, he
returns it. 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.
In respect to the defendant’s obligation to order by the
dozen, the only one expressly imposed by the contract,
the effect of its breach would only entitle the plaintiff to
disregard the orders which the defendant might place
under other conditions; but if the plaintiff consents to fill
them, he waives his right and cannot complain for having
acted thus at his own free will.
For the foregoing reasons, we are of opinion that the
contract by and between the plaintiff and the defendant
was one of purchase and sale, and that the obligations the
breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by
law.
Puyat and Sons Co. v. Arco Amusement Company
Facts:
Respondent is engaged in operating cinematographs,
while petitioner is acting as an agent for Starr Piano
Company of Richmond. Respondent negotiated with
petitioner and agreed that petitioner would order sound
reproducing equipment on its behalf, and respondent
would pay 10% commission and out-of-pocket expenses
in addition to the selling price. Transactions for 2 orders
transpired. After 3 years, respondent discovered that that
price quoted to them by petitioner was not the net price
but the list price. They sought to obtain reimbursement
from the petitioner, and failing on this, filed the instant
case.
Issue:
Whether the contract between petitioner and respondent
is that of agency where agent is bound to indemnify the
principal for damages, or a mere contract of sales
Held:
The letters, by which the respondent accepted the prices
for the sound reproducing equipment subject of its
contract with the petitioner, are clear in their terms and
admit no other interpretation that the respondent in
question at the prices indicated which are fixed and
determinate. The respondent admitted in its complaint
filed with the Court of First Instance of Manila that the
petitioner agreed to sell to it the first sound reproducing
equipment and machinery.
We agree with the trial judge that "whatever unforseen
events might have taken place unfavorable to the
defendant (petitioner), such as change in prices, mistake
in their quotation, loss of the goods not covered by
insurance or failure of the Starr Piano Company to
properly fill the orders as per specifications, the plaintiff
(respondent) might still legally hold the defendant
(petitioner) to the prices fixed of $1,700 and $1,600." This
is incompatible with the pretended relation of agency
between the petitioner and the respondent, because in
agency, the agent is exempted from all liability in the
discharge of his commission provided he acts in
accordance with the instructions received from his
principal (section 254, Code of Commerce), and the
principal must indemnify the agent for all damages which
the latter may incur in carrying out the agency without
fault or imprudence on his part (article 1729, Civil Code).

While the letters state that the petitioner was to receive

ten per cent (10%) commission, this does not necessarily
make the petitioner an agent of the respondent, as this
provision is only an additional price which the respondent
bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale.

In the second place, to hold the petitioner an agent of the

respondent in the purchase of equipment and machinery
from the Starr Piano Company of Richmond, Indiana, is
incompatible with the admitted fact that the petitioner is
the exclusive agent of the same company in the
Philippines. It is out of the ordinary for one to be the
agent of both the vendor and the purchaser. The facts
and circumstances indicated do not point to anything but
plain ordinary transaction where the respondent enters
into a contract of purchase and sale with the petitioner,
the latter as exclusive agent of the Starr Piano Company in
the United States.

It follows that the petitioner as vendor is not bound to

reimburse the respondent as vendee for any difference
between the cost price and the sales price which
represents the profit realized by the vendor out of the
transaction. This is the very essence of commerce without
which merchants or middleman would not exist.