Topic: Article 1482

Whenever earnest money is given in a contract of sale it shall be considered as part of

the price and as proof of the perfection of the contract.

First Optima Realty vs. Securitron Security Services

G.R. No. 199648
28 January 2015

Facts:

Eleazar, representing Securitron Security Services, Inc, offered to buy the property of
First Optima Realty Corporation.

Eleazar had conducted negotiation with Young, Executive Vice President of Optima,
however, the negotiations did not reach any agreement as the latter told the former
that she needs to confer the discussion to her sister.

However, despite the fact that no agreement was made - no contract was settled,
Eleazar issued a check in favour of Optima, accompanied by a letter, stating that the
check serves as the earnest money.

Hence, this petition.

Issue:

Whether or not the money delivered was earnest money thereby providing a perfected
contract of sale.

Ruling:

No.

Article 1482 provides that there must first be a perfected contract of sale before we
can speak of earnest money.

In the case at bar, Eleazar and Young had some negotiations but never reached an
agreement, the latter told that she needs to confer the meeting to her sister. This
impliedly means that the offer was never accepted. Hence, no contract was made.
However, Eleazar still proceeded in giving the check accompanied by the letter serve
us an earnest money not, and the check was not given directly to Young but to clerk of
the business.
Therefore, the money deposited is not earnest money because Article 1482 provides
that there must first be a perfected contract of sale before we can speak of earnest
money. Apparently, in this case, there was no contract happened as the parties never
got past the negotiation stage.

Rizalino Oesmer, et.al. vs. Paraiso Devt. Corp. (G.R. No. 157493, Feb.5, 2007)

Facts:

Earnesto and Enriqueta Oesmer signed the contract to sell drafted by the Paraiso
Development Corporation. And a check was given in the amount of P100,000.00
referred as option money.

However, the Oesmer siblings informed their intention to rescind the Contract to Sell
and return the amount of P100,000.00 given by the Paraiso. Subsequently, filed a
complaint for Declaration of Nullity or Annulment of Option Agreement or Contract to
Sell.

Regional Trial Court ruled the case in favour of Paraiso, which was affirmed by the
Court of Appeals, and declared that the Contract to Sell executed is a valid and
binding to the signatories of the contract.

Oesmer siblings avers that the Contract to Sell is a unilateral promise to sell and the
option money does not bind them for lack of cause or consideration distinct from the
price.

Issue:

Whether or not the consideration of P100,000.00 paid is an option money.

Ruling:

No.

The Court differentiates the difference between earnest money and option contract.

1. Earnest money is part of the purchase price. Option money is a distinct

consideration for an option contract.

2. Earnest money is given only where there is already a sale. Option money applies
to a sale not yet perfected.

3. When earnest money is given, the buyer is bound to pay the balance. When
option contract is given, he is not required to buy, but may even forfeit it
depending on the terms of the option.
In the case at bar, Ernesto and Enriqueta signed the Contract to Sell drafter by the
Paraiso Corporation. Consequently, Paraiso issued a check in the amount of
P100,000.00 referred as "option money". However, facts provided that Ernesto took the
receipt of the amount of P100,000.00 which formed part of the purchase price.

Therefore, the consideration of P100,000.00 is not an option contract but instead an

earnest money because the amount given is done after the contract to sell was
executed, and the facts provided that the amount given formed part of the purchase
price, which these traits cannot be attached to option money.

Nota Bene:

It is well-settled that contracts are perfected by mere consent, upon the acceptance by
the offeree of the offer made by the offeror.

Topic: Article 1484

Art. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee’s failure to pay cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.

Equitable Savings Bank vs. Rosalinda Palces

G.R. No. 214752
9 March 2016

Facts:

Palces purchased a car through a loan granted by petitioner. The former executed a
Promissory Note with Chattel Mortgage in favour of Equitable Savings Bank.

However, Palces failed to pay the monthly installments in January and February 2007,
which triggered the acceleration clause contained in the Promissory Note with Chattel
Mortgage. Palces made a late payments to make amends of her default.

Equitable Savings Bank filed a replevin suit to recover the possession of the subject
property, which was granted by the Regional Trial Court, and affirmed by the Court of
Appeals.
The Court of Appeals avers that Equitable Savings Bank should not accepted Palces’
late partial payment because by choosing to recover the subject property via writ of
replevin, Equitable Savings Bank waived its right to recover any unpaid installments,
pursuant to Article 1484 of the New Civil Code.

Issue:

Whether or not Article 1484 is applicable in this case.

Ruling:

No.

In Article 1484, it is important to establish the existence of vendor-vendee

relationship.

In the case at bar, Palces bough the subject vehicle to a third party, and sought
financing from Equitable Savings Bank for its full purchase price.

Therefore, Article 1484 is not applicable in this case because there was no vendor-
vendee was established as Palces never bought the subject property to Equitable
Savings Bank, the latter only financed the full purchase price of the personal property.

Requisites:

1. There must be a contract

2. The contract must be one of sale
3. What is sold is personal property
4. The sale must be on the installment place.

Levy Hermanos, Inc. vs. Gervacio

69 Phil. 52
1939

Facts:

Levy Hermanos sold a car to Lazaro Blas Gervacio.

In this case, Gervacio, after making the initial payment, executed a promissory note
for the balance of P2,400, payable on of before 15 June 1937, the same also
mortgaged the car to Hermanos.

However, Gervacio failed to pay the note at its maturity, which prompted Hermanos to
foreclosed the car, at which Hermanos himself was the highest bidder for P800.
Hermanos filed an action for the collection of the balance of P1,600.00 and interest.

The Court ruled that Hermanos can no longer recover the balance because he already
availed the foreclosure of the property. The judge cited Article 1454-A which states
that if the vendor has chosen to foreclose the mortgage, he shall have no further action
against the purchaser for the recovery of unpaid balance.

Issue:

Whether or not Article 1454-A of Civil Code is applicable in this case

Ruling:

No.

Article 1454-A of Civil Code does not apply to the sale of personal property on straight
terms. A sale on straight terms, after the payment of the intial payment, the balance
should be paid in its totality at the time specified.

In the case at bar, Gervacio, after making his initial payment, he executed a
promissory note for the balance of P2,400, payable on or before 15 June 1937,

Therefore, Article 1454-A is not applicable in this case because the sale of personal
property in this case is on straight terms.

Topic: Article 1487

The expenses for the execution and registration of the sale shall be borne by the vendor,
unless there is a stipulation to the contrary.

Estate of C.T. Lim vs. City of Manila

182 SCRA 482
1990

Facts:

Concordia Lim obtained a real estate loan from Government Service Insurance System
(GSIS) in the amount of around P800,000.00, secured by a mortgage constituted on
two (2) parcles of land.

In 1977, Lim failed to pay the loan which resulted to foreclosure, where the GSIS was
the highest bidder.

In 1979, Ernestina, the administratix, was allowed to repurchase the foreclosed

properties.
However, City Treasurer of Manila required Lim to pay the real estate taxes due of the
properties for the years of 1977, 1978, and first quarter of 1979. Ernestina paid the
same but under protest.

RTC dismissed the case for lack of jurisdiction .

Hence, this petition.

Issue:

Whether or not Lim has the right to recover.

Ruling:

Yes.

Article 1487 of the Civil Code provides that the expenses for the execution and
registration of the sale shall be borne by the vendor, unless there is a stipulation to
the contrary.

In the case at bar, there is no stipulation in the contract states that "real estate taxes"
due for the years 1977, 1978, and first quarter of 1979 shall be paid by Lim. The
payments made by the Lim cannot be construed to be an admission of a tax liability
since it was paid under protest.

Therefore, Lim has the right to recover because the law clearly provides tax collected to
her is invalid.

Topic: Article 1490.

The husband and the wife cannot sell property to each other, except:

1. When a separation of property was agreed upon in the marriage settlements; or

2. When there has been a judicial separation of property under Article 191.

Cook vs. McMicking

GR No. 8913
March 3, 1914

Facts

Nellie Cook is the wife of Edward Cook. She is the owner of a parcel of land in Paco,
Manila. A judgment was entered against Cook, by virtue of which, an execution was
issued and levied upon the land owned by Nellie. The land was then advertised for
sale. Nellie prays for a permanent injunction prohibiting McMicking et al from selling
Nellie’s land.

Edward Cook transferred the land to Nellie in 1904. In 1911, Edward became indebted
to Johnson for the purchase of lands. Judgment on the indebtedness was procured in
1912.

Contentions

On the part of Johnson, the transfer of land between Edward and Nellie is void. The
land remains the property of Edward and subject to levy.

Court Decision

CFI Manila granted the injunction restraining the sale of property levied in an
execution issued upon judgment in the case Johnson et al v. Edward Cook.

Issue: WON the transfer between Edward and Nellie is void (NO)

Ruling

The court held that Johnson cannot challenge the validity of the transfer of the land.
They have no relation, right, or interests to Edward and Nellie, or to the property, at
the time of transfer.

There are certain transfers between spouses which are prohibited. This prohibition
can only be taken advantage of by those who have a relation to the spouses, or those
whose rights or interests are interfered with because of the transfer, otherwise, the
transfer cannot be attacked.

Hence, the land is owned by Nellie and is not subject to levy.

Topic: Article 1491.

Article 1491 (5) of the Civil Code applies only if the sale or assignment of the property
takes place DURING THE PENDENCY of the litigation involving client's property.

The Conjugal Partnership of the Sps. Vicente Cadavedo & Benita Arcoy-Cadavedo
vs. Lacaya (713 SCRA 397 [2014]) (in re “Champerty”)

Facts:

Spouses Cadavedo hired the services of Atty. Lacaya on a contingency fee basis, that
they will pay Atty. Lacaya for the amount of P2,000.00 in case that Spouses Cadavedo
become the prevailing parties in the case at bar.
The case filed by Atty. Lacaya on behalf of Spouses Cadavedo obtained a favourable
decision from Court of Appeals with finality, docketed as Civil Case No. 1721.

Consequently, Atty. Lacaya acquired the disputed one-half portion of the property
while the issuance of a writ of execution in Civil Case No. 1721 were already pending
before the lower court. Similarly, the compromise agreement, including the
subsequent judicial approval, was effected during the pendency of Civil Case No. 3352.

Hence, this petition.

Issue:

Whether or not Atty. Lacaya's acquisition of the one-half portion contravenes Article
1491 (5) of the Civil Code.

Ruling:

Yes, Atty. Lacaya’s acquisition of the one-half portion contravenes Article 1491 (5) of
the Civil Code.

Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or
assignment, the property that has been the subject of litigation in which they have
taken part by virtue of their profession. The same is prohibited by Rule 10 of the
Canons of Professional Ethics. This provision applies only if the sale or assignment of
the property takes place DURING THE PENDENCY of the litigation involving client's
property.

In the case at bar, Atty. Lacaya acquired the disputed one-half portion of the property
while the issuance of a writ of execution in Civil Case No. 1721 were already pending
before the lower court. Similarly, the compromise agreement, including the
subsequent judicial approval, was effected during the pendency of Civil Case No.
3352.

Therefore, Atty. Lacaya's acquisition of the one-half portion contravenes Article 1491
(5) of the Civil Code because the acquisition of the property and the compromise
agreement, was effected during the pendency of the Civil Cases No. 1721 and 3352.

The present case cannot be said as a case under the exception of contingent fee. The
Court held that a Contingent fee contract is a valid exception to the prohibition, but
this contract must be in writing where the fee, often a fixed percentage of what may
be recovered in the action, is made to depend upon the success of the litigation. The
payment of the contingent fee is not made during the pendency of the litigation
involving the client's property but only after the judgement has been rendered in
the case handled by the lawyer.
 Joey R. Peña vs. Jesus Delos Santos, et.al.
G.R. No. 202223
2 March 2016

Facts:

Jesus Delos Santos (Jesus) and Rosita Delos Santos Flores (Rosita) were the
judgment awardees of the two-thirds portion or 9,915 square meters of four
adjoining lots designated as Lots 393-A, 393-B, 394-D and 394-E, measuring
14,771 sq m, located in Boracay Island

Peña averred that he is the transferee of Jesus and Rosita's adjudged allotments
over the subject lots. He claimed that he bought the same from Atty. Romeo Robiso
(Atty. Robiso) who in turn, acquired the properties from Jesus and Rosita through
assignment and sale

Apparently, Atty. Robiso was engaged by Jesus and Rosita to be their counsel in Civil
Case No. 3683 by virtue of an Attorney's Agreement and Undertaking dated July 11,
1998. Atty. Robiso undertook to advance his own funds for all expenses and costs he
may incur in relation to the case. In consideration thereof, Jesus and Rosita obliged
themselves to give or pay to him as contingent professional fees, 2,000 sq m of any
and all lands that the courts will award to them in the case.

RTC ruled that the ownership rights was transferred to Atty. Rabiso. The RTC
upheld that the conveyance made by Jesus and Rosita in favor of Atty. Robiso is
valid since it was not made during the pendency of litigation but after judgment
has been rendered.

CA reversed the decision because it was a prohibited transaction under Art.

1491(5).

Issue:

Whether or not the sale to Atty. Robiso is valid.

Ruling:

No.

Article 1491 (5) prohibits lawyers from acquiring property or rights that may be the
object of any litigation on which they may take part by virtue of their profession.
Hence, the sale is void.
In the case at bar, the records show that when the property was conveyed to Atty.
Robiso, the judicial action over the subject lots was still in the appellate proceedings
stage.

Therefore, the property conveyed to Atty. Robiso by Jesus and Rosita is null and void
as the conveyance was executed while it was still the object litigation.