Fernando A. Gaite v.
Isabelo Fonacier the other understands that he assumes the
G.R. No. L-11827 | July 31, 1961 | Reyes, J.B.L., J.
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; and
2) Whether there were insufficient tons of ores.
Ruling:
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 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
risk of receiving nothing for what he gives (as
in the case of a sale of hopes or expectations,
emptio spei), it is not in the usual course of
business to do so; hence, the contingent
character of the obligation must clearly
appear. Nothing is found in the record to
evidence that Gaite desired or assumed to run
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, an not only upon a bond by
Fonacier, the Larap Mines & Smelting Co., and
the company's stockholders, but also on one
by a surety company; and the fact that
appellants did put upsuch 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.
Province Of Cebu v. Heirs Of Rufina Morales G.R.
NO. 170115 | February 19, 2008 | Ynares-Santiago
Facts: On September 27, 1961, petitioner Province of
Cebu leased in favor of Rufina Morales a 210-square
meter lot which formed part of Lot No. 646-A of the
Banilad Estate. Subsequently or sometime in 1964,
petitioner donated several parcels of land to the City
of Cebu. Among those donated was Lot No. 646-A
which the City of Cebu divided into sub-lots. The area
occupied by Morales was thereafter denominated as
Lot No. 646-A-3, for which Transfer Certificate of
Title (TCT) No. 30883 was issued in favor of the City
of Cebu.
On July 19, 1965, the city sold Lot No. 646-A-3
as well as the other donated lots at public auction in
order to raise money for infrastructure projects.
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.
In the meantime, petitioner filed an action for
reversion of donation against the City of Cebu
docketed as Civil Case No. 238-BC. On May 7, 1974,
petitioner and the City of Cebu entered into a
compromise agreement which the court approved.
The agreement provided for the return of the
donated lots to petitioner except those that have
already been utilized by the City of Cebu. Pursuant
thereto, Lot No. 646-A-3 was returned to petitioner
and registered in its name under TCT No. 104310.
Morales died during the pendency of Civil
Case No. 238-BC. She was not able to make any other
payments on the balance of the purchase price for the
lot.
Respondent Quesada, one of the nieces of
Morales, wrote to then Cebu Governor Gullas asking
for the formal conveyance of Lot No. 646-A-3 to
Morales' surviving heirs, in accordance with the
award earlier made by the City of Cebu. This was
followed by another letter of the same tenor
addressed to Governor Rama.
The requests remained unheeded thus,
Quesada, together with the other nieces of Morales
filed an action for specific performance and
reconveyance of property against petitioner, which
was docketed as Civil Case No. CEB-11140 before
Branch 6 of the Regional Trial Court of Cebu City. RTC
ruled in favor of respondents. CA affirmed.
Issue: Whether or not the award is tantamount to a
perfected contract of sale between Morales and the
City of Cebu.
Ruling: YES. The award is tantamount to a perfected
contract of sale between Morales and the City of
Cebu, while partial payment of the purchase price
and actual occupation of the property by Morales and
respondents effectively transferred ownership of the
lot to the latter. This is true notwithstanding the
failure of Morales and respondents to pay the balance
of the purchase price.
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.
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. 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. All these elements were present in the
transaction between the City of Cebu and Morales.
Petitioner’s assertion that there is no
perfected contract of sale because there is no
execution of “Contract of Purchase of Sale” has no
merit. 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. Subject to the provisions
of the Statute of Frauds, a formal document is not
necessary for the sale transaction to acquire binding
effect.
Failure of Morales 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.
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. In this case, respondents' predecessor had
undoubtedly commenced performing her obligation
by making a down payment on the purchase price.
Unfortunately, however, she was not able to complete
the payments due to legal complications between
petitioner and the city.
BALATBAT v. COURT OF APPEALS
G.R. NO. 109410 I August 28, 1996 I Torres, Jr., J.
Facts: The subject lot was acquired by plaintiff
Aurelio Roque and Maria Mesina during their
conjugal union. A house was constructed later
thereon. Aurelio and Maria had four children, the
defendants in this case. When Maria died, Aurelio
filed a case for partition. As legal spouse Aurelio was
entitled to one-half of the house and lot, and the
other half was divided among him and their four
children, for one-fifths each.
The decision for partition having become
final and executory, the Register of Deeds of Manila
issued a transfer certificate of title. On April 1, 1980,
Aurelio sold his 6/10 share to spouses Repuyan, as
evidenced by a deed of absolute sale. Subsequently,
Aurora Repuyan caused the annotation of her
affidavit of adverse claim on June 21 of the same year.
Later, Aurelio filed a complaint for rescission of
contract grounded on the buyers’ failure to pay the
balance of the purchase price.
On February 4, 1982, a deed of absolute sale
was executed between Aurelio and his children, and
herein petitioner Clara Balatbat, involving the entire
lot. Balatbat filed a motion for the issuance of writ of
possession, which was granted by the court on
September 20, 1982, subject to valid rights and
interests of third persons. Notably, Balatbat had filed
a motion to intervene in the rescission case, but did
not file her complaint in intervention.
Issues:
1) Whether or not the sale to Repuyan spouses
was consummated; and
2) Whether or not the spouses have better claim
in case of a double sale.
Rulings:
1) YES. The sale is consummated and not merely
executory despite the fact that there was no
delivery of the subject property and the
consideration/price was not fully paid.
A contract of sale being consensual, it is
perfected by the mere consent of the parties.
The failure of the buyer to make good the
price does not, in law, cause the ownership to
revest to the seller unless the bilateral
contract of sale is first rescinded or resolved
pursuant to Article 1191 of the New Civil
Code. Non-payment only creates a right to
demand the fulfillment of the obligation or to
rescind the contract; it 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.
With respect to the non-delivery of the
possession of the subject property to the
private respondent, devoid of any stipulation
that "ownership in the thing shall not pass to
the purchaser until he has fully paid the
price", ownership in the thing shall pass from
the vendor to the vendee upon actual or
constructive delivery of the thing sold even if
the purchase price has not yet been fully paid.
Article 1498 of the Civil Code provides that —
when the sale is made through a public
instrument, the execution thereof shall be
equivalent to the delivery of the thing which
is the object of the contract, if from the deed
the contrary does not appear or cannot be
inferred.
Hence 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. 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).
2) YES. 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.
The annotation of the adverse claim on TCT
No. 135671 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.
SAN LORENZO DEVELOPMENT CORPORATION vs.
COURT OF APPEALS
GR No. 124242 | January 21, 2005| Tinga, J.
Facts: Respondents Miguel Lu and Pacita Zavalla
(Spouses Lu) owned two parcels of land. They then
sold both parcels of land to Pablo Babasanta, who
made a downpayment of P50,000. Sometime after,
Babasanta notified the spouses about having received
information that the spouses sold the same property
to another without his knowledge and consent. He
then demanded that the second sale be cancelled and
that a final deed of sale be issued in his favor so that
he could effect full payment of the purchase price.
In response, Pacita Lu acknowledged having
agreed to sell property to Babasanta. However, she
reminded the latter 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. Further, Pacita
added that she returned the sum of P50,000 to
Babasanta.
Babasanta filed a complaint against Spouses
Lu alleging that the two parcels of land had been sold
to him and that despite his repeated demands for the
execution of a final deed of sale in his favor, the
spouses refused.
Petitioner San Lorenzo Development
Corporation (SLDC) intervened and alleged that it
had legal interest in the subject matter under
litigation because 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 upholding the sale of the property to SLDC.
Babasanta appealed, alleging that the trial court
erred in upholding the validity of the sale made by
the Spouses Lu in favor of SLDC.
To prove the perfection of the contract of sale
in his favor, Babasanta presented a document signed
by Pacita Lu acknowledging receipt of the sum of
P50,000 as partial payment. While the receipt signed
by Pacita did not mention the price for which the
property was being sold, this deficiency was supplied
by Pacita Lu’s letter wherein she admitted that she
agreed to sell the land to Babasanta.
Issue: Whether the agreement between Babasanta
and Spouses Lu is a contract of sale.
Ruling: NO. The Court held that the agreement
between Babasanta and the Spouses Lu is a contract
to sell and not a contract of sale.
Contracts, in general, are perfected by mere
consent, which is manifested by the meeting of the
offer and the acceptance upon the thing which are to
constitute the contract. The offer must be certain and
the acceptance absolute. Moreover, contracts shall be
obligatory in whatever form they may have been
entered into, provided all the essential requisites for
their validity are present.
In this case, the receipt signed by Pacita Lu
merely states that she accepted the sum of P50,000
from Babasanta as partial payment. 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 the Court that
the Spouses Lu never intended to transfer ownership
to Babasanta except upon full payment of the
purchase price.
The distinction between a contract to sell and
a contract of sale is quite germane. In a contract of
sale, title passes to the vendee upon the delivery of
the thing sold; whereas in a contract to sell, by
agreement of the ownership is reserved in the vendor
and is not to pass until the full payment of the price.
In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is
resolved or rescinded; whereas in a contract to sell,
title is retained by the vendor until the full payment
of the price, such payment being a positive
suspensive condition and failure of which is not a
breach but an event that prevents the obligation of
the vendor to convey title from becoming effective.
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. Mere sending of a letter by the
vendee expressing the intention to pay without the
accompanying payment is not considered a valid
tender of payment. Consignation of the amounts due
in court is essential in order to extinguish
Babasanta’s obligation to pay the balance of the
purchase price. Glaringly absent from the records is
any indication that Babasanta even attempted to
make the proper consignation of the amounts due,
thus, the obligation on the part of the sellers to
convey title never acquired obligatory force.
Barreto v. San Marina
G.R. No. L-8169 | December 29, 1913 | Torres, J.
Facts: Alberto Barretto alleges that he is the owner of
the whole hacienda called Balintagac. He was in
possession of the said hacienda quietly, peacefully,
and continuously, as were his predecessors since
the year 1884 until May, 1912. Defendant Leonardo
F. Barretto alleging himself to be the owner of a
certain part of said hacienda illegally and unduly
usurped a portion of land of the said hacienda.
Since that time the defendant had been
receiving two-thirds of the fruits which the usurped
portion annually produced, which amounted to 33
uyones and 145 and 33 per cent cavanes of rice at P8
per upon and P2 a cavan, and whose value amounts
to the sum P554; that the defendant refused to return
that portion of land usurped together with the fruits
received, or their value, in spite of the fact that he has
been required to do so in writing by the plaintiff.
Issue:
Ruling: As the extinguishment of the right of the
creditor and the termination of the use and
possession of the real property depend upon the
entire payment of the debt and its interest, it is
proper - the liquidation of accounts having been
made to fix definitely the sums of the amount which
the debtors had paid on account of the capital and
interests and which had been really received by the
creditor.
The contract of agency can subsist only so
long as the principal has confidence in his agent
because from the moment such confidence
disappears and although there be a fixed period for
the exercise of of the office of the agent, a principal
has a perfect right to revoke the power that he had
conferred upon the agent owing to the confidence he
had in him and which for sound reasons had ceased
to exist.
Atkins Kroll & Co. v. Cu Hian Tek
102 Phil 984 | January 1958
Facts: On September 13, 1951, petitioner sent a
letter to respondent offering a total of 1,000 cartons
of Luneta brand sardines. Respondent
unconditionally accepted the said offer through a
letter delivered on September 21, 1951, but Atkins
failed to deliver the goods due to the shortage of
catch of sardines in California.
Respondent, therefore, filed an action for
damages with the CFI which granted the same in his
favor. Upon appeal, the CA affirmed the decision.
Petitioner contends that there was no such contract
of sale but only an option to buy, which was not
enforceable for lack of consideration because it is
provided under the 2nd paragraph of Art. 1479 of the
Civil Code that “an accepted unilateral promise to buy
or to sell is supported by a consideration distinct
from the price.” Petitioner also insisted that the offer
was a mere offer of option, because the offer was a
continuing offer to sell under September 23.
Issue: Whether or not there was a contract of sale
between the promise or only a unilateral promise to
buy.
Ruling: CONTRACT OF SALE. There was a contract of
sale between the parties. Petitioner’s argument
assumed that only a unilateral promise arose when
the respondent accepted the offer, which is incorrect
because a bilateral contract to sell and to buy was
created upon respondent’s acceptance.
Had respondent backed out after accepting,
by refusing to get the sardines and/or to pay for their
price, he could also be sued. But his letter-reply to
petitioner indicated that he accepted the offer for the
sale and that he had already filed an application for
import license. After accepting the promise and
before he exercises his option, the holder of the
option is not bound to buy. In this case, however,
upon respondent’s acceptance of the offer, a bilateral
promise to sell and to buy ensued and the respondent
had assumed the obligations of a buyer.
Sun Brothers Appliance v. Perez
Facts: The parties entered into a conditional Sale
Agreement of an Admiral air conditioner, the price of
which is ₱1,678. The agreement contained the
following stipulations:
(1) Title to said property shall vest in the Buyer
only upon full payment of the entire account
as herein provided, and only upon complete
performance of all the other conditions
herein specified.
(2) The Buyer shall keep said property in good
condition and properly protected against the
elements, at his/its address above stated, and
undertakes that if said property or any part
thereof be lost, damaged, or destroyed for any
causes, he shall suffer such loss, or repair
such damage, it being distinctly understood
and agreed that said property remains at
Buyer’s risk after delivery.
Pursuant to the contract, petitioner delivered the
item and was received by respondent, who then
made a downpayment of ₱274. The petitioner
installed the air condition but later burned. Petitioner
claimed that the damage was force majeure while
respondent stopped paying the monthly installments.
Issue: Who bears the loss?
Ruling: BUYER. The agreement making the buyer
responsible for any loss whatsoever, fortuitous or
otherwise, even if the title to the property remains in
the vendor, is neither contrary to law, nor to morals
or public policy . Citing American decisions, the court
held that the loss did not relieve the buyer from his
obligation to pay. Reason for the rule:
(1) The absolute and unconditional nature of the
vendee’s promise to pay for the goods. The
promise is nowise dependent upon the
transfer of the absolute title.
(2) The fact that the vendor has fully performed
his contract and has nothing further to do
except receive payment, and the vendee
received what he bargained for when he
obtained the right of possession and use of
the good sand the right to acquire title upon
making full payment of the price.
(3) Providing an incentive to care properly for
the goods, they being exclusively under the
control and dominion of the vendee.
Pacific Oxygen & Acetylene Co. v. Central Bank
G.R. No. L-21881 | March 1, 1968 | Fernando, J.
Facts: Plaintiff Pacific Oxygen and Acetylene Co.
applied on Sept. 21, 1961 with the Philippine Trust
company, an agent of the Central Bank, for
commercial credit in the amount of $63,964.00 in
favor of the Independent Engineering Co., Inc.,
O'Fallon, a United States corporation located in
Illinois to cover the shipment of a plant. The
application was approved on October 4, 1961, with
the Philippine Trust Company establishing an
irrevocable letter of credit at the free market rate of
P3.01875 to every dollar, the letter of credit, expiring
on February 1, 1962. he plaintiff also on September
21, 1961, applied with the Philippine Trust Company
for the purchase of forward exchange in the same
amount of $63,964.00 and for the same purpose.
Philippine Trust Company applied with the Central
Bank for the purchase of forward exchange in the
amount of $63,694.00 to cover its U.S. dollar
commitment against the letter of credit opened under
free market rate for the plaintiff. Then on October 6,
1961, the Central Bank in turn executed a forward
exchange contract for the sale of foreign exchange in
the said amount to be delivered on January 2, 1962.
On November 7, 1961, upon plaintiff's application,
the letter of credit was amended to increase the
amount by $3,910.00 to cover the estimated freight
and ship charges, to be followed as in the case of the
original letter of credit with the purchase; of forward
exchange for a similar amount. On January 17, 1962,
the Philippine Trust Company applied for the
purchase of forward exchange with the Central Bank
in the amount of $71,617.00 of which $67,874.00
would cover its U.S. dollar commitments against the
letter of credit opened under free market rate for the
plaintiff. Then the next day the Central Bank executed
the corresponding forward exchange contract for the
same amount to be delivered on March 17, 1962.
On January 21, 1962, the Central Bank
suspended the margin levy. On February 8, 1962, the
Independent Engineering Co., Inc., O'Fallon, Illinois,
U.S.A., the beneficiary, drew two drafts against said
letter of credit and the Continental Illinois National
Bank and Trust Company of Chicago, Chicago, Illinois,
correspondent of the Philippine Trust Company,
Manila, honored the first draft on February 9, 1962,
and the second draft on February 13, 1962. n March
14, 1962, the plaintiff paid under protest to the
Central Bank, thru the Philippine Trust Company, the
amounts of P22,058.00 and P8,780.65, or a total of
P30,839.49, representing the 15% margin fee, the
amount sought to be recovered.
Issue: Whether or not the collection made by the
defendant from the plaintiff constituting the marginal
fee for its commercial credit is valid.
Ruling: A margin fee may be collected from "all sales
of foreign exchange by the Central Bank and its
authorized agent banks, . . .." It was expressly found
by the lower court: "On January 17, 1962, the
Philippine Trust Company applied for the purchase of
forward exchange with the Central Bank in the
amount of $71,617.02, of which $67,874.00 to cover
its U.S. dollar commitments against the letter of
credit opened under free market rate for the plaintiff,
and on the next day the Central Bank executed the
corresponding forward exchange contract (No.
12145) for the same amount to be delivered on
March 17, 1962.
It is well-settled in our law that a contract of
sale exists from the moment "one of the contracting
parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other to
pay therefor a price certain in money or its
equivalent."
There is a perfection of such a contract "at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the
price" from which moment, "the parties may
reciprocally demand performance, subject to the
provisions of the law governing the form of
contracts."
It is a fair restatement of the prevailing
principle in American law that an agreement by one
party to sell and deliver, and by the other to purchase
at a mentioned price and terms certain personal
property on or before a specified future date is a
contract of sale and not an option. With the
categorical finding in the decision appealed from that
the purchase of the forward exchange by the Central
Bank occurred on January 17, 1962, prior to the
suspension of the margin levy on January 21, 1962, it
cannot be denied that deference must be paid to the
legal provision calling for a margin fee "in respect of
all sales of foreign exchange by the Central Bank and
its authorized agents . . . ." From Lizarraga Hermanos
v. Yap Tico, this Court has steadfastly adhered to the
doctrine that its first and fundamental duty is the
application of the law according to its express terms,
interpretation being called for only when such literal
application is impossible.
Bucton v. Gabar
G.R. No. L-36359 | January 31, 1974 | Antonio, J.
Facts: This action for specific performance filed by
the plaintiffs prays, inter-alia, that defendants-
spouses be ordered to execute in favor of plaintiffs a
deed of sale of the western half of a parcel of land
having an area of 728 sq. m. covered by TCT No. II of
the office of the Register of Deeds of Misamis
Oriental. Plaintiffs' evidence tends to show that
sometime in 1946 defendant Josefina Llamoso Gabar
bought the above-mentioned land from the spouses
Villarin on installment basis, to wit, P500 down, the
balance payable in installments. Josefina entered into
a verbal agreement with her sister-in-law, plaintiff
Nicanora Gabar Bucton, that the latter would pay
one-half of the price (P3,000) and would then own
one-half of the land.
In January, 1947 the spouses Villarin
executed the deed of sale of the land abovementioned
in favor of defendant Josefina Llamoso Gabar, Exhibit
I, to whom was issued on June 20, 1947 TCT No. II,
cancelling OCT No. 6337. Plaintiffs then sought to
obtain a separate title for their portion of the land in
question. Defendants repeatedly declined to
accommodate plaintiffs.
Issue: Whether or not there was a sale between
Josefina and Nicanora.
Ruling: YES. There is no question that petitioner
Nicanora paid P1,500.00 to respondent Josefina as
purchase price of one-half of the lot now covered by
TCT No. II, for respondent Court of Appeals found as
a fact "that plaintiffs really paid for a portion of the
lot in question pursuant to their agreement with the
defendants that they would own one-half (1/2) of the
land." That sale, although not consigned in a public
instrument or formal writing, is nevertheless valid
and binding between petitioners and private
respondents, for the time-honored rule is that even a
verbal contract of sale or real estate produces legal
effects between the parties.
Although at the time said petitioner paid
P1,000.00 as part payment of the purchase price on
January 19, 1946, private respondents were not yet
the owners of the lot, they became such owners on
January 24, 1947, when a deed of sale was executed
in their favor by the Villarin spouses. In the premises,
Article 1434 of the Civil Code, which provides that
"when a person who is not the owner of a thing sells
or alienates and delivers it, and later the seller or
grantor acquires title thereto, such title passes by
operation of law to the buyer or grantee," is
applicable. Petitioners therefore became owners of
the one-half portion of the lot in question by virtue of
a sale which, though not evidenced by a formal deed,
was nevertheless proved by both documentary and
parole evidence.
Adelfa Properties v. Court of Appeals
Facts:
Private respondents and their brothers were co-
owners of a parcel of land in Las Pinas, Metro Manila.
The brothers Jose and Dominador sold their shares,
which is the eastern portion of the lot, to Adelfa
Properties. Later, Adelfa showed interest in
purchasing the western portion of the property
which belonged to private respondents. Pursuant to
this, they executed an exclusive option to purchase
wherein Adelfa paid P50,000 as option money. It was
agreed that such will be credited as partial payment
upon consummation of the sale.
However, before Adelfa could pay the
purchase price, a complaint for the annulment of sale
of the eastern portion was filed. Adelfa suspended the
payment of the full purchase price and the complaint
was later dismissed. Adelfa expressed it intent to
purchase the property but learned that it had been
sold already to someone else. Private respondents
sought to recover the title of the property from
Adelfa, who did not comply. Thus, a case for the
annulment of contract was filed against Adelfa with a
prayer that the exclusive option to purchase be
declared void. The RTC ruled in favor of respondents,
holding that the agreement entered into was merely
an option contract, and declared that the suspension
of payment constituted as a counter-offer which was
tantamount to a rejection of the option. The CA
affirmed the decision.
Issue: Whether or not the exclusive option to
purchase was a mere option contract.
Ruling: CONTRACT TO SELL. The agreement
between the parties is a contract to sell, and not an
option contract or a contract of sale. In this case,
there were two situations which convinced the court
that the parties did not intend to pass ownership
until full payment of the purchase price. First is the
exclusive option to purchase. There is no stipulation
regarding the reconveyance of the property to
respondents in the event that petitioner does not
comply with its obligation. With the absence of such a
stipulation, it may legally be inferred that the parties
never intended to transfer ownership to the
petitioner to completion of payment of the purchase
price. This is supported by the fact that the deed of
absolute sale would have been issued only upon the
payment of the balance of the purchase price. Second,
there was no actual or constructive delivery. The
exclusive option to purchase is not contained in a
public instrument the execution of which would have
been considered equivalent to delivery. Neither did
petitioner take actual, physical possession of the
property at any given time.
The title of a contract does not necessarily
determine its true nature. Hence, the fact that the
document is entitled "Exclusive Option to Purchase"
is not controlling where the text thereof shows that it
is a contract to sell. It is not a sale of property but a
sale of the right to purchase.
Until acceptance, it is not, properly speaking,
a contract. The distinction between an "option" and a
contract of sale is that an option is an unaccepted
offer. It states the terms and conditions on which the
owner is willing to sell the land, if the holder elects to
accept them within the time limited. If the holder
does so elect, he must give notice to the other party,
and the accepted offer thereupon becomes a valid
and binding contract. If an acceptance is not made
within the time fixed, the owner is no longer bound
by his offer, and the option is at an end. A contract of
sale, on the other hand, fixes the relative rights and
obligations of both parties at the time of its
execution. The offer and the acceptance are
concurrent, since the minds of the contracting parties
meet in the terms of the agreement.
Romero v. Court of Appeals
Facts:
Romero, a civil engineer, planned to put up a
warehouse. Private respondents offered to sell the
property to Romero if he pays a down payment
which will be used for the ejectment suit against the
informal settlers. Romero agreed and thus entered
into a conditional contract of sale. Said contract
stipulated that if after 60 days from the date of the
signing of the contract, and the informal settlers are
yet ejected, the down payment shall be returned to
the petitioner. The court ordered the informal
settlers to vacate, however, it was only after 60 days.
Private respondents sought to return the down
payment but petitioner refused since the judgment
was favorable, and even proposed that he can
shoulder the expenses for the ejectment, provided
that such will be subtracted from his remaining
balance. Private respondent contented that the
conditional sale is now void due to their failure to
evict the informal settles within the 60 day-period
and they wanted to retain the property.
Issue: Whether or not the vendor can demand the
rescission of a contract of sale of a parcel of land for a
cause traceable to his own failure.
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. 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.
Private respondent’s failure to evict the informal
settlers from the property within the stipulated
period gives petitioner the right to either refuse to
proceed with the agreement or waive that condition
in consonance with Article 1545 of the Civil Code.
Here, evidently, the petitioner has waived the
performance of the condition imposed on the private
respondent. In any case, private respondent’s action
for rescission is not warranted as she is not the
injured party. Petitioner, being the injured party, has
the right to rescind the agreement.
Optimum Development Bank v. Spouses
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 in favor of
Spouses Jovellanos. 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. The MeTC ordered Sps. Jovellanos to vacate
the subject property and pay Optimum reasonable
compensation in the amount of ₱5,000.00 for its use
and occupation until possession has been
surrendered.
The spouses assailed the jurisdiction of the
MeTC, claiming that the case did not merely involve
the issue of physical possession but rather, questions
arising from their rights under a contract to sell
which is a matter that is incapable of pecuniary
estimation and, therefore, within the jurisdiction of
the RTC.
Issue: Whether or not the validity of the cancellation
of the contract to sell under the Maceda Law lies
within the jurisdiction of the MeTC.
Ruling: YES. 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 seller 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.
Roque v. Aguado
Facts:
Petitioner-spouses Roque executed a Deed of
Conditional Sale of Real Property with Rivero, the
original owner of the unregistered Lot for
₱30,775.00. Sps. Roque made an initial payment of
₱15,387.50 upon signing, while the remaining
balance to be paid upon the registration of the lot, as
well as the segregation and the concomitant issuance
of a separate title over the subject portion in their
names. Thereafter, Sps. Roque took possession and
introduced improvements on the subject portion
which they utilized as a balut factory.
Sabug, Jr. applied for a free patent over the
entire Lot 18089 and was an issued Original
Certificate of Title (OCT) No. M-5955 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 a 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.
Sabug, Jr., executed a Deed of Absolute Sale
with Aguado for ₱2,500,000.00 which caused the
cancellation of OCT No. M-5955 and the issuance of
Transfer Certificate of Title (TCT) No. M-96692 in her
name. Thereafter, Aguado obtained an ₱8,000,000.00
loan from Land Bank secured by a mortgage over Lot
18089. Land Bank commenced extra-judicial
foreclosure proceedings and eventually tendered the
highest bid in the auction sale when she failed to pay
her loan obligation. Aguado failed to redeem the
property, therefore Land Bank consolidated its
ownership, and TCT No. M-115895 was issued in its
name.
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 seeking to be declared as the
true owners of the subject portion which had been
erroneously included in the sale between Aguado and
Sabug, Jr., and, subsequently, the mortgage to Land
Bank, both covering Lot 18089 in its entirety. The CA
affirmed the decision of the RTC.
Issue: Whether or not the CA erred in not ordering
the reconveyance of the subject portion in favor of
the petitioners.
Ruling: The Court ruled that the Deed of Conditional
Sale is actually in the nature of a contract to sell and
not one of sale contrary to Sps. Roque’s belief. It has
been consistently ruled 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 the present case, 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 to
the buyers 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.
Ang Yu Asuncion v. Court of Appeals
Facts:
Ang Yu Asuncion et. al. are lessees of residential and
commercial spaces owned by the Unjiengs. In 1986,
the Unjiengs informed Petitioners Ang Yu Asuncion
that the property was being sold and that they were
given priority to acquire them. Both parties agreed
on a price of P5M. However, they had not yet agreed
on the terms and conditions of the sale.
Consequently, the petitioners wrote to the Unjiengs
twice, asking them to specify the terms and
conditions. The Unjiengs did not reply. 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 lower court dismissed the case and held
that the Unjieng’s offer to sell was never accepted
because they did not agree upon the terms and
conditions of the sale. Thus there was no contract of
sale at all. However, the lower court ruled that if the
defendants would offer their property at a price not
exceeding P11M, the plaintiffs will have the right of
refusal. The property was sold to De Buen Realty. The
title to the property was transferred into the name of
De Buen and demanded that the petitioners vacate
the premises. Hence, the petitioners instituted this
case.
Issues:
1) Whether or not the contract of sale is perfect
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.
Ruling:
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.
Until the contract is perfected, 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). 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.
Vda. De Jomoc v. Court of Appeals
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 Maria 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 Facts:
a Deed of Extrajudicial Settlement and Sale of Land
Both parties herein entered into a contract to sell
with private respondent for P300,000.00. The
under which respondent assured petitioners that he
document was not yet signed by all the parties nor
would buy the subject properties on or before July
notarized but in the meantime, Maura So had made
31, 1991 for P1,750,000. Petitioners surrendered
partial payments amounting to P49,000.00.
physical possession of the lots to respondent which
Mariano So, the appellant in the recovery the latter used to build a school. On the
proceeding, agreed to settle the case by executing a aforementioned date, the sale did not materialize.
Deed of Reconveyance of the land in favor of the heirs Consequently, petitioners filed a complaint for
of Pantaleon Jomoc. The reconveyance was in reformation of contract to sell.
compliance with the decision in the recovery case
The parties later entered into a compromise
and resulted in the dismissal of his appeal. The heirs
agreement which stipulated that petitioners would
of Jomoc executed another extra-judicial settlement
give respondent 5 months to raise P2,060,000 and
with absolute sale in favor of intervenors Lim Leong
that failure thereof would lead the respondent to
Kang and Lim Pue filing claiming that they believe
vacating the premises immediately. Said compromise
that So already backed-out from the agreement.
agreement was approved by the trial court.
Later, Maura So demanded from the Jomoc family the
execution of a final deed of conveyance. They ignored Two months after, private respondent,
the demand. alleging that they had negotiated a loan from the
Bank of the Philippine Islands, requested petitioners
Maura So sued petitioners-heirs for specific
to execute with them a contract to sell in their favor.
performance to compel them to execute and deliver
Respondent filed with the trial court an urgent
the proper registrable deed of sale over the lot. The
motion for an order directing petitioners to execute a
lower court, finding that there was no sufficient
contract to sell in private respondent's favor in
evidence to show complainant-respondents'
accordance with paragraph 7 of the compromise
withdrawal from the sale. On appeal, the trial court
agreement. Petitioners filed a motion for execution of
decision was affirmed.
judgement on the ground that respondent failed to
Issue: Whether or not the sale is enforceable. settle their obligations. Judge denied the motion and
directed petitioners to execute the required contract
Ruling: YES. Since petitioners admit the existence of
to sell in favor of private respondent. Respondent
the extra-judicial settlement, the court finds that
judge opined that the proximate cause of private
there was meeting of the minds between the parties
respondent's failure to comply with the compromise
and hence, there is a valid contract that has been
agreement was the refusal of petitioners to execute a
partly executed. The contract of sale of real property
contract to sell as required under the agreement.
even if not complete in form, so long as the essential
Respondent judge added that petitioners should have
requisites of consent of the contracting parties,
executed the contract to sell because anyway they
object, and cause of the obligation concur and they
would not be prejudiced since there was no transfer
were clearly established to be present, is valid and
of ownership involved in a contract to sell.
effective as between the parties. Public document is
only needed to bind third persons. The payment Issue: Whether or not respondent judge committed
made by So is a clear proof of her intention to acquire grave abuse of discretion in ordering petitioner to
the property and the petitioners cannot claim about execute a contract to sell in favor of private
the respondent backing out. The sale to the respondent.
intervenors Lim cannot be recognized because when
Ruling: NO. The compromise agreement does not
they bought the property, there was already a notice
give the right to demand from petitioner the
of lis pendens and the sale cannot be said to be in
execution of a contract to sell.
good faith.
The Court said that parties had already
entered into a contract to sell. Thereafter, when the
Macion v. Guiani transaction failed to materialize, the parties filed
suits against each other; petitioners, their unlawful
detainer case, and private respondent a complaint for
reformation of contract, alleging that petitioners in
fact had caused the preparation of the contract to sell
dated April 26, 1991 with the understanding that the
land would be used as a collateral in obtaining a loan
with DBP.
The Court held that the compromise
agreement must be interpreted to give upon private
respondent-buyer the power to demand a contract to
sell from petitioner-sellers. Where the seller
promised to execute a deed of absolute sale upon
completing payment of the price, it is a contract to
sell. In the case at bar, the sale is still in the executory
stage since the passing of title is subject to a
suspensive condition, namely, that if private
respondent is able to secure the needed funds to be
used in the purchased of the two (2) lots owned by
petitioners. 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.
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, because 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 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.
Calimlim-Canullas v. Fortun
Facts:
Petitioner Mercedes Calimlim-Canullas was married
to Fernando Canullas and lived in a house built on
land owned by the latter’s father. When his father
died, Fernando inherited the land. Fernando
abandoned his family and lived with Daguines.
During the pendency of the appeal, they were
convicted of concubinage. He sold the property with
the house to Daguines. In the document of sale,
Fernando described the house as “also inherited from
my deceased parents”. Unable to take possession of
the house, Daguines filed a complaint for quieting of
title and damages against Mercedes. Mercedes
claimed that the house in dispute is where she and
her children are currently living, and that it was built
with conjugal funds. Furthermore, she claimed that
the sale of the land together with the house and
improvements to Daguines. The trial court initially
found in favor of Daguines but upon MR, declared the
petitioner the owner and the sale void.
Issue:
Whether or not the sale of the house and lot,
including the improvements is valid.
Ruling:
NO. The sale is null and void for being contrary to
morals and public policy. Contracts whose cause or
purpose is contrary to law, morals, good customs,
public order and public policy are void and inexistent
from the very beginning.
The law emphatically prohibits spouses from
selling property to each other subject to certain
exceptions. This is so because if transfers or
conveyances between spouses are allowed during
marriage, that would destroy the system of conjugal
partnership, a basic policy in civil law. It was also
designed to prevent the exercise of undue influence
by one spouse over the other, as well as to protect the
institution of marriage, which is the cornerstone of
family law. These prohibitions apply to a couple
living as husband and wife without the benefit of
marriage.
Phil. Trust Co. v. Roldan
Facts:
Mariano L. Bernardo, a minor, inherited 17 parcels of
land located in Bulacan from his late father, Marcelo
Bernardo. In view of his minority, guardianship
proceedings were instituted, where in Socorro
Roldan, Mariano’s stepmother and the surviving
spouse of Marcelo, was appointed. Socorro filed in
said guardianship proceedings a motion asking for
authority to sell as guardian the 17 parcels of land to
Dr. Fidel C. Ramos, her brother-in-law, for
P14,700.00. The said sum will be used to allegedly
invest the money in a residential house located in
Manila, which Mariano wanted. The same motion was
granted. On August 5, 1947, Socorro, as guardian,
executed the proper deed of sale in favor of Dr.
Ramos. On August 12, 1947, she obtained the judicial
confirmation of the sale. Just a day later, on August
13, Dr. Ramos personally executed, a deed of
conveyance covering the same 17 lands for P15,000
in favor of Socorro. Three out of the 17 parcels were
later sold by Socorro to Emilio Cruz for P3,000
reserving to herself the right to repurchase.
The Philippine Trust Company later replaced
Socorro as guardian of Mariano and sought to undo
the three contracts regarding the 17 parcels of lands
alleging that in effect, Socorro sold to herself the
properties of her ward which is contrary to Article
1459 of the Civil Code. The CFI denied the petition on
ground that 1459 is not controlling since there was
no proof that Dr. Ramos was a mere intermediary or
that the latter had an agreement with Socorro to buy
the lands for her benefit. The CA affirmed the
decision of the CFI.
Issue:
Whether or not the 3 contracts of sale are annullable
for violation of Art. 1459 of the Civil Code.
Ruling:
YES. It is as if Socorro, the guardian, purchased the
land for her own benefit. Even without proof that
Socorro had connived with Dr. Ramos, the Court has
no hesitation that Socorro took by purchase, her
ward’s parcels of land through Dr. Ramos and
therefore, 1459 applies. This may be deduced from
the very short time between the two sales which is
only one week. If we are technical, it would appear
that just after one day from the judicial confirmation
of the sale to Dr. Ramos, the sale from Dr. Ramos back
to Socorro already took place. The contention of
Socorro that the sale was beneficial for the minor will
not lie. Since the initial amount of sale to Dr. Ramos
has proven to be relatively smaller than what the
land could actually sell for. Socorro knew that the
land could be of more value but only sold it for
P14,700. Furthermore, the house where the money
was allegedly invested produced for Mariano only an
income of P1,200 pesos yearly. Hence, the Court
annuls the two contracts of sale for being a violation
of 1459 of the Civil Code. And the third control of sale
to Cruz, as Socorro could pass no title to him. The
Court declares that Mariano L. Bernardo be the
owner of the 17 parcels of land. Socorro is ordered to
return to Mariano the lands with legal interest and
fruits.
Chrysler Phil. Corp. v. Court of Appeals
Facts:
Petitioner filed with the CFI a Complaint for Damages
against Allied Brokerage Corporation, Negros
Navigation Company and Sambok, Bacolod. It alleged
that on October 2, 1970, Sambok, Bacolod, ordered
from petitioner various automotive products worth
P30,909.61, payable in 45 days; that on November
25, 1970, petitioner delivered said products to its
forwarding agent, Allied Brokerage Corporation, for
shipment; that Allied Brokerage loaded the goods on
board the M/S Doñ a Florentina, a vessel owned and
operated by Negros Navigation Company, for delivery
to Sambok, Bacolod; that when petitioner tried to
collect from the latter the amount of P31,037.56,
representing the price of the spare parts plus
handling charges, Sambok, Bacolod, refused to pay
claiming that it had not received the merchandise;
that petitioner also demanded the return of the
merchandise or their value from Allied Brokerage
and Negros Navigation, but both denied any liability.
Issue:
Whether or not the petitioner should be faulted for
its failure to deliver the ordered products to the
respondent.
Ruling:
YES. The order for spare parts was made by the
President of Sambok, Pepito Ng, through its
marketing consultant. Notwithstanding, upon receipt
of the Bill of Lading, Sambok, Bacolod, initiated, but
did not pursue, steps to take delivery as they were
advised by Negros Navigation that because some
parts were missing. They would just be informed as
soon as the missing parts were located. It was only
four years later, however, or in 1974, when a
warehouseman of Negros Navigation, Severino
Aguarte, found in their off-shore bodega, parts of the
shipment in question, but already deteriorated and
valueless. Under the circumstances, Sambok, Bacolod,
cannot be faulted for not accepting or refusing to
accept the shipment from Negros Navigation four
years after shipment. The evidence is clear that
Negros Navigation could not produce the
merchandise nor ascertain its whereabouts at the
time Sambok, Bacolod, was ready to take delivery.
Where the seller delivers to the buyer a quantity of
goods less than he contracted to sell, the buyer may
reject them.
From the evidentiary record, Negros
Navigation was the party negligent in failing to
deliver the complete shipment either to Sambok,
Bacolod, or to Sambok, Iloilo, but as the Trial Court
found, petitioner failed to comply with the conditions
precedent to the filing of a judicial action. Thus, in the
last analysis, it is petitioner that must shoulder the
resulting loss. The general rule that before, delivery,
the risk of loss is home by the seller who is still the
owner, under the principle of "res petit domino", is
applicable in petitioner's case.
Masiclat v. Centeno
Facts:
Defendant-respondent Centeno owned 15 sacks of
rice offered for sale at her store situated on a street
near public market. In the morning of Jan. 21,
1951, a person approached defendant and offered
her to purchase the rice in question. Defendant
agreed to sell 15 sacks of rice in question at
P26/sack, which the buyer promised to pay as soon
as he would receive the price of his adobe stones
which were being then unloaded from a truck
owned by Francisco Tan, then parked at the opposite
side of the street in front of the Union Grocery facing
the defendant’s store. Relying on this promise and
upon the request of said purchaser, the defendant
ordered the rice in question loaded in the said truck,
of which the plaintiff was the caretaker, expecting
that as soon as the adobe stones would be paid,
said purchaser would pay her the price of the rice.
While the rice was being loaded on the truck
and even thereafter, defendant kept an eye on it
waiting for the purchaser to come to pay her. When
the adobe stones were completely unloaded from the
truck, the defendant looked for the purchaser, but the
latter was not found. So defendant decided to unload
the rice from the truck but to her surprise plaintiff-
petitioner Masiclat objected on the ground that he
has bought it at P26/sack from a person whom he
did not know and whom he met only that morning
for the first time. Defendant insisted in unloading the
rice and the plaintiff objected. Hence, defendant
called a policeman to investigate the matter and the
latter brought the rice in question to the Municipal
building where it was deposited pending
investigation. Plaintiff then initiated this action for
recovery of possession of the rice in question.
Issues:
1) Whether or not the contract of sale was
consummated between respondent Centeno
and the unknown purchaser alleged by the
plaintiff.
2) Whether or not petitioners have a better title
to the rice.
Ruling:
1) Although a contract of sale is perfected upon
the parties having agreed as to the thing
which is the subject matter of the contract
and the price, ownership is not considered
transmitted until the property is actually
delivered and the purchaser has taken
possession and paid the price agreed upon.
The evidence does not clearly show the
identity of the person who tried to buy the
rice in question from the respondent, and
neither does it show that the same person
was the one who sold the commodity to
Ramon Masiclat.
The sale between the respondent Centeno
and the unknown purchaser was not
consummated because although the former
allowed the rice in question to be loaded in
the truck, she did not intend to transfer its
ownership until she was paid the stipulated
price; and this is very evident from the fact
that respondent continually watched her rice
and demanded its unloading as soon as the
unknown purchaser was missing. Respondent
thus has not lost ownership and legal
possession thereof.
2) The general principle of law as enunciated in
Art. 1505 that where one of 2 persons must
suffer the fraud of a third, the loss should fall
upon him who has enabled the third person
to do the wrong, does not apply for the
following. reasons:
 (1) There was no definite finding that the
unknown buyer was the same person
who sold the rice to Masiclat; and
(2) Centeno could not have been so negligent
as to allow the unknown purchaser to run
away with the rice and enable him to sell
it to Masiclat. Centeno even kept an eye
on the rice in question.
Sun Brothers Appliances v. Perez
Facts:
Sun Brothers brought an action to recover from
defendant the sum of P1,404.00, the price of one
Admiral Air Conditioner. Petitioner delivered to the
defendant by the plaintiff under a conditional sale
agreement the said air conditioner with a stipulated
interest of 12% until its full payment. Perez claimed
that the air-conditioner in question was delivered to
him installed in his office and that it was totally
destroyed by fire. He claimed that the air conditioner
was destroyed by force majeure and not by his fault
or negligence, and thus, he is not liable under the
conditional sale.
The CFI ordered Perez to pay plaintiff the
amount demanded with interest and attorney’s fees.
The conditional sale executed contained the
following provisions: “Title to said property shall vest
in the Buyer only upon full payment of the entire
account as herein provided, and only upon complete
performance of all the other conditions herein
specified” and that “Buyer shall keep said property in
good condition and properly protected against the
elements, at his/its address above-stated, and
undertakes that if said property or any part thereof
be lost, damaged, or destroyed for any causes, he
shall suffer such loss, or repair such damage, it being
distinctly understood and agreed that said property
remains at Buyer's risk after delivery.”
In his appeal, Perez argues that inasmuch as
the title to the property sold shall vest in the buyer
only upon full payment of the price, the loss of the
vendor; that the phrase "for any cause" used in
paragraph 2 of the agreement may not be interpreted
to include a fortuitous event absolutely beyond the
control of the appellant; and that although Article
1174 of the new Civil Code recognizes the exception
on fortuitous event when the parties to a contract
expressly so stipulate, the phrase "for any cause"
used in the contract did not indicate any intention of
the parties that the loss of the unit due to fortuitous
event is to be included within the responsibility of
the vendor.
He also argues that the stipulation in the
contract of sale whereby the buyer shall be liable for
any loss, damage or destruction for any cause, is not
contrary to law, morals or public policy and is
specifically authorized to be stipulated upon between
the parties by Article 1174 of the Civil Code; that the
risk of loss was expressly stipulated to be undertaken
by the buyer, even if the title to the property sold
remained, also by stipulation, in the vendor; that the
terms "any cause" used in the agreement includes a
fortuitous event, and an express stipulation making
the vendee responsible in such case is valid.
Issue:
Whether or not the agreement stipulating that the
buyer shall be responsible for any loss whatsoever,
fortuitous or otherwise, even if the title to the
property remains in the vendor, is neither contrary to
law, nor to morals or public policy.
Ruling:
NO. The SC has held such stipulation to be legal in the
case of Government vs. Amechazurra and declare it to
be based on a sound public policy in conditional sales
according to American decisions.
The rule is that where goods are sold and
delivered to the vendor under an agreement that the
title is to remain in the vendor until payment, the loss
or destruction of the property while in the possession
of the vendor before payment, without his fault, does
not relieve him from the obligation to pay the price,
and he, therefore, suffers the loss.
In accord with this rule are the provisions of
the Uniform Sales Act and the Uniform Conditional
Sales Act. There are several basis for this rule. First is
the absolute and unconditional nature of the vendee's
promise to pay for the goods. The promise is nowise
dependent upon the transfer of the absolute title.
Second is the fact that the vendor has fully performed
his contract and has nothing further to do except
receive payment, and the vendee received what he
bargained for when he obtained the right of
possession and use of the goods and the right to
acquire title upon making full payment of the price. A
third basis advanced for the rule is the policy of
providing an incentive to care properly for the goods,
they being exclusively under the control and
dominion of the vendee.
Cheng v. Genato
Facts:
Respondent Genato entered into a contract to sell
with the Da Jose spouses on September 6, 1989 over
his two parcels of land. The contract was in a public
instrument and was duly annotated at the back of the
two certificates of title on the same day. Upon
execution of the contract, 50k was paid as part of
downpayment to the vendor. The contract also
provides that the VENDEE, thirty (30) DAYS after the
execution of the contract, and only after having
satisfactorily verified and confirmed the truth and
authenticity of documents and that nothing is
detrimental to his interest, Vendee shall pay the
vendor 950k full payment of the agreed
downpayment. Thereafter, possession shall be
transferred to vendee. Da Jose spouses asked for an
extension of another 30 days or until November 5,
1989 to finish verifying the titles mentioned in clause
3. Pending the effectivity of the aforesaid extension
period, and without due notice to the Da Jose
spouses, Genato executed an Affidavit to Annul the
Contract to Sell, on October 13, 1989. Said affidavit
was not annotated at the back of his TCTs. Thereafter,
Cheng sought Genato to inquire about the property
and offered to buy the same. Cheng was made aware
of the annotations in the title about the contract to
sell with the Da Jose spouses together with the
Affidavit to annul the Contract to sell. Despite these,
Cheng went ahead and issued a check for P50,000.00
upon the assurance by Genato that the previous
contract with the Da Jose spouses will be annulled.
Genato issued a handwritten receipt therefor. On
October 26, 1989, Genato caused the registration of
the Affidavit to Annul the Contract to Sell in the
Registry of Deeds. However, the next day, having an
accidental encounter with the Da Jose spouses,
Genato was reminded that the additional 30-day
period given to the Da Jose spouses was still in effect,
and that they were willing and able to pay the
balance of the agreed down payment. He then
decided to continue the Contract he had with them.
Consequently, he returned the check given to him by
Cheng. Cheng instituted a complaint for specific
performance to compel Genato to execute a deed of
sale to him averring that 50k he gave served as an
earnest money and thus their contract was already
perfected. Genato alleged that the agreement was
only a simple receipt of an option-bid deposit subject
to the condition that the prior contract with the Da
Jose spouses be first cancelled. The Da Jose spouses,
in their Answer in Intervention, asserted that they
have a superior right to the property as first buyers.
They alleged that the unilateral cancellation of the
Contract to Sell was without effect and void and that
Cheng is in bad faith. The trial court ruled in favor of
Cheng stating that the receipt issued by Genato to
Cheng unerringly meant a sale. It also opined that
there was a valid rescission of the Contract to Sell
even if Genato unilaterally rescind the contract
applying Art 1191 and 1161 (particularly the XPN to
demand: time is of the essence) The CA reversed the
ruling of RTC. Hence this petition.
Issues:
1) Whether or not Da Jose spouses’ contract to sell
has been validly rescinded or resolved.
2) Whether or not the rule on double sales under
Art. 1544 is applicable in the case.
Ruling:
1) NO. In a Contract to Sell, the payment of the
purchase price is a positive suspensive condition,
the failure of which is not a breach but a situation
that prevents the obligation of the vendor to
convey title from acquiring an obligatory force. In
fact, with this circumstance, there can be no
rescission of an obligation that is still non-
existent, the suspensive condition not having
occurred as yet. Emphasis should be made that
the breach contemplated in Article 1191 of the
New Civil Code is the obligors failure to comply
with an obligation already extant, not a failure of
a condition to render binding that obligation.
Furthermore, no default can be ascribed to the Da
Jose spouses since the 30-day extension period
has not yet expired. Moreover, Genato is not
relieved from the giving of a notice, verbal or
written, to the Da Jose spouses for decision to
rescind their contract. The act of a party in
treating a contract as cancelled should be made
known to the other. For such an act is always
provisional. It is always subject to scrutiny and
review by the courts in case the alleged defaulter
brings the matter to the proper courts.
2) NO. Cheng was inconsistent with his claims. In his
complaint, Cheng alleged that the P50,000.00
down payment was earnest money. And next, his
testimony was offered to prove that the
transaction between him and Genato was actually
a perfected contract to sell. It was correctly held
by the lower courts that the receipt which was
the result of their agreement, is a contract to sell.
This patent twist only operates against Cheng's
posture which is indicative of the weakness of his
claim. Even assuming that the receipt is to be
treated as a conditional contract of sale, it did not
acquire any obligatory force since it was subject
to a suspensive condition that the earlier contract
to sell between Genato and the Da Jose spouses
should first be cancelled or rescinded a condition
never met. Also, the receipt alone would not even
show that a conditional contract of sale has been
entered by Genato and Cheng. When the
requisites of a valid contract of sale are lacking in
said receipt, therefore the sale is neither valid or
enforceable. Also, Article 1544 (rules on double
sales) can be applied tin the present case. In view
that the governing principle of Article 1544, Civil
Code is PRIMUS TEMPORE, PORTIOR JURE (first
in time, stronger in right). For not only was the
contract between herein respondents first in
time; it was also registered long before
petitioners intrusion as a second buyer. This
principle only applies when the special rules
provided in the aforecited article of Civil Code do
not apply or fit the specific circumstances
mandated under said law or by jurisprudence
interpreting the article. The rule exacted by
Article 1544 of the Civil Code for the second
buyer to be able to displace the first buyer are:
(1) that the second buyer must show that he
acted in good faith (i.e. in ignorance of the first
sale and of the first buyers rights) from the time
of acquisition until title is transferred to him by
registration or failing registration, by delivery of
possession; (2) the second buyer must show
continuing good faith and innocence or lack of
knowledge of the first sale until his contract
ripens into full ownership through prior
registration as provided by law. Thus, knowledge
gained by Cheng of the first transaction between
the Da Jose spouses and Genato defeats his rights
even if he is first to register the second
transaction, since such knowledge taints his prior
registration with bad faith.
Fudot v. Catleya Land
Facts:
In July 1992, respondent Cattleya Land, Inc. had
someone to check the titles of nine lots it intended to
buy from spouses Tecson. Finding no defect on the
titles, Cattleya Land purchased the lots from the
Tecsons through a Deed of Conditional Sale in
November 1992, and subsequently, a Deed of
Absolute Sale in October 1993. However, the Register
of Deeds refused annotating the sale because of an
existing notice of attachment in the lots. Nonetheless,
the attachment was eventually cancelled after
Cattleya Land persuaded the Tecsons to settle it. In
January 1995, Petitioner Fudot presented for
registration in the titles a deed of sale purportedly
executed by the Tecsons in her favor on December
1986. Cattleya Land immediately sent a letter of
protest to Fudot’s application. Having learned that
the Register of Deed registered the dead of sale of
petitioner and issued a new title in her name,
Cattleya Land filed a complaint with the Regional
Trial Court. In intervention, Asuncion Tecson claimed
that she never signed any deed of sale covering any
part of the conjugal property in favor of Fudot. The
Regional Trial Court ruled that the sale between the
Tecsons and Fudot was invalid because the deed of
sale was forged, based on the convincing and
unrebutted testimony of Asuncion. The Court of
Appeals dismissed the appeal holding that there was
no double sale as the Tecson-Fudot sale was null and
void.
Issue: Whether or not Fudot has a better right as the
first buyer of the subject property in accordance with
Art. 1455 of the Civil Code on double sale.
Ruling: NO. There is no double sale to speak of
because the sale between spouses Tecson and Fudot
is invalid as it bears the forged signature of Asuncion.
The Court held that Art. 1455 will not apply where
said deed is found to be a forgery, the result being
that the right of other vendee should prevail. Both the
trial court and the Court of Appeals upheld that the
sale between spouses Tecson and Fudot is invalid
based on the unrebutted testimony of Asuncion that
her signature was forged. The signature of Asuncion
was essential considering that at the time the sale
was made, Art. 166 of the Civil Code provides that a
husband cannot alienate or encumber any real
property of the conjugal relationship without the
wife’s consent. Even assuming that there was a
double sale, the knowledge gained by first buyer does
not defeat his right, except where the second buyer
registers the second sale in good faith. However, the
knowledge gained by the second buyer of the first
sale defeats his rights even if he is the first to register
the second sale as knowledge taints his prior
registration. In the present case, the Court held that
Cattleya Land is buyer in good faith having purchased
the lots without any notice of a previous sale other
than a notice of attachment, which it even persuaded
the Tecsons to settle the same in order to register the
property.
Coronel v. Court of Appeals
Facts: A complaint for specific performance filed by
private respondent Alcaraz against petitioners to
consummate the sale of a parcel of land in Quezon
City. On January 19, 1985, petitioners executed a
“Receipt of Down Payment” of P50,000 in favor of
plaintiff Ramona Alcaraz, binding themselves to
transfer the ownership of the land in their name from
their deceased father, afterwhich the balance of
P1,190,000 shall be paid in full by Alcaraz. On
February 6, 1985, the property was transferred to
petitioners. On February 18, 1985, petitioners sold
the property to Mabanag. For this reason,
Concepcion, Ramona’s mother, filed an action for
specific performance.
Issue: Whether or not the contract between the
petitioners and private respondent be deemed a
contract to sell?
Ruling: NO. The agreement could not have been a
contract to sell because the sellers herein made no
express reservation of ownership or title to the
subject parcel of land. Furthermore, the circumstance
which prevented the parties from entering into an
absolute contract of sale pertained to the sellers
themselves (the certificate of title was not in their
names) and not the full payment of the purchase
price. Under the established facts and circumstances
of the case, the Court may safely presume that, had
the certificate of title been in the names of
petitioners-sellers at that time, there would have
been no reason why an absolute contract of sale
could not have been executed and consummated
right there and then. What is clearly established by
the plain language of the subject document is that
when the said “Receipt of Down Payment” was
prepared and signed by petitioners Romeo A.
Coronel, et al., the parties had agreed to a conditional
contract of sale, consummation of which is subject
only to the successful transfer of the certificate of
title from the name of petitioners’ father, Constancio
P. Coronel, to their names. Sale, by its very nature, is a
consensual contract because it is perfected by mere
consent. In a contract to sell, the prospective seller
explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller
does not as yet agree or consent to transfer
ownership of the property subject of the contract to
sell until the happening of an event, which for
present purposes we shall take as the full payment of
the purchase price. What the seller agrees or obliges
himself to do is to fulfill his promise to sell the
subject property when the entire amount of the
purchase price is delivered to him. In other words the
full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller
without further remedies by the prospective buyer. A
contract to sell may thus be defined as 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 said property
exclusively to the prospective buyer upon fulfillment
of the condition agreed upon, that is, full payment of
the purchase price. 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 cases. 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 used for damages by the intending
buyer. In a conditional contract of sale, however,
upon the fulfillment of the suspensive condition, the
sale becomes absolute and this will definitely affect
the seller’s title. The provision on double sale
presumes title or ownership to pass to the first buyer,
the exceptions being: (a) when the second buyer, in
good faith, registers the sale ahead of the first buyer,
and (b) should there be no inscription by either of the
two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first
buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to
him to the prejudice of the first buyer. In a case of
double sale, what finds relevance and materiality is
not whether or not the second buyer was a buyer in
good faith but whether or not said second buyer
registers such second sale in good faith, that is,
without knowledge of any defect in the title of the
property sold. If a vendee in a double sale registers
that sale after he has acquired knowledge that there
was a previous sale of the same property to a third
party or that another person claims said property in
a previous sale, the registration will constitute a
registration in bad faith and will not confer upon him
any right.
Uruca v. Court of Appeals
Facts: The Velezes, private respondents herein, were
the owners of the lot and commercial building in
Cebu while the petitioners Emilia Uraca and others
were lessees of the said building. On July 8, 1985, The
Velezes through Carmen Ting wrote a letter to the
petitioners offering to sell the subject property for
P1,050,000 and at the same time requesting them to
reply in 3 days. Such sale was accepted by petitioners
through letter. On July 11, 1985, Uraca went to see
Ting about the offer to sell but she was told by the
latter that the price was P1,400,000 in cash or
managers check and not P1,050,000 as erroneously
stated in their letter-offer after some haggling. Uraca
agreed to the price of P1,400,000 but counter-
proposed that payment be paid in installments with a
down payment of P1,000,000 and the balance of
P400,000 to be paid in 30 days. Ting did not accept
the said counter offer of Emilia Uraca although this
fact is disputed by Uraca. However, no payment was
made by petitioners to the Velezes. The Velezes sold
the lot and commercial building to the Avenue Group
for P1,050,000 net of taxes, registration fees, and
expenses of the sale. At the time the Avenue Group
purchased the subject property on July 13, 1985 from
the Velezes, the certificate of title of the said property
was clean and free of any annotation of adverse
claims or lis pendens. On July 1, 1985, the petitioners
filed complaint against the Velezes. The next day,
petitioners registered a notice of lis pendens over the
property in question with the Office of the Register of
Deeds. On October 30, 1985, the Avenue Group filed
an ejectment case against petitioners ordering the
latter to vacate the commercial building standing on
the lot in question. RTC ruled in favor of the
petitioners ruling that the Velezes were not free to
sell the properties to the Avenue Group. However, the
CA reversed the ruling of RTC.
Issues:
1) Whether or not there was novation as regards to
the first sale.
2) Whether or not petitioners have better rights to
buy and own the Velezes’ property for registering
their notice of lis pendens ahead of the Avenue
Groups registration of their deeds of sale.
Ruling:
1) NO. The petitioners made a qualified acceptance
of this offer by proposing that the payment of this
higher sale price be made by installment, with
P1,000,000 as down payment and the balance of
P400,000 payable 30 days thereafter. Under
Article 1319 of the Civil Code, such qualified
acceptance constitutes a counter-offer and has
the ineludible effect of rejecting the Velezes' offer.
Indeed, petitioners' counter-offer was not
accepted by the Velezes. It is well-settled that "an
offer must be clear and definite, while an
acceptance must be unconditional and
unbounded, in order that their concurrence can
give rise to a perfected contract." In line with this
basic postulate of contract law, "a definite
agreement on the manner of payment of the price
is an essential element in the formation of a
binding and enforceable contract of sale." Since
the parties failed to enter into a new contract that
could have extinguished their previously
perfected contract of sale, there can be no
novation of the latter. Consequently, the first sale
of the property in controversy, by the Velezes to
petitioners for P1,050,000.00, remained valid and
existing.
2) YES. Article 1544 of the Civil Code provides the
statutory solution: “Should it be immovable
property, the ownership shall belong to the
person acquiring it who in good faith first
recorded it in the Registry of Property. Should
 there be no inscription, the ownership shall
pertain to the person who in good faith was first
in the possession; and, in the absence thereof, to
the person who presents the oldest title, provided
there is good faith.” Under the foregoing, the
prior registration of the disputed property by the
second buyer does not by itself confer ownership
or a better right over the property. Article 1544
requires that such registration must be coupled
with good faith. Knowledge gained by the first
buyer of the second sale cannot defeat the first
buyer's rights except where the second buyer
registers in good faith the second sale ahead of
the first. Such knowledge of the first buyer does
not bar her from availing of her rights under the
law, among them, to register first her purchase as
against the second buyer. But in converso,
knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register
the second sale, since such knowledge taints his
prior registration with bad faith. This is the price
exacted by Article 1544 for the second buyer
being able to displace the first buyer; that before
the second buyer can obtain priority over the
first, he must show that he acted in good faith
throughout (i.e, in ignorance of the first sale and
of the first buyer's rights) — from the time of
acquisition until the title is transferred to him by
registration or failing registration, by delivery of
possession." After a thorough scrutiny of the
records of the instant case, the Court finds that
bad faith tainted the Avenue Group's purchase on
July 13, 1985 of the Velezes' real property subject
of this case, and the subsequent registration
thereof on August 1, 1995. The Avenue Group had
actual knowledge of the Velezes' prior sale of the
same property to the petitioners, a fact
antithetical to good faith. For a second buyer like
the Avenue Group to successfully invoke the
second paragraph, Article 1544, it must possess
good faith from the time of the sale in its favor
until the registration of the same. This
requirement of good faith the Avenue Group
sorely failed to meet.
Naawan Community Rural Bank v. Court of
Appeals
Facts: In 1988, after inquiries from the Office of the
Register of Deeds of Cagayan de Oro City and the
Bureau of Lands on the legal status of the vendor's
title, spouses Alfredo and Annabelle Lumo purchased
a house and lot covered by TCT No. 41499 from
Guillermo Comayas. The deed of absolute sale was
registered and TCT No. T-50134 was issued in their
names. However, when they requested for the
issuance of a new tax declaration in their names, they
learned from the City Assessor's Office that the said
property was also declared for tax purposes in the
name of Naawan Community Rural Bank, Inc.
(petitioner). It appeared then that in 1983 Comayas
mortgaged the said property to petitioner and for
failure to pay the said loan, it was foreclosed and sold
at a public auction to the latter as a highest bidder.
And in 1986, after the redemption period had lapsed,
the deed of final conveyance was registered under
Act 3344 and recorded in the registration book of the
Register of Deeds of Cagayan de Oro City. By reason
thereof, spouses Lumo filed an action for quieting of
title. After trial, the Regional Trial Court rendered a
decision declaring spouses Lumo to be a purchaser
for value and in good faith. On appeal, CA affirmed
the trial court's decision. Hence, this petition. Both
parties cite Article 1544 of the Civil Code which
governs the double sale of immovable property.
Article 1544 provides: ". . . . Should it be immovable
property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the
Registry of Property."
Issues:
1) Whether or not registration of sheriff’s deed of
final conveyance in the proper registry of deeds is
more superior than the Torrens title.
2) Whether or not private respondents could be
considered as buyers in good faith.
Ruling:
1) NO. It has been held that, where a person claims
to have superior proprietary rights over another
on the ground that he derived his title from a
sheriff's sale registered in the Registry of
Property, Article 1473 (now Article 1544) of the
Civil Code will apply only if said execution sale of
real estate is registered under Act 496.
Unfortunately, the subject property was still
untitled when it was already acquired by
petitioner bank by virtue of a final deed of
conveyance. On the other hand, when private
respondents purchased the same property, it was
covered by the Torrens System. A close scrutiny
of the records reveals that, at the time of the
 execution and delivery of the sheriff's deed of
final conveyance, the disputed property was
already covered by the Land Registration Act and
OCT No. 0-820 pursuant to Decree No. N189413
was likewise already entered in the registration
book of the Register of Deeds of CDO City as of
April 17, 1984. Thus, from April 17, 1984, the
subject property was already under the operation
of the Torrens System. Under the said system,
registration is the operative act that gives validity
to the transfer or creates a lien upon the land.
Moreover, the issuance of a certificate of title had
the effect of relieving the land of all claims except
those noted thereon. Accordingly, private
respondents, in dealing with the subject
registered land, were not required by law to go
beyond the register to determine the legal
condition of the property. To have required them
to do more would have been to defeat the
primary object of the Torrens System which is to
make the Torrens Title indefeasible and valid
against the whole world.
2) YES. The "priority in time" principle being
invoked by petitioner bank is misplaced because
its registration referred to land not within the
Torrens System but under Act 3344. On the other
hand, when private respondents bought the
subject property, the same was already
registered under the Torrens System. It is a well-
known rule in this jurisdiction that persons
dealing with registered land have the legal right
to rely on the face of the Torrens Certificate of
Title and to dispense with the need to inquire
further, except when the party concerned has
actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make
such inquiry.
Radiowealth Finance Co. v. Palileo
Facts: Spouses Enrique Castro and Herminia R.
Castro sold to plaintiff-appellee Manuelito Palileo, a
parcel of unregistered coconut land in Surigao del
Norte. The sale is evidenced by a notarized Deed of
Absolute Sale which was not registered in the
Registry of Property for unregistered lands in the
province of Surigao del Norte. Since the execution of
the deed of sale, Manuelito Palileo, exercised acts of
ownership over the land through his mother Rafaela
Palileo, as administratrix or overseer. Palileo has
continuously paid the real estate taxes on said land
from 1971 until the present A judgment was
rendered against Enrique T. Castro by the then CFI of
Manila, to pay Radiowealth Finance Company with
interest at the rate of 16% per annum until fully paid.
Upon the finality of the judgment, a writ of execution
was issued. Pursuant to said writ, provincial Sheriff
Marietta E. Eviota, through Deputy Provincial Sheriff
Leopoldo Risma, levied upon and finally sold at
public auction the subject land that Enrique Castro
had sold to Manuelito Palileo. A certificate of sale was
executed by the Provincial Sheriff in favor of
Radiowealth Finance Company, being the only
bidder. After the period of redemption had expired, a
deed of final sale was also executed by the same
Provincial Sheriff. Both the certificate of sale and the
deed of final sale were registered with the Registry of
Deeds. Learning of what happened to the land, Palileo
filed an action for quieting of title over the same.
After a trial on the merits, the court a quo rendered a
decision in his favor. On appeal, the decision of the
trial court was affirmed. Hence, this petition for
review on certiorari.
Issues:
1) Whether or not the deed of absolute sale
allegedly executed by Castro in favor of Palileo
was simulated or fictitious.
2) Whether or not Radiowealth Finance Company is
the owner of the disputed property by reason of
the certificate of sale and deed of final sale which
were all registered in the register of deeds.
Ruling:
1) NO. It is not simulated or fictitious. The finding of
the Court of Appeals that the property in question
was already sold to Palileo by Sps. Castro before
the execution sale is evidenced by a deed of sale.
Said deed of sale is notarized and is presumed
authentic. There is no substantive proof to
support Radiowealth Finance Company's
allegation that the document is fictitious or
simulated. With this in mind, the Court sees no
reason to reject the conclusion of the Court of
Appeals that Palileo was not a mere
administrator of the property. That he exercised
acts of ownership through his mother also
remains undisputed.
2) NO. Under Act No. 3344, registration of
instruments affecting unregistered lands is
"without prejudice to a third party with a better
right". The aforequoted phrase has been held by
 the Court to mean that the mere registration of a
sale in one's favor does not give him any right
over the land if the vendor was not anymore the
owner of the land having previously sold the
same to somebody else even if the earlier sale
was unrecorded. The case of Carumba vs. Court of
Appeals is a case in point. It was held therein that
Article 1544 of the Civil Code has no application
to land not registered under Act No. 496. Like in
the case at bar, Carumba dealt with a double sale
of the same unregistered land. The first sale was
made by the original owners and was unrecorded
while the second was an execution sale that
resulted from a complaint for a sum of money
filed against the said original owners. Applying
Section 35, Rule 39 of the Revised Rules of Court,
the Court held that Article 1544 of the Civil Code
cannot be invoked to benefit the purchaser at the
execution sale though the latter was a buyer in
good faith and even if this second sale was
registered. It was explained that this is because
the purchaser of unregistered land at a sheriffs
execution sale only steps into the shoes of the
judgment debtor, and merely acquires the latter's
interest in the property sold as of the time the
property was levied upon. Applying this
principle, the Court of Appeals correctly held that
the execution sale of the unregistered land in
favor of Radiowealth Finance Company is of no
effect because the land no longer belonged to the
judgment debtor as of the time of the said
execution sale.
A. A. ADDISON vs. MARCIANA FELIX and BALBINO
TIOCO
G.R. No. L-12342 | August 3, 1918 | Fisher,J.
Facts: Addison sold 4 parcels of land to the
Defendants which has total value not exceeding
P85,000. As initial payment, P 3,000 was paid by the
defendants, remainder in installments, the first of
P2,000 on July 15, 1914, and the second of P5,000
thirty days after the issuance to her of a certificate of
title under the Land Registration Act, and further,
within ten years from the date of such title P10, for
each coconut tree in bearing and P5 for each such
tree not in bearing, that might be growing on said
four parcels of land on the date of the issuance of title
to her.
It was also agreed by the parties that within 1
year from the date of issuance certificate of title, the
plaintiff may rescind the contract.
Defendants were not able to fulfill their
promise to pay P2,000 on the first installment. Hence,
a suit was filed by Addison in the CFI. In defense,
defendants claimed that Addison was not able to
deliver said lands in the agreement. Evidence show
that plaintiff was only able to designate/survey 2 out
of the 4 parcels of land (2/3 of such was occupied by
Julio Villafuerte and his brother who claimed to be
the owners of said lots) to the defendants.
The trial court ruled in favor of the
defendants, holding that the contract of sale was
rescinded. Hence, the present appeal of the plaintiff.
Issue: Whether or not there was a valid delivery
made by the plaintiff.
Ruling: NO. The record shows that the plaintiff did
not deliver the thing sold. With respect to two of the
parcels of land, he was not even able to show them to
the purchaser; and as regards the other two, more
than two- thirds of their area was in the hostile and
adverse possession of a third person.
The Code imposes upon the vendor the
obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in the
hands and possession of the vendee." (Civ. Code, art.
1462.) It is true that the same article declares that the
execution of a public instruments is equivalent to the
delivery of the thing which is the object of the
contract, but, in order that this symbolic delivery may
produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing
sold that, at the moment of the sale, its material
delivery could have been made. It is not enough to
confer upon the purchaser the ownership and the
right of possession. The thing sold must be placed in
his control. When there is no impediment whatever
to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic
delivery through the execution of a public instrument
is sufficient. But if, notwithstanding the execution of
the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and
make use of it himself or through another in his
name, because such tenancy and enjoyment are
opposed by the interposition of another will, then
fiction yields to reality — the delivery has not been
effected.
Cruz v. Cabana
GR No. L-56232 | June 22, 1984 | TEEHANKEE, J.:
Facts: In June 1965, respondent Leodegaria Cabañ a
sold the subject property to respondent spouses
Teofilo Legaspi and Iluminada Cabañ a (spouses
Legaspi) under their contract entitled “Bilihang
Muling Mabibili” which stipulated that Cabañ a can
repurchase the land within one year from December
31, 1966. The said land was not repurchased,
however, so the spouses Legaspi took possession of
the said property. Later, Cabañ a requested that the
land title be lent to her in order to mortgage the
property to the Philippine National Bank (PNB), to
which the spouses Legaspi yielded. On October 21,
1968, Cabañ a formally sold the land to spouses
Legaspi by way of an absolute sale. The spouses
Legaspi then attempted to register the deed of sale,
but failed because they could not present the owner's
duplicate of title which was still in the possession of
the PNB as mortgage. Subsequently, they were able to
register the document of sale on May 13, 1969 under
Primary Entry No. 210113 of the Register of Deeds of
Quezon Province.
On November 29, 1968, Cabañ a sold the same
property to herein petitioner Abelardo Cruz (now
deceased), who, in turn, tried to register the deed of
sale on September 3, 1970. However, he was
informed that Cabañ a had already sold the property
to the spouses Legaspi, so he was only able to register
the land in his name on February 9, 1971. The CFI of
Quezon Province declared the spouses Legaspi as the
true and rightful owners of the subject property and
the land title that Cruz had acquired as null and void.
The Court of Appeals affirmed said decision, but
ordered Cabañ a reimburse to Cruz's heirs the
amounts of P2,352.50, which the late petitioner
Abelardo Cruz paid to PNB to discharge the mortgage
obligation of Cabañ a in favor of said bank, and the
amount of P3,397.50, representing the amount paid
by said Abelardo Cruz to her as consideration of the
sale with pacto de retro of the subject property.
Issue: Who is the rightful owner of the subject
property?
Ruling: The Supreme Court affirmed the decision of
the appellate court with modification ordering and
sentencing respondent Leodegaria Cabañ a to
reimburse and pay to petitioner's heirs the total sum
of P5,750.00.
There is no question that spouses Legaspi
were the first buyers, first on June 1, 1965 under a
sale with right of repurchase and later on October 21,
1968 under a deed of absolute sale and that they had
taken possession of the land sold to them; that
Abelardo Cruz was the second buyer under a deed of
sale dated November 29, 1968, which to ail
indications, contrary to the text, was a sale with right
of repurchase for ninety (90) days. There is no
question, either, that spouses Legaspi were the first
and the only ones to be in possession of the subject
property.
The knowledge of the first sale Abelardo Cruz
had gained defeats his rights even if he is first to
register the second sale, since such knowledge taints
his prior registration with bad faith. This is the price
exacted by Article 1544 of the Civil Code. Before the
second buyer can obtain priority over the first, he
must show that he acted in good faith throughout (i.e.
in ignorance of the first sale and of the first buyer's
rights) - from the time of acquisition until the title is
transferred to him by registration or failing
registration, by delivery of possession. The second
buyer must show continuing good faith and
innocence or lack of knowledge of the first sale until
his contract ripens into full ownership through prior
registration as provided by law."
RADIOWEALTH FINANCE COMPANY v.
MANUELITO S. PALILEO
G.R. No. 83432 | May 20, 1991 | GANCAYCO, J.
Facts: Spouses Enrique Castro and Herminia R.
Castro sold to plaintiff-appellee Manuelito Palileo, a
parcel of unregistered coconut land in Surigao del
Norte. The sale is evidenced by a notarized Deed of
Absolute Sale which was not registered in the
Registry of Property for unregistered lands in the
province of Surigao del Norte. Since the execution of
the deed of sale, Manuelito Palileo, exercised acts of
ownership over the land through his mother Rafaela
Palileo, as administratrix or overseer. Palileo has
continuously paid the real estate taxes on said land
from 1971 until the present.
 A judgment was rendered against Enrique T.
Castro by the then CFI of Manila, to pay Radiowealth
Finance Company with interest at the rate of 16% per
annum until fully paid. Upon the finality of the
judgment, a writ of execution was issued. Pursuant to
said writ, provincial Sheriff Marietta E. Eviota,
through Deputy Provincial Sheriff Leopoldo Risma,
levied upon and finally sold at public auction the
subject land that Enrique Castro had sold to
Manuelito Palileo. A certificate of sale was executed
by the Provincial Sheriff in favor of Radiowealth
Finance Company, being the only bidder. After the
period of redemption had expired, a deed of final sale
was also executed by the same Provincial Sheriff.
Both the certificate of sale and the deed of final sale
were registered with the Registry of Deeds.
Learning of what happened to the land,
Palileo filed an action for quieting of title over the
same. After a trial on the merits, the court a quo
rendered a decision in his favor. On appeal, the
decision of the trial court was affirmed. Hence, this
petition for review on certiorari.
Issues:
1) Whether or not the deed of absolute sale
allegedly executed by Castro in favor of
Palileo was simulated or fictitious; and
2) Whether or not Radiowealth Finance
Company is the owner of the disputed
property by reason of the certificate of sale
and deed of final sale which were all
registered in the register of deeds.
Ruling:
1) NO. It is not simulated or fictitious. The
finding of the Court of Appeals that the
property in question was already sold to
Palileo by Sps. Castro before the execution
sale is evidenced by a deed of sale. Said deed
of sale is notarized and is presumed
authentic. There is no substantive proof to
support Radiowealth Finance Company's
allegation that the document is fictitious or
simulated. With this in mind, the Court sees
no reason to reject the conclusion of the
Court of Appeals that Palileo was not a mere
administrator of the property. That he
exercised acts of ownership through his
mother also remains undisputed.
2) NO. Under Act No. 3344, registration of
instruments affecting unregistered lands is
"without prejudice to a third party with a
better right". The aforequoted phrase has
been held by the Court to mean that the mere
registration of a sale in one's favor does not
give him any right over the land if the vendor
was not anymore the owner of the land
having previously sold the same to somebody
else even if the earlier sale was unrecorded.
The case of Carumba vs. Court of Appeals is a
case in point. It was held therein that Article
1544 of the Civil Code has no application to
land not registered under Act No. 496. Like in
the case at bar, Carumba dealt with a double
sale of the same unregistered land. The first
sale was made by the original owners and
was unrecorded while the second was an
execution sale that resulted from a complaint
for a sum of money filed against the said
original owners. Applying Section 35, Rule 39
of the Revised Rules of Court, the Court held
that Article 1544 of the Civil Code cannot be
invoked to benefit the purchaser at the
execution sale though the latter was a buyer
in good faith and even if this second sale was
registered. It was explained that this is
because the purchaser of unregistered land at
a sheriffs execution sale only steps into the
shoes of the judgment debtor, and merely
acquires the latter's interest in the property
sold as of the time the property was levied
upon.
Applying this principle, the Court of Appeals
correctly held that the execution sale of the
unregistered land in favor of Radiowealth
Finance Company is of no effect because the
land no longer belonged to the judgment
debtor as of the time of the said execution
sale.