NATURE OF A CONTRACT OF SALE 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),
1. Gaite v. Fonacier
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.
Issues:
(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
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
the risk of losing his right over the ore without getting 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, and 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.
2. Province of Cebu v. Heirs of Rufina Morales
Facts:
Province of Cebu leased in favor of Rufina Morales a 210-
square meter lot. Petitioner donated the lot occupied by
Morales to the City of Cebu. The city, then, sold the subject lot at
public auction. The highest bidder for the said lot was Hever Bascon
but Morales was allowed to match the highest bid since she
had a preferential right to the lot as actual occupant thereof. Morales
thus paid the required deposit and partial payment for the
lot. Later, the subject lot was returned to petitioner and
registered in its name. Morales died and apart from the deposit and
down payment, she was not able to make any other payments on the
balance of the purchase price for the lot. Now the surviving heirs of
Morales are asking for the formal conveyance of subject lot, in
accordance with the award earlier made by the City of Cebu. They
also consigned with the court the amount representing the
balance of the purchase price which petitioner allegedly refused to
accept.
Issue: Can respondents still tender payment of the full purchase
price? Yes.
Held: Article 1592 of the Civil Code pertinently provides that “In the
sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long as no demand
for rescission of the contract has been made upon him either judicially
or by notarial act. After the demand, the court may not grant him a
new term. Thus, respondents could still tender payment of the
full purchase price as no demand for rescission had been made upon
them, either judicially or through notarial act. While it is true that it took
a long time for respondents to bring suit for specific performance and
consign the balance of the purchase price, it is equally true that
petitioner or its predecessor did not take any action to have the
contract of sale rescinded. Article 1592 allows the vendee to
pay as long as no demand for rescission has been made. The
consignation of the balance of the purchase price before the trial court
thus operated as full payment, which resulted in the extinguishment of
respondents’ obligation under the contract of sale.
Doctrine:
 When is a sale by public action perfected?
A sale by public auction is perfected "when the auctioneer announces
its perfection by the fall of the hammer or in other customary manner".
It does not matter that Morales merely matched the bid of the highest
bidder at the said auction sale. The contract of sale was nevertheless
perfected as to Morales, since she merely stepped into the shoes of
the highest bidder.
Consequently, there was a meeting of minds between the City of
Cebu and Morales as to the lot sold and its price, such that each party
could reciprocally demand performance of the contract from the other.
 What is the nature of a contract of sale?
A contract of sale is a consensual contract and 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. From that moment, the parties may
reciprocally demand performance subject to the provisions of the law
governing the form of contracts.
 What are the elements of a valid contract of sale?
The elements of a valid contract of sale under Article 1458 of the Civil
Code are: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent.23 All
these elements were present in the transaction between the City of
Cebu and Morales.
There is no merit in petitioner’s assertion that there was no perfected
contract of sale because no "Contract of Purchase and Sale" was ever
executed by the parties. As previously stated, a contract of sale is a
consensual contract that is perfected upon a meeting of minds as to
the object of the contract and its price.
 Is a formal document of sale necessary for a sale transaction
to acquire a binding effect?
Subject to the provisions of the Statute of Frauds, a formal document
is not necessary for the sale transaction to acquire binding effect. For
as long as the essential elements of a contract of sale are proved to
exist in a given transaction, the contract is deemed perfected
regardless of the absence of a formal deed evidencing the same.
Similarly, petitioner erroneously contends that the failure of Morales to
pay the balance of the purchase price is evidence that there was
really no contract of sale over the lot between Morales and the City of
Cebu. On the contrary, the fact that there was an agreed price for the
lot proves that a contract of sale was indeed perfected between the
parties.
  Is failure to pay the balance of the purchase price equivalent to
an invalid sale?
Failure to pay the balance of the purchase price did not render the
sale inexistent or invalid, but merely gave rise to a right in favor of the
vendor to either demand specific performance or rescission of the
contract of sale. It did not abolish the contract of sale or result in its
automatic invalidation.
As correctly found by the appellate court, the contract of sale between
the City of Cebu and Morales was also partially consummated. The
latter had paid the deposit and down payment for the lot in
accordance with the terms of the bid award. She first occupied the
property as a lessee in 1961, built a house thereon and was
continuously in possession of the lot as its owner until her death in
1969. Respondents, on the other hand, who are all surviving heirs of
Morales, likewise occupied the property during the latter’s lifetime and
continue to reside on the property to this day.
 What are the three stages of a contract of sale?
The stages of a contract of sale are as follows:
(1) negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the
contract is perfected;
(2) perfection, which takes place upon the concurrence of the
essential elements of the sale which are the meeting of the minds of
the parties as to the object of the contract and upon the price; and
(3) consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating in the
extinguishment thereof.
3. Balatbat v. CA
Facts:
Aurelio Roque field a complaint for partition against his children
Corazon, Feliciano, Severa and Osmundo Roque, and Alberto de los
Santos before the CFI. The Roque children were declared in default
and Aurelio presented evidence ex-parte. Eventually, the trial court
rendered a decision in favor of Aurelio; holding that Aurelio and his
wife Maria Mesina acquired the lot (TCT 51330) during their conjugal
union, as well as the house that was constructed thereon; that when
Maria Mesina died, leaving no debt, Aurelio (as surviving spouse) was
entitled to ½ share pro-indiviso of the conjugal property (i.e. house
and lot) and that Aurelio and his 4 children were entitled to 1/5 share
pro-indiviso each of the ½ share pro-indiviso forming the estate of
Maria Mesina; ordering the partition of the properties;
On 5 October 1979, the Register of Deeds of Manila issued TCT
135671 (with Aurelio Roque having 6/10 share; and the Roque
children with 1/10 share each). On 1 April 1980, Aurelio sold his 6/10
share in TCT 135671 to respondent spouses Repuyan. Repuyan
caused the annotation of her affidavit of adverse claim on the TCT
135671, “claiming that she bought 6/10 portion of the property from
Aurelio Roque for the amount of P50,000.00 with a downpayment of
P5,000.00 and the balance of P45,000.00 to be paid after the partition
and subdivision of the property.”
On 20 August 1980, Aurelio Roque filed a complaint for “Rescission of
Contract” against spouses Repuyan before the then CFI Manila
(Branch IV, Civil Case 134131). The complaint is grounded on
spouses Repuyan’s failure to pay the balance of P45,000.00 of the
purchase price. On 5 September 1980, spouses Repuyan filed their
answer with counterclaim.
In the meantime, the trial court issued an order in Civil Case 109032
(Partition case) dated 2 February 1982, ordering the Deputy Clerk of
the court to sign the deed of absolute sale for and in behalf of Roque
children, in order to effect the partition of the property involved in the
case. A deed of absolute sale was executed on 4 February 1982
between Aurelio, Corazon, Feliciano, Severa and Osmundo Roque
and petitioner Clara Balatbat, married to Alejandro Balatbat. On 14
April 1982, Clara Balatbat filed a motion for the issuance of a writ of
possession which was granted by the trial court on 14 September
1982, subject, however, to valid rights and interest of third persons
over the same portion thereof, other than vendor or any other person
or persons privy to or claiming any rights or interest under it. The
corresponding writ of possession was issued on 20 September 1982.
On 20 May 1982, Clara Balatbat filed a motion to intervene in Civil
Case 134131 which was granted as per court’s resolution of 21
October 1982. However, Clara Balatbat failed to file her complaint in
intervention.
On 15 April 1986, the trial court rendered a decision dismissing the
complaint, and declaring the Deed of Absolute Sale dated 1 April
1980 as valid and enforceable and Aurelio is, as he is hereby ordered,
to partition and subdivide the land covered by TCT 135671, and to
aggregate therefrom a portion equivalent to 6/10 thereof, and cause
the same to be titled in the name of spouses Repuyan, and after
which, the latter to pay Aurelio the sum of P45,000.00.
On 9 December 1988, Balatbat and her husband filed a complaint for
delivery of the owners duplicate copy of TCT 135671 before the RTC
against Jose and Aurora Repuyan. On 27 January 1989, spouses
Repuyan filed their answer with affirmative defenses and compulsory
counterclaim. On 2 August 1990, the RTC Manila rendered a decision
dismissing the complaint, finding that the Balatbats were not able to
establish their cause of action against the Repuyans and have no
right to the reliefs demanded in the complaint.
Dissatisfied, Balatbat filed an appeal before the Court of Appeals (CA-
GR CV 29994) which rendered decision on 12 August 1992, affirming
the judgment appealed.
Issues:
(1) Whether the alleged sale to private respondents was merely
executory and not a consummated transaction.
(2) Whether there was double sale as contemplated under Art. 1544
of CC.
(3) Whether petitioner was a buyer in good faith and for value.
Held:
(1) NO. Contrary to petitioner’s contention that the sale dated April 1,
1980 in favor of private respondents Repuyan was merely executory
for the reason that there was no delivery of the subject property and
that consideration/price was not fully paid, SC find the sale as
consummated, hence, valid and enforceable. The Court dismissed
vendor’s Aurelio Roque complaint for rescission of the deed of sale
and declared that the Sale dated April 1, 1980, as valid and
enforceable. No appeal having been made, the decision became final
and executory.
The execution of the public instrument, without actual delivery of the
thing, transfers the ownership from the vendor to the vendee, who
may thereafter exercise the rights of an owner over the same. In the
instant case, vendor Roque delivered the owner’s certificate of title to
herein private respondent. The provision of Article 1358 on the
necessity of a public document is only for convenience, not for validity
or enforceability. It is not a requirement for the validity of a contract of
sale of a parcel of land that this be embodied in a public instrument. A
contract of sale being consensual, it is perfected by the mere consent
of the parties. Delivery of the thing bought or payment of the price is
not necessary for the perfection of the contract; and failure of the
vendee to pay the price after the execution of the contract does not
make the sale null and void for lack of consideration but results at
most in default on the part of the vendee, for which the vendor may
exercise his legal remedies.
(2) Article 1544 of the Civil Code provides that in case of double sale
of an immovable property, ownership shall be transferred (1) to the
person acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith was
first in possession; and (3) in default thereof, to the person who
presents the oldest title, provided there is good faith.
In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share
to private respondents Repuyan on April 1, 1980. Subsequently, the
same lot was sold again by vendor Aurelio Roque (6/10) and his
children (4/10), represented by the Clerk of Court pursuant to Section
10, Rule 39 of the Rules of Court, on February 4, 1982. Undoubtedly,
this is a case of double sale contemplated under Article 1544 of the
New Civil Code.
Evidently, private respondents Repuyan’s caused the annotation of an
adverse claim on the title of the subject property on July 21, 1980.
The annotation of the adverse claim in the Registry of Property is
sufficient compliance as mandated by law and serves notice to the
whole world. On the other hand, petitioner filed a notice of lis pendens
only on February 2, 1982. Accordingly, private respondents who first
caused the annotation of the adverse claim in good faith shall have a
better right over herein petitioner. As between two purchasers, the
one who has registered the sale in his favor, has a preferred right over
the other who has not registered his title even if the latter is in actual
possession of the immovable property. Further, even in default of the
first registrant or first in possession, private respondents have
presented the oldest title. Thus, private respondents who acquired the
subject property in good faith and for valuable consideration
established a superior right as against the petitioner.
(3) Petitioner cannot be considered as a buyer in good faith. If
petitioner did investigate before buying the land on February 4, 1982,
she should have known that there was a pending case and an
annotation of adverse claim was made in the title of the property
before the Register of Deeds and she could have discovered that the
subject property was already sold to the private respondents. It is
incumbent upon the vendee of the property to ask for the delivery of
the owner’s duplicate copy of the title from the vendor. One who
purchases real estate with knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein; and the
same rule must be applied to one who has knowledge of facts which
should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor.
Good faith, or the want of it is not a visible, tangible fact that can be
seen or touched, but rather a state or condition of mind which can
only be judged of by actual or fancied tokens or signs.
4. San Lorenzo Development Corporation v. CA
FACTS:
Respondents Spouses Miguel Lu and Pacita Zavalla Lu, owned two
(2) parcels of land situated in Sta. Rosa, Laguna. On 20 August 1986,
the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta, Babasanta made a downpayment of fifty thousand
pesos (P50,000.00) as evidenced by a memorandum receipt issued
by Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to
demand the execution of a final deed of sale in his favor so that he
could effect full payment of the purchase price. In the same letter,
Babasanta notified the spouses about having received information
that the spouses sold the same property to another without his
knowledge and consent. He demanded that the second sale be
cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she
acknowledged having agreed to sell the property to him at fifteen
pesos (P15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became due,
he requested for a reduction of the price and when she refused,
Babasanta backed out of the sale. Pacita added that she returned the
sum of fifty thousand pesos (P50,000.00) to Babasanta through
Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the
Regional Trial Court, of San Pedro, Laguna, a Complaint for Specific
Performance and Damages against his co-respondents herein, the
Spouses Lu. Babasanta alleged that the lands had been sold to him
by the spouses. Despite his repeated demands for the execution of a
final deed of sale in his favor, respondents allegedly refused.
On 19 January 1990, herein petitioner San Lorenzo Development
Corporation (SLDC) filed a Motion for Intervention before the trial
court. SLDC alleged that it had legal interest in the subject matter
under litigation because on 3 May 1989, the two parcels of land
involved, had been sold to it in a Deed of Absolute Sale with
Mortgage. It alleged that it was a buyer in good faith and for value and
therefore it had a better right over the property in litigation.
After a protracted trial, the RTC rendered its Decision on 30 July 1993
upholding the sale of the property to SLDC.
Respondent Babasanta appealed the trial court’s decision to the Court
of Appeals. On 4 October 1995, the Court of Appeals rendered its
Decision which set aside the judgment of the trial court. It declared
that the sale between Babasanta and the Spouses Lu was valid and
subsisting and ordered the spouses to execute the necessary deed of
conveyance in favor of Babasanta. The appellate court ruled that the
Absolute Deed of Sale with Mortgage in favor of SLDC was null and
void on the ground that SLDC was a purchaser in bad faith.
Hence, this petition.
ISSUE:
The core issue presented for resolution in the instant petition is who
between SLDC and Babasanta has a better right over the two parcels
of land subject of the instant case in view of the successive
transactions executed by the Spouses Lu.
RULING:
An analysis of the facts obtaining in this case, as well as the evidence
presented by the parties, irresistibly leads to the conclusion that the
agreement between Babasanta and the Spouses Lu is a contract to
sell and not a contract of sale.
The receipt signed by Pacita Lu merely states that she accepted the
sum of fifty thousand pesos (P50,000.00) from Babasanta as partial
payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna.
While there is no stipulation that the seller reserves the ownership of
the property until full payment of the price which is a distinguishing
feature of a contract to sell, the subsequent acts of the parties
convince us that the Spouses Lu never intended to transfer ownership
to Babasanta except upon full payment of the purchase price.
Doubtlessly, the receipt signed by Pacita Lu should legally be
considered as a perfected contract to sell.
The perfected contract to sell imposed upon Babasanta the obligation
to pay the balance of the purchase price. There being an obligation to
pay the price, Babasanta should have made the proper tender of
payment and consignation of the price in court as required by law.
Respondent Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging receipt of partial
payment for the property. For one, the agreement between Babasanta
and the Spouses Lu, though valid, was not embodied in a public
instrument. Hence, no constructive delivery of the lands could have
been effected.
Spouses Lu with Babasanta. Simply stated, from the time of execution
of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the
consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys 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 or interest of some
other person in the property. Following the foregoing definition, we
rule that SLDC qualifies as a buyer in good faith since there is no
evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta. At the time of the sale of the
property to SLDC, the vendors were still the registered owners of the
property and were in fact in possession of the lands.
Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the
property at any time, SLDC’s right is definitely superior to that of
Babasanta’s.

On the part of petitioner, SLDC registered the sale with the Registry of
Deeds after it had acquired knowledge of Babasanta’s claim.
Babasanta, however, strongly argues that the registration of the sale
by SLDC was not sufficient to confer upon the latter any title to the
property since the registration was attended by bad faith. Specifically,
he points out that at the time SLDC registered the sale on 30 June
1990, there was already a notice of lis pendens on the file with the
Register of Deeds, the same having been filed one year before on 2
June 1989.
Did the registration of the sale after the annotation of the notice of lis
pendens obliterate the effects of delivery and possession in good faith
which admittedly had occurred prior to SLDC’s knowledge of the
transaction in favor of Babasanta?
It must be stressed that as early as 11 February 1989, the Spouses
Lu executed the Option to Buy in favor of SLDC upon receiving
P316,160.00 as option money from SLDC. After SLDC had paid more
than one half of the agreed purchase price of P1,264,640.00, the
Spouses Lu subsequently executed on 3 May 1989 a Deed of
Absolute Sale in favor or SLDC. At the time both deeds were
executed, SLDC had no knowledge of the prior transaction of the

FORMALITIES
1. Rosencor Development Corporation vs. Judge Inquing
FACTS: The case was originally filed on December 10, 1993 by
Paterno Inquing, Irene Guillermo and Federico Bantugan, herein
respondents, against Rosencor Development Corporation (hereinafter
“Rosencor”), Rene Joaquin, and Eufrocina de Leon. Originally, the
complaint was one for annulment of absolute deed of sale but was
later amended to one for rescission of absolute deed of sale. A
complaint-for intervention was thereafter filed by respondents
Fernando Magbanua and Danna Lizza Tiangco. The complaint-in-
intervention was admitted by the trial court in an Order dated May 4,
1994
“This action was originally for the annulment of the Deed of Absolute
Sale dated September 4, 1990 between defendants Rosencor and
Eufrocina de Leon but later amended (sic) praying for the rescission
of the deed of sale.
Plaintiffs and plaintiffs-intervenors averred that they are the lessees
since 1971 of a two-story residential apartment located at No. 150
Tomas Morato Ave., Quezon City covered by TCT No. 96161 and
owned by spouses Faustino and Cresencia Tiangco. The lease was
not covered by any contract. The lessees were renting the premises
then for P150.00 a month and were allegedly verbally granted by the
lessors the pre-emptive right to purchase the property if ever they
decide to sell the same.
Upon the death of the spouses Tiangcos in 1975, the management of
the property was adjudicated to their heirs who were represented by
Eufrocina de Leon. The lessees were allegedly promised the same
pre-emptive right by the heirs of Tiangcos since the latter had
knowledge that this right was extended to the former by the late
spouses Tiangcos. The lessees continued to stay in the premises and
allegedly spent their own money amounting from P50,000.00 to
P100,000.00 for its upkeep. These expenses were never deducted
from the rentals which already increased to P1,000.00.
In June 1990, the lessees received a letter from Atty. Erlinda Aguila
demanding that they vacate the premises so that the demolition of the
building be undertaken. They refused to leave the premises. In that
same month, de Leon refused to accept the lessees’ rental payment
claiming that they have run out of receipts and that a new collector
has been assigned to receive the payments. Thereafter, they received
a letter from Eufrocina de Leon offering to sell to them the property
they were leasing for P2,000,000.00. xxx.
In April 1992 before the demolition can be undertaken by the Building
Official, the barangay interceded between the parties herein after
which Rosencor raised the issue as to the rental payment of the
premises. It was also at this instance that the lessees were furnished
with a copy of the Deed of Sale and discovered that they were
deceived by de Leon since the sale between her and Rene
Joaquin/Rosencor took place in September 4, 1990 while de Leon
made the offer to them only in October 1990 or after the sale with
Rosencor had been consummated. The lessees also noted that the
property was sold only for P726,000.00.
The lessees offered to reimburse de Leon the selling price of
P726,000.00 plus an additional P274,000.00 to complete their
P1,000.000.00 earlier offer. When their offer was refused, they filed
the present action praying for the following: a) rescission of the Deed
of Absolute Sale between de Leon and Rosencor dated September 4,
1990; b) the defendants Rosencor/Rene Joaquin be ordered to
reconvey the property to de Leon; and c) de Leon be ordered to
reimburse the plaintiffs for the repairs of the property, or apply the
said amount as part of the price for the purchase of the property in the
sum of P100,000.00.”
After trial on the merits, the Regional Trial Court rendered a Decision
dated May 13, 1996 dismissing the complaint. The trial court held that
the right of redemption on which the complaint was based was merely
an oral one and as such, is unenforceable under the law.
On June 25, 1999, the Court of Appeals rendered its decision
reversing the decision of the trial court. The appellants to, in turn, pay
the appellees back rentals from May 1990 up to the time this decision
is promulgated.
ISSUE/S: Whether or not respondents have established their right of
first refusal despite petitioner reliance on their defense based on the
statute of fraud?
LAWS:
Article 1403. The following contracts are unenforceable unless they
are ratified:
1. Those entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his power.
2. Those that do not comply with the statute of fraud as set forth in
this number. In the following cases, an agreement hereafter made
shall be unenforceable by action unless the same or some note or
memorandum thereof, be in writing, and subscribed by party charged,
or by his agent; evidence, therefore, of the agreement cannot be
perceived without the writing, or a secondary evidence of its contents:
a). an agreement that by its terms is not to be performed within one
year from making thereof,
b). A special promise to answer for the debt, default, or miscarriage of
another,
c). An agreement made in consideration of marriage, another than a
mutual promise to marry,
d). an agreement for the sale of goods, chattels, or things in action at
a price not less than five hundred pesos, unless the buyer accept and
received part of such goods and chattels, or the evidence of some of
them, of such thing in action, or pay at the time some part of the
purchase entry is made by the auctioneer in his sales book, at the
time of the sale, of the amount and kind of property sold, term of sale,
price name of purchaser and person on whose account the sale is
made, it is a sufficient memorandum.
e). An agreement for the leasing for a longer period than one year, or
for the sale of real property or of interest therein,
f). A representation as to the incapable of giving consent to a contract,
3. Those where both parties are incapable of giving their consent to a
contract.
HOLDINGS
1. Both the appellate court and the trial court failed to discuss,
however, the threshold issue of whether or not a right of first refusal is
indeed covered by the provisions of the New Civil Code on the statute
of frauds.
2. The term “statute of frauds” is descriptive of statutes which require
certain classes of contracts to be in writing. This statute does not
deprive the parties of the right to contract with respect to the matters
therein involved, but merely regulates the formalities of the contract
necessary to render it enforceable.
3. The statute of frauds refers to specific kinds of transactions and
cannot apply to any other transaction that is not enumerated therein.
The application of such statute presupposes the existence
4. A right of first refusal akin to “an agreement for the leasing of a
longer period than one year, or for the sale of real property or of an
interest therein” as contemplated by Article 1403, of a perfected
contract.
5. This does not mean however that respondents are left without any
remedy for the unjustified violation of their right of first refusal. Their
remedy however is not an action for the rescission of the Deed of
Absolute Sale but an action for damages against the heirs of the
spouses Tiangco for the unjustified disregard of their right of first
refusal.
2. Dizon v. CA
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.
3. Dalion v. CA
Facts:
A land in Southern Leyte was declared in the name of Segundo
Dalion. Sabesaje sued to recover ownership this land based on a
private document of absolute sale, allegedly executed by Segundo
Dalion.
Dalion, however, denied the sale, saying that:
 The document was fictitious
 His signature was a forgery, and
 That the land is conjugal property, which he and his wife
acquired in 1960 from Saturnina Sabesaje as evidenced by
the "Escritura de Venta Absoluta."
The spouses denied the claims of Sabesaje that after executing a
deed of sale over the parcel of land, they had pleaded with Sabesaje
to be allowed to administer the land because Dalion did not have
livelihood.
Spouses Dalion admitted, however, administering 5 parcels of land in
Southern Leyte, which belonged to Leonardo Sabesaje, grandfather
of Sabesaje, who died in 1956.
The Dalions never received their agreed 10% and 15% commission
on the sales of copra and abaca.
Sabesaje's suit, they say, was intended merely to harass and forestall
Dalion's threat to sue for these unpaid commissions.
Trial Court decided in favor of Sabesaje and ordered the Dalions to
deliver the parcel of land in a public document. CA affirmed.
Issues:
1. Was the contract of sale valid?
2. Is a public document needed for transfer of ownership?
Held:
1. Yes. People who witnessed the execution of the deed positively
testified on its authenticity. They stated that it had been executed and
signed by the signatories. A contract of sale is a consensual contract,
which means that the sale is perfected by mere consent. No particular
form is required for its validity. Upon perfection of the contract, the
parties may reciprocally demand performance (NCC 1475, NCC), i.e.,
the vendee may compel transfer of ownership of the object of the
sale, and the vendor may require the vendee to pay the thing sold
(NCC 1458).
2. No. The provision of NCC 1358 of NCC on the necessity of a public
document is only for convenience, not for validity or enforceability.
The trial court thus rightly and legally ordered Dalion to deliver to
Sabesaje the parcel of land and to execute corresponding formal
deed of conveyance in a public document. Under NCC 1498, when
the sale is made through a public instrument, the execution is
equivalent to the delivery of the thing. Delivery may either be actual
(real) or constructive. Thus delivery of a parcel of land may be done
by placing the vendee in control and possession of the land (real) or
by embodying the sale in a public instrument (constructive).
4. Peñalosa vs. Santos
Contracts; Simulated Contracts; Requisites; Words and Phrases;
Simulation is a declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the purposes of
deception, the appearance of a juridical act which does not exist or is
different from that which was really executed.—It should have been
readily apparent to the trial court that the circumstances it cited in its
decision are not proper grounds for holding that the second deed is
simulated. Simulation is a declaration of a fictitious will, deliberately
made by agreement of the parties, in order to produce, for purposes
of deception, the appearance of a juridical act which does not exist or
is different from that which was really executed. Its requisites are: a)
an outward declaration of will different from the will of the parties; b)
the false appearance must have been intended by mutual agreement;
and c) the purpose is to deceive third persons. None of these
requisites is present in this case.
Same; Same; The basic characteristic of an absolutely simulated or
fictitious contract is that the apparent contract is not really desired or
intended to produce legal effects or alter the juridical situation of the
parties in any way.—The basic characteristic of an absolutely
simulated or fictitious contract is that the apparent contract is not
really desired or intended to produce legal effects or alter the juridical
situation of the parties in any way. However, in this case, the parties
already undertook certain acts which were directed towards fulfillment
of their respective covenants under the second deed, indicating that
they intended to give effect to their agreement.
Same; Notarial Law; Non-appearance of the parties before the notary
public who notarized the deed does not necessarily nullify nor render
the parties’ transaction void ab initio.—It should be emphasized that
the non-appearance of the parties before the notary public who
notarized the deed does not necessarily nullify nor render the parties’
transaction void ab initio. We have held previously that the provision
of Article 1358 of the New Civil Code on the necessity of a public
document is only for convenience, not for validity or enforceability.
Failure to follow the proper form does not invalidate a contract. Where
a contract is not in the form prescribed by law, the parties can merely
compel each other to observe that form, once the contract has been
perfected. This is consistent with the basic principle that contracts are
obligatory in whatever form they may have been entered into,
provided all essential requisites are present. Same; Sales; Elements.
—The elements of a valid contract of sale under Art. 1458 of the Civil
Code are: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent. In the
instant case, the second deed reflects the presence of all these
elements and as such, there is already a perfected contract of sale.
Same; Same; Non-payment of the purchase price is not among the
instances where the law declares a contract to be null and void. —
However, it is well-settled that non-payment of the purchase price is
not among the instances where the law declares a contract to be null
and void. It should be pointed out that the second deed specifically
provides: That for and in consideration of the sum of TWO MILLION
PESOS (P2,000,000.00), Philippine Currency paid in full by HENRY
R. PEÑALOSA, receipt of which is hereby acknowledged by me to my
full satisfaction, I hereby by these presents, sells (sic), cede, convey
and otherwise dispose of the above described parcel of land, unto
HENRY R. PEÑALOSA, his heirs, successors and assigns, free from
all liens and encumbrances, x x x (SGD.) SEVERINO C. SANTOS
VENDOR x x x As can be seen from above, the contract in this case
is absolute in nature and is devoid of any proviso that title to the
property is reserved in the seller until full payment of the purchase
price. Neither does the second deed give Severino a unilateral right to
resolve the contract the moment the buyer fails to pay within a fixed
period. At most, the non-payment of the contract price merely results
in a breach of contract for non-performance and warrants an action for
rescission or specific performance under Article 1191 of the Civil
Code.
Summary:
Petitioner appeals by certiorari from the decision of the Court of
Appeals, which affirmed the judgment of the Regional Trial Court of
Quezon City declaring the second deed of absolute sale entered into
between petitioner and respondents as void and inexistent and
ordering petitioner to vacate the subject property and to pay
reasonable compensation for its use.
Doctrine:
Art. 1458 of the Civil Code are: (1) consent or meeting of the minds;
(2) determinate subject matter; and (3) price certain in money or its
equivalent.
It is well-settled that non-payment of the purchase price is not among
the instances where the law declares a contract to be null and void.
Article 1477 of the Civil Code states that ownership of the thing sold
shall be transferred to the vendee upon the actual or constructive
delivery thereof.
Facts:
Respondents Severino C. Santos (deceased) and Adela Mendez
Santos are registered owners of a residential house and lot located at
No. 113 Scout Rallos Street, Quezon City under TCT No. PT-23458
(54434). In 1988, Severino and Adela decided to sell their property
and for this purpose, negotiated with petitioner Hernando (or Henry)
Peñalosa. The property was then occupied by a lessee, Eleuterio
Perez, who was given preference to buy it under the same terms
offered by the buyer. Perez proposed less favorable terms and
expectedly, Severino rejected his offer.
On August 1, 1988, petitioner Henry Peñalosa and respondent
Severino Santos attempted to enter into an agreement whereby the
latter, for a consideration of P1,800.000.00, would sell to the former
the property subject of the instant case.
On August 15, 1988, Henry signed a document stating that the first
deed was executed between him and Severino, for the sole purpose
of helping the latter eject Perez, the occupant of the property. Henry
acknowledged in said document that although Severino had agreed to
sell the property to him, he had not paid the consideration stated in
the first deed.
Thereafter, Henry and Severino executed another deed of absolute
sale (second deed) for a higher consideration of P2,000,000.00. This
second deed was signed by both parties and duly notarized. It states
that Severino sells and transfers the house and lot to Henry, who had
paid the full price of P2,000,000.00 therefor.
Henry then gave Severino P300,000.00 as "earnest money",
purportedly with the understanding that the former was to pay the
balance within 60 days. Otherwise, said amount would be forfeited in
favor of Severino. The latter also maintained that he signed the
second deed only for the purpose of facilitating Henry's acquisition of
a bank loan to finance payment of the balance of the purchase price9
and added that execution of the second deed was necessary to
enable Henry to file a court action for ejectment of the tenant.10
After execution of the second deed, Henry filed a loan application with
the Philippine American Life Insurance Company (Philam Life) for the
amount of P2,500,000.00. According to Henry, he had agreed with
Severino during the signing of the second deed, that the balance of
P1,700,000.00 would be paid by means of a loan, with the property
itself given as collateral.
Meanwhile, Henry filed a case against Perez for not vacating the
property upon demand. Perez countersued and assailed the validity of
the sale transaction between Henry and Severino.
While the aforesaid court cases were pending resolution, Philam Life
informed Severino through a letter, that Henry's loan application had
been approved by the company on January 18, 1989.
The release of the loan proceeds was made subject to the submission
of certain documents in Severino's possession, one of which is the
owner's duplicate of the Transfer Certificate of Title (TCT) pertaining
to the property. However, when Henry and Severino met with officials
of Philam Life to finalize the loan/mortgage contract, Severino refused
to surrender the owner's duplicate title and insisted on being paid
immediately in cash. As a consequence, the loan/mortgage contract
with Philam Life did not materialize.
Subsequently, on April 28, 1989, judgment was rendered by the MTC-
QC ordering the tenant Perez to vacate and surrender possession of
the property to Henry. In said judgment, Henry was explicitly
recognized as the new owner of the property by virtue of the contract
of sale dated September 12, 1988, after full payment of the purchase
price of P2,000,000.00, receipt of which was duly acknowledged by
Severino.
Upon finality of said judgment, Henry and his family moved into the
disputed house and lot on August 1989, after making repairs and
improvements.19 Henry spent a total of P700,000.00 for the
renovation, as evidenced by receipts.
On July 27, 1992, Severino sent a letter to Henry, through counsel,
demanding that Henry vacate the house and lot, on the ground that
Henry did not conclusively offer nor tender a price certain for the
purchase of the property. The letter also stated that Henry's alleged
offer and promise to buy the property has since been rejected by
Severino.
When Henry refused to vacate the property, Severino brought this
action for quieting of title, recovery of possession and damages before
the Regional Trial Court of Quezon City. Severino alleged in his
complaint that there was a cloud over the title to the property, brought
about by the existence of the second deed of sale.
The trial court rendered judgment in favor of Severino. The appellate
court affirmed the judgment of the trial court and denied Henry’s
motion for reconsideration.
Hence, the petition.
Issues Ratio:
Whether or not the second deed is valid and constitutes evidence of
the final agreement between the parties regarding the sale transaction
entered into by them
YES.
The elements of a valid contract of sale under Art. 1458 of the Civil
Code are: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent. In the
instant case, the second deed reflects the presence of all these
elements and as such, there is already a perfected contract of sale.
It is well-settled that non-payment of the purchase price is not among
the instances where the law declares a contract to be null and void.
The contract in this case is absolute in nature and is devoid of any
proviso that title to the property is reserved in the seller until full
payment of the purchase price. Neither does the second deed give
Severino a unilateral right to resolve the contract the moment the
buyer fails to pay within a fixed period. At most, the non-payment of
the contract price merely results in a breach of contract for non-
performance and warrants an action for rescission or specific
performance under Article 1191 of the Civil Code.
Be that as it may, although the law allows rescission as a remedy for
breach of contract, the same may not be availed of by respondents in
this case. To begin with, it was Severino who prevented full payment
of the stipulated price when he refused to deliver the owner's original
duplicate title to Philam Life. His refusal to cooperate was unjustified,
because as Severino himself admitted, he signed the deed precisely
to enable petitioner to acquire the loan. He also knew that the
property was to be given as security therefor. Thus, it cannot be said
that petitioner breached his obligation towards Severino since the
former has always been willing to and could comply with what was
incumbent upon him.
In sum, the only conclusion which can be deduced from the aforesaid
circumstances is that ownership of the property has been transferred
to petitioner. Article 1477 of the Civil Code states that ownership of
the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. It is undisputed that the property was
placed in the control and possession of petitioner when he came into
material possession thereof after judgment in the ejectment case. Not
only was the contract of sale perfected, but also actual delivery of the
property effectively consummated the sale.
Dispositive:
WHEREFORE, the petition is GRANTED.
5. Fule vs. Court of Appeals
Civil Law; Contracts; Sale; 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 upon the price.—The Civil Code provides
that contracts are perfected by mere consent. From this moment, the
parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according
to their nature, may be in keeping with good faith, usage and law. 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 upon the
price. Being consensual, a contract of sale has the force of law
between the contracting parties and they are expected to abide in
good faith by their respective contractual commitments. Article 1358
of the Civil Code which requires the embodiment of certain contracts
in a public instrument, is only for convenience, and registration of the
instrument only adversely affects third parties. Formal requirements
are, therefore, for the benefit of third parties. Non-compliance
therewith does not adversely affect the validity of the contract nor the
contractual rights and obligations of the parties thereunder.
Same; Same; Same; Voidable or Annullable Contracts.—
Contracts that are voidable or annullable, even though there may
have been no damage to the contracting parties are: (1) those where
one of the parties is incapable of giving consent to a contract; and (2)
those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud.
Same; Same; Same; Same; There is fraud when, through the
insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which, without them, he would
not have agreed to.—There is fraud when, through the insidious
words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not
have agreed to. The records, however, are bare of any evidence
manifesting that private respondents employed such insidious words
or machinations to entice petitioner into entering the contract of barter.
Neither is there any evidence showing that Dr. Cruz induced petitioner
to sell his Tanay property or that she cajoled him to take the earrings
in exchange for said property. On the contrary, Dr. Cruz did not
initially accede to petitioner’s proposal to buy the said jewelry. Rather,
it appears that it was petitioner, through his agents, who led Dr. Cruz
to believe that the Tanay property was worth exchanging for her
jewelry as he represented that its value was P400,000.00 or more
than double that of the
jewelry which was valued only at P160,000.00. If indeed petitioner’s
property was truly worth that much, it was certainly contrary to the
nature of a businessman-banker like him to have parted with his real
estate for half its price. In short, it was in fact petitioner who resorted
to machinations to convince Dr. Cruz to exchange her jewelry for the
Tanay property.
Same; Same; Same; Same; To invalidate a contract, mistake must
“refer to the substance of the thing that is the object of the contract, or
to those conditions which have principally moved one or both parties
to enter into the contract.”—Moreover, petitioner did not clearly allege
mistake as a ground for nullification of the contract of sale. Even
assuming that he did, petitioner cannot successfully invoke the same.
To invalidate a contract, mistake must “refer to the substance of the
thing that is the object of the contract, or to those conditions which
have principally moved one or both parties to enter into the contract.”
An example of mistake as to the object of the contract is the
substitution of a specific thing contemplated by the parties with
another.
Facts: Petitioner Gregorio Fule, a banker by profession and a jeweler
at the same time, acquired a 10-hectare property in Tanay, Rizal,
which used to be under the name of Fr. Antonio Jacobe. Petitioner, as
corporate secretary of the bank, looked and found a buyer who might
be interested in the Tanay property, herein private respondent Dr.
Ninevetch Cruz. It so happened that at the time, petitioner had shown
interest in buying a pair of emerald-cut diamond earrings owned by
Dr. Cruz which he had seen in January of the same year when his
mother examined and appraised them as genuine. Dr. Cruz, however
declined petitioner’s offer to buy the jewelry.
Subsequently, however, negotiations for the barter of the jewelry and
the Tanay property ensued. Dr. Cruz requested herein private
respondent Atty. Juan Belarmino to check the property who, in turn,
found out that no sale or barter was feasible because the one-year
period for redemption of the said property had not yet expired at the
time.
In an effort to cut through any legal impediment, petitioner executed, a
deed of redemption on behalf of Fr. Jacobe purportedly in the amount
of P15,987.78, and on even date, Fr. Jacobe sold the property to
petitioner for P75,000.00.
As Dr. Cruz had already agreed to the proposed barter, petitioner
went to Prudential Bank once again to take a look at the jewelry.
Petitioner, arrived at the residence of Atty. Belarmino to finally
execute a deed of absolute sale. Since the jewelry was appraised only
at P160,000.00, the parties agreed that the balance of P40,000.00
would just be paid later in cash. Dr. Cruz opened the safety deposit
box at around 6:00PM, retrieving a transparent plastic or cellophane
bag with the jewelry inside and handing over the same to petitioner.
The latter took the jewelry from the bag, went near the electric light at
the bank’s lobby, held the jewelry against the light and examined it for
ten to fifteen minutes. After a while, Dr. Cruz asked, “Okay na ba
iyan?” Petitioner expressed his satisfaction by nodding his head.
Later, at about 8:00 o’clock in the evening of the same day, petitioner
arrived at the residence of Atty. Belarmino complaining that the
jewelry given to him was fake. He then used a tester to prove the
alleged fakery. Thereafter, the group decided to go to the house of a
certain Macario Dimayuga, a jeweler, to have the earrings tested.
Dimayuga, after taking one look at the earrings, immediately declared
them counterfeit.
Petitioner filed a complaint before the RTC against private
respondents praying, among other things, that the contract of sale
over the Tanay property be declared null and void on the ground of
fraud and deceit.
Trial Court ruled in favour of Dr Cruz and that the contract of sale was
valid. Moreover, the trial court considered the lapse of two (2) hours
(6:00 to 8:00) more or less before plaintiff complained as
unreasonable delay. The CA affirmed the decision in toto.
Issue: Whether or not under the facts duly established herein, the
contract can be voided in accordance with law so as to compel the
parties to restore to each other the things that have been the subject
of the contract with their fruits, and the price with interest.
Held: NO. The Civil Code provides that contracts are perfected by
mere consent. From this moment, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping
with good faith, usage and law.[17] 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 upon the price. Being consensual, a
contract of sale has the force of law between the contracting parties
and they are expected to abide in good faith by their respective
contractual commitments. Article 1358 of the Civil Code which
requires the embodiment of certain contracts in a public instrument, is
only for convenience,[19] and registration of the instrument only
adversely affects third parties. Formal requirements are, therefore, for
the benefit of third parties. Non-compliance therewith does not
adversely affect the validity of the contract nor the contractual rights
and obligations of the parties thereunder.
Contracts that are voidable or annullable, even though there may
have been no damage to the contracting parties are: (1) those where
one of the parties is incapable of giving consent to a contract; and (2)
those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud. Accordingly, petitioner now stresses before
this Court that he entered into the contract in the belief that the pair of
emerald-cut diamond earrings was genuine. On the pretext that those
pieces of jewelry turned out to be counterfeit, however, petitioner
subsequently sought the nullification of said contract on the ground
that it was, in fact, “tainted with fraud” such that his consent was
vitiated.
There is fraud when, through the insidious words or machinations of
one of the contracting parties, the other is induced to enter into a
contract which, without them, he would not have agreed to. The
records, however, are bare of any evidence manifesting that private
respondents employed such insidious words or machinations to entice
petitioner into entering the contract of barter. Neither is there any
evidence showing that Dr. Cruz induced petitioner to sell his Tanay
property or that she cajoled him to take the earrings in exchange for
said property. On the contrary, Dr. Cruz did not initially accede to
petitioner’s proposal to buy the said jewelry. Rather, it appears that it
was petitioner, through his agents, who led Dr. Cruz to believe that
the Tanay property was worth exchanging for her jewelry as he
represented that its value was P400,000.00 or more than double that
of the jewelry which was valued only at P160,000.00. If indeed
petitioner’s property was truly worth that much, it was certainly
contrary to the nature of a businessman-banker like him to have
parted with his real estate for half its price. In short, it was in fact
petitioner who resorted to machinations to convince Dr. Cruz to
exchange her jewelry for the Tanay property.
Moreover, petitioner did not clearly allege mistake as a ground for
nullification of the contract of sale. Even assuming that he did,
petitioner cannot successfully invoke the same. To invalidate a
contract, mistake must “refer to the substance of the thing that is the
object of the contract, or to those conditions which have principally
moved one or both parties to enter into the contract.”[25] An example
of mistake as to the object of the contract is the substitution of a
specific thing contemplated by the parties with another. In his
allegations in the complaint, petitioner insinuated that an inferior one
or one that had only Russian diamonds was substituted for the jewelry
he wanted to exchange with his 10-hectare land. He, however, failed
to prove the fact that prior to the delivery of the jewelry to him, private
respondents endeavored to make such substitution.
Likewise, the facts as proven do not support the allegation that
petitioner himself could be excused for the “mistake.” On account of
his work as a banker-jeweler, it can be rightfully assumed that he was
an expert on matters regarding gems. Indeed, the finger of suspicion
of switching the genuine jewelry for a fake inevitably points to him.
Such a mistake caused by manifest negligence cannot invalidate a
juridical act. As the Civil Code provides, “(t)here is no mistake if the
party alleging it knew the doubt, contingency or risk affecting the
object of the contract.
Both the trial and appellate courts, therefore, correctly ruled that there
were no legal bases for the nullification of the contract of sale.
Ownership over the parcel of land and the pair of emerald-cut
diamond earrings had been transferred to Dr. Cruz and petitioner,
respectively, upon the actual and constructive delivery thereof. Said
contract of sale being absolute in nature, title passed to the vendee
upon delivery of the thing sold since there was no stipulation in the
contract that title to the property sold has been reserved in the seller
until full payment of the price or that the vendor has the right to
unilaterally resolve the contract the moment the buyer fails to pay
within a fixed period. Such stipulations are not manifest in the contract
of sale.
PERFECTION OF A CONTRACT OF SALE
1. Vda de Jomoc vs. Court of Appeals
Doctrine: The contract of sale of real property even if not complete in
form, so long as the essential requisites of consent of the contracting
parties, object, and cause of the obligation concur and they were
clearly established to be present, is valid and effective as between the
parties. Public document is only needed to bind third persons.
Facts:
- A parcel of land in Cagayan de Oro owned by late Pantaleon Jomoc
was fictitiously sold to third persons in which the last transferee are
the spouses Mariano and Maura So. Maria Vda de Jomoc, as
administrarix of Pantaleon Jomoc’s estate, filed suit to recover the
property.
- The case was decided in favor of Jomoc and was accordingly
appealed by Mariano So and one Gaw Sur Cheng to the Court of
Appeals.
- While pending appeal, Vda de Jomoc executed executed a Deed of
Extrajudicial Settlement and Sale of Land with private respondent for
P300,000.00. The document was not yet signed by all the parties nor
notarized but in the meantime, Maura So had made partial payments
amounting to P49,000.00.
- Mariano So, the appellant in the recovery proceeding, agreed to
settle the case by executing a Deed of Reconveyance of the land in
favor of the heirs of Pantaleon Jomoc. The reconveyance was in
compliance with the decision in the recovery case and resulted in the
dismissal of his appeal. The heirs of Jomoc executed another extra-
judicial settlement with absolute sale in favor of intervenors Lim Leong
Kang and Lim Pue filing claiming that they believe that So already
backed-out from the agreement. Later, Maura So demanded from the
Jomoc family the execution of a final deed of conveyance. They
ignored the demand.
- Maura So sued petitioners-heirs for specific performance to compel
them to execute and deliver the proper registrable deed of sale over
the lot.
- The lower court, finding that there was no sufficient evidence to
show complainant-respondents' withdrawal from the sale.
- On appeal, the trial court decision was affirmed.
Issue/s: WON the sale is enforceable.
Held:
- Since petitioners admit the existence of the extra-judicial settlement,
the court finds that there was meeting of the minds between the
parties and hence, there is a valid contract that has been partly
executed.
- The contract of sale of real property even if not complete in form, so
long as the essential requisites of consent of the contracting parties,
object, and cause of the obligation concur and they were clearly
established to be present, is valid and effective as between the
parties. Public document is only needed to bind third persons.
- The payment made by So is a clear proof of her intention to acquire
the property and the petitioners cannot claim about the respondent
backing out. The sale to the intervenors Lim cannot be recognized
because when they bought the property, there was already a notice of
lis pendens and the sale cannot be said to be in good faith.
Dispositive: WHEREFORE, the petitions are hereby DISMISSED for
lack of merit. The decision of the Court of Appeals dated September
13, 1989 and its resolution dated April 2, 1990 are AFFIRMED.
2. Ang Yu Asuncion vs. Court of Appeals
Facts:
Petitioners Ang Yu Asuncion et. al. are lessees of residential and
commercial spaces owned by the Unjiengs. They have been leasing
the property and possessing it since 1935 and have been paying
rentals.
In 1986, the Unjiengs informed Petitioners Ang Yu Asuncion that the
property was being sold and that Petitioners were being given priority
to acquire them (Right of First Refusal). They agreed on a price of
P5M but they had not yet agreed on the terms and conditions.
Petitioners wrote to the Unjiengs twice, asking them to specify the
terms and conditions for the sale but received no reply. Later, the
petitioners found out that the property was already about to be sold,
thus they instituted this case for Specific Performance [of the right of
first refusal].
The Trial Court dismissed the case. The trial court also held that the
Unjieng’s offer to sell was never accepted by the Petitioners for the
reason that they did not agree upon the terms and conditions of the
proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the defendants
subsequently offer their property for sale at a price of P11-million or
below, plaintiffs will have the right of first refusal.
The Court of Appeals affirmed the decision of the Trial Court.
In the meantime, in 1990, the property was sold to De Buen Realty,
Private Respondent in this case. The title to the property was
transferred into the name of De Buen and demanded that the
Petitioners vacate the premises.
Because of this, Petitioners filed a motion for execution of the CA
judgement. At first, CA directed the Sheriff to execute an order
directing the Unjiengs to issue a Deed of Sale in the Petitioner’s
favour and nullified the sale to De Buen Realty. But then, the CA
reversed itself when the Private Respondents Appealed.
Issues:
1. Whether or not the Contract of Sale is perfected by the grant of a
Right of First Refusal.
2. Whether or not a Right of First Refusal may be enforced in an
action for Specific Performance.
Held:
1. No. A Right of First Refusal is not a Perfected Contract of Sale
under Art. 1458 or an option under Par. 2 Art 1479 or an offer under
Art. 1319. In a Right of First Refusal, only the object of the contract is
determinate. This means that no vinculum juris is created between the
seller-offeror and the buyer-offeree.
2. No. Since a contractual relationship does not exist between the
parties, a Right of First Refusal may not be enforced through an
action for specific performance. Its conduct is governed by the law on
human relations under Art. 19-21 of the Civil Code and not by contract
law.
Therefore, the Supreme Court held that the CA could not have
decreed at the time the execution of any deed of sale between the
Unjiengs and Petitioners.
Other Rules, Comments and Discussion:
This case is notable because it lays down the rules on options
contracts and right of first refusal as well as promises to buy and sell.
First, the Supreme Court discussed the stages of the formation of a
sales contract, these are:
Negotiation – covers the period from the time the prospective
contracting parties indicate interest in the contract to the time the
contract is concluded (perfected).
Perfection – takes place upon the concurrence of the essential
elements thereof. In a sales contract this is governed by Art. 1458
Consummation – begins when the parties perform their respective
undertakings under the contract culminating in the extinguishment
thereof
Until the contract is perfected (No. 2), it cannot, as an independent
source of obligation, serve as a binding juridical relation. A sales
contract is perfected when a person, called the seller, obligates
himself, for a price certain, to deliver and to transfer ownership of a
thing or right to another, called the buyer, over which the latter agrees
(Art 1458).
Under Art. 1458, there is no perfection of a sale under a “Contract to
Sell”. A Contract to Sell is characterized as a conditional sale and the
breach of the suspensive condition will prevent the obligation to
transfer title from acquiring obligatory force.
Promises to Buy and Sell
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, and compliance therewith may accordingly be exacted. The
Right of First Refusal falls under this classification.
Accepted unilateral promise – If it specifies the thing to be sold and
the price to be paid and when coupled with a valuable consideration
distinct and separate from the price, is what may properly be termed a
perfected contract of option. This contract is legally binding. (Par. 2
Art. 1458) Note however, that the option is a contract separate and
distinct from the contract of sale. Once the option is exercised before
it is withdrawn, a bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their respective
undertakings.
Offers with a Period
Where a period is given to the offeree within which to accept the offer,
the following rules generally govern:
If the period is not itself founded upon or supported by a consideration
– Offeror may withdraw offer at any time before its acceptance (or
knowledge of its acceptance). However, the right to withdraw must not
be exercised whimsically or arbitrarily otherwise it can give rise to
damages under Art. 19 of the New Civil Code
If period is founded on a separate consideration – This is a perfected
contract of option. Withdrawal of the offer within the period of the
option is deemed a breach of the contract of option (not the sale). “If,
in fact, the optioner-offeror withdraws the offer before its acceptance
(exercise of the option) by the optionee-offeree, the latter may not sue
for specific performance on the proposed contract (“object” of the
option) since it has failed to reach its own stage of perfection. The
optioner-offeror, however, renders himself liable for damages for
breach of the option.”
Earnest money – This is not an offer with a period. Earnest money is
distinguished from the option contract if the consideration given will be
considered as a part of the purchase price of the object of the sale.
Earnest money is evidence of a perfected contract of sale. (Art. 1482)
Right of First Refusal
This is “an innovative juridical relation” because it is neither a
perfected contract of sale under Art. 1458 nor an option contract
under par. 2 Art 1479. The object might be made determinate, the
exercise of the right, however, is dependent on the offeror’s eventual
intention to enter into a binding juridical relation with another but also
on terms and conditions such as price. There is no juridical tie or
vinculum juris.
Breach of the right cannot justify correspondingly an issuance of a writ
of execution under a court judgement that recognizes its existence,
such as in Ang Yu Asuncion. An action for Specific Performance is not
allowed under a Right of First Refusal because doing so would negate
the indispensable element of consensuality in the perfection of
contracts.
This right is not inconsequential because it gives right to an action for
damages under Art. 19.
Other Acts that Won’t Bind
Public advertisements or solicitations – Construed as mere invitations
to make offers and/or proposals.
Related Cases
The cases of Equatorial v. Mayfair and Parañaque Kings v. Court of
Appeals held that if a sale happens in violation of a Right of First
Refusal where the buyer is aware of the existence of that right in favor
of another (such as when it is written in a lease contract), the sale
may be rescinded and the seller may be forced to offer the property to
the party with the Right of First Refusal.
However, the case of Ang Yu Asuncion may still be good law for
cases not involving a third party buyer in bad faith.
3. Macion vs. Guiani
DOCTRINE: An accepted bilateral promise to buy and sell is similar
to, but not exactly the same, as a perfected contract of sale because
there is already a meeting of minds upon the thing which is the object
of the contract and upon the price. But a contract of sale is
consummated only upon the delivery and payment. It cannot be
denied that the compromise agreement, having been signed by both
parties, is tantamount to a bilateral promise to buy and sell a certain
thing for a price certain. Hence, this gives the contracting parties
rights in personam, such that each has the right to demand from the
other.
FACTS:
1. Macion and Dela Vida Institute entered into a contract to sell, where
the latter (President of De La VidaInstitute) assured the former that it
will buy the 2 parcels of land in Cotabato City on or before July
31,1991 at P1.75M.
2. In the meantime, Dela Vida took possession of it and promptly built
an edifice worth P800,000. However, on the said date, the sale did not
materialize.
3. Consequently, Macion filed a complaint for unlawful detainer
against Dela Vida, while Dela Vida countered with a complaint for
reformation of the contract to sell. These differences were eventually
settled.
4. In 1992, both parties entered into a compromise agreement,
approved by the court, where Macion will give Dela Vida 5 months to
raise P2.06M and in case of failure to do so, Dela Vida would vacate
the premises.
5. After 2 months, Dela Vida alleged that they had negotiated a loan
from BPI and requested Macion to execute the contract to sell in its
favor. However, Macion refused, which prompted Dela Vida to file
anurgent motion for an order to direct Macion to execute the contract
to sell. In return, Macion filed amotion for execution of judgment
alleging that after 5 months, Dela Vida was not able to settle their
obligations with Macion.
6. RTC ruled in favor of Dela Vida. Saying that the proximate cause of
the failure to comply with compromise agreement was the refusal of
Macion to execute the contract.
ISSUE: W/N it was proper to execute a contract to sell in favor of Dela
Vida
HELD: YES.
1. Although the compromise agreement (par. 7) does NOT give Dela
Vida the right to demand from Macion the execution of the contract to
sell in its favor. From this paragraph, it is clear that Macion is obliged
to execute a Deed of Sale and not a Contract to Sell upon payment of
the full price of P2.06M. Thereafter, Macion will turn over to Dela Vida
the TCT.
2. HOWEVER, a review of the facts reveals that even prior to the
signing of the compromise agreement, both parties had entered into a
contract to sell, which was superseded by a compromise
agreement.This compromise agreement must be interpreted as
bestowing upon Dela Vida the power to demand a contract to sell
from Macion. Where Macion promised to execute a deed of absolute
sale upon completing payment of the price, it is a contract to sell.
3. In the case at bar, the sale is still in the executory stage since the
passing of title is subject to a suspensive condition—that if Dela Vida
is able to secure the needed funds to purchase the properties from
Macion. A mere executory sale, one where the sellers merely promise
to transfer the property at some future date, or where some conditions
have to be fulfilled before the contract is converted from an executory
to an executed one, does not pass ownership over the real estate
being sold. It cannot be denied that the compromise agreement,
having been signed by both parties, is tantamount to a bilateral
promise to buy and sell a certain thing for a price certain. Hence, this
gives the contracting parties rights in personam, such that each has
the right to demand from the other the fulfillment of their respective
undertakings. Demandability may be exercised at any time after the
execution of the Deed.
4. The order of respondent judge directing petitioners to issue a
contract to sell does not place petitioners in any danger of losing their
property without consideration, for, to repeat, in a contract to sell there
is no immediate transfer of ownership. In contracts to sell, payment is
a positive suspensive condition, failure of which does not constitute a
breach but an event that prevents the obligation of the vendor to
convey title from materializing, in accordance with Article 1184 of the
Civil Code. Petitioners as promisors were never obliged to convey title
before the happening of the suspensive condition. In fact, nothing
stood in the way of their selling the property to another after a
unsuccessful demand for said price upon the expiration of the time
agreed upon.
5. Since the period given by the petitioners under the compromise
agreement has already lapsed, we order the trial court to fix anew a
period within which private respondents could secure the needed
funds for the purchase of the land. Petition DISMISSED.
4. Ramos vs. Court of Appeals
Facts:
Eduardo Yuseco (now deceased) obtained a loan of P35,000.00 from
the Government 5,000.00 from the Government Service Insurance
System. To guarantee payment of the loan, Yuseco constituted a
mortgage over his property covered by TCT No. Register of Deeds of
Quezon City in favor of GSIS. Under the mortgage contract, Yuseco
was prohibited from selling, disposing of, mortgaging, or in any
manner encumbering the mortgaged property without prior written
consent of the GSIS.
Yuseco executed a Contract to Sell (Exh. A) of the mortgaged
property in favor of mortgaged property in favor of petitioner Felipe
Belmonte, by virtue of which Belmonte agreed to assume Yusecos
obligation to the GSIS. The undertaking was to be performed within
one year from the perfection of the contract. Belmonte was, however,
unable to comply with his obligation within the period agreed upon, so
that he requested an extension. His request was granted and he was
given until January 15, 1971 to comply with his obligation. As
Belmonte was still unable to comply with his obligation
notwithstanding the extension given to him, he and his wife asked
Andres Ramos to share in the payment of the amortizations to the
GSIS. This was made with the knowledge and consent of Yuseco who
executed a Deed of Absolute Sale with Assumption of Mortgage (Exh.
ale with Assumption of Mortgage (Exh. D) in favor of all in favor of all
petitioners on January 21, 1971. It was agreed that was agreed that
the spouses Belmonte and
Ramos would pay for all expenses for the preparation of documents
and afterwards submit the contract to the GSIS for its approval.
On February 26, 1971, the GSIS informed Yuseco that his request for
authority to execute the Deed of Absolute Sale with Assumption of
Mortgage could not be considered pending the return of the certificate
of title which Yuseco had borrowed from the GSIS. On July 26, 1971,
however, the GSIS notified Yuseco that its Board of Trustees had
appr s Board of Trustees had approved his request oved his request
for authority to execute the Deed of for authority to execute the Deed
of Absolute Sale Absolute Sale with Assumption of Mortgage even
thou with Assumption of Mortgage even though Yusecos certificate of
title had not been returned.
On February 14, 1975, petitioners delivered to the GSIS a letter from
Eduardo Yuseco, a letter from Eduardo Yuseco, informing the GSIS
that the certificate of title had been lost and, for this reason,
requesting the been lost and, for this reason, requesting the GSIS to
undertake the reconstitution of the lost title and to tle and to charge
the cost thereof to petitioners. charge the cost thereof to petitioners.
To protect their interest, petitioners at the same time registered an
adverse claim which was annotated on TCT No. 123161.Since
December 9, 1969, petitioners had been paying the petitioners had
been paying the GSIS the GSIS the monthly amortization monthly
amortizations, but for some reason they sto s, but for some reason
they stopped doing so on Oct pped doing so on October 1, 1981, after
ober 1, 1981, after paying a total of P27,430.16, although in the
paying a total of P27,430.16, although in the confirmation of accounts
sent by the GSIS, the tota rmation of accounts sent by the GSIS, the
total payments credited to them was P30,903.52. The payments were
all made in the nts were all made in the name of Eduardo name of
Eduardo Yuseco. (Exhs. E, E-1 to Yuseco. (Exhs. E, E-1 to E-51)
On July 16, 1982, the GSIS On July 16, 1982, the GSIS informed
Yuseco and the informed Yuseco and the spouses Belmonte of the
arr spouses Belmonte of the arrearages earages amounting to
P37,758.84 and warned them that if the amount was not settled on
amount was not settled on time, the time, the mortgage would be
foreclosed. As no settlement of the amount was made, the GSIS
extrajudicially foreclosed the mortgag extrajudicially foreclosed the
mortgage on Septembe e on September 17, 1982. The GSIS
purchased the pro r 17, 1982. The GSIS purchased the property as
the highest bidder at the auction sale. as the highest bidder at the
auction sale. It then It then informed the spouses Belmonte of the
forecl informed the spouses Belmonte of the foreclosure of the
mortgage and demanded the payments of rents from them from them
for their use of the for their use of the property. On property. On
October 19, 1982, the GSIS October 19, 1982, the GSIS again wrote
the spouses again wrote the spouses Belmonte and asked them to
Belmonte and asked them to file an file an application for the lease of
the property to application for the lease of the property to formalize
their stay on the property. ize their stay on the property.
But the Belmontes did not do so. But the Belmontes did not do so. On
April 27, 1983, On April 27, 1983, the spouses and Ramos wrote the
the spouses and Ramos wrote the GSIS that, GSIS that, as vendees
of the property, they were as vendees of the property, they were
exercising th exercising their right to redeem the property (Exh. eir
right to redeem the property (Exh. M). The M). The GSIS replied that it
would consider any legal redemptioner who first exercised the right
ptioner who first exercised the right of redemption (Exh. N).
At about the At about the same time that petitioners signified t same
time that petitioners signified their intentio heir intention to redeem the
property, edeem the property, Yuseco negotiated for the sale of the
Yuseco negotiated for the sale of the foreclosed pr foreclosed
property to private respondent Dionisio operty to private respondent
Dionisio Palla, showing the latter a photocopy of his title to the
property.Palla and his lawyer, Atty. Marte Sta. Elena, went to verify
the authenticity of Yusecos title in the itle in the Register of Deeds of
Quezon City Register of Deeds of Quezon City where they learned of
the where they learned of the adverse claim of petition adverse claim
of petitioners. Upon assurance by his ers. Upon assurance by his
lawyer that the lawyer that the adverse claim was not an impediment
to the purchase of the of the property and despite advice from
property and despite advice from Yuseco that there were tenants (the
petitioners were actually the occupants) on the e actually the
occupants) on the property, Palla property, Palla purchased the
property from Yuseco for P92,000.00 on May 20, 1983 (Exh. Q). Palla
20, 1983 (Exh. Q). Palla sought to sought to redeem the property from
the GSIS but redeem the property from the GSIS but he was not al he
was not allowed to do so in his own name. lowed to do so in his own
name.
Consequently, he advanced the redemption price, in the amount of
the amount of P53,000.00, to Yuseco who P53,000.00, to Yuseco
who redeemed the property from the GSIS on redeemed the property
from the GSIS on June 14, 198 June 14, 1983.
Issue:
WHETHER THE DEED OF ABSOLUTE SALE WITH ASSUMPTION
OF MORTGAGE WAS NOT PERFECTED BECAUSE OF THE
ALLEGED NON-FULFILLMENT BY PETITIONERS OF THE
SUSPENSIVE CONDITION IMPOSED BY THE GSIS AS WELL AS
THE LACK OF WRITTEN CONSENT AND APPROVAL OF THE
MORTGAGEE GSIS OF THE SALE.
THE RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
NOT HOLDING THAT THE PETITIONERS HAVE THE BETTER AND
SUPERIOR RIGHT OVER THE OVER THE PRIVATE
RESPONDENT DIONISIO PALLA AS REGARDS THE MORTGAGED
PROPERTY IN QUESTION.
Ruling:
No, the CA did not No, the CA did not err in not holding that petition
err in not holding that petitioner have the better er have the better and
superior right superior right over private respondent Palla as regards
the mortgaged property in question.
Because of petitioners failure to update their account, pay the
amortizations and execute a promissory note, GSIS conditional
approval of the sale of the GSIS conditional approval of the sale of the
property and assumption of mortgage never became ty and
assumption of mortgage never became effective. The Deed of
Absolute Sale with Assumption of Mortgage itself was not perfected
since assumption of the mortgage by petitioners was a condition
precedent for the sale of the dition precedent for the sale of the
property property to them. Art. 1181 of to them. Art. 1181 of the Civil
Code provides that the Civil Code provides that in conditional
obligations, the acquisition of ions, the acquisition of rights, as well as
the rights, as well as the extinguishm extinguishment or loss of those
already acquired, s ent or loss of those already acquired, shall depend
hall depend upon the upon the happening of the event happening of
the event which constitutes the condit which constitutes the condition.
Accordingly, in sa ion. Accordingly, in sales with assumption of les
with assumption of mortgage, the assumption of mortgage is a
condition to the sellers consent so that without approval by the
mortgagee, no sale is perfected. approval by the mortgagee, no sale
is perfected.Indeed, no one can plausibly assert that with only eed, no
one can plausibly assert that with only P15,000.00 paid to Yuseco and
about P30,903.52 paid to the GSIS, petitioners became the the GSIS,
petitioners became the owners of the property when the consideration
for the sale he sale of the land and its of the land and its improvemen
improvements was not only the amount paid to the seller not only the
amount paid to the seller but the paym but the payment of his
indebtedness to the GSIS as ent of his indebtedness to the GSIS as
well.
Since the Deed of Since the Deed of Absolute Sale with Assumption
of Absolute Sale with Assumption of Mortgage executed Mortgage
executed by Yuseco in favor of by Yuseco in favor of the petitioners
was ineffective, Yuseco legally remained as the owner and mortgagor
of the
subject property and the debtor of the GSIS. subject property and the
debtor of the GSIS. In fact, the title to the property (TCT No. 123161)
t, the title to the property (TCT No. 123161) remained in his name.As
such, Yuseco had the right to redeem, as he did in redeem, as he did
in fact redeem, the fact redeem, the property on June 14, 1983,
before the property on June 14, 1983, before the expiration on
expiration on October 11, 1983 of the one-year peri October 11, 1983
of the one-year period of redemption. Nor can petitioners assail the
sale of the property after the property after its redemption to
respondent its redemption to respondent Palla.
5. Boston Bank of the Philippines vs. Manalo
Doctrine:
● It is not enough for the parties to agree on the price of the property.
The parties must also agree on the manner of payment of the price of
the property to give rise to a binding and enforceable contract of sale
or contract to sell. This is so because the agreement as to the manner
of payment goes into the price, such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price.
● When an essential element of a contract is reserved for future
agreement of the parties, no legal obligation arises until such future
agreement is concluded.
Short Facts:
Sps Manalo are purported buyers of 2 lots sold by OBM (initial bank).
In a letter-agreement, the total purchase price and 20% downpayment
was agreed upon. Spouses Manalo began construction in the lot.
When rights to lots was acquired by Boston bank from OBM, Boston
Bank tried to stop construction stating that the spouses did not have
permission, stating that there was no valid Contract-to-Sell since the
manner of payment of the 80% balance was not agreed upon,
therefore the “letter-agreement” was not binding contract.
Facts:
1. Xavierville Estate, Inc. (XEI) sold to OBM (initial bank-buyer) some
residential lots in Xavierville subdivision. XEI became agent of the
bank, and continued selling the residential lots.
2. Carlos Manalo, Jr. proposed to XEI, through its President Emerito
Ramos(Ramos), that he will purchase two lots in the subdivision and
offered as part of the downpayment the P34,887.66 that Ramos owed
him. XEI,through Ramos, agreed.
3. In a letter-agreement dated August 22, 1972 to Perla Manalo
(Carlos’ wife), 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.
4. The spouses constructed a house on the property. They were
notified of XEI’s resumption of selling operations but they did not pay
the balance of the downpayment because XEI failed to give them a
contract of conditional sale.
5. XEI turned over its selling operations to OBM. Then, CBM (later
renamed as Boston Bank) acquired the Xavierville Estate from OBM.
6. CBM/Boston Bank requested Perla Manalo to stop any on-going
construction on the property since 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 but she failed to do so.
7. The spouses filed a complaint for damages and specific
performance against bank to obtain contract. The spouses 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.
8. RTC ruled in favor of spouses and ordered delivery of Deed of Sale
of lots, stating that letter agreement was a valid CTS. CA upheld
ruling of RTC
Issue: WON letter agreement was a valid contract to sell (CTS)? - NO.
Held:
NO. Contract is unenforceable because manner of payment of 80%
balance has yet to be agreed upon.
● For a perfected contract of sale or contract to sell to exist in law,
there must be an agreement of the parties, not only on the price of the
property sold, but also on the manner the price is to be paid by the
vendee.
● Price is an essential element in the formation of a binding and
enforceable contract of sale. 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.
○ In this case, there is no showing that there was a schedule of
payment of the balance of the purchase price. In the letter
agreements, parties confined themselves to agreeing on the price of
the property, the 20% downpayment, and credited respondents for the
amount owned by Ramos as part of the 20% downpayment. However,
the determination of the terms of payment of the 80% BALANCE had
yet to be agreed upon on or before December 31, 1972, or even
afterwards, when the parties sign the corresponding contract of
conditional sale.
● Jurisprudence has ruled that if a material element of a contemplated
contract is left for future negotiations, the same is too indefinite to be
enforceable. And when an essential element of a contract is reserved
for future agreement of the parties, no legal obligation arises until
such future agreement is concluded.
● Respondents failed and refused to pay the balance of the
downpayment and of the purchase price of the property amounting to
P278,448.00 despite notice to them of the resumption by XEI of its
selling operations. On the other hand, XEI and OBM failed and
refused to transmit a contract of conditional sale to the respondents.
The respondent-spouses could have at least consigned the balance of
the downpayment after notice of the resumption of the selling
operations of XEI and filed an action to compel XEI or OBM to
transmit to them the said contract; however, they failed to do so.
● As a consequence, respondents and XEI (or OBM for that matter)
failed to forge a perfected contract to sell the two lots; hence,
respondents have no cause of action for specific performance against
petitioner. Republic Act No. 6552 applies only to a perfected contract
to sell and not to a contract with no binding and enforceable effect.
● Petition is GRANTED. RTC and CA decisions reversed and set
aside.
6. ADELFA Properties v. CA
FACTS: Private respondents and their brothers are the co-owners of
a parcel of land in Las Pinas. The petitioner Adelfa and private
respondents executed an “Exclusive Option to Purchase” over the
western part of the property owned by private respondents.
Accordingly, petitioners paid an alleged option money of 50,000
agreed in the contract. Before petitioner could make payment of the
balance, it received summons and a copy of the complaint of the
nieces and nephews of the private respondents against the latter. As
a result, petitioner suspended the payment of the purchase price and
suggested that private respondents settle the case with their nephews
and nieces. Private respondents attributed the suspension of payment
to “lack of word of honor.” Private respondents sent a notice
cancelling the contract and rejected the offer of the petitioner’s
counsel to pay the purchase price. 50% of the alleged option money
was returned to the petitioners and requested that the certificate of
title be returned to them. Petitioner failed to return the copy of the
certificate, hence, the private respondents filed a filed a case for
annulment of the exclusive option to purchase.
RTC ruled that it was an option contract and that the suspension of
payment constituted a counter offer and is tantamount to a rejection of
the offer. CA affirmed the ruling of the RTC.
ISSUE: Whether the contract executed between the parties is an
option contract
RULING: No, the alleged exclusive option to purchase is a perfected
contract to sell. Although it was referred to as exclusive option to
purchase, the intention of the parties was really a contract to sell.
Firstly, although the contract provided for automatic rescission and
partial forfeiture of the amount already paid in case of default, it did
not provide that the petitioner is obliged to return possession or
ownership of the property in case of default. There was an implied
agreement that the ownership shall not be passed to the vendees until
full payment of the purchase price. Moreover, it is gleaned from the
letter sent by the petitioner that the deed of absolute sale will be
issued only upon the payment of the purchase price. Under the law
and jurisprudence, a contract which has this kind of stipulation is
considered a contract to sell.
Secondly, there was no intention on the part of the vendors to deliver
the title with the purpose of transferring ownership. They claimed that
their counsel in the petition for reconstitution is the counsel of
petitioner.
Moreover, the alleged option money was intended to be a part of the
purchase price, and not a consideration for the option or the right to
purchase.
7. PNB v. CA and Lapaz Kaw Ngo
FACTS: PNB is the owner of a parcel of land situated in Sta. Cruz,
Manila. PNB accepted the offer of private respondent to purchase the
land subject to the condition that before the sale could take place,
Lapaz will be responsible for ejecting the squatters therein at her own
expense, and upon her failure to pay the 20% deposit of the purchase
price, her initial deposit shall be forfeited. Lapaz failed to pay the
additional deposit, hence the sale never materialized.
Upon the request of Lapaz to revive the same contract, the bank
granted it subject to almost the same conditions with an inclusion that
when she fails to pay the additional deposit, the bank may sell the
property to others and that the previous deposit shall not be
considered as part of the purchase price. This time, Lapaz requested
that the condition to eject the squatters at her own expense be
stricken out. Instead of heeding to her request, PNB rescinded the
contract. Lapaz filed an action for specific performance against the
bank.
ISSUE: Whether the contract entered into by PNB and Lapaz is a
perfected contract of sale
RULING: No, the contract entered into by the parties is not a contract
of sale but a contract to sell.
In a contract to sell, ownership is retained by the seller and is not to
pass to the buyer until full payment of the price or fulfillment of some
other conditions. In this case, although the buyer had fulfilled some of
the conditions required, she failed to comply with the other conditions.
The court also finds that the letter-agreements between the parties
reveal their intention of making the sale dependent on Lapaz Ngo’s
compliance with certain other conditions. Moreover, no less revealing
is the fact that the letter-agreements are not deeds of sale, there
under no title having been passed from the bank to Mrs. Ngo.
A contract to sell is akin to a conditional sale where the efficacy or
obligatory force of the vendor’s obligation to transfer title is
subordinate to the happening of a future and uncertain event, so that
if the suspensive condition does take place, the parties would stand
as if the conditional obligation had never existed. In this case, the
condition was not fulfilled so the bank exercised its right to unilaterally
rescind the contract. The bank cannot be compelled to sell and deliver
the property to the private respondent.
As to the earnest money, since it was given in a contract to sell, it
forms part of the consideration only if the sale is consummated upon
full payment of the purchase price. Thus, Article 1482, which speaks
of a contract of sale, does not apply.
8. Romero v. CA
FACTS: Petitioner Virgilio Romero a civil engineer together with his
foreign partners wants to put up a Central Warehouse in Metro
Manila. Alfonso Flores and his wife accompanied by a broker, offered
a parcel of land measuring 1,952 square meters, owned by the private
respondent Enriqueta Chua vda. De Ongsiong. The two entered into a
“Conditional deed of Sale”. The petitioner paid in advance in the sum
of P50,000.00 for the eviction of squatters. Private respondent sought
the return of the advance payment she received because she could
not get rid of the squatters.
ISSUE: May the vendor demand the rescission of a contract of sale of
a parcel of land for a cause traceable to his own failure to evict the
squatters?
RULING: No. A perfected contract of sale may either be absolute or
conditional depending on whether the agreement is devoid of, or
subject to, any condition imposed on the passing of title of the thing to
be conveyed or on the obligation of a party thereto. When ownership
is retained until the fulfillment of a positive condition the breach of the
condition will simply prevent the duty to convey title from acquiring an
obligatory force. If the condition is imposed upon the obligation of a
party thereto when ownership is retained until the fulfillment of a
positive condition will simply prevent the duty to convey title from
acquiring an obligatory force. If the condition is imposed on an
obligation of a party which is not complied with the other party may
either refuse to proceed or waive said condition. Where, of course, the
condition is imposed upon the perfection of the contract itself, the
failure of such condition would prevent the juridical relation itself from
coming into existence. The right of resolution of a party to an
obligation is predicted on a breach of faith by the other party that
violates the reciprocity between them. It is private respondent who
has failed in her obligation under the contract. Petitioner did not
breach the agreement. He has agreed, in fact, to shoulder the
expense of the execution of the judgment in the ejectment case and to
make arrangements with the sherriff to effect such execution.
Where the so-called “potestative condition” is imposed not on the birth
of the obligation but on its fulfillment, only the condition is avoided
leaving unaffected the obligation itself.
9. Optimum Development Bank v. Sps. Jovellanos
FACTS: Spouses Jovellanos entered into a Contract to Sell with
Palmera Homes for the purchase of a residential house and lot
payable for a period of 10 years. Later, Palmera Homes assigned all
its rights, title and interest in the Contract to Sell in favor of Optimum.
A year later, Optimum issued a Notice of Delinquency and
Cancellation of Contract to Sell to Spouses Jovellanos for their failure
to pay their monthly installments despite several written and verbal
demands. A month later, a final Demand Letter by Optimum required
Spouses Jovellanos to vacate and deliver possession of the subject
property within seven (7) days, which however remained unheeded.
Optimum instituted the action for unlawful detainer within one year
from the final demand to vacate. METC ordered Jovellanos to vacate
the property and pay Optimum for the use of the property. RTC
affirmed. The CA dismissed the complaint for lack of jurisdiction.
ISSUE: Whether the validity of the cancellation of the Contract to Sell
under RA 6552 (MACEDA LAW) lies within the competence or
jurisdiction of the Metropolitan Trial Court (MeTC).
HELD: Yes. The unlawful detainer suit is well within the jurisdiction of
the MeTC because action is premised upon the cancellation or
termination of the Contract to Sell and that the MeTC rightfully held
that due to non-payment, the spa Jovellanos does not anymore have
the right to possess.
The court in Oronce v CA found that MTCs are authorized to look into
the ownership of the property in controversy in ejectment cases. This
is because to resolve possession, courts must resolve the issue of
ownership based on the interpretation of the contract or agreement
between the plaintiff and defendant.
In a contract to sell, all the seller is obligated to do is to sell the
property exclusively to the buyer, while the buyer is obligated to pay
for the thing he is buying. The full payment of the purchase price in a
contract to sell is a suspensive condition. if not fulfilled, the seller has
no obligation to convey title to the buyer.
Under RA 6552, the mechanics of cancellation of Contract to Sell is
based on the amount of installments already paid by the buyer under
the said contract. Since Jovellanos had paid less than two years in
installments, Section 4 of RA 6552 provides for three (3) requisites
before the seller may actually cancel the subject contract: first, the
buyer shall give the buyer a 60-day grace period to be reckoned from
the date the installment became due; second, the seller must give the
buyer a notice of cancellation/demand for rescission by notarial act if
the buyer fails to pay the installments due at the expiration of the said
grace period; and
third, the seller may actually cancel the contract only after 30 days
from the buyer’s receipt of the said notice of cancellation/demand for
rescission by notarial act.
There was a valid and effective cancellation of the Contract to Sell in
accordance with Section 4 of RA 6552 and since Spouses Jovellanos
had already lost their right to retain possession of the subject property
as a consequence of such cancellation, their refusal to vacate and
turn over possession to Optimum makes out a valid case for unlawful
detainer.
10. Roque v Aguado
TOPIC: Contract of conditional sale, contract to sell, double sale
FACTS:
On July 21, 1977, petitioners-spouses Roque and the original owners
of the then unregistered Lot 18089 – namely, Rivero, et al. executed
the 1977 Deed of Conditional Sale over a 1,231-sq. m. portion of Lot
18089 for a consideration of P30,775.00. The parties agreed that Sps.
Roque shall make an initial payment of P15,387.50 upon signing,
while the remaining balance of the purchase price shall be payable
upon the registration of Lot 18089, as well as the segregation and the
concomitant issuance of a separate title over the subject portion in
their names. After the deed’s execution, Sps. Roque took possession
and introduced improvements on the subject portion which they
utilized as a balut factory.
Pertinent provision of the 1977 Deed of Conditional Sale:
DEED OF CONDITIONAL SALE OF REAL PROPERTY
KNOW ALL MEN BY THESE PRESENTS:
xxx
That for and in consideration of the sum of THIRTY THOUSAND
SEVEN HUNDRED SEVENTY FIVE PESOS (P30,775.00), Philippine
Currency, payable in the manner hereinbelow specified, the
VENDORS do hereby sell, transfer and convey unto the VENDEE, or
their heirs, executors, administrators, or assignors, that unsegregated
portion of the above lot, x x x.
That the aforesaid amount shall be paid in two installments, the first
installment which is in the amount of __________ (P15,387.50) and
the balance in the amount of __________ (P15,387.50), shall be paid
as soon as the described portion of the property shall have been
registered under the Land Registration Act and a Certificate of Title
issued accordingly;
That as soon as the total amount of the property has been paid and
the Certificate of Title has been issued, an absolute deed of sale shall
be executed accordingly;
xxx
On August 12, 1991, Sabug, Jr, applied for a free patent over the
entire Lot 18089 and was eventually issued OCT No. M-59558 in his
name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero,
in her personal capacity and in representation of Rivero, et al.,
executed the 1993 Joint Affidavit, acknowledging that the subject
portion belongs to Sps. Roque and expressed their willingness to
segregate the same from the entire area of Lot 18089.
On December 8, 1999, however, Sabug, Jr., through the 1999 Deed
of Absolute Sale, sold Lot 18089 to Aguado for P2,500,000.00, who,
in turn, caused the cancellation of OCT No. M-5955 and the issuance
of TCT No. M-96692 dated December 17, 199911 in her name.
Thereafter, Aguado obtained an P8,000,000.00 loan from the Land
Bank secured by a mortgage over Lot 18089. When she failed to pay
her loan obligation, Land Bank commenced extra-judicial foreclosure
proceedings and eventually tendered the highest bid in the auction
sale. Upon Aguado’s failure to redeem the subject property, Land
Bank consolidated its ownership, and TCT No. M-11589513 was
issued in its name on July 21, 2003.
On June 16, 2003, Sps. Roque filed a complaint for reconveyance,
annulment of sale, deed of real estate mortgage, foreclosure, and
certificate of sale, and damages before the RTC.
ISSUE:
Whether or not the 1977 Deed of Conditional Sale is a conditional
contract of sale or a contract to sell.
HELD:
It is a CONTRACT TO SELL. The Court held that where the seller
promises to execute a deed of absolute sale upon the completion by
the buyer of the payment of the purchase price, the contract is only a
contract to sell even if their agreement is denominated as a Deed of
Conditional Sale, as in this case. This treatment stems from the legal
characterization of a contract to sell, that is, a bilateral contract
whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the subject property
exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, such as, the full payment of the purchase price.
Elsewise stated, in a contract to sell, ownership is retained by the
vendor and is not to pass to the vendee until full payment of the
purchase price.
In contracts to sell the obligation of the seller to sell becomes
demandable only upon the happening of the suspensive condition,
that is, the full payment of the purchase price by the buyer. It is only
upon the existence of the contract of sale that the seller becomes
obligated to transfer the ownership of the thing sold to the buyer. Prior
to the existence of the contract of sale, the seller is not obligated to
transfer the ownership to the buyer, even if there is a contract to sell
between them.
Final installment not paid thus no perfected contract of sale
Here, it is undisputed that Sps. Roque have not paid the final
installment of the purchase price. As such, the condition which would
have triggered the parties’ obligation to enter into and thereby perfect
a contract of sale in order to effectively transfer the ownership of the
subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps.
Roque) cannot be deemed to have been fulfilled. Consequently, the
latter cannot validly claim ownership over the subject portion even if
they had made an initial payment and even took possession of the
same.
Conditional contract of sale and contract to sell in relation to double
sale
It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted
with, but to a third person, as in the case at bench.
In a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price,
for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the
property.
There is no double sale in such case. Title to the property will transfer
to the buyer after registration because there is no defect in the owner-
seller’s title per se, but the latter, of course, may be sued for damages
by the intending buyer.