Ursal v. CA (G.R. No.

142411)

Facts:

Spouses Moneset are registered owners of a parcel of land and they executed on it a
Contract to Sell in favor of petitioner Ursal. Petitioner paid the monthly installments but
stopped due to the spouses’ failure to deliver the TCT. The land was subject of an absolute
deed of sale in favor of Dr. Canora, Jr. and was sold again with pacto de retro. The land was
mortgaged with respondent Rural Bank of Larena and corresponding annotations to the title
were made. For failure of the spouses to pay the loan, the bank served a notice of extra-
judicial foreclosure. Petitioner moved for the declaration of the non-effectivity of the
mortgage and the payment of damages alleging that there was fraud/bad faith in the part of
the spouses and with the bank for granting the REM in spite knowing that the property was
in possession of petitioner. RTC ruled in favor of petitioner but maintained that the property
be foreclosed. CA affirmed in toto.

Issue:

Whether or not respondent bank acted in bad faith by failing to look beyond the TCT of the
property before a loan may be extended upon it.

Ruling: YES.

We agree. Banks cannot merely rely on certificates of title in ascertaining the status of
mortgaged properties; as their business is impressed with public interest, they are expected
to exercise more care and prudence in their dealings than private individuals. Indeed, the
rule that persons dealing with registered lands can rely solely on the certificate of title does
not apply to banks.

As enunciated in Cruz vs. Bancom:

Respondent… is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private

individuals, it is expected to exercise greater care and prudence in its dealings, including
those involving registered lands. A banking institution is expected to exercise due diligence
before entering into a mortgage contract. The ascertainment of the status or condition of a
property offered to it as security for a loan must be a standard and indispensable part of its
operations.

*The ruling in the case however is still unfavorable to petitioner. The court held:

“Our agreement with petitioner on this point of law, notwithstanding, we are constrained to
refrain from granting the prayers of her petition. The reason is that, the contract between
petitioner and the Monesets being one of “Contract to Sell Lot and House,” petitioner, under
the circumstances, never acquired ownership over the property and her rights were limited
to demand for specific performance from the Monesets, which at this juncture however is no
longer feasible as the property had already been sold to other persons.”
Ace Foods vs. Micro Pacific, G.R. No. 200602, December 11, 2

DOCTRINES:

• A contract of sale is classified as a consensual contract, which means that the sale is perfected by
mere consent. No particular form is required for its validity. Upon perfection of the contract, the
parties may reciprocally demand performance, i.e., the vendee may compel transfer of ownership of
the object of the sale, and the vendor may require the vendee to pay the thing sold.

• The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or
promised.

• The real nature of a contract may be determined from the express terms of the written agreement
and from the contemporaneous and subsequent acts of the contracting parties.—A contract is what
the law defines it to be, taking into consideration its essential elements, and not what the contracting
parties call it.

• In the construction or interpretation of an instrument, the intention of the parties is primordial and
is to be pursued.

• In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the prospective buyer,
binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, i.e., the full payment of the purchase price. A contract to sell may not even be
considered as a conditional contract of sale where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of
sale, the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur.

FACTS:

MTCL sent to ACE Foods a letter-proposal for the delivery and sale of Cisco Routers and Frame Relay
products. ACE Foods accepted MTCL’s proposal and accordingly issued Purchase Order for the subject
products amounting to P646,464.00.

Thereafter, MTCL delivered the said products to ACE Foods. The invoice states that "title to sold
property is reserved in MICROPACIFIC TECHNOLOGIES CO., LTD. until full compliance of the terms and
conditions of above and payment of the price".

After the delivery and installation of the products, ACE Foods lodged a Complaint against MTCL before
the RTC, praying that the latter pull out the products since MTCL breached its "after delivery services"
obligations to it.

MTCL, in its Answer, denied the allegations of ACE Foods and prayed that ACE Foods be compelled to
pay the purchase price, as well as damages related to the transaction. RTC observed that the
agreement between ACE Foods and MTCL is in the nature of a contract to sell. CA reversed and set
aside the RTC’s ruling, and found that the agreement between the parties is in the nature of a contract
of sale.
ISSUE: Whether or not the there was a contract of sale between MTCL and ACE Foods.

HELD:

The parties have agreed to a contract of sale and not to a contract to sell. Bearing in mind its
consensual nature, a contract of sale had been perfected at the precise moment ACE Foods, as
evinced by its act of sending MTCL the Purchase Order, accepted the latter’s proposal to sell the
subject products in consideration of the purchase price of P646,464.00. From that point in time, the
reciprocal obligations of the parties already arose and consequently may be demanded.

Facts:Dolores Ventura entered into a contract to sell with spouses Endaya for the purchase of two
parcels of landowned by the latter. The contract stipulated that Dolores would initially pay a down
payment of ₱103,284 upon the execution of the contract and pay the balance of ₱244,476.00within an
15-year period with 12% interest p.a. on the outstanding balance, plus a 12% interest p.a. on
the arrears, and also the obligation to pay the real property taxes over the subject
properties.Dolores was placed in possession of the subject properties and allowed to erect a
building thereon. However, before the payment period expired, Dolores passed
away.Dolores' children filed to the RTC a complaint for specific performance, seeking to
compel Sps. Endaya to execute a deed of sale over the subject properties. The petitioners
claim that the total payments made by Doloresand petitioners amounted to ₱952,152.00, which is
more than the agreed purchase price of ₱347,760.00, including the 12%interest p.a. thereon
computed on the outstanding balance.Sps. Endaya aver that prior to the death of Dolores, several
restructuring of the contract were agreed upon by the parties fixing the obligation to
P3,000,000.The RTC ruled in favor of the petitioners stating that the full payment of the purchase

price of the property was proven, but this was reversed by the CA which found that the petitioners
were not able to fully comply with their obligations

CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST

COMPANY, petitioners,
vs.
SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS, respondents.

Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC)
are banking institutions duly organized and existing under Philippine laws. On or about June
15, 1983, a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from
CDB, to secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La
Loma, Quezon City and covered by TCT No. 300809 registered in his name. As Guansing
defaulted in the payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale
held on March 15, 1984, the mortgaged property was sold to CDB as the highest bidder.
Guansing failed to redeem, and on March 2, 1987, CDB consolidated title to the property in
its name. TCT No. 300809 in the name of Guansing was cancelled and, in lieu thereof, TCT
No. 355588 was issued in the name of CDB.1âwphi1.nêt
Petitioners deny that a contract of sale was ever perfected between them and private
respondent Lolita Chan Lim. They contend that Lim's letter-offer clearly states that the sum
of P30,000,00 was given as option money, not as earnest money. 5 They thus conclude that
the contract between CDB and Lim was merely an option contract, not a contract of sale.

The contention has no merit. Contracts are not defined by the parries thereto but by
principles of law.6 In determining the nature of a contract, the courts are not bound by the
name or title given to it by the contracting parties.7 In the case at bar, the sum of
P30,000.00, although denominated in the offer to purchase as "option money," is actually in
the nature of earnest money or down payment when considered with the other terms of the
offer. In Carceler v. Court of Appeals,8 we explained the nature of an option contract, viz. —

An option contract is a preparatory contract in which one party grants to the other,
for a fixed period and under specified conditions, the power to decide, whether or not
to enter into a principal contract, it binds the party who has given the option not to
enter into the principal contract with any other person during the period; designated,
and within that period, to enter into such contract with the one to whom the option
was granted, if the latter should decide to use the option. It is a separate agreement
distinct from the contract to which the parties may enter upon the consummation of
the option.

An option contract is therefore a contract separate from and preparatory to a contract of

sale which, if perfected, does not result in the perfection or consummation of the sale. Only
when the option is exercised may a sale be perfected.

The sale by CDB to Lim being void, the question now arises as to who, if any, among the
parties was at fault for the nullity of the contract. Both the trial court and the appellate
court found petitioners guilty of fraud, because on June 16, 1988, when Lim was asked by
CDB to pay the 10% option money, CDB already knew that it was no longer the owner of
the said property, its title having been cancelled.22 Petitioners contend that: (1) such finding
of the appellate court is founded entirely on speculation and conjecture; (2) neither CDB nor
FEBTC was a party in the case where the mortgagor's title was cancelled; (3) CDB is not
privy to any problem among the Guansings; and (4) the final decision cancelling the
mortgagor's title was not annotated in the latter's title.

As a rule, only questions of law may be raised in a petition for review, except in
circumstances where questions of fact may be properly raised.23 Here, while petitioners
raise these factual issues, they have not sufficiently shown that the instant case falls under
any of the exceptions to the above rule. We are thus bound by the findings of fact of the
appellate court. In any case, we are convinced of petitioners' negligence in approving the
mortgage application of Rodolfo Guansing.

HEIRS OF SEVERINA SAN MIGUEL, namely: MAGNO LAPINA, PACENCIA LAPINA,

MARCELO LAPINA, SEVERINO LAPINA, ROSARIO LAPINA, FRANCISCO LAPINA,
CELIA LAPINA assisted by husband RODOLFO TOLEDO, Petitioners, v. THE
HONORABLE COURT OF APPEALS, DOMINADOR SAN MIGUEL,

Article 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided they are not contrary to law, morals,
good customs, public order or public policy (underscoring ours).
It is basic that the law is deemed written into every contract. 34 Although a contract is the
law between the parties, the provisions of positive law which regulate contracts are deemed
written therein and shall limit and govern the relations between the parties. 35 The Civil
Code provisions on sales state:

Article 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay a price
certain in money or its equivalent. xxx

Article 1459. The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered.

Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of sale (underscoring ours).

True, in contracts of sale, the vendor need not possess title to the thing sold at the
perfection of the contract. 36 However, the vendor must possess title and must be able to
transfer title at the time of delivery. In a contract of sale, title only passes to the vendee
upon full payment of the stipulated consideration, or upon delivery of the thing sold.

Therefore, to insist that Dominador, et al. pay the price under such circumstances would
result in Severinas heirs unjust enrichment. 

Article 1405. The following contracts are inexistent and void from the beginning: xxx

(5) Those which contemplate an impossible service.

PNB vs. Court of Appeals, G.R. No. 118357, May 6, 1997

While the MOA was expressly a contract for the assignment of rights and interests, it is in
fact a contract of sale. Under Art. 1458 of the Civil Code, by the contract of sale, 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.
Yes. Following provisions of Act No. 3135,"sale cannot be made legally outside the
province in which the property sold is situated", the Giporlos Project is situated
in Eastern Samar, a province separate anddistinct from Samar where the
foreclosure sale
took place. Hence, the foreclosure sale is nul land void. Ordinarily, by the nullification
of the foreclosure sale, the properties involved would revert to their original status
of being mortgaged. However, the situation in this case is an exception to that rule.
The MOA,the source of MMIC's right of ownership over the properties sold at the
foreclosursale, has been rescinded. Consequently petitioner should exclude said
properties from the MMIC's properties which were mortgaged pari passuto the
petitioner and DBP through the MTA. However, since the foreclosed properties had
been turned over
to the Asset Privatization Trust, petitioner must reimburse private respondent the
value thereof at the time of the foreclosure sale.

Heirs of Juan San Andres vs. Vicente Rodriguez, G.R. No. 135634, May 31, 2000

The petition has no merit.

First. Art. 1458 of the Civil Code provides:

By the contract of sale 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.

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for
the price;

b) Determinate subject matter; and,

c) Price certain in money or its equivalent. 12

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received
P500.00 from respondent as "advance payment for the residential lot adjoining his
previously paid lot on three sides excepting on the frontage; the agreed purchase price was
P15.00 per square meter; and the full amount of the purchase price was to be based on the
results of a survey and would be due and payable in five (5) years from the execution of a
deed of sale.

Petitioner contends, however, that the "property subject of the sale was not described with
sufficient certainty such that there is a necessity of another agreement between the parties
to finally ascertain the identity; size and purchase price of the property which is the object
of the alleged sale." 1 He argues that the "quantity of the object is not determinate as in
fact a survey is needed to determine its exact size and the full purchase price therefor" 14
In support of his contention, petitioner cites the following provisions of the Civil Code:

Art. 1349. The object of every contract must be determinate as to its kind. The fact that the
quantity is not determinable shall not be an obstacle to the existence of a contract, provided
it is possible to determine the same without the need of a new contract between the parties.

Art. 1460. . . . The requisite that a thing be determinate is satisfied if at the time the
contract is entered into, the thing is capable of being made determinate without the
necessity of a new and further agreement between the parties.
Petitioner's contention is without merit. There is no dispute that respondent purchased a
portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the
middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what
was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to
respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot
is capable of being determined without the need of any new contract. The fact that the
exact area of these adjoining residential lots is subject to the result of a survey does not
detract from the fact that they are determinate or determinable. As the Court of Appeals
explained: 15

Appellee's Exhibit "A" (page 4, Records) affirmingly shows that the original 345 sq. m.
portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the remaining portion
of the said Lot 1914-B-2 on three (3) sides, in the east, in the west and in the north. The
northern boundary is a 12 meter road. Conclusively, therefore, this is the only remaining
509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially purchased by
Rodriguez. It is quite difined, determinate and certain. Withal, this is the same portion
adjunctively occupied and possessed by Rodriguez since September 29, 1964, unperturbed
by anyone for over twenty (20) years until appellee instituted this suit.

Thus, all of the essential elements of a contract of sale are present, i.e., that there was a
meeting of the minds between the parties, by virtue of which the late Juan San Andres
undertook to transfer ownership of and to deliver a determinate thing for a price certain in
money. As Art. 1475 of the Civil Code provides:

The contract of sale 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. . . .

Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.

The stipulation that the "payment of the full consideration based on a survey shall be due
and payable in five (5) years from the execution of a formal deed of sale" is not a condition
which affects the efficacy of the contract of sale. It merely provides the manner by which
the full consideration is to be computed and the time within which the same is to be paid.
But it does not affect in any manner the effectivity of the contract. Consequently, the
contention that the absence of a formal deed of sale stipulated in the receipt prevents the
happening of a sale has no merit.

Naranja vs. Court of Appeals, G.R. No. 160132, April 17, 2009
On September 13, 2002, the CA reversed the RTC Decision. The CA held that the unregisterability
of a deed of sale will not undermine its validity and efficacy in transferring ownership of the
properties to private respondent. The CA noted that the records were devoid of any proof evidencing
the alleged vitiation of Roque’s consent to the sale; hence, there is no reason to invalidate the sale.
Registration is only necessary to bind third parties, which petitioners, being the heirs of Roque
Naranja, are not. The trial court erred in applying Article 1544 of the Civil Code to the case at bar
since petitioners are not purchasers of the said properties. Hence, it is not significant that private
respondent failed to register the deed of sale before the extrajudicial settlement among the heirs.
The dispositive portion of the CA Decision reads:
The Court does not agree with petitioners’ contention that a deed of sale must contain a technical
description of the subject property in order to be valid. Petitioners anchor their theory on Section 127
of Act No. 496,21 which provides a sample form of a deed of sale that includes, in particular, a
technical description of the subject property.

To be valid, a contract of sale need not contain a technical description of the subject property.
Contracts of sale of real property have no prescribed form for their validity; they follow the general
rule on contracts that they may be entered into in whatever form, provided all the essential requisites
for their validity are present.22 The requisites 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.

Samson vs. Court of Appeals, G.R. No. 108245, November 25, 1994

The subject matter of this case is a commercial unit at the Madrigal Building, located at
Claro M. Recto Avenue, Sta. Cruz, Manila. The building is owned by Susana Realty
Corporation and the subject premises was leased to private respondent Angel Santos.
The lessee’s haberdashery store, Santos & Sons, Inc., occupied the premises for almost
twenty (20) years on a yearly basis. 2 Thus, the lease contract in force between the
parties in the year 1983 provided that the term of the lease shall be one (1) year,
starting on August 1, 1983 until July 31, 1984. 3

On June 28, 1984, the lessor Susana Realty Corporation, through its representative Mr.
Jes Gal R. Sarmiento, Jr., informed respondents that the lease contract which was to
expire on July 31, 1984 would not be renewed

All went well for a few months. In July 1985, however, petitioner received a notice from
Susana Realty, addressed to Santos & Sons, Inc., directing the latter to vacate the
leased premises on or before July 15, 1985. 11 Private respondent failed to renew his
lease over the premises and petitioner was forced to vacate the same on July 16,
1985. chanrobles law library : red

Petitioner then filed an action for damages against private Respondent. He imputed

fraud and bad faith against private respondent when the latter stated in his letter-
proposal that his lease contract with Susana Realty has been impliedly renewed.
Petitioner claimed that this misrepresentation induced him to purchase the store of
Santos & Sons and the leasehold right of private Respondent.

When appellant Angel C. Santos said that the lease contract had expired but that it was
impliedly renewed, that representation should have put appellee on guard. To protect
his interest, appellee should have checked with the lessor whether that was so, and this
he failed to do; or he would have simply deferred his decision on the proposed sale until
Miss Madrigal’s arrival, and this appellee also failed to do. 
Javier vs. Court of Appeals, G.R. No. 48194, March 15, 1990
Leonardo Tiro, owner of an ordinary timber license issued by the Bureau of Forestry in the town
of Medina, Misamis Oriental, entered into a Deed of Assignment to assign, transfer and convey
his shares of stocks in the TIMBERWEALTH CORPORATION with Jose and Estrella Javier in
the total amount of P120,000 in which P20, 000.00 shall be paid upon signing of the contract
and the balance of P100, 000.00 shall be paid in P10, 000.00 every shipment of export logs actually
produced from the forest concession.
At the time the said deed of assignment was executed, private respondent had a pending application
for an additional forest concession southwest of and adjoining the area of the concession subject of
the deed of assignment. Hence, on February 28, 1966, private respondent and petitioners
entered into another "Agreement" which stipulates that in the event of the approval of the
additional concession, the former’s rights shall be transferred to the latter in
consideration for the sum of P30, 000.00. On November 18, 1966, the private respondent’s
forest concession was renewed up to May 12, 1967, but since the concession consisted of only 2,535
hectares, he was therein informed that he is given until May 12, 1967 to form an
organization such as a cooperative, partnership or corporation with other adjoining licensees so as
to have a total holding area of 20,000.00 On April 10, 1967, the petitioners, now acting as timber
license holders by virtue of the deed of assignment, entered into a Forest Consolidation
Agreement with other ordinary timber license holders. On July 16, 1968, for failure of petitioners to
pay the balance due under the two deeds of assignment, private respondent filed an action
against petitioners. The petitioners contend that private respondent failed his contractual
obligations and the conditions for the enforceability of the obligations did not materialize.
Private respondent then replied that the deed of assignment did not only transfer his shares
of stocks but his rights and interest in the logging concession. The trial court rendered judgment
for the petitioners, however the Court of Appeals reversed the decision.
Hence, this petition.

Issue:Whether the deed of assignment dated February 15, 1966 and the agreement of
February 28, 1966 are null and void, the former for total absence of consideration and the
latter for non-fulfillment of the conditions stated therein.

Held:No. Petitioners contend that since said corporation never came into existence, no
share of stocks was ever transferred to them, hence the said deed is null and void for lack of cause
or consideration. The SC does not agree. As found by the Court of Appeals, the true cause or
consideration of said deed was the transfer of the forest concession of private respondent
to petitioners for P120,000.00.The deed of assignment of February 15, 1966 is a relatively
simulated contract which states a false cause or consideration, or one where the parties
conceal their true agreement.A contract with a false consideration is not null and voidper se.
Under Article 1346 of the Civil Code, a relatively simulated contract, when it doesnot
prejudice a third person and is not intended for any purpose contrary to law, morals, good
customs, public order or public policy binds the parties to their real agreement.As to the
alleged nullity of the agreement dated February 28, 1966, we agree with petitioners that
they cannot be held liable thereon. The efficacy of said deed of assignment is subject to
the condition that the application of private respondent for an additional area for forest
concession be approved by the Bureau of Forestry. Since private respondent did not obtain
that approval, said deed produces no effect. The said agreement is a bilateral contract which
gave rise to reciprocal obligations, that is, the obligation of private respondent to transfer his
rights in the forest concession over the additional area and, on the other hand, the obligation of
petitioners to pay P30,000.00. The demandability of the obligation of one party depends
upon the fulfillment of the obligation of the other. In this case, the failure of private respondent
to comply with his obligation negates his right to demand performance from petitioners.
Vda. De Rigonan vs. Derecho, G.R. No. 159571, July 15, 2005
A parcel of land was owned by the late Hilarion Derecho which was subsequently owned by
his eight children by intestate succession. Five of the co-owners sold the inherited property to
Francisco Lacambra, subject to a five-year redemption clause. Three of the Derecho heirs were
not parties to the pacto de retro sale.Two years after the expiration of the redemption period,
Dolores --together with her husband, Leandro Rigonan --purchased the land from Lacambra and
immediately occupied it.More that five decades passed without controversy, Leandro Rigonan
executed the assailed Affidavit of Adjudication in favor of his son, Teodoro Rigonan. Under the
said instrument, Leandro declared himself to be the soleheir of Hilarion. Teodoro obtained a Tax
Declaration of the property.During the same year, Teodoro mortgaged the subject property to
the Rural Bank of Compostela of Cebu. Fearing foreclosure, he settled his obligations with the
bank by securing the aid of Sps. Laude. Subsequently, Teodoro executed the assailed Deed of
Absolute Sale of Unregistered Land in favor of Valerio Laude. Respondents brought anaction to
recover the property and to annul the Deed of Sale in favor of Laude and the Affidavit of
Adjudication, whose validity and authenticity they assailed on the ground of fraud. They likewise
maintained that the subject property had not been partitioned among the heirs; thus, it was still
co-owned at the time it was conveyed to Petitioner Laude.Petitioners argued that the document
had no bearing on their claim of ownership. They theorized that the co-ownership over the
property ended when the period of redemption lapsed without any action on the party of
the co-owners. Therefore, the Rigonan spouses bought the property as legitimate vendees for
value and in good faith, no in the capacity of redeeming co-owners.Petitioners likewise
argues that their predecessors has continuously owned and possessed the subject property
or 72 years. Accordingly acquisitive prescription had allegedly set in, in their favor, when the
case was filed.CA held that the Affidavit of Adjudication and the Deed of Absolute Sale were
both void. The Affidavit was deemed fraudulent because of the undisputed factual finding that
some of the heirs of Hilarion were still alive at the time of its execution. The Deed of Sale was
held void becausethe vendor, Teodoro, had no legal right to dispose of the entire co-owned
property.AstheContracts werevoid,thedefense ofprescription wasinapplicable.Article1410ofthe Civil
Code states that actions for the declaration of the inexistence of a contract do not prescribe.

Issue:1.Whether at the time of the purchase in 1928, co-ownership still subsisted among the
heirs of Hilarion Derecho.2.Whether the subject property can be recovered.

Held:1. No. Following the Court's ruling in Adiarte and Umale that after the expiration of
the period for redemption, the parties could either (1) enter into an entirely new contract
involving the same property, or (2) if there is no express period stipulated, the period of
redemption may be extended, provided the extension did not exceed the maximum period of
10 years allowed by the Spanish Civil Code.In the present case, Lacambra and the heirs
stipulated a five-year redemption period. When it lapsed, the vendee acquired absolute
title, while the five co-owners-sellers were stripped of their co-ownership of the
property.Therefore, when Dolores repurchased the property in 1928, she did so in her personal
capacity, no longer as a co-owner-seller. Following the ruling inAdiarte, she is
deemed to have entered into an entirely new contract, independent of the 1921pacto de
retrosale.2. No. There is no question that the said action does not prescribe, but the principal
question in this case is the recovery of the subject property, which is the ultimate goal of
respondents. They seek the nullification of the Contracts, merely as a means orprelude to the recovery
of the property. Unfortunately for them, acquisitive prescription has already set in to bar the
recovery.The imprescriptibility of an action to annul a contract does not mean that the present
respondents are perpetually allowed to recover the property, the subject of the void contract.
They may file the action to annul, but their right to recover based on ownership is contingent on
the premise that theystillownthe property.In the present case, we hold that respondents can no
longer recover the property despite the nullity of the assailed contracts, because they have lost
their ownership by reason of prescription.
Bravo-Guerrero vs. Bravo, G.R. No. 152658, July 29, 2005
Facts: Spouses Mauricio Bravo ("Mauricio") and Simona5 Andaya Bravo ("Simona") owned two parcels of land
("Properties"). They had three children - Roland, Cesar and Lily, all surnamed Bravo. Cesar died without issue. Lily
Bravo married David Diaz, and had a son, David B. Diaz, Jr. ("David Jr."). Roland had six children, namely, Lily
Elizabeth Bravo-Guerrero ("Elizabeth"), Edward Bravo ("Edward"), Roland Bravo, Jr. ("Roland Jr."), Senia Bravo,
Benjamin Mauricio Bravo, and their half-sister, Ofelia Bravo ("Ofelia").

Simona executed a General Power of Attorney ("GPA") on 17 June 1966 appointing Mauricio as her attorney-in-
fact. In the GPA, Simona authorized Mauricio to "mortgage or otherwise hypothecate, sell, assign and dispose of
any and all of my property, real, personal or mixed, of any kind whatsoever and wheresoever situated, or any
interest therein

Mauricio subsequently mortgaged the Properties to the Philippine National Bank (PNB) and Development Bank of
the Philippines (DBP) for ₱10,000 and ₱5,000, respectively.

Also, Mauricio executed a Deed of Sale with Assumption of Real Estate Mortgage ("Deed of Sale") conveying the
Properties to "Roland A. Bravo, Ofelia A. Bravo and Elizabeth Bravo"8 ("vendees"). The sale was conditioned on the
payment of ₱1,000 and on the assumption by the vendees of the PNB and DBP mortgages over the Properties.

Edward thru his wife and David Jr. assails the validity of the of the Deed of Sale and praying for the partition of the
Properties among the surviving heirs of Mauricio and Simona. DAVID Jr. Died.

RTC – favored P and upheld the validity of Sale

CA – REVERESED RTC - GPA executed by Simona in 1966 was not sufficient to authorize Mauricio to sell the
Properties because Article 1878 of the Civil Code ("Article 1878") requires a special power of attorney for such
transactions. The appellate court reasoned that the GPA was executed merely to enable Mauricio to mortgage the
Properties, not to sell them. Thus declaring the Sale NULL & VOID.

Issue: WHETHER THE COURT OF APPEALS ERRED IN NOT UPHOLDING THE VALIDITY AND
ENFORCEMENT OF THE DEED OF SALE WITH ASSUMPTION OF MORTGAGE.

Ruling: As to consent, alienating a conjugal property without the consent of the wife is merely
voidable. With regards to consent Art 166 and 173 must be construed in together. There is no stipulation of such
between the spouses and Even under the present Civil Code, however, the Deed of Sale is not void. Simona,
however, did not assail the Deed of Sale during her marriage or even after Mauricio’s death. The records are bereft
of any indication that Simona questioned the sale of the Properties at any time.

R contends that the contract was simulated and the price of 1000 for the deed of sale was grossly inadequate
compared to the actual values.

When the parties to an alleged contract do not really intend to be bound by it, the contract is simulated and void. A
simulated or fictitious contract has no legal effect whatsoever29 because there is no real agreement between the
parties.

Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect
the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a
donation or some other contract.32 Inadequacy of cause will not invalidate a contract unless there has been fraud,
mistake or undue influence.33 In this case, respondents have not proved any of the instances that would invalidate
the Deed of Sale.

Respondents even failed to establish that the consideration paid by the vendees for the Properties was grossly
inadequate. As the trial court pointed out, the Deed of Sale stipulates that, in addition to the payment of ₱1,000,
the vendees should assume the mortgage loans from PNB and DBP. The consideration for the sale of the Properties
was thus ₱1,000 in cash and the assumption of the ₱15,000 mortgage.
R contend that P did not pay the mortgage - t is not the act of payment of price that determines the validity of a
contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price
goes into the performance of the contract.
SC – REVERSES CA – Reinstated RTC with modifications.
Ramon Ramos vs. Heirs of Honorio Ramos, G.R. No. 14048, April 25, 2002

Facts: Lucio Ramos and Salud Abejuela are spouses (both deceasesd) they begot the following children, namely:
Juan Ramos, Honorio Ramos, Josefa Ramos and Ramon Ramos. The above-named children and Lucio Ramos
himself, executed an Extrajudicial Settlement of the estate of the deceased Salud Abejuela.

Juan and Josefa filed a complaint for partition and annulment of confirmatory deeds of sale against Ramon A and
Honorio Ramos. However, on November 10, 1975, submitted a compromise agreement which was approved and
adopted by the court as its decision in the case. That Juan and Josefa forever waive, quitclaim, relinquish, and
renounce whatever rights and interests they may have over Parcel 5 and [Lot 2961]

A deed of sale was found in favor of Ramon regarding Lot 2961 executed by their Mother, where R(heirs of
Honorio) assailed contending that they co owned the land and that the sale was simulated to only grant it to
Ramon to use as a security for obtaining a loan to PNB.
And that the understanding and agreement with his parents Lucio and Salud Ramos was that, Ramon Ramos
should hold said land in trust for his brother, Honorio and same should be divided between the two in equal shares.
Ramon later repudiated his co-ownership of the lot with Honorio.

RTC – Favored R for failing to negate the deed of sale as simulated.

CA – Reversed CA - the CA held that the Deed of Sale executed between petitioner and Salud Abejuela had been
tainted by several "badges of simulation." First, if petitioner was the sole owner of the lot, Honorio Sr. would not
have been impleaded as petitioner’s co-defendant in the earlier partition case. Second, the compromise agreement
in the said case was not sufficient proof of petitioner’s exclusive ownership of the disputed lot. On the contrary,
Honorio Sr.’s wife, Pureza, demanded in writing that the said lot be partitioned. Third, estoppel did not bar
respondents from asking for such partition.

Issues: In brief, the main issue is whether the 1954 Deed of Sale executed by Salud in petitioner’s favor was
simulated. And Granting without admitting any merit [to] the claim of [the] heirs of Honorio Sr. over the subject
property, the same is unenforceable pursuant to the provisions of the Statute of Frauds.

Ruliing: The Petition is meritorious. Respondents maintain that the presumption of regularity was overturned
by several circumstances that prove simulation, as follows: (1) the vendor and the vendee were mother and son,
(2) the consideration of P1000 for the lot was too low, and (3) petitioner did not have the means to pay for the
supposed purchase price.

We are not convinced that the Deed of Sale was simulated. The primary consideration in determining the true
nature of a contract is the intention of the parties. 15 Such intention is determined from the express terms of their
agreement as well as from their contemporaneous and subsequent acts.
In the case at bar, we opine that respondents failed to show simulation. First, both the trial and the appellate
courts agree that respondents failed to prove the existence of a contra documento. The evidentiary weight of
Anastacio Gaylo’s testimony that the contra documento was shown to him by Salud herself is weak, considering
that there was no explanation why parol evidence had been resorted to, when the best evidence would have been
the contra documento itself.
Second, mere mother-son relationship between the vendor and the vendee does not prove their lack of intention to
be bound by the 1954 Deed of Absolute Sale. Not all contracts between family members are fictitious because, by
itself, consanguinity is not proof of simulation.

Respondents claim that petitioner did not pay any consideration, because he was not yet gainfully employed in
1954 when the Deed of Sale was executed. –negated P was already working in a law firm. Since no evidence was
presented to show how much the lot was worth in 1954, there is no basis for saying that the price was too low.
Evidence clearly shows that petitioner hired tenants to take care of and to harvest coconuts from Lot 2961.
Petitioner approached Honorio Sr., to share in paying the disturbance compensation to a tenant who had
mistakenly planted on the disputed property, Honorio refused, such belied respondents’ claim of co-ownership.
Respondents claim that the disputed lot was intended to be given by Salud to petitioner and Honorio Sr. as part of
their inheritance. The settlement of the estate of Salud, therefore, was the most appropriate opportunity for
respondents to establish their claim over the property. Having passed up that chance, laches and estoppel have
now set on them.

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which could or
should have been done earlier through the exercise of due diligence.
Heirs of Pangan vs. Spouses Perreras, G.R. No. 157374, August 27, 2009
Facts: The spouses Pangan were the owners of the lot and two-door apartment (subject properties)
located at 1142 Casañas St., Sampaloc, Manila.5 On June 2, 1989, Consuelo agreed to sell to the
respondents the subject properties for the price of ₱540,000.00. On the same day, Consuelo received
₱20,000.00 from the respondents as earnest money but the price was subsequently increased to
₱580,000.00.

In compliance with the agreement, the respondents issued two Far East Bank and Trust Company checks payable
to Consuelo in the amounts of ₱200,000.00 and ₱250,000.00 on June 15, 1989. Consuelo, however, refused to
accept the checks. She justified her refusal by saying that her children (the petitioners-heirs) – co-owners of the
subject properties – did not want to sell the subject properties. For the same reason, Consuelo offered to return
the ₱20,000.00 earnest money she received from the respondents, but the latter rejected it. Thus, Consuelo filed a
complaint for consignation against the respondents on September 5, 1989, docketed as Civil Case No. 89-50258,
before the RTC of Manila, Branch 28.

RTC & CA sided with Respondents:

Issues: 1. Was there a perfected contract between the parties? 2. What is the nature of the contract between
them? And 3. What is the effect of the respondents’ belated payment on their contract?

Yes. There was a perfected contract between the parties since all the essential requisites of a contract were
present Article 1318 of the Civil Code declares that no contract exists unless the following requisites concur: (1)
consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of
the obligation established.
Since the object of the parties’ agreement involves properties co-owned by Consuelo and her children, the
petitioners-heirs insist that their approval of the sale initiated by their mother, Consuelo, was essential to its
perfection. Accordingly, their refusal amounted to the absence of the required element of consent. That a thing is
sold without the consent of all the co-owners does not invalidate the sale or render it void. Article 493 of the Civil
Code recognizes the absolute right of a co-owner to freely dispose of hispro indivisoshare as well as the fruits and
other benefits arising from that share, independently of the other co-owners. Thus, when Consuelo agreed to sell
to the respondents the subject properties, what she in fact sold was her undivided interest. There was no indication
in the agreement that the contract depended upon the children's consent of the sale

In sum, the case contains no element, factual or legal, that negates the existence of a perfected contract between
the parties.Ruling:Petition DENIED. CA decision AFFIRMED.

In cases of breach due to nonpayment, the vendor may avail of the remedy of rescission in a contract of sale.
Nevertheless, the defaulting vendee may defeat the vendor’s right to rescind the contract of sale if he pays the
amount due before he receives a demand for rescission, either judicially or by a notarial act, from the vendor. This
right is provided under Article 1592 of the Civil Code:

Article 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay
the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the contract has been made upon him
either judicially or by a notarial act. After the demand, the court may not grant him a new term. [Emphasis
supplied.]

Nonpayment of the purchase price in contracts to sell, however, does not constitute a breach; rather, nonpayment
is a condition that prevents the obligation from acquiring obligatory force and results in its cancellation.

Based on the above discussion, we conclude that the respondents’ payment on June 15, 1989 of the installment
due on June 14, 1989 effectively defeated the petitioners-heirs’ right to have the contract rescinded or cancelled.
Toyota Shaw vs. Court of Appeals, G.R. No. 116650, May 23, 1995
Facts: A contract was negated by P to be perfected. A breach was made entitling R to damages and atty. Fees.
RTC & CA favored R.
PR sought to buy a toyota lite ace where they already signed a Vehicle Sales Proposal (VSP) and give a 100k
downpayment saying that he would need it on june 17 1989. The spaces provided for "Delivery Terms" were not
filled-up. It also contains the following pertinent provisions:
CONDITIONS OF SALES
1. This sale is subject to availability of unit.
2. Stated Price is subject to change without prior notice, Price prevailing and in effect at time of selling wil,

Unfortunately, the unit was not available on the said date. “Nasulot ng bang malakas”. Toyota also contends,
however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit
financing application of Sosa. It further alleged that a particular unit had already been reserved and earmarked for
Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. Toyota then
gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be
refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of P100,000.00,
4 the receipt of which was shown by a check voucher of Toyota,5 which Sosa signed with the reservation, "without
prejudice to our future claims for damages.
2 letters was sent by PR asking for the dp and payment of damages but before the answered by P was received by
PR, the latter already filed actions to the court. P answered that there are no perfected contract of sale entered by
their agent and PR because the required documents by the financing were incomplete.
RTC & CA favored R.

Issue: Is there a perfected contract of sale?

Ruling: We find merit in the petition.

Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract of
sale. Article 1458 of the Civil Code defines a contract of sale as follows: Art. 1458. By the contract of sale 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.
A contract of sale may be absolute or conditional. and Article 1475 specifically provides when it is deemed
perfected: Art. 1475. The contract of sale 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.

It is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa
and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The provision
on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a
contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed.
But nothing was mentioned about the full purchase price and the manner the installments were to be paid.
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. 18 This is so because the agreement as to the manner of payment goes into the
price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.
Definiteness as to the price is an essential element of a binding agreement to sell personal property.

In a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer
installment, the seller, and the financing company which is subrogated in the place of the seller, as the creditor of
the installment buyer. Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds
on the sale on installment basis.

The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no
demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any
legally indemnifiable injury.

SC – grants and reversed CA.

Estate of Gonzales vs. Heirs of Perez, G.R. No. 169681, November 5, 2009
Facts: Pedro Gonzales was the highest bidder on a sale of lot A&C thru a bidding conducted by the then Municipal
of Marikina – the bid was accepted; however, the Governor of Rizal did not act upon the said deed. (Marikina
previous Province of Rizal).
P then sold to PR a portion of Lot C – had a Deed of Sale but not notarized. (Both Pedro and Marcos Perez died)

Later on, the Municipality of Marikina, executed a Deed of Absolute Transfer of Real Property over Lots A and C in
favor of the Estate of Pedro C. Gonzales. Transfer Certificate of Title (TCT) No. 223361, covering Lot C, was issued
in the name of the said estate. P then executed extrajudicial partition.

Respondents then sent a demand letter to one of herein petitioners asking for the reconveyance of the subject
property.11 However, petitioners refused to reconvey the said lot. As a consequence, respondents filed an action
for "Annulment and/or Rescission of Deed of Absolute Transfer of Real Property x x x and for Reconveyance with
Damages."

RTC – Favored P and ruled that the sale was invalid and the Lot was only transferred to Pedro on 1992 so no valid
subject of Sale happened in 1966.
CA – favored PR - held that a sale of real property, though not consigned in a public instrument, is nevertheless
valid and binding among the parties and that the form required in Article 1358 of the Civil Code is not essential to
the validity or enforceability of the transactions but only for convenience.

P appealed to SC.

Issue: Is there a valid sale materialized on 1966 given that the subject Lot was only transferred to P on 1999?

Ruling: The Court did not agree to P’s contention that PR, could not have legally bought the disputed parcel of
land from P, Pedro, in September 1966 because, during that time, Pedro had not yet acquired ownership of the
subject lot.

Governors Only exercise thereof is subject to supervision by approval or disapproval, i.e., contracts entered in
pursuance of the power would ordinarily be approved if entered into in good faith and for the best interests of the
municipality; they would be denied approval if found illegal or unfavorable to public or municipal interest. The
absence of the approval, therefore, does not per se make the contracts null and void ONLY VOIDABLE.

In the present case, since the contract was never annulled or set aside, it had the effect of transferring ownership
of the subject property to Pedro. Having lawfully acquired ownership of Lots A and C, Pedro, in turn, had the full
capacity to transfer ownership of these parcels of land or parts thereof, including the subject property which
comprises a portion of Lot C.

It is wrong for petitioners to argue that it was only on June 25, 1992, when TCT No. 223361 covering Lot C was
issued in the name of the estate of Pedro, that he became the owner thereof.

Article 1496 of the Civil Code provides:

The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the
ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee.

Article 1497 of the Civil Code states that: The thing sold shall be understood as delivered when it is placed in the
control and possession of the vendee. In the present case, there is no dispute that Pedro took control and
possession of the said lot immediately after his bid was accepted by the Municipal Government of Marikina. In fact,
herein petitioners, in their Answer with Compulsory Counterclaim admit that both Pedro and Marcos, together with
their respective heirs, were already occupying the subject property even before the same was sold to Pedro and
that, after buying the same, Pedro allowed Marcos and his family to stay thereon.21 This only shows that upon
perfection of the contract of sale between the Municipality of Marikina and Pedro, the latter acquired ownership of
the subject property by means of delivery of the same to him.
Stated differently, although a conveyance of land is not made in a public document, it does not affect the validity of
such conveyance. Article 1358 does not require the accomplishment of the acts or contracts in a public instrument
in order to validate the act or contract but only to insure its efficacy.31 Thus, based on the foregoing, the Court
finds that the CA did not err in ruling that the contract of sale between Pedro and Marcos is valid and binding.
Orduña vs. Fuentebella, G.R. No. 176841, June 29, 2010
Facts: Sometime in 1996, Gabriel Sr. sold the subject residential lot with an area of 74 square meters located at
Fairview Subdivision, Baguio City, to petitioner Antonita Orduna BUT no formal deed was executed to document the
sale. The contract price was apparently payable in installments as Antonita remitted from time to time and Gabriel
Sr. accepted PARTIAL PAYMENTS.

One of the Ordunas would later testify that Gabriel Sr. agreed to execute a final deed of sale upon full payment of
the purchase price. As early as 1979, however, Antonita and her sons, Dennis and Anthony Orduna, were already
occupying the subject lot on the basis of some arrangement undisclosed in the records and even constructed their
house thereon. They also paid real property taxes for the house and declared it for tax purposes, as evidenced by a
Tax Declaration. Despite all those payments made for the subject lot.

Gabriel, Jr. would later SELL it to BERNARD BANTA for the loan he obtained – Marcus and Benjamin – Eduardo
obviously WITHOUT the knowledge of petitioners, as later developments would show. RTC ruled in favor of
respondents, and affirmed by the CA.

Issue: Whether the sale of the subject lot by Gabriel Sr. to Antonita was unenforceable under the Statute of
Frauds.

Held: No. The verbal contract of sale has been partially executed through the partial payments made by one party
duly received by the vendor, as in the present case, the contract is taken out of the scope of the Statute. Since
contracts are generally obligatory in whatever form they may have been entered into, provided all the essential
requisites for their validity are present, the Statute simply provides the method by which the contracts enumerated
in Art. 1403 (2) maybe proved but does not declare them invalid because they are not reduced to writing. In fine,
the form required under the Statute is for convenience or evidentiary purposes only.

With regards to consideration - The Court to be sure takes stock of the fact that the contracting parties to the 1995
or 1996 sale agreed to a purchase price of PhP 125,000 payable on installments. But the original lot owner, Gabriel
Sr., died before full payment can be effected. Nevertheless, petitioners continued remitting payments to Gabriel,
Jr., who sold the subject lot to Bernard on June 30, 1999. Gabriel, Jr., as may be noted, parted with the property
only for PhP 50,000. On the other hand, Bernard sold it for PhP 80,000 to Marcos and Benjamin. From the
foregoing price figures, what is abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit in
installment, was very much more than what his son, for the same lot, received from his buyer and the latter’s
buyer later.

Ruling: The CA, just as the RTC, ruled that the contract is unenforceable for non-compliance with the Statute of
Frauds. We disagree for several reasons. Foremost of these is that the Statute of Frauds expressed in Article 1403,
par. (2),29 of the Civil Code applies only to executory contracts, i.e., those where no performance has yet been
made. Stated a bit differently, the legal consequence of non-compliance with the Statute does not come into play
where the contract in question is completed, executed, or partially consummated.

The prescriptive period for the reconveyance of fraudulently registered real property is 10 years, reckoned from the
date of the issuance of the certificate of title, if the plaintiff is not in possession, but imprescriptible if he is in
possession of the property.38 Thus, one who is in actual possession of a piece of land claiming to be the owner
thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his
right.39 As it is, petitioners’ action for reconveyance is imprescriptible.
First Optima vs. Securitron, G.R. No. 199648, January 28, 2015
In a potential sale transaction, the prior payment of earnest money even before the property owner can agree to
sell his property is irregular, and cannot be used to bind the owner to the obligations of a seller under an otherwise
perfected contract of sale; to cite a well-worn cliché, the carriage cannot be placed before the horse. The property
owner-prospective seller may not be legally obliged to enter into a sale with a prospective buyer through the
latter’s employment of questionable practices which prevent the owner from freely giving his consent to the
transaction; this constitutes a palpable transgression of the prospective seller’s rights of ownership over his
property, an anomaly which the Court will certainly not condone.

Looking to expand its business and add to its existing offices, respondent – through its General Manager, Antonio
Eleazar (Eleazar) – sent a December 9, 2004 Letter7 addressed to petitioner – through its Executive Vice-
President, Carolina T. Young (Young) – offering to purchase the subject property at P6,000.00 per square meter. A
series of telephone calls ensued, but only between Eleazar and Young’s secretary;8 Eleazar likewise personally
negotiated with a certain Maria Remoso (Remoso), who was an employee of petitioner.9 At this point, Eleazar was
unable to personally negotiate with Young or the petitioner’s board of directors.

Sometime thereafter, Eleazar personally went to petitioner’s office offering to pay for the subject property in cash,
which he already brought with him. However, Young declined to accept payment, saying that she still needed to
secure her sister’s advice on the matter.10 She likewise informed Eleazar that prior approval of petitioner’s Board
of Directors was required for the transaction, to which remark Eleazar replied that respondent shall instead await
such approval.

R – sent a letter and chek of 100k for the alleged sale of the land – declared it as earnest money – without the
proper negotiation and sale of the land. Despite the delicate nature of the matter and large amount involved,
respondent did not deliver the letter and check directly to Young or her office; instead, they were coursed through
an ordinary receiving clerk/receptionist of the petitioner, who thus received the same and therefor issued and
signed Provisional Receipt No. 33430. Clerk Note: This is issued to transactions not yet cleared but subsequently
an Official Receipt will be issued.

Issue:Whether the money delivered by respondent to petitioner was earnest money thereby providing a perfected
contract of sale.

Held: No. The stages of a contract of sale are: (1) negotiation, starting 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; and (3) consummation, which commences when the parties
perform their respective undertakings under the contract of sale, culminating in the extinguishment of the contract.
In the present case, the parties never got past the negotiation stage. Nothing shows that the parties had agreed on
any final arrangement containing the essential elements of a contract of sale, namely, (1) consent or the meeting
of the minds of the parties; (2) object or subject matter of the contract; and (3) price or consideration of the
sale.In a potential sale transaction, the prior payment of earnest money even before the property owner can agree
to sell his property is irregular, and cannot be used to bind the owner to the obligations of a seller under an
otherwise perfected contract of sale; to cite a well-worn cliché, the carriage cannot be placed before the horse.

he property owner-prospective seller may not be legally obliged to enter intoa sale with a prospective buyer
through the latter’s employment of questionable practices which prevent the owner from freely giving his consent
to the transaction; this constitutes a palpable transgression of the prospective seller’s rights of ownership over his
property, an anomaly which the Court will certainly not condone.An agreement where the prior free consent of one
party thereto is withheld or suppressed will be struck down, and the Court shall always endeavor to protect a
property owner’s rights against devious practices that put his property in danger of being lost or unduly disposed
without his prior knowledge or consent.
Delivery; the operative act which transfers ownership

San Lorenzo vs. Court of Appeals, G.R. No. 124242, January 21, 2005
FACTS:
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta. The latter made a downpayment of fifty thousand pesos (P50,000.00) as evidenced
by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made by Babasanta. He demanded the execution of a
Final Deed of Sale in his favor so he may effect full payment of the purchase price; however, the
spouses declined to push through with the sale.  They claimed that when he requested for a discount
and they refused, he rescinded the agreement. Thus, Babasanta filed a case for Specific Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged that on 3 May 1989,
the two parcels of land involved, namely Lot 1764-A and 1764-B, 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.
ISSUE:
Who between SLDC and Babasanta has a better right over the two parcels of land?
RULING:
An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu
is a contract to sell and not a contract of sale.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot. While there is no
stipulation that the seller reserves the ownership of the property until full payment of the price which
is a distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the
Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the
purchase price.
In relation to the acquisition and transfer of ownership, it should be noted that sale is not a
mode, but merely a title. A mode is the legal means by which dominion or ownership is created,
transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership.

Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him in any of the ways specified in Article 1497 to 1501. 30 The word
"delivered" should not be taken restrictively to mean transfer of actual physical possession of the
property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and (2) legal
or constructive delivery.

 there was no delivery to Babasanta, whether actual or constructive, which is essential to

transfer ownership of the property. Thus, even on the assumption that the perfected contract between
the parties was a sale, ownership could not have passed to Babasanta in the absence of delivery, since
in a contract of sale ownership is transferred to the vendee only upon the delivery of the thing sold.
Be it noted that delivery of the property to SLDC was immediately effected after the execution
of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the
Spouses Lu in favor of Babasanta

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.  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.

There was no double sale in this case because the contract in favor of Babasanta was a mere
contract to sell; hence, Art. 1544 is not applicable. There was neither actual nor constructive delivery
as his title is based on a mere receipt. Based on this alone, the right of SLDC must be preferred.
Ten Forty Realty vs. Cruz, 410 SCRA 484 (G.R. No. 151212, Sep. 10, 2003)
FACTS:
• Petitioner filed an ejectment complaint against Marina Cruz(respondent) before the MTC. Petitioner
alleges that the land indispute was purchased from Barbara Galino on December 1996, and that said
land was again sold to respondent on April 1998;
• On the other hand, respondent answer with counterclaim that never was there an occasion when
petitioner occupied a portion of the premises. In addition, respondent alleges that said land was a
public land (respondent filed a miscellaneous sales application with the Community Environment and
Natural Resources Office) and the action for ejectment cannot succeed where it appears that
respondent had been in possession of the property prior to the petitioner;
• On October 2000, MTC ordered respondent to vacate the land and surrender to petitioner possession
thereof. On appeal, the RTC reversed the decision. CA sustained the trial court’s decision.

ISSUE/S:
Whether or not petitioner should be declared the rightful owner of the property.

HELD:
No. Respondent is the true owner of the land.1) The action filed by the petitioner, which was an action
for “unlawful detainer”, is improper. As the bare allegation of petitioner’s tolerance of respondent’s
occupation of the premises has not been proven, the possession should be deemed illegal from the
beginning. Thus, the CA correctly ruled that the ejectment case should have been for forcible
entry. However, the action had already prescribed because the complaint was filed on May 12, 1999 –
a month after the last day forfiling;2) The subject property had not been delivered to petitioner;
hence, it did not acquire possession either materially or symbolically. As between the two
buyers, therefore, respondent was first in actual possession of the property.
 As regards the question of whether there was good faith in the second buyer. Petitioner has not
proven that respondent was aware that her mode of acquiring the property was defective at the time
she acquired it from Galino. At the time, the property — which was public land –had not been
registered in the name of Galino; thus, respondent relied on the tax declarations thereon. As shown,
the former’s name appeared on the tax declarations for the property until its sale to the latter in 1998.
Galino was in fact occupying the realty when respondent took over possession. Thus, there was no
circumstance that could have placed the latter upon inquiry or required her to further investigate
petitioner’s right of ownership.

DOCTRINE/S:
Execution of Deed of Sale; Not sufficient as delivery. Ownership is transferred not by contract
but by tradition or delivery. Nowhere in the Civil Code is it provided that the execution of a Deed of
Sale is a conclusive presumption of delivery of possession of a piece of real estate. The execution of a
public instrument gives rise only to a prima facie presumption of delivery. Such presumption
is destroyed when the delivery is not effected, because of a legal impediment. Such
constructive or symbolic delivery, being merely presumptive, was deemed negated by the failure of
the vendee to take actual possession of the land sold. Disqualification from Ownership of Alienable
Public Land.

Private corporations are disqualified from acquiring lands of the public domain, as provided under
Section 3 of Article XII of the Constitution. While corporations cannot acquire land of the public
domain, they can however acquire private land. However, petitioner has not presented proof that, at
the time it purchased the property from Galino, the property had ceased to be of the public domain
and was already private land. The established rule is that alienable and disposable land of the public
domain held and occupied by a possessor — personally or through predecessors-in-interest, openly,
continuously, and exclusively for 30 years — is ipso jure converted to private property by the mere
lapse of time.
RULING:
The Supreme Court DENIED the petition.
Vasquez vs. Ayala Corporation, G.R. No. 149734, November 19, 2004

FACTS: On April 23, 1981, spouses Vasquez entered into a MOA with Ayala Corp. with Ayala buying
from the Vazquez spouses all of the latter's shares of stock in Conduit Development, Inc. The main
asset was a property in Ayala Alabang which was then being developed by Conduit under a
development plan where the land was divided into Villages 1, 2 and 3. The development was then
being undertaken by G.P. Construction and Development Corp. Under the MOA, Ayala was to develop
the entire property, less what was defined as the "Retained Area". This "Retained Area" was to be
retained by the Vazquez spouses. The area to be developed by Ayala was called the "Remaining Area".
In this "Remaining Area" were 4 lots adjacent to the "Retained Area" and Ayala agreed to offer these
lots for sale to the spouses at the prevailing price at the time of purchase. After the execution of the
MOA, Ayala caused the suspension of work on Village 1 of the project. Ayala then received a letter
from Lancer General Builder Corp. in which the latter was claiming a certain amount as subcontractor.
G.P. Construction not being able to reach an amicable settlement with Lancer, Lancer sued G.P.
Construction, Conduit and Ayala in the court. G.P. Construction and Lancer both tried to enjoin Ayala
from undertaking the development of the property. The suit was terminated only on 1987. Taking the
position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area" within 3 years from
the date of the MOA, the Vasquez spouses sent several "reminder" letters of the approaching so-called
deadline. However, no demand after 1984, was ever made by the Vasquez spouses for Ayala to sell
the 4 lots. On the contrary, one of the letters signed by their authorized agent categorically stated
that they expected development of Phase 1 to be completed 3 years from the settlement of the legal
problems with the previous contractor. By early 1990, Ayala finished the development of the
vicinity. The 4 lots were then offered to be sold to the Vasquez spouses at the prevailing
price in 1990. This was rejected by the Vasquez spouses who wanted to pay at 1984 prices,
thereby leading to the suit below.

ISSUE: Whether or not respondent incurred default or delay in the fulfillment of its obligation.

Whether or not Paragraph 5.15 of the MOA is an option contract or right of first refusal?

HELD: No. Under Article 1193 of the Civil Code, obligations for whose fulfillment a day certain has
been fixed shall be demandable only when that day comes. However, no such day certain was fixed in
the MOA. Accordingly, Ayala Corp. cannot likewise be said to have delayed performance of the
obligation. Even assuming that the MOA imposes an obligation on Ayala Corp. to develop the subject
lots, within 3 years from date thereof, Ayala Corp. could still not be held to have been in delay since
no demand was made by petitioners for the performance of its obligation. Moreover, the letters were
mere reminders and not categorical demands to perform. These letters were sent before the obligation
could become legally demandable. More importantly, petitioners waived the 3 year period as
evidenced by their agent's letter to the effect that petitioners agreed that the 3 year period should be
counted from the termination of the case filed by Lancer.

No. The said paragraph is a mere right of first refusal. Although the paragraph has a
definite object, i.e., the sale of the 4 lots, the period within which they will be offered for
sale to Vasquez and, necessarily, the price for which the subject lots will be sold are not
specified. The phrase “at the prevailing market price at the time of the purchase” connotes that
there is no definite period within which Ayala is bound to reserve the subject lots for Vasquez to
exercise his privilege to purchase. Neither is there a fixed or determinable price at which the subject
lots will be offered for sale. The price is considered certain if it may be determined with reference to
another thing certain or if the determination thereof is left to the judgment of a specified person or
persons.

Further, paragraph 5.15 was inserted into the MOA to give Vasquez the first crack to buy the subject
lots at the price which Ayala would be willing to accept when it offers the subject lots for sale. It is
not supported by an independent consideration.
Ang Yu Asuncion vs. Court of Appeals, G.R. No. 109125, December 2, 1994

FACTS:

The plaintiffs were tenants or lessees of residential and commercial spaces owned by defendants in
Binondo. On several conditions defendants informed the plainti ffs that they are o ffering to sell the
premises and are giving them priority to acquire the same.

During negotiations, Cu Unjieng offered a price of P6- million while plainti ffs made a counter of o ffer of
P5-million.Plaintiff thereafter asked the defendants to put their offer in writing to which the defendants
acceded. In reply to defendants’ letter, plaintiffs wrote, asking that they specify the terms and
conditions of the offer to sell. When the plaintiffs did not receive any reply, they sent another letter
with the same request. Since defendants failed to specify the terms and conditions of the offer to sell
and because of information received that the defendants were about to sell the property, plaintiffs
were compelled to file the complaint to compel defendants to sell the property to them. Defendants
filed their answer denying the material allegations of the complaint and interposing a special defense
of lack of cause of action.

The court dismissed the complaint on the ground that the parties did not agree upon the terms and
conditions of the proposed sale, hence, there was no contact of sale at all. The lower court ruled that
should the defendants subsequently offer their property for sale at a price of P11-million or below,
plaintiffs will have the right of first refusal. Aggrieved by the decision, plaintiffs appealed to Court of
Appeals which ruled that there was no meeting of the minds between the parties concerning the sale
of the property. Absent such requirement, the claim for specific performance will not lie. The decision
of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme
Court denied the appeal for insufficiency in form and substances.

The Cu Unjieng spouses executed a Deed of Sale transferring the property in question to Buen Realty
and Development Corporation. Buen Realty, as the new owner of the subject property, wrote to the
lessees demanding the latter to vacate the premises. In its reply, it stated that Buen Realty and
Development Corporation brought the property subject to the notice of lis pendens. Buen Realty, as
the new owner of the subject property, wrote to the lessees demanding the latter to vacate the
premises.

Because of this, Petitioners filed a motion for execution of the CA judgement. At first, CA directed the
Sheriff to execute an order directing the Unjiengs to issue a Deed of Sale in the Petitioner’s favour and
nullified the sale to De Buen Realty. But then, the CA reversed itself when the Private
Respondents Appealed.

ISSUE:

Whether or not the Contract of Sale is perfected by the grant of a Right of First Refusal.
Whether or not a Right of First Refusal may be enforced in an action for Specific Performance.

RULING:

Right of first refusal is not a perfected contract of sale under Article 1458 of the Civil Code In
the law on sales, the so-called “right of first refusal” is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil
Code.

In a right of first refusal, while the object might be made determinate, the exercise of the right,
however, would be dependent not only on the grantor’s eventual intention to enter into a binding
juridical relation with another but also on terms, including the price, that obviously are yet to be later
firmed up.
The proper action for violation of the right of first refusal is to file an action for damages and NOT writ
of execution The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded
a “right of first refusal” in favor of petitioners (Ang Yu et. al). The consequence of such a declaration
entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us,
petitioners are aggrieved by the failure of private respondents to honor the right of first
refusal, the remedy is not a writ of execution on the judgment, since there is none to
execute, but an action for damages in a proper forum for the purpose.

Unconditional mutual promise to buy vs. Accepted unilateral promise An unconditional mutual promise
to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on
the parties, and compliance therewith may accordingly be exacted.

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when
coupled with a valuable consideration distinct and separate from the price, is what may properly be
termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with
the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479 An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the price.
(1451a)

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not
the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach
of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally
bound to comply with their respective undertakings.

Buen Realty cannot be ousted from the ownership and possession of the property Furthermore,
whether private respondent Buen Realty Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether or not it should, in any case, be considered
bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must
be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in
Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge,
let alone ousted from the ownership and possession of the property, without first being duly afforded
its day in court.
Equatorial Realty Development, Inc. v. Mayfair Theater 370

Facts: Carmelo had a property in Recto, Manila a 1000 sqm 2 storey building which was leased to R
with a right of 1st refusal. However within the 20yr lease term the properties were sold to P for 11.3
m.
Carmelo entered into a contract with respondent for the latter to lease A PORTION OF THE SECOND
FLOOR of the two-storey building, situated at C.M. Recto Avenue, Manila, with a floor area of 1,610
square meters and THE SECOND FLOOR AND MEZZANINE of the two-storey building, situated at C.M.
Recto Avenue, Manila, with a floor area of 150 square meters.

The contract is set for the next 20 years.

2 years later, the parties entered into yet another contract involving; A PORTION OF THE SECOND
FLOOR of the two-storey building, situated at C.M. Recto Avenue, Manila, with a floor area of 1,610
square meters and THE SECOND FLOOR AND MEZZANINE of the two-storey building, situated at C.M.
Recto Avenue, Manila, with a floor area of 150 square meters.

Stipulated in the contract was; That if the LESSOR should desire to sell the leased premises, the
LESSEE shall be given 30-days exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than the LESSEE, the
LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale
hereof that the purchaser shall recognize this lease and be bound by all the terms and conditions
thereof.

Sometime in 1974, Carmelo through Mr. Pascal by a telephone call told the respondent that it is
contemplating to sell the said property and that a certain Jose Araneta is willing to buy the same for
US$1,200,000. It also asked the respondent if it’s willing to the property for six to seven million
pesos. Respondent through Mr. Yang told the petitioner that it would respond once a decision was
made.

Respondent in its reply mentioned a stipulated part of the contract as to when Carmelo would decide
to sell the property. Carmelo did not reply.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which
included the leased premises housing the "Maxim" and "Miramar" theatres, to Equatorial by virtue of a
Deed of Absolute Sale, for the total sum of P11,300,000.00.

Mayfair instituted the action a quo for specific performance and annulment of the sale of the leased
premises to Equatorial.

Carmelo’s defense; as special and affirmative defense (a) that it had informed Mayfair of its desire to
sell the entire C.M. Recto Avenue property and offered the same to Mayfair, but the latter answered
that it was interested only in buying the areas under lease, which was impossible since the property
was not a condominium; and (b) that the option to purchase invoked by Mayfair is null and void for
lack of consideration.

Equitorial’s allegation; that the option is void for lack of consideration (sic) and is unenforceable by
reason of its impossibility of performance because the leased premises could not be sold separately
from the other portions of the land and building. It counterclaimed for cancellation of the contracts of
lease, and for increase of rentals in view of alleged supervening extraordinary devaluation of the
currency. Equatorial likewise cross-claimed against co-defendant Carmelo for indemnification in
respect of Mayfair's claims.
Trial Court rendered decision in favor of Carmelo and Equitorial.

ISSUE:
Whether or not the OPTION CLAUSE IN THE CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST
REFUSAL PROVISO

HELD:

We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for
a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a
contract of a right of first refusal.

In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following
language:
A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the
privilege of buying from, or selling to B, certain securities or properties within a limited time at a
specified price.

The rule so early established in this jurisdiction is that the deed of option or the option clause in a
contract, in order to be valid and enforceable, must, among other things, indicate the definite price at
which the person granting the option, is willing to sell
ROSENCOR V. INQUING (March 08, 2001)

FACTS:
Respondents are tenants of a two-storey residential apartment in Tomas Morato QC. The lease was not
covered by any contract.
Lessees were verbally given by the lessors the pre-emptive right to purchase the property in case of sale.

The original lessors died and their heir also promised the lessees the same pre-emptive right to purchase.
The new lessors represented by Eufrocina de Leon demanded the lessees to vacate the property
because the building will allegedly be demolished but after the lessees declined, she sent them a letter
offering to sell the property for 2M. Lessees made a counter offer of 1M but no reply was made by the
lessors.

De leon subsequently informed the lessees that the property was already sold to Rosencor. Lessees
claimed that they were deceived because the property was already sold to Rosencor before it was offered
to them. They offered to reimburse the payment to the lessors but the offer was declined as hence, this
petition.

ISSUE:
WON the lessors should recognize the pre-emptive right of the lessees even if it was only given verbally.

HELD:
The right of first refusal is not covered by the Statute of Frauds. The application of such statute
presupposes the existence of a perfected contact which is no applicable in this case. As such, a right of
first refusal need not be written to be enforceable and can be proved by oral evidence.

Lessees have proven that the lessors admit the right of first refusal given to them when the property was
offered to them by 2M.

The prevailing doctrine is that a contract of sale entered in violation of right of first refusal is rescissible.
However, this doctrine cannot be applied here because the vendees (Rosencor) is in good faith. Under
Art.1358, recission cannot take place when things which are the object of sale is legally in possession of
third person who did not act in bad faith.

Rosencor could not have acted in bad faith because they are not aware of the right of first refusal given
verbally. Respondents should instead file for damages.
Tanay Recreation Center vs. Fausto, G.R. No. 140182, April 12, 2005

Tanay Recreation Center and Development Corp. (TRCDC) was the lessee of a
property owned by Catalina Fausto. A contract of lease was executed with a period of
20 years which may be extended. In said contract, a stipulation provides “that should
Fausto decide to sell the property, petitioner shall have the “priority right” to purchase
the same.” When TRCDC wrote the land owner with the intention of renewing the lease
contract, Fausto’s daughter Anunciacion, replied saying that she is now the new owner
since the property was already sold to her. She also demanded that the former vacate
the property since she will not be renewing the contract. TRCDC filed a case before the
Regional Trial Court for the annulment of the deed of sale, injunction, specific
performance and damages. The RTC ruled that the lease should be extended for seven
more years but on appeal, the Court of Appeals decided in favor of Anunciacion
ordering TRCDC to vacate the property immediately. The CA declared that although the
stipulation of “priority right” is valid, it does not apply if the property is sold to a relative.
TRCDC appealed to the Supreme Court.

The Right Applies

The Supreme Court reversed the ruling of the CA. The “right of first refusal” applies
regardless of the relationship of the owner and the buyer. The Court explained: “When a
lease contract contains a right of first refusal, the lessor is under a legal duty to the
lessee not to sell to anybody at any price until after he has made an offer to sell to the
latter at a certain price and the lessee has failed to accept it. The lessee has a right that
the lessor’s first offer shall be in his favor. Petitioner’s right of first refusal is an integral
and indivisible part of the contract of lease and is inseparable from the whole contract.
The consideration for the lease includes the consideration for the right of first refusal
and is built into the reciprocal obligations of the parties.” The terms of the contract of
lease stated clearly that “That should the LESSOR decide to sell the leased premises,
the LESSEE shall have the priority right to purchase the same”. This could not have any
other interpretation other than that the lessor cannot sell the property to another unless
the lessee to whom it is offered refuses to buy it or waives his right. If this stipulation is
violated by the lessor, the lessee has the remedy of having the deed of sale rescinded
or annulled. The SC went on to elucidate that “a right of first refusal means identity of
terms and conditions to be offered to the lessee and all other prospective buyers and a
contract of sale entered into in violation of a right of first refusal of another person, while
valid, is rescissible”. It was therefore erroneous for the CA to rule that the right of first
refusal does not apply if the buyer is a relative of the owner/lessor.
Mendoza vs. David [SALES] case digest

FACTS: Petitioner ordered 3 sets of furniture and issued specifications to respondent for P185,650.00.
A down payment of85,650 pesos has been paid. Upon delivery, petitioner rejected it because of
inferior material and quality and thereby asked for a refund. Respondent ignored it and demanded for
the balance of P100,000.00. He reclaimed the said furniture. Respondent David retrieved the said
furniture due to non payment of the balance.Thus, petitioner’s complaint herein stands: the CA, who
dismissed her case, erred since the transaction was by description or by sample (who avers that the
said that the delivered materials were supposed to match bulk goods.)

ISSUE:

Whether or not the transaction between the parties was that of a sale by description or by sample.

RULING:
There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the
bulk, which is not present and there is no opportunity to inspect or examine the same.21 To constitute
a sale by sample, it must appear that the parties treated the sample as the standard of quality and
that they contracted with reference to the sample with the understanding that the product to be
delivered would correspond with the sample.22 In a contract of sale by sample, there is an implied
warranty that the goods shall be free from any defect which is not apparent on reasonable
examination of the sample and which would render the goods unmerchantable.23
There is a sale of goods by description where "a seller sells things as being of a particular kind, the
buyer not knowing whether the seller’s representations are true or false, but relying on them as true;
or as otherwise stated, where the buyer has not seen the article sold and relies on the description
given to him by the seller, or has seen the goods, but the want of identity is not apparent on
inspection."24 A seller’s description of the goods which is made part of the basis of the transaction
creates a warranty that the goods will conform to that description.25 Where the goods are bought by
description from a seller who deals in the goods of that description, there is an implied warranty that
the goods are of merchantable quality.
Neither. The court clarified that:
The sale of furniture in this case is not a sale by sample. The term sale by sample does not
include an agreement to manufacture goods to correspond with the pattern.27 In this case,
the three sets of furniture were manufactured according to the specifications provided by
the buyer. Mendoza did not order the exact replica of the furniture displayed in David’s shop
but made her own specifications on the measurement, material and quality of the furniture
she ordered.
Neither is the transaction a sale by description. Mendoza did not rely on any description
made by David when she ordered the furniture. Mendoza inspected the furniture displayed
in David’s furniture shop and made her own specifications on the three sets of furniture she
ordered.
In a sale by sample, the standard of quality a small quantity is exhibited by the seller as a fair
specimen of the bulk, which is not present and there is no opportunity to inspect or examine the
same.
In a sale by description, a seller’s description of the goods which is made part of the basis of the
transaction creates a warranty that the goods will conform to that description.
In the present case, the sale was not considered by sample because it does not constitute an
agreement to correspond with a certain pattern. There is no agreement to replicate the goods in
respondent David’s furniture store. It is also not by description because it would require the seller to
be the one who would give the description. In this case it was the buyer. Clearly, this is a “made to
order” sale.

DISTAJO v COURT OF APPEALS (XI. Capacity to Buy or Sell)

G.R. No. 112954, August 25, 2000 | P: PARDO, J.
FACTS:
During her lifetime, Iluminada Abiertas designated one of her sons, Rufo Distajo to be the
administrator of her parcels of land denoted as Lot nos. 1018, 1046, 1047, and 1057 in Capiz. She
sold a portion of Lot. No. 1018 to her other children, the other properties to her son, Rufo.

When Iluminada died in 1971, her other children and the petitioner (the son of Rizaldo), filed a
complaint for recovery of possession and ownership which the RTC dismissed for lack of cause of
action, laches and prescription. The parties appealed to the CA.

The Court of Appeals dismissed the plaintiff’s complaint for lack of cause of action except for a portion
of the lot prayed for (Lot. No. 1018). Ricardo filed a motion for reconsideration which the CA denied.

ISSUE:
Whether the prohibition under the Civil Code for an administrator from acquiring properties under his
administration absolute.

HELD:
NO. Under paragraph (2) of Article 1491 of the Civil Code, the prohibition against agents purchasing
property in theirs for sale or management is not absolute. It does not apply if the principal consents to
the sale of the property in the hands of the agent or administrator. In this case, the deeds of sale
signed by Iluminada Abiertas shows that she gave consent to the sale of the properties in favor of her
son, Rufo, who was the administrator of the properties. Thus, the consent of the principal removes the
transaction out of the proportion contained in Article 1491 (2).

The Court affirmed the decision of the CA.

Calimlim-Canullas v. Fortun (XI. Capacity to Buy or Sell)

Facts:

Petitioner Mercedes Calimlim-Canullas and Fernando Canullas were married in 1962, with 5 children,
and were living on a house situated on a land inherited by the latter. In 1978, Fernando abandoned
his family and lived with Corazon Daguines. In 1980, Fernando sold the house and lot to Daguines,
who initiated a complaint for quieting of title. Mercedes resisted, claiming that the house and lot were
conjugal properties, and the sale was null nad void for she had not consented thereto.

Issues:

(1) Whether or not the construction of a conjugal house on the exclusive property of the husband ipso
facto gave the land the character of conjugal property

(2) Whether or not the sale of the lot together with the house and improvements thereon was valid
under the circumstances surrounding the transaction

Held:

(1) Both the land and the building belong to the conjugal partnership but the conjugal partnership is
indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of
the conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation of
the conjugal partnership. FERNANDO could not have alienated the house and lot to DAGUINES since
MERCEDES had not given her consent to said sale.

(2) The contract of sale was null and void for being contrary to morals and public policy. The sale was
made by a husband in favor of a concubine after he had abandoned his family and left the conjugal
home where his wife and children lived and from whence they derived their support. That sale was
subversive of the stability of the family, a basic social institution which public policy cherishes and
protects. The law emphatically prohibits the spouses from selling property to each other subject to
certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is
so because if transfers or con conveyances between spouses were 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. The prohibitions apply to a couple living
as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt
would turn out to be better than those in legal union." Those provisions are dictated by public interest
and their criterion must be imposed upon the wig of the parties.
MAHARLIKA PUBLISHING CORP V TAGLE (XI. Capacity to Buy or Sell)

FACTS

GSIS owned a parcel of land with a building and printing equipment in Paco, Manila. It was sold to
Maharlika in a Conditional Contract of Sale with the stipulation that if Maharlika failed to pay monthly
installments in 90 days, the GSIS would automatically cancel the contract. Because Maharlika failed to
pay several monthly installments, GSIS demanded that Maharlika vacate the premises. Even though
Maharlika refused to do so, the GSIS published an advertisement inviting the public to bid in a public
auction. A day before the scheduled bidding, Adolfo Calica, the President of Maharlika, gave the GSIS
head office 2 checks worth 11,000 and a proposal for a compromise agreement. The GSIS General
Manager Roman Cruz gave a not to Maharlika saying “Hold Bidding. Discuss with me.” However, the
public bidding took place as scheduled and the property was subsequently awarded to Luz Tagle, the
wife of the GSIS Retirement Division Chief. Maharlika demanded that the sale be considered null and
void, as Mrs. Tagle should have been disqualified from bidding for the GSIS property. RTC and CA
both ruled that the Tagles were entitled to the property and Maharlika should vacate the premises.

ISSUE

Whether or not Tagle are entitled to the property ?

HELD

NO. The sale to them was against public policy. First of all, the GSIS head office was stopped from
claiming that they did not give the impression to Maharlika that they were accepting the proposal for a
compromise agreement. The act of the general manager is binding on GSIS. Second, Article 1491 (4)
of the CC provides that public officers and employees are prohibited from purchasing the property of
the state or any GOCC or institution, the administration of which has been entrusted to them cannot
purchase, even at public or judicial auction, either in person or through the mediation of another. The
SC held that as an employee of the GSIS, Edilberto Tagle and his wife are disqualified from bidding on
the property belonging to the GSIS because it gives the impression that there was politics involved in
the sale. It is not necessary that actual fraud be shown, for a contract which tends to injure the public
service is void although the parties entered into it honestly and proceeded under it in good faith.
Fabilo vs. IAC G.R. No. L-68838 March 11, 1991(XI. Capacity to Buy or Sell)

Facts:
In the instant petition for review on certiorari, petitioners seek the reversal of the appellate court's
decision interpreting in favor of lawyer Alfredo M. Murillo the contract of services entered into between
him and his clients, spouses Florencio Fabillo and Josefa Taña.

In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her brother,
Florencio, a house and lot in San Salvador Street, Palo, Leyte which was covered by tax declaration
No. 19335, and to her husband, Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte. After
Justina's death, Florencio filed a petition for the probate of said will. On June 2, 1962, the probate
court approved the project of partition "with the reservation that the ownership of the land declared
under Tax Declaration No. 19335 and the house erected thereon be litigated and determined in a
separate proceeding."

Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San
Salvador property.

Florencio and Murillo entered into a contract.

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against Gregorio D.
Brioso to recover the San Salvador property. The case was terminated on October 29, 1964 when the
court, upon the parties' joint motion in the nature of a compromise agreement, declared Florencio
Fabillo as the lawful owner not only of the San Salvador property but also the Pugahanay parcel of
land.
Consequently, Murillo proceeded to implement the contract of services between him and Florencio
Fabillo by taking possession and exercising rights of ownership over 40% of said properties. He
installed a tenant in the Pugahanay property.

Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to
give Murillo his share of their produce. Inasmuch as his demands for his share of the produce of the
Pugahanay property were unheeded, Murillo filed on March 23, 1970 in the then Court of First
Instance of Leyte a complaint captioned "ownership of a parcel of land, damages and appointment of a
receiver" against Florencio Fabillo, his wife Josefa Taña, and their children Ramon Fabillo and Cristeta
F. Maglinte.

Issue: WON the contract of services agreed upon is in violation of Article 1491 of the Civil Code.

Held: The contract of services did not violate said provision of law. Article 1491 of the Civil Code,
prohibits lawyers from acquiring by purchase even at a public or judicial auction, properties and rights
which are the objects of litigation in which they may take part by virtue of their profession. The said
prohibition, however, applies only if the sale or assignment of the property takes place during the
pendency of the litigation involving the client's property.

Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said
prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made
during the pendency of the litigation but only after judgment has been rendered in the case handled
by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien
over funds and property of his client and may apply so much thereof as may be necessary to satisfy
his lawful fees and disbursements.

As long as the lawyer does not exert undue influence on his client, that no fraud is committed or
imposition applied, or that the compensation is clearly not excessive as to amount to extortion, a
contract for contingent fee is valid and enforceable. Moreover, contingent fees were impliedly
sanctioned by No. 13 of the Canons of Professional Ethics which governed lawyer-client relationships
when the contract of services was entered into between the Fabillo spouses and Murillo.

However, SC disagree with the courts below that the contingent fee stipulated between the Fabillo
spouses and Murillo is 40% of the properties subject of the litigation for which Murillo appeared for the
Fabillos. A careful scrutiny of the contract shows that the parties intended forty percent of the value of
the properties as Murillo's contingent fee. This is borne out by the stipulation that "in case of success
of any or both cases," Murillo shall be paid "the sum equivalent to forty per centum of whatever
benefit" Fabillo would derive from favorable judgments. The same stipulation was earlier embodied by
Murillo in his letter of August 9, 1964 aforequoted.

Worth noting are the provisions of the contract which clearly states that in case the properties are
sold, mortgaged, or leased, Murillo shall be entitled respectively to 40% of the "purchase price,"
"proceeds of the mortgage," or "rentals." The contract is vague, however, with respect to a situation
wherein the properties are neither sold, mortgaged or leased because Murillo is allowed "to have the
option of occupying or leasing to any interested party forty per cent of the house and lot." Had the
parties intended that Murillo should become the lawful owner of 40% of the properties, it would have
been clearly and unequivocally stipulated in the contract considering that the Fabillos would part with
actual portions of their properties and cede the same to Murillo.

The ambiguity of said provision, however, should be resolved against Murillo as it was he himself who
drafted the contract. This is in consonance with the rule of interpretation that, in construing a
contract of professional services between a lawyer and his client, such construction as would be more
favorable to the client should be adopted even if it would work prejudice to the lawyer. Rightly so
because of the inequality in situation between an attorney who knows the technicalities of the law on
the one hand and a client who usually is ignorant of the vagaries of the law on the other hand.

Considering the nature of the case, the value of the properties subject matter thereof, the length of
time and effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of P3,000.00 as
reasonable attorney's fees for services rendered in the case which ended on a compromise agreement.
In so ruling, we uphold "the time-honored legal maxim that a lawyer shall at all times uphold the
integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service
and securing justice, not money-making. For the worst scenario that can ever happen to a client is to
lose the litigated property to his lawyer in whom all trust and confidence were bestowed at the very
inception of the legal controversy."
In re: Atty. Melchor Ruste, 70 Phil 243 (1940)

Fact:

 That in cadastral case No. 6, G. L. R. O. Record No. 483 of the Court of First Instance of
Zamboanga, the respondent, Melchor E. Ruste, appeared for and represented, as counsel,
Severa Ventura and her husband, Mateo San Juan, the herein complainant, who claimed lot
No. 3765; and as a result of said cadastral proceedings, an undivided eleven-twentieth
(11/20) share of said lot was adjudicated by said court to said claimants;

 That there was no agreement the respondent and his said clients as to the amount of his fees;
but that they paid to him upon demand on different occasions the sums of (30 and P25 as
attorney's fees;

 That after said payments, the respondent again demanded of the complainant and his wife as
additional fees the sum of P25, but they had no money to pay, him, and so he asked them to
execute in his favor a contract of lease, and a contract of sale, of their share in said lot No.
3764 in order that he may be able to borrow or raise said sum of P25;

 Sometime in July, 1930, the respondent acted as counsel for the complainant and his wife
when the latter laid claim of ownership upon lot No. 3764 in case No. 6, G. L. R. O., Cadastral
Record 483 of the Court of First Instance of Zamboanga, eleven-twentieth of said lot having
been eventually adjudicated to the wife, Severa Ventura, on December 20, 1933. On
September 22, 1930, that is, during pendency of said cadastral case, the spouses purportedly
leased a part of said lot to the respondent for P100, which lease was cancelled and superseded
by a deed of sale executed on the same date, whereby the said spouses, in consideration of
P1,000, conveyed eleven-twentieth of the same land in favor of the respondent. This is also
the finding of the Solicitor-General in his report submitted in this case:

Issue: W/N Atty. Ruste can appropriate the properties given by the Complainants as fee to his
service?

Ruling: No and it constitutes malpractice on the side of the Atty. Whether the deed of sale in
question was executed at the instance of the spouses driven by financial necessity, as contended by
the respondent, or at the latter's behest, as contended by the complainant, is of no moment. In either
case as attorney occupies a vantage position to press upon or dictate his terms to a harassed client, in
breach of the "rule so amply protective of the confidential relations, which must necessarily exist
between attorney and client, and of the rights of both." (Hernandez vs. Villanueva, supra.)

There is evidence to show that the respondent has failed to account to the aggrieved spouses for the
various amounts received by him on account of the transactions effected by him pertaining to the
portion of lot No. 3764. However, as the evidence is conflicting and the statements of the parties are
contradictory on this point, it is believed that the determination of the exact amount due them by the
respondent should better elucidated and determined in an appropriate action which the complaint and
his spouse may institute against the respondent for this purpose.

For having improperly acquired the property referred to in Exhibits A and B, under the above
circumstances, which property was then subject matter of a judicial proceedings, in which he
was counsel, the respondent is found guilty of malpractice and is hereby suspended for a
period of one year, reserving to the complainant and his spouse such action as may by proper for the
recovery of such amount or amounts as may be due from the respondent. So ordered.
Norkis Distributors vs. Court of Appeals, G.R. No. 91029, February 7, 1991
The critical factor which gives legal effect to the act is the actual intention of the vendor to deliver,
and its acceptance by the vendee. Without that intention, there is no tradition.

FACTS

Alberto Nepales bought from Norkis Distributors, Inc. a brand-new Yamaha motorcycle payable by a
means of Letter of Guaranty from the Development Bank of the Philippines (DBP). As security, Alberto
executed a chattel mortgage on the motorcycle in favor of DBP. To facilitate the chattel mortgage,
Norkis Distributors issued a sales invoice showing that the contract of sale was perfected. Further, the
motorcycle was registered with the Land Transportation Office (LTO) in the name of Alberto. The
motorcycle was delivered to a certain Julian Nepales who allegedly was an agent of Alberto, which the
latter denied being his agent.

Later on, the motorcycle met an accident which resulted to its total wreck. DBP released the loan
proceeds to Norkis Distributors, which prompted Alberto to demand the delivery of the motorcycle.
When Norkis Distributor could not deliver, Alberto filed an action for specific performance with
damages before the Regional Trial Court (RTC). Norkis Distributor answered that the motorcycle had
been delivered already. The RTC ruled in favor of Alberto, which was affirmed by the Court of Appeals
(CA).

Hence, Norkis Distributor filed a Petition before the Supreme Court averring that the motorcycle has
already been delivered as evidenced by the issuance of the Sales Invoice and registration of the
motorcycle under the name of Alberto.

ISSUE: Whether or not Norkis Distributor shall bear the loss of the motorcycle.

HELD

The Supreme Court ruled in the affirmative. The act of delivery whether constructive or actual, must
be coupled of delivering the thing, without which the act is insufficient. In other words, the critical
factor which gives legal effect to the act is the actual intention of the vendor to deliver, and its
acceptance by the vendee. Without that intention, there is no tradition.

In the present case, the issuance of sales invoice did not prove the transfer of ownership as it is
nothing, but a detailed statement of the thing sold. It is also not considered as a bill of sale. Further,
with the said issuance and the subsequent registration in the name of Alberto, Norkis Distributor did
not intend to transfer the title to Alberto. It only made so to facilitate the execution of the chattel
mortgage in favor of DBP. Hence, there was no tradition.

As such, the Civil Code provides that the things sold remain at the seller’s risk until ownership thereof
is transferred to the buyer, in the absence of an express assumption of risk by the buyer, for there
was neither an actual or constructive delivery of the thing.

RULING

Petition is DENIED. CA Decision is affirmed.

Gaisano v Insurance G.R. No. 147839 June 8, 2006

Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire insurance policies with book debt
endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing
materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the
Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45
days after the time of the loss covered under this Policy." The policies also provide for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and
delivered by the Insured which are outstanding at the date of loss for a period in excess of six (6) months from the
date of the covering invoice or actual delivery of the merchandise whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every
calendar month all amount shown in their books of accounts as unpaid and thus become receivable item from their
customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore
Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or
destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and LSPI were paid for
their claims and that the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials
with IMC was P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was purely accidental; that the
cause of the fire was not attributable to the negligence of the petitioner. Also, it said that IMC and LSPI retained
ownership of the delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano to pay Insurance the P 2
million and the P 500,000 the latter paid to IMC and Levi Strauss.
Hence this petition.

Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of
IMC and LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to
petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales
invoices that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the
above described merchandise remains the property of the vendor until the purchase price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with IMC and LSPI.

Held:.
1. No. Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods
sold and delivered to the customers and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days
after the loss through fire, and not the loss or destruction of the goods delivered.
2. Yes. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred
to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether
actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the
contract and the ownership in the goods has been retained by the seller merely to secure performance by the
buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by
the buyer. Petitioner bears the risk of loss of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the delivered goods. Unlike the civil law
concept of res perit domino, where ownership is the basis for consideration of who bears the risk of loss, in
property insurance, one's interest is not determined by concept of title, but whether insured has substantial
economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable interest in property
may consist in: (a) an existing interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy,
coupled with an existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its
destruction. Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any
interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien. In
this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account
45 days after the time of the loss covered by the policies.
3. Yes. Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 117432 of the
Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's
accounts with IMC and LSPI that remained unpaid 45 days after the fire. Accordingly, petitioner's obligation is for
the payment of money. As correctly stated by the CA, where the obligation consists in the payment of money, the
failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his liability.
The rationale for this is that the rule that an obligor should be held exempt from liability when the loss occurs thru
a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and there is
no stipulation holding him liable even in case of fortuitous event. It does not apply when the obligation is pecuniary
in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of
anything of the same kind does not extinguish the obligation." This rule is based on the principle that the genus of
a thing can never perish. An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of
any specific property of the debtor.
4. Yes. With respect to IMC, the respondent has adequately established its claim. The P 3 m claim has been
proven. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation
accrues simply upon payment by the insurance company of the insurance claim Respondent's action against
petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. There was no evidence that
respondent has been subrogated to any right which LSPI may have against petitioner. Failure to substantiate the
claim of subrogation is fatal to petitioner's case for recovery of P535,613.00.
LEONCIA T. ZAIDE, et. at. vs. Court of Appeals
NARVASA, J.:
Facts: On January 11, 1965, Edita Zaide executed a public instrument
denominated "Deed of Sale" by which, in consideration of P5,000.00 paid to her,
she sold the parcel of land covered
by TCT No. 69088 to Leoncia T. Zaide. The deed described both the vendor, Edita
Zaide, and the vendee, Leoncia T. Zaide, as "married," but named neither of
their husbands. The document however did bear the signature of Edita's husband,
Roberto de Leon, indicating his "marital consent."
The omission of the name of the vendee's husband in the deed of sale gave
rise to a problem. Precisely because of it, the Register of Deeds refused to
accept it for registration. A second deed of sale — couched in the same terms as
the first but this time with the names of the husbands of both the vendor and
the vendee -was made and shortly thereafter was presented to, and was promptly
accepted for registration, by the Register of Deeds. The latter then issued a
new title, TCT No. 138606, in the name of "Leoncia T. Zaide, married to
Primitivo Zaide."
With this lot as collateral, the Zaide Spouses thereafter obtained a loan
from the Government Service Insurance System in the sum of P28,500.00. This was
sometime in November, 1964. The proceeds were used to construct a two-story
apartment building on the land.
On June 1, 1969, the house of the de Leons burned down. They moved to one of the
doors of the apartment built by the Zaide Spouses. They were asked to pay
rentals. They refused. Litigation ensued.
The de Leon Spouses filed a complaint with the Court of First Instance of
Rizal against the Zaide Spouses alleging that the second deed of sale was forged
and therefore should be cancelled. The De Leon spouses reasoned that they "could
not possibly have sold their lot for the measly sum of P5,000.00 appearing in
the forged deed ..considering that the market price of the land ... cannot be
less than P20,000.00.”
CFI rendered judgement in favor of the Zaide Spouses i.e the second deed
of sale is VALID. CA reversed. Hence, this the instant case.

Issue: Whether or not the first Deed of sale is valid even if defective of
faulty in its form.

Held: YES, the first deed of sale is VALID. Although the first deed of sale was
genuine, it was so far defective as to render it unregistrable in the Registry
of Property. As already pointed out, it did not set forth the name of the
vendee's husband and was for this reason refused registration by the Register of
Deeds. The defect was unsubstantial. It did not invalidate the deed . The legal
dispositions are clear. Though defective in form, the sale was valid; and the
parties could compel each other to do what was needful to make the document of
sale registrable. The law generally allows a contract of sale to be entered into
in any form, whether "in writing, or by word of mouth, or partly in writing and
partly by word or mouth, or (even) inferred from the conduct of the parties;"
but if the agreement concerns "the sale of land or of an interest therein," the
law requires not only that "the same, or some note or memorandum thereof, be in
writing, and subscribed by the party charged" in order that it may be enforceable
by action, but also that the writing be in the form of a "public document." The law
finally provides that "If the law requires a document or other special form, as
in the acts and contracts enumerated in .. (Article 1358), the contracting
parties may compel each other to observe that form, once the contract has been
perfected .. (and such) right may be exercised simultaneously with the action
upon the contract."
In the case at bar, the Zaides thus had the right to compel the de Leons to
observe the special form prescribed by law; i.e., revised the public document by
inserting the name of the vendee's husband. Indeed, this was precisely what was
done in the second deed of sale.
Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to the buyer, even if
there is a contract to sell between them. It is also upon the existence of the contract of sale that the buyer is
obligated to pay the purchase price to the seller. Since the transfer of ownership is in exchange for the purchase
price, these obligations must be simultaneously fulfilled at the time of the execution of the contract of sale, in the
absence of a contrary stipulation.

In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code, as follows:

Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the
object of the sale. (Emphasis supplied)

The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of real property, the
seller is not obligated to transfer in the name of the buyer a new certificate of title, but rather to transfer
ownership of the real property. There is a difference between transfer of the certificate of title in the name of the
buyer, and transfer of ownership to the buyer. The buyer may become the owner of the real property even if the
certificate of title is still registered in the name of the seller. As between the seller and buyer, ownership is
transferred not by the issuance of a new certificate of title in the name of the buyer but by the execution of the
instrument of sale in a public document.
TOMAS K. CHUA v. CA, GR No. 119255, 2003-04-09
Facts: Valdes-Choy advertised for sale her paraphernal house and lot ("Property") Chua responded to
the advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price of
P10,800,000.00 payable in cash.

Valdes-Choy received from Chua a check for P100,000.00 R E C E I P T ONE HUNDRED THOUSAND PESOS
ONLY (P100,000.00) as EARNEST MONEY Chua secured from Philippine Bank of Commerce ("PBCom") a
manager's check for P480,000.00.

Chua handed to Valdes-Choy the PBCom manager's check for P485,000.00 so Valdes-Choy could pay the
capital gains tax as she did not have sufficient funds to pay the tax. Valdes-Choy issued a receipt...
showing that Chua had a remaining balance of P10,215,000.0 Valdes-Choy, accompanied by Chua,
deposited the P485,000.00 manager's check to her account with Traders Royal Bank.

On time of the deal, Chua showed to Valdes-Choy a PBCom manager's check for P10,215,000.00
representing the balance of the purchase price. Chua, however, did not give this PBCom manager's
check to Valdes-Choy because the TCT was still registered in the name of Valdes-Choy. Chua required
that the Property be registered first in his name before he would... turn over the check to Valdes-Choy.
This angered Valdes-Choy who tore up the Deeds of Sale, claiming that what Chua required was not part
of their agreement.

On 15 July 1989, the deadline for the payment of the balance of the purchase price, ValdesChoy
suggested to her counsel that to break the impasse Chua should deposit in escrow the P10,215,000.00
balance. Upon such deposit, Valdes-Choy was willing to... cause the issuance of a new TCT in the name
of Chua even without receiving the balance of the purchase price. Valdes-Choy's counsel promised to
relay her suggestion to Chua and his counsel, but nothing came out of it.

Chua filed a complaint for specific performance against Valdes-Choy which the trial court dismissed
Chua re-filed his complaint for specific performance with damages. After trial in due course, the trial
court rendered... judgment in favor of Chua,... Valdes-Choy appealed to the Court of Appeals which
reversed the decision of the trial court

Issues: (a) whether the transaction between Chua and Valdes-Choy is a perfected contract of sale or a
mere contract to sell, and (b) whether Chua can compel Valdes-Choy to cause the issuance of a new TCT
in Chua's name even before payment of the full purchase price.

Ruling: The petition is bereft of merit. There is no dispute that Valdes-Choy is the absolute owner of the
Property which is registered in her name... the balance of P10,215,000.00 was not actually paid to
Valdes-Choy Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the
Receipt, as a contract to sell and not a contract of sale.

We hold that the agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract
to sell and not a contract of sale. The distinction between a contract of sale and contract to sell is... well-
settled: In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing
sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the
vendee until full payment of the purchase price. perusal of the Receipt shows that the true agreement
between the parties was a contract to sell. Receipt provides that the earnest money shall be forfeited in
case the buyer fails to pay the balance of the purchase price on or before 15 July 1989.

In such event, Valdes-Choy can sell the Property to other interested parties. There is in effect a right...
reserved in favor of Valdes-Choy not to push through with the sale upon Chua's failure to remit the
balance of the purchase price before the deadline. This is in the nature of a stipulation reserving
ownership in the seller... the agreement between Chua and Valdes-Choy was embodied in a receipt
rather than in a deed of sale, ownership not having passed between them.

Valdes-Choy retained possession of the certificate of title Since the agreement between Valdes-Choy
and Chua is a mere contract to sell, the full payment of the purchase price partakes of a suspensive
condition In a contract to sell, the obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. It is only upon the existence of the contract of sale that the
seller becomes obligated to transfer the ownership Prior to the existence of the contract of sale, the
seller is not obligated to transfer ownership to the buyer, even if there is a contract to sell between
them. It is also upon the existence of the contract of sale that the buyer is obligated to pay the purchase
price to the... seller.

Since the transfer of ownership is in exchange for the purchase price, these obligations must be
simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of a contrary
stipulation. In the sale of real property, the seller is not obligated to transfer in the name of the buyer a
new certificate of title, but rather to transfer ownership of the real property.

In a contract of sale of real property, delivery is effected when the instrument of sale is executed in a
public document Valdes-Choy was in a position to comply with all her obligations as a seller under the
contract to sell.

Since Chua refused to pay the consideration in full on the agreed date, which is a suspensive condition,
Chua cannot compel Valdes-Choy to consummate the sale of the Property. Chua acquired no right to
compel Valdes-Choy to transfer ownership of the Property to him because the suspensive condition -
the full payment of the purchase price - did not happen.

Principles: Art. 1458. By the contract of sale 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.

In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code, as
follows: Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the
thing which is the object of the sale. Delivery is not only a necessary condition for the enjoyment of the
thing, but is a mode of acquiring dominion and determines the transmission of ownership, the birth of
the real right.
The delivery, therefore, made in any of the forms provided in articles 1497... to 1505 signifies that the
transmission of ownership from vendor to vendee has taken place. The delivery of the thing constitutes
an indispensable requisite for the purpose of acquiring ownership. Our law does not admit the doctrine
of transfer of property by mere... consent; the ownership, the property right, is derived only from
delivery of the thing Article 1498 of the Civil Code provides that Art. 1498. 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 clearly be inferred.

Article 1582 of the Civil Code provides that Art. 1582. The vendee is bound to accept delivery and to pay
the price of the thing sold at the time and place stipulated in the contract. ART. 1181. In conditional
obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired shall
depend upon the happening of the event which constitutes the condition.
Alfredo vs. Borras, 404 SCRA 145 (2003)
Facts:
A parcel of land measuring 81,524 square meters ("Subject Land") in Barrio Culis, Mabiga,Hermosa,
Bataan is the subject of controversy in this case. The spouses Godofredo Alfredo ("Godofredo")and
Carmen Limon Alfredo ("Carmen") were the registered owners and they subsequently sold the same to
the spouses Armando Borras ("Armando") and Adelia Lobaton Borras ("Adelia") where some of the
money was used to pay the mortgage loan of spouses Alfredo with the Development Bank of the
Philippines("DBP"). Thereafter, the spouses Borras took possession of the land but discovered that the
spouses Alfredore-sold the land to other persons. Spouses Borras filed an adverse claim with the
Register of Deeds of Bataan. They discovered that Godofredo and Carmen had secured an owner's
duplicate copy of OCT No. 284 after filing a petition in court for the issuance of a new copy. Godofredo
and Carmen claimed in their petition that they lost their owner’s duplicate copy. Armando and Adelia
wrote Godofredo and Carmen complaining about their acts,but the latter did not reply. Thus, Armando
and Adelia filed a complaint for specific performance. Armando and Adelia amended their complaint to
include the following persons as additional defendants: the spouses Arnulfo Savellano and Editha B.
Savellano, Danton D. Matawaran, the spouses Delfin F.Espiritu, Jr. and Estela S. Espiritu, and
Elizabeth Tuazon ("Subsequent Buyers"). The Subsequent Buyers, who are also petitioners in this
case, purchased from Godofredo and Carmen the subdivided portions of the Subject Land. The
Register of Deeds of Bataan issued to the Subsequent Buyers transfer certificates of title to the lots
they purchased. In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively
"petitioners") argued that the action is unenforceable under the Statute of Frauds. Petitioners pointed
out that there is no written instrument evidencing the alleged contract of sale over the Subject Land in
favor of spouses Borras. Petitioners asserted that the Subsequent Buyers were buyers in good faith
and for value. The Court ruled in favor of the spouses Borras. Petitioners appealed to the Court of
Appeals which thereafter issued its Decision affirming the decision of the trial court. It denied
petitioners' motion for reconsideration. The Court of Appeals found the factual findings of the trial
court well supported by the evidence. Based on these findings, the Court of Appeals also concluded
that there was a perfected contract of sale and the Subsequent Buyers were not innocent purchasers.

Issue: Whether the action to enforce the alleged oral contract of sale brought after 24 years from its alleged
perfection had been barred by prescription and by laches.

Whether the deeds of absolute sale and the transfer certificates of title over the portions of the Subject Land issued
to the Subsequent Buyers, innocent purchasers in good faith and for value whose individual titles to their
respective lots are absolute and indefeasible, are valid.

Ruling: The contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia
was a perfected contract. A contract is perfected once there is consent of the contracting parties on the object
certain and on the cause of the obligation.[12 In the instant case, the object of the sale is the Subject Land, and
the price certain is P15,000.00.

The contract of sale of the Subject Land has also been consummated because the sellers and buyers have
performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to
transfer the ownership of the determinate thing sold, and to deliver the same, to the buyer who obligates himself
to pay a price certain to the seller. In the instant case, Godofredo and Carmen delivered the Subject Land to
Armando and Adelia, placing the latter in actual physical possession of the Subject Land by introducing them as
new owners to the Tenants. Godofredo and Carmen also turned over to Armando and Adelia the documents of
ownership to the Subject Land, namely the owners duplicate copy of OCT No. 284, the tax declaration and the
receipts of realty tax payments.

On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt dated 11 March
1970 issued by Carmen. Armando and Adelia fulfilled their obligation to provide the P7,000.00 to pay the D
The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The Statute of Frauds
provides that a contract for the sale of real property shall be unenforceable unless the contract or some note or
memorandum of the sale is in writing and subscribed by the party charged or his agent. The existence of the
receipt dated 11 March 1970, which is a memorandum of the sale, removes the transaction from the
provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed.
Thus, where one party has performed ones obligation, oral evidence will be admitted to prove the agreement. In
the instant case, the parties have consummated the sale of the Subject Land, with both sellers and buyers
performing their respective obligations under the contract of sale.

Godofredo and Carmen had already sold the Subject Land to Armando and Adelia. The settled rule is
when ownership or title passes to the buyer, the seller ceases to have any title to transfer to any third
person.[54 If the seller sells the same land to another, the second buyer who has actual or constructive knowledge
of the prior sale cannot be a registrant in good faith.[55 Such second buyer cannot defeat the first buyers title.[56
In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the
sale.[57cräläwvirtualibräry

Thus, to merit protection under the second paragraph of Article 1544[58 of the Civil Code, the second buyer must
act in good faith in registering the deed.[59 In this case, the Subsequent Buyers good faith hinges on whether
they had knowledge of the previous sale. Petitioners do not dispute that Armando and Adelia registered their
adverse claim with the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers purchased their
respective lots only on 22 February 1994 as shown by the date of their deeds of sale. Consequently, the adverse
claim registered prior to the second sale charged the Subsequent Buyers with constructive notice of the defect in
the title of the sellers,[60 Godofredo and Carmen.

It is immaterial whether Calonso, the broker of the second sale, communicated to the Subsequent Buyers the
existence of the adverse claim. The registration of the adverse claim on 8 February 1994 constituted, by operation
of law, notice to the whole world.[61 From that date onwards, the Subsequent Buyers were deemed to have
constructive notice of the adverse claim of Armando and Adelia. When the Subsequent Buyers purchased portions
of the Subject Land on 22 February 1994, they already had constructive notice of the adverse claim
registered earlier.[62 Thus, the Subsequent Buyers were not buyers in good faith when they purchased
their lots on 22 February 1994. They were also not registrants in good faith when they registered their deeds of
sale with the Registry of Deeds on 24 February 1994.

The Subsequent Buyers individual titles to their respective lots are not absolutely indefeasible. The defense of
indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate of title with
notice of a flaw in his title.[63 The principle of indefeasibility of title does not apply where fraud attended
the issuance of the titles as in this case.