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Sales Case Digest

VELARDE vs. CA (2001)


FACTS:
David Raymundo is absolute & registered owner of parcel of land.
George Raymundo (Davids father) negotiated with Sps. Velarde for
sale of said property which was, however, under lease.
8 Aug 86: DOS with Assumption of Mortgage was executed by
David, as vendor, in favor of Velardes, as vendee with the ff conditions
P800k as downpayment & balance of P1.8M to pay mortgage
obligation to BPI in the name of Raymundo.
Velarde also agreed that until such time that the assumption of
mortgage is approved by BPI, they shall pay said loan + in event that
they violate terms & conditions of Deed of Real Estate Mortgage,
downpayment and all other payments made will be forfeited in favor
of Raymundo + Raymundo is entitled to rescind.
15 Dec 86: Velardes were advised that their application for
assumption of mortgage with BPI was not approved, prompting them
not to make any further payments.
5 Jan 87: Raymundo wrote to Velardes, informing that their nonpayment to BPI constituted non-performanc of their obligation.
7 Jan 87: Velardes expressed willingness to pay balance provided
that 1) Raymundo deliver actual possession of property, 2) cause
the release of title & mortgage from BPI, 3) execute DOAS in their
favor.
8 Jan: Raymundo sent notarial notice of cancellation/rescission of
intended sale due to Velardes failure to comply with terms &
condition of DOS with AOM.
9 Feb: Velardes filed complaint for specific performance and
nullity of cancellation against Raymundo.
ISSUE: WON Raymundos rescission of the contract of sale was
justified
HELD:
Affirmative. Velardes did not merely stop paying the mortgage
obligations; they also failed to pay the balance of the purchase price.
When their application for assumption was disapproved, they should
have paid the balance to Raymundo.
Instead, Velardes sent a letter to Raymundo offering to make such
payment only upon the fulfillment of certain conditions not originally
agreed upon in the contract of sale. Such conditional offer to pay
cannot take the place of actual payment as would discharge the
obligation of a buyer under a contract of sale.
In a contract of sale, the seller obligates itself to transfer the
ownership of and deliver a determinate thing, and the buyer to pay
therefor a price certain in money or its equivalent.
Raymundo had already performed his obligation through the
execution of DOS, which effectively transferred ownership of the
property to Velardes through constructive delivery. Prior physical
delivery or possession is not legally required, and the execution of
DOS is deemed equivalent to delivery.
Velardes did not perform their correlative obligation of paying the
contract price in the manner agreed upon. Worse, they wanted
Raymundo to perform obligations beyond those stipulated in the
contract before fulfilling their own obligation to pay the full purchase
price.
Breach committed by Velardes was substantial so as to warrant
rescission under Art 1191. Their failure to comply with their
obligation to pay the balance violated the very essense of reciprocity
in the contract of sale.
True that Velardes expressed their willingness to pay the balance of
the purchase price one month after it became due; however, this was
not equivalent to actual payment as would constitute a faithful
compliance of their reciprocal obligation. Moreover, the offer to pay
was conditioned on the performance by Raymundo of additional
burdens that had not been agreed upon in the original contract.
STAGES IN THE LIFE OF CONTRACT OF SALE
SAN MIGUEL PROPERTIES vs. SPS. HUANG (2000)
FACTS:

First to Third Exam Coverage


San Miguel Properties is a domestic corporation engaged in
purchase and sale of real properties. Part of its inventory are two
parcels of land.
21 Feb 94: San Miguel offered the properties to Atty. Dauz,
acting for Sps. Huang, for sale for P52.140M in cash.
24 Mar: Atty. Dauz signified Sps. Huangs interest in purchasing
the properties for same amount under ff terms P500k as earnest
money & balance to be paid in 8 equal monthly installments from
May-Dec 94. San Miguel refused.
29 Mar 94: Atty. Dauz wrote another letter with the ff terms
P1M as earnest-deposit money provided that 1) they be given
exclusive option to purchase property w/in 30 days from date of
acceptance, 2) during said period, they will negotiate terms &
conditions of purchase, 3) refund P1M if no agreement.
San Miguels VP Sobrecarey indicated conformity & affixed his
signature & accepted P1M. Sobrecarey ordered removal of For Sale
sign.
Atty. Dauz & Sobrecarey commenced negotiations. Sobrecarey
informed willingness to sell on 90-day term. Atty. Dauz countered
with offer of 6mos to pay.
14 Apr: met again & Atty. Dauz proposed 4mos to pay.
25 Apr: Atty. Dauz asked for extension of 45 days (until 13 Jun)
within which to exercise her option to purchase. Granted.
7 Jul: San Miguel wrote Atty. Dauz, informing her that because
they failed to agree on terms & conditions of sale, it is returning P1M
to Sps. Huang.
20 Jul: Sps. Huang demanded DOS & attempted to return
earnest-deposit but San Miguel refused on the ground that their
option to purchase had already expired.
16 Aug: Sps. Huang filed complaint for specific performance.
ISSUE: WON there was a perfected contract of sale by virtue of the
P1M paid as the earnest money
HELD:
Negative. P1M earnest-deposit could not have been given as
earnest money as contemplated in Art 1482 because, at the time San
Miguel accepted the terms of Atty. Dauzs offer, their contract had not
yet been perfected.
This is evident from the conditions attached by Atty. Dauz to the
letter. First condition shows that sale was never perfected. Acceptance
of this condition did not give rise to a perfected sale but merely to an
option or an accepted unilateral promise on the part of Sps. Huang to
buy the properties within 30 days from the date of acceptance of the
offer. Such option giving them the exclusive right to buy the
properties within the period agreed upon is separate and distinct
from the contract of sale which the parties may enter.
Even the option secured by Sps. Huang was fatally defective. Art.
1479, an accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor only if the
promise is supported by a distinct consideration. Consideration in an
option contract may be anything of value, unlike in sale where it must
be the price certain in money or its equivalent. There is no showing
here of any consideration for the option. Lacking any proof of such
consideration, the option is unenforceable.
Second condition is even more proof that contract was not
perfected. The stages of contract of sale are:
1. negotiation period from the time the prospective
contracting parties indicate interest in the contract to the
time contract is perfected
2. perfection concurrence of essential elements of sale;
meeting of the minds of the parties as to object & price
3. consummation begins when parties perform their
respective undertakings under the contract
The alleged "indubitable evidence" of a perfected sale cited by the
CA was nothing more than offers and counter-offers which did not
amount to any final arrangement containing the essential elements of
a contract of sale. While the parties already agreed on the real
properties which were the objects of the sale and on the purchase
price, the fact remains that they failed to arrive at mutually
acceptable terms of payment.
Manner of payment of the purchase price is an essential element
before a valid and binding contract of sale can exist. Although CC
does not expressly state that the minds of the parties must also meet

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Sales Case Digest


on the terms or manner of payment of the price, the same is needed,
otherwise there is no sale.
Thus, it is not the giving of earnest money, but the proof of the
concurrence of all the essential elements of the contract of sale which
establishes the existence of a perfected sale.
II. ESSENTIAL CHARACTERISTICS OF A CONTRACT OF SALE
1. Nominate and Principal
2. Consensual
QUIJADA vs. CA (1998)
FACTS:
Petitioners are the children of late Trinidad Corvera Vda. De
Quijada. Trinidad was one of the heirs of late Pedro Corvera &
inherited from him 2-hec parcel of land.
5 Apr 56: Trinidad together with sisters Leonila & Paz, & brother
Epapiadito executed conditional deed of donation of 2-hec parcel of
land in favor of Municipality of Talacogon on the condition that land
shall be used solely as part of the campus of proposed provincial high
school.
However, Trinidad remained in possession of the parcel of land
despite donation.
29 Jul 62: Trinidad sold 1-hec of land to Regalado Mondejar.
Also, Trinidad verbally sold remaining 1-hec to Mondejar without
benefit of written DOS but evidenced by receipts of payment.
80: heirs of Trinidad filed complaint for forcible entry against
Mondejar. Dismissed.
87: proposed provincial high school having failed to materialize,
Sangguniang Bayan of Talacogon enacted resolution reverting 2-hec
land donated back to the donors.
In the meantime, Mondejar sold portions of the land to Bautista,
Golorans, Guden.
5 Jul 88: heirs of Trinidad filed action against Mondejar et.al.,
alleging that their deceased mother never sold, conveyed or
transferred of the property in question to any person because it was
already donated to the Municipality & at time of alleged sale, land was
still owned by Municipality hence sale was void.
ISSUE: WON the sale made by Trinidad Quijada to Mondejar was
perfected and as such, was valid
HELD:
Affirmative. Donation made on 5 Apr 56 by Trinidad and her
brother & sisters was subject to condition that the donated property
shall be "used solely and exclusively as a part of campus of the
proposed Provincial High School in Talacogon. It further provides
that should "the proposed Provincial High School be discontinued or
if the same shall be opened but for some reason or another, the same
may in the future be closed" the donated property shall automatically
revert to the donor.
When the Municipality's acceptance of the donation was made
known to the donor, the former became the new owner of the
donated property notwithstanding condition imposed by the donee.
The donation is perfected once acceptance by the donee is made
known to donor. Ownership is immediately transferred to the latter
and that ownership will only revert to the donor if the resolutory
condition is not fulfilled.
Resolutory condition is the construction of the school. Hence,
Trinidad could not have sold the lots since she had earlier transferred
ownership thereof by virtue of DOD. So long as the resolutory
condition subsists and is capable of fulfillment, donation remains
effective and donee continues to be the owner. Since no period was
imposed by donor for donee to comply, latter remains owner.
Such period, however, became irrelevant when the Municipality
manifested through resolution that it cannot comply with condition of
building a school & this was made known to donor.
The donor may have an inchoate interest in donated property
during the time that ownership of the land has not reverted to her.
Such inchoate interest may be the subject of contracts including a
contract of sale. Hence, sale was valid as Trinidad retained an
inchoate interest on the lots by virtue of the automatic reversion
clause in DOD.

First to Third Exam Coverage


As to laches, not yet barred. Heirs cause of action to quiet title
commenced only when the property reverted to the donor in 87.
When suit was initiated the ff year, cannot be said that Heirs slept on
their rights for a long time.
Sale, being a consensual contract, is perfected by mere consent,
which is manifested the moment there is a meeting of the minds as
to the offer and acceptance thereof on 3 elements: subject matter,
price and terms of payment of the price.
Ownership by seller on the thing sold at the time of the perfection
of the contract of sale is not an element for its perfection. What the
law requires is that the seller has the right to transfer ownership at
the time the thing sold is delivered. Perfection per se does not
transfer ownership which occurs upon the actual or constructive
delivery of the thing sold. A perfected contract of sale cannot be
challenged on the ground of non-ownership on the part of the seller
at the time of its perfection; hence, the sale is still valid.
Consummation, however, of perfected contract is different. It
occurs upon the constructive or actual delivery of the subject matter
to the buyer when the seller or her successors-in-interest
subsequently acquires ownership thereof. Such circumstance
happened in this case when Heirs became the owners of the subject
property upon the reversion of ownership. Consequently, ownership is
transferred to Mondejar and those who claim their right from him.
LAFORTEZA vs. MACHUCA (2000)
FACTS:
Property consisting of house & lot is registered in name of late
Francisco Laforteza, although conjugal in nature.
2 Aug 88: Lea Laforteza executed SPA in favor of Roberto &
Gonzalo Laforteza, appointing both as her Atty-in-fact authorizing
them jointly to sell subject property & sign any document for
settlement of estate of late Francisco.
Same day: Michael Laforteza executed SPA in favor of Roberto &
Gonzalo granting them same authority.
Both agency instruments contained provision that in any
document or paper to exercise authority granted, signature of both
attys-in-fact must be affixed.
27 Oct 88: Dennis executed SPA in favor of Roberto for purpose
of selling subject property.
30 Oct 89: Dennis executed another SPA in favor of Roberto &
Gonzalo naming both attys-in-fact for purpose of selling subject
property & signing document for settlement of estate of late
Francisco. Also contained same provision.
20 Jan: heirs of late Francisco represented by Roberto & Gonzalo
entered into MOA (Contract to Sell) with Alonzo Machuca for P630k
payable by P30k as earnest money & P600k upon issuance of new
certificate of title & upon execution of extra-judicial settlement of
estate with sale in favor of Machuca.
20 Jan 89: Machuca paid earnest money.
18 Sep 98: heirs wrote letter to Machuca furnishing him a copy
of the reconstituted title to subject property, advising him he had 3
days to produce balance of P600k.
18 Oct: Machuca sent heirs letter requesting for extension of 30
days to produce balance. Roberto signed conformity. But not
approved by Gonzalo.
15 Nov: Machuca informed heirs that he already had P600k but
heirs refused to accept balance. Roberto told him property was no
longer for sale.
20 Nov: heirs informed Machuca that they were cancelling the
MOA in view of latters failure to comply with obligation. Machuca
reiterated request to tender payment. But heirs insisted on rescission.
So Machuca filed action for specific performance.
ISSUE: WON there was perfected contract of sale
HELD:
Affirmative. Perusal of MOA shows that transaction between heir
and Machuca was one of sale and lease. A contract of sale is a
consensual contract and is perfected at the moment there is a
meeting of the minds upon the thing which is the object of the
contract and upon the price.
Elements of valid contract: consent, subject matter, price.

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Sales Case Digest


There was a perfected agreement between heirs & Machuca
whereby heirs obligated themselves to transfer the ownership of and
deliver the house and lot & Machuca to pay price of P600k.
All elements of a contract of sale were thus present. However, the
balance of purchase price was to be paid only upon the issuance of
the new certificate of title in lieu of the one in the name of the late
Francisco Laforteza and upon the execution of an extrajudicial
settlement of his estate. Prior to the issuance of the "reconstituted"
title, the respondent was already placed in possession of the house
and lot as lessee thereof for six months at a monthly rate of.
Option contract. Stipulated that should the issuance of the new
title & execution of extrajudicial settlement be completed prior to
expiration of 6-mo period, Machuca would be liable only for the
rentals pertaining to the period commencing from the date of the
execution of agreement up to execution of the extrajudicial
settlement. It was also expressly stipulated that if after the expiration
of the 6-mo period, the lost title was not yet replaced and the
extrajudicial partition was not yet executed, Machuca would no longer
be required to pay rentals and would continue to occupy. 6-mo
period was not period within which to exercise an option.
6-mo period merely delayed the demandability of the contract of
sale and did not determine its perfection for after the expiration of the
period, there was absolute obligation on the part of heirs & Machuca
to comply with the terms of sale.
The issuance of the new certificate of title in the name of late
Francisco Laforteza & execution of an extrajudicial settlement of his
estate was not a condition which determined the perfection of the
contract of sale.
Heirs failed to distinguish between condition imposed upon
perfection of contract & condtition imposed on performance of
obligation. Failure to comply with the first condition results in the
failure of a contract, while the failure to comply with the second
condition only gives the other party the option either to refuse to
proceed with the sale or to waive the condition.
Art. 1545. Where the obligation of either party to a contract of
sale is subject to any condition which is not performed, such party
may refuse to proceed with the contract or he may waive
performance of the condition. If the other party has promised that
the condition should happen or be performed, such first mentioned
party may also treat the nonperformance of the condition as a breach
of warranty.
Where the ownership in the things has not passed, the buyer
may treat the fulfillment by the seller of his obligation to deliver the
same as described and as warranted expressly or by implication in
the contract of sale as a condition of the obligation of the buyer to
perform his promise to accept and pay for the thing.
There was already perfected contract. Condition was imposed
only on the performance of the obligations contained thereto. The
mere fact that the obligation of the respondent to pay the balance of
the purchase price was made subject to the condition that the
petitioners first deliver the reconstituted title of the house and lot
does not make the contract a contract to sell for such condition is not
inconsistent with a contract of sale.
Also rescission cannot be justified because not delay. Machuca
could not therefore be considered in delay for in reciprocal
obligations, neither party incurs in delay if the other party does not
comply or is not ready to comply in a proper manner with what was
incumbent upon him.
VDA. DE APE vs. CA (2005)
FACTS:
Cleopas Ape was registered owner of Lot 2319 of Escalante
Cadastre. Upon his death, property was passed on to wife Maria
Ondoy & 11 children, including Fortunato.
15 Mar 73: Generosa Cawit de Lumayno joined by husband
Braulio instituted case for specific performance of DOS with damages
against Fortunato & wife Perpetua. Alleged that on 11 Apr 71,
Generosa & Fortunato entered into contract of sale of land for P5k.
Fortunato agreed to sell his share in Lot 2319. Agreement was
contained in receipt prepared by Generosos son-in-law, Andres
Flores.

First to Third Exam Coverage


Generosa wanted to register the claimed sale transaction so she
demanded that Fortunato execute DOS & receive balance of
consideration. But Fortunato refused to heed demands.
Fortunato denied allegations, claiming he never sold his share &
that his signature apprearing on receipt was forged. Also maintained
that they have contract of lease with Generosa, commencing in 1960
& to last 65 with option for another 5 yrs. Annual lease rental was
P100, paid on installment basis.
Generosa testified that Fortunato went to her store to collect
rental payment but she was no longer interested in renewing lease so
they entered into contract of sale instead for P5k. She asked son
Flored to prepare receipt & Flores read document to Fortunato.
Fortunato affixed his signature.
ISSUE: WON there was a perfected contract of sale
HELD:
Negative. A contract of sale is a consensual contract, thus, it is
perfected by mere consent of the parties. It is born from the moment
there is a meeting of minds upon the thing which is the object of the
sale and upon the price. Upon its perfection, the parties may
reciprocally demand performance, that is, the vendee may compel the
transfer of the ownership and to deliver the object of the sale while
the vendor may demand the vendee to pay the thing sold.
The essence of consent is the agreement of the parties on the
terms of the contract, the acceptance by one of the offer made by the
other. It is the concurrence of the minds of the parties on the object
and the cause, which constitutes the contract.
To be valid, consent must meet the following requisites: (a) it
should be intelligent, or with an exact notion of the matter to which it
refers; (b) it should be free and (c) it should be spontaneous.
Intelligence in consent is vitiated by error; freedom by violence,
intimidation or undue influence; spontaneity by fraud.
General rule is that he who alleges fraud or mistake in a
transaction must substantiate his allegation as the presumption is
that a person takes ordinary care for his concerns and that private
dealings have been entered into fairly and regularly. The exception to
this rule is provided under Art 1332 CC which provides that "[w]hen
one of the parties is unable to read, or if the contract is in a language
not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been
fully explained to the former."
Generosa is the one seeking to enforce the claimed contract of
sale, then she hears burden of proving that terms of agreement were
fully explained to Fortunato who was an illiterate. But failed to do.
Andres Flores testified that that the receipt was in English & he was
aware that Fortunato could not read & write English. He did not
bother to request a person who is not related to them to translate the
receipt. Although there was another person in the store with them,
same person also couldnt read & write English. It didnt occur to
Flores to look for another witness from the Municipal Building which
was very near to their house.
VILLANUEVA vs. PNB (2006)
FACTS:
Special Assets Management Department of PNB issued
advertisement for sale thru bidding of certain PNB properties in
GenSan, including Lot 17 (P1.409M) & Lot 19 (P2.268M). Bidding
was subject to ff conditions: 1) cash bids be submitted not later than
27 Apr 89, 2) said bids be accompanied by 10% deposit in
managers/cashiers check, 3) all acceptable bids be subject to
approval by PNB authorities.
28 Jun 90: Reynaldo Villanueva offered to purchase Lots 17 & 19
for P3.677M. Also manifested deposit of P400k to show good faith
but with understanding that it be treated as part of payment of
purchase price only when offer is accepted. PNB forwarded
Villanuevas letter to VP Ramon Guevara of SAMD.
6 Jul 90: Guevara informed Villanueva that only Lot 19 is
available for P2,883,300 & wrote that if price if acceptable, Villanueva
is requested to submit revised offer to purchase. Instead of
submitting revised offer, Villanueva merely inserted at bottom of
Guevaras letter a note:

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Sales Case Digest


CONFORME: Price of P2,883,300 (downpayment of P600k &
balance payable in 2 years)
Villanueva paid P200k to PNB, issued OR 16997 to acknowledge
receipt of partial payment deposit on offer to purchase. Villanueva
signed typewritten note: This is a deposit made to show the sincerity of
my purchase offer with the understanding that it shall be returned
without interest if my offer is not favorably considered or be forfeited if
my offer is approved.
24 Jul 90: P380k was debited from Villanuevas Savings Acct &
credited to SAMD.
11 Oct: Guevara wrote Villanueva that SAMD is deferring
negotiations with him over said property & is returning his deposit.
Villanueva attempted to deliver postdated checks covering balance of
purchase price but PNB refused.
Villanueva filed complaint for specific performance.
ISSUE: WON there was a perfected contract of sale
HELD:
Negative. Contracts of sale are perfected by mutual consent
whereby the seller obligates himself, for a price certain, to deliver and
transfer ownership of a specified thing or right to the buyer over
which the latter agrees. Mutual consent exists only fro confluence of
two acts: an offer certain as to the object of the contract and its
consideration, and an acceptance of the offer which is absolute in that
it refers to the exact object and consideration embodied in said offer.
While it is impossible to expect the acceptance to echo every nuance
of the offer, it is imperative that it assents to those points in the offer
which, under the operative facts of each contract, are not only
material but motivating as well. Anything short of that level of
mutuality produces not a contract but a mere counter-offer awaiting
acceptance.
Case at bar: PNB began with invitation to bid, which should be
submitted not later than 27 Apr 89. 28 Jun, Villanueva made offer to
buy Lots 17 & 19 as an offer corresponding to the Apr 89 invitation
to bid issued by PNB. But it cannot be said that the 28 June letter of
Villanueva was an effective acceptance of the Apr 89 invitation to bid
for, by its express terms, said invitation lapsed on 27 Apr 89. The
June letter of Villanueva was an offer to buy independent of the April
invitation to bid. However, PNB replied that only Lot 19 is available.
This reply was certainly not an acceptance of the June offer but a
mere counter-offer.
In reply, Villanueva signed his conformity but inserted terms as to
manner of payment. This was not an acceptance of the counter-offer
but was a further counter-offer because of his qualified acceptance.
Acceptance of Villanuevas payments did not amount to an
implied acceptance of his last counter-offer, however. To begin with,
PNB, which accepted the payment, had no authority to bind SAMD to
a contract of sale with Villanueva. Amounts paid by Villanueva were
not earnest money but mere deposits or proof of his interest in the
purchase of Lot 19. Acceptance of said amounts by PNB does not
presuppose perfection of any contract.
3.

Bilateral and Reciprocal

CORTES vs. CA (2006)


FACTS:
Villa Ezperanza Devt Corp, as buyer, and Antonio Cortes, as seller,
entered into contract of sale over 3 lots for P3.7M.
Various dates in 83: Corporation advanced to Cortes the sum of
P1.213M.
Sep 83: parties executed DOAS containing ff terms Corporation
shall pay P2.2M upon execution of this instrument, & balance of
P1.5M shall be payable within 1 yr.
Said deed was retained by Cortes for notarization.
14 Jan 85: Corporation filed case for specific performance
seeking to compel Cortes to deliver TCTs & original copy of DOAS,
alleging that despite its readiness to pay purchase price, Cortes
refused to deliver sought documents.
Cortes claimed that owners duplicate copies of TCTs were already
surrendered to Corporation but latter refused to pay in full the agreed
downpayment.

First to Third Exam Coverage


ISSUE: WON rescission is proper since Corporation failed to pay in
full the amount of P2.2 despite Cortes delivery of DOAS
HELD:
Negative. No doubt that the contract of sale in question gave rise
to a reciprocal obligation of the parties. Reciprocal obligations are
those which arise from the same cause, and which each party is a
debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed
simultaneously, so that the performance of one is conditioned upon
the simultaneous fulfillment of the other.
As to WON there was delay to justify rescission: stipulation in
DOAS was that Corporation shall pay in full upon execution of
contract but evidence revealed that Cortes agreed that full payment of
P2.2M would depend upon delivery of TCTs of 3 lots.
What further confirmed the agreement to deliver TCTs is the
testimony of Cortes that the title of the lots will be transferred in
name of Corporation upon full payment of P2.2M downpayment.
By agreeing to transfer title upon full payment of P2.2M Cortes'
impliedly agreed to deliver the TCTs to Corporation in order to effect
said transfer. Hence, the phrase "execution of this instrument" as
appearing in DOAS, and which event would give rise to the
Corporation's obligation to pay in full cannot be construed as
referring solely to the signing of the deed.
With the transfer of titles as the corresponding reciprocal
obligation of payment, Cortes' obligation is not only to affix his
signature in the Deed, but to set into motion the process that would
facilitate the transfer of title of the lots, i.e., to have the Deed notarized
and to surrender the original copy thereof to the Corporation together
with the TCTs.
But evidence revealed that Cortes never surrendered documents
to the Corporation. He testified that he delivered it to Manny Sanchez,
son of the broker, & Manny told him that mother Marcosa delivered it
to the Corporation. However, Marcosa's unrebutted testimony is that
she did not receive TCTs. She also denied knowledge of delivery
thereof to her son Manny.
Cortes did not perform his obligation to have the Deed notarized
and to surrender the same together with the TCTs. Therefore, both
parties were actually in delay.
Considering that their obligation was reciprocal, performance
thereof must be simultaneous. The mutual inaction of Cortes and
Corporation therefore gave rise to a compensation morae or default
on part of both parties because neither has completed their part in
their reciprocal obligation. Cortes is yet to deliver the original copy of
notarized Deed & TCTs, while the Corporation is yet to pay in full the
agreed down payment of P2.2M. This mutual delay of the parties
cancels out the effects of default, such that it is as if no one is guilty
of delay.
Hence, ordered the parties to perform their respective oligation in
the contract of sale.
ALMOCERA vs. ONG (2008)
FACTS:
Johnny Ong tried to acquire from Andre Almocera (CEO of First
Builder Multi-Purpose Coop) a townhome described as Unit 4 of
Atrium Townhomes in Cebu.
Contract to Sell reflected selling price of P3.4M for 88sq.m. Ong
was able to pay P1.060M. Prior to full payment of amount, Ong
claimed that Almocera fraudulently concealed that fact that before &
at the time of perfection of contract to sell, the property was already
mortgaged to & encumbered with Land Bank. Also, construction of
the house has long been delayed & remains unfinished. And on 13
Mar 99, Lot 4-a was advertised for public auction for foreclosure of
mortgage.
Arguments of Almocera: 20 Mar 95, FBMC borrowed money
P500k from Tommy Ong, Johnnys brother. This was used to finance
the documentation reqs of Land Bank for funding of the Atrium Town
Homes. Loan will be applied in payment of 1 townhome unit which
Tommy may eventually purchase. When project was under way,
Tommy wanted to buy another unit for his brother Johnny. Unit was
not yet identified. But Tommy later identified Unit 4. When contract to
sell of Unit 4 was being drafted, Tommy requested for another
contract to sell covering Unit 5 to give Johnny option to choose

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Sales Case Digest


whichever unit he might decide to buy. When construction was in full
blact, Tommy made Unit 5 that final choice. When he knew that Unit
4 will be sold to other persons, changed his choice to Unit 4.
ISSUE: WON Almocera failed to fulfill his obligation in the contract
HELD:
Affirmative. Contract entered into by parties was a contract to sell.
The contract was denominated as such and it contained the provision
that the unit shall be conveyed by way of an Absolute Deed of Sale,
together with the attendant documents of Ownership. Thus,
ownership has not passed to Johnny Ong.
A contract to sell is akin to a conditional sale where the
efficacy/obligatory force of vendors obligation to transfer title is
subordinated to the happening of a future & uncertain event, so that
if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.
Clear that Almocera and FBMC had the obligation to complete the
townhouse unit within six months from the signing of the contract.
Upon compliance therewith, the obligation of respondent to pay the
balance of P2.4M arises.
The contract contains reciprocal obligations which were to be
fulfilled by the parties, i.e., to complete and deliver the townhouse
within six months from the execution of the contract to sell on the
part of Almocera and FBMC, and to pay the balance of the contract
price upon completion and delivery of the townhouse on the part of
Ong.
The obligation of Almocera and FBMC which is to complete and
deliver the townhouse unit within the prescribed period, is
determinative of the Ongs obligation to pay the balance of the
contract price. With their failure to fulfill their obligation as stipulated
in the contract, they incurred delay and are liable for damages. They
cannot insist that Ong comply with his obligation.
As to WON demand is necessary: negative. Demand by oNG
would be useless because the impossibility of complying with their
obligation was due to their fault. If only they paid their loans with the
LBP, the mortgage on the subject townhouse would not have been
foreclosed and thereafter sold to a third person.
The obligation of Ong to pay the balance of the contract price was
conditioned on Almocera and FBMCs performance of their obligation.
Considering that they did not comply with their obligation to
complete and deliver the townhouse unit within the period agreed
upon, Ong could not have incurred delay.
Hence, Ong is justified in refusing to pay the balance.
4.

Onerous

GAITE vs. FONACIER (1961)


FACTS:
Isabelo Fonacier was owner of 11 iron lode mineral claims known
as Dawahan Group. By DOA dated 29 Sep 52, Fonacier constituted &
appointed Fernando Gaite as his true & lawful atty-in-fact to enter into
contract with any individual/juridical person for exploration &
development of mining claims on royalty basis of not less than
P0.50/ton of ore.
19 Mar 54: Gaite in turn executed a general assignment
conveying development & exploitation of said mining claims into the
Larap Iron Mines. Gaite embarked upon development & exploration,
opening & paving roads within & outside their boundaries.
Fonacier, however, decided to revoke the authority he granted to
Gaite to exploit & develop the mining claims in question & Gaite
assented.
8 Dec 54: a document Revocation of Power of Atty & Contract
was executed, wherein Gaite transferred to Fonacier, for P20K + 10%
royalties that Fonacier would receive from mining claims. Gaite also
transferred all his rights & interests over the 24k tons of iron ore that
he already extracted from the mineral claims for P75k P10k to be
paid upon signing of agreement & balance of P65k to be paid from &
out of 1st letter of credit covering the 1st shipment.
To secure payment of said balance, Fonacier promised to execute
in favor of Gaite a surety bond & delivered the same to him with
himself as principal & Larap Mines & its stockholders as sureties.
When this was presented to Gaite, he refused to sign unless another

First to Third Exam Coverage


bond written by a bonding company was put up to secure payment of
balance. So a second bond was executed with Far Eastern Surety as
additional surety. But liability of FES would attach only when there
had been actual sale of iron ore by Larap Mines for amount of not
less than P65k & liability would expire on 8 Dec 55.
Same day: Fonacier revoked power of atty he gave to Gaite &
signed Revocation of Power of Atty & Contract. Fonacier entered into
Contract of Mining Operation, ceding, transferring & conveying unto
Larap Mines the right to develop, exploit & explore mining claims.
Likewise transferred complete title to 24k tons of iron ore he acquired
from Gaite to Larap.
8 Dec 55: FES bond expired but no sale of 24k tons of iron ore
had been made by Larap Minds nor had the P65k balance of price of
ore been paid to Gaite by Fonacier. When Fonacier & his sureties
failed to pay as demanded by Gaite, Gaite filed complaint.
Fonacier argued that the obligation to pay P65k was subject to a
condition it would be payable out of the first letter of credit covering
the 1st shipment of iron ore. Since no sale of iron ore had been made,
condition had not yet been fulfilled. Hence, obligation is not yet due &
demandable.
ISSUE: WON the obligation of Fonacier to pay Gaite the P65k balance
is one with a period or term & not one with suspensive condition, &
that the term expired on 8 Dec 55
HELD:
What characterizes a conditional obligation is the fact that its
efficacy or obligatory force (as distinguished from its demandability)
is subordinated to the happening of a future and uncertain event; so
that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.
A contract of sale is normally commutative and onerous: not only
does each one of the parties assume a correlative obligation (the
seller to deliver and transfer ownership of the thing sold and the
buyer to pay the price), but each party anticipates performance by
the other from the very start.
What characterizes a conditional obligation is the fact that its
efficacy or obligatory force (as distinguished from its demandability)
is subordinated to the happening of a future and uncertain event; so
that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.
Nothing is found in the record to evidence that Gaite desired or
assumed to run the risk of losing his right over the ore without getting
paid for it, or that Fonacier understood that Gaite assumed any such
risk. This is proved by the fact that Gaite insisted on a bond a to
guarantee payment of the P65k & not only upon a bond by Fonacier,
the Larap Mines & the company's stockholders, but also on one by a
surety company.
To subordinate the obligation to pay the balance to the sale or
shipment of the ore as a condition precedent, would be tantamount
to leaving the payment at the discretion of the debtor, for the sale or
shipment could not be made unless the appellants took steps to sell
the ore. Fonacier would thus be able to postpone payment
indefinitely.
Assuming that there could be doubt whether by the wording of
the contract the parties indented a suspensive condition or a
suspensive period, rules of interpretation would incline the scales in
favor of "the greater reciprocity of interests", since sale is essentially
onerous. Art 1378(1): If the contract is onerous, the doubt shall be
settled in favor of the greatest reciprocity of interests.
No question that greater reciprocity obtains if the buyer's
obligation is deemed to be actually existing, with only its maturity
(due date) postponed or deferred, that if such obligation were viewed
as non-existent or not binding until the ore was sold.
The sale of the ore to Fonacier was a sale on credit, and not an
aleatory contract where the transferor, Gaite, would assume the risk of
not being paid at all; and that the previous sale or shipment of the
ore was not a suspensive condition for the payment of the balance of
the agreed price, but was intended merely to fix the future date of the
payment.
5.

Commutative

BUENAVENTURA vs. CA (2003)

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Sales Case Digest


FACTS:
Leonardo Joaquin & Feliciana Landrito are parents of petitioners.
They sought to declare as null and void ab initio certain DOS of real
property executed by Sps Joaquin in favor of their co-defendant
children & the corresponding certificates of title issued in their
names. They alleged that there was no actual valid consideration for
the DOS; that even assuming there was, the properties are more than
3x more valuable than the price; DOS do not reflect true intent of
parties; purported sale of properties was result of deliberate
conspiracy designed to unjustly deprive the rest of compulsory heirs
of their legitime.
ISSUE: WON DOS are void for lack of consideration or gross
inadequacy of price
HELD:
As to interest: Petitioners complaint betrays their motive for filing
this case. Their strategy was to have the DOS declared void so that
ownership of the lots would eventually revert to their respondent
parents. If their parents die still owning the lots, petitioners & their
respondent sibling will then co-own their parents estate by hereditary
succession.
It is evident from the records that petitioners are interested in the
properties subject of DOS but they have failed to show any legal right
to the properties.
Petitioners do not have any legal interest over the properties
subject of DOS. Their right to their parents properties is merely
inchoate and vests only upon their parents death. While still living,
the parents of petitioners are free to dispose of their properties.
As to lack of consideration: A contract of sale is not a real
contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the
meeting of the minds as to price. If the real price is not stated in the
contract, then the contract of sale is valid but subject to reformation.
If there is no meeting of the minds of the parties as to the price,
because the price stipulated in the contract is simulated, then the
contract is void.
It 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. Failure to pay the consideration is
different from lack of consideration. The former results in a right to
demand the fulfillment or cancellation of the obligation under an
existing valid contract while the latter prevents the existence of a valid
contract.
However, petitioners failed to show that the prices in DOS were
absolutely simulated.
There is no requirement that the price be equal to the exact value
of the subject matter of sale. All the respondents believed that they
received the commutative value of what they gave. Petitioners failed
to prove any of the instances mentioned in Art. 1355 & 1470 CC,
which would invalidate the sale.
Art. 1355: Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract, unless there
has been fraud, mistake or undue influence.
Art. 1470: Gross inadequacy of price does not affect a
contract of sale, except as may indicate a defect in the consent,
or that the parties really intended a donation or some other act
or contract.
6.

Sale is Title and not Mode

SAN LORENZO DEVELOPMENT CORP vs. CA (2005)


FACTS:
Sps. Lu owned 2 parcels of land situated in Sta. Rosa, Laguna.
20 Aug 86: Sps. Lu purportedly sold the 2 parcels of land to
Pablo Babasanta for price of P15/sqm. Babasanta made
downpayment of P50k evidenced by memorandum receipt issued by
Pacita Lu. Other payments totaling P200k were also made.
3 May 89: Sps. Lu also sold said lots to San Lorenzo Devt Corp
by virtue of DOAS with Mortgage.

First to Third Exam Coverage


22 May: Babasanta wrote letter to Pacita Lu to demand execution
of final DOS in his favor so he could effect full payment & notified sps.
about having received info that they sold same property to another
w/o his knowledge & consent.
In response, Pacita wrote letter to Babasanta wherein she
acknowledged having agreed to sell property to him at P15/sqm.
However, reminded him that when balance of purchase price became
due, he requested for reduction of price & when she refused, he
backed out. Added that she returned P50k to Babasanta through Oya.
2 Jun 89: Babasanta filed Complaint for Specific Performance &
Damages against Sps. Lu, alleging that despite his repeated demands
for the execution of final deed of sale in his favor, Sps. Lu refused.
19 Jan 90: SLDC filed Motion for Intervention, alleging it was
buyer in good faith & for value, hence had better right over property.
Babasanta argued that SLDC had no legal interest because the
lots had already been conveyed to him by Sps. Lu & hence, they were
without legal capacity to transfer/disporse of the lots to SLDC.
Argument of SLDC: 11 Feb 89, Sps. Lu executed in its favor an
Option to Buy the lots. It paid option money of P316,610 out of total
consideration of P1,264,640. After Sps. Lu received total amount of
P632,320, executed DOAS with Mortgage in its favor. Certificates of
title over properties were delivered to it clean & free from any adverse
claims and/or notice of lis pendens. Only learned of filing of
complaint sometime in Jan 90, prompting it to file motion to
intervene.
ISSUE: Who between SLDC & Babasanta has a better right over the
lots in view of the successive transactions executed by Sps. Lu
HELD:
SLDC has better right.
Agreement between Babasanta & Sps. Lu is contract to sell, not
sale. Receipt signed by Pacita merely states that she accepted the
sum of P50k from Babasanta as partial payment of 3.6 hec 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 Sps. Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase
price. Babasantas 22 May letter stated that despite his repeated
requests for execution of final DOS, Pacita refused. In effect,
Babasanta himself recognized that ownership of the property would
not be transferred to him until such time as he shall have effected full
payment. Also, had the sellers intended to transfer title, they could
have easily executed the document of sale in its required form
simultaneously with their acceptance of the partial payment, but they
did not.
Distinguished contract of sale to contract to sell.
The perfected contract to sell imposed upon Babasanta the
obligation to pay the balance of the purchase price. There being an
obligation to pay the price, Babasanta should have made the proper
tender of payment and consignation of the price in court as required
by law. Mere sending of a letter by the vendee expressing the
intention to pay without the accompanying payment is not considered
a valid tender of payment. 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.
Even assumption that it was a contract of sale would still fail. Sale,
being a consensual contract, is perfected by mere consent and from
that moment, the parties may reciprocally demand performance.
The perfection of a contract of sale should not, however, be
confused with its consummation. 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.
Article 712 of the Civil Code, "ownership and other real rights
over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain
contracts, by tradition.
Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same. Therefore, sale by itself does not transfer or

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Sales Case Digest


affect ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale,
that actually transfers ownership.
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 Art.
1497-1501. 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.
Actual delivery consists in placing the thing sold in the control
and possession of the vendee. Legal or constructive delivery, on the
other hand, may be had through any of the following ways:
1. symbolical tradition such as the delivery of the keys of the
place where the movable sold is being kept
2. traditio longa manu or by mere consent or agreement if
the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale
3. traditio brevi manu if the buyer already had possession of
the object even before the sale
4. traditio constitutum possessorium where seller remains in
possession of the property in a different capacity
Babasanta did not acquire ownership by the mere execution of
the receipt by Pacita acknowledging receipt of partial payment for the
property. Agreement between Babasanta and Sps. Lu, though valid,
was not embodied in a public instrument. Hence, no constructive
delivery. Babasanta had not taken possession of the property at any
time after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful owner
of the lands. Hence, no delivery to Babasanta, whether actual or
constructive, which is essential to transfer ownership.
SLDC registered the sale with ROD after it had acquired
knowledge of Babasantas claim. At the time the deeds in favor of
SLDC were executed, it had no knowledge of prior transaction of Sps.
Lu with Babasanta. Hence, it qualifies as buyer in good faith. At the
time of the sale of the property to SLDC, the vendors were still the
registered owners of the property and were in fact in possession of
the lands.
NORKIS DISTRIBUTORS, INC. vs. CA (1991)
FACTS:
Norkis is distributor of Yamaha motorcycles in Negros Occidental.
20 Sep 79: Alberto Nepales bought brand new Yamaha
Wonderbike from Norkis-Bacolod branch. Price of P7,500 was
payable by means of Letter of Guaranty from DBP, which Norkis
agreed to accept. Credit was extended to Nepales for the price of the
motorcycle payable to DBP upon release of motorcycle loan.
As security, Nepales would execute a chattel mortgage on the
motorcycle in favor of DBP. Branch Manager Labajo issued Norkis
Sales Invoice #0120 showing that the contract of sale of motorcycle
had been perfected. Nepales signed sales invoice to signify conformity
with the terms. Motorcycle, however, remained in Norkis possession.
6 Nov 79: motorcycle was registered in Land Transportation
Commission in name of Alberto Nepales.
22 Jan 80: motorcycle was delivered to a certain Julian Nepales
who was allegedly the agent of Alberto Nepales but latter denies it.
Alberto & Julian presented the unit to DBPs Appraiser-Investigator
Arriesta.
3 Feb 80: motorcycle met an accident. Investigation conducted
by DBP revealed that unit was being driven by Zacarias Payba at the
time of accident. Unit was a total wreck, was returned & stored inside
Norkis warehouse.
20 Mar: DBP released proceeds of Nepales motorcycle loan to
Norkis in total sum of P7,500. As price of motorcycle was increased
to P7,828, Nepales paid difference & demanded delivery. However,
Norkis could not deliver. Hence, Nepales filed action for specific
performance with damages.
ISSUE: WON there had been transfer of ownership of the motorcycle
to Nepales at the time it was destroyed (to answer: who should bear
the loss of the motorcycle?)
HELD:

First to Third Exam Coverage


Negative. Norkis concedes that there was no "actual" delivery of
the vehicle. However, it insists that there was constructive delivery: 1)
issuance of Sales Invoice in name of Nepales & affixing of his
signature, 2) registration of vehicle with LTC, 3) issuance of OR for
payment of registration fees. BUT issuance of a sales invoice does not
prove transfer of ownership of the thing sold to the buyer. An invoice
is nothing more than a detailed statement of the nature, quantity and
cost of the thing sold and has been considered not a bill of sale.
In all forms of delivery, it is necessary that the act of delivery
whether constructive or actual, be coupled with the intention of
delivering the thing. The act, without the intention, is insufficient.
When motorcycle was registered by Norkis in the name of
Nepales, Norkis did not intend yet to transfer the title or ownership to
Nepales, but only to facilitate the execution of a chattel mortgage in
favor of the DBP for the release of the buyer's motorcycle loan. The
Letter of Guarantee issued by DBP reveals that the execution in its
favor of a chattel mortgage over the purchased vehicle is a prerequisite for the approval of the buyer's loan. If Norkis would not
accede to that arrangement, DBP would not approve Nepales loan
application and, consequently, there would be no sale.
Hence, the critical factor in the different modes of effecting
delivery, 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. Code imposes upon the vendor the
obligation to deliver the thing sold. The thing is considered to be
delivered when it is "placed in the hands and possession of the
vendee. (Art. 1462) Execution of a public instrument is equivalent to
the delivery of the thing which is the object of the contract, but, in
order that this symbolic delivery may produce the effect of tradition, it
is necessary that the vendor shall have had such control over the
thing sold that, at the moment of the sale, its material delivery could
have been made. It is not enough to confer upon the purchaser the
ownership and the right of possession.
Purpose of the execution of sales invoice & registration of vehicle
in name of Nepales was not to transfer ownership & dominion over
motorcycle to him but only to comply with requirements of DBP for
processing Nepales motorcycle loan. On 20 Mar 80, before Nepales
loan was released and before he even paid Norkis, the motorcycle had
already figured in an accident while driven by one Zacarias Payba.
Payba was not shown by Norkis to be a representative or relative of
Nepales. The latter's supposed relative, who allegedly took possession
of the vehicle from Norkis did not explain how Payba got hold of the
vehicle. Norkis' claim that Julian Nepales was acting as Alberto's agent
when he allegedly took delivery of the motorcycle is controverted by
the latter. Alberto denied having authorized Julian Nepales to get the
motorcycle from Norkis Distributors or to enter into any transaction
with Norkis relative to said motorcycle.
AZNAR vs. YAPDIANGCO (1965)
FACTS:
May 59: Teodoro Santos advertised in 2 metropolitan papers the
sale of his Ford Fairlane 500.
28 May: certain L. de Dios, claiming to be nephew of Vicente
Marella, went to Santos residence to answer the ad. However,
Teodoro was out during so it was Irineo, son, who talked with de Dios.
Told Irineo that Marella was interested in buying the car.
Teodoro instructed son to see said Marella the ff day at his given
address. So Irineo went. Marella agreed to buy car for P14.7k price
would be paid only after car had been registered in his name.
Irineo, Teodoro & L. de Dios went to office of Atty. Jose Padolina
where DOS of car was executed in Marellas favor. Proceeded to
Motor Vehicles Office in QC where registration of car was effected.
Purchase price had not been paid.
Teodoro returned to house. Gave Irineo the registration papers &
copy of DOS to Irineo & instructed him not to part with them until
Marella shall have given full payment. Irineo proceeded to Marellas
house & demanded payment. Marella said amount he had was short
by P2k & begged to be allowed to secure shortage from a sister living
in Azcarraga St. Marella ordered de Dios to go to said sister with
Irineo. Also requested the registration papers & DOS from Irineo on
pretext that he would like to show them to his lawyer. Irineo handed
the same & proceeded to alleged house of Marellas sister.

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Sales Case Digest


Irineo & de Dios alighted from car & entered house. De Dios asked
Irineo to wait at sala while he went inside room. For a long time
waiting, Irineo went down to discover that car was not there anymore.
Irineo rushed to see Marellas house but it was already closed &
Marella gone. Reported matter to father who advised police.
29 May: Marella was able to seel car to Jose Aznar for P15k.
While car was in possession of Aznar & while waiting to its registration
in his name, agents of PH Constabulary seized & confiscated the
same pursuant to Teodoros report that car was unlawfully taken from
him.
Aznar filed complaint for replevin against Capt. Yapdiangco, head
of PH Constabulary, which seized the car. Teodoro moved to
intervene, allowed. LC rendered decision in favor of Teodoro.
ISSUE: Who has a better right to the possession of the disputed car?
HELD:
Teodoro has a better right.
Art. 1506 is inapplicable because in this case, seller or Marella
had no title at all.
ART. 1506. Where the seller of goods has a voidable title
thereto, but his, title has not been voided at the time of the sale,
the buyer acquires a good title to the goods, provided he buys
them in good faith, for value, and without notice of the seller's
defect of title.
Marella did not have any title to the property under litigation
because the same was never delivered to him. He sought ownership
or acquisition of it by virtue of contract. Marella could have acquired
ownership or title to the subject matter thereof only by the delivery or
tradition of the car to him.
Art. 712. Ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and
intestate succession, and in consequence of certain contracts, by
tradition.
Ownership is not transferred by contract merely but by tradition
or delivery. So long as property is not delivered, the ownership over it
is not transferred by contract merely but by delivery. Contracts only
constitute titles or rights to the transfer or acquisition of ownership,
while delivery or tradition is the method of accomplishing the same.
Car in question was never delivered to the vendee by the vendor
as to complete or consummate the transfer of ownership by virtue of
the contract. It should be recalled that while there was indeed a
contract of sale between Marella and Teodoro Santos, the former, as
vendee, took possession of the subject matter thereof by stealing the
same while it was in the custody of the latter's son.
No adequate evidence on record as to whether Irineo voluntarily
delivered the key to the car to the unidentified person who went with
him and L. De Dios to the place on Azcarraga where a sister of
Marella allegedly lived. But even if Irineo did, it was not the delivery
contemplated by Art. 712 CC. For then, it would be indisputable that
he turned it over to the unidentified companion only so that he may
drive Irineo and De Dios to said place on Azcarraga & not to vest the
title to the said vehicle to him as agent of Marella. Art. 712
contemplates that act be coupled with the intent of delivering the
thing.
Applying Art 559, the rule is to the effect that if the owner has lost
a thing, or if he has been unlawfully deprived of it, he has a right to
recover it, not only from the finder, thief or robber, but also from third
persons who may have acquired it in good faith from such finder,
thief or robber. Two exceptions to GR of irrevindicabiity: 1) owner has
lost the thing, or 2) owner has been unlawfully deprived.
EQUATORIAL REALTY vs. MAYFAIR THEATER, IINC. (2001)
FACTS:
Carmelo & Bauermann, Inc. used to own parcel of land with 2storey building constructed thereon.
1 Jun 67: Carmelo entered into Contract of Lease with Mayfair
Theater for period of 20 yrs. Lease covered portion of 2nd flr &
mezzanine of a 2-storey building. Mayfair used it as movie house
known as Maxim Theater.
31 Mar 69: Mayfair entered into 2nd Contract of Lease with
Carmelo for lease of another portion of latters property part of 2nd
flr of 2-storey building & 2 more spaces on the ground flr &

First to Third Exam Coverage


mezzanine. Mayfair put up another movie house known as Miramar
Theater. COL was likewise for period of 20 yrs.
Both leases contained provision granting Mayfair right of first
refusal to purchase subject properties.
30 Jul 78: subject properties were sold by Carmelo to Equatorial
Realty for P11.3M without being offered to Mayfair first.
Mayfair filed complaint before RTC for annulment of DOAS,
specific performance & damages. RTC ruled in favor of Carmelo &
Equatorial. CA reversed, rescinding the DOAS. This decision became
final & executory on 17 Mar 97.
25 Apr: Mayfair filed motion for execution. TC granted. However,
Carmelo could no longer be located. Ff order of execution, Mayfair
deposited its payment to Carmelo. LC issued Deed of Reconveyance
in favor of Carmelo & DOS in favor of Mayfair. ROD cancelled
Equatorials title & issued new in the name of Mayfair.
18 Sep 97: Equatorial filed action for collection of sum of money
against Mayfair, claiming payment of rental or reasonable
compensation for its use of the premises after its lease contracts had
expired. Alleged that COL covering Maxim Theater expired 31 May 87
while COL covering Miramar expired 31 Mar 89. Represented itself as
owner of premises by reason of COS on 30 Jul 78.
ISSUE: WON Equatorial is entitled to back rentals as owner of the
subject properties
HELD:
Negative. Rent is a civil fruit that belongs to the owner of the
property producing it by right of accession. Rentals that fell due from
the time of the perfection of the sale to Equatorial until its rescission
by final judgment should belong to the owner of the property during
that period.
By a contract of sale, "one of the contracting parties obligates
himself to transfer ownership of and to deliver a determinate thing
and the other to pay therefor a price certain in money or its
equivalent."
Ownership of the thing sold is a real right, which the buyer
acquires only upon delivery of the thing to him in any of the ways
specified in Arts. 1497-1501 or in any other manner signifying an
agreement that the possession is transferred from the vendor to the
vendee. This right is transferred, not merely by contract, but also by
tradition or delivery. And there is said to be delivery if and when the
thing sold "is placed in the control and possession of the vendee."
While the execution of a public instrument of sale is recognized by
law as equivalent to delivery of the thing sold, such constructive or
symbolic delivery, being merely presumptive, is deemed negated by
the failure of the vendee to take actual possession of the land sold.
Delivery has been described as a composite act, a thing in which
both parties must join and the minds of both parties concur. It is an
act by which one party parts with the title to and the possession of
the property, and the other acquires the right to and the possession
of the same. In its natural sense, delivery means something in
addition to the delivery of property or title; it means transfer of
possession. In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate "the absolute
giving up of the control and custody of the property on the part of the
vendor, and the assumption of the same by the vendee."
Equatorial never took actual control and possession of the
property sold, in view of Mayfair's timely objection to the sale and the
continued actual possession of the property. The objection took the
form of a court action impugning the sale which was rescinded by
judgment. Execution of a contract of sale as a form of constructive
delivery is a legal fiction. It holds true only when there is no
impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. Hence, Mayfairs
opposition to the transfer of the property by way of sale to Equatorial
was a legally sufficient impediment that effectively prevented the
passing of the property into the latter's hands.
The execution of a public instrument gives rise, therefore, only to
a prima facie presumption of delivery. Such presumption is destroyed
when the instrument itself expresses or implies that delivery was not
intended; or when by other means it is shown that such delivery was
not effected, because a third person was actually in possession of the
thing. In the latter case, the sale cannot be considered consummated.

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Sales Case Digest


The point may be raised that under Art. 1164 CC, Equatorial as
buyer acquired a right to the fruits of the thing sold from the time the
obligation to deliver the property to petitioner arose. That time arose
upon the perfection of the Contract of Sale on 30 July 78, from which
moment the laws provide that the parties to a sale may reciprocally
demand performance. Does this mean that despite the judgment
rescinding the sale, the right to the fruits34 belonged to, and
remained enforceable by, Equatorial?
Negative. Art. 1385 answers, rescission creates the obligation to
return the things which were the object of the contract, together with
their fruits, and the price with its interest; xxx" Not only the land and
building sold, but also the rental payments paid, if any, had to be
returned by the buyer.
In mother case, "Equatorial xxx has received rents" from Mayfair
"during all the years that this controversy has been litigated." The
Separate Opinion of Justice Teodoro Padilla in the mother case also
said that Equatorial was "deriving rental income" from the disputed
property. Do all these statements concede actual delivery?
Still negative. The fact that Mayfair paid rentals to Equatorial
during the litigation should not be interpreted to mean either actual
delivery or ipso facto recognition of Equatorial's title. To be able to
maintain physical possession of the premises while awaiting the
outcome of the mother case, it had no choice but to pay the rentals.
The rental payments made by Mayfair should not be construed as a
recognition of Equatorial as the new owner. They were made merely
to avoid imminent eviction.
At bottom, it may be conceded that, theoretically, a rescissible
contract is valid until rescinded. However, thisgeneral principle is not
decisive to the issue of whether Equatorial ever acquired the right to
collect rentals. What is decisive is the civil law rule that ownership is
acquired, not by mere agreement, but by tradition or delivery.
Equatorial was never put in actual and effective control or possession
of the property because of Mayfair's timely objection.
Sale to Equatorial may have been valid from inception, but it was
judicially rescinded before it could be consummated. Equatorial never
acquired ownership, not because the sale was void, as erroneously
claimed by the trial court, but because the sale was not
consummated by a legally effective delivery of the property sold.
IV. DISTINGUISHED FROM OTHER CONTRACTS
1.

Distinguished from Barter

Article 1638. By the contract of barter or exchange one of the


parties binds himself to give one thing in consideration of the other's
promise to give another thing.
Article 1468. If the consideration of the contract consists partly in
money, and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such
intention does not clearly appear, it shall be considered a barter if the
value of the thing given as a part of the consideration exceeds the
amount of the money or its equivalent; otherwise, it is a sale.
2.

Distinguished from Donation

Article 725. Donation is an act of liberality whereby a person


disposes gratuitously of a thing or right in favor of another, who
accepts it.
3.

Distinguished from Contract for Piece of Work

Article 1467. A contract for the delivery at a certain price of an


article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same
is on hand at the time or not, is a contract of sale, but if the goods are
to be manufactured specially for the customer and upon his special
order, and not for the general market, it is a contract for a piece of
work.
INCHAUSTI vs. CROMWELL (1911)
FACTS:

First to Third Exam Coverage


Inchausti & Co. is engaged in the business of buying & selling
hemp at wholesale, for its own account & on commission. It was
admitted that it is customary to sell hemp in bales & operation of
bailing hemp is designated by the word prensaje. Also, in all sales of
hemp, price is quoted to the buyer per picul but there is no mention
being made of bailing. However, there is tacit understanding, unless
otherwise agreed upon, that the hemp will be delivered in bales.
Jan 05 Mar 10: Inchausti collected & received, under prensaje
denomination, from purchasers of hemp sold for its own account,
plus price expressly agreed upon.
Oct 08 Mar 10: Inchausti collected for the account of the
owners of hemp sold by Inchausti in Manila on commission & under
prensaje denomination, plus price expressly agreed upon.
Inchausti always estimated the amount due it as commissions on
sales of hemp based on the total sum collected from the purchasers
of hemp, including charge made in each case under prensaje
denomination. It always paid CIR the tax collectible based on the
selling price expressly agreed upon both for its own account and on
commission but has not, untill compelled, paid said tax upon sums
received from purchasers under prensaje denomination.
29 Apr 10: Ellis Cromwell of CIR demanded Inchausti to pay sum
of P137068 as tax upon prensaje denomination within 5 days.
4 May: Inchausti paid Cromwell under protest the said sum. It
appealed to Cromwell but was overruled. Cromwell refused to return
the amount paid by Inchausti.
Inchausti contends that the tax assessed by CIR upon the
aggregate sum of charges made against purchasers of hemp under
prensaje denomination is illegal because said charge does not
constitute a part of the selling price of hemp but is a charge made for
the service of bailing the hemp.
On the other hand, CIR Cromwell contends that said charge made
under the prensaje denomination is in fact a part of the gross value
of the hemp sold & of its actual selling price.
ISSUE: WON the baled hemp constitutes a contract of sale and thus,
makes Inchausti chargeable for the amount of tax based on the baled
hemp & not on the raw hemp sold
HELD:
Affirmative. The Court noted that it was admitted by Inchausti that
it is customary to sell hemp in bales, and that the price quoted in the
market for hemp per picul is the price for the hemp baled. Also, that
if Inchausti sold hemp it would be the understanding, without words,
that such hemp would be delivered in bales, and that the purchase
price would include the cost and expense of baling. Hence, selling
price consists of the value of the hemp loose plus the cost and
expense of putting it into marketable form.
Indeed, at the time of such sales it was not known by the vendee
whether the hemp was then actually baled or not. All that he knew &
all that concerned him was that the hemp should be delivered to him
baled. He did not ask Inchausti to perform services for him, nor did
Inchausti agree to do so. The contract was single and consisted solely
in the sale and purchase of hemp. The purchaser contracted for
nothing else and the vendor agreed to deliver nothing else.
Price signifies the sum stipulated as the equivalent of the thing
sold and also every incident taken into consideration for the fixing of
the price, put to the debit of the vendee and agreed to by him. It is
quite possible that Inchausti, in this case in connection with the hemp
which he sold, had himself already paid the additional expense of
baling as a part of the purchase price which he paid and that he
himself had received the hemp baled from his vendor. It is quite
possible also that such vendor of the Inchausti may have received the
same hemp from his vendor in baled form, that he paid the additions
cost of baling as a part of the purchase price which he paid. In such
case Inchausti performed no service whatever for his vendee, nor did
the Inchaustis vendor perform any service for him.
The distinction between a contract of sale and one for work,
labor, and materials is tested by the inquiry whether the thing
transferred is one not in existence and which never would have
existed but for the order of the party desiring to acquire it, or a thing
which would have existed and been the subject of sale to some other
person, even if the order had not been given.
When a person stipulates for the future sale of articles which he is
habitually making, and which at the time are not made or finished, it

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Sales Case Digest


is essentially a contract of sale and not a contract for labor. It is
otherwise when the article is made pursuant to agreement. If the
article ordered by the purchaser is exactly such as Inchausti makes
and keeps on hand for sale to anyone, and no change or modification
of it is made at the defendant's request, it is a contract of sale, even
though it may be entirely made after.
Clear that in the case at bar the hemp was in existence in baled
form before the agreements of sale were made, or, at least, would
have been in existence even if none of the individual sales here in
question had been consummated. It would have been baled,
nevertheless, for sale to someone else, since, it is customary to sell
hemp in bales.
Case at bar: baling was performed for the general market and was
not something done by Inchausti which was a result of any peculiar
wording of the particular contract between him and his vendee. It is
undoubted that Inchausti prepared his hemp for the general market.
This would be necessary. One whose exposes goods for sale in the
market must have them in marketable form. The hemp in question
would not have been in that condition if it had not been baled. the
baling, therefore, was nothing peculiar to the contract between
Inchausti and his vendee. It was precisely the same contract that was
made by every other seller of hemp, engaged as was Inchausti, and
resulted simply in the transfer of title to goods already prepared for
the general market.
Therefore, baling is performed before the sale. The purchaser of
hemp owes to the seller nothing whatever by reason of their contract
except the value of the hemp delivered. That value, that sum which
the purchaser pays to the vendee, is the true selling price of the
hemp, and every item which enters into such price is a part of such
selling price. By force of the custom prevailing among hemp dealers
in the Philippine Islands, a purchaser of hemp in the market, unless
he expressly stipulates that it shall be delivered to him in loose form,
obligates himself to purchase and pay for baled hemp. Wheher or not
such agreement is express or implied, whether it is actual or tacit, it
has the same force.
CELESTINO CO vs. COLLECTOR OF INTERNAL REVENUE
FACTS:
Celestino Co & Company is a duly registered general
copartnership doing business under trade name of Oriental Sash
Factory.
From 1946-1951, it paid percentage taxes of 7% on the gross
receipts of its sash, door & window factory in accordance with Sec.
186 of National Revenue Code imposing taxes on sale of
manufactured articles. However in 1952, it began to claim liability
only to the contractors 3% tax under Sec. 191. It claimed that it does
not manufacture ready-made sash, doors and windows for the public
and that it makes these articles only special order of its customers.
Hence, it alleged that it is not a manufacturer but a contractor.
ISSUE: 1) WON Celestino Co is a manufacturer or contractor
2) WON Celestino Cos business is a matter of contract of sale or
contract of piece of work
HELD:
1) Manufacturer, hence liable for 7% tax. The important thing to
remember is that Celestino Co & Company habitually makes sash,
windows and doors, as it has represented in its stationery and
advertisements to the public. That it "manufactures" the same is
practically admitted by Celestino itself. The fact that windows and
doors are made by it only when customers place their orders, does
not alter the nature of the establishment, for it is obvious that it only
accepted such orders as called for the employment of such materialmoulding, frames, panels-as it ordinarily manufactured or was in a
position habitually to manufacture.
Any builder or homeowner, with sufficient money, may order
windows or doors of the kind manufactured by Celestino. Therefore it
is not true that it serves special customers only or confines its
services to them alone. And anyone who sees, and likes, the doors
ordered by Don Toribio Teodoro & Sons Inc. may purchase from
Celestino doors of the same kind, provided he pays the price. Surely,
Celestino will not refuse, for it can easily duplicate or even massproduce the same doors-it is mechanically equipped to do so.

First to Third Exam Coverage


That the doors and windows must meet desired specifications is
neither here nor there. If these specifications do not happen to be of
the kind habitually manufactured by Celestino special forms for
sash, mouldings of panels it would not accept the order and no
sale is made. They are bought because they meet the specifications
desired by the purchaser. The Oriental Sash Factory does nothing
more than sell the goods that it mass-produces or habitually makes.
Apparent that the Oriental Sash Factory did not merely sell its
services to Teodoro & Co. because it also sold the materials. In fact, it
sold materials ordinarily manufactured by it to Teodoro & Co.,
although in such form or combination as suited the fancy of the
purchaser. Such new form does not divest the Oriental Sash Factory
of its character as manufacturer.
2) Contract of sale. Although the Factory does not, in the ordinary
course of its business, manufacture and keep on stock doors of the
kind sold to Teodoro, it could stock and/or probably had in stock the
sash, mouldings & panels it used therefor.
When this Factory accepts a job that requires the use of
extraordinary or additional equipment, or involves services not
generally performed by it-it thereby contracts for a piece of work
filing special orders within the meaning of Article 1467. The orders
herein exhibited were not shown to be special. They were merely
orders for work nothing is shown to call them special requiring
extraordinary service of the factory. If, as alleged, all the work of
appellant is only to fill orders previously made, such orders should
not be called special work, but regular work.
CIR vs. ARNOLDUS CARPENTRY SHOP, INC. (1988)
FACTS:
Arnoldus is a domestic corporation & has for its secondary
purpose the "preparing, processing, buying, selling, exporting,
importing, manufacturing, trading and dealing in cabinet shop
products, wood and metal home and office furniture, cabinets, doors,
windows, etc., including their component parts and materials, of any
and all nature and description. Sold locally & exported abroad.
For this, Arnoldus kept samples or models of its woodwork on
display from where its customers may refer to when placing their
orders.
Mar 79: examiners of CIR conducted an investigation of the
business tax liabilities of Arnoldus. As per examination, the total gross
sales of Arnoldus for year 77 from both its local and foreign dealings
amounted to P5,162,787.59. From this, Arnoldus reported in its
quarterly percentage tax returns P2,471,981.62 for its gross local
sales. The balance of P2,690,805.97, which is 52% of the total gross
sales, was considered as its gross export sales.
BIR examiners de Dios & Trinidad made a report to Commissioner
classifying Arnoldus as other independent contractor. As a result,
examiners assessed Arnoldus for deficiency tax of P88,972.23.
31 Jan 81: Arnoldus received a notice of tax deficiency
assessment inclusive of charges & interest for year 77 for
P108,720.92. This tax deficiency was a consequence of the 3% tax
imposed on Arnoldus gross export sales which, in turn, resulted from
the examiners' finding that categorized it as a contractor.
19 Feb 81: Arnoldus filed a protest with CIR, arguing that it is a
manufacturer and therefor entitled to tax exemption on its gross
export sales under Sec. 202(e) of National Internal Revenue Code. It
explained that it was the 7% tax exemption on export sales which
prompted Arnoldus to exploit the foreign market which resulted in the
increase of its foreign sales to at least 52% of its total gross sales.
23 Jun: Arnoldus received the final decision of CIR, considering it
as a contractor & not a manufacturer.
ISSUE: WON Arnoldus Carpentry Shop is a manufacturer & not a
contractor hence, not liable for the deficiency contractors tax for year
77
HELD:
Affirmative. Arnoldus Carpentry is a "manufacturer" as defined in
the Tax Code and not a "contractor" under Sec. 205(e). Independent
contractors are persons (juridical and natural) xxx whose activity
consists essentially of the sale of all kinds of services for a fee
regardless of whether or not the performance of the service calls for
the exercise or use of the physical or mental faculties of such

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Sales Case Digest


contractors or their employees. Arnoldus business does not fall under
this definition.
The contention that the fact that Arnoldus "designs and makes
samples or models that are 'displayed' or presented or 'submitted' to
prospective buyers who 'might choose' therefrom" signifies that what
Arnoldus is selling is a kind of service its shop is capable of rendering
in terms of woodwork skills and craftsmanship is untenable. This
contention ignores that fact that Arnoldus sells goods which it keeps
in stock and not services. Arnoldus had a ready stock of its shop
products for sale to its foreign and local buyers. As a matter of fact,
the purchase orders from its foreign buyers showed that they ordered
by referring to the models designated by Arnoldus. Even purchases
by local buyers for television cabinets were by orders for existing
models except only for some adjustments in sizes and accessories
utilized. Samples were displayed, and if in stock, were available for
immediate sale to local and foreign customers. And in all the
purchase orders presented as exhibits, whether from foreign or local
buyers, reference was made to the model number of the product
being ordered or to the sample submitted by Arnoldus.
The contention that what exists prior to any order is but the
sample model only, nothing more, nothing less and the ordered
quantity would never have come into existence but for the particular
order as represented by the sample or model is also untenable. CIR
wants to impress upon this Court that under Article 1467, the true
test of whether or not the contract is a piece of work (and thus
classifying Arnoldus as a contractor) or a contract of sale (which
would classify it as a manufacturer) is the mere existence of the
product at the time of the perfection of the contract such that if the
thing already exists, the contract is of sale, if not, it is work. Not so.
What determines whether the contract is one of work or of sale is
whether the thing has been manufactured specially for the customer
and upon his special order. Thus, if the thing is specially done at the
order of another, this is a contract for a piece of work. If, on the other
hand, the thing is manufactured or procured for the general market in
the ordinary course of one's business, it is a contract of sale.
The distinction between a contract of sale and one for work, labor
and materials is tested by the inquiry whether the thing transferred is
one not in existence and which never would have existed but for the
order of the party desiring to acquire it, or a thing which would have
existed and has been the subject of sale to some other persons even
if the order had not been given.
There are also attendant facts herein to show habituality of the
production for the general public. If the furniture were found to be
saleable, some television cabinets were manufactured for display and
sold to the general public. Samples were displayed, and if in stock,
were available for immediate sale to local and foreign customers.
ENGINEERIING & MACHINERY CORP. vs. CA, ALMEDA (1996)
FACTS:
10 Sep 62: Engineering & Machinery Corp, & Ponciano Almeda
entered into a contract, whereby Engineering undertook to fabricate,
furnish & install the air-conditioning system in Almedas building for
P210k. Engineering was to furnish the materials, labor, tools & all
services required in order to fabricate & install the system. System
was complete in 63 & Almeda paid in full the contract price.
2 Sep 65: Almeda sold building to Natl Investment & Devt Corp.
NIDC took possession of the building but due to its noncompliane
with the terms & conditions of DOS, Almeda was able to secure
judicial rescission. Ownership of building was decreed back to Almeda
& acquired possession in 71. Then he learned from NDIC employees
the defects of the air-conditioning system of the building.
Acting on this, Almeda commissioned Engr. Sapico to render
technical evaluation of the system. Engr. Sapico enumerated the
defects of the system & concluded that it was not capable of
maintaining the desired room temperature.
8 May 71: Almeda filed an action for damages against
Engineering & Machinery, alleging that the air-conditioning system
installed by Engineering did not comply with agreed plans &
specifications. Engineering moved to dismiss, arguing that
prescriptive period is 6mos only. On the other hand, Almeda argued
that prescriptive period is 10yrs because it is a contract for a piece of
work and not a contract of sale.

First to Third Exam Coverage


ISSUE: WON the contract entered into by the parties is one of sale
or for a piece of work?
HELD:
Contract for piece of work. A contract for piece of work, labor &
materials may be distinguished from a contract of sale by the inquiry
as to whether the thing transferred is one not in existence and which
would never have existed but for the order, of the person desiring it.
In such case, the contract is one for piece of work. On the other hand,
if the thing subject of the contract would have existed and been the
subject of a sale to some other person even if the order had not been
given, then the contract is one of sale.
A contract for the delivery at a certain price of an article which the
vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the
time or not is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order,
and not for the general market, it is a contract for a piece of work.
To Tolentino, the distinction between the two contracts depends
on the intention of the parties. Thus, if the parties intended that at
some future date an object has to be delivered, without considering
the work or labor of the party bound to deliver, the contract is one of
sale. But if one of the parties accepts the undertaking on the basis of
some plan, taking into account the work he will employ personally or
through another, there is a contract for piece of work.
Case at bar: It is not Engineerings line of business to
manufacture air-conditioning systems to be sold "off-the-shelf." Its
business and particular field of expertise is the fabrication and
installation of such systems as ordered by customers and in
accordance with the particular plans and specifications provided by
the customers. Naturally, the price or compensation for the system
manufactured and installed will depend greatly on the particular
plans and specifications agreed upon with the customers.
It would appear that this suit is barred by prescription because
the complaint was filed more than four years after the execution of
the contract and the completion of the air-conditioning system. But a
close scrutiny of the complaint filed in the trial court reveals that the
original action is not really for enforcement of the warranties against
hidden defects, but one for breach of the contract itself. Hence, 10
yrs. Since the governing contract was executed on September 10,
1962 and the complaint was filed on May 8, 1971, it is clear that the
action has not prescribed.
DINO vs. CA (2001)
FACTS:
Sps. Dino are doing business under trade name Candy Claire
Fashion Garment for manufacturing & selling shirts. On the other
hand, Roman Sio is part owner & general manager of a
manufacturing corporation doing business under trade name
Universal Toy Master Mftg.
Sps. Dino & Sio entered into contract whereby Sio would would
manufacture 20k pieces of vinyl frogs & 20k pieces of vinyl
mooseheads at P7/piece in accordance with the sample approved by
Sps. Dino. These frogs and mooseheads were to be attached to the
shirts Sps. Dino would manufacture and sell.
Sio delivered in several installments the 40k pcs of frogs &
mooseheads. Last delivery was made on 28 Sep 88. Sps. Dino fully
paid the agreed price. However, they returned (on diff dates) 29,772
pcs of frogs & mooseheads for failing to comply with approved
sample. They then demanded Sio for a refund of purchase price.
However, Sio refused to pay so Sps. Dino filed action for collection of
a sum of money. TC ruled in favor of Sps. Dino. CA affirmed but later
reversed itself, finding that complaint was filed beyond prescriptive
period.
ISSUE: WON the contract entered into by the parties is one of sale
or of piece of work?
HELD:
Contract for a piece of work. Contract between the parties
stipulated that Sio would manufacture upon order of the Sps. Dino
20k pcs of vinyl frogs and 20k pcs of vinyl mooseheads according to

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Sales Case Digest


the samples specified and approved by Sps. Dino. Sio did not
ordinarily manufacture these products, but only upon order of Sps.
Dino and at the price agreed upon.
A contract for a piece of work, labor and materials may be
distinguished from a contract of sale by the inquiry as to whether the
thing transferred is one not in existence and which would never have
existed but for the order of the person desiring it. In such case, the
contract is one for a piece of work, not a sale. On the other hand, if
the thing subject of the contract would have existed and been the
subject of a sale to some other person even if the order had not been
given then the contract is one of sale.
At any rate, whether the agreement between the parties was one
of a contract of sale or a piece of work, the provisions on warranty of
title against hidden defects in a contract of sale apply. A hidden
defect is one which is unknown or could not have been known to the
vendee. Prescribed.
CIR vs. CA, CTA, ADMU (1997)
FACTS:
ADMU is a non-stock, non-profit educational institution with
auxiliary units and branches all over PH. One of which is the Institute
of Philippine Culture, which has no legal personality separate and
distinct from that of ADMU. IPC is a Philippine unit engaged in social
science studies of Philippine society and culture.
8 Jul 83: ADMU received from CIR a demand letter assessing it
the sum of P174,043.97 for alleged deficiency contractors tax & an
assessment in sum of P1.141M for alleged deficiency income tax for
fiscal year 78.
ADMU sent CIR a letter-protest & filed a memorandum contesting
validity of the assessments.
17 Mar 88: CIR rendered a letter-decision cancelling the
assessment for deficiency income tax but modifying the assessment
for deficiency contractors tax by increasing amount due to P193,475.
Unsatisfied, ADMU requested for reconsideration. Also filed
petition for review of said letter-decision. While petition was pending,
CIR issued final decision reducing assessment for deficiency
contractors tax to P46,516.
12 Jul 93: CTA set aside & cancelled the tax assessment. CA
affirmed decision.
ISSUE: WON ADMU, through its auxiliary unit or branch IPC, is
performing the work of an independent contractor & thus subject to
3% contractors tax under Sec. 205 of Natl Internal Revenue Code
HELD:
Negative. To fall under its coverage, Sec. 205 of Natl Internal
Revenue Code requires that the independent contractor be engaged
in the business of selling its services. However, ADMU did not contract
for the sale of the service of IPC.
No evidence that Ateneo's IPC ever sold its services for a fee to
anyone or was ever engaged in a business apart from and
independently of the academic purposes of the university. Records do
not show that Ateneo's IPC in fact contracted to sell its research
services for a fee. CIR presented no evidence to prove its bare
contention that, indeed, contracts for sale of services were ever
entered into by ADMU.
Funds received by ADMU are technically not a fee. They may
however fall as gifts or donations which are tax-exempt" as shown by
ADMUs compliance with the requirement of Sec. 123 of NIRC
providing for the exemption of such gifts to an educational institution.
IPC, as a unit of ADMU, is not engaged in business. Undisputedly,
ADMU is mandated by law to undertake research activities to
maintain its university status. research activities being carried out by
the IPC is focused not on business or profit but on social sciences
studies of Philippine society and culture. Since it can only finance a
limited number of IPC's research projects, private respondent
occasionally accepts sponsorship for unfunded IPC research projects
from
international
organizations,
private
foundations
and
governmental agencies. However, such sponsorships are subject to
private respondent's terms and conditions, among which are, that the
research is confined to topics consistent with the private respondent's
academic agenda; that no proprietary or commercial purpose
research is done; and that private respondent retains not only the

First to Third Exam Coverage


absolute right to publish but also the ownership of the results of the
research conducted by the IPC. Quite clearly, the aforementioned
terms and conditions belie the allegation that private respondent is a
contractor or is engaged in business.
Bears stressing that private respondent is a non-stock, non-profit
educational corporation. The fact that it accepted sponsorship for
IPC's unfunded projects is merely incidental. For, the main function of
the IPC is to undertake research projects under the academic agenda
of ADMU. Moreover the records do not show that in accepting
sponsorship of research work, IPC realized profits from such.
Questioned transactions of Ateneo's IPC cannot be deemed either
as a contract of sale or a contract of a piece of work. 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." By its very nature,
a contract of sale requires a transfer of ownership. Transfer of title or
an agreement to transfer it for a price paid or promised to be paid is
the essence of sale. In the case of a contract for a piece of work, "the
contractor binds himself to execute a piece of work for the employer,
in consideration of a certain price or compensation. If the contractor
agrees to produce the work from materials furnished by him, he shall
deliver the thing produced to the employer and transfer dominion
over the thing. Whether the contract be one of sale or one for a piece
of work, a transfer of ownership is involved and a party necessarily
walks away with an object
Clear from the evidence on record that there was no sale either of
objects or services because there was no transfer of ownership over
the research data obtained or the results of research projects
undertaken by IPC. Clear that the research activity of the Institute of
Philippine Culture is done in pursuance of maintaining Ateneo's
university status and not in the course of an independent business of
selling such research with profit in mind.
The contention that it is IPC that is being taxed & not ADMU is
patently erroneous because the former is not an independent juridical
entity that is separate & distinct from the latter.
DISTINGUISHED FROM AGENCY TO SELL
QUIROGA vs. PARSONS HARDWARE (1918)
FACTS:
24 Jan 11: Andres Quiroga & Parsons Hardware entered into a
contract whereby Quiroga grants exclusive right to sell his beds in
Visayan Islands to J. Parsons under the ff conditions:
Quiroga shall furnish beds of his manufacture to Parsons for
his establishment in Iloilo, invoice them at the same price he
has fixed for sales in Manila & shall make discount of 25% of
the invoiced prices as commission
Parsons shall pay Quiroga for beds received within 60 days;
shall not sell any other kind except Quirogas bed
Expenses for transportation & shipment shall be borne by
Quiroga; give notice at least 15 days beforehand of any
alteration in price
Quiroga alleged that Parsons violated the ff: not sell the beds at
higher price that those of the invoices, have an open establishment in
Iloilo, conduct the agency, keep the beds on public exhibition, pay for
the advertisement expenses for the same, order the beds by the
dozen & in no other manner.
However, except for the obligation on the part of Parsons to order
the beds by the dozen & in no other manner, none of the obligations
imputed to Parsons.
ISSUE: WON the contract entered into was a contract of sale or
agency
HELD:
Sale. To classify a contract, regard must be given to its essential
clauses. In the contract in question, what was essential, as
constituting its cause and subject matter, is that Quiroga was to
furnish Parsons with the beds which the latter might order, at the
price stipulated, and that Parsons was to pay the price in the manner
stipulated. The price agreed upon was the one determined by Quiroga
for sale of beds in Manila, with a discount of from 20-25%, according
to their class. Payment was to be made at the end of 60 days or

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Sales Case Digest


before at Quirogas request, or in cash & additional discount was to
be allowerd for prompt payment.
Essential features of a contract of sale: obligation on the part of
Quiroga to supply the beds & on the part of Parsons, to pay their
price. These features exclude the legal conception of an agency or
order to sell whereby the mandatory or agent received the thing to
sell it, and does not pay its price, but delivers to the principal the
price he obtains from the sale of the thing to a third person, and if he
does not succeed in selling it, he returns it. By virtue of the contract,
Parsons was necessarily obliged to pay their price within the term
fixed, w/o any other consideration & regardless as to whether he had
or had not sold the beds.
Not a single one of these clauses necessarily conveys the idea of
an agency. The words commission on sales used in article 1 mean
nothing else, as stated in the contract itself, than a mere discount on
the invoice price. The word agency only expresses that Parsons was
the only one that could sell the Quiroga's beds in Visayan Islands.
Testimony of Ernesto Vidal: said he drafted the contract & replied
it was to be an agent for his beds & to collect a commission on sales.
Vidal was mistaken in his classification. It must be understood that a
contract is what the law defines it to be, & not what it is called by the
parties.
Quiroga also wanted to prove that Parsons had returned beds it
could not sell & it forwarded to Parsons the beds that it wanted &
Parsons received his commission for the beds sold this only shows
that, on the part of both, there was mutual tolerance in the
performance of the contract in disregard of its terms & it gives no
right to have the contract considered, not as the parties stipulated it,
but as they performed it. Only the acts of the contracting parties,
subsequent to, and in connection with, the execution of the contract,
must be considered for the purpose of interpreting the contract, when
such interpretation is necessary, but not when, as in the instant case,
its essential agreements are clearly set forth.
Also, the return of certain brass beds & was not effected in
exchange for the price paid for them but was for other beds of
another kind. As to shipment of beds without previous notice, the
brass beds were precisely the ones so shipped & that Quiroga agreed
to their return. As to commissions, they merely constituted a discount
on the invoice price.
In respect to Parsons obligation to order by the dozen, the only
one expressly imposed by the contract, the effect of its breach would
only entitle Quiroga to disregard the orders which Parsons might
place under other conditions; but if Quiroga consents to fill them, he
waives his right and cannot complain for having acted thus at his own
free will.
PUYAT & SONS vs. ARCO AMUSEMENT (1941)
FACTS:
29: Teatro Arco was engaged in business of operating
cinematographs. Its name was changed to Arco Amusement Co.
Salmon was the president while Coulette was business manager.
Gonzalo Puyat & Sons was acting as exclusive agents in the PH
for Starr Piano Company of Richmond, USA; dealt in
cinematographer equipment & machinery.
Arco desired to equip its cinematograph with sound reproducing
devices so approached Puyat & Sons thru President Gil Puyat &
employee Santos. After negotiations, it was agreed that Arco would, in
behalf of Puyat & Sons, order sound reproducing equipment from
Starr Piano & that Puyat & Sons would pay Arco, in addition to price
of equipment, a 10% commission, plus all other expenses.
Arco sent cable to Starr Piano, inquiring about the equipment
desired. Reply was received by Puyat & Sons with the price of $1,700,
informed Arco. Order was authorized & equipment was delivered, to
which Arco paid $1.7k plus 10% commission.
The ff yr: another order for sound reproducing equipment was
placed by Puyat with Arco, on the same terms. Order was confirmed
by Arco that it would pay $1.6k for the equipment plus 10%
commission plus other.
About 3 yrs: officials of Arco discovered that the price quoted to
them by Puyat with regard to their 2 orders was not the net price but
the list price & that Puyat obtained discount from Starr; that the
prices charged them were much too high. They sought reduction,
reimbursement.

First to Third Exam Coverage


ISSUE: WON the contract was one of sale or agency
HELD:
Sale. The contract is the law between the parties and should
include all the things they are supposed to have been agreed upon.
What does not appear on the face of the contract should be regarded
merely as "trader's talk", which cannot bind either party. The letters
are clear in their terms and admit no other interpretation that Arco in
question at the prices indicated which are fixed and determinate. Arco
admitted in its complaint that Puyat agreed to sell to it the first sound
reproducing equipment.
Whatever unforeseen events might have taken place unfavorable
to Arco, such as change in prices, mistake in their quotation, loss of
the goods not covered by insurance or failure of the Starr Piano to
properly fill the orders as per specifications, Puyat might still legally
hold Arco to the prices fixed of $1.7k and $1.6k." This is incompatible
with the pretended relation of agency between the parties.
In agency, the agent is exempted from all liability in the discharge
of his commission provided he acts in accordance with the
instructions received from his principal and the principal must
indemnify the agent for all damages which the latter may incur in
carrying out the agency without fault or imprudence on his part.
While the letters state that Puyat was to receive 10% commission,
this does not necessarily make Puyat an agent of Arco, as this
provision is only an additional price which Arco bound itself to pay.
To hold Puyat an agent of Arco in the purchase of equipment and
machinery from the Starr Piano is incompatible with the admitted
fact that Puyat is the exclusive agent of the same company in PH. It is
out of the ordinary for one to be the agent of both the vendor and the
purchaser. The facts and circumstances indicated do not point to
anything but plain ordinary transaction where Arco enters into a
contract of purchase and sale with Puyat, the latter as exclusive agent
of the Starr Piano.
It follows that Puyat as vendor is not bound to reimburse Arco as
vendee for any difference between the cost price and the sales price
which represents the profit realized by the vendor out of the
transaction.
Also, the 25% discount by Starr to Puyat is available only to Puyat
as the formers exclusive agent in the PH. Arco could not have
secured this discount from Starr & neither was Puyat willing to waive
that discount in favor of Arco. No reason is advanced by Arco why
Puyat should waive the 25% discount in exchange for the 10%
commission. Puyat was not duty bound to reveal the private
arrangement it had with Starr relative to such discount.
It is well known that local dealers acting as agents of foreign
manufacturers, aside from obtaining a discount from the home office,
sometimes add to the list price when they resell to local purchasers. It
was apparently to guard against an exhorbitant additional price that
the respondent sought to limit it to 10%, and Arco is estopped from
questioning that additional price. If Arco later on discovers itself at the
short end of a bad bargain, it alone must bear the blame, and it
cannot rescind the contract, much less compel a reimbursement of
the excess price. The fact that Puyat obtained more/less profit than
Arco calculated before entering into the contract or reducing the price
agreed upon between them is not fraudulent. Not every concealment
is fraud.
KER & CO vs. LINGAD (1971)
FACTS:
Ker & Co was assessed by CIR Domingo the sum of P20,272.33
as commercial brokers percentage tax, surcharge & compromise
penalty for period 1 Jul 49 to 31 Dec 53. Ker & Co requested for
cancellation of such assessment but was refused. It filed petition for
review with CTA.
CTA held Ker & Co taxable except as to compromise penalty.
Amount due fixed at P19,772.33.
Turned out this liability arose from a contract of Ker & Co as
Distributor with United States Rubber Intl as Company. Ker & Co is
required to exert every effort to have the shipment of the products in
the maximum quantity & to promote in every way the sale thereof.
Prices, discounts, terms, etc were subject to change in the discretion
of USRI.

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Sales Case Digest


Crucial stipulation: Company shall from time to time consign to
the Distributor & the Distributor will receive, accept and/or hold upon
consignment the products specified under the terms of this
agreement. Distributor agrees that responsibility for the final sole of
all goods delivered shall rest with him. All goods on consignment shall
remain the property of the Company until sold by the Distributor to
the purchaser or purchasers, but all sales made by the Distributor
shall be in his name, in which the sale price of all goods sold less the
discount given to the Distributor by the Company, whether or not
such sale price shall have been collected by the Distributor from the
purchaser or purchasers, shall immediately be paid and remitted by
the Distributor to the Company. Further agreed that this agreement
does not constitute Distributor the agent or legal representative of the
Company for any purpose whatsoever. Distributor is not granted any
right or authority to assume or to create any obligation or
responsibility, express or implied, in behalf of or in the name of the
Company, or to bind the Company in any manner or thing.
All specifications for goods ordered were subject to acceptance by
Company with Ker & Co as Distributor to accept such goods & clear
the same through customs & arrange delivery in warehouse in Cebu.
Also, orders are to be filled in whole or in part. Dealer, as Distributor,
is allowed discount of 10% on net amount of sales of merchandise
made under such agreement. Ker & Co (as Distributor) was also
required to report to Company the data showing in detail all sales
during the month. As distributor, Ker & Co had to make payment on
such invoice on due date with Company.
ISSUE: WON the relationship created is one of vendor & vendee (sale)
or of broker & principal (agency)
HELD:
Broker & principal (agency). Ker & Co is, by contractual
stipulation, an agent of US Rubber Intl. This is borne out by the facts
that Ker & Co can dispose of the products of Company only to certain
persons/entities & within stipulated limits; it merely receives, accepts
and/or holds upon consignment the products, which remain
properties of the latter company; every effort shall be made by Ker to
promote in every way the sale of the products; sales made by Ker are
subject to approval by the company; on dates determined by the
rubber company, Ker shall render a detailed report showing sales
during the month; rubber company shall invoice the sales as of the
dates of inventory and sales report; rubber company agrees to keep
the consigned goods fully insured under insurance policies payable to
it in case of loss; upon request of the rubber company at any time,
Ker shall render an inventory of the existing stock which may be
checked by an authorized representative of the former; and upon
termination/cancellation of the Agreement, all goods held on
consignment shall be held by Ker for the account of the rubber
company until their disposition is provided for by the latter.
Acc to Natl Internal Revenue Code, a commercial broker "includes
all persons, other than importers, manufacturers, producers, or bona
fide employees, who, for compensation or profit, sell or bring about
sales or purchases of merchandise for other persons or bring
proposed buyers and sellers together, or negotiate freights or other
business for owners of vessels or other means of transportation, or for
the shippers, or consignors or consignees of freight carried by vessels
or other means of transportation. The term includes commission
merchants.
Since the company retained ownership of the goods, even as it
delivered possession unto the dealer for resale to customers, the price
and terms of which were subject to the company's control, the
relationship between the company and the dealer is one of agency.
The transfer of title/agreement to transfer it for a price paid or
promised is the essence of sale. If such transfer puts the transferee in
the attitude or position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and not merely as an
agent who must account for the proceeds of a resale, the transaction
is a sale; while the essence of an agency to sell is the delivery to an
agent, not as his property, but as the property of the principal, who
remains the owner and has the right to control sales, fix the price, and
terms, demand and receive the proceeds less the agent's commission
upon sales made.
A reading of the contract discloses that the relationship arising
therefrom was not one of seller & purchaser. If it were thus intended,

First to Third Exam Coverage


then it would not have included covenants which in their totality
would negate the concept of a firm acquiring as vendee goods from
another. Instead, the stipulations were so worded as to lead to no
other conclusion than that the control by the USRI over the goods in
question is "pervasive".
SCHMID vs. RJL MARTINEZ (1988)
FACTS:
RJL Martinez is engaged in business of deep-sea fishing. It needed
electric generators for some of its boats. Schmid sold electric
generators of different brands. They negotiated for the acquisition
thereof. There were 2 transactions.
First: sale of 3 generators. Not disputed that Schmid was vendor
of generators. Company supplied the generators from its stockroom.
It was also Schmid which invoiced the sale.
Second: As RJL was canvassing for generators, Schmid gave RJL
its Quotation for 12 Nagata brand generators. It was stipulated that
payment would be made by confirming an irrevocable letter of credit
in favor of Nagata Co. Among General Conditions of Sale appearing
on dorsal side of Quotation is: buyer will, upon request, promptly open
irrevocable letter of credit in favor of seller
Agreeing with this, RJL opened a letter of credit in favor of Nagata
Co.
20 Nov 75: Schmid transmitted to Nagata an order for 12
generators to be shipped directly to RJL. Nagata sent RJL the bill of
lading & its own invoice. Generators were directly shipped to RJL.
Schmid received from Nagata a commission of P1,752 for sale of 12
generators to RJL.
All 15 generators subject of 2nd transaction burned out after
continuous use. RJL informed Schmid about this. Schmid brought
matter to attention of Nagata.
Jul 76: Nagata sent 2 tech representatives who made ocular
inspection. Found that generators were overrated capacity was
5KVA but turned out, actual capacity was only 4KVA.
Schmid replaced 3 generators subject of 1st sale with generators
of diff brand. As for 12 generators subject of 2nd sale, Jap technicians
advised RJL to ship 3 generators to Japan for Nagata to repair.
Remaining 9 were neither repaired/replaced. Nagata wrote Schmid
suggesting that latter check the generators, request for spare parts for
replacement free of charge, & send to Nagata Schmids warrantly
claim including labor cost. Schmid indicated it was not agreeable to
these.
Since not all generators were replaced/repaired, RJL formally
demanded that it be refunded the cost of generators & paid damages.
Schmid maintained it was not the seller of 12 generators & refused
refund.
14 Feb 77: RJL brought suit against Schmid on theory that latter
was vendor of 12 generators & as such, liable under warranty against
hidden defects.
ISSUE: WON the 2nd transaction between parties was a sale of an
indent transaction
HELD:
A contract is what the law defines it to be, considering its essential
elements, and not what it is caged by the contracting parties.
Definition of sale acc to Art. 458. The essence of the contract of
sale is transfer of title or agreement to transfer it for a price paid or
promised. On the other hand, there is no statutory definition of
"indent" in this jurisdiction. An indentor is a middlemen in the same
class as commercial brokers and commission merchants. A broker is
generally defined as one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he
has no concern; the negotiator between other parties, never acting in
his own name but in the name of those who employed him; he is
strictly a middleman and for some purpose the agent of both. A
broker is one whose occupation it is to bring parties together to
bargain, or to bargain for them. A commission merchant is one
engaged in the purchase or sale for another of personal property
which, for this purpose, is placed in his possession and at his
disposal. He maintains a relation not only with his principal and the
purchasers or vendors, but also with the property which is subject
matter. An indentor may therefore be best described as one who, for

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Sales Case Digest


compensation, acts as a middleman in bringing about a purchase and
sale of goods between a foreign supplier and a local purchaser.
Hence, chief feature of a commercial broker and a commercial
merchant is that in effecting a sale, they are merely intermediaries or
middle-men, and act in a certain sense as the agent of both parties to
the transaction.
SCHMID was not a vendor, but was merely an indentor, in the
second transaction. RJL MARTINEZ admitted that the generators were
purchased "through indent order". Also admitted in its demand letter
to Schmid that 12 of 15 generators were purchased through your
company (Schmid) by indent order & 3 by direct purchase. Evidence
also shows that RJL paid directly Nagata, for the generators, and that
the latter company itself invoiced the sale and shipped the generators
directly to the former. The only participation of Schmid was to act as
an intermediary or middleman between Nagata and RJL, by procuring
an order from RJL and forwarding the same to Nagata. The above
transaction is significantly different from the first transaction wherein
SCHMID delivered the goods from its own stock, issued its own
invoice & collected payment directly from purchaser.
Argument: RJL insists that Schmid was the vendor of the 12
generators because the Quotation & General Conditions of Sale on the
dorsal side do not necessarily lead to the conclusion that Nagata &
not Schmid was real seller; that acts of Schmid after it was informed
of defect were indicative of its awareness that it was vendor; contents
of the letter from Nagata to Schmid re the repair indicated that the
latter was within purview of seller.
First contention disregards the circumstances surrounding the
second transaction as distinguished from those surrounding the first
transaction. Neither does the solicitous manner by which Schmid
responded to RJLs complaint prove that the former was the seller of
the generators. No indentor will just fold its hands when a client
complains about the goods it has bought upon the indentor's
mediation in its desire to promote the product of the seller and to
retain the goodwill of the buyer. Schmid did not replace any of the 12
generators, but merely rendered assistance to both RJL and Nagata
so that latter could repair the defective generators. Lastly, proposal of
Nagata rejected by Schmid that the latter undertake the repair of 9
other defective generators, with the former supplying the replacement
parts free of charge & subsequently reimbursing the latter for labor
cost cannot support conclusion that Schmid is vendor of the
generators of 2nd transaction or was acting "within purview of a
seller.
However, even as an indentor, Schmid may still be held liable for
soe other contractual obligation. An indentor is to some extent an
agent of both the vendor and the vendee. As such agent, therefore, he
may expressly obligate himself to undertake the obligations of his
principal.
Warranty of hidden defects: nowhere is it stated therein that
Schmid bind itself to answer for the defects of the things sold. There
being no allegation nor any proof that the Quotation does not express
the true intent and agreement of the contracting parties, extrinsic
parol evidence of warranty will be to no avail. Merely constituted an
expression of opinion, cannot be construed as warranty.
VICTORIAS MILLING vs. CA (2000)
FACTS:
St. Therese Merchandising regularly bought sugar from Victorias
Milling Co. Victorias issued several Shipping List/Delivery Receipts to
STM as proof of purchases. Among these was SLDR #1214M. It
covers 25k bags of sugar. Each bag contained 50 kgs, priced at
P638/bag. Transaction covered was a direct sale.
25 Oct 89: STM sold to Consolidated Sugar Corp its rights in
SLDR #1214M for P14.750k. CSC issued 4 checks. It wrote Victorias
that it had been authorized by STM to withdraw the sugar covered by
SLDR #1214M & a letter of authority from STM authorizing CSC to
withdraw for & in behalf of STM.
27 Oct 89: STM issued checks in total amount of P31.9M with
Victorias as payee.
CSC surrendered SLDR #1214M to Victorias Nawaco warehouse
& was allowed to withdraw sugar. But after 2k bags was withdrawn,
Victorias refused to allow further withdrawals, arguing that STM had
already withdrawn all the sugar covered by cleared checks.

First to Third Exam Coverage


27 Apr 90: CSC filed complaint for specific performance, alleging
STM had fully paid Victorias hence, no justification for refusing
delivery.
On the other hand, Victorias argued it was an unpaid seller. Also
explained that SLDRs were not documents of title but mere delivery
receipts issued pursuant to a series of transactions entered into
between it & STM. It prescribed delivery of the sugar to the party
specified therein & did not authorize the transfer of said partys rights
& interests.
ISSUE: WON CSC was an agent of STM
HELD:
Negative. CC defines contract of agency as Art. 1868. By the
contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent
or authority of the latter.
The basis of agency is representation. On the part of the
principal, there must be an actual intention to appoint or an intention
naturally inferable from his words or actions; and on the part of the
agent, there must be an intention to accept the appointment and act
on it, and in the absence of such intent, there is generally no agency.
One factor which most clearly distinguishes agency from other legal
concepts is control; one person - the agent - agrees to act under the
control or direction of another - the principal. Indeed, the very word
"agency" has come to connote control by the principal.
Where the relation of agency is dependent upon the acts of the
parties, the law makes no presumption of agency, and it is always a
fact to be proved, with the burden of proof resting upon the persons
alleging the agency, to show not only fact of its existence but also its
nature & extent.
CSC was a buyer of SLDR & not an agent of STM. CSC was not
subject to STMs control. The question of whether a contract is one of
sale or agency depends on the intention of the parties as gathered
from the whole scope & effect of the language employed. That the
authorization given to CSC contained the phrase "for and in (STM's)
behalf" did not establish agency. Ultimately, decisive is the intention
of the parties. That no agency was meant to be established by the
CSC & STM is clearly shown by CSC's communication to Victorias that
SLDR #1214M had been "sold and endorsed" to it. The use of the
words "sold and endorsed" means that STM & CSC intended a
contract of sale & not agency.
Second issue: it was not a serial part of a single transaction or of
one account contrary to Victorias insistence. Victorias had been paid
for the sugar purchased under SLDR #1214M. Victorias clearly had
the obligation to deliver said commodity to STM or its assignee.
Victorias & CSC, as assignee of STM, were not mutually creditors &
debtors of each other.
Third issue: SLDR #1214M contains the ff -- by payment by
buyer/trader of refined sugar and/or receipt of this document by the
buyer/trader personally or through a representative, title to refined sugar
is transferred to buyer/trader and delivery to him/it is deemed effected
and completed. This shows that Victorias transferred title to the sugar
to the buyer or his assignee upon payment of the purchase price.
Said terms clearly establish a contract of sale, not a contract to sell.
Victorias is now estopped from alleging the contrary. The contract is
the law between the contracting parties.
Fourth issue: despite careful scrutiny, we find here the records
bare of convincing evidence whatsoever to support the Victorias'
allegations of fraud. We are now constrained to deem this matter
purely speculative, bereft of concrete proof.
DISTINGUISHED FROM DACION EN PAGO
PNB vs. PINEDA (1991)
FACTS:
1963: Ignacio Arroyo, married to Lourdes Tuason Arroyo,
obtained loan of P580k from PNB to purchase 60% of subscribed
capital stock & acquire controlling interest of Tayabas Cement Co. As
security, Sps. Arroyo executed real estate mortgage over parcel of
land known as La Vista property.

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Sales Case Digest


TCC filed with PNB an application & agreement for the
establishment of an 8-yr deferred letter of credit for $7M in favor of
Toyo Menka Kaisha to cover the importation of a cement plant
machinery & equipment.
Upon approval of said application, Arroyos executed the ff
documents to secure loan accommodation: Surety Agreement dated
5 Aug 64 & Covenant dated 6 Aug 64.
Imported cement plant machinery & equipment arrived from
Japan & were released to TCC under trust receipt agreement.
Subsequently, Toyo Menka made corresponding drawings against L/C
as scheduled. But TCC failed to remit and/or pay corresponding
amount covered by drawings.
19 May 68: Pursuant to trust receipt agreement, PNB notified
TCC of its intention to repossess the imported machinery &
equipment for failure of TCC to settle its obligations under L/C.
Meantime: personal accounts of Arroyos, which included another
loan of P160k secured by a real estate mortgage over parcels of agri
land known as Hacienda Bacon had likewise become due. Arroyos
failed to satisfy obligations with PNB. PNB foreclosed the mortgages.
18 Jul 75: PNB filed petition for extra-judicial foreclosure of real
estate mortgage over properties La Vista property & Hacienda
Bacon. At auction sale, PNB was highest bidder.
When said property was about to be awarded to PNB, rep of
Arroyos objected & demanded from PNB the difference of bid price of
P1M & indebtedness of P499,060 of Arroyos on their personal
account. To remedy this, PNB filed supplemental petition requesting
Sheriff to proceed with sale of subject real properties to satisfy not
only P499k owed by Arroyos on their personal account but also
amount of P35M owed by Arroyos as sureties of TCC. Petition was
opposed by Arroyos.
May 76: PNB filed petition for mandamus against City Sheriff to
compel her to proceed with foreclosure sale. Granted.
14 Sep 76: TCC filed complaint against PNB & City Sheriff to
restrain the foreclosure as well as declaration that its obligation with
PNB had been fully paid by reason of PNBs repossession of imported
machinery.
ISSUE: WON TCCs liability has been extinguished by the
repossession of PNB of the imported cement plant machinery &
equipment
HELD:
Negative. PNB took possession of the imported cement plant
machinery & equipment pursuant to the trust receipt agreement
executed by & between PNB & TCC giving the former the unqualified
right to the possession & disposal of all property shipped under the
L/C until such time as all the liabilities and obligations under said
letter had been discharged.
In a L/C or trust receipt agreement, a bank extends a loan covered
by the Letter of Credit, with the trust receipt as a security for the loan.
In other words, the transaction involves a loan feature represented by
the letter of credit & a security feature which is in the covering trust
receipt. A trust receipt, therefore, is a security agreement, pursuant to
which a bank acquires a "security interest" in the goods.
PNB's possession of the subject machinery & equipment being
precisely as a form of security for the advances given to TCC under
the L/C, said possession by itself cannot be considered payment of
the loan secured thereby. Payment would legally result only after PNB
had foreclosed on said securities, sold the same and applied the
proceeds thereof to TCC's loan obligation. Mere possession does not
amount to foreclosure for foreclosure denotes the procedure adopted
by the mortgagee to terminate the rights of the mortgagor on the
property and includes the sale itself.
Neither can said repossession amount to dacion en pago. Dation
in payment takes place when property is alienated to the creditor in
satisfaction of a debt in money and the same is governed by sales.
Dation in payment is the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. Repossession of the machinery and
equipment in question was merely to secure the payment of TCC's
loan obligation and not for the purpose of transferring ownership
thereof to PNB in satisfaction of said loan. Thus, no dacion en pago
was ever accomplished.

First to Third Exam Coverage


Hence, PNB has the right to foreclose the mortgages executed by
the spouses Arroyo as sureties of TCC. A surety is considered in law
as being the same party as the debtor in relation to whatever is
adjudged touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable.
LO vs. KJS (2003)
FACTS:
KJS Eco-Formwork System PH is a corporation engaged in sale of
steel scaffoldings while Sonny Lo, doing business under the name &
style Sans Enterprises, is a building contractor.
22 Feb 90: Lo ordered scaffolding equipment from KJS worth
P540k. Paid downpayment in amount of P150k. Balance was payable
in 10mos.
KJS delivered the scaffoldings. Lo was able to pay first 2 monthly
installments but business encountered financial difficulties & was
unable to settle obligation.
11 Oct 90: Lo & KJS executed DOA, whereby Lo assigned to KJS
his receivables in amount of P335,462.14 from Jomero Realty Corp.
But when KJS tried to collect said credit from JRC, latter refused
to honor DOA because it claimed that Lo was also indebted to it.
26 Nov: KJS sent letter to Lo demanding payment but Lo refused
to pay claiming that his obligation had been extinguished by the DOA.
ISSUE: WON DOA extinguished the obligation of Lo to KJS
HELD:
Negative. An assignment of credit is an agreement by virtue of
which the owner of a credit, known as the assignor, by a legal cause,
(sale, dacion, exchange) and without the consent of the debtor,
transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as
the assignor could enforce it against the debtor.
In dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as equivalent of
payment of an outstanding debt. To be valid, requisites:
1. performance of the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal
thing or a real right or a credit against the third person
2. some difference between the prestation due and that which
is given in substitution (aliud pro alio)
3. an agreement between the creditor and debtor that the
obligation is immediately extinguished by reason of the
performance of a prestation different from that due
The undertaking really partakes in one sense of the nature of sale,
that is, the creditor is really buying the thing or property of the
debtor, payment for which is to be charged against the debtors debt.
Hence, the assignment of credit, which is in the nature of a sale of
personal property, produced the effects of a dation in payment which
may extinguish the obligation. However, as in any other contract of
sale, the vendor or assignor is bound by certain warranties.
Lo, as vendor/assignor, is bound to warrant the existence and
legality of the credit at the time of the sale or assignment. When JRC
claimed that it was no longer indebted to Lo since the latter also had
an unpaid obligation to it, it essentially meant that its obligation to Lo
has been extinguished by compensation. Therefore, it is incumbent to
Lo to make good its warranty and pay the obligation.
Further, Lo breached his obligation under the DOA assignor
shallexecute and do all such further acts and deeds as shall be
reasonably necessary to effectually enable said assignee to recover
whatever collectibles said assignor has in accordance with the true intent
and meaning of these presents.
Indeed, by warranting the existence of the credit, Lo should be
deemed to have ensured the performance thereof in case the same is
later found to be inexistent. He should be held liable to pay to
respondent the amount of his indebtedness.
AQUINTEY vs. SPS. TIBONG (2006)
FACTS:
Agrifina Aquintey lent money to Felicidad Tibong. Acc to Felicidad,
Agrifina would be earning interests higher than those given by the
bank for her money. Felicidad told Agrifina that since former was

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Sales Case Digest


engaged in the sale of dry goods at GP Shopping Arcade, she would
use the money to buy bonnels & thread. So Agrifina lent sum of
P773k to Felicidad & each loan transaction was covered by either a
PN or an acknowledgment receipt. Felicidad was able to pay only her
loans amounting to P122,600.
Jul 90: Felicidad gave Agrifina City Trust Bank Check in amount
of P50k but was dishonored. Filed case for violation of BP 22.
Agrifina learned that Felicidad had re-loaned the amounts to other
borrowers. So Agrifina sought assistance of Atty. A-ayo who advised
her to require Felicidad to execute DOAs over Felicidads debtors &
also suggested that Felicidads debtors execute PNs in Agrifinas favor
to turn over their loans from Felicidad.
7 Aug 90 to Oct 90: Felicidad executed DOA of credits, in which
Felicidad transferred & assigned to Agrifina the total amount of
P546,459 due from debtors. In said deeds, Felicidad confirmed that
her debtors were no longer indebted to her for their respective loans.
Agrifina narrated that Felicidad showed to her the way to the
debtors houses to enable her to collect from them. Agrifina was able
to collect P301k from Felicidads debtors.
Apr 90: Agrifina tried to collect balance of Felicidads account but
Felicidad told her to wait until her debtors had money.
ISSUE: WON the obligation of Sps. Tibong to pay the balance of their
loans was partially extinguished by execution of DOAs in favor of
Aquintey
HELD:
Affirmative. An assignment of credit is an agreement by virtue of
which the owner of a credit, known as the assignor, by a legal cause,
such as sale, dation in payment, exchange or donation, and without
the consent of the debtor, transfers his credit and accessory rights to
another, known as the assignee, who acquires the power to enforce it
to the same extent as the assignor could enforce it against the debtor.
It may be in the form of sale, but at times it may constitute a dation
in payment, such as when a debtor, in order to obtain a release from
his debt, assigns to his creditor a credit he has against a third person.
Dacion en pago is the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. It is a special mode of payment where
the debtor offers another thing to the creditor who accepts it as
equivalent of payment of an outstanding debt.
All requisites for valid dation in payment are present. Felicidad
assigned to Agrifina her credits "to make good" the balance of her
obligation. Felicidad testified that she executed the deeds to enable
her to make partial payments of her account, since she could not
comply with Agrifina's demands to pay the account in cash. They
agreed to relieve the Felicidad of her obligation to pay the balance of
her account, and for Agrifina to collect the same from Felicidad's
debtors.
Admittedly, some of Felicidad's debtors, like Edna Papat-iw, were
not able to affix their conformity to the deeds. In an assignment of
credit, however, the consent of the debtor is not essential for its
perfection; the knowledge thereof or lack of it affecting only the
efficaciousness or inefficaciousness of any payment that might have
been made. The assignment binds the debtor upon acquiring
knowledge of the assignment but he is entitled, even then, to raise
against the assignee the same defenses he could set up against the
assignor necessary in order that assignment may fully produce legal
effects. Thus, the duty to pay does not depend on the consent of the
debtor. The purpose of the notice is only to inform that debtor from
the date of the assignment. Payment should be made to the assignee
and not to the original creditor.
The transfer of rights takes place upon perfection of the contract,
and ownership of the right, including all appurtenant accessory rights,
is acquired by the assignee who steps into the shoes of the original
creditor as subrogee of the latter from that amount, the ownership of
the right is acquired by the assignee. The law does not require any
formal notice to bind the debtor to the assignee, all that the law
requires is knowledge of the assignment. Even if the debtor had not
been notified, but came to know of the assignment by whatever
means, the debtor is bound by it.
SSS vs. AGP (2008)

First to Third Exam Coverage


FACTS:
Sometime 2000: AGP informed SSS in writing of its premiums &
loan amortization delinquencies covering period from Jan-May 2000
amounting to P7.3M. It proposed to pay its said arrears by end of
2000 but requested for condonation of all penalties. In turn, SSS
suggested 2 options to AGP, either to pay by installment or through
dacion en pago.
AGP chose to settle obligation with SSS through dacion en pago,
covering its 5,999sqm property situated in Baguio. SSS proposed to
carve-out from said property an area sufficient to cover AGPs
delinquencies. But AGP was not amenable to subdivide Baguio
property.
AGP made another proposal to SSS, offering as payment a portion
of 58,153sqm lot located in Batangas. SSS informed AGP of its
decision to include other companies within the umbrella of DMCI
group with arrearages with SSS. Semirara Coal Corp was left with
outstanding delinquencies with SSS so Semirara was included in
proposed settlement through dacion.
AGP complied with requirements SSS directed it to submit.
4 Apr 01: SSS approved AGPs proposal to settle its & Semiraras
delinquencies through dacion en pago. As result, posting of
contributions & loan amortization to individual member accounts of
both was effected & benefits of member-employees of both
companies were restored.
To effect property transfer, DOA has to be executed between SSS
& AGP. SSS failed to come up with required DOA so AGP prepared
draft & submitted it to Ofc of VP. But SSS failed to take any action
causing AGP to resubmit it to same office.
A year after approval of proposal, SSS sent revised copy of DOA to
AGP. However, amount of AGPs obligation appearing in DOA has
ballooned from P29M to P40M allegedly because of additional
interests & penalties.
AGP demanded for deletion of additional interests on the ground
that delay in the approval of DOA & delay in conveyance of property
was solely attributable to SSS. Also maintained willingness to pay
P29M. But SSS refused to accept payment through dacion en pago
unless AGP also pay the additional interests.
AGP & Semirara filed complaint for specific performance against
SSS.
RTC Ruling: The alleged dacion en pago is crystal clear
manifestation of offering a special form of payment which to the mind
of the court will produce effect only upon acceptance by the offeree
and the observance and compliance of the required formalities by the
parties. No matter in what form it may be, still the court believes that
the subject matter is the payment of contributions and the
corresponding penalties, not specific performance to enforce dacion
en pago.
CA Ruling: The subject of the complaint is no longer the payment
of the premium and loan amortization delinquencies, as well as the
penalties appurtenant thereto, but the enforcement of the dacion en
pago pursuant to the SSS Resolution. The action therefore is correctly
one for specific performance.
ISSUE: WON an action for specific performance was proper in order
to enforce the agreed dacion en pago
HELD:
Affirmative. There is no longer any dispute with respect to AGPs
accountability to SSS. They admitted their delinquency & offered to
settle them by way of dacion en pago subsequently approved by SSS.
Dacion en pago is the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. It is a special mode of payment where
the debtor offers another thing to the creditor who accepts it as
equivalent of payment of an outstanding debt. The undertaking really
partakes in one sense of the nature of sale. As such, the essential
elements of a contract of sale, namely, consent, object certain, and
cause or consideration must be present. In its modern concept, what
actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the
performance of an obligation is considered as the object of the
contract of sale, while the debt is considered as the purchase price.
Any case, common consent is an essential prerequisite.

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Sales Case Digest


Further, since it partakes in the nature of a sale & an action of
specific performance being proper in sale, it also follows that it is a
proper action to enforce dacion en pago.
The controversy, instead, lies in the non-implementation of the
approved and agreed dacion en pago on the part of the SSS. As such,
respondents filed a suit to obtain its enforcement which is, doubtless,
a suit for specific performance.
YUSON vs. VITAN (2006)
FACTS:
Mar Yuson was taxi driver with 8 children. In Oct 02, he received
sum of money by way of inheritance. He & his wife intended to use
the money to purchase a taxi, repair their dilapidated house & hold a
debut party for their daughter.
They were able to purchase secondhand taxi. Atty. Vitan helped
him with all legal matter concerning this purchase. But their other
plans were put on hold because Vitan borrowed P100k from them in
Dec 02. It was agreed that loan would be repaid before end of ff year,
in time for debut.
To guarantee payment, Vitan executed in favor of Yuson several
postdated checks but turned out to be worthless.
Yuson sought aid of the IBP National Committee on Legal Aid
(NCLA) in obtaining payment. An administrative case was filed against
Atty. Vitan.
When date passed without any payment, Yuson demanded
collateral to secure loan. Thus, Atty. Vitan executed a document
denominated as DOAS covering Vitans parcel of land in Bulacan.
Their intention was to transfer the title of the property to him
temporarily so that he could either sell or mortgage it. Also, agreed
that if it was mortgaged, Vitan would redeem it as partial or full
payment of loan.
However, the parties executed a 2nd DOAS, this time, in favor of
Atty. Vitan with Yuson as vendor. Purpose of document was not
explained.
12 Apr 04: Yuson was able to mortgage the property for P30k.
Contrary to their agreement, Vitan did not redeem it from mortgagee
& simply sent Yuson a letter, promising to pay on/before 12 Jul 04.
Promise was not fulfilled so mortgagee demanded payment from
Yuson which exposed him to shame & ridicule.
19 Jul 04: IBP-NCLA sent letter on behalf of Yuson, stating that
an administrative case would be filed against him unless he settled
obligation.
30 Aug 04: IBP received reply from Vitan, explaining that he had
settled obligation. He maintained that he had executed DOAS in favor
of Yuson over his 203sqm property in Bulacan. When asked about the
2nd DOAS, Vitan called it a Counter DOS executed as a sort of
collateral/security for the account of his liaison officer, arguing that it
was she who had incurred the debts & he only acted as character
reference and/or guarantor.
ISSUE: WON Vitans obligation has been extinguished by way of
dation
HELD:
Negative. Atty. Vitan undoubtedly owed money to Yuson. In a
letter to IBP Deputy Director, Vitan admitted he incurred P100k loan.
It was only in his Answer that he suddenly denied that he had
personally incurred this obligation. However, the story involving his
liaison office was clearly a mere afterthought.
Vitan contends his obligation was already extinguished by way of
dation in payment, through the DOAS. Governed by the law on sales,
dation in payment is a transaction that takes place when a piece of
property is alienated to the creditor in satisfaction of a debt in
money. It involves delivery & transmission of ownership of a thing -by the debtor to the creditor -- as an accepted equivalent of
performance of obligation.
Records reveal that Vitan did not really intend to sell and
relinquish ownership over his property in Sta. Maria, Bulacan,
notwithstanding the execution of DOAS in favor of Yuson. The second
DOAS, which reconveyed the property to Vitan, is proof that he had no
such intention. This second Deed, which he referred to as his "safety
net," betrays his intention to counteract the effects of the first one.

First to Third Exam Coverage


In a manner of speaking, Atty. Vitan was taking back with his right
hand what he had given with his left. The second DOAS returned the
parties right back where they started, as if there were no sale in favor
of Yuson to begin with. In effect, on the basis of the second DOAS,
Vitan took back and asserted his ownership over the property despite
having allegedly sold it. Thus, he fails to convince us that there was a
bona fide dation in payment or sale that took place between the
parties; that is, that there was an extinguishment of obligation.
It appears that the true intention of the parties was to use the
Bulacan property to facilitate payment. They only made it appear that
the title had been transferred to Yuson to authorize him to sell or
mortgage the property. Vitan even admitted in his letter that their
intention was to convert the property into cash, so that payment
could be obtained by Yuson and the excess returned to Vitan. The
records, however, do not show that the proceeds derived were
sufficient to discharge the obligation of the lawyer fully; thus, he is
still liable to the extent of the deficiency.
FILINVEST CREDIT CORP vs. PHIL. ACETYLENE (1982)
FACTS:
30 Oct 71: PH Acetylene purchased from Alexander Lim, as
evidenced by DOS, a motor vehicle for P55,247.80 with down of P20k
& balance payable under terms & conditions of PN at monthly
installment of P1,036.
As security, PH Acetylene executed executed a chattel mortgage
over same motor vehicle in favor of Lim.
2 Nov 71: Lim assigned to Filinvest Finance all his rights, title &
interests in the PN & chattel mortgage by virtue of DOA.
Thereafter, Filinvest Finance assigned to Filinvest Credit Corp all
its rights, title & interests on the PN & chattel mortgage which, in
effect, the payment of unpaid balance owed by PH Acetylene to Lim
was financed by FCC such that Lim became fully paid.
PH Acetylene failed to comply with the terms & conditions set
forth in PN & chattel mortgage since it had defaulted in payment of 9
successive installments. FCC sent demand letter. So, PH Acetylene
wrote back advising FCC of its decision to return the mortgaged
property, which return shall be in full satisfaction of its indebtedness
pursuant to Art 1484. Mortgaged vehicle was returned to FCC
together with document Voluntary Surrender with SPA to Sell.
4 Apr 73: FCC wrote letter to PH Acetylene informing latter that
FCC cannot sell motor vehicle as there were unpaid taxes on said
vehicle. FCC requested PH Acetylen to update its account by paying
the installments in arrears & accruing interests.
8 May: FCC offered to deliver back the motor vehicle but PH
Acetylene did not accept, arguing that the return of vehicle
extinguished its obligation. So FCC instituted action for collection of
sum of money.
ISSUE: WON the return of the mortgaged motor vehicle to FCC by
virtue of its voluntary surrender by PH Acetylene extinguished the
obligation
HELD:
Art 1484 states: 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 vendee's failure to pay cover 2+
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.
The mere return of the mortgaged motor vehicle by the
mortgagor (PH Acetylene), to the mortgagee (FCC) does not constitute
dation in payment or dacion en pago in the absence, express or
implied of the true intention of the parties. Dacion en pago, according
to Manresa, is the transmission of the ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance
of obligation. In dacion en pago, as a special mode of payment, the
debtor offers another thing to the creditor who accepts it as

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Sales Case Digest


equivalent of payment of an outstanding debt. The undertaking really
partakes in one sense of the nature of sale, that is, the creditor is
really buying the thing or property of the debtor, payment for which is
to be charged against the debtor's debt. Common consent is an
essential prerequisite.
Evidence fails to show that the mortgagee (FCC) consented, or at
least intended, that the mere delivery to, and acceptance by him, of
the mortgaged motor vehicle be construed as actual payment. Fact
that the mortgaged motor vehicle was delivered to him does not
necessarily mean that ownership thereof, as juridically contemplated
by dacion en pago, was transferred from PH Acetylene to FCC. In the
absence of clear consent of FCC to the proferred special mode of
payment, there can be no transfer of ownership of the mortgaged
motor vehicle from PH Acetylene to FCC.
A more solid basis of the true intention of the parties is furnished
by the document executed by appellant captioned "Voluntary
Surrender with Special Power of Attorney To Sell" dated 12 Mar 73.
An examination of the language of the document reveals that the
possession of the mortgaged motor vehicle was voluntarily
surrendered by PH Acetylene to FCC authorizing the latter to look for
a buyer and sell the vehicle in behalf of PH Acetylene who retains
ownership thereof, and to apply the proceeds of the sale to the
mortgage indebtedness, with the undertaking of PH Acetylene to pay
the difference, if any, between the selling price and the mortgage
obligation. FCC, in essence was constituted as a mere agent to sell the
motor vehicle which was delivered, not as its property, for if it were,
he would have full power of disposition of the property, not only to
sell it as is the limited authority given him in the special power of
attorney.
Had FCC intended to completely release PH Acetylene of its
mortgage obligation, there would be no necessity of executing said
document. Nowhere can it be found that the mere surrender of the
mortgaged motor vehicle to FCC extinguished PH Acetylene's
obligation for the unpaid price.
Under the law, the delivery of possession of the mortgaged
property to FFC can only operate to extinguish PH Acetylene's liability
if FCC had actually caused the foreclosure sale of the mortgaged
property when it recovered possession thereof.
DISTINGUISHED FROM LEASE
FILINVEST vs. CA (1989)
FACTS:
Sps. Jose Sy Bang & Iluminada Tan were engaged in the sale of
gravel produced from crushed rocks and used for construction
purposes. To increase their production, they engaged the services of
Mr. Ruben Mercurio to look for a rock crusher. Mercurio referred the
Sps to the Rizal Consolidated Corp which had one machinery.
Oscar, brother of Jose, went to inspect the machine at RCCs plant
site. He was satisfied so the Sps signified their intent to purchase it.
But the price of the rock crusher was P550k.
Sps applied for financial assistance from Filinvest Credit Corp.
FCC agreed to extend financial aid on the ff conditions:
The machinery be purchased in FCCs name
It be leased (with option to purchase upon termination of
lease period) to the Sps
Sps execute a real estate mortgage in favor of FCC as security
18 May 81: contract of lease of machinery with option to
purchase was entered into by the parties for a period of 2 yrs. Also
stipulated that at end of 2yr period, machine would be owned by Sps.
Sps. executed a real estate mortgage over 2 parcels of land in favor of
FCC.
7 Sep: Sps. claimed that they had only tested the machine that
month and that contrary to the 20-40 tons/hr capacity of the
machine as stated in lease contract, machine could only process 5
tons of rocks/hr. demanded that FCC make good the stipulation in the
lease contract.
FCC did not act on them so Sps. stopped payment. As
consequence, FCC extrajudicially foreclosed the real estate mortgage
and Sps. received Sheriffs Notice of Auction Sale. Sps. filed complaint
against FCC.
2 yrs later: TC rendered decision in favor of Sps. CA affirmed,
ordering the return of the defective machine to FCC & for FCC to

First to Third Exam Coverage


return deposit & rentals of Sps. FCC appealed, arguing that cause of
action of Sps. is against RCC, the original seller, & that it is a mere
financier.
ISSUE: What is the real nature of the contract between FCC & Sps.?
HELD:
Contract of sale. The fact that the rock crusher was purchased
from RCC in the name and with the funds of FCC proves beyond
doubt that the ownership thereof was effectively transferred to it. It is
precisely this ownership which enabled FCC to enter into the
"Contract of Lease of Machinery and Equipment" with Sps.
The real intention of the parties should prevail. The nomenclature
of the agreement cannot change its true essence. Apparent that the
intent of the parties to the subject contract is for the so-called rentals
to be the installment payments. Upon the completion of the
payments, then the rock crusher, subject matter of the contract,
would become the property of the Sps. This form of agreement has
been criticized as a lease only in name.
Article 1484 (3): 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: (3) Foreclose the chattel mortgage or 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.
The device contract of lease with option to buy is at times
resorted to as a means to circumvent Art. 1484(3). Through the setup, the vendor, by retaining ownership over the property in the guise
of being the lessor, retains, likewise, the right to repossess the same,
without going through the process of foreclosure. There arises
therefore no need to constitute a chattel mortgage over the movable
sold. More important, the vendor, after repossessing the property and,
in effect, canceling the contract of sale, gets to keep all the
installments-cum-rentals already paid.
Article 1485. The preceding article shall be applied to contracts
purporting to be leases of personal property with option to buy, when
the lessor has deprived the lessee of possession or enjoyment of the
thing.
However, failed to find any reason to hold FCC liable for the rock
crusher's failure to produce in accordance with its described capacity.
It was the Sps. or Oscar who chose, inspected & tested the machinery.
It was only after they had inspected and tested the machine, and
found it to their satisfaction, that they sought financial aid from FCC.
Moreover, it is the Sps., by reason of their business, who are
presumed to be more knowledgeable, if not experts, on the subject
machinery. It is their faikure or neglect to exercise the caution and
prudence in the selection, testing & inspection of the rock crusher.
They shall bear the loss.
Notes:

DISTINGUISHED FROM CONTRACT TO SELL


ALMIRA vs. CA (2003)
FACTS:
Juana Almira et.al. (petitioners) are the wife & children of late
Julio Garcia who inherited fromo his mother, Maria Alibudbud, Lot
1642. Lot 1642 was co-owned & registered in names of 3 persons
Vicente de Guzman (), Enrique Hemedes () & Francisco Alibudbud
(). No separate title was issued in the name of Julio Garcia but there
were tax declarations in his name to the extent of his grandfathers
share.
5 Jul 84: Heirs of Julio Garcia & Federico Briones entered into
Kasunduan ng Pagbibilihan over 21,460sqm portion of Lot 1642 for
P150k. Briones paid P65k upon execution while balance of P85k was
made payable within 6mos from date of execution.

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Sales Case Digest


Heirs of Garcia allegedly informed Briones that TCT No RT-1076
of Lot 1642 was in possession of cousin Conchalina Alibudbud.
Briones still willingly entered into the Kasunduan provided that full
payment of purchase price will be made upon delivery to him of the
title.
Briones took possession of the property & made various
payments to Heirs. However, upon failure of Heirs to deliver the
separate title to the property, he refused to make further payments.
Heirs filed complaint for rescission of Kasunduan, among others,
against Briones.
ISSUE: WON the contract entered into by the parties was a contract
to sell which entitles the Heirs to rescission
HELD:
Negative, contract of sale. The rights of the parties are governed
by the terms and the nature of the contract they enter into. In a
contract to sell, ownership is, by agreement, reserved to the vendor
and is not to pass until full payment of the purchase price; whereas,
in contract of sale, title to the property passes to the vendee upon
delivery of the thing sold. Non-payment by the vendee in a contract of
sale entitles the vendor to demand specific performance or rescission
of the contract, with damages, under Article 1191.
Careful reading of the provisions of the Kasunduan reveals that it
is a contract of sale. A deed of sale is absolute in nature in the
absence of any stipulation reserving title to the vendor until full
payment of the purchase price. In such cases ownership of the thing
sold passes to the vendee upon actual or constructive delivery
thereof. There is nothing in the Kasunduan which expressly provides
that Heirs retain title or ownership of the property, until full payment
of the purchase price. The absence of such stipulation in the
Kasunduan coupled with the fact that Briones took possession of the
property upon the execution of the Kasunduan indicate that the
parties have contemplated a contract of absolute sale.
There was a perfected contract of sale. The parties agreed on the
sale of a determinate object and the price certain therefor, without
any reservation of title on the part of Heirs. Ownership was effectively
conveyed by Heirs to Briones, who was given possession of the
property. The delivery of a separate title in name of Julio Garcia was a
condition imposed on Briones obligation to pay the balance of the
purchase price. It was not a condition imposed on the perfection of
the contract of sale.
Hence, cannot avail of rescission. The power to rescind is only
given to the injured party. In the case at bar, Heirs were not ready,
willing and able to comply with their obligation to deliver a separate
title in the name of Julio Garcia to Briones. Therefore, they are not in
a position to ask for rescission of the Kasunduan. It is Briones who
has the option either to refuse to proceed with the sale or to waive the
performance of the condition imposed on his obligation to pay
balance of the purchase price.
SPOUSES SERRANO vs. CAGUIAT (2007)
FACTS:
Mar 90: Godofredo Caguiat offered to buy the lot of Sps. Herrera.
Sps. agreed to sell it at P1,500/sqm. Caguiat gave them P100k as
partial payment. Sps. gave respondent Receipt for Partial Payment of
Lot 23, stating that Caguiat promised to pay the balance on/before
23 Mar 90.
28 Mar: Caguiat wrote Sps. informing them of readiness to pay
the balance & requesting them to prepare the final DOS.
4 Apr: Sps. sent letter to Caguiat stating that Amparo Herrera is
leaving for abroad & that they are cancelling the transaction. Also
informed Caguiat that he can recover the earnest money anytime. In
another letter, informed Caguiat that they delivered PNB check in
amount of P100k to Caguiats counsel.
In view of cancellation, Caguiat filed complaint for specific
performance. TC ruled there was perfected contract of sale. CA
affirmed.
ISSUE: WON the document Receipt for Partial Payment is a
contract to sell or contract of sale

First to Third Exam Coverage


Contract to sell. Interpreting the Receipt, no other interpretation
than that they agreed to a conditional contract of sale, consummation
of which is subject only to the full payment of the purchase price
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE
PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL
EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.
A contract to sell is akin to a conditional sale where the efficacy
or obligatory force of the vendor's obligation to transfer title is
subordinated to the happening of a future and uncertain event, so
that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed. The
suspensive condition is commonly full payment of the purchase price.
In a contract of sale, title passes to the buyer upon delivery of the
thing sold. Non-payment of the price is a negative resolutory
condition and the vendor has lost and cannot recover the ownership
of the land sold until & unless the contract of sale itself is resolved
and set aside.
In a contract to sell, the ownership is reserved in the seller and is
not to pass until full payment of the purchase price is made. Full
payment is a positive suspensive condition. However, the title remains
in the vendor if the vendee does not comply with the condition
precedent of making payment at the time specified in the contract.
"Receipt for Partial Payment" shows that the true agreement
between the parties is a contract to sell. First, ownership over the
property was retained by Sps and was not to pass to Caguiat until full
payment of the purchase price. In effect, Sps have the right to rescind
unilaterally the contract the moment Caguiat fails to pay within the
fixed period. Second, the agreement between the parties was not
embodied in a deed of sale. The absence of a formal deed of
conveyance is a strong indication that the parties did not intend
immediate transfer of ownership, but only a transfer after full
payment. Third, Sps retained possession of the TCT of the lot. This is
an additional indication that the agreement did not transfer to
Caguiat, either by actual or constructive delivery, ownership of
property.
Art 1482 speaks of earnest money given in a contract of sale. In
this case, the earnest money was given in a contract to sell. The
earnest money forms part of the consideration only if the sale is
consummated upon full payment of the purchase price. Now, since
the earnest money was given in a contract to sell, Art 1482, which
speaks of a contract of sale, does not apply.

NABUS vs. PACSON (2009)


FACTS:
Sps. Nabus were owners of parcels of land, which were mortgaged
to PNB to secure a loan in amount of P30k.
19 Feb 77: Sps. Nabus executed a DOCS covering 1000sqm of
land in favor of Sps. Pacson for P170k, provided that P13k be paid
directly to PNB, mortgage balance of P17,500 shall be paid by
Pacsons, & as soon as mortgage obligation is fully paid, Pacsons pay
amount of P2k/mo until full amount of P170k is fully paid.
Pursuant to Deed, Pacsons paid PNB. Thereafter, Pacsons took
possession of the property & constructed a building and fence.
24 Dec: before payment of balance mortgage with PNB, Bate
Nabus died. Julie Nabus (wife) & minor daughter Michelle Nabus
executed Deed of Extrajudicial Settlement. TCT was issued in names
of Julie & Michelle.
Jan 84: Julie approached Pacson to ask for full payment of lot
but Pacson told her to return after 4 days. When Julie returned,
Pacson sent her & daughter Catalina to Atty. Rillera for execution of
DOAS. Atty. Rillera required Julie to return in 4 days with DOES, TCT,
& guardianship papers of Michelle. Julie did not return.
Getting suspicious, Pacson went to ROD & asked for copy of title
of land. Found that it was still in the name of Julie & Michelle. After a
week, Pacson heard rumor that lot was sold to Betty Tolero. Went
back to ROD & found that DOAS was executed in favor of Tolero. So
Pacsons filed complaint for annulment of deeds.
ISSUE: WON the DOCS was a contract of sale or contract to sell
HELD:

HELD:

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Sales Case Digest


Contract to sell. 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.
A contract of sale is absolute when title to the property passes to
the vendee upon delivery of the thing sold. A deed of sale is absolute
when there is no stipulation in the contract that title to the property
remains with the seller until full payment of the purchase price. The
sale is also absolute if there is no stipulation giving the vendor the
right to cancel unilaterally the contract the moment the vendee fails
to pay within a fixed period. In a conditional sale, as in a contract to
sell, ownership remains with the vendor and does not pass to the
vendee until full payment of the purchase price. The full payment of
the purchase price partakes of a suspensive condition, and nonfulfillment of the condition prevents the obligation to sell from arising.
A Contract to Sell may not be considered as a Contract of Sale
because the first essential element (consent or meeting of the minds)
is lacking. In a contract to sell, the prospective seller explicitly reserves
the transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an
event. What the seller obliges himself to do is to fulfill his promise to
sell the subject property when the entire amount of the purchase
price is delivered to him.
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively
to the prospective buyer upon fulfillment of the condition agreed
upon, that is, full payment of the purchase price.
Case at bar: DOCS stipulated that "as soon as the full
consideration of the sale has been paid by the vendee, the
corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold." Where the vendor promises to
execute a deed of absolute sale upon the completion by the vendee of
the payment of the price, the contract is only a contract to sell.
If Pacsons paid the Sps Nabus in accordance with the stipulations
in DOCS, the consideration would have been fully paid in June 1983.
As vendees given possession of the subject property, the ownership of
which was still with the vendors, the Pacsons should have protected
their interest and inquired from Julie Nabus why she did not return
and then followed through with full payment of the purchase price
and the execution of the deed of absolute sale. The Sps Pacson had
the legal remedy of consigning their payment to the court; however,
they did not do so.
Since the Deed of Conditional Sale executed in their favor was
merely a contract to sell, the obligation of the seller to sell becomes
demandable only upon the happening of the suspensive condition.
The full payment of the purchase price is the positive suspensive
condition, the failure of which is not a breach of contract, but simply
an event that prevented the obligation of the vendor to convey title
from acquiring binding force.
Since the contract to sell was without force and effect, Julie Nabus
validly conveyed the subject property to another buyer, Betty Tolero,
through a contract of absolute sale. Sps. Pacson, however, have the
right to reimbursement & damages.
REYES vs. TUPARAN (2011)
FACTS:
Mila Reyes owned a lot, where she put up a 3-storey commercial
building known as RBJ Building & residential apartment building.
Since 90, she had been operating a drugstore & cosmetics store on
the ground flr where she also had been residing while other areas
were leased by tenants & street vendors.
Dec 89: Victoria Tuparan leased a space on the ground flr of RBJ
Building for her pawnshop business for P4k/mo. Tuparan invested
thousands of pesos in Reyes financing/lending business.
20 Jun 88: Reyes mortgaged the properties to Farmers Savings
Bank to secure loan of P2M. She decided to sell her real properties
for P6.5M so she could liquidate her bank loan & finance her
businesses. Tuparan verbally offered to conditionally buy the
properties for P4.2M & to assumed the bank loan of P2.278M:

First to Third Exam Coverage


Conditional sale will be canceled if Reyes finds another buyer
of said properties within next 3mos
Reyes would continue to use the space occupied by her
drugstore & cosmetics store without rentals for duration of
installments
Lease for 15yrs in favor of Reyes over said space for P8k
Tuparan will undertake renewal & payment of fire insurance
FSL approved the proposal on the condition that Reyes would sign
as co-maker for the mortgage obligation assumed by Tuparan.
26 Nov 90: the parties & FSL executed Deed of Conditional Sale
of Real Properties with Assumption of Mortgage.
Tuparan however defaulted in the payment of her obligations.
Instead of paying in lump sum, she paid Reyes in small amounts from
time to time.
19 Mar 92: residential building was gutted by fire. Tuparan
neglected to renew the fire insurance policy on the buildings.
Since Dec 90: Tuparan had taken possession of the real
properties & had been continuously collecting & receving monthly
rental income from the tenants & vendors without sharing it with
Reyes.
10 Sep 92: Reyes filed complaint for Rescission of contract with
damages against Tuparan.
ISSUE: WON the Deed entered into by the parties & FSL is a contract
to sell or contract of sale
HELD:
Contract to sell. Stipulation in the contract: title and ownership of
the subject real properties shall remain with Reyes until the full
payment of Tuparan of the balance of the purchase price and
liquidation of the mortgage obligation of 2M; upon full payment by
Tuparan of the full balance of the purchase price and the assumed
mortgage obligation, FSL shall issue the corresponding Deed of
Cancellation of Mortgage and Reyes shall execute the corresponding
Deed of Absolute Sale in favor of Tuparan.
Reyes obligation to sell the subject properties becomes
demandable only upon the happening of the positive suspensive
condition, which is Tuparans full payment of the purchase price.
Without full payment, there can be no breach of contract to speak of
because Reyes has no obligation yet to turn over the title. Tuparans
failure to pay in full the purchase price is not the breach of contract
contemplated under Article 1191 but rather just an event that
prevents Reyes from being bound to convey title.
Considering, however, that the Deed of Conditional Sale was not
cancelled by Reyes and that out of the total purchase price of the
subject property in the amount of 4.2M, the remaining unpaid
balance of Tuparan is only 805k, a substantial amount of the
purchase price has already been paid. It is only right and just to allow
Tuparan to pay the said unpaid balance of the purchase price to
Reyes.
Granting that a rescission can be permitted under Article 1191,
the Court still cannot allow it for the reason that, considering the
circumstances, there was only a slight or casual breach in the
fulfillment of the obligation. Rescission is allowed only when the
breach is substantial & fundamental to the fulfillment of the
obligation.
Cannot be denied that Tuparan paid to FSL Bank Reyes
mortgage obligation in the amount of 2,278,078.13, which formed
part of the purchase price of the subject property. Likewise, it is not
disputed that Tuparan paid directly to Reyes the amount of
721,921.87 representing the additional payment for the purchase of
the subject property. Clearly, out of the total price of 4,200,000.00,
Tuparan was able to pay the total amount of 3M, leaving a balance
of 1.2M.
PART II: ELEMENTS OF A CONTRACT OF SALE
I.

CONSENT: Parties
1. Minors, insane or demented persons, deaf-mutes

LABAGALA vs. SANTIAGO (2001)


FACTS:

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Sales Case Digest


Jose Santiago owned a parcel of land. Sisters Nicolasa and
Amanda Santiago alleged that he had fraudulently registered it in his
name alone & sued Jose for recovery of 2/3 share of the property.
20 Apr 81: TC decided in favor of sisters.
6 Feb 84: Jose died intestate.
5 Aug 87: Nicolasa & Amanda filed complaint for recovery of title,
ownership, and possession against Ida Labagala to recover from her
the 1/3 portion of said property pertaining to Jose but which came
into Labagalas sole possession upon Joses death.
Santiagos alleged that Joses share in the property belongs to
them by operation of law because they are the only legal heirs of
Jose, who died intestate. Also claimed that the purported sale of the
property made by their brother to Labagala in Mar 79 was executed
through machinations and with malicious intent. Also insisted that the
DOS was a forgery. It showed that Jose affixed his thumbmark
thereon but they averred that, having been able to graduate from
college, Jose never put his thumbmark on documents he executed
but always signed his name in full. Also pointed that it is highly
improbable for Labagala to have paid the consideration of P150k
because she was unemployed and without any visible means of
livelihood. Also unusual that Labagala registered the DOS only on 26
Jan 87, almost 8 yrs after execution of the sale.
On the other hand, Ida Labagala claimed that she was actually Ida
Santiago & that she was daughter of Jose, thus entitled to his share in
the subject property. Argued that the purported sale of the property
was in fact a donation to her.
ISSUE: WON there was a perfected contract of sale (or donation)
HELD:
Negative. Jose did not have the right to transfer ownership of the
entire property to Labagala since 2/3 thereof belonged to his
sisters. Labagala could not have given her consent to the contract,
being a minor at the time. Consent of the contracting parties is
among the essential requisites of a contract, including one of sale,
absent which there can be no valid contract. Moreover, Labagala
admittedly did not pay any centavo for the property, which makes the
sale void.
Article 1471. If the price is simulated, the sale is void, but the act may
be shown to have been in reality a donation, or some other act or contract.

Neither may the purported DOS be a valid deed of donation. Even


assuming that the deed is genuine, it cannot be a valid donation. It
lacks the acceptance of the donee required by Art. 725. Being a
minor in 1979, the acceptance of the donation should have been
made by her father, Leon Labagala or her mother Cornelia Cabrigas
or her legal representative pursuant to Art. 741. No one of those
mentioned in the law - in fact no one - accepted the "donation" for
Ida.
If Jose Santiago intended to donate the properties in question to
Ida, what was the big idea of hiding the nature of the contract in the
facade of the sale? If the deed is a genuine document, how could it
have happened that Jose Santiago who was of course fully aware that
he owned only 1/3 pro indiviso of the properties covered by his title
sold or donated the whole properties to Ida? Why in heaven's name
did Jose Santiago, a college graduate, who always signed his name in
documents requiring his signature affix his thumbmark on DOS? etc
Note: Santiagos are not assailing Labagalas legitimate status but
are, instead, asserting that she is not at all their brothers child.
PARAGAS vs. HEIRS OF BALACANO (2005)
FACTS:
Gregorio Balacano, married to Lorenza Sumigcay, was the
registered owner of Lot 1175-E and Lot 1175-F. Gregorio and Lorenza
had 3 children: Domingo, Catalino, Alfredo.
Lorenza died 11 Dec 91. Gregorio died on 28 Jul 96.
Prior to Gregorios death, he was admitted at Veterans General
Hospital on 28 Jun 96 & stayed there until 19 Jul 96. He was
transferred in the afternoon of 19 Jul 96 to the Veterans Memorial in
QC where he was confined until his death.
22 Jul, or week prior to his death: Gregorio purportedly sold a
portion of Lot 1175-E and whole Lot 1175-F to Sps. Paragas for
P500k. Sale appeared in a DOAS notarized by Atty. De Guzman.
17 Oct: Paragas sold portion of Lot 1175-E to Catalino for P60k.

First to Third Exam Coverage


Domingo Bacalanos children filed complaint for annulment of
sale & partition against Catalino & Sps. Paragas. They alleged that
grandfather Gregorio could not have appeared before the notary
public on 22 Jul because he was then confined at Veterans Memorial
Hospital; that at the time of alleged execution of DOS, Gregorio was
seriously ill, in fact dying, which vitiated his consent to the disposal
of the property; that Catalino manipulated the execution of deed &
prevailed upon the dying Gregorio to sign his name on a paper the
contents of which he never understood because of his serious
condition. Also assuming Gregorio was of sound mind, he could only
transfer a half portion of Lots 1175-E & 1175-F as the other half
belongs to their grandmother Lorenza who predeceased Gregorio
(conjugal properties).
Sps. Paragas & Catalino moved to dimiss no cause of action
because Domingos children failed to allege a ground for the
annulment of DOS as they did not cite any MIVFU but merely alleged
serious illness.
ISSUE: WON Gregorio consented to the sale hence, sale is valid
HELD:
Negative. Sps. Paragas argued that at least a month prior to
Gregorios signing of the deed, they already agreed on the sale of said
lots & in fact, this agreement was partially executed by Rudy Paragas
to Gregorio of P50k before the latter signed the deed. They posit that
Gregorios consent to the sale should be determined not at the time
he signed the DOS but at the time when he agreed to sell the
property.
Atty. De Guzmans testimony did not conclusively establish the
meeting of the minds between Gregorio & Sps. Paragas on the price
or consideration. He merely declared that he was asked by Gregorio
to prepare a deed, did not clearly narrate the details of the
agreement.
Not disputed that when Gregorio signed the deed of sale, Gregorio
was seriously ill, as he in fact died a week after the deeds signing.
Gregorio died of complications caused by cirrhosis of the liver.
Gregorios death was neither sudden nor immediate; he fought at
least a month-long battle against the disease until he succumbed to
death on July 22, 1996. Given that Gregorio purportedly executed a
deed during the last stages of his battle against his disease, we
seriously doubt whether Gregorio could have read, or fully
understood, the contents of the documents he signed or of the
consequences of his act. We note in this regard that Gregorio was
brought to the Veterans Hospital at Quezon City because his
condition had worsened on or about the time the deed was allegedly
signed.
Additionally, the irregular and invalid notarization of the deed is a
falsity that raises doubts on the regularity of the transaction itself.
While the deed was indeed signed on July 18, 1996 at Bayombong,
Nueva Vizcaya, the deed states otherwise, as it shows that the deed
was executed on July 22, 1996 at Santiago City.
DOS was allegedly signed by Gregorio on his death bed in the
hospital. Gregorio was an octogenarian at the time of the alleged
execution of the contract and suffering from liver cirrhosis at that
circumstances which raise grave doubts on his physical and mental
capacity to freely consent to the contract.
FRANCISCO vs. HERRERA (2002)
FACTS:
Eligio Herrera Sr., the father of Pastor Herrera, was the owner of 2
parcels of land.
3 Jan 91: Julian Francisco bought from Eligio the first parcel for
P1M, paid in installments. Subsequently (12 Mar 91), he bought the
2nd parcel for P750k.
Children of Eligio tried to negotiate with Julian Francisco to
increase the purchase price, contending that the contract price for the
2 parcels was grossly inadequate. But Julian refused so Pastor
Herrera filed complaint for annulment of sale, claiming ownership
over the 2nd parcel. He also claimed that the 1st parcel was subject to
the co-ownership of surviving heirs of Francisca Herrera, wife of Eligio,
considering that she died intestate before alleged sale. Also alleged
that the sale of two lots was null and void on the ground that at the
time of sale, Eligio was already incapacitated to give consent to a

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Sales Case Digest


contract because he was already afflicted with senile dementia,
characterized by deteriorating mental and physical condition
including loss of memory.
Julian Francisco, for his part, alleged that Pastor Herrera was
estopped from assailing the sale of the lots. He contended that Pastor
had effectively ratified both contracts of sales, by receiving the
consideration offered in each transaction.
ISSUE: WON Eligio Herrera Sr. consented to the sale
HELD:
Negative. Both TC & CA found that Eligio Sr. was already suffering
from senile dementia at the time he sold the lots in question. Hence,
he was already mentally incapacitated when he entered into the
contracts of sale.
A void or inexistent contract is one which has no force and effect
from the very beginning. Hence, it is as if it has never been entered
into and cannot be validated either by the passage of time or by
ratification. There are two types of void contracts: (1) those where one
of the essential requisites of a valid contract as provided for by Article
1318 of the Civil Code is totally wanting; and (2) those declared to be
so under Article 1409 of the Civil Code. By contrast, a voidable or
annullable contract is one in which the essential requisites for validity
under Article 1318 are present, but vitiated by want of capacity, error,
violence, intimidation, undue influence, or deceit.
Art. 1318 states that no contract exists unless there is a
concurrence of consent of the parties, object certain as subject
matter, and cause of the obligation established. Art. 1327 provides
that insane or demented persons cannot give consent to a contract.
But, if an insane or demented person does enter into a contract, the
legal effect is that the contract is voidable as specifically provided in
Art. 1390.
Article 1390. The following contracts are voidable or annullable, even
though there may have been no damage to the contracting parties: (1) Those
where one of the parties is incapable of giving consent to a contract; (2)
Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud. These contracts are binding, unless they are annulled by a
proper action in court. They are susceptible of ratification.

Established that Eligio, Sr. entered into an agreement with


Francisco, but that the formers capacity to consent was vitiated by
senile dementia. Hence, assailed contracts are not void or inexistent
per se; rather, these are contracts that are valid and binding unless
annulled through a proper action filed in court seasonably.
An annullable contract may be rendered perfectly valid by
ratification, which can be express or implied. Implied ratification may
take the form of accepting and retaining the benefits of a contract.
This is what happened in this case. If Pastor was not agreeable with
the contracts, he could have prevented Francisco from delivering the
payments, or if this was impossible, he could have immediately
instituted the action for reconveyance and have the payments
consigned. None of these happened. Upon learning of the sale, Pastor
negotiated for the increase of the purchase price while receiving the
installment payments. It was only when he failed to convince
Francisco to increase the price that he instituted the complaint.
Clearly, he was agreeable to the contracts, only he wanted to get
more. Further, there is no showing he returned the payments or made
an offer to do so.
2.

Sale by and between spouses

GUIANG vs. CA (1998)


FACTS:
Gilda Corpuz & Judie Corpuz are legally married spouses.
Sometime 14 Feb 83, Sps. Corpuz bought Lot 9, Blk 8 from Manuel
Callejo through a conditional DOS for P14,735.
22 Apr 88: Sps. Corpuz sold portion of said lot to Sps. Guiang
& since then, Guiangs occupied the said portion & built their house.
Jun 89: Gilda Corpuz left for Manila to look for work.
Jan 90: Harriet Corpuz (daughter) learned that her father
intended to sell the remaining half portion, including house to
Guiangs. She wrote letter to her mother to inform her & Gilda replied
that she was objecting to the sale. But Harriet did not inform her

First to Third Exam Coverage


father about this. Instead, she gave the letter to Luzviminda Guiang so
she could advise her father.
1 Mar 90: Judie Corpuz sold to Luzviminda Guiang thru Deed of
Transfer of Rights the remaining half of their lot & house for P30k.
Subsequently, Luzviminda executed another agreement over Lot 9,
Blk 8 with Manuela Callejo, widow of the original registered owner for
P9k.
11 Mar: Gilda returned home & found her children staying with
other households. She gathered her children & went home. For
staying in the house, Guiangs complained to Brgy authorities for
trespassing.
ISSUE: WON the Deed of Transfer of Rights was validly executed
HELD:
Negative. Guiangs insisted that DOTR was validly executed in
good faith & for valuable consideration. The absence of Gildas
consent merely rendered the Deed voidable under Art. 1390.
Untenable.
Art. 1390, par. 2 refers to contracts visited by vices of consent,
i.e., contracts which were entered into by a person whose consent was
obtained and vitiated through mistake, violence, intimidation, undue
influence or fraud. In this instance, Gildas consent to the contract of
sale of their conjugal property was totally inexistent or absent. Hence,
said contract properly falls within the ambit of Art. 124 FC.
Art. 124. The administration and enjoyment of the conjugal partnership
properly shall belong to both spouses jointly. In case of disagreement, the
husband's decision shall prevail, subject recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the other spouse
may assume sole powers of administration. These powers do not include the
powers of disposition or encumbrance which must have the authority of the
court or the written consent of the other spouse. In the absence of such
authority or consent, the disposition or encumbrance shall be void. However,
the transaction shall be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be perfected as a binding
contract upon the acceptance by the other spouse or authorization by the
court before the offer is withdrawn by either or both offerors.

The disposition is void. Fraud and the intimidation referred to by


Guiangs were perpetrated in the execution of the document
embodying the amicable settlement. Gilda Corpuz alleged during trial
that brgy authorities made her sign said document through
misrepresentation and coercion. In any event, its execution does not
alter the void character of DOS between Judie and Guiangs. The fact
remains that such contract was entered into without the wife's
consent.
The nullity of the contract of sale is premised on the absence of
Gildas consent. To constitute a valid contract, the Civil Code requires
the concurrence of the following elements: (1) cause, (2) object, and
(3) consent, the last element being indubitably absent in the case at
bar.
As to ratification: Negative. DOTR cannot be ratified, even by
amicable settlement. The participation by some brgy authorities in
the "amicable settlement" cannot otherwise validate an invalid act.
The "amicable settlement entered into by Gilda and Guiangs is a
contract. It is a direct offshoot of DOTR. By express provision of law,
such a contract is also void (Art. 1422). A void contract cannot be
ratified.
Neither can the "amicable settlement" be considered a continuing
offer that was accepted and perfected by the parties, following the last
sentence of Article 124. It did not mention a continuing offer to sell
the property or an acceptance of such continuing offer. Its tenor was
to the effect that Gilda would vacate the property.
HEIRS OF REYES vs. MIJARES (2003)
FACTS:
Vicente & Ignacia were married in 1960 but had been separated
de facto since 1974. Sometime 74, Ignacia learned that on 1 Mar
83, Vicente sold Lot 4349-B-2 to Sps. Mijares for P40k. also found
out that Vicente filed petition for administration & appointment of
guardian, misrepresenting that Ignacia died on 22 Mar 82 & that he

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Sales Case Digest

First to Third Exam Coverage

& their 5 minor children were her only heirs. Court authorized Vicente
to sell estate of Ignacia.
9 Aug 84: Ignacia sent letter to Sps. Mijares demanding the
return of her share in the lot. She filed complaint for annulment of
sale against Sps. Mijares.
Sps. Mijares claimed that they are purchasers in good faith & sale
was valid because it was duly approved by the court. Vicente, on the
other hand, contended that what he sold to Sps. Mijares was only his
share & that he never represented that Ignacia was already dead. He
likewise testified that Sps. Mijares took advantage of his illiteracy by
filing a petition for the issuance of letters of administration &
appointment of guardian without his knowledge.

Ceferino to occupy the premises & make improvements on the


unfinished building.
Concepcion alleged that without her consent, Sps. Padua caused
the subdivision of the property into 3 portions & registered it in their
names.
Antonio Padua averred that he bought the property in 80 &
introduced improvements thereon. He & wife Eugenia allowed
Natividad & Ceferino to occupy the premises temporarily. After they
caused subdivision of property, Antonio requested Natividad to vacate
the premises but she refused & claimed that Concepcion owned it.
Antonio filed ejectment suit. Also, Antonio claimed that wife Eugenia
admitted that Concepcion offered to buy 1/3 of the property.

ISSUE: WON the sale of Vicente without Ignacias consent was valid

ISSUE: WON there was valid sale between Eugenia & Concepcion

HELD:
Governing laws at the time the assailed sale was contracted are
Articles 166 & 173.

HELD:
Voidable but already prescribed. There was a perfected contract
of sale between Eugenia and Concepcion. Records show that Eugenia
offered to sell a portion of the property to Concepcion, who accepted
the offer and agreed to pay P100k as consideration. The contract of
sale was consummated when both parties fully complied with their
respective obligations. Eugenia delivered the property to Concepcion,
who in turn, paid Eugenia the price of P100k.
The verbal contract of sale between Eugenia and Concepcion did
not violate the provisions of the Statute of Frauds 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. When a verbal contract has been
completed, executed or partially consummated, as in this case, its
enforceability will not be barred by the Statute of Frauds, which
applies only to an executory agreement. Thus, where one party has
performed his obligation, oral evidence will be admitted to prove the
agreement. The oral contract of sale between Eugenia and
Concepcion was evidenced by a receipt signed by Eugenia. Antonio
also stated that his wife admitted to him that she sold the property to
Concepcion.
Undisputed that the subject property was conjugal and sold by
Eugenia in Apr 1987 or prior to the effectivity of FC on 3 Aug 88.
Article 254 of which repealed Title V, Book I of the Civil Code
provisions on the property relations between husband and wife.
However, Article 256 thereof limited its retroactive effect only to cases
where it would not prejudice or impair vested or acquired rights in
accordance with the Civil Code or other laws. In the case at bar,
vested rights of Concepcion will be impaired or prejudiced by the
application of the Family Code; hence, the provisions of the Civil Code
should be applied.
Consent of both Eugenia and Antonio is necessary for the sale of
the conjugal property to be valid. Antonios consent cannot be
presumed. No evidence that Antonio participated or consented to the
sale of the conjugal property. Eugenia alone is incapable of giving
consent to the contract. Therefore, in the absence of Antonios
consent, the disposition made by Eugenia is voidable. Being an oral
contract, action to annul must be commenced within 6 yrs from time
the right of action accrued.
Eugenia sold the property in April 1987 hence Antonio should
have asked the courts to annul the sale on or before April 1993. No
action was commenced by Antonio to annul the sale, hence his right
to seek its annulment was extinguished by prescription.
Even assuming that the 10-yr prescriptive period under Art. 173
should apply, Antonio is still barred because since April 1987, more
than 10 yrs had already lapsed without any such action being filed.

Art. 166. Unless the wife has been declared a non compos mentis or a
spendthrift, or is under civil interdiction or is confined in a leprosarium, the
husband cannot alienate or encumber any real property of the conjugal
partnership without the wifes consent. If she refuses unreasonably to give her
consent, the court may compel her to grant the same.
Art. 173. The wife may, during the marriage and within ten years from
the transaction questioned, ask the courts for the annulment of any contract
of the husband entered into without her consent, when such consent is
required, or any act or contract of the husband which tends to defraud her or
impair her interest in the conjugal partnership property. Should the wife fail to
exercise this right, she or her heirs after the dissolution of the marriage, may
demand the value of property fraudulently alienated by the husband.

The husband could not alienate or encumber any conjugal real


property without the consent, express or implied, of the wife
otherwise, the contract is voidable. Such alienation or encumbrance
by the husband is void. The better view, however, is to consider the
transaction as merely voidable and not void. This is consistent with
Article 173 of CC pursuant to which the wife could, during the
marriage and within 10 years from the questioned transaction, seek
its annulment.
Under Art. 166, the husband cannot generally alienate or
encumber any real property of the conjugal partnership without the
wifes consent. The alienation or encumbrance if so made however is
not null and void. It is merely voidable. The offended wife may bring
an action to annul the said alienation or encumbrance.
No dispute that said lot is conjugal property having been
purchased using the conjugal funds of the spouses during the
subsistence of their marriage. The sale of said lot to Sps. Mijares
without the knowledge and consent of Ignacia is voidable. Her action
to annul the March 1, 1983 sale which was filed on June 4, 1986,
before her demise is perfectly within the 10 yr prescriptive period
under Art. 173.
Sale of lot should be annulled in its entirety. Alienation or
encumbrance must be annulled in its entirety and not only insofar as
the share of the wife in the conjugal property is concerned. Upon the
provisions of Art. 161-163, the conjugal partnership is liable for many
obligations while the conjugal partnership exists. The conjugal
property is even subject to the payment of debts contracted by either
spouse before the marriage, as those for the payment of fines and
indemnities imposed upon them after the responsibilities in Art. 161
have been covered, if it turns out that the spouse who is bound
thereby, "should have no exclusive property or if it should be
insufficient."
Sps. Mijares are not purchasers in good faith. There existed
circumstances that should have placed Sps. Mijares on guard.
AINZA vs. PADUA (2005)
FACTS:
Sps. Padua owned a lot with unfinished residential house.
Sometime Apr 87, Concepcion Ainza bought of an undivided
portion of the property from Sps. Padua for P100k. However, no
DOAS was executed to evidence said transaction but cash payment
was received by Sps. Padua. Ownership was transferred to
Concepcion through physical delivery to her atty-in-fact & daughter
Natividad Tuliao. Concepcion authorized Natividad & her husband

FUENTES vs. ROCA (2010)


FACTS:
11 Oct 82: Sabina Tarroza sold her 358sqm lot to son Tarciano
Roca under DOAS. But Tarciano did not for the meantime have the
registered title transferred to his name.
6 yrs later in 88: Tarciano offered to sell the lot to Sps. Fuentes.
Agreement required Sps. Fuentes to pay Tarciano a downpayment of
P60k for transfer of lots title to him. Parties left their signed

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Sales Case Digest


agreement with Atty. Plagata, who then worked on the other
requirements of the sale. According to Atty. Plagata, he went to see
Rosario in one of his trips to Manila & had her sign an affidavit of
consent. As soon as the other conditions were met, Atty. Plagata
notarized Rosarios affidavit in Zamboanga City.
11 Jan 89: Tarciano executed DOAS in favor of Sps. Fuentes.
8 yrs later in 97: children of Tarciano & Rosario filed an action
for annulment of sale & reconveyance of land, claiming that the sale
to Sps. Fuentes was void since Rosario did not giver her consent to it.
Her signature on the affidavit of consent had been forged.
Sps. Fuentes denied the allegations. They presented Atty. Plagata
who testified that he personally saw Rosario sign the affidavit at her
residence in Paco, Manila. Admitted, however, that he notarized the
document in Zamboanga four months later. Sps. Fuentes also pointed
out that the claim of forgery was personal to Rosario & she alone
could invoke it. Besides, 4-yr prescriptive period for nullifying sale on
ground of fraud had already lapsed.
ISSUE: WON Rosarios signature on the document of consent to her
husbands sale of their conjugal land to Sps. Fuentes was forged
HELD:
Affirmative hence, sale is void. CA observed a marked difference
between her signature on the affidavit of consent and her specimen
signatures. No weight to Atty. Plagatas testimony that he saw Rosario
sign the document in Manila on 15 Sep 88 since this clashed with
his declaration in the jurat that Rosario signed the affidavit in
Zamboanga on 11 Jan 89.
The Sps. Fuentes presented no evidence that Rosario suffered
from any illness or disease that accounted for the variance in her
signature when she signed the affidavit of consent. Notably, Rosario
had been living separately from Tarciano for 30 years since 58. And
she resided so far away in Manila. It would have been quite tempting
for Tarciano to just forge her signature and avoid the risk that she
would not give her consent to the sale or demand a stiff price for it.
The law that applies to this case is the FC, not CC. Although
Tarciano and Rosario got married in 1950, Tarciano sold the conjugal
property to the Fuentes spouses on January 11, 1989, a few months
after the Family Code took effect on August 3, 1988.
Under CC: While its Art. 165 made Tarciano the sole
administrator of the conjugal partnership, Art. 166 prohibited him
from selling commonly owned real property without his wifes
consent. Still, if he sold the same without his wifes consent, the sale
is not void but merely voidable. Art. 173 gave Rosario the right to
have the sale annulled during the marriage within ten years from the
date of the sale.
In contrast to Art. 173 of CC, Art. 124 of FC does not provide a
period within which the wife who gave no consent may assail her
husbands sale of the real property. It simply provides that without
the other spouses written consent or a court order allowing the sale,
the same would be void.
Under the provisions of CC governing contracts, a void or
inexistent contract has no force and effect from the very beginning.
And this rule applies to contracts that are declared void by positive
provision of law, as in the case of a sale of conjugal property without
the other spouses written consent. A void contract is equivalent to
nothing and is absolutely wanting in civil effects. It cannot be
validated either by ratification or prescription. Still, an action to
declare its inexistence is necessary to allow restitution of what has
been given under it.
SPS. AGGABAO vs. SPS. PARULAN (2010)
FACTS:
Jan 91: Real estate broker Marta Atanacio offered 2 parcels of
land to Sps. Aggabao, who initially did not show interest due to the
rundown condition of the improvements.
2 Feb: However, Sps. Aggabao & Atanacio met with Ma. Elena
Parulan at the site of the property where Ma. Elena showed to them
the ff documents: TCT 63376, 3 tax declarations, copy of SPA dated 7
Jan 91 executed by Dionisio Parulan authorizing Ma. Elena to sell
property. Before meeting ended, Sps. Aggabao paid P20k as earnest
money.

First to Third Exam Coverage


4 Feb: Sps. Aggabao went to Register of Deeds & Assessors Ofc of
Paranaque to verify the TCTs shown. Discovered that one lot had been
encumbered to Banco Filipino but had already been cancelled due to full
payment. Noticed that said loan had been effected through SPA executed by
Dionisio in favor of Ma. Elena.

18 Mar: Sps. Aggabao delivered final amount of P700k to Ma.


Elena, who executed a DOAS in their favor. Ma. Elena did not turn
over the owners duplicate copy of TCT 63376, claiming that said
copy was in possession of a relative who was then in HK. But she did
not turn over said TCT as promised. Sps. Aggabao learned that it was
actually in Atty. Jeremy Parulan (brother of Dionisio Parulan) who
appeared to hold an SPA executed by Dionisio authorizing him to sell
both lots.
25 Mar: Sps. Aggabao & Atty. Parulan met where Atty. Parulan
demanded P800k in exchange for the duplicate owners copy
because he represented the current value of the property to be
P1.5M.
5 Apr: Atty. Parulan decided to call them but they informed him
that they had already fully paid to Ma. Elena.
15 Apr: Dionisio commenced an action, praying for declaration of
nullity of DOAS executed by Ma. Elena.
ISSUE: WON the sale between Ma. Elena & Sps. Aggabao is valid
HELD:
Sale was void, without consent of Dionisio. Art. 124 FC applies to
sale of conjugal properties made after the effectivity of the FC. Sale
was made on 18 Mar 91, or after 3 Aug 88, the effectivity of FC.
According to Art. 256 of FC, the provisions of the FC may apply
retroactively provided no vested rights are impaired. Sps. Aggabao
failed to show any vested right in the property acquired prior to 3 Aug
88 that exempted their situation from retroactive application. Also,
Sps. Aggabao failed to substantiate their contention that Dionisio,
while holding the administration over the property, had delegated to
his brother, Atty. Parulan, the administration of the property,
considering that they did not present in court the SPA granting to
Atty. Parulan the authority for the administration.
The power of administration does not include acts of disposition
or encumbrance, which are acts of strict ownership. As such, an
authority to dispose cannot proceed from an authority to administer,
and vice versa, for the two powers may only be exercised by an agent
by following the provisions on agency of CC (from Art. 1876-1878).
Specifically, the apparent authority of Atty. Parulan, being a special
agency, was limited to the sale of the property in question, and did
not include or extend to the power to administer the property.
Sps. Aggabaos insistence that Atty. Parulans making of a
counter-offer during the 25 Mar 91 meeting ratified the sale merits
no consideration. Under Art. 124 of FC, the transaction executed sans
the written consent of Dionisio or the proper court order was void;
hence, ratification did not occur, for a void contract could not be
ratified.
Yes, void sale was a continuing offer from Sps. Aggabao and Ma.
Elena that Dionisio had the option of accepting or rejecting before the
offer was withdrawn by either or both Ma. Elena and Sps. Aggabao.
The last sentence of the second paragraph of Art. 124 of FC makes
this clear, stating that in the absence of the other spouses consent,
the transaction should be construed as a continuing offer on the part
of the consenting spouse and the third person, and may be perfected
as a binding contract upon the acceptance by the other spouse or
upon authorization by court before offer is withdrawn by either/both
offerors.
Art. 124 of FC categorically requires the consent of both spouses
before the conjugal property may be disposed of by sale, mortgage,
or other modes of disposition.
Not buyers in good faith. An unquestioning reliance by Sps.
Aggabao on Ma. Elenas SPA without first taking precautions to verify
its authenticity was not a prudent buyers move.
PELAYO vs. PEREZ (2005)
FACTS:
11 Jan 88: David Pelayo conveyed to Melki Perez two parcels of
agricultural land in Panabo by a DOAS. Loreza Pelayo (wife) and
another one witnessed the execution of the deed. Loreza, however,
signed only on the 3rd page in the space provided for witnesses.

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Perez then asked Loreza to sign on the 1st & 2nd pages of deed
but refused. He filed complaint for specific performance against
Pelayos.
ISSUE: WON the DOS was null and void for lack of marital consent
HELD:
Negative. Lorenza, by affixing her signature to the Deed of Sale on
the space provided for witnesses, is deemed to have given her implied
consent to the contract of sale.
Sale is a consensual contract that is perfected by mere consent,
which may either be express or implied. A wifes consent to the
husbands disposition of conjugal property does not always have to
be explicit or set forth in any particular document, so long as it is
shown by acts of the wife that such consent or approval was indeed
given. Although it appears on the face of the deed of sale that Loreza
signed only as an instrumental witness, circumstances leading to the
execution of said document point to the fact that Loreza was fully
aware of the sale of their conjugal property and consented to the sale.
Pelayos do not deny that Loreza was present during the execution
of the deed of sale as her signature appears thereon. Neither do they
claim that Loreza Pelayo had no knowledge whatsoever about the
contents of the subject document. Thus, it is quite certain that she
knew of the sale of their conjugal property between her husband and
Perez. They did not even attempt to overcome the aforementioned
presumption as no evidence was ever presented to show that Loreza
was in any way lacking in her mental faculties and, hence, could not
have fully understood the ramifications of signing the deed of sale.
Neither did petitioners present any evidence that Loreza had been
defrauded, forced, intimidated or threatened into affixing her
signature on the document.
Under Art. 173, in re to Art. 166, both of NCC, which was still in
effect on January 11, 1988 when the deed in question was executed,
the lack of marital consent to the disposition of conjugal property
does not make the contract void ab initio but merely voidable.
It has been held that the contract is valid until the court annuls
the same and only upon an action brought by the wife whose consent
was not obtained. In the present case, despite Perezs repeated
demands for Loreza to affix her signature on all the pages of the deed
of sale, showing respondents insistence on enforcing said contract,
Lorenza still did not file a case for annulment of the deed of sale. It
was only when respondent filed a complaint for specific performance
on August 8, 1991 when petitioners brought up Lorezas alleged lack
of consent as an affirmative defense. Thus, if the transaction was
indeed entered into without Lorezas consent, we find it quite puzzling
why for more than three and a half years, Loreza did absolutely
nothing to seek the nullification of the assailed contract.
Loreza knew of the full import of the transaction between Perez
and her husband; and, by affixing her signature on the deed of sale,
she, in effect, signified her consent to the disposition of their conjugal
property.
ABALOS vs. MACATANGAY (2004)
FACTS:
Sps. Abalos are registered owners of a parcel of land with
improvements.
17 Oct 89: Armed with SPA purportedly issued by wife, Arturo
Abalos executed a Receipt & Memorandum of Agreement in favor of
Galicano Macatangay. Arturo acknowledged receipt of check from
Macatangay in the amount of P5k, earnest money. RMOA furher
stated that full payment would be effected as soon as possession of
the property shall have been turned over to Macatangay.
25 Oct 89: Arturos wife executed a SPA appointing her sister
Bernadette Ramos to act for & in her behalf relative to the transfer of
the property to Macatangay. Marital squabble was brewing between
Arturo & Esther at the time & to protect his interest, Macatangay
caused annotation of adverse claim on the title of the spouses.
16 Nov 89: Macatangay sent letter to Arturo & Esther informing
them of his readiness & willingness to pay the full amount of the
purchase price. Letter contained a demand upon the spouses to
comply with their obligation to turn over possession of the property to
him.

First to Third Exam Coverage


Same date: Esther, through atty-in-fact, executed in favor of
Macatangay a Contract to Sell the property to the extent of her
conjugal interest for P650k less the sum already received by her &
Arturo. Esther agreed to surrender possession within 20 days.
7 Dec: Macatangay informed Sps. Abalos that he had set aside
the full payment of the purchase price. Reiterated his demand upon
them to comply with their obligation to turn over possession of
property. However, Sps. failed to deliver property which prompted
Macatangay to cause annotation of another adverse claim. Then filed
complaint for specific performance.
RTC dismissed complaint, ruling that SPA issued by Esther in
favor of Arturo was void as it was falsified. CA reversed, ruling that
assuming it was void, cannot affect the transaction between Esther &
Macatangay.
ISSUE: WON there was valid sale
HELD:
Negative, husband/wifes right to of conjugal assets does not
vest until liquidation of conjugal partnership. Sps. Abalos appear to
have been married before effectivity of FC hence, regime of conjugal
partnership of gains. Subject land which had been acquired during
the marriage forms part of conjugal partnership. Under CC, the
husband is the administrator of the conjugal partnership. This right is
clearly granted to him by law. More, the husband is the sole
administrator. The wife is not entitled as of right to joint
administration. The husband, even if he is statutorily designated as
administrator of the conjugal partnership, cannot validly alienate or
encumber any real property of the conjugal partnership without the
wifes consent. Similarly, the wife cannot dispose of any property
belonging to the conjugal partnership without the conformity of the
husband. Prior to liquidation of conjugal partnership, interest of each
spouse is inchoate, a mere expectancy.
Sale by the husband of property belonging to the conjugal
partnership without the consent of the wife when there is no showing
that the latter is incapacitated is void ab initio because it is in
contravention of the mandatory requirements of Art. 166 of CC. Since
Art 166 of CC requires the consent of the wife before the husband
may alienate or encumber any real property of the conjugal
partnership, it follows that acts or transactions executed against this
mandatory provision are void except when the law itself authorizes
their validity.
Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the
property to Macatangay for a price certain within a period of 30 days. The
RMOA does not impose upon Macatangay an obligation to buy Arturos
property, as in fact it does not even bear his signature thereon. It is quite clear
that after the lapse of the 30-day period, without Macatangay having exercised
his option, Arturo is free to sell the property to another. This shows that the
intent of Arturo is merely to grant Macatangay the privilege to buy the property
within the period therein stated. There is nothing in the RMOA which indicates
that Arturo agreed therein to transfer ownership of the land which is an
essential element in a contract of sale. Unfortunately, the option is not binding
upon the promissory since it is not supported by a consideration distinct from
the price. Granting for the sake of argument that the RMOA is a contract of sale,
the same would still be void not only for want of consideration and absence of
Macatangays signature thereon, but also for lack of Esthers conformity thereto.
Quite glaring is the absence of the signature of Esther in the RMOA, which
proves that she did not give her consent to the transaction initiated by Arturo.
The husband cannot alienate any real property of the conjugal partnership
without the wifes consent.
The nullity of the RMOA as a contract of sale emanates not only from lack
of Esthers consent thereto but also from want of consideration and absence of
Macatangays signature thereon. Such nullity cannot be obliterated by Esthers
subsequent confirmation of the putative transaction as expressed in the
Contract to Sell. Under the law, a void contract cannot be ratified and the action
or defense for the declaration of the inexistence of a contract does not
prescribe. True, in the Contract to Sell, Esther made reference to the earlier
RMOA executed by Arturo in favor of Macatangay. However, the RMOA which
Arturo signed is different from the deed which Esther executed through her
atty-in-fact. For one, the first is sought to be enforced as a contract of sale while
the 2nd is purportedly a contract to sell only.
The congruence of the wills of the spouses is essential for the valid
disposition of conjugal property. Where the conveyance is contained in the
same document which bears the conformity of both husband and wife, there
could be no question on the validity of the transaction. But when there are 2
documents on which the signatures of the spouses separately appear, textual
concordance of the documents is indispensable. Hence, in this case where the
wifes putative consent to the sale of conjugal property appears in a separate

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document which does not, however, contain the same terms & conditions as in
the first docu signed by the husband, a valid transaction could not have arisen.

parcels for her benefit. CA affirmed, ruling that the minor knew the
particulars of and approved the transaction.

CALIMLIM-CANULLAS vs. FORTUN (1984)

ISSUE: WON the sale of the property was valid

FACTS:
19 Dec 62: Mercedes Calimlim-Canullas and Fernando Canullas
were married. After Fernandos father died in 65, Fernando inherited
the land in question.
78: Fernando abandoned his family & was living with Corazon
Daguines. They were convicted of concubinage.
15 Apr 80: Fernando sold subject property with the house to
Daguines for P2k. In docu of sale, Fernando described the house as
also inherited by me from my deceased parents.
Unable to take possession of house and lot, Daguines initiated
complaint for quieting of title and damages against Mercedes. On the
other hand, Mercedes argued that the house was built with conjugal
funds and through her industry & that sale of land together with
house and improvements to Daguines was null and void because they
are conjugal properties and she had not given her consent to the sale.

Negative. Article 1459 OCC applies. Socorro Roldan took by


purchase her wards parcels thru Dr. Fidel Ramos. She may have
acted without malice, that there may have been no previous
agreement between her and Dr. Ramos to the effect that he would
buy the lands for her. But the fact remains that she acquired her
proteges properties, through her brother-in-law. That she planned to
get them for herself at the time of selling them to Dr. Ramos, may be
deduced from the very short time between the two sales (one week).
Additionally, if she was willing to pay P15k for the lands, why did
she sell the parcels of less? In one day (or actually one week) the
price could not have risen so suddenly.
Socorro alleged that the transaction was beneficial to the minor.
She stated that the money P14,700 invested in the house on Tindalo
St. produced for him rentals of P2,400 yearly whereas the parcels of
land yielded to Socorro was only an average of P1,522 yearly.
However, this argument would carry some weight if that house had
been built out of the purchase price of P14,700 only. The calculation
does not include the price of the lot on which the house was erected.
Result is that the price paid for the seventeen parcels gave the minor
an income of only P1,200 a year, whereas the harvest from the
seventeen parcels netted his step-mother a yearly profit of P1,522.
The minor was thus on the losing end.

ISSUE: WON there was valid sale between Fernando and Daguines
HELD:
Null and void for being contrary to morals & public policy. 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. The land belonging to
one of the spouses, upon which the spouses have built a house,
becomes conjugal property only when the conjugal partnership is
liquidated and indemnity paid to the owner of the land.
Fernando could not have alienated the house and lot to Daguines
since Mercedes had not given her consent to said sale. 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. While Art. 133 of
the Civil Code considers as void a donation between the spouses
during the marriage, policy considerations of the most exigent
character as wen as the dictates of morality require that the same
prohibition should apply to a common-law relationship.
3.

Others relatively disqualified


a. Guardians, Agents, Administrators

PHILIPPINE TRUST CO vs. ROLDAN (1956)


Mariano Bernardo inherited 17 parcels of land from his deceased
father. Since he was still a minor at that time, guardianship
proceedings were instituted and Socorro Roldan (stepmother) was
appointed as guardian.
27 Jul 47: Socorro Roldan filed a motion asking for authority to
sell as guardian the 17 parcels to Dr. Fidel Ramos for P14,700, to
invest money in a residential house. Granted.
5 Aug 47: Socorro, as guardian, executed a DOS in favor of her
brother-in-law Fidel. Subsequently, she obtained a judicial
confirmation of the sale.
13 Aug: Fidel executed a deed of conveyance in favor of Socorro,
covering the same parcels of land for P15k. Socorro, then, sold 4
parcels to Emilio Cruz for P3k, with right to repurchase.
10 Aug 48: Philippine Trust Company replaced Socorro Roldan
as guardian. It sought to undo what Socorro had done, contending
that the sale should be annulled because it violates Art. 1459 CC
which prohibits the guardian from purchasing either in person or
through the mediation of another the property of the ward.
CFI held that there was no proof that Fidel Ramos was a mere
intermediary or that he had previously agreed with Socorro to buy the

DISTAJO vs. CA (2000)


During the lifetime of Iluminada Abiertas, she designated son Rufo
Distajo as administrator of her lands Lots 1018, 1046, 1047, 1057.
On various dates: Iluminada sold a portion of Lot 1018 to her
other children Raul, Ricardo, Ernesto, Federico, Eduardo.
Subsequently, she certified to the sale of Lots 1046 and 1047 in favor
of Rufo. She sold Lot 1057 to Rhodora, daughter of Rufo. She also
sold Lot 1018 to Rufo.
Meanwhile, Justo Abiertas Jr. (brother of Iluminada) died, leaving
behind his children. Teresita, his daughter, paid for the real estate
taxes of certain parcels of land, including a portion of Lot 1047. Said
portion of Lot 1047 was sold by Teresita to Rufo. After purchase, Rufo
took possession & paid real estate taxes.
71: Iluminada Abiertas died. Following this, Zacarias Distajo, Pilar
Distajo-Tapar & Rizaldo Distajo demanded possession of the 7
parcels of land from Lagrimas Distajo & husband Rufo Distajo.
5 Jun 86: Ricardo Distajo, with other heirs of Iluminada, filed with
RTC a complaint for recovery of possession & ownership of Lot 1018
and partition of Lots 1001, 1018-B, 1046-1049, 1057. They alleged
that Iluminada owns the said parcels of land & that Rufo cannot
acquire the same because CC prohibits the administrator from
acquiring properties under his administration.
ISSUE: WON Rufo Distajo is prohibited from acquiring said lots
Art. 1491. The following persons cannot acquire by purchase, even at a
public or judicial auction, either in person or through the mediation of
another:
(1) The guardian, the property of the person or persons who may be
under guardianship;
(2) Agents, the property whose administration or sale may have been
entrusted to them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under
administration;" x x x

Under par. 2, the prohibition against agents purchasing property


in their hands 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.
Negative. The DOS 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 Iluminada Abiertas removes the transaction out of the
prohibition contained in Art. 1491(2).
CUI vs. CUI (1957)

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Sales Case Digest


25 May 48: Jesus Cui & Jorge Cui brought an action in CFI Cebu
against Antonio Cui & Mercedes Cui de Ramos seeking annulment of
sale of 3 parcels of land.
19 Mar 49: Rosario Cui, daughter of Don Mariano Cui, filed
petition for appointment of a guardian of the person & properties of
her father on the ground of incompetency. He was declared as such &
Victorino Reynes was appointed as his guardian.
Antonio Cui (defendant) argued that sale is valid because it was
executed when Don Mariano Cui was still in possession of his mental
faculties and that, while sale was at first executed in favor of
defendants and their sister Rosario Cui, the latter however resold her
share to Don Mariano for reason stated in the deed of resale executed
to the effect.
For their part, Jesus Cui (plaintiffs) alleged that during marriage of
Don Mariano Cui & Dona Antonia Perales, they acquired certain
properties in Cebu; that upon death of Dona Antonia, conjugal
properties were placed under administration of Don Mariano; that
while Don Mariano was 84 yrs old, defendants secured the transfer of
said lots to themselves by means of deceit; that in the DOS, Rosario
appeared as vendee but on upon learning of tis fact, she renounced
her rights under the sale & returned her portion to Don Mariano by
executing deed of resale in his favor.
ISSUE: WON the sale was void on the ground that it was a transaction
between principal & agent
Negative. As to argument that sale was void because it was
without the consent of Don Mariano, considering that he was already
old and sickly, is without merit. Merely based on surmises or
conjectures or circumstances. Though the testimonies show that he
was sickly or forgetful because of his advanced age, these do not
however point unremittingly to the conclusion that at the time he
signed said deed of sale he was not full enjoyment of his mental
faculties as to disqualify him to do so or that he was not aware of the
nature of the transaction he was then undertaking. Weakness of mind
alone, not caused by insanity, is not a ground for voiding a contract.
While under Art. 1459 of OCC, an agent or administrator is
disqualified from purchasing property in his hands for sale or
management, and, in this case, the property in question was sold to
Antonio Cui while he was already the agent or administrator of the
properties of Don Mariano Cui, we however believe that this question
can not now be raised or invoked for the following reasons.
1. This contention is being raised in this appeal for the first time.
2. The power of attorney in question is couched in so general a
language that one cannot tell whether it refers to the properties of
Don Mariano or only to the conjugal properties of the spouses.
However, considering that the appointment was extended to
Antonio Cui by Don Mariano so that he may act as agent "for me
and for the intestate heirs of the deceased Antonia Perales", one is
led to believe that the power refers to the conjugal properties
wherein he had one-half interest in the heirs of Doa Antonia, the
remaining half. Moreover, the power of attorney was executed on
March 2, 1946 while the deed of sale was executed on March 8,
1946. They were therefore executed practically at the same time,
which makes it doubtful as to whether such sale can be deemed
to be within the prohibition of the law.
3. The prohibition of the law is contained in article 1459 of the old
Civil Code, but this prohibition has already been removed. Under
the provisions of article 1491, section 2, of the new Civil Code, an
agent may now buy property placed in his hands for sale or
administration, provided that the principal gives his consent
thereto. While the new Code came into effect only on August 30,
1950, however, since this is a right that is declared for the first
time, the same may be given retroactive effect if no vested or
acquired right is impaired (Article 2253, new Civil Code). During
the lifetime Don Mariano, and particularly on March 8, 1946, the
herein appellants could not claim any vested or acquired right in
these properties, for, as heirs, the most they had was a mere
expentancy. We may, therefore, invoke now this practical and
liberal provision of our new Civil Code even if the sale had taken
place before its effectivity.
b.

Attorneys

First to Third Exam Coverage


DIRECTOR OF LANDS vs. ABABA (1979)
Atty. Alberto Fernandez was retained as counsel by Maximo
Abarquez in a civil case for annulment of a contract of sale with right
of repurchase & for recovery of land which was the subject matter.
29 May 61: CFI Cebu ruled against Abarquez. Appealed to CA.
10 Jun: Abarquez, who was litigating as pauper & was engaging
the services of his lawyer on contingent basis, executed a document
whereby he obliged himself to give to his lawyer of whatever he
might recover from Lots 5600 & 5602 (part of estate of parents &
were partitioned by Maximo & Agripino Abarquez) should appeal
prosper.
27 Aug 63: CA reversed decision of TC. TCT was issued in the
name of Maximo Abarquez over his share in said lots.
Atty. Alberto Fernandez waited for Maximo to comply with his
obligation under the document but the latter refused to comply.
Instead, he offered to sell the whole parcels to Sps. Larrazabal,
prompting Atty. Fernandez to annotate his attorneys lien on the TCT
& notify the buyers of his claim over the half portion.
Realizing that the motion to annotate attorneys lien was wrong,
he filed an affidavit of adverse claim with ROD Cebu. This was
annotated.
29 Jul 65: Notwithstanding annotation, Maximo executed DOAS
to 2/3 of the lands to Sps. Larrazabal. The annotation of adverse
claim was carried over to the new TCT.
ISSUE: WON the contract for a contingent fee basis of the interest of
Atty. Fernandez is prohibited by Art. 1491
Negative. It was argued that a contract for contingent fee violated
Art. 1491 because it involves an assignment of a property subject of
litigation.
Article 1491. The following persons cannot acquire by purchase even at
a public or judicial auction, either in person or through the petition of another.
xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior
and other o and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory they exercise their respective functions;
this prohibition includes the act of acquiring by assignment and shall apply
to lawyers, with respect to the property and rights which may be the object
of any litigation in which they may take part by virtue of their profession.

Art. 1491 prohibits only the sale or assignment between the


lawyer and his client, of property, which is the subject of litigation.
The prohibition in said article applies only to a sale or assignment to
the lawyer by his client of the property, which is the subject of
litigation. In other words, for the prohibition to operate, the sale of the
property must take place during the pendency of the litigation
involving the property. Hence, prohibition does not apply to cases
where after completion of litigation the lawyer accepts on account of
his fee, an interest the assets realized by the litigation. Further, A
contract for a contingent fee is not covered by Art. 1491 because the
transfer or assignment of the property in litigation takes effect only
after the finality of a favorable judgment.
Case at bar: the attorney's fees of Atty. Fernandez, consisting of
of whatever Maximo Abarquez might recover from his share in the
lots in question, is contingent upon the success of the appeal. Hence,
the payment of the attorney's fees, that is, the transfer or assignment
of of the property in litigation will take place only if the appeal
prospers. Therefore, the transfer actually takes effect after the finality
of a favorable judgment rendered on appeal and not during the
pendency of the litigation involving the property in question. Such a
contract does not involve a sale or assignment of right.
Contracts of this nature are permitted because they redound to the
benefit of the poor client and the lawyer "especially in cases where the
client has meritorious cause of action, but no means with which to pay for
legal services unless he can, with the sanction of law, make a contract for a
contingent fee to be paid out of the proceeds of the litigation".

VALENCIA vs. CABANTING (1991)


AC 1302, 1391: Paulino Valencia & wife Romana allegedly bought
a parcel of land from Serapia Raymundo. They built their residential
house there. However, failed to register the sale or secure TCT in their
names.

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Sales Case Digest


Dec 68: conference was held in the house of Atty. Eduardo
Jovellanos to settle land dispute between Serapia & Sps. Valencia.
Serapia was willing to relinquish ownership if Valencia could show
documents evidencing the same. Paulino presented a DOS in Ilocano
dialect but Serapia claimed the deed covered a diff property.
15 Dec 69: Serapia, assisted by Atty. Cabanting, filed complaint
against Paulino for recovery of possession. On the other hand,
Valencia engaged the services of Atty. Dionisio Antiniw, who advised
them to present a notarized DOS in lieu of the private document
Compraventa Definitiva written in Ilocano. Paulino gave Atty. Antiniw
P200 to pay the person who would falsify the signature of Serapia.
CFI rendered decision in favor of Serapia. Document was
inauthentic. Paulino filed Petition for Certiorari before CA. While
petition was pending, TC issued order of execution decision has
become final.
20 Mar 73: Serapia sold 40sqm of litigated lot to Atty. Jovellanos
& remaining portion to her counsel, Atty. Cabanting.
4 Mar 74: Paulino filed disbarment proceeding against Atty.
Cabanting on the ground that he violated Art. 1491. CA dismissed.
Subsequently, daughter Constantia Valenica also filed disbarment
proceeding against Atty. Antiniw for participation in the forgery of
Compraventa Definitiva and also against Atty. Jovellanos & Cabanting
for purchasing a litigated property.
ISSUE: WON Attys. Jovellanos & Cabanting violated Art. 1491
As to Atty. Cabanting, affirmative. As to Atty. Jovellanos,
negative. Public policy prohibits the transactions in view of the
fiduciary relationship involved. It is intended to curtail any undue
influence of the lawyer upon his client. Any violation of this
prohibition would constitute malpractice and is a ground for
suspension. However, Art. 1491, applies only while the litigation is
pending.
Case at bar: while it is true that Atty. Cabanting purchased the lot
after finality of judgment, there was still a pending certiorari
proceeding. A thing is said to be in litigation not only if there is some
contest or litigation over it in court, but also from the moment that it
becomes subject to the judicial action of the judge.
In certiorari proceedings, CA may either grant or dismiss the
petition. Hence, it is not safe to conclude, for purposes under Art.
1491 that the litigation has terminated when the judgment of the trial
court become final while a certiorari connected therewith is still in
progress. Thus, purchase of the property by Atty. Cabanting in this
case constitutes malpractice in violation of Art. 1491.
However, sale in favor of Atty. Jovellanos does not constitute
malpractice. There was no attorney-client relationship between
Serapia and Atty. Jovellanos, considering that the latter did not take
part as counsel in the civil case.
DAROY vs. ABECIA (1998)
Atty. Esteban Abecia was counsel for Regalado Daroy in case for
forcible entry before MTC Opol, Misamis Oriental. Judgment was
rendered in favor of Daroy. To satisfy judgment, sheriff sold at public
auction a parcel of land belonging to one of the defendants to Daroy
as highest bidder. Upon failure of defendants to redeem, ownership
was consolidated in Daroy.
Daroy claimed that Atty. Abecia forged his signature in DOAS
dated 31 Mar 71, transferring subject parcel of land to Jose Gangay
& that in another DOAS, it was made to appear that Gangay in turn
conveyed the land to Nena Abecia, wife of Atty. Abecia. Daroy alleged
that he entrusted the title of land to Abecia as counsel & allowed him
to take possession of the land upon the latters request. He
discovered fraud only in 1984.
Atty. Abecia alleged that the transfer of his clients property to his
wife was proper because he allegedly was not paid for his
professional services.
ISSUE: WON Atty. Abecia violated Art. 1491
Negative. The land in question was purchased by Daroy at the
sheriffs sale on March 25, 1971. The land was owned by Gertrudes
de Bajuyo, wife of one of the defendants in the action for forcible
entry. Upon the lapse of one year and the failure of the owner to

First to Third Exam Coverage


redeem the land, its ownership was consolidated in the name of
complainant Regalado Daroy. However, as early as August 4, 1973
Daroy already knew that title to the land had already been transferred
in the name of Atty. Abecias wife.
What appears to have happened in this case is that the parties
thought that because the land had been acquired by Daroy at a
public sale held in order to satisfy a judgment in his favor in a case in
which Atty. Abecia was Daroys counsel, the latter could not acquire
the land. The parties apparently had in mind Art. 1491.
The parties were mistaken in thinking that Atty. Abecia could not
validly acquire the land. The prohibition in Art. 1491 does not apply
to the sale of a parcel of land, acquired by a client to satisfy a
judgment in his favor, to his attorney as long as the property was not
the subject of the litigation. For indeed, while judges, prosecuting
attorneys, and others connected with the administration of justice are
prohibited from acquiring property or rights in litigation or levied
upon in execution, the prohibition with respect to attorneys in the
case extends only to property and rights which may be the object of
any litigation in which they may take part by virtue of their profession.
The parties in this case thought the transfer of the land to Atty.
Abecia was prohibited and so they contrived a way whereby the land
would be sold to Jose Gangay, whose wife Anita is the sister of Mrs.
Nena Abecia, and then Gangay would sell the land to Mrs. Abecia. The
sale of the land to Gangay may be fictitious and, therefore, void, but
that Daroy intended to convey the land ultimately to Atty. Abecia
appears to be the case.
RAMOS vs. NGASEO (2004)
1998: Federico Ramos went to Atty. Patricio Ngaseos Makati
Office to engage his services as counsel in a case involving a parcel of
land in San Carlos, Pangasinan. It was alleged that Federico did not
promise to pay Atty. Ngaseo 1000sqm of said land as appearance
fees. Also alleged that when he went to Atty. Ngaseos office, he was
informed that the decision was adverse but was assured that they
could still file an appeal.
Although appeal was filed, Ramos charged Atty. Ngaseo for failing
to submit a copy of the summons & copy of the assailed decision.
Then he learned that Atty. Ngaseo filed notice of appeal 3 days after
lapse of reglementary period.
Atty. Ngaseo, for his part, alleged that he filed a timely notice of
appeal but moved to be discharged because he had colon cancer.
18 Jul 01: CA rendered favorable judgment. Decision became
final.
29 Jan 03: Ramos received a demand-letter from Atty. Ngaseo,
asking for delivery of the 1000sqm parcel of land which he allegedly
promised as payment for Atty. Ngaseos appearance fees.
ISSUE: WON Atty. Ngaseo violated Art. 1491
Negative. Under Art. 1491(5), lawyers are prohibited from
acquiring either by purchase or assignment the property or rights
involved which are the object of the litigation in which they intervene
by virtue of their profession. The prohibition on purchase is all
embracing to include not only sales to private individuals but also
public or judicial sales. Public policy disallows the transactions in view
of the fiduciary relationship involved. However, the said prohibition
applies only if the sale or assignment of the property takes place
during the pendency of the litigation involving the clients property.
Consequently, where property is acquired after the termination of the
case, no violation attaches.
In all cases where Art. 1491 was violated, the illegal transaction
was consummated with the actual transfer of the litigated property
either by purchase or assignment in favor of the prohibited individual.
Case at bar: no actual acquisition of the property in litigation
since Atty. Ngaseo only made a written demand for its delivery which
Ramos refused to comply. Mere demand for delivery of the litigated
property does not cause the transfer of ownership, hence, not a
prohibited transaction within the contemplation of Art. 1491.
Even assuming that such demand for delivery is unethical, Atty.
Ngaseos act does not fall within the purview of Art. 1491. The letter
of demand dated 29 Jan 03 was made long after the judgment in
Civil Case No. SCC-2128 became final and executory on 18 Jan 02.
c.

Judges

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Sales Case Digest


MACARIOLA vs. ASUNCION (1982)
Sinforosa Bales et.al. filed a complaint for partition against
Bernardita Macariola, concerning the properties left by the deceased
Francisco Reyes, the common father of Bernardita Macariola and
Sinforosa Bales.
Mrs. Macariola alleged that Sinforosa was not a daughter of
Francisco Reyes; the only legal heirs of deceased were Macariola;
properties left by Francisco Reyes were all the conjugal properties of
the latter and his first wife.
8 Jun 63: decision was rendered by Judge Asuncion. This
decision became final for lack of an appeal. So a project of partition
was submitted to Judge Asuncion. Notwithstanding the fact that the
project of partition was not signed by the parties themselves but only
by the respective counsel of Macariola and Bales, Judge Asuncion
approved it.
One of the properties mentioned in the project of partition was
Lot 1184. This was the exclusive property of Francisco Reyes
(deceased), was adjudicated in said project of partition to Luz,
Anacorita Ruperto, Adela, and Priscilla all surnamed Reyes in equal
shares. The Lot 1184 was subdivided into 5 lots denominated as Lot
1184-A to 1184-E.
6 Mar 65: Dr. Arcadio Galapon and his wife sold a portion of Lot
1184-E to Judge Asuncion and his wife, Victoria S. Asuncion.
31 Aug 66: Sps. Asuncion and Sps. Galapon conveyed their
respective shares and interest in Lot 1184-E to "The Traders
Manufacturing and Fishing Industries Inc."
9 Aug 68: Macariola filed instant complaint alleging that Judge
Asuncion violated Art. 1491(5), which was one of those properties
involved in the civil case decided by him.

First to Third Exam Coverage


partition and the two orders approving the same, it is however of no
moment. Fact remains that Judge Asuncion purchased on 6 Mar 65
a portion of Lot 1184-E from Dr. Arcadio Galapon; hence, after the
finality of the decision which he rendered on 8 Jun 63 and his 2
questioned orders dated 23 Oct 63 and 11 Nov 63. Therefore, the
property was no longer subject of litigation. The sale of a portion of
Lot 1184-E to Judge Asuncion having taken place over 1 yr after the
finality of the decision in Civil Case No. 3010 as well as the 2 orders
approving the project of partition, and not during the pendency of the
litigation, there was no violation of Art. 1491(5) of the New Civil Code.
GAN TINGCO vs. PABINGUIT (1916)
Candida Acabo was the owner of 6 parcels of land in Jimalalud,
Oriental Negros.
12 Jun 11: according to the notarial instrument, these lands were
sold by their owner Candida Acabo to one Gan Tingco for P500.
Gan Tingco was unable to take possession for they were in the
possession of Silvino Pabinguit, who alleges certain rights therein.
Pabinguit claimed to have purchased them for P375 from Faustino
Abad & that Abad had become their owner through purchase from
Henry Gardner. He also alleged that Gardner owned them by reason
of having purchased them for P555 at a public auction held in the
barrio of Martelo on 20 Mar 07.
20 Mar 07: sheriff proceeded to sell at public auction all the
property levied upon. Henry Gardner, the justice of the peace,
appeared as the highest bidder.
Henry Gardner argued that the deputy sheriff had executed in his
favor a certificate of his purchase at auction sale. Afterwards when he
learned that he was forbidden to do so, he sold what he had
purchased to Faustino Abad, Candida Acabos son, who was but a boy
at the time.

ISSUE: WON Judge Asuncion violated Art. 1491(5)


ISSUE: WON Henry Gardner violated the prohibition
Negative. Article 1491. The following persons cannot acquire by
purchase, even at a public or judicial action, either in person or through the
mediation of another: xxx xxx xxx (5) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and other officers and employees
connected with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of any litigation in
which they may take part by virtue of their profession.

The prohibition applies only to the sale or assignment of the


property which is the subject of litigation to the persons disqualified
therein. For the prohibition to operate, the sale or assignment of the
property must take place during the pendency of the litigation
involving the property.
Case at bar: when Judge Asuncion purchased on 6 Mar 65 a
portion of Lot 1184-E, the decision in the civil case which he rendered
on 8 Jun 63 was already final. The lot in question was no longer
subject of the litigation. Moreover, at the time of the sale on 6 Mar
65, Judge Asuncion's order dated 23 Oct 63 and the amended order
dated 11 Nov 63 approving the 16 Oct 63 project of partition made
pursuant to the 8 Jun 63 decision, had long become final for there
was no appeal from said orders.
Judge Asuncion did not buy the lot in question on 6 Mar 65
directly from the plaintiffs but from Galapon who earlier purchased
on 31 Jul 64 Lot 1184-E from 3 of the plaintiffs, namely, Priscilla
Reyes, Adela Reyes, and Luz R. Bakunawa. Lot 1184 or more
specifically one-half thereof was adjudicated in equal shares to
Priscilla Reyes, Adela Reyes, Luz Bakunawa, Ruperto Reyes and
Anacorita Reyes in the project of partition, and the same was
subdivided into five lots denominated as Lot 1184-A to 1184-E. Lot
1184-E was sold on 31 Jul 64 to Dr. Galapon for which he was issued
TCT No. 2338 by ROD Tacloban, and on 6 Mar 65 he sold a portion
of said lot to Judge Asuncion and his wife who declared the same for
taxation purposes only. The subsequent sale on 31 Aug 66 by Sps.
Asuncion and Sps. Galapon of their respective shares and interest in
said Lot 1184-E to the Traders Manufacturing and Fishing Industries,
Inc., in which Judge Asuncion was the president and his wife was the
secretary, took place long after the finality of the decision.
While it appears that complainant herein filed on or about 9 or 11
Nov 68 an action before CFI Leyte, seeking to annul the project of

Affirmative. In public auctions held by direction of our alcaldes,


neither the latter nor any person whomsoever in their name shall bid
in anything sold at such public auctions." The word alcaldes means
judges. Prior to the enactment of CC, the Penal Code was also in
force. Art. 400 of the latter prohibits, under penalty, any judge from
taking part, either directly, or indirectly, in any operation of exchange,
trade or profit with respect to things not the product of his own
property, within the territory over which he exercises jurisdiction. It
would not seem too much to conclude that the said article of the Civil
Code does not make any distinction between property in litigation. In
effect, it appears to be as delicate a matter for a judge to take part in
the sale of property that had been the subject of litigation in his court,
as to intervene in auction of property which, though not directly
litigated in his court, is nevertheless levied upon and sold as the result
of a writ of execution issued by him. What the law intends to avoid is
the improper interference with an interest of a judge in a thing levied
upon and sold by his order.
If under the law Gardner was prohibited from acquiring the
ownership of Acabo's lands, then he could not have transmitted to
Faustino Abad the right of ownership that he did not possess; nor
could Abad, to whom this alleged ownership had not been transmitte,
have conveyed the same to Pabinguit. What Gardner should have
done was to claim the price that had been deposited in court, and the
justice of the peace of Guijulngan should have declared the auction
void and have ordered a new sale to be held, besides correcting the
errors that had been committed in the proceedings.
II. SUBJECT MATTER
1. Existing, future, and contingent
SIBAL vs. VALDEZ (1927)
29 Apr 24: Deputy Sheriff Vitaliano Mamawal, by virtue of a writ
of execution, attached the personal property of Sibal, including the
sugarcane in the 7 parcels of land & real property, consisting of 11
parcels of land & a house & camarin. Mamawal sold the personal
property at public auction to Emiliano Valdez. Valdez also bought 8 of
11 parcels, including house & camarin.

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Sales Case Digest


Within 1 yr from date of attachment & sale, Sibal offered to
redeem said sugar cane & tendered to Valdez payment. However,
Valdez refused to accept & return. Also alleged that Valdez was
attempting to harvest the palay planted in 4 over 7 parcels of said
lots, that he had harvested & taken possession of the palay in 1
parcel. All palay belonged to Sibal.
Sibal prayed that a writ of preliminary injunction be issued
against Valdez to restrain him from distributing him in the possession
of the parcels, from taking possession or harvesting sugar cane, &
from taking possession or harvesting the palay in said parcels.
It was contended that sugarcane comes under classification of
real property as ungathered products in para. 2 of Art. 334.
ISSUE: WON sugar cane is personal or real property
Personal. Pending fruits and ungathered products may be sold
and transferred as personal property. Growing crops raised by yearly
labor and cultivation are considered personal property.
If the crop was an immovable, it would be destructive of the very
objects of the act, it would render the pledge of the crop objects of
the act, it would render the pledge of the crop impossible, for if the
crop was an inseparable part of the realty possession of the latter
would be necessary to that of the former; but such is not the case.
True, it is provided that "standing crops and the fruits of trees not
gathered and trees before they are cut down are likewise immovable
and are considered as part of the land to which they are attached;"
but the immovability provided for is only one in abstracto and without
reference to rights on or to the crop acquired by other than the
owners of the property to which the crop was attached. The
immovability of a growing crop is in the order of things temporary, for
the crop passes from the state of a growing to that of a gathered one,
from an immovable to a movable. The existence of a right on the
growing crop is a mobilization by anticipation, a gathering as it were
in advance, rendering the crop movable quoad the right acquired
thereon.
A valid sale may be made of a thing, which though not yet actually
in existence, is reasonably certain to come into existence as the
natural increment or usual incident of something already in existence,
and then belonging to the vendor, and then title will vest in the buyer
the moment the thing comes into existence. Things of this nature are
said to have a potential existence. A man may sell property of which
he is potentially and not actually possessed. He may make a valid sale
of the wine that a vineyard is expected to produce. But the thing sold
must be specific and identified. They must be also owned at the time
by the vendor.
PICHEL vs. ALONZO (1982)
Government awarded a parcel of land, Lot 21, to Prudencio
Alonzo. Award was cancelled on the ground that he alienated the land
to another, in violation of law.
14 Aug 68: Alonzo & his wife sold to Luis Pichel the fruits of the
coconut trees which may be harvested in the land in question for the
period 15 Sept 68 to 1 Jan 76 for P4.2k. However, land was still
under lease to Ramon Sua.
In 1972, Alonzos rights to the land were reinstated.
Jul 72: Pichel for the first time since the execution of the DOS in
his favor, caused the harvest of the fruit of the coconut trees.
ISSUE: WON Pichel has the right/authority to executed the DOS in
1968
Affirmative. Nothing in the record to show that at any time after
the supposed cancellation of Alonzo's award on 27 Jan 65, reversion
proceedings against Lot 21 were instituted by the State. Instead, the
admitted fact is that the award was reinstated in 1972. He is not
deemed to have lost any of his rights as grantee of Lot 21 under RA
477. From the cancellation of the award in 65 to its reinstatement in
72, Alonzo could exercise all the rights pertaining to a grantee.
The subject matter of the contract of sale in question are the
fruits of the coconut trees on the land during the years from
September 15, 1968 up to January 1, 1976, which subject matter is a
determinate thing. Under Article 1461, things having a potential
existence may be the object of the contract of sale. In fact, pending

First to Third Exam Coverage


crops which have potential existence may be the subject matter of the
sale.
On the contention that the DOS was actually a contract of lease:
DOS was precisely what it purports to be. It is a document evidencing
the agreement of the parties for the sale of coconut fruits of Lot 21,
and not for the lease of the land itself. DOS defines the object of the
contract thus: "the herein sale of the coconut fruits are for an the
fruits on the aforementioned parcel of land during the years...(from)
September 15, 1968; up to January 1, 1976." Hence, it is a valid
contract of sale. It has the essential elements of a contract of sale.
The essential difference between a contract of sale and a lease of
things is that the delivery of the thing sold transfers ownership, while
in lease no such transfer of ownership results as the rights of the
lessee are limited to the use and enjoyment of the thing leased.
2.

Licit

TAEDO vs. CA (1996)


20 Oct 62: Lazardo Taedo executed a notarized DOAS in favor
of eldest brother, Ricardo Taedo & his wife Teresita, conveying 1
hec of whatever share I shall have over Lot 191 for P1.5k. The said
property will be his future inheritance from his parents.
28 Feb 80: Upon death of father, Lazaro executed Affidavit of
Conformity to re-affirm, respect, acknowledge & validate the sale I
made in 62.
13 Jan 81: Lazaro executed another notarized DOS in favor of the
Sps. his undivided 1/12 of a parcel of land known as Lot 191,
acknowledging receipt of P10k as consideration.
Feb 81: Ricardo learned that Lazaro sold the same property to
his children through a DOS dated 29 Dec 80.
7 Jun 82: Sps. recorded the DOS in their favor in ROD.
Heirs of Lazardo Taedo filed complaint for rescission of DOS
executed by Lazardo in favor of Ricardo, claiming that Lazardo
executed an Absolute DOS in their favor.
The Sps. however, presented a Deed of Revocation of a DOS dated
12 Mar 81 wherein Lazaro revoked the sale in favor of the Heirs for
the reason that it was simulated/fictitious without any consideration.
After case was filed, Lazaro executed sworn statement which
virtually repudiated the contents of DRDOS & DOS in favor of Sps.
Lazaro testified that he sold the property to Ricardo & that it was his
lawyer who induced him to execute DOS in favor of his children after
giving him P5 to buy a drink.
ISSUE: WON a sale of future inheritance valid
Negative. However, sale made in 1962 involving future
inheritance is not really at issue here. A contract of sale of anticipated
future inheritance is null and void. It is not valid and cannot be the
source of any right nor the creator of any obligation between the
parties. Hence, the Affidavit of Conformity, insofar as it sought to
validate/ratify the 1962 sale, is also useless.
Article 1347, "no contract may be entered into upon a future
inheritance except in cases expressly authorized by law."
However, the documents that are critical to the resolution of this
case are: (a) DOS of 13 Jan 81 in favor of Sps. covering Lazaro's
undivided inheritance of 1/12 share in Lot 191, which was
subsequently registered on 7 Jun 82; and (b) DOS dated 29 Dec 80
in favor of Lazaros children covering the same. These two documents
were executed after the death of Matias (and his spouse) and after a
deed of extra-judicial settlement of Matias' estate was executed, thus
vesting in Lazaro actual title over said property. In other words, these
dispositions, though conflicting, were no longer infected with the
infirmities of the 1962 sale.
Also, the property in question is an immovable. Ownership shall
belong to the buyer who in good faith registers it first in the registry
of property. Thus, although the DOS in favor of Sps. was later than the
one in favor of children, ownership would vest in the former because
of the undisputed fact of registration. On the other hand, children
have not registered the sale to them at all. One who registered the
sale in his favor has a preferred right over the other who has not
registered his title, even if the latter is in actual possession of the
immovable property.

~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~

Sales Case Digest


MARTINEZ vs. CA (1974)
Sps. Martinez are registered owners of 2 parcels of land, used a
fishponds. The property involved in the instant case is the 2nd parcel.
The second parcel, originally owned by a Montemayor was
transferred several times among various owners through the years
until current Martinez spouses acquired ownership by virtue of a TCT.
To avoid untoward incident, the couple referred the matter to the
Committee on Rivers and Streams to determine if the second parcel
was either a public river or a private fishpond.
The Committee on Rivers and Streams rendered a decision to
restore the exclusive possession and use of the creek in question as
their registered property.
Later on, a dispute erupted between the Martinez spouses and
officials of the Department of Public Works and Communications after
the spouses constructed dikes in the water.
The officials of the DPWC alleged that disputed land is a public
river and cannot be held in private capacity.
The spouses allege that the disputed land is covered by a Torrens
title and is thereby indefeasible and not subject to a collateral attack.
ISSUE: WON the said property is a licit subject matter in the contract
of sale entered into by Sps. Martinez when they bought it
Negative. The above-mentioned properties are parts of the public
domain intended for public use, are outside the commerce of men
and, therefore, not subject to private appropriation.
The incontestable and indefeasible character of a Torrens
certificate of title does not operate when the land covered thereby is
not capable of registration. The Land Registration Court has no
jurisdiction over non-registerable properties, such as public navigable
rivers which are parts of the public domain, and cannot validly
adjudge the registration of title in favor of a private applicant.
REYES vs. BELTRAN (2008)
Lot 6-B was allocated to Sps. Laquian. When Marcelo Laquian
died, property was left to his wife Constancia Socco. Upon her death,
she left the original parcel of land with her heirs-siblings. Pursuant to
unnotarized document entitled Extrajudicial Settlement of the Estate
of Deceased Constancia Socco, executed by Constancias heirs in
1965, parcel of land was partitioned into 3 lots Lot 6-A, 6-B, 6-C. Lot
6-B was adjudicated to Elena Socco-Beltran but no title had been
issued in her.
25 Jun 98: Elena Socco-Beltran filed application for purchase of
Lot 6-B before DAR, alleging that it was adjudicated in her favor in the
extra-judicial settlement of Constancias estate.
Heirs of Arturo Reyes filed their protest on the ground that subject
property was sold by Miguel Socco, Elenas brother, in favor of their
father Arturo Reyes, evidenced by Contract of Sell dated 5 Sept 54:
that I am to inherit as such a portion of her lot consisting of Four
Hundred Square Meters (400) more or less

ISSUE: WON the contract of sale was valid


Negative. Heirs of Reyes cannot derive title to the subject
property by virtue of the Contract to Sell. Vendor, Miguel R. Socco,
was not yet the owner of the subject property and was merely
expecting to inherit the same as his share as a co-heir of Constancias
estate. It was also declared in the Contract itself that Miguel R.
Soccos conveyance of the subject to the buyer, Arturo Reyes, was a
conditional sale. It is, therefore, apparent that the sale of the subject
property in favor of Arturo Reyes was conditioned upon the event that
Miguel Socco would actually inherit and become the owner of the
said property. Absent such occurrence, Miguel R. Socco never
acquired ownership of the subject property which he could validly
transfer to Arturo Reyes.
Article 1459 states, The thing must be licit and the vendor must
have a right to transfer ownership thereof at the time it is delivered."
The law specifically requires that the vendor must have ownership of
the property at the time it is delivered. It was explicit in the Contract
itself that, at the time it was executed, Miguel R. Socco was not yet the
owner of the property and was only expecting to inherit it. Hence, no

First to Third Exam Coverage


valid sale. Without acquiring ownership of the subject property, Arturo
Reyes also could not have conveyed the same to his heirs.
On the contention that Heirs that they physically occupied the
subject lot for more than 30 yrs thus, gained ownership: they were
unable to prove actual possession of the property for the period
required by law. There must be conclusive evidence of possession for
the required number of years. However, evidence presented by the
Heirs falls short of being conclusive only self-serving statement that
they took possession of the property & general statement in a letter of
Brgy. Capt. Gapero, certifying that Reyes was the occupant of
property. The statement is rendered doubtful by the fact that as early
as 1997, when respondent filed her petition for issuance of title
before the DAR, Arturo Reyes had already died and was already
represented by his heirs. The certification given by Barangay Captain
Gapero that Arturo Reyes occupied the premises for an unspecified
period of time, i.e., since peace time until the present, cannot prevail
over Legal Officer Pinlacs more particular findings in her
Report/Recommendation.
FRENZEL vs. CATITO (2003)
Alfred Fritz Frenzel is an Australian citizen of German descent. He
arrived in PH, started engaging in business, married Teresita Santos.
In 1981, Alfred & Teresita separated from bed & board without
divorce.
Feb 83: Alfred arrived in Sydney for vacation, met Ederlina Catito.
Unknown to him was that she was married to Klaus Miller. Alfred was
enamored by Ederlina so persuaded her to stop working as masseuse
in Kings Cross, to return to PH. They met in Manila, reiterated
proposal to Ederlina to say in PH, proposed idea to put up beauty
parlor.
Alfred told Ederlina that he was married but he was eager to
divorce wife. Alfred proposed marriage to Ederlina but she said to
wait.
Ederlina found a building at #444 MH del Pilar, Ermita, owned by
Atty. Jose Hidalgo who offered to convey his rights over the property
for 18k accepted Ederlina put up beauty parlor had it
registered under her name. Alfred was the one who paid for the
property & purchase of equipment & furniture for the parlor.
Alfred also bought a house & lot in the name of Ederlina, knowing
that he was disqualified from owning lands in the PH & believing that
after their marriage, they would jointly own.
28 Jul 84: While Alfred was in Papua New Guinea, he received a
letter from Klaus Miller, informing him that Klaus & Ederlina had been
married on 16 Oct 78 & had blisfull married life until Alfred intruded
& begging Alfred to leave Ederlina alone. Alfred confronted Ederlina
admitted but assured that she would divorce Klaus.
Alfred decided to purchase another house & lot owned by Rodolfo
Morales. Again agreed to have DOS made out in the name of Ederlina.
Also purchased another parcel of land from Atty. Camporedondo;
again in the name of Ederlina. (blah blah)
Ederlinas petition for divorce was denied relationship with
Alfred started deteriorating lived separately Alfred filed
complaint for recovery of real & personal properties.
ISSUE: WON Alfred may recover the said properties
Negative. Lands of the public domain, which include private
lands, may be transferred or conveyed only to individuals or entities
qualified to acquire or hold private lands or lands of the public
domain. Aliens, whether individuals or corporations, have been
disqualified from acquiring lands of the public domain. Hence, they
have also been disqualified from acquiring private lands.
Even if, as claimed by Alfred, the sales in question were entered
into by him as the real vendee, the said transactions are in violation of
the Constitution; hence, are null and void ab initio. A contract that
violates the Constitution and the law, is null and void and vests no
rights and creates no obligations. It produces no legal effect at all.
Alfred, being a party to an illegal contract, cannot come into a court of
law and ask to have his illegal objective carried out. Under Article
1412, Alfred cannot have the subject properties deeded to him or
allow him to recover the money he had spent for the purchase
thereof.

~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~

Sales Case Digest


Alfred cannot feign ignorance of the constitutional prohibition, nor
claim good faith. He is charged with knowledge of the prohibition. As
can be gleaned from the fact, he was fully aware that he was
disqualified from acquiring and owning lands under Philippine law
even before he purchased the properties in question; and, to skirt the
constitutional prohibition, the petitioner had the deed of sale placed
under the respondent's name as the sole vendee. He was aware that
as a non-citizen, he was disqualified from validly purchasing any land
within the country. His claim that he acquired the properties because
of his desire to marry Ederlina, believing that both of them would
thereafter jointly own, was merely an afterthought to salvage a lost
cause.
Article 1416 states, When the agreement is not illegal per se but
is merely prohibited, and the prohibition by the law is designed for
the protection of the plaintiff, he may, if public policy is thereby
enhanced, recover what he has paid or delivered. The provision
applies only to those contracts which are merely prohibited, in order
to benefit private interests. It does not apply to contracts void ab
initio. The sales of three parcels of land in favor of the petitioner who
is a foreigner is illegal per se. The transactions are void ab initio
because they were entered into in violation of the Constitution.
3.

Determinate or At Least Determinable

HEIRS OF JUAN SAN ANDRES vs. RODRIGUEZ (2000)


Juan San Andres was the registered owner of Lot 1914-B-2 in
Naga.
28 Sep 64: he sold a portion (345sqm) to Vicente Rodriguez for
P2,415, evidenced by DOS.
5 May 65: upon death of Juan San Andres, Ramon San Andres
was appointed judicial administrator of his estate. Ramon engaged
the services of geodetic engineer Jose Peero to prepare a
consolidated plan of the estate. Peero prepared a sketch plan of the
345sqm lot sold to Rodriguez. Found that Rodriguez had enlarged the
are which he purchased from Juan San Andres by 509sqm.
Ramon sent letter to Rodriguez demanding him to vacate the
portion allegedly encroached by him. Rodriguez refused, claiming he
had purchased the same from Juan; that apart from the 345sqm lot
which he bought, Juan also sold him the ff day the remaining portion
of the lot consisting of 509sqm, treating the 2 lots as one whole
parcel; that full payment of the 509sqm lot would be effected w/in 5
yrs from execution of a formal DOS after survey is conducted; that
with consent of Juan, he took possession & introduced improvements
since 1964.
24 Nov 87: Ramon filed for recovery of possession of the
509sqm.

First to Third Exam Coverage


result of a survey does not detract from the fact that they are
determinate or determinable.
Art. 1460 provides that a thing sold is determinate if at the time
the contract is entered into, the thing is capable of being determinate
without necessity of a new or further agreement between the parties.
Contention the sale was absolute: no merit. There is no
reservation of ownership nor a stipulation providing for a unilateral
rescission by either party. In fact, the sale was consummated upon
the delivery of the lot to Rodriguez. The stipulation that the "payment
of the full consideration based on a survey shall be due and payable
in 5 yrs 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.
Contention that Rodriguez is barred by prescription & laches:
untenable. The contract of sale in this case is perfected, and the
delivery of the subject lot to respondent effectively transferred
ownership to him. For this reason, respondent seeks to comply with
his obligation to pay the full purchase price, but because the deed of
sale is yet to be executed, he deemed it appropriate to deposit the
balance of the purchase price in court.
ATILANO vs. ATILANO (1969)
1916: Eulogio Atilano I acquired Lot 535 by purchase from
Gerardo Villanueva. He obtained TCT in his name.
18 May: after subdivision (5 lots) was effected, Eulogio Atilano I
executed DOS covering Lot 535-E in favor of brother Eulogio Atilano II
for P150. 3 other portions were also sold to other persons while
Eulogio Atilano I retained for himself Lot 535-A. Upon his death, title
to the lot passed to Ladislao Atilano.
6 Dec 52: Eulogio Atilano II, now widower, obtained TCT over
535-E in his & his childrens names as co-owners.
16 Jul 59: desiring to put an end to co-ownership, had the land
resurveyed so that it could be properly subdivided. They discovered
that land they were actually occupying was Lot 535-A, not E while
land which remained in possession of Ladislao Atilano was Lot 535-E,
not A.
25 Jan 60: Heirs of Eulogio Atilano II filed action, alleging that
they offered to surrender to Ladislao the possession of Lot 535-A &
demanded in return possession of Lot 535-E but Ladislao refused.
Ladislao alleged that the reference to Lot 535-E in the DOS of 18
May 20 was an involuntary error; that intention of the parties to the
sale was to convey the lot correctly identified as Lot 535-A; that since
1916, when he acquired the lot & up to time of Eulogios death, he
had been possessing & had his house on the portion designated as
Lot 535-E; that Eulogio I even increased the area under his
possession by buying the adjoining Lot 536.

ISSUE: WON the subject matter of the sale was determinate


ISSUE: WON the sale was valid
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.
The essential elements of sale are: consent or meeting of the
minds, determinate subject matter, and price certain in
money/equivalent.
As shown in 29 Sep 64 receipt, 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/sqm; 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 5 yrs from the execution of a
deed of sale.
Heirs contend that the property subject of the sale was not
described with sufficient certainty: no merit. 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
& 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 3 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

Affirmative. When one sells or buys real property a piece of


land, for example one sells or buys the property as he sees it, in its
actual setting and by its physical metes and bounds, and not by the
mere lot number assigned to it in the certificate of title.
Case at bar: portion correctly referred to as Lot 535-A was already
in the possession of the vendee, Eulogio Atilano II, who had
constructed his residence therein, even before the sale in his favor &
even before the subdivision of the entire lot No. 535. Eulogio Atilano I
had his house on the portion correctly identified, after the subdivision,
as Lot 535-E, even adding to the area thereof by purchasing a portion
of an adjoining property belonging to a different owner. The two
brothers continued in possession of the respective portions the rest of
their lives, obviously ignorant of the initial mistake in the designation
of the lot subject of the 1920 until 1959, when the mistake was
discovered for the first time.
The real issue here is not adverse possession, but the real
intention of the parties to that sale. The object thereof, as intended
and understood by the parties, was that specific portion where the
vendee was then already residing, where he reconstructed his house
at the end of the war, and where his heirs-plaintiffs continued to
reside thereafter: namely, Lot 535-A; and that its designation as Lot
535-E in the DOS was simple mistake in the drafting of the document.

~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~ MARRY SUAN NOTES ~

Sales Case Digest


The mistake did not vitiate the consent of the parties, or affect the
validity and binding effect of the contract between them.
CC provides a remedy for such a situation by means of
reformation of the instrument. However, in this case, DOS executed in
1920 need no longer reformed. The parties have retained possession
of their respective properties conformably to the real intention of the
parties to sale & all they should do is to execute mutual deeds of
conveyance.
MELLIZA vs. CITY OF ILOILO (1968)
Juliana Melliza owned 3 parcels of residential land in Iloilo under
her name, known as Lots 2, 5, 1214.
27 Nov 31: Juliana donated to Municipality of Iloilo 9000sqm of
Lot 1214 to serve as site for municipal hall was revoked because
the area donated was found inadequate to meet the requirements of
the development plan, Arellano plan.
Lot 1214 was divided into Lots 1214-A & 1214-B further
subdivided into Lots 1214-B-1, 1214-B-2, 1214-B-3.
15 Nov 32: Juliana executed instrument without any caption (in
Spanish) 14 Jan 38: Juliana sold her remaining interest in Lot
1214 to Remedios Sian Villanueva 4 Nov 46: Remedios
transferred her right s to said portion to Pio Sian Melliza.
24 Aug 49: City of Iloilo donated the city hall site together with
the building to UP Lots 1214-B, 1214-C, 1214-D.
1952: UP enclosed the site with wire fence. Pio Sian Melliza made
representations, thru lawyer, with city authorities for payment of the
value of Lot 1214-B. No recovery was obtained; City did not have
funds.
10 Dec 55: Pio Sian Melliza filed action against Iloilo City & UP
for recovery of Lot 1214-B or its value. Iloilo City contended that Lot
1214-B was included in the public instrument executed by Juliana
Melliza in favor of then municipality in 1932.
ISSUE: WON conveyance by Juliana to Iloilo included Lot 1214-B
Affirmative. First, no question that the paramount intention of the
parties was to provide Iloilo municipality with lots sufficient or
adequate in area for the construction of the Iloilo City hall site, with its
avenues and parks. For this matter, a previous donation for this
purpose between the same parties was revoked by them because of
inadequacy of the area of the lot donated. Second, reading the public
instrument in toto, with special reference to the paragraphs
describing the lots included in the sale, shows that said instrument
describes four parcels of land by their lot numbers and area; and
then it goes on to further describe, not only those lots already
mentioned, but the lots object of the sale, by stating that said lots are
the ones needed for the construction of the city hall site, avenues and
parks according to the Arellano plan. If the parties intended merely to
cover the specified lots Lots 2, 5, 1214-C and 1214-D, there would
scarcely have been any need for the next paragraph, since these lots
are already plainly and very clearly described by their respective lot
number and area.
The requirement of the law that a sale must have for its object a
determinate thing, is fulfilled as long as, at the time the contract is
entered into, the object of the sale is capable of being made
determinate without the necessity of a new or further agreement
between the parties. The specific mention of some of the lots plus the
statement that the lots object of the sale are the ones needed for city
hall site, avenues and parks, according to the Arellano plan,
sufficiently provides a basis, as of the time of the execution of the
contract, for rendering determinate said lots without the need of a
new and further agreement of the parties.
The Arellano plan was in existence as early as 1928. As stated, the
previous donation of land for city hall site on 27 Nov 31 was revoked
on 6 Mar 32 for being inadequate in area under said Arellano plan.
NGA vs. IAC (1989)
National Grains Authority (now National Food Authority) is a
government agency created under PD 4. One of its incidental
functions is the buying of palay grains from qualified farmers.
23 Aug 79: Leon Soriano offered to sell palay grains to NFA
through Provincial Manager Willam Cabal. He submitted documents

First to Third Exam Coverage


required by NFA for pre-qualifying as a seller. His documents were
processed & was given a quota of 2,640 cavans of palay.
Thereafter, Soriano delivered 630 cavans. The palay delivered
were not rebagged, classified & weighed. Soriano demanded payment
of the 630 cavans but was informed that its payment will be held in
abeyance since Cabal was still investigating on an information that
Soriano was not bona fide farmer & palay delivered not produced
from his farmland.
28 Aug 79: Cabal wrote Soriano advising him to withdraw from
NFA warehouse the 630 cavans Soriano delivered, cannot legally
accept the delivery because Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans, Soriano inisisted that the
palay grains delivered be paid. He filed complaint for specific
performance and/or collection of money + damages against NFA,
Cabal.
Meanwhile, by agreement of the parties & upon order of TC, 630
cavans were withdrawn from warehouse. Subsequently, TC ordered
NFA to pay Soriano.
NFA contends there was no contract of sale as the delivery of the
630 cavans was made only for the purposes of having it offered for
sale.
ISSUE: WON there was a contract of sale
Article 1458 defines sale as a contract whereby one of the contracting
parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other party to pay therefore a price certain in
money or its equivalent.

Affirmative. Soriano initially offered to sell palay grains produced


in his farmland to NFA. When the latter accepted the offer by noting
in Soriano's Farmer's Information Sheet a quota of 2,640 cavans,
there was already a meeting of the minds between the parties. The
object of the contract, being the palay grains produced in Soriano's
farmland and the NFA was to pay the same depending upon its
quality. The fact that the exact number of cavans of palay to be
delivered has not been determined does not affect the perfection of
the contract.
Article 1349 provides: The fact that the quantity is not determinate
shall not be an obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a new contract
between the parties."

Hence, no need for NFA and Soriano to enter into a new contract
to determine the exact number of cavans of palay to be sold. Soriano
can deliver so much as long as it does not exceed 2,640 cavans.
Contention that there was no consent because there was no
acceptance of the 630 cavans: untenable. Sale is a consensual
contract, "there is perfection when there is consent upon the
subject matter and price, even if neither is delivered. The acceptance
referred to which determines consent is the acceptance of the offer of
one party by the other and not of the goods delivered as contended
by NFA. The reason why NFA initially refused acceptance of the 630
cavans of palay delivered by Soriano is that it (NFA) cannot legally
accept the said delivery because Soriano is allegedly not a bona fide
farmer. But TC & CA found that Soriano was a bona fide farmer
hence, qualified to sell palay grains. Therefore, NFAs refusal to accept
was without just cause.
SCHUBACK & SONS vs. CA (1993)
1981: Ramon San Jose contacted Schuback & Sons PH Trading
Corp through PH Consulate General in Hamburg, West Germany
because he wanted to purchase MAN bus spare parts from Germany.
16 Oct 81: San Jose submitted to Schuback & Sons a list of the
parts he wanted to purchase with specific part numbers &
description. Schuback & Sons referred the list to Schuback Hamburg
for quotations. Then it sent to San Jose a letter, enclosing its offer on
the items listed.
4 Dec: San Jose informed Schuback & Sons that he preferred
genuine to replacement parts & requested 15% on all items.
17 Dec: Schuback & Sons submitted its formal offer containing
the item number, quantity, part number, description, unit price & total
to San Jose San Jose informed Schuback of his desire to avail of
the prices of parts at that time & enclosed Purchase Order 0101,
containing the item number, part number, description. San Jose

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Sales Case Digest


promised to submit the quantity per unit he wanted to order on Dec
28/29 San Jose personally submitted the quantities to General
Manager Reichert Schuback immediately ordered the items from
Hamburg Schuback Hamburg ordered the items from NDK, a
supplier of MAN spare parts order of confirmation was sent by
Schuback Hmaburg to Schuback & Sons, which was forwarded to San
Jose Schuback reminded San Jose to open letter of credit to avoid
delay in shipment & payment of interest but San Jose had difficulties
in securing L/C.
Schuback Hamburg received invoices from NDK for partial
deliveries. Schuback & Sons reminded San Jose of his order but San
Jose replied that he did not make any valid Purchase Order & there
was no definite contract between them.
ISSUE: WON a contract of sale has been perfected between the
parties
Affirmative. A 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. Article 1319 states: "Consent is manifested by
the meeting of the offer and acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter
offer."
The offer by Schuback was manifested on 17 Dec 81 when it
submitted its proposal containing the item number, quantity, part
number, description, the unit price and total to San Jose. On 24 Dec
81, San Jose informed Schuback of his desire to avail of the prices of
the parts at that time and simultaneously enclosed its Purchase Order
0l01 dated 14 Dec 81. At this stage, a meeting of the minds between
vendor and vendee has occurred, the object of the contract: being the
spare parts and the consideration, the price stated in Schuback's
offer dated 17 Dec 81 and accepted by San Jose on 24 Dec 81.
Although said purchase order did not contain the quantity he wanted
to order, San Jose made good, his promise to communicate the same
on Dec 29.
Although the quantity to be ordered was made determinate only
on Dec 29, quantity is immaterial in the perfection of a sales contract.
What is of importance is the meeting of the minds as to the object
and cause, which from the facts disclosed, show that as of 24 Dec
81, these essential elements had already occurred.
Situation reveals that San Jose failed to open an irrevocable letter
of credit. This omission, however, does not prevent the perfection of
the contract between the parties, for the opening of the letter of credit
is not to be deemed a suspensive condition. The facts do not show
that Schuback reserved title to the goods until San Jose had opened a
L/C.
4.

Obligation to Transfer Ownership

First to Third Exam Coverage


stage, the sellers ownership of the thing sold is not an element in the
perfection of the contract of sale. The contract, however, creates an
obligation on the part of the seller to transfer ownership and to
deliver the subject matter of the contract. It is during the delivery that
the law requires the seller to have the right to transfer ownership of
the thing sold. In general, a perfected contract of sale cannot be
challenged on the ground of the sellers non-ownership of the thing
sold at the time of the perfection of the contract. Further, even after
the contract of sale has been perfected between the parties, its
consummation by delivery is yet another matter. It is through
tradition or delivery that the buyer acquires the real right of
ownership over the thing sold.
Undisputed is the fact that at the time of the sale, Rodolfo de
Leon was not the owner of the land he delivered to Aurora. Thus, the
consummation of the contract and the consequent transfer of
ownership would depend on whether he subsequently acquired
ownership of the land in accordance with Article 1434.
Also, the document of partition is not genuine. A comparison of
the genuine signatures of Hermoso de Leon with his purported
signature on the Deed of Extrajudicial Partition with Quitclaim will
readily reveal that the latter is a forgery.
NOOL vs. CA (1997)
2 parcels of land are in dispute. First has an area of 1 hec
formerly owned by Victorino Nool; the other with an area of 3 hec was
previously owned by Francisco Nool. Sps. Conchita Nool & Gaudencio
Almojera are now seeking recovery of the aforementioned parcels
from Anacleto Nool.
Conchita obtained loan from DBP secured by real estate
mortgage on said parcels which were still registered in names of
Francisco & Victorino. However, they failed to pay said loan hence,
mortgage was foreclosed. Within redemption period, they contacted
Anacleto for him to redeem the properties which he did.
However, Conchita & Gaudencio executed a private handwritten
document labeled as Resibo ti Katulagan (Receipt of Agreement),
making it appear that Conchita & Gaudencio sold to Anacleto the
parcels. They again entered into another private handwritten
agreement labeled as Kasuratan where they agreed that Sps. can
acquire back or repurchase the lands when she has money.
The Sps. plead for the enforcement of this agreement.
For his part, Anacleto argued that he acquired the lands from DBP
through a negotiated sale & was misled when he signed the private
writing, agreeing to return the lands to Conchita when they have
money to redeem the same. Anacleto was made to believe that
Conchita still had the right to redeem the said properties. Manuel
Mallorca of DBP certified that right of redemption was not exercised
within the period hence, DBP became the absolute owner of said
parcels. And about 2 yrs after, DBP entered into Deed of Conditional
Sale involving same parcels with Anacleto as vendee.

ALCANTARA-DAUS vs. DE LEON (2003)


ISSUE: WON the contract of repurchase is valid
Sps. De Leon alleged that they are owners of a parcel of land, Lot
4786 which Hermoso De Leon inherited from his father Marcelino de
Leon by virtue of a Deed of Extrajudicial Partition.
Early 60s: Sps. de Leon engaged the services of Atty. Florencio
Juan to take care of the documents of the properties of his parents.
After death of Atty. Juan, documents revealed that their properties
had been conveyed by sale or quitclaim to Hermosos brothers &
sisters, to Atty. Juan & his sisters, when in truth, no such conveyances
were intended. Hermoso alleged that his signature was forged. Also
discovered that the land in question was sold by Rodolfo de Leon to
Aurora Alcantara.
For her part, Aurora Alcantara-Daus contended that she bought
the land in good faith & for value on 6 Dec 75; that she has been in
OCENPO over the same.
Sps. de Leon filed complaint for annulment of documents and
title, ownership, possession

Negative. Article 1370 is applicable only to valid and enforceable


contracts. The principal contract of sale and the auxiliary contract of
repurchase are both void.
Case at bar: the sellers, Conchita & Gaudencio, no longer had any
title to the parcels of land at the time of sale. Since the alleged
contract of repurchase was dependent on the validity of the first
agreement, it is itself void. A void contract cannot give rise to a valid
one.
Clear that the sellers can no longer deliver the object of the sale to
the buyers, as the buyers themselves have already acquired title and
delivery thereof from the rightful owner, the DBP. Thus, such contract
may be deemed to be inoperative and may thus fall, by analogy, to
Art. 1409(5). Here, delivery of ownership is no longer possible. It has
become impossible.
HEIRS OF SAN MIGUEL vs. CA (2001)

ISSUE: WON there was valid sale


Negative. A contract of sale is consensual. It is perfected by mere
consent upon a meeting of the minds on the offer and the acceptance
thereof based on subject matter, price and terms of payment. At this

Severina San Miguel claimed to own a parcel of land in Bacoor,


Cavite. Without Severinas knowledge, Dominador managed to cause
the subdivision of the land into 3 lots.

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Sales Case Digest


25 Sep 74: Dominador filed petition with CFI to issued title over
Lots 1 & 2 granted.
22 Aug 78: Severina filed with CFI, alleging that the land
registration proceedings were fraudulently concealed by Dominador
from her Court declared OCTs of Dominador as null & void ROD
Cavite issued TCT in names of Severina & heirs TC issued order in
favor of Severinas heirs writ of possession returned unsatisfied
writ of demolition was also not satisfied.
6 Aug 93: Severinas heirs decided not to pursue the writs &
entered into compromise with Dominador, where Severinas heirs
were to sell the lots to Dominador for P1.5M with the delivery of TCT
conditioned upon the purchase of another Lot 11 which was not yet
titled plus P300k.
Pursuant to Kasunduan, the parties executed DOS designated as
Kasulatan sa Bilihan ng Lupa. Dominador filed motion praying that
Heirs deliver the owners copy of the certificate of title to them. Heirs
opposed, stressing that under the Kasunduan, the title would only be
surrendered upon payment of P300k within 2mos. Dominador
admitted non-payment because Heirs did not present proof of
ownership over the untitled lot.
ISSUE: WON Dominador may be compelled to pay the P300k as
agreed upon in the Kasunduan
Negative. Heirs anchor their claim on the Kasunduan, stressing
on their freedom to stipulate but this is misplaced. Article 1306
provides that stipulations are binding provided they are not contrary
to law. Basic that the law is deemed written into every contract.
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.
True, in contracts of sale, the vendor need not possess title to the
thing sold at the perfection of the contract. 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.
Case at bar: Heirs are not in position to transfer title. There was
no proof of ownership in favor of Heirs. In fact, it is Emiliano Eugenio,
who holds a tax declaration over the said land in his name. Though
tax declarations do not prove ownership of the property of the
declarant, tax declarations and receipts can be strong evidence of
ownership of land when accompanied by possession for a period
sufficient for prescription. Severina's heirs have nothing to counter
this document.
To insist that Dominador pay the price under such circumstances
would result in Severina's heirs' unjust enrichment. The essence of a
sale is the transfer of title or an agreement to transfer it for a price
actually paid or promised

Price
1.

Price must be real


a.
Price is simulated

MAPALO vs. MAPALO (1966)


Sps. Miguel Mapalo & Candida Quiba are illiterate farmers. They were
registered owners of a 1,635sqm residential land in Pangasinan. Out of
love for Maximo Mapalo, Miguels brother, they decided to donate the
eastern hald of their land to him.
15 Oct 36: Sps. Mapalo were deceived into signing a DOAS over the
entire land in Maximos favor. Their signatures were allegedly procured
with fraud. Maximos attorney translated the document as a deed of
donation covering the eastern portion of their land. The DOAS stated a
consideration of P500 but Sps. Mapalo did not receive anything.
Following this, Sps. Mapalo built a fence of permanent structure in the
middle of their land, segregating the eastern portion from the western.
15 Mar 38: Maximo registered the deed in his behalf & obtained TCT
over the entire land.
20 Oct 51, 13 yrs later: Maximo sold the entire land to Narcisos for
P2,500. Also registered and TCT was issued. Narcisos took possession only
of the eastern portion.
7 Feb 52: Narcisos filed a suit, praying to be declared entire owners of
the land.
Sps. Mapalo filed counterclaim, seeking cancellation of the TCT in favor
of Narcisos as to the western half, alleging fraud and bad faith.

First to Third Exam Coverage


ISSUE: WON there was a valid sale, i.e. valid consideration
Negative. Consent was admittedly given but was obtained through
fraud, which makes the contract voidable. The parcel of land is a valid
subject matter. Consideration is lacking.
As to the eastern portion, Sps. Mapalo are not claiming it because they
have donated the same to Maximo. Hence, valid donation.
As to the western portion, Sps. Mapalo did not donate the same. The
liberality as to cause or consideration does not exist.
Hence, the question: WON there was an onerous conveyance of
ownership with respect to the western portion? Negative.
Contracts without a cause or consideration produces no effect
whatsoever. The statement of a false consideration renders the contract
voidable, unless it is proven that it is supported by another licit
consideration. Also, the action for annulment of a contract on the ground
of falsity of consideration shall last four years, the term to run from the
date of the consummation of the contract.
The DOAS stated the consideration of P500. However, this was totally
absent. Sps. Mapalo never received anything from Maximo. There was no
relative simulation because, actually, there was really no consideration.
Hence, absolute simulation. An absolutely simulated contract is void. A
contract of sale is null and void and produces no effect whatsoever where
the same is without cause or consideration, such as when a purchase
price appears to have been paid but has in fact never been paid
Narcisos are also not buyers in good faith. Testimonies showed that
Narcisos stayed for some days on the western side until their house was
removed by Sps. Mapalo. Pacifica Narciso also admitted that when they
bought the property, Miguel Mapalo was still in the premises, & that before
buying the land, went to house of Miguel and asked if they will permit their
brother Maximo to sell the property. Also, they were neighbors. They were
well aware of the nature and extent of the interest of Maximo over the
land.
MODINA vs. CA (1999)
17 Dec 75: Merlinda Chiang sold parcels of land to husband Ramon
Chiang by virtue of DOAS Ramon subsequently sold parcels of land to
Serafin Modina by virtue of DOS on 3 Aug 79 and 24 Aug 79 Modina
brought Complaint for Recovery of Possession against private respondents
Merlinda intervened and sought declaration of nullity of DOS between
her husband and Modina on the ground that titles of parcels of land were
never legally transferred to her husband & admitted that said lots were
ordered sold by CFI in Intestate Estate of Nelson Plana where she was
appointed as administratix (being widow) of her first husband TC & CA
declared it null and void
ISSUE: WON Merlinda is barred by the in pari delicto principle from
questioning the DOS
Negative. The contracts in this case are inexistent. Hence, Articles 1411
and 1412 are inapplicable. In pari delicto doctrine applies only to
contracts with illegal consideration or subject matter, whether the
attendant facts constitute an offense or misdemeanor or whether the
consideration involved is merely rendered illegal.
In Merlindas complaint-in-intervention, she did not aver the same as a
ground to nullify the DOS. In fact, she denied the existence of the DOS in
favor of her husband. In the said Complaint, her allegations referred to the
want of consideration. She did not put up the defense under Article 1490,
to nullify her sale to her husband Chiang because such a defense would
be inconsistent with her claim that the same sale was inexistent.
Contention that Merlinda intentionally gave away the estate because
made misrepresentations as to their civil status: factual issues & not for
the Court to evaluate.
Since one of the characteristics of a void or inexistent contract is that it
does not produce any effect, MERLINDA can recover the property from
petitioner who never acquired title thereover.
WON Modina is a purchaser in good faith & for value? Negative. There
were circumstances which are indicia of his bad faith. He asked his
nephew Placido Matta to investigate the origin of the property and Placido
learned that the same formed part of the properties of Merlindas first
husband. The said sale was also between the spouses. Also, when the
property was inspected, Modina met all the lessees who informed him that
the lands belong to Merlinda & had no knowledge that the lots were sold
to the husband.
VDA. DE CATINDIG vs. HEIRS OF ROQUE (1976)

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Sales Case Digest

First to Third Exam Coverage

The subject matter of the case is a fishpond, Lot 4626, with an area of
more than 13hec, owned by 9 persons in different proportions.
The co-owners leased it to Mrs. Catindig for 10 yrs from 1 Oct 41. After
the termination, Mrs. Catindig remained in possession because she was
negotiating for its purchase for P52k.
18 Oct 60: German Ramirez, one of the co-owners, executed a deed
wherein he sold his 2/16 share to Mrs. Catindig for P6,500.
Two weeks later, Pedro Villanuava, learned of the sale but the sale
retroacted to 13 Apr 50.
18 Nov 60: Heirs of Roque filed action against Mrs. Catindig to compel
her to allow them to redeem the portion sold by German. Subsequently
amended their complaint, including prayer for recovery of possession of
the fishpond.
CAs Findings: Consideration of P52k was not paid by Mrs. Catindig
because she was not able to obtain a loan, the proceeds of which would
have been used to pay the co-owners who had executed simulated sales of
their shares. There was no notarized deed of sale because Mrs. Catindig
did not pay the price to the co-owners except German Ramirez. Two coowners did not barter their shares for the two parcels of land owned by
Mrs. Catindig. What the said co-owners did was to possess the lands of
Mrs. Catindig in exchange for the latter's possession of their shares in the
fishpond.

the 1,012-sqm lot which he claims he also bought from de Leon actually
forms part of Lequins lot. It cannot be denied by Vizconde that the lot
which they actually bought, is the dried up canal which is adjacent to
petitioners 10,115-sqm lot. There was deception on the part of
Raymundo when he misrepresented to Lequin that the 1,012-sqm lot he
bought from de Leon is a separate and distinct lot from the 10,115-sqm
lot the Lequin bought from de Leon.
As to the issue of lack of consideration: affirmative. The contract of sale
appears to be supported by a valuable consideration. However, this is a
simulated sale and unsupported by any consideration, for Vizconde never
paid the P15k purported purchase price.
The evidence of Lequin was uncontroverted as Vizconde failed to
adduce any proof that they indeed paid P15k to Lequin. Indeed, having
asserted their purchase of the 512-sqm portion of Lequin based on the
Kasulatan, it behooves upon Vizconde to prove such affirmative defense of
purchase. Unless the party asserting the affirmative defense of an issue
sustains the burden of proof, his or her cause will not succeed.
It was established that it was Lequin who paid Vizconde P50k & execute
a DOS in favor of the latter. Where the deed of sale states that the
purchase price has been paid but in fact has never been paid, the deed of
sale is null and void ab initio for lack of consideration.
Hence, P50k paid by Lequin must be restored to them.

ISSUE: WON the alleged sales of respondents shares are simulated and
void ab initio

HEIRS OF INTAC vs. CA (2012)

Affirmative. The alleged sales on April 13 or 14, 1950 of respondents'


shares are simulated and void ab initio. They were absolutely simulated,
fictitious or inexistent contracts. Hence, prescription or laches cannot bar
the action or defense for the declaration of their inexistence.
CAs findings are conclusive. The price was not paid or that the
statement in the supposed contracts of sale as to the payment of the price
was simulated fortifies the view that the alleged sales were void. If the
price is simulated, the sale is void. A contract of sale is void and produces
no effect whatsoever where the price, which appears thereon as paid, has
in fact never been paid by the purchaser to the vendor.
She is not entitled to demand the execution of a notarized DOS for the
14/16 pro indiviso portion of the fishpond because the alleged sales in her
favor are void.
SPS. LEQUIN vs. SPS. VIZCONDE (2009)
1995: Sps. Lequin bought a lot, 10,115sqm, from Carlito de Leon. This
sale was negotiated by Raymundo Vizconde. Adjacent to the lot and
located in between it and a road is a dried up canal.
1997: Sps. Vizconde told Sps. Lequin that they had also bought from de
Leion a 1,012sqm lot adjacent to Lequins property & built a house
thereon. As confirmed by de Leon, however, the lot claimed by Vizconde is
part of the lot sold to Lequin.
Believing this and with consent of Vizcondes, Sps. Lequin constructed
their house on the 500sqm half-portion of the lot claimed by Vizconde
since this was near the road. Vizcondes residence is on the remaining
512sqm of same lot.
Sps. Lequin consulted their lawyer, who advised them that the 1,012
sqm lot be segregated from the subject lot whose title they own & to make
it appear that they are selling to Vizconde the 512 sqm thereof.
12 Feb 2000: This sale was embodied in a Kasulatan, where it was
made to appear that Vizconde paid P15k for the purchase of the 512 sqm
portion. In reality, however, this was not paid to Lequins. Actually, it was
Lequins who paid Vizconde P50k for the 500 sqm portion where they built
their house.
Jul 2000: Lequins tried to develop the dried up canal located between
their 500 sqm lot & the public road. Vizcondes objected & claimed
ownership of said dried up canal.
Lequins looked into the ownership of the dried up canal & the lot
claimed by Vizcondes. De Leon told Lequins that what he had sold to
Vizcondes was the dried up canal & that the 1,012 sqm lot claimed by
Vizconde really belongs to Lequins.
13 Jul 2001: Lequins filed complaint to declare the Kasulatan as null
and void ab initio.
ISSUE: WON the Kasulatan is a valid contract of sale
Negative. Sps. Vizconde employed fraud and machinations to induce
Sps. Lequin to enter into the contract of sale. Hence, the Kasulatan over
the 512-sqm lot is voidable for vitiated consent.
The sale between Lequin and de Leon over the 10,115-sqm lot was
negotiated by Raymundo Vizconde. As such, Raymundo was fully aware
that what Lequin bought was the entire 10,115 square meters and that

Ireneo Mendoza executed DOAS of property in favor of Angelina Intac &


husband Mario
despite sale, Ireneo and family continued staying in
property & paid realty taxes
Ireneo died intestate and yet, widow and
private respondents remained in property and even up to present
respondents alleged: sale was simulated and void because Sps. Intac only
borrowed the title of property to be used as collateral for a loan
ISSUE: WON there was a valid sale
Negative. The deed of sale executed by Ireneo and Salvacion was
absolutely simulated for lack of consideration and cause and, therefore,
void. (See: Articles 1345, 1346)
If the parties state a false cause in the contract to conceal their real
agreement, the contract is only relatively simulated and the parties are
still bound by their real agreement. Hence, where the essential requisites
of a contract are present and the simulation refers only to the content or
terms of the contract, the agreement is absolutely binding and enforceable
between the parties and their successors in interest.
In absolute simulation, there is a colorable contract but it has no
substance as the parties have no intention to be bound by it. The main
characteristic of an absolute simulation is that the apparent contract is not
really desired or intended to produce legal effect or in any way alter the
juridical situation of the parties. Hence, void. The parties may recover from
each other what they may have given under the contract.
Case at bar: no valid sale took place. There was no consideration and no
intent to sell. Mariettos testimony showed that Ireneo personally told him
that he was going to execute a document of sale because Sps. Intac
needed to borrow the title & use it as collateral for their loan application.
Ireneo & Salvacion never intended to sell or permanently transfer the full
ownership of the subject property to Sps. Intac.
Heirs of Intac failed to present any concrete evidence to disprove
Mariettos testimony. Failed to adduce proof, even by circumstantial
evidence, that they did, in fact, pay the P150k consideration.
Granting that Ireneo was in financial straits, it does not prove that he
intended to sell the property to Angelina. Heirs of Intac could not adduce
any proof that they lent money to Ireneo or that he shared in the proceeds
of the loan they had obtained.
Hence, questioned contract of sale was only for the purpose of lending
the title to Sps. Intac to enable them to secure a loan. Their arrangement
was only temporary and could not give rise to a valid sale.
Also, Ireneo and his family continued to be in physical possession of the
subject property after the sale in 1977 and up to the present. They even
went as far as leasing the same and collecting rentals. Also failed to show
that they had been paying real estate taxes. The tax declarations
presented were just an afterthought.
The subsequent acts of the parties belie the intent to be bound by the
deed of sale. The primary consideration in determining the true nature of
a contract is the intention of the parties. The contemporaneous and
subsequent acts of both parties in this case, point to the fact that the
intention of Ireneo was just to lend the title to the Sps. Intac to enable
them to borrow money and put up a hospital in Sta. Cruz, Laguna. Clearly,
the contract was absolutely simulated and, therefore, void.
BUENAVENTURA vs. CA (2003)

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Sales Case Digest


Sps. Leonardo Joaquin & Feliciana Landrito are the parents of plaintiffs
and defendants. Plaintiffs sought to declare as null and void ab initio
certain deeds of sale of real property executed by their parents in favor of
defendants, on the ground that the DOS are simulated because:
1.
no actual valid consideration for the DOS
2.
assuming there was, the properties are more than 3-fold times
more valuable that the sums in the DOS
3.
DOS do not reflect & express the true intent of the parties
4.
the sale was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs of their legitime
ISSUE: WON there was no valid consideration & even assuming there was,
it was grossly inadequate
Negative. If there is no meeting of the minds of the parties as to the
price, because the price stipulated in the contract is simulated, then the
contract is void.
It 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. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or
cancellation of the obligation under an existing valid contract while the
latter prevents the existence of a valid contract.
Case at bar: petitioners failed to show that the prices in the Deeds of
Sale were absolutely simulated. They presented Valdozs testimony stating
that their father told her that he would transfer a lot to her through DOS
without need for her payment of the purchase price. Not credible.
Petitioners failure to prove absolute simulation of price is magnified by
their lack of knowledge of their respondent siblings financial capacity to
buy the questioned lots. On the other hand, the Deeds of Sale which
petitioners presented as evidence plainly showed the cost of each lot sold.
Not only did respondents minds meet as to the purchase price, but the
real price was also stated in the Deeds of Sale.
As to WON there was gross inadequacy of consideration: negative.
Petitioners failed to prove any of the instances mentioned in Articles 1355
and 1470 which would invalidate, or even affect, the Deeds of Sale. Indeed,
there is no requirement that the price be equal to the exact value of the
subject matter of sale. All the respondents believed that they received the
commutative value of what they gave.

b.

Price is false

MACAPAGAL vs. REMORIN (2005)


Subject of the controversy is a 105-sqm land known as Lot 5, together
with adjacent 52.5-sqm lot known as Lot 4, which forms part of Lots 24
and 25.
Lots 24 & 25 were registered in name of Candido Caluza. After Candido
died in 81, legally-adopted daughter Corazon & wife Purificacion executed
a DOES dated 21 Nov 81, adjudication between themselves the properties
of Candido. Lots 24 & 25 (+ Lot 23) were adjudicated to Corazon.
However, administration over these lots were entrusted to Purificacion as
Corazon had to leave for Thailand after marriage to a Thai.
Unknown to Corazon & while in Thailand, Purificacion executed an
Affidavit of Loss alleging that TCTs of Lots 24 & 25 were lost. Alleged she
was her deceased husbands sole heir. Granted.
Jul 86: Purificacion sold lots to Catalina Remorin, who subsequently
mortgaged the lots to L&R Lending Corp for P200k.
Corazon learned about this. Filed a complaint for reconveyance &
damages against Purificacion & Catalina.
4 May 87: Catalina executed a Deed of Transfer, signed by witness
Purificacion, admitting illegality of the transfer of lots in their names &
acknowledging Corazon as rightful owner. This was presented by Corazon
in a motion to dismiss but was withdrawn when counsel of Catalina &
Purificacion objected on the ground that it was not executed with counsel.
Deed of Transfer, however, was presented by Corazon before ROD.
Catalinas TCT over Lots 24 & 25 was cancelled, new TCT in Corazons
name.
Prior to this, however, Catalina mortgaged the lots to Laurelia
Valenciano for P295k to pay off indebtedness to L&R. This inscription of
the mortgage was carried over to Corazons TCT.
21 Mar 98: Corazon, Purificacion, Catalina & Laurelia executed a MOA
to settle the civil & criminal cases, wherein Corazon agreed to cede in
favor of Purificacion full ownership over the southernmost apartment and
portion of Lot 25, subject to the condition that Purificacion shall assume
satisfaction of mortgage debt contracted by Catalina in favor of Laurelia.

First to Third Exam Coverage


28 Jul 88: Purificacion died. So another compromise agreement was
executed, wherein Corazon & Catalina agreed that title to the same lot
shall be transferred to its interested buyer with Catalina assuming
mortgage obligation with Laurelia.
24 May 89: Corazon sold Lot 5 to Laurelia through a deed Sale of
Unsegregated Portion of Land. However, Catalina also sold the same lot
to Mariquita Macapagal on 24 Aug, claiming to be authorized under
Compromise Agreement. Macapagal filed complaint for nullification.
ISSUE: Who is the owner of Lot 5?
Corazon was the registered owner of Lot 5 at the time the 2 sales were
executed. As owner, she had the right to enjoy and dispose of Lot 5 as well
as to exclude any person from such enjoyment and disposal.
The Compromise Agreement cannot be taken as a waiver of Corazons
authority to sell and grant thereof to Catalina considering that the
Agreement merely provided that Catalina pay off her mortgage obligation
and incidental expenses from the proceeds of the sale. It was not expressly
stated, nor did it necessarily mean, that Catalina herself be the one to
directly sell the property. The money may merely be handed over to her
for such payment. Moreover, intent to give Catalina authority to sell may
not be easily attributed to Corazon considering that the latter had to file
the reconveyance case.
Even assuming arguendo that the parties intended to confer upon
Catalina authority to sell the property, they did not intend the Agreement
to be the document itself considering that they agreed to execute other
documents as are necessary to implement the agreement, which they
never did.
Neither can Macapagal demand enforcement of Compromise
Agreement on the ground that she was the "interested buyer". Being a
stranger to the Agreement, she cannot demand its enforcement for it is
settled that a compromise agreement determines the rights and
obligations only of the parties to it. Even if she was indeed the interested
buyer referred to in the Agreement and there was already a closed deal
between her, Corazon and Catalina, even before the execution of the
Compromise Agreement, it is strange that she was not identified outright
as the buyer and that DOS in her favor was executed only 12 mos after or
on 24 Aug 89.
As to consideration: The fact that the DOS between Corazon and
Laurelia did not accurately reflect the true consideration thereof is not
cause for declaration of its nullity. When the parties intended to be bound
by the contract except that it did not reflect the actual purchase price of
the property, there is only a relative simulation of the contract which
remains valid and enforceable. It cannot be declared null and void since it
does not fall under the category of an absolutely simulated or fictitious
contract. The contract of sale is valid but subject to reformation.

c.

Non-payment of price

BALATBAT vs. CA (1996)


15 Jun 77: Aurelio Roque filed complaint for partition against Corazon
Roque, Alberto de los Santos, Feliciano Roque, Severa & Osmundo Roque.
29 Mar 79: TC decided in favor of Aurelio, ruling that the lot was
acquired by Aurelio & Maria Mesina during their conjugal union + house.
When Maria died 28 Aug 66, the only conjugal properties left are the
house & lot. As legal spouse, Aurelio is entitled to share pro-indiviso.
This became final. ROD issued TCTs in favor of Roques.
1 Apr 80: Aurelio sold his 6/10 share to Sps. Repuyan through DOAS.
21 Jul: Repuyan caused annotation of affidavit of adverse claim on TCT.
20 Aug: Aurelio filed complaint for rescission against Sps. Repuyan on
the ground that they failed to pay the balance of P45k of the purchase
price.
4 Feb 82: Roques entered into DOAS with Clara Balatbat.
Subsequently, Balatbat filed motion for issuance of writ of possession.
Granted but subject to valid rights and interest of 3rd persons over the same
portion thereof, other than vendor or any other person/s privy to/claiming any
rights or interests under it.
15 Apr 86: TC dismissed complaint of rescission.
3 Mar 87: Balatbat filed a notice of lis pendens before ROD. Also filed
complaint for delivery of the owners duplicate copy against Sps. Repuyan.
TC dismissed complaint. CA affirmed.
ISSUE: Who is the owner of the property?
Sale was consummated hence, valid & enforceable. A decision was
already rendered, declaring the DOS in favor of Repuyan as valid and
enforceable. No appeal was made hence, already became final.

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Sales Case Digest


Examining the terms & conditions of DOS, the P45k balance is payable
only "after the property covered by TCT has been partitioned and
subdivided, and title issued in the name of the buyer hence, vendor
Roque cannot demand payment of the balance unless and until the
property has been subdivided and titled in the name of Sps. Repuyan.
As to non-payment of price: Devoid of any stipulation that "ownership
in the thing shall not pass to the purchaser until he has fully paid the
price" , ownership in thing shall pass from the vendor to the vendee upon
actual or constructive delivery of the thing sold even if the purchase price
has not yet been fully paid. The failure of the buyer to make good the
price does not, in law, cause the ownership to revest to the seller unless
the bilateral contract of sale is first rescinded or resolved pursuant to Art.
1191. Non-payment only creates a right to demand the fulfillment of
obligation or rescind the contract.
As to non-delivery of the possession to Sps. Repuyan: ownership of the
thing sold is acquired only from the time of delivery thereof, either actual
or constructive. (See: Art. 1498) The execution of the public instrument,
without actual delivery of the thing, transfers the ownership from the
vendor to the vendee, who may thereafter exercise the rights of an owner
over the same. Roque delivered the OCT to Sps. Repuyan. It is not
necessary that vendee be physically present at every square inch of the
land bought by him, possession of public instrument of land is sufficient to
accord him rights of ownership.
Delivery of the thing bought or payment of the price is not necessary for
the perfection of the contract; and failure of the vendee to pay the price
after the execution of the contract does not make the sale null and void for
lack of consideration but results at most in default on the part of the
vendee, for which the vendor may exercise his legal remedies.
As to double sale: Aurelio Roque sold 6/10 portion of his share to Sps.
Repuyan on 1 Apr 80. Subsequently, the same lot was sold again by
Aurelio & his children. Hence, there was double sale. In case of double
sale. Ownership shall vest in the person acquiring it who in good faith first
recorded it in Registry of Property. Repuyans caused the annotation of an
adverse claim on the title of the property on 21 Jul 80. On the other hand,
Balatbat filed a notice of lis pendens only on 2 Feb 82. Hence, to
Repuyans.

2.

Must be in money or its equivalent

ONG vs. ONG (1985)


25 Feb 76: Imelda Ong executed a Quitclaim Deed in favor of Sandra
Maruzzo (minor) for 1-peso, whereby she transferred, released, assigned &
quit-claimed to the latter the undivided portion of Lot 10-B. But Imelda
subsequently revoked said deed.
20 Jan 82: Imelda donated the whole property to son, Rex OngJimenez.
20 Jun 83: Sandra, through guardian Alfredo Ong, filed action against
Imelda for recovery of ownership/possession & nullification of DOD.
Imeldas contention: the Quitclaim Deed was null & void inasmuch as it
is equivalent to a DOD, acceptance of which by the donee is necessary to
give it validity. Averred that donee Sandra was still a minor at that time.
Also alleged that the 1-peso consideration is not a consideration at all.
ISSUE: WON there was no consideration
Negative. Careful perusal of the Quitclaim Deed reveals that the
conveyance of the undivided portion of the property was for and in
consideration of 1-peso and other valuable considerations paid by Sandra
through her representative Alfredo Ong to Imelda. The cause or
consideration is not the 1-peso alone but also other valuable
considerations.
CAs findings: Although the cause is not stated in the contract it is
presumed that it is existing unless the debtor proves the contrary. One of
the disputable presumptions is that there is a sufficient cause of the
contract. This presumption cannot be overcome by a simple assertion of
lack of consideration especially when the contract itself states that
consideration was given, and the same has been reduced into a public
instrument with all due formalities and solemnities. To overcome this
presumption, the alleged lack of consideration must be shown by
preponderance of evidence.
Also, it is not unusual in deeds of conveyance adhering to the AngloSaxon practice of stating that the consideration given is the sum of P1,
although the actual consideration may have been much more.
Even granting that the Quitclaim deed in question is a donation, Art.
741 CC provides that the requirement of the acceptance of the donation in
favor of minor by parents or legal representatives applies only to onerous
and conditional donations where the donation may have to assume certain
charges or burdens. The donation to an incapacitated donee does not

First to Third Exam Coverage


need the acceptance by the lawful representative if said donation does not
contain any condition. In simple and pure donation, the formal acceptance
is not important for the donor requires no right to be protected and the
donee neither undertakes to do anything nor assumes any obligation. The
Quitclaim now in question does not impose any condition.
BAGNAS vs. CA (1989)
11 Mar 64: Hilario Mateum died, without ascendants or descendants &
survived only by collateral relatives. Mateum left no will & an estate
consisting of 29 parcels of land.
3 Apr 64: Rosa Retonil, Teofilo Encarnacion, Jose Nambayan
(respondents) registered with ROD Cavite 2 DOS purportedly executed by
Mateum in their favor covering 10 parcels, each with consideration of P1 &
services rendered, being rendered & to be rendered for my benefit.
Another deed dated 6 Feb 63 covered 5 parcels, & another dated 4 Mar
63 covered another 5 parcels.
22 May 64: Isaac Bagnas et.al. filed suit, seeking annulment of the
deeds as fictitious, falsified, or alternatively, donations void for want of
acceptance. At pre-trial, the parties agreed that the controversy be limited
to 10 parcels. Of the 10 in litigation, 9 were assessed for purposes of
taxation at values aggregating P10,500.
Respondents contention: said sales were made for good & valuable
consideration done good things to Mateum, nursed him in his last
illness.
ISSUE: WON the price of P1 plus unspecified past, present and future
services to which no value is assigned renders the deeds void or inexistent
from the beginning
Void ab initio for lack of consideration. Contracts with a false cause, or
which are absolutely simulated or fictitious are not merely voidable but
void, unless it is shown that they are supported by another true and lawful
cause or consideration. Conveyances of property affected with such a vice
cannot operate to divest and transfer ownership, even if unimpugned.
There was an apparent gross disproportion between the stipulated price
in the deeds of P1 plus unspecified & unquantified services &
undisputable valuable real estate allegedly sold worth at least P10,500
going only be assessments for tax purposes. This demonstrates that they
state a false and fictitious consideration. Since there is no other true &
lawful cause shown, said deeds are not merely voidable but void ab initio.
Neither can the validity of said conveyances be defended on the theory
that their true causa is the liberality of the transferor and they may be
considered in reality donations because the law also prescribes that
donations of immovable property, to be valid, must be made and accepted
in a public instrument. It is not denied by respondents that there has been
no such acceptance, claiming it is not required.
The transfers in question being void, it follows as a necessary
consequence and conformably to the concurring opinion in Armentia, that
the properties purportedly conveyed remained part of the estate of Hilario
Mateum, said transfers notwithstanding, recoverable by his intestate heirs,
the petitioners herein, whose status as such is not challenged.
The burden of proof was on the respondents. However, they failed to
offer any proof whatsoever.
REPUBLIC vs. PRDC (1958)
6 May 55: Republic in representation of the Bureau of Prisons
instituted a complaint against Macario Apostol & Empire Insurance Co.
First cause: Alleged that Apostol submitted the highest bid of P450/ton
for the purchase of 100 tons of Palawan Almaciga from BOP, that Apostol
obtained the goods worth P15,878.59 but paid only P691.10. Second
cause: also alleged that Apostol submitted the best bid for purchase of 3M
board feet of logs at P88 per 1k board feet, that Apostol obtained
deliveries valued at P65,830 but failed to pay balance of P18,827.57.
19 Jul: PH Resources Devt Corp moved to intervene. Alleged that
sometime prior to Apostols transactions, it had some goods deposited in
a warehouse, that Apostol (then president of corp) disposed of said goods
by delivering it to BOP in an attempt to settle his personal debts with BOP,
that upon discovery of Apostols act, the corporation took steps to recover
said goods from BOP but BOP refused. Denied motion for intervention.
Apostols defense: already paid.
Governments contention: PRDC has no legal interest because the
action brought against Apostol & Empire is just for the collection of a sum
of money, the unpaid balance of the purchase price of logs and almaciga
bought by him from the Bureau of Prisons. Further argued that price is
always paid in terms of money & the supposed payment by Apostol, being
in kind, is no payment at all, citing Art. 1458.

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Sales Case Digest

First to Third Exam Coverage

ISSUE: WON PRDC has legal interest to intervene


Affirmative. Same Art. 1458 provides that the purschaser may pay "a
price certain in money or its equivalent," which means that the price need
not be in money. Whether the GI sheets, black sheets, MS Plates, round
bars and GI pipes claimed by PRDC to belong to it and delivered to the
Bureau of Prison by Apostol in payment of his account is sufficient
payment therefore, is for the court to pass upon and decide after hearing
all the parties in the case. Should the trial court hold that it is as to credit
Apostol with the value or price of the materials delivered by him, certainly
PRDC would be affected adversely if its claim of ownership of the sheets,
plates, bars & pipes is true.
CAs findings as to legal interest of PRDC: True that the very subject
matter of the original case is a sum of money. But it is likewise true that
the materials purportedly belonging to PRDC have been assessed and
evaluated and their price equivalent in terms of money have been
determined. Said materials for whatever price they have been assigned by
Apostol as tokens of payment of his private debts with the Bureau of
Prisons. It becomes enormously plain in the event the respondent judge
decides to credit Macario Apostol with the value of the goods delivered by
the latter to the Bureau of Prisons, PRDC stands to be adversely affected
by such judgment. Hence, PRDC has legal interest.

3.

Must be certain or ascertainable at perfection

VILLANUEVA vs. CA (1997)


Gamaliel Villanueva has been a tenant-occupant of a unit in the 3-door
apartment building built on a parcel of land owned by Sps. Dela Cruz.
Feb 86: Jose Dela Cruz offered said parcel of land with the 3-door
apartment building for sale & Gamaliel & Irene Villanueva showed interest.
As initial step, Jose gave Irene a letter of authority dated 12 Feb 86 for
her to inspect the subject property. Because property was in arrears in
payment of realty taxes, Jose approached Irene & asked for a certain
amount to pay for the taxes so that the property would be cleared of any
encumbrance. Irene gave P10k, agreeing that it would form part of the
sale price of P550k.
Subsequently, Jose went to Irene with Ben Sabio, a tenant of one of the
units & requested Irene to allow Ben Sabio to purchase of the property.
Irene agreed so that they would just purchase the other half for P265k.
Property was subdivided & 2 separate titles were secured. Sabio
immediately made payments by installments.
6 Mar 87: Sps. Dela Cruz executed a Deed of Assignment of the other
half portion of the parcel of land in favor of Sps. Pili, wherein Villanuevas
apartment unit is situated, purportedly as full payment of an indebtedness
obtained from Sps. Pili. TCT was issued in the name of Sps. Pili.
Villanuevas came to know of such assignment & complained to the
barangay captain on the ground that there was already an agreement
between Dela Cruz & Villanueva. Also contended that a contract of sale
had been perfected & that the 10k formed part of the purchase price,
citing Art. 1482 (earnest money).
Dela cruz contended that what was agreed upon was that the P10k be
primarily intended as payment for realty tax, and was going to be part of
the consideration of the sale if the transaction would finally be
consummated. They insist that there was no clear agreement as to the
true amount of consideration.
ISSUE: WON there was a perfected contract of sale in favor of Villanueva
Negative. Dela Cruz never testified that he or wife had agreed to a
definite price for the subject property. In fact, his testimony during the
cross-examination firmly negated any price agreement with Villanueva
because he and his wife quoted the price of P575k and did not agree to
reduce it to P550k as claimed by Villanueva. They offered the property for
P575k but Villanueva counter-offered for P550k.
To settle the above conflicting claims of the parties, Villanueva could
have presented the contract of sale allegedly prepared by Jose dela Cruz.
Unfortunately, the contract was not presented in evidence.
Assuming arguendo that such draft deed existed, it does not necessarily
follow that there was already a definite agreement as to the price. If there
was, why then did private respondent Jose de la Cruz not sign it? If indeed
the draft deed of sale was that important to petitioners' cause, they should
have shown some effort to procure it. They could have secured it through
a subpoena duces tecum or thru the use of one of the modes of discovery.
But petitioners made no such effort.
Since the price was not fixed, the essential elements which give life to
the contract were lacking. It follows that the lessee cannot compel the
lessor to sell the leased land to him. The price must be certain, it must be

real, not fictitious. It is not necessary that the certainty of the price be
actual or determined at the time of executing the contract. The fact that
the exact amount to be paid therefor is not precisely fixed, is no bar to an
action to recover such compensation, provided the contract, by its terms,
furnishes a basis or measure for ascertaining the amount agreed upon.
The price could be made certain by the application of known factors;
where, in a sale of coal, a basic price was fixed but subject to modification,
the price was held certain. A contract of sale is not void for uncertainty
when the price, though not directly stated in terms of pesos and centavos,
can be made certain by reference to existing invoices identified in the
agreement. In this respect, the contract of sale is perfected. The price must
be certain, otherwise there is no true consent between the parties. There
can be no sale without a price.
There was no meeting of the mind as to the price, expressly or
impliedly, directly or indirectly.
As to applicability of Statute of Frauds & law on double sale: the
statute of frauds applies only to executory contracts and not to partially or
completely executed ones. However, there is no perfected contract in this
case, therefore there is no basis for the application of the statute of frauds.
The application of such statute presupposes the existence of a perfected
contract and requires only that a note or memorandum be executed in
order to compel judicial enforcement thereof. Also, the civil law rule on
double sale finds no application because there was no sale at all to begin
with.
What took place was only a prolonged negotiation to buy and to sell,
and at most, an offer and a counter-offer but no definite agreement was
reached by the parties.

MORENO, JR. vs. PRIVATE MANAGEMENT OFFICE (2006)


Subject matter of this complaint is the J. Moreno Building, specifically
the 2nd-6th floors of the building.
Jose Moreno is the owner of the ground floor, 7th floor & the penthouse
of said building & the lot on which it stands. Private Management Office is
the owner of the 2nd-6th floors of the building.
13 Feb 93: PMO called for conference for the purpose of discussing
Morenos right of first refusal over the floors owned by PMO. PMO
informed Moreno that the proposed purchase price for the floors was
P21M.
22 Feb: PMO, in a letter, informed Moreno that the Board of Trustees of
APT is in agreement that he has the right of first refusal and requested
him to deposit 10% of the "suggested indicative price" of P21M on/before
Feb 26.
26 Feb: Moreno paid P2.1M. However, PMO again wrote Moreno that its
Legal Department has questioned the basis for the computation of the
indicative price for the said floors.
2 Apr 93: PMO wrote Moreno that BOT has "tentatively agreed on a
settlement price of P42,274,702.17" for the said floors.
ISSUE: WON there was a perfected contract of sale over the subject floors
at the price of P21M
Negative. Again, the offer must be certain and the acceptance absolute.
To reach that moment of perfection, the parties must agree on the same
thing in the same sense, so that their minds meet as to all the terms. They
must have a distinct intention common to both and without doubt or
difference. Once there is concurrence of the offer and acceptance of the
object and cause, the stage of negotiation is finished.
The letter is clear evidence that PMO did not intend to sell the subject
floors at the price certain of P21M. It stated, please advise Mr. Moreno
that the suggested indicative price for APTs 5 floors of the building is
P21M.
The letter clearly states that P21M is merely a "suggested indicative
price" of the subject floors as it was yet to be approved by the Board of
Trustees. Before the Board could confirm the suggested indicative price,
the Committee on Privatization must first approve the terms of the sale or
disposition. The imposition of this suspensive condition finds basis under
Proclamation No. 5022 which vests in the Committee the power to
approve the sale of government assets, including the price of the asset to
be sold.
Morenos argument: even before PMO sells or offers for sale a
government asset, the terms thereof have already been previously
approved by the Committee, i.e., "subject to its having received the prior
written approval of the Committee to sell such an asset at a price. Thus,
the Committees approval of the suggested indicative price of P21M is not
necessary.
No merit. If we adopt the argument of petitioner, Sec. 12, Art. III would
nullify the power granted to the Committee under Sec. 5 (4), Art. II of the
same Proclamation. Under Sec. 5(4), the Committee has the power "to

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Sales Case Digest

First to Third Exam Coverage

approve or disapprove, on behalf of the National Government and without


need of any further approval or other action from any other government
institution or agency, the sale or disposition of such assets, in each case
on terms and to purchasers recommended by the Trust The law is
clear that the Trust shall recommend the terms for the Committees
approval or disapproval, and not the other way around.
Morenos argument: the "suggested indicative price" of P21M is not a
proposed price, but the selling price indicative of the value at which
PMOwas willing to sell. This is the same in the ruling of the trial court.
No merit. The reliance of the trial court in the Webster definition of the
term "indicative," as also adopted by Moreno, is misplaced. The
transaction at bar involves the sale of an asset under a privatization
scheme which attaches a peculiar meaning or signification to the term
"indicative price." An indicative price is a ball-park figure and PMO
supplies such a figure purely to define the ball-park.
Morenos construction of the letter of 22 Feb 93 that his assent to the
"suggested indicative price" of P21M converted it as the price certain, thus
giving rise to a perfected contract of sale is Morenos own subjective
understanding. As such, it is not shared by PMO. Hence, there was no
meeting of the minds. That the letter constituted a definite, complete and
certain offer is the subjective belief of Moreno alone. The letter in question
is a mere evidence of a memorialization of inconclusive negotiations, or a
mere agreement to agree, in which material term is left for future
negotiations. It is a mere evidence of the parties preliminary transactions
which did not crystallize into a perfected contract.
For a valid contract to have been created, the parties must have
progressed beyond this stage of imperfect negotiation. But as the records
would show, the parties are yet undergoing the preliminary steps towards
the formation of a valid contract. Since there is no perfected contract of
sale, the issue on estoppel is now moot and academic.

4.

Manner of payment of price is essential

NAVARRA vs. PLANTERS (2007)


5 Jul 82: Navarras obtained a loan of P1.2M from Planters Bank. As
security, they executed a deed of mortgage over their 5 parcels of land.
However, they failed to pay their loan obligation. Planters Bank foreclosed
the mortgage & were sold for P1.341M to Planters as highest bidder. 1-yr
redemption period expired without Navarras redeeming the properties.
On the other hand, RRRC Devt Corp is a real estate company owned by
the parents of Carmelita Navarra. RRRC itself obtained a loan from
Planters Bank secured by a mortgage over another set of properties
owned by RRRC. The loan was unpaid so Planters foreclosed the assets of
RRRC. However, RRRC was able to negotiate with the Bank for the
redemption of its foreclosed properties by way of concession, whereby the
Bank allowed RRRC to refer to it would-be buyers of the foreclosed RRRC
properties who would remit their payments directly to the Bank, which
payments would then be considered as redemption price for RRRC. The
properties were sold to 3rd persons whose payments therefor, directly
made to the Bank, were in excess by P300k for the redemption price.
In the meantime, Jorge Navarra sent a letter to Planters Bank proposing
to repurchase the 5 lots, with a request that he be given until 31 Aug 85
to pay the downpayment of P300k. Planters Bank wrote back to Navarra,
agreeing with his request.
20 Aug 85: Jorge Navarra went to the office of Mr. Castillo bringing a
letter requesting that the excess payment of P300k in connection with the
redemption made by RRRC be applied as downpayment for their
repurchase.
Because the amount of P300k was sourced from a different transaction
between RRRC and Planters Bank and involved different debtors, the Bank
required Navarra to submit a board resolution from RRRC authorizing him
to negotiate for and its behalf & empowering him to apply the excess
amount of P300k in RRRCs redemption payment as down payment for
the repurchase.
21 Jan 87: Planters Bank denied the documentation of the proposed
repurchase of the foreclosed properties because of Jorges noncompliance with the Banks request for submission of board resolution of
RRRC.
28 Jan: Jorge claimed having already delivered copies.
19 Feb: Bank sent notice to the Navarras demanding that they vacate.
31 Jun: Navarras filed complaint for specific performance with
injunction against Planters Bank, alleging that that there was a perfected
contract of sale between them repurchase price of P1.8M with down of
P300k.
ISSUE: WON there was a perfected contract of sale

Negative. There was no certain offer and absolute acceptance to give


rise to a meeting of the minds between the parties.

While the foregoing letters indicate the amount of P300k as down


payment, they are, however, completely silent as to how the succeeding
installment payments shall be made. Letters merely acknowledge that the
downpayment of P300k was agreed upon by the parties. However, this fact
cannot lead to the conclusion that a contract of sale had been perfected.
Before a valid and binding contract of sale can exist, the manner of
payment of the purchase price must first be established since the
agreement on 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.
The Navarras letter/offer failed to specify a definite amount of the
purchase price for the sale/repurchase of the subject properties. It merely
stated that the "purchase price will be based on the redemption value plus
accrued interest at the prevailing rate up to the date of the sales contract."
The ambiguity of this statement only bolsters the uncertainty of the
Navarras so-called "offer" for it leaves much rooms for such questions, as:
what is the redemption value? what prevailing rate of interest shall be
followed: is it the rate stipulated in the loan agreement or the legal rate?...
In another letter of the Navarras: Maybe you can give us a long-term
payment scheme on the basis of my brothers annual savings of roughly
US$30,000.00 every time he comes home for his home leave.
Again, the offer was not clear insofar as concerned the exact number of
years that will comprise the long-term payment scheme. The absence of a
stipulated period within which the repurchase price shall be paid all the
more adds to the indefiniteness of the Navarras offer.
Clearly, then, the lack of a definite offer on the part of the spouses could
not possibly serve as the basis of their claim that the sale/repurchase of
their foreclosed properties was perfected. The reason is obvious: one
essential element of a contract of sale is wanting: the price certain. What is
dramatically clear is that there was no meeting of minds vis-a-vis the price,
expressly or impliedly, directly or indirectly.
Further, the tenor of Planters Banks letter-reply negates the contention
of the Navarras that the Bank fully accepted their offer. The letter
specifically stated that there is a need to negotiate on the other details of
the transaction before the sale may be formalized. Such statement in the
Banks letter clearly manifests lack of agreement between the parties as to
the terms of the purported contract of sale/repurchase, particularly the
mode of payment of the purchase price and the period for its payment.
The law requires acceptance to be absolute and unqualified.
Aside from their first letter dated 18 Jul 85, the Navarras wrote another
letter dated 20 Aug 85, this time requesting the Bank that the down
payment of P300k be instead taken from the excess payment made by the
RRRC in redeeming its own foreclosed properties. The very circumstance
that the Navarras had to make this new request is a clear indication that
no definite agreement has yet been reached at that point. As we see it, this
request constitutes a new offer on the part of the Navarras, which offer
was again conditionally accepted by the Bank as in fact it even required
the Navarras to submit a board resolution of RRRC before it could proceed
with the proposed sale/repurchase. The eventual failure of the spouses to
submit the required board resolution precludes the perfection of a
contract of sale/repurchase between the parties.
What transpired between the parties was only a prolonged negotiation
to buy and to sell, and, at the most, an offer and a counter-offer with no
definite agreement having been reached by them.

AMADO vs. SALVADOR (2006)


Judge Amado owned a parcel of land with area of 5,928sqm. The
property subject of this controversy is a portion thereof, consisting of
1,106sqm.
Allegations of Renato Salvador: Sep 79, Judge Amado agreed to sell to
him the subject property for P60/sqm or P66,360 payable in cash or
construction materials which would be delivered to Judge Amado. However,
Salvador failed to state the terms of payment, such as the period within
which the payment was supposed to be completed, or how much the
payment should be made in cash. Then, Salvador undertook the transfer &
relocation of 5 squatter families residing on the property. Judge Amado
allowed Salvador to take possession of the property and to build thereon a
residential structure, office, warehouse, perimeter fence and a deep well
pump. Oct 80, Salvador had already given Judge Amado total cash
advances of P30,310 & delivered construction materials amounting to
P36,904.
Arguments of the heirs of Amado: Judge Amado let Salvador use the
subject property, upon the request of the latters father and grandfather,
who were Judge Amados friends. Salvador used the property for his
business of manufacturing hollow blocks. The cash advances & various
construction materials were received by Judge Amado from Salvador in
connection with a loan agreement & not as payment of the sale. They
offered in eveidence a loan agreement, wherein Salvador & Judge Amado

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Sales Case Digest

First to Third Exam Coverage

appeared as co-borrowers with Capitol City Devt Bank as lender. The


property was used as collateral while Salvador undertook the obligation to
construct a perimeter fence over the land & to deliver hollow blocks to
Judge Amados son. When Salvadors business folded up, he failed to pay
his share of the monthly amortization of the loan with the bank. To
prevent foreclosure, Judge Amado paid the loan. Judge Amado sent a
demand letter to Salvador, directing him to vacate but was ignored. Judge
Amado filed an ejectment suit but was dismissed.
22 Aug 96: Salvador filed an action for specific performance with
damages against the heirs. He presented a note written by Judge Amado:
Meron naniningil sa akin ng P500.00 kayat ako ay bigyan ng ganoong halaga
ngayon. Hindi ko nilagdaan iyong papel na dala ni Kapitan Maeng at ito ay
nasa akin pa. Saka ko na ibabalik iyon pa gang aking plano ay napaayos ko na.
Ang lupa ay gagawin kong dalawang lote.
Also, to prove that he paid purchase price, Salvador submitted a
statement of account of cash advances, statements of account of
construction materials, invoice no. 50 for construction materials, delivery
receipts.
ISSUE: WON there was a perfected contract of sale
Negative. 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. 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 or consideration.
Salvador fails to allege the manner of payment of the purchase price on
which the parties should have agreed. No period was set within which the
payment must be made. Of the purchase price of P66,360.00, which the
parties purportedly agreed upon, the amount which should be paid in
cash and the amount for construction materials was not determined. This
means that the parties had no exact notion of the consideration. This is
fatal.
There were serious doubts as to whether cash advances and deliveries
of construction materials evidenced by numerous statements of accounts
and delivery receipts were actually intended as payment for the land.
1) The statements of accounts and the delivery receipts do not indicate
that the construction materials or the cash advances were made in
connection with the sale of the subject property. Any doubt as to the
real meaning of the contract must be resolved against the person
who drafted the instrument and is responsible for the ambiguity
thereof. Since Salvador prepared these statements, he cannot benefit
from the resulting ambiguity. Salvador is not an ignorant & illiterate
person; rather, he is a businessman.
2) One of the delivery receipts presented by Salvador was partially paid.
If Judge Amado had already agreed that the construction materials
delivered to him and his family constituted the payment for the
subject property, the act of partially paying for construction materials
would be incongruous to such intention.
3) Salvador himself gave conflicting statements on whether he has
completed payment. The findings of fact made by MTC presented
that Salvador paid Judge Amado P62,319.38 in cash and
construction materials for the property, and a balance of P4,040.62
was left unpaid due to the failure of Judge Amado to execute and
deliver the deed of sale. However, in the RTC, Salvador claimed that
he paid Judge Amado P67,215.38 in cash and construction
materials, which was more than the purchase price of P66,360.00
upon which they agreed.
4) Salvador again contradicts himself as to the date he supposedly
completed the payments for the subject property. He alleges that by
Oct 1980, he had already fully paid Judge Amado P67,215.38 in
cash and construction materials. Yet in the same pleading, he
included 11 separate deliveries of construction materials made from
8 Dec 1980 to 6 Jan 1981 as evidence of payment.
Cannot presume the existence of a sale of land, absent any direct proof
of it. While it is apparent that Salvador paid cash advances and delivered
construction materials to Judge Amado, this fact alone does not attest to
the existence of a sale of land. There was an absence of a uniform
intention to apply these cash advances and construction materials as
payment for the purchase of the subject property.
As to the handwritten note: This note is not conclusive proof of the
existence of a perfected sale. What this note proves is that Judge Amado
was hesitant to sign the unidentified document and was still waiting for
the completion of his plan to divide the land referred to in the note. To say
that the document is the deed of sale and the land is the subject property
claimed by Salvador would be based on pure surmise and conjecture
without a more specific reference to them in the note. Moreover, the P500
which Judge Amado was demanding from Salvador could not have been
payment pursuant to the purported sale of the subject property.

No positive proof was adduced that Judge Amado had fully accepted
Salvadors sketchy proposal. Even if the handwritten note actually referred
to the subject property, it merely points to the fact that the parties were, at
best, negotiating a contract of sale. Judge Amado had not expressed his
unconditional acceptance of Salvadors offer. He merely expressed that he
was considering the sale of the subject property, but it was nevertheless
clear that he still was unprepared to sign the contract.

BANK OF COMMERCE vs. MANALO (2006)


Xavierville Estate Inc. was the owner of parcels of land in QC, known as
Xavierville Estate Subd. XEI caused the subdivision of the property into
residential lots, which was then offered for sale.
8 Sep 67: XEI, through GM Antonio Ramos, as vendor, & The Overseas
Bank of Manila, as vendee, executed a Deed of Sale of Real Estate over
some residential lots, including Lot 1 Block 2 & Lot 2 Block 2. Transaction
was subject to the approval of the Board of Directors of OBM & was
covered by real estate mortgages in favor of PNB as security for its
account amounting to P5.187M & Central Bank as security for advances of
P22,185,193. Still, XEI continued to sell the residential lots as agent of
OBM.
72: XEI Pres. Emerito Ramos, Jr. contracted the services of Engr. Carlos
Manalo, Jr. who was in the business of drilling deep water wells and
installing pumps. For P34,887, Manalo installed a water pump at Ramos
residence. Manalo then proposed to XEI to purchase a lot in Xavierville &
offered as part of the downpayment the P34k Ramos owed him. XEI
agreed.
8 Feb: Ramos requested Manalo to choose which lots he wanted to buy
so that the price of the lots and the terms of payment could be fixed and
incorporated in the conditional sale. Manalo chose Lots 1 & 2 of Block 2.
22 Aug: Ramos confirmed the reservation of the lots. Also pegged the
price of the lots at P200/sqm or P348,060 with 20% down, payable
on/before 31 Dec 72. Manalo conformed.
2 Sep: Sps. Manalo took possession of the property & constructed a
house & installed a fence.
In the meantime, many of lot buyers refused to pay their monthly
installments until they were assured that they would be issued Torrens
title over the lots. Sps. Manalo were notified of the resumption of the
selling operations. Manalo also did not pay the balance of the
downpayment because Ramos failed to prepare a contract of conditional
sale & transmit it to Manalo for signing.
14 Aug 73: Perla Manalo went to XEI & requested that payment of the
downpayment be deferred but XEI rejected. XEI then furnished her with a
statement of their account.
25 Jan 74: Sps. Manalo received another statement of account. But
Manalo stated they had not yet received the notice of resumption of XEIs
seling operations & there had been no arrangement on the payment of
interests. Hence, they should not be charged with the interests.
Jun 76: Manalo constructed a business sign in the sidewalk near his
house. XEI informed Manalo that signs were not allowed along the
sidewalk.
XEI turned over its selling operations to OBM. OBM warned Manalo
regarding the business signs. Commercial Bank of Manila acquired
Xavierville from OBM. CBM requested Perla Manalo to stop any ongoing
construction on the property since CBM was the owner of the lot. Perla
informed them that her husband had contract with OBM through XEI to
purchase the property. She promised to send documents but failed.
CBM filed complaint for unlawful detainer. Sps. Manalo wrote CBM to
offer amicable settlement, promising to abide by the purchase price of
P313,172 per agreement with XEI. However, CBM proposed the price of
P1,500/sqm. Sps. Manalo rejected this counter proposal.
25 Jan 93: Manalo proposed amicable settlement by paying P942,648.
However, CBM rejected & insisted that they pay P4.5M as current market
value of the property.
Manalos contention: even if the manner and timeline for the payment
of the balance of the purchase price of the property is an essential
requisite of a contract to sell, nevertheless, as shown by their letter
agreement of 22 Aug 72 with the OBM, through XEI & the other letters to
them, an agreement was reached as to the manner of payment of the
balance of the purchase price.
ISSUE: WON there was a perfected contract of sale
Negative. For a perfected contract of sale or contract to sell to exist in
law, there must be an agreement of the parties, not only on the price of
the property sold, but also on the manner the price is to be paid by the
vendee. A definite agreement as to the price is an essential element of a
binding agreement to sell personal or real property because it seriously
affects the rights and obligations of the parties. Price is an essential

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Sales Case Digest

First to Third Exam Coverage

element in the formation of a binding and enforceable contract of sale.


The fixing of the price can never be left to the decision of one of the
contracting parties. But a price fixed by one of the contracting parties, if
accepted by the other, gives rise to a perfected sale. It is not enough for
the parties to agree on the price of the property. The parties must also
agree on the manner of payment of the price of the property to give rise to
a binding and enforceable contract.
In a contract to sell property by installments, it is not enough that the
parties agree on the price as well as the amount of downpayment. The
parties must, likewise, agree on the manner of payment of the balance of
the purchase price and on the other terms and conditions relative to the
sale. Even if the buyer makes a downpayment or portion thereof, such
payment cannot be considered as sufficient proof of the perfection of any
purchase and sale between the parties.
Not difficult to glean from the aforequoted averments that the
petitioners themselves admit that they and the respondent still had to
meet and agree on how and when the down-payment and the installment
payments were to be paid. Such being the situation, it cannot, therefore,
be said that a definite & firm sales agreement between the parties had
been perfected over the lot.
No showing, in the records, of the schedule of payment of the balance
of the purchase price on the property amounting to P278,448. The parties
confined themselves to agreeing on the price of the property (P348,060),
the 20% downpayment of the purchase price (P69,612), and credited
Manalo for the P34,887 owing from Ramos as part of the 20%
downpayment. The timeline for the payment of the balance of the
downpayment (P34,724.34) was also agreed upon, that is, on or before
XEI resumed its selling operations, on or before 31 Dec 72, or within 5
days from written notice of such resumption of selling operations. The
parties had also agreed to incorporate all the terms and conditions
relating to the sale, inclusive of the terms of payment of the balance of the
purchase price and the other substantial terms and conditions in the
"corresponding contract of conditional sale," to be later signed by the
parties, simultaneously with respondents settlement of the balance of the
downpayment.
However, the determination of the terms of payment of the P278,448
had yet to be agreed upon on or before 31 Dec 72, or even afterwards,
when the parties sign the corresponding contract of conditional sale. The
parties are in agreement that there had been no contract of conditional
sale ever executed by XEI, OBM or CBM, as vendor, and Sps. Manalo, as
vendees
So long as an essential element entering into the proposed obligation of
either of the parties remains to be determined by an agreement which
they are to make, the contract is incomplete and unenforceable.
In its letter to Manalo dated 17 Jun 76, XEI stated, in part, that Manalo
had purchased the property "on installment basis." However, in the said
letter, XEI failed to state a specific amount for each installment, and
whether such payments were to be made monthly, semi-annually, or
annually. Also, Manalo failed to adduce a shred of evidence to prove that
they were obliged to pay the P278,448 monthly, semi-annually or
annually. The allegation that the payment of the P278,448 was to be paid
in installments is, thus, vague and indefinite. Case law is that, for a
contract to be enforceable, its terms must be certain and explicit, not
vague or indefinite.
The bare fact that other lot buyers were allowed to pay the balance of
the purchase price of lots purchased by them in 120 or 180 monthly
installments does not constitute evidence that XEI also agreed to give
Manalo the same mode and timeline of payment of the P278,448. Manalo
failed to allege and prove that, as a matter of business usage, habit or
pattern of conduct, XEI granted all lot buyers the right to pay the balance
of the purchase price in installments of 120 months of fixed amounts with
pre-computed interests, and that XEI and Manalo had intended to adopt
such terms of payment relative to the sale of the two lots in question.
Regarding Art. 1469 that price of the property may be considered
certain if it be so with reference to another thing: reviewing the letter
agreement of the parties, there is no direct or implied reference to the
manner and schedule of payment of the balance of the purchase price of
the lots covered by the deeds of conditional sale executed by XEI and that
of the other lot buyers as basis for or mode of determination of the
schedule of the payment by Manalo.

5.

Inadequacy of price does not affect ordinary sale

DIRECTOR OF LANDS vs. ABARCA (1934)


Lot 700 was claimed by Datu Bualan & a number of Bagobos, on the
one side, &, on the other, by Juan Sarenas & Domingo Braganza.
14 yrs ago in a civil case: Lot 700 was the subject of litigation between
Datu Bualan & Ciriaco Lizada. Juan Sarenas & Domingo Braganza were

the attorneys for Datu Bualan. A judgment was rendered in favor of Datu
Bualan & his co-claimants.
However, a controversy arose between the Bagobos & their attorneys as
to the amount of attorneys fees, whereupon the attorneys took possession
of the property. An action was brought by the Bagobos against their
former attorneys for recovery. Judgment was rendered ordering attorneys
to retun the property & requiring the Bagobos to pay their former
attorneys P6k as fees. And so, Datu Bualan paid Sarenas & Braganza
P5,126.13. They also paid to the municipal treasurer of Davao in the name
of Sarenas & Braganza for taxes & penalties due on the property while it
was still in possession of the attorneys, the sum of P1,035.87. The
Bagobos assumed that these payments satisfied the judgment against
them.
Sarenas & Braganza claimed that the sum paid to the municipal
treasurer of Davao should not be credited on the amount of the judgment
obtained by them. They caused the clerk of court to issue a writ of
execution on said judgment. Sheriff levied Lot 700 & sold it to Sarenas &
Braganza for P877.25. Upon failure of the Bagobos to redeem the
property, they filed an action, alleging that they were absolute owners of
Lot 700.
Trial court ruled in favor of Datu Bualan & ordered registration of the lot
in their names. However, the property was subject to a lien in favor of
Sarenas & Braganza for P877.25 with interest.
Ruling of the trial court: the sale by the sheriff of the property in
question in favor of Sarenas & Braganza was null and void, because it was
not made in accordance with the requirements of the law, and also
because the amount of P877.25 paid by Sarenas and Braganza was
absolutely inadequate.
ISSUE: WON the sale in favor of Sarenas & Braganza was null and void
Affirmative. It appears that in 1927 the assessed value of the contested
property was more than P60k. A judicial sale of real property will be set
aside when the price is so inadequate as to shock the conscience of the
court.
The amount paid by Datu Bualan and his co-claimants for taxes and
penalties due on the contested property should be credited on the
judgment obtained by Sarenas and Braganza. Such taxes and penalties
accrued while the property was in that possession under a claim of
ownership.
BRAVO-GUERRERO vs. BRAVO (2005)
Sps. Bravo owned two parcels of land. The properties contain a large
residential dwelling, a smaller house & other improvements.
Sps. Mauricio & Simona Bravo had 3 children Roland, Cesar, Lily.
Cesar died without issue. Lily married David Diaz & had a son David.
Roland had 6 children Elizabeth, Edward, Roland, Senia, Benjamin,
Ofelia.
17 Jun 66: Simona executed a General Power of Attorney appointing
Mauricio as her atty-in-fact, whereby she 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 PNB & DBP for P10k & P5k.
25 Oct 70: Mauricio executed a DOS with Assumption of Real Estate
Mortgage conveying the properties to Roland, Ofelia & Elizabeth as
vendees. This was conditioned on the payment of P1k & on the assumption
of the loan obligation with PNB & DBP. DOS was notarized by Atty. Guzman
but was not annotated on the TCT. The mortgage loans & receipts for loan
payments continued to be in Mauricios name even after his death.
Simona died.
23 Jun 97: Edward, represented by wife Fatima, filed action for judicial
partition of the properties, claiming that he & other grandchildren of
Mauricio & Simona are co-owners of the properties by succession. Despite
this, Elizabeth refused to share with him the possession & rental income.
Edward then amended his complaint, including a prayer to annul the DOS,
claiming that it was merely simulated to prejudice the other heirs.
ISSUE: WON Mauricio executed the DOS without Simonas consent, WON
the sale was simulated as shown by the grossly inadequate consideration
1) Negative. Art. 166 applies only to properties acquired by the
conjugal partnership after the effectivity of the CC 30 Aug 50. Although
there is no dispute that the properties were conjugal properties of
Mauricio and Simona, the records do not show, and the parties did not
stipulate, when the properties were acquired. And under Art. 1413 of old
Spanish CC, the husband could alienate conjugal partnership property for
valuable consideration without the wifes consent

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Sales Case Digest


Even under the present CC, the DOS is still not void. It is well-settled
that contracts alienating conjugal real property without the wifes consent
are merely voidable (during the marriage & within 10 years from the
transaction).
Hence, Edwards action to annul the DOS based on Art. 166 must fail
for having been filed out of time. The marriage of Mauricio and Simona
was dissolved when Mauricio died in 1973. More than ten years have
passed since the execution of the Deed of Sale. Further, as heirs of
Simona, they are not the parties who can invoke Article 166. Article 173
reserves that remedy to the wife alone.
Simona, however, did not assail the Deed of Sale during her marriage or
even after Mauricios death. In fact, she executed a general power of
attorney in favor of Mauricio. Even if a document is titled as a general
power of attorney, the requirement of a special power of attorney is met if
there is a clear mandate from the principal specifically authorizing the
performance of the act. The GPA was valid and regular on its face. It was
notarized and as such, it carries the evidentiary weight conferred upon it
with respect to its due execution. While it is true that it was denominated
as a general power of attorney, a perusal thereof revealed that it stated an
authority to sell. Simona expressly authorized Mauricio in the GPA to "sell,
assign and dispose of any and all of my property.
2) Negative. In a sale, cash of equivalent value replaces the property
taken from the estate. There is no diminution of the estate but merely a
substitution in values. Donations and other dispositions by gratuitous title,
on the other hand, must be included in the computation of legitimes.
Consideration was only P1k & as contended by Edward, it was grossly
inadequate compared to the actual value of the properties.
Simulation of contract and gross inadequacy of price are distinct legal
concepts, with different effects. 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 whatsoever because
there is no real agreement between the parties.
In contrast, a contract with inadequate consideration may nevertheless
embody a true agreement between the parties. A contract of sale is a
consensual contract, which becomes valid and binding upon the meeting
of minds of the parties on the price and the object of the sale. The concept
of a simulated sale is thus incompatible with inadequacy of price. When
the parties agree on a price as the actual consideration, the sale is not
simulated despite the inadequacy of the price.
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. Inadequacy of cause will not
invalidate a contract unless there has been fraud, mistake or undue
influence.
DOS stipulates that, in addition to the payment of P1k, the vendees
should assume the mortgage loans from PNB and DBP. The consideration
for the sale of the Properties was thus P1k in cash and the assumption of
the P15k mortgage. Hence, total consideration is P16k.
Even P16k is not considered grossly inadequate as compared to the
value of the property. The DOS was executed in 1970. The valuation of the
properties in 1979/1997 is of little relevance to the issue of whether P16k
was a grossly inadequate price to pay for the properties in 1970. Certainly,
there is nothing surprising in the sharp increase in the value of the
properties 9/27 years after the sale, particularly when we consider that the
properties are located in Makati. Also, tax declarations placed the assessed
value of both properties at P16,160. Compared to this, the price of P16k
cannot be considered grossly inadequate, much less so shocking to the
conscience as to justify the setting aside of the DOS.
As to contention that the vendees did not make the mortgage
payments: no merit. Assuming that the vendees failed to pay the full price
stated in the Deed of Sale, such partial failure would not render the sale
void. The contract of sale is valid, despite the manner of payment, or even
the breach of that manner of payment. It 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. Failure to pay the consideration
is different from lack of consideration. The former results in a right to
demand the fulfillment or cancellation of the obligation under an existing
valid contract while the latter prevents the existence of a valid contract.
Neither was it shown that the rentals from tenants were sufficient to
cover the mortgage payments. The mortgage was fully paid in 1974.
Petitioners point out that they were duly employed and had the financial
capacity to buy the Properties in 1970. Respondents did not refute this.

PART III: FORMATION OF CONTRACT OF SALE


I.

POLICITACION

First to Third Exam Coverage


1. Option contract
TAYAG vs. LACSON (2004)
Angelica Tiotuyco vda. de Lacson & her children were the registered
owners of 3 parcels of land in Mabalacat, Pampanga. These properties
were tenanted agricultural lands & administered by Renato Espinosa for
the owner.
17 Mar 96: a group of original farmers/tillers, namely Tiamson et.al. &
another group, namely Tolentino et.al. individually executed separate
Deeds of Assignment in favor of Herminio Tayag. They assigned to Tayag
their respective rights as tenants/tillers of the landholdings possessed &
tilled by them for P50/sqm. Amount was made payable when the legal
impediments to the sale of the property to the petitioner no longer
existed." Tayag was also granted the exclusive right to buy the property if
and when Lacson, with the concurrence of the tenants, agreed to sell the
property.
Tayag gave varied sums of money to the tenants as partial payments,
evidenced by receipts.
24 Jul: Tayag called a meeting of the defendants-tenants to work out
the implementation of the terms of their separate agreements.
8 Aug: defendant-tenants wrote to Tayag that they were not attending
the meeting & instead gave notice of their collective decision to sell all
their rights & interests, as tenants/lessees, over the landholding to Lacson.
19 Aug: Tayag filed a complaint against the defendants-tenants, as well
as Lacson, for the court to fix a period within which to pay the agreed
purchase price of P50/sqm as provided in DOA.
Tiamson et.al. alleged that the money each of them received from Tayag
were in the form of loans & that they were deceived into signing DOA.
ISSUE: WON there was a perfected option contract
Negative. Under the Deeds of Assignment, the obligation of Tayag to
pay to each of the defendants-tenants the balance of the purchase price
was conditioned on the occurrence of the following events: (a) Lacson
agrees to sell their property to Tayag; (b) the legal impediments to the sale
of the landholding to Tayag no longer exist; & (c) Tayag decides to buy the
property.
It is only upon the occurrence of the foregoing conditions that the
petitioner would be obliged to pay to the defendants-tenants the balance
of the P50/sqm under the DOA. However, Tayag and the defendantstenants had yet to submit the DOA to DAR which, in turn, had to act on
and approve or disapprove the same. In fact, as alleged by Tayag in his
complaint, he was yet to meet with the defendants-tenants to discuss the
implementation of DOA.
An option is a contract by which the owner of the property agrees with
another person that he shall have the right to buy his property at a fixed
price within a certain time. It is a condition offered or contract by which
the owner stipulates with another that the latter shall have the right to buy
the property at a fixed price within a certain time, or under, or in
compliance with certain terms and conditions, or which gives to the owner
of the property the right to sell or demand a sale. It imposes no binding
obligation on the person holding the option, aside from the consideration
for the offer. Until accepted, it is not, properly speaking, treated as a
contract. An option contract is a separate and distinct contract from which
the parties may enter into upon the conjunction of the option.
The defendants-tenants, under the deeds of assignment, granted to
Tayag not only an option but the exclusive right to buy the landholding.
But the grantors were merely the defendants-tenants, and not Lacsons, the
registered owners of the property. Not being the registered owners of the
property, the defendants-tenants could not legally grant to Tayag the
option, much less the "exclusive right" to buy the property. As the Latin
saying goes, "nemo dat quod non habet."
ADELFA PROPERTIES vs. CA (1995)
Jose, Dominador, Rosario & Salud Jimenez were registered co-owners of
a parcel of land consisting of 17,710 sqm in Las Pias, Metro Manila.
28 Jul 88: Jose & Dominador sold their share of of said parcel,
specifically the eastern portion, to Adelfa Properties pursuant to a
Kasulatan sa Bilihan ng Lupa.
Subsequently, a Confirmatory Extrajudicial Partition Agreement was
executed by the Jimenezes, wherein the eastern portion of the lot, was
adjudicated to Jose & Dominador while the western to Rosario & Salud.
Adelfa Properties expressed interest in buying the western portion.
25 Nov 89: an Exclusic Option to Purchase was executed between
Adelfa Properties, & Rosario Jimenez-Castaeda & Salud Jimenez, under
the ff terms:
Selling price is P2,856,150

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Sales Case Digest


Sum of P50k received from Adelfa Properties as an option money shall
be credited as partial payment upon consummation of sale & balance
to be paid on/before 30 Nov 89
In case of default, option shall be cancelled & 50% shall be refunded
However, since the owners copy of the certificate of title issued to Salud
had been lost, a petition for the re-issuance of a new owners copy of said
certificate of title was filed in court through Atty. Bernardo, counsel of
Adelfa.
A new owners copy was issued but remained in the possession of Atty.
Bernardo until he turned it over to Adelfa Properties.
29 Nov 89: before Adelfa Properties could make payment, it received a
summons & copy of complaint filed by the nephews & nieces of Rosario &
Salud & Adelfa Properties for annulment of the DOS. So Adelfa Properties
informed Rosario & Salud that it would hold payment of the full purchase
price & suggested they they settle the case with their nephews & nieces.
Salud refused to heed the suggestion of Adelfa Properties & attributed
the suspension of payment of the price to lack of word of honor.
7 Dec 89: Adelfa Properties caused to be annotataed on the title of the
lot its option contract with Rosario & Salud & its contract of sale with Jose
& Dominador.
14 Dec: Rosario & Salud informed Adelfa Properties that they were
cancelling the transaction. In turn, Atty. Bernardo offered to pay the
purchase price price provide that P500k be deducted for the settlement of
the case but was rejected by Rosario & Salud. Then reduced the amount
from P500k to P300k but was also rejected.
28 Feb 90: Rosario & Salud executed a Deed of Conditional Sale in
favor of Emylene Chua over the same parcel of land.
16 Apr: Atty. Bernardo wrote Rosario & Salud that in view of the
dismissal of the case against them, Adelfa Properties was willing to pay the
purchase price & requested that DOAS be executed. Ignored by Rosario &
Salud.
27 Jul 90: Rosario & Salud sent letter to Adelfa Properties, enclosing a
check for P25k representing the refund of 50% of the option money. They
requested the return of the owners duplicate copy of the certificate of title
but Adelfa Properties failed to surrender the title.
Rosario & Salud Jimenez filed for annulment of contract with damages,
praying that the exclusive option to purchase be declared null & void.
ISSUE: WON the Exclusive Option to Purchase executed between Adelfa
Properties & Rosario Jimenez-Castaeda & Salud Jimenez is an option
contract
Negative. The alleged option contract was a contract to sell and not a
contract of sale. In contract of sale, the title passes to the vendee upon the
delivery of the thing sold; whereas in a contract to sell, by agreement the
ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full
payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach but an event that prevents the
obligation of vendor to convey title from becoming effective.
The parties never intended to transfer ownership to Adelfa Properties
except upon the full payment of the purchase price. Firstly, the exclusive
option to purchase, although it provided for automatic rescission of the
contract and partial forfeiture of the amount already paid in case of
default, does not mention that Adelfa is obliged to return
possession/ownership of the property as a consequence of non-payment.
There is no stipulation anent reversion or reconveyance of the property to
Rosario & Salud in the event that Adelfa does not comply with its
obligation. With the absence of such a stipulation, although there is a
provision on the remedies available to the parties in case of breach, it may
legally be inferred that the parties never intended to transfer ownership to
Adelfa to completion of payment of the purchase price. In effect, there was
an implied agreement that ownership shall not pass to the purchaser until
he had fully paid the price. First, the DOAS would have been issued only
upon payment of the balance of the purchase price, as may be gleaned
from Adelfas letter, wherein it informed Rosario & Salud that it "is now
ready and willing to pay you simultaneously with the execution of the
corresponding deed of absolute sale." Secondly, it has not been shown
there was delivery of the property, actual or constructive, made to Adelfa.
The exclusive option to purchase is not contained in a public instrument
the execution of which would have been considered equivalent to delivery.
Neither did Adelfa take actual, physical possession of the property at any
given time. Still, it is a perfected contract to sell. The fact that the
document is entitled "Exclusive Option to Purchase" is not controlling
where the text shows that it is a contract to sell.

An option is a continuing offer or contract by which the owner stipulates with


another that the latter shall have the right to buy the property at a fixed price

First to Third Exam Coverage


within a certain time, or under, or in compliance with, certain terms and
conditions, or which gives to the owner of the property the right to sell or
demand a sale. It is also sometimes called an "unaccepted offer." An option is
not of itself a purchase, but merely secures the privilege to buy. It is not a sale
of property but a sale of property but a sale of the right to purchase. It is simply
a contract by which the owner of property agrees with another person that he
shall have the right to buy his property at a fixed price within a certain time. He
does not sell his land; he does not then agree to sell it; but he does sell
something, that it is, the right or privilege to buy at the election or option of the
other party. Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the consideration for
the offer. Until acceptance, it is not, properly speaking, a contract, and does not
vest, transfer, or agree to transfer, any title to, or any interest or right in the
subject matter, but is merely a contract by which the owner of property gives
the optionee the right or privilege of accepting the offer and buying the property
on certain terms.
Distinction between option & contract of sale: an option is an unaccepted
offer. It states the terms and conditions on which the owner is willing to sell the
land, if the holder elects to accept them within the time limited. If the holder
does so elect, he must give notice to the other party, and the accepted offer
thereupon becomes a valid and binding contract. If an acceptance is not made
within the time fixed, the owner is no longer bound by his offer, and the option
is at an end. A contract of sale, on the other hand, fixes definitely the relative
rights and obligations of both parties at the time of its execution. The offer and
the acceptance are concurrent, since the minds of the contracting parties meet
in the terms of the agreement.

Case at bar: there is indeed a concurrence of Adelfa's offer to buy and


Rosario's acceptance thereof. Rosario & Salud accepted the offer of Adelfa
to buy their property under the terms of their contract. At the time Adelfa
made its offer, Rosario & Salud suggested that their transfer certificate of
title be first reconstituted, to which Adelfa agreed. As a matter of fact, it
was Adelfa's counsel, Atty. Bernardo, who assisted them in filing a petition
for reconstitution. After the title was reconstituted, the parties agreed that
Adelfa would pay either in cash/manager's check the amount of
P2,856,150 for the lot. Adelfa was supposed to pay the same on 25 Nov
89, but it later offered to make a down payment of P50k, with the balance
of P2,806,150.00 to be paid on or before 30 Nov 89. Rosario & Salud
agreed to the counter-offer made. As a result, the so-called exclusive
option to purchase was prepared by Adelfa Properties and was
subsequently signed by Rosario & Salud, thereby creating a perfected
contract to sell between them.
Deduction of P500k (reduced to P300k) tantamount to counter-offer:
negative. There already existed a perfected contract between the parties at
the time the alleged counter-offer was made. Thus, any new offer by a
party becomes binding only when it is accepted by the other. In the case
of Rosario & Salud, they actually refused to concur in said offer of Adelfa,
by reason of which the original terms of the contract continued to be
enforceable. At any rate, the same cannot be considered a counter-offer
for the simple reason that Adelfa's sole purpose was to settle the civil case
in order that it could already comply with its obligation. In fact, it was even
indicative of a desire by Adelfa to immediately comply therewith, except
that it was being prevented from doing so because of the filing of the civil
case which, it believed in good faith, rendered compliance improbable at
that time. The reason of "lack of word of honor" is to us a clear indication
that Rosario & Salud considered Adelfa already bound by its obligation to
pay the balance of the consideration. In effect, they were demanding or
exacting fulfillment of the obligation from Adelfa. With the arrival of the
period agreed upon by the parties, Adelfa was supposed to comply with
the obligation incumbent upon it to perform, not merely to exercise an
option or a right to buy the property.
The obligation of Adelfa on 30 Nov 93 consisted of an obligation to give
something, that is, the payment of the purchase price. The contract did
not simply give Adelfa the discretion to pay for the property. It will be
noted that there is nothing in the said contract to show that Adelfa was
merely given a certain period within which to exercise its privilege to buy.
The agreed period was intended to give time to Adelfa within which to
fulfill and comply with its obligation, that is, to pay the balance of the
purchase price. No evidence was presented by Rosario & Salud to prove
otherwise.

The test in determining whether a contract is a "contract of sale or


purchase" or a mere "option" is whether or not the agreement could be
specifically enforced. An agreement is only an "option" when no obligation rests
on the party to make any payment except such as may be agreed on between
the parties as consideration to support the option until he has made up his
mind within the time specified. An option, and not a contract to purchase, is
effected by an agreement to sell real estate for payments to be made within
specified time and providing forfeiture of money paid upon failure to make
payment, where the purchaser does not agree to purchase, to make payment,
or to bind himself in any way other than the forfeiture of the payments made.

P50k was actually earnest money. It was not distinct from the cause or
consideration for the sale of the property, but was itself a part thereof. It

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Sales Case Digest

First to Third Exam Coverage

constitutes an advance payment and must, therefore, be deducted from


the total price. Earnest money is given by the buyer to seller to bind the
bargain. Rosario & Salud failed to show that the payment of the balance of
the purchase price was only a condition precedent to the acceptance of
the offer or to the exercise of the right to buy. On the contrary, it has been
sufficiently established that such payment was but an element of the
performance of petitioner's obligation under the contract to sell.
Distinction between earnest money & option money: (a) earnest money is
part of the purchase price, while option money ids the money given as a distinct
consideration for an option contract; (b) earnest money is given only where
there is already a sale, while option money applies to a sale not yet perfected;
and (c) when earnest money is given, the buyer is bound to pay the balance,
while when the would-be buyer gives option money, he is not required to buy.

a.

action had prescribed. There were allegations by Sps. Villamor that they
demanded from Sps. Reyes as early as 1984 the enforcement of their
rights under the contract. Still, it was beyond the 10 years period
prescribed by the Civil Code.
Also, to allow Sps. Villamor to demand the delivery of the property
subject of this case 13 years or 17 years after the execution of the deed at
the price of only P70/sqm is iniquitous. The price of real estate in Metro
Manila is continuously on the rise.
b.

No Separate Consideration

SANCHEZ vs. RIGOS (1972)


DIAMANTE vs. CA (1992)

Meaning of Separate Consideration

BIBLE BAPTIST vs. CA (2004)

VILLAMOR vs. CA (1991)


Jul 71: Macaria Reyes sold a portion of 300sqm of a 600-sqm lot
located in Baesa, Caloocan to Sps. Villamor for P21k. Earlier, Macaria
borrowed P2k from Sps. Villamor which amount was deducted from the
total purchase price.
The portion sold to Sps. Villamor is now covered by TCT in their name
while the remaining portion is still in the name of Macaria.
11 Nov: Macaria executed a Deed of Option in favor of Sps. Villamor in
which the remaining 300sqm portion of the lot would be sold to Villamor:
At the price of P70/sqm
Reason why Sps. Villamor agreed to buy at the price of P70/sqm is
because Macaria & husband Roberto have agreed to sell & convey to
them the remaining portion, whenever the need of such sale arises,
either on our part or on the part of Sps. Villamor
Macaria alleged: when her husband Roberto retired in 84, they offered
to repurchase the lot sold to the Sps. Villamor but Marina Villamor refused
& reminded them that the Deed of Option in fact gave the Sps. the option
to purchase the remaining portion of the lot.
Villamors claimed: they had expressed their desire to purchase the
remaining portion but Sps. Reyes had been ignoring them. So they filed a
complaint for specific performance against the Reyeses.
ISSUE: WON the Deed of Option whereby Sps. Reyes agreed to sell their
lot to Sps. Villamor "whenever the need of such sale arises, either on our part
or on the part of Sps. Villamor was valid
Ineffective. The "deed of option" entered into by the parties in this case
had unique features. Ordinarily, an optional contract is a privilege existing
in one person, for which he had paid a consideration and which gives him
the right to buy, for example, certain merchandise or certain specified
property, from another person, if he chooses, at any time within the
agreed period at a fixed price.
The first part of the deed covered the statement on the sale the
300sqm portion of the lot to Sps. Villamor at the price of P70/sqm "which
was higher than the actual reasonable prevailing value of the lands in that
place at that time of sale." The second part stated that the only reason why
the Villamors agreed to buy the said lot at a much higher price is because
the Reyeses also agreed to sell to the Villamors the other half-portion of
300sqm of the land. The sale of the other half would be made "whenever
the need of such sale arises, either on our (Reyeses) part or on the part of the
Sps. Villamor. It appears that while the option to buy was granted to the
Villamors, the Reyeses were likewise granted an option to sell. In other
words, it was not only the Villamors who were granted an option to buy for
which they paid a consideration. The Reyeses as well were granted an
option to sell should the need for such sale on their part arise.
The option offered by Sps. Reyes had been accepted by Sps. Villamor,
the promise, in the same document. The acceptance of an offer to sell for
a price certain created a bilateral contract to sell and buy and upon
acceptance, the offer, ipso facto assumes obligations of a vendee.
Demandabilitiy may be exercised at any time after the execution of the
deed.
However, the Deed of Option did not provide for the period within which
the parties may demand the performance of their respective undertakings
in the instrument. The parties could not have contemplated that the
delivery of the property and the payment thereof could be made
indefinitely and render uncertain the status of the land. The failure of
either parties to demand performance of the obligation of the other for an
unreasonable length of time renders the contract ineffective.
Under Article 1144(1), actions upon written contract must be brought
within 10 years. The Deed of Option was executed on November 11, 1971.
The complaint in this case was filed by Sps. Villamor on July 13, 1987, 17
years from the time of the execution of the contract. Hence, the right of

NAVOTAS INDUSTRIAL vs. CRUZ (2005)


c.

There must be Acceptance of Option Offer

VASQUEZ vs. CA (1991)


d.

Proper Exercise of Option Contract

2. Right of First Refusal


PUP vs. GOLDEN (2010)
Early 60s: National Devt Corp owned a 10-hec property located in Sta.
Mesa, Manila, known as NDC Compound.
7 Sep 77: NDC entered into Contract of Lease with Golden Horizon
Realty Corp over a portion of the property for 10 yrs, renewable for
another 10 yrs with mutual consent.
4 May 78: 2nd Contract of Lease was executed between NDC & Golden,
covering another portion, also renewable upon mutual consent after
expiration of 10-yr lease period. Golden was also granted the option to
purchase the area leased, the price to be negotiated and determined at the
time the option to purchase is exercised.
Under the lease agreement, Golden was obliged to construct at its own
expense buildings, which shall automatically belong to NDC upon
expiration. So Golden introduced permanent improvements, spending
P5M. The structures were later on leased to various manufacturers.
13 Jun 88: before under 2nd Lease Contract, Golden wrote to NDC
indicating its exercise its option to renew the lease for another 10 yrs but
no response. Golden wrote another, reiterating the same & requesting for
priority to negotiate for its purchase but NDC did not reply. However, NDC
continued to accept rental payments.
Sep 88: Golden discovered that NDC had decided to secretly dispose
the property to a 3rd party. So Golden filed complaint for specific
performance.
In the meantime, on 6 Jan 89: Pres. Aquino issued MO 124, ordering
the transfer of the whole NDC Compound to the National Govt, which
would convey it in favor of PUP.
Golden arguments: MO 124 is a nullity. Asumming it is valid, Goldens
right must still be respected by allowing it to purchase the leased
premises.
ISSUE: WON Goldens right of first refusal was violated
Affirmative. The 2nd Lease Contract contained the provision, granting
Golden the right of first refusal.
Distinction between option contract and right of first refusal: An option is a
contract by which the owner of the property agrees with another person that
the latter shall have the right to buy the formers property at a fixed price within
a certain time. 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. On the other hand, a
right of first refusal is a contractual grant, not of the sale of a property, but of
the first priority to buy the property in the event the owner sells the same. While
the object might be made determinate, the exercise of the right of first refusal
would be dependent not only on the owners eventual intention to enter into a
binding juridical relation with another but also on terms, including the price,
that are yet to be firmed up.

Since the option to purchase clause has no definite period within which
the lease premises will be offered for sale to Golden & the price is made
subject to negotiation & determined only at the time the option is
exercised, it is merely a right of first refusal.

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Sales Case Digest


As to contention that the right was not carried over under the implied
renewal of the lease: When a lease contract contains a right of first refusal,
the lessor has the legal duty to the lessee not to sell the leased property to
anyone at any price until after the lessor has made an offer to sell the property
to the lessee and the lessee has failed to accept it. Only after the lessee has
failed to exercise his right of first priority could the lessor sell the property to
others.

Golden timely exercised its option to purchase on 12 Aug 88. However,


considering that NDC had been negotiating through the National Govt for
the sale of the property in favor of PUP as early as 15 Jul 88 without first
offering to sell it to Golden & even when Golden communicated its desire
to exercise the option to purchase granted to it, it is clear that NDC
violated Goldens right of first refusal. Under the premises, the matter of
the right of refusal not having been carried over to the impliedly renewed
month-to-month lease after the expiration of the second lease contract on
21 Oct 88 becomes irrelevant since at the time of the negotiations of the
sale to PUP, Goldens right of first refusal was still subsisting.
As to contention that PUP vs. CA is inapplicable: the reckoning point of
the offer of sale to a third party was not the issuance of MO 214 on 6 Jan
89 but the commencement of such negotiations as early as Jul 88 when
Goldens right of first refusal was still subsisting and the lease contracts
still in force. NDC did not bother to respond to Goldens letter of 13 Jun
88 informing it of Goldens exercise of the option to renew and requesting
to discuss further the matter with NDC, nor to the subsequent letter.
As to contention that right of first refusal can be invoked only with
respect to 2nd lease contact: NDC had considered the lease premises as a
single unit. Evidences were submitted showing that NDC only issued 1
receipt for rental payments for the 2 portions.
The 4 May 78 contract embodied the option to renew the lease for
another 10 years upon mutual consent and gave Golden the option to
purchase the leased premises for a price to be negotiated and determined
at the time such option was exercised. It is to be noted that MO 214 itself
declared that the transfer is "subject to such liens/leases existing.
The 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 right is built into the reciprocal obligations of the parties. 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 lessors first offer shall be in his
favor.
A party to a contract cannot unilaterally withdraw a right of first refusal that
stands upon valuable consideration. It is not correct to say that there is no
consideration for the grant of the right of first refusal if such grant is embodied
in the same contract of lease. Since the stipulation forms part of the entire lease
contract, the consideration for the lease includes the consideration for the grant
of the right of first refusal. In entering into the contract, the lessee is in effect
stating that it consents to lease the premises and to pay the price agreed upon
provided the lessor also consents that, should it sell the leased property, then,
the lessee shall be given the right to match the offered purchase price and to
buy the property at that price.

ASUNCION vs. CA (1994)


29 Jul 87: Ang Yu Asuncion & Keh Tiong filed complaint for specific
performance against Bobby Cu Unjieng, et.al alleging:
they are tenants of residential & commercial spaces owner by Cu
Unjieng
they have occupied it since 1935 & had been paying rentals
Cu Unjieng informed them that they are offering to sell the premises
& are giving them priority to acquire the same
during negotiations, Bobby offered price of P6M while they made
counter-offer of P5M & that they asked Bobby to put their offer in
writing
Asuncion wrote to them on 24 Oct 86, asking that they specify the
terms & conditions of the offer to sell but did not receive any reply
15 Nov 90: While the case was pending, Sps. Cu Unjieng executed a
DOS in favor of Buen Realty & Devt Corp for P15M.
CA Judge ordered that Cu Unjieng execute the necessary DOS of the
property in favor of Asuncion for P15M in recognition of their right of
refusal. Issued a writ of execution.
Asuncions arguments: Buen Realty can be held bound by the writ of
execution by virtue of the notice of lis pendens, carried over on the TCT
issued to it, at the time of its purchase of the property.
ISSUE: WON Buen Realty can be bound by the writ of execution
Negative. The final judgment in the civil case has merely accorded a
right of first refusal in favor of Asuncion. And if they are aggrieved by the
failure of Cu Unjieng to honor the right of first refusal, the remedy is not a

First to Third Exam Coverage


writ of execution on the judgment, since there is none to execute, but an
action for damages in a proper forum for the purpose.
Even on the premise that such right of first refusal has been decreed
under a final judgment, like here, its breach cannot justify correspondingly
an issuance of a writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action for specific
performance without thereby negating the indispensable element of
consensuality in the perfection of contracts.
A right of first refusal is an innovative juridical relation. It cannot be deemed
a perfected contract of sale under Article 1458. Neither can the right of first
refusal, understood in its normal concept, per se be brought within the purview
of an option under the 2nd par. of Article 1479 or possibly of an offer under
Article 1319. An option or an offer would require, among other things, 10 a
clear certainty on both the object and the cause or consideration of the
envisioned contract. 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. Prior thereto, it can at best be so described as merely belonging to a
class of preparatory juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would still be indefinite) but
by, among other laws of general application, the pertinent scattered provisions
of the Civil Code on human conduct.

PARAAQUE KINGS vs. CA (1997)


Catalina Santos is the owner of 8 parcels of land in Paraaque.
28 Nov 77: Frederick Chua leased the property. Subsequently, Chua
assigned all his rights & interest in the leased property to Lee Ching Bing
by virtue of a DOA & with conformity of Santos. Lee Ching Bing also
assigned his rights & interest to Paraaque Kings Enterprises by virtue of
DOA & with conformity of Santos.
Paragraph 9 of the lease contract provides, lessee shall have the first
option or priority to buy the properties subject of the lease.
21 Sep 88: Santos sold the 8 parcels to David Raymundo for P5M.
Santos informed Paraaque Kings of the sale to Raymundo. But had it
reconveyed to her for P5M when she realized her violation of the right of
first refusal.
Subsequently, property was offered for sale to Paraaque Kings for
P15M & was given 10 days to make good of the offer. Period expired,
wrote another letter with the same tenor.
8 May 89: before expiration, Paraaque Kings counsel wrote to Santos,
offering to buy the properties for P5M.
15 May 89: another DOS was executed by Santos in favor of
Raymundo for P9M, violating para. 9 again. Two days after, Santos replied
to Paraaque Kings, stating that period has lapsed & it is not privy to the
contract.
ISSUE: WON Paraaque Kings right of first refusal was violated
Affirmative. There was an actionable contractual breach. Under para. 9,
Paraaque Kings was was granted the "first option or priority" to purchase
the leased properties in case Santos decided to sell. Santos indeed sold
the properties to Raymundo without first offering to Paraaque Kings but
after realizing her error, she had it reconveyed to her. She offered to sell
the Paraaque Kings for P15M but rejected because of the ridiculous
price. Again, Santos violated the same provision when she sold it to
Raymundo for P9M without offering the same to Paraaque Kings at such
price.
In order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the
amount of P9M, the price for which they were finally sold to Raymundo,
should have likewise been first offered to Paraaque Kings
Therefore, the basis of the right of first refusal must be the current offer
to sell of the seller or offer to purchase of any prospective buyer. Only
after the optionee fails to exercise its right of first priority under the same
terms and within the period contemplated, could the owner validly offer to
sell the property to a 3rd person under the same terms as offered to the
optionee.
As to contention that the assignment of the lease contract did not
include the option to purchase: the provisions of the deeds of assignment
were very clear. Under the first assignment, it was stated: the assignor
hereby cedes, transfers and assigns to herein assignee, all his rights, interest
and participation over said premises afore-described. Under the next
assignment, it was also stated: the assignor hereby sells, transfers and
assigns all his rights, interest and participation over said leased premises.
As to the contention that Raymundo is not privy to the lease contract
hence, could not have violated its provisions: he stepped into the shoes of
the owner-lessor of the land as, by virtue of his purchase, he assumed all

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Sales Case Digest

First to Third Exam Coverage

the obligations of the lessor under the lease contract. Moreover, he


received benefits in the form of rental payments.
ROSENCOR vs. CA (2001)
Inquing, et.al. are lessees of 2-story residential apartment since 1971,
owned by Sps. Tiangco. However, lease was not covered by any
contractrenting for P150/mo. and right of first refusal was granted
verbally.
Sps. Tiangco died in 1975, management of property was adjudicated to
heirs and represented by Eufrocina de Leon. Again, right of first refusal
was granted to Inquing bcos Eufrocina knew that they were granted the
same before. Inquing continued to stay in the premises and spent money
for its upkeep which were never deducted from the rentals (increased to
P1k).
Jun 90: lessees received letter from Atty. Aguila demanding they vacate
the property so that the building may be demolished but they refused to
leave. Eufrocina also refused to accept rental payments claiming they ran
out of receipts and new collector has been assigned to receive them.
They received letter from Eufrocina offering to sell to them the property
for P2M but they offered to buy it for P1M. Eufrocina told them she will be
submitting offer to other heirs but no answer was given re offer.
Nov 90, Rene Joaquin introduced himself as new owner.
Jan 91: received another letter from Atty. Aguila. Also received letter
from Eufrocina that heirs of Tiangcos have already sold it to Rosencor.
Atty. Aguila sent another letter, as counsel for Rosencor/Rene Joaquin.
But the lessees discovered that sale between Eufrocina and Rosencor took
place in 4 Sept 90 while the offer made to them was only in Oct 90 (after
sale with Rosencor was consummated).
ISSUE: 1. WON right of first refusal is covered by the statute of frauds, 2.
WON Inquings have the right of first refusal, 3. WON DOAS in favor of
Rosencor should be rescinded in order for Inquings to exercise their right
of refusal
1. Negative. This is important as it will determine the type of evidence
which may be considered as proof of the alleged right of first refusal.
The term "statute of frauds" is descriptive of statutes which require
certain classes of contracts to be in writing. This statute does not
deprive the parties of the right to contract with respect to the matters
therein involved, but merely regulates the formalities of the contract
necessary to render it enforceable. Is it akin to an agreement for the
leasing of a longer period than one year? A right of first refusal is not
among those listed as unenforceable under the statute of frauds.
Furthermore, the application of Article 1403, par. 2(e) presupposes the
existence of a perfected, albeit unwritten, contract of sale. A right of
first refusal, such as the one involved in the instant case, is not by any
means a perfected contract of sale of real property. At best, it is a
contractual grant, not of the sale of the real property involved, but of
the right of first refusal over the property sought to be sold.
2. Affirmative. They have proven the existence of such right. They were
promised by the late Sps. Tiangco & later on, by their heirs a right of
first refusal over the property they were currently leasing should they
decide the sell the same. On the other hand, Eufrocina de Leon was
not presented to deny the existence or knowledge of the said right.
3. Negative. A contract of sale entered into in violation of a right of first
refusal of another person, while valid, is rescissible. However, in the
instant case, there is a circumstance which prevents the application of
rescission. In the cases cited by the Court, it ordered rescission of
sales made in violation of a right of first refusal precisely because the
vendees therein could not have acted in good faith as they were aware
or should have been aware of the right of first refusal granted to
another person by the vendors therein. In the case at bar, the right
granted was an oral one. As such, in order to hold that Rosencor was
in bad faith, there must be clear and convincing proof that it was
made aware of the said right of first refusal either by the Inquings or
by the heirs of the spouses Tiangco. Good faith is always presumed.
Evidence on record fails to show that Rosencor acted in bad faith in
entering into DOS over the disputed property with the heirs of the Sps.
Tiangco. Inquings failed to present any evidence that prior to the sale
of the property on 4 Sep 90, Rosencor were aware or had notice of
the oral right of first refusal.
Failed to see how the letter could give rise to bad faith on the part of
Rosencor. No mention is made of the right of first refusal granted to
Inquings. The name of Rosencor or any of it officers did not appear on
the letter and the letter did not state that Atty. Aguila was writing in
behalf of Rosencor. Even assuming that Atty. Aguila was indeed writing
in behalf of Rosencor, there is no showing that Rosencor was aware at
that time that such a right of first refusal existed.

No showing that after receipt of 1 Jun 90 letter, Inquings notified


Rosencor or Atty. Aguila of their right of first refusal. No showing that
they contacted the heirs of the Sps. Tiangco after they received this
letter to remind them of their right over the property.
As to letter of Eufrocina: Eufrocina de Leon wrote the letter on her
own behalf and not on behalf of Rosencor and, as such, it only shows
that Eufrocina was aware of the existence of the oral right of first
refusal. It does not show that Rosencor was likewise aware of the
existence of the said right. Moreover, the letter was made after the
execution of DOAS.
VASQUEZ vs. AYALA (2004)
23 Apr 81: Sps. Vasquez entered into a MOA with Ayala Corp, with
Ayala buying from Sps. Vasquez all of the latters shares of stock in
Conduit Devt Inc. The main asset of Conduit was a 49.9 hec property in
Ayala Alabang, Muntinlupa, which was being developed by Conduit under
a development plan where the land was divided into Vilages 1, 2, 3 of the
Don Vicente Village. The development was being undertaken by GP
Construction.
Under MOA, Ayala was to develop the entire property, less what was
defined as Retained Area. This area was to be retained by Sps. Vasquez.
The area to be developed by Ayala was called the Remaining Area. In
this area, there were 4 lots adjacent to the Retained Area & Ayala granted
Sps. Vasquez the first option to purchase these lots at the prevailing price.
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, Sps.
Vasquez sent several "reminder" letters of the approaching so-called
deadline. However, no demand after 23 Apr 84 was ever made by Sps.
Vasquez for Ayala to sell.
Early 90: Ayala finished the development of the vicinity of the 4 lots to
be offered for sale. The 4 lots were then offered to be sold to the Sps.
Vasquez at the prevailing price in 1990. But was rejected by Sps. Vasquez
who wanted to pay at 1984 prices.
Ayala Corp maintained that paragraph 5.15 of the MOA is a right of first
refusal and not an option contract.
ISSUE: WON para. 5.15 was a right of first refusal or an option contract
Right of first refusal. An option is a preparatory contract in which one
party grants to another, for a fixed period and at a determined price, the
privilege to buy or sell, or to decide whether or not to enter into a principal
contract. In a right of first refusal, on the other hand, while the object
might be made determinate, the exercise of the right 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 are yet to
be firmed up.
Para. 5.15 is obviously a mere right of first refusal and not an option
contract. Although the paragraph has a definite object, i.e., the sale of
subject lots, the period within which they will be offered for sale to Sps.
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
Corporation is bound to reserve the subject lots for Sps. Vasquez to
exercise their privilege to purchase. Neither is there a fixed or
determinable price at which the subject lots will be offered for sale.
Further, para 5.15 was inserted into the MOA to give Sps. Vasquez the
first crack to buy the subject lots at the price which Ayala Corporation
would be willing to accept when it offers the subject lots for sale. It is not
supported by an independent consideration.
Ayala Corporation offered the subject lots for sale to Sps. Vasquez at the
price of P6,500/sqm, the prevailing market price for the property when
the offer was made on 18 Jun 90. However, Sps. insisted on paying the
1984 prevailing market price of P460/sqm. Ayala reduced the price to
P5k/sqm but again, Sps. rejected with a counter-offer of P2k. Ayala
rejected this. With this rejection, Sps. lost their right to purchase the
subject lots.
TANAY RECREATION CENTER vs. FAUSTO (2005)
1 Aug 71: Tanay Recreation Center is the lessee of a property owned
by Catalina Matienzo Fausto under a contract of lease. The lease contract
provided for 20-yr term, subject to renewal within 60 days prior to
expiration. Contract also provided that should Fausto decide to sell the
property, Tanay shall have the priority right to purchase the same.
17 Jun 91: Tanay wrote Fausto informing her of its intention to renew
the lease. However, it was Faustos daughter, Anunciacion Pacunayen, who
replied, asking that Tanay remove the improvements as she is now the
absolute owner of the property. It appears that Fausto had sold the

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Sales Case Digest

First to Third Exam Coverage

property to Pacunayen on 8 Aug 90 for P10k under Kasulatan ng Bilihan


Patuluyan ng Lupa.
4 Sep 91: Tanay filed complaint for annulment of DOS, specific
performance with damages.
ISSUE: WON the right of first refusal was violated even when the sale was
in favor of a relative
Affirmative. 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. The consideration for the lease includes the consideration for the right
of first refusal and is built into the reciprocal obligations of the parties.
When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon. The wording of the
stipulation giving Tanay the right of first refusal is plain and unambiguous,
and leaves no room for interpretation. It simply means that should Fausto
decide to sell the leased property during the term of the lease, such sale
should first be offered to Tanay. The stipulation does not provide for the
qualification that such right may be exercised only when the sale is made
to strangers or persons other than Faustos kin. Thus, under the terms of
Tanays right of first refusal, Fausto has the legal duty to Tanay not to sell
the property to anybody, even her relatives, at any price until after she has
made an offer to sell to Tanay at a certain price and said offer was
rejected by Tanay.

The rule is that a sale made in violation of a right of first refusal is valid.
However, it may be rescinded, or, as in this case, may be the subject of an
action for specific performance. Therefore, 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 would not be useless to annul the sale between Fausto & Pacunayen
for the reason that the property would still remain with Pacunayen after
the death of her mother by virtue of succession, as in fact, Fausto died in
March 1996, and the property now belongs to Pacunayen, being Faustos
heir. For one, Fausto was bound by the terms and conditions of the lease
contract. Under the right of first refusal clause, she was obligated to offer
the property first to Tanay before selling it to anybody else. When she sold
the property to respondent without offering it to Tanay, the sale while valid
is rescissible.
With the death of Fausto, whatever rights and obligations she had over
the property, including her obligation under the lease contract, were
transmitted to her heirs by way of succession. A lease contract is not
essentially personal in character. Thus, the rights and obligations therein
are transmissible to the heirs. The lease contract between Tanay and
Fausto is a property right, which is a right that passed on to Pacunayen
and the other heirs, if any, upon the death of Fausto. the contract of lease,
with all its concomitant provisions, continues even after Faustos death
and her heirs merely stepped into her shoes. Pacunayen, as an heir of
Fausto, is therefore bound to fulfill all its terms and conditions. There is no
personal act required from Fausto such that Pacunayen cannot perform it.
Faustos obligation to deliver possession of the property to Tanay upon the
exercise by the latter of its right of first refusal may be performed by
Pacunayen and the other heirs, if any. Similarly, nonperformance is not
excused by the death of the party when the other party has a property
interest in the subject matter of the contract.
As to acknowledgment of the legitimacy of the sale to Pacunayen &
now barred from exercising the right: records are bereft of any
proposition that Tanay waived its right of first refusal under the contract
such that it is now estopped from exercising the same. In a letter dated
June 17, 1991, Tanay wrote to Fausto asking for a renewal of the term of
lease. Tanay cannot be faulted for merely seeking a renewal of the lease
contract because obviously, it was working on the assumption that title to
the property is still in Faustos name and the latter has the sole authority
to decide on the fate of the property. Instead, it was Pacunayen who
replied, advising Tanay to remove all the improvements on the property,
as the lease is to expire on the 1st of August 1991. Pacunayen also
informed Tanay that her mother has already sold the property to her.
While Tanay may have sought the renewal of the lease, it cannot be
construed as a relinquishment of its right of first refusal. Estoppel must be
intentional and unequivocal.
Given the foregoing, the "Kasulatan ng Bilihan Patuluyan ng Lupa"
dated 8 Aug 90 between Fausto and Pacunayen must be rescinded.
Considering, however, that Fausto already died during the pendency of
this case with the CA, her heirs should have been substituted as
respondents in this case. Considering further that the Court cannot declare
Pacunayen as the sole heir, as it is not the proper forum for that purpose,
the right of Tanay may only be enforced against the heirs of the deceased
Catalina Matienzo Fausto, represented by Pacunayen.

As to cancellation of TCT in name of Pacunayen: under ordinary


circumstances, cancellation would be the logical effect of rescission.
However, circumstances in this case are not ordinary. The buyer of the
subject property is the sellers own daughter. If and when the title in
Pacunayens name is cancelled and reinstated in Faustos name, and
thereafter negotiations between Tanay and Pacunayen for the purchase of
the subject property break down, then the subject property will again
revert to Pacunayen as she appears to be one of Faustos heirs. Hence,
title should remain in the name of Pacunayen, for and in behalf of the
other heirs, if any, to be cancelled only when Tanay successfully exercises
its right of first refusal and purchases the subject property.
LLENADO vs. LLENADO (2009)
2 Dec 75: Cornelio leased Lot 249-D-1 to his nephew Romeo Llenado
for 5 yrs, renewable for another 5 yrs at the option of Cornelio.
31 Mar 78: Cornelio, Romeo, Orlando Llenado executed an Agreement
whereby Romeo assigned all this rights to Orlando over the unexpired
portion of the aforesaid lease contract. Also agreed that Orlando shall have
the option to renew the lease contract for another 3 yrs, renewable for
another 4 yrs and that "during the period that [this agreement] is enforced,
the x x x property cannot be sold, transferred, alienated or conveyed in
whatever manner to any third party."
24 Jun 78: Cornelio & Orlando entered into Supplementary Agreement.
Orlando was given additional option to renew the lease contract for an
aggregate period of 10 yrs at 5-yr intervals, inserted in order to comply
with the requirements of Mobil Philippines, Inc.
7 Nov 83: Orlando died & his wife, Wenifreda Llenado took over the
operation of the gasoline station.
29 Jan 87: Cornelio sold Lot 249-D to his children through a DOS,
denominated as Kasulatan sa Ganap Na Bilihan for P160k. Cornelio died.
1993: Eduardo (son of Cornelio) informed Wenifreda of his desire to
take over the subject lot. However, the latter refused to vacate the
premises despite repated demands. So filed a complaint for unlawful
detainer.
ISSUE: WON the sale by Cornelio to his sons is invalid for contravening the
right of first refusal of Orlando over the subject lot
Negative. The parties expressly stipulated in the 31 Mar 78 Agreement
that Romeo, as lessee, shall transfer all his rights and interests under the
lease contract with option to renew "in favor of the party of the Third Party
(Orlando), the latters heirs, successors and assigns" indicating the clear
intent to allow the transmissibility of all the rights and interests of Orlando
under the lease contract unto his heirs, successors or assigns. Accordingly,
the rights and obligations under the lease contract with option to renew
were transmitted from Orlando to his heirs upon his death.
It does not follow, however, that the lease subsisted at the time of the
sale of the subject lot on 29 Jan 87. When Orlando died on 7 Nov 83, the
lease contract was set to expire 26 days later or on 3 Dec, unless renewed
by Orlandos heirs for another 4 years. While the option to renew is an
enforceable right, it must necessarily be first exercised to be given effect.
The election of the option to renew the lease in this case cannot be
inferred from Wenifredas continued possession of the subject lot and
operation of the gasoline station even after the death of Orlando and the
expiration of the lease.
In the unlawful detainer case, the lease was terminated and that they
permitted Wenifreda and her children to remain in possession of the
subject property out of tolerance and respect for the close blood
relationship between Cornelio and Orlando. It was incumbent, therefore,
upon the heirs of Orlando as the plaintiff with the burden of proof.
Since the lease agreement had been terminated for failure of Orlando &
heirs to renew the same, no violation of right of first refusal.
As to verbal promise of Cornelio of Orlandos first priority to buy: Right
of first refusal is a contractual grant. It need not be written to be
enforceable and may be proven by oral evidence.

PERFECTION STAGE
Absolute Acceptance of a Certain Offer
HEIRS OF IGNACIO vs. HOME BANKERS (2013)
Aug 81: Fausto Ignacio mortgaged 2 parcels of land to Home Savings
Bank as security for P500k loan. However, Ignacio defaulted in the
payment so HSB proceeded to foreclose the real estate mortgage.
26 Jan 83: At foreclosure sale, HSB was the highest bidder for
P764,984.67. Certificate of Sale was issued to Bank. Because Ignacio
failed to redeem within 1 yr, titles were consolidated in favor of Bank.

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Sales Case Digest


Despite lapse of redemption period & consolidation of title, Ignacio
offered to repurchase the properties. Bank considered the offer to
repurchase but there was no repurchase contract executed. However,
Ignacio alleged that there was a verbal repurchase/compromise
agreement between them.
In the meantime, Bank disposed some of the properties after
subdivision thereof. Two properties were still registered in the name of
Bank.
25 Jul 89: Ignacio expressed willingness to pay amount of P600k in full
as balance of repurchase price & requested Bank to release the two
parcels. However, Bank turned down the request. Ignacio annotated
adverse claim.
24 Aug 89: one of the lot was sold by Bank to Sps. Rodriguez without
informing Ignacio. 6 Oct: Bank sold the other lot to Sps. Rodriguez &
Zuigas.
27 Dec 89: Ignacio filed an action for specific performance & damages.
TCs decision: Bank disregarded Ignacios substantial payments on the
total repurchase consideration. Letter dated 22 Mar 84 was referenced as
the authority for Ignacio in making the installment payments. Compromise
agreement amounted to valid contract of sale.
CAs decision: by modifying the terms of the offer contained in said
letter of Bank, Ignacio effectively rejected the original offer with his
counter-offer. There was also no written conformity by Bank's officers to
the amended conditions for repurchase which were unilaterally inserted
by Ignacio. Consequently, no contract of repurchase was perfected.
Evidence submitted: 22 Mar 84 letter of Bank with total selling price of
P950k, down of P150k with balance payable in 3 equal installments.
ISSUE: WON there was perfected contract of repurchase
Negative. Ignacio wrote notations in the said letter indicating that the
repurchase price would be P900k to be paid as follows: P150k - end of
May '84; P150k - end of June '84; Balance - "Depending on financial
position". Ignacio also alleged the following conditions of the verbal
agreement: (1) bank shall release the equivalent land area for payments
made by Ignacio who shall shoulder the expenses for subdivision of the
land; (2) in case any portion of the subdivided land is sold by Ignacio, a
separate document of sale would be executed directly to the buyer; (3) the
remaining portion of the properties shall not be subject of bank's
transaction without the consent and authority of Ignacio; (4) Ignacio shall
continue in possession of the properties and whatever portion still
remaining, and attending to the needs of its tenants; and (5) payments
shall be made directly to UPI.
Ignacios acceptance of the bank's terms and conditions for the
repurchase of the foreclosed properties was not absolute. Ignacio set a
different repurchase price and also modified the terms of payment, which
even contained a unilateral condition for payment of the balance,
depending on Ignacio's "financial position." This may be considered as a
counter-proposal which must be accepted by the bank. However, no
evidence of any document or writing showing the conformity of banks
officers to this counter-proposal.
As to contention that the receipts issued by UPI on his installment
payments were concrete proof that there was an implied acceptance: it
must be noted that acceptance may be shown by the acts, conduct, or
words of a party recognizing the existence of the contract of sale. It must
be affirmatively & clearly made & must be evidenced by some
acts/conduct communicated to the offeror, in a formal or informal
manner.
Even assuming that the bank employee whom Ignacio claimed he had
talked to regarding the said letter had acceded to his own modified terms
for the repurchase, their supposed verbal exchange did not bind bank in
view of its corporate nature. There was no evidence that said Mr. Lazaro or
Mr. Fajardo was authorized by bank's Board of Directors to accept
Ignacio's counter-proposal to repurchase the foreclosed properties at the
price and terms other than those communicated in the March 22, 1984
letter.

Contracts or acts of a corporation must be made either by the board of


directors or by a corporate agent duly authorized by the board. Absent such
valid delegation/authorization, the rule is that the declarations of an individual
director relating to the affairs of the corporation, but not in the course of, or
connected with, the performance of authorized duties of such director, are held
not binding on the corporation. Thus, a corporation can only execute its powers
and transact its business through its Board of Directors and through its officers
and agents when authorized by a board resolution or its by-laws.

In the absence of conformity/acceptance by properly authorized bank


officers of Ignacios counter-proposal, no perfected repurchase contract
was born. Ignacio therefore had no legal right to compel bank to accept
the P600k being tendered as payment for supposed balance of
repurchase price.

First to Third Exam Coverage


First, if the counter-proposal was mutually agreed upon by both the
Ignacio & bank, how come not a single signature of the representative of
the bank was affixed thereto. Second, it is inconceivable that an agreement
of such great importance, involving two personalities who are both aware
and familiar of the practical and legal necessity of reducing agreements
into writing, Ignacio, being a lawyer and the bank, a banking institution,
not to formalize their repurchase agreement. Third, it is quite absurd and
unusual that the bank could have acceded to the condition that the
balance of the payment of the repurchase price would depend upon the
financial position of the Ignacio. Such open-ended and indefinite period
for payment is hardly acceptable to a banking institution. Last, had there
been a repurchase agreement, then, there should have been titles or
deeds of conveyance issued in favor of the Ignacio. But there was none.

When Deviation Allowed


VILLONCO vs. BORMAHECO (1975)
Francisco Cervantes & wife Rosario are owners of Lots 3, 15 & 16,
mortgaged to DBP as security for loan of P441k. Mortgage debt was fully
paid on 10 Jul 69. Cervantes is the president of Bormaheco, Inc dealer
& importer of industrial and agricultural machinery.
Early Feb 64: there were negotiations for the sale of said lots &
improvements thereon between Romeo Villonco of Villonco Realty &
Bormaheco Inc, through intervention of Edith Perez de Tagle, a broker.
They discussed the price & terms of the sale.
Villonco assumed that lots belonged to Bormaheco & that Cervantes
was duly authorized to sell the same. Cervantes did not disclose that the
lots were conjugal properties & that they were mortgaged to DBP.
12 Feb 64: Bormaheco, Inc. through Cervantes made a written offer to
Romeo Villonco for the sale of the property at Buendia Avenue.
P400/sqm, deposit of P100k must be placed as earnest money as
part payment of the property in event that the sale is consummated,
sale is to be consummated only after consummation of purchase by
Cervantes of another property at Sta. Ana Manila, to be finalized
within 45 days
Property mentioned was the land of Natl Shipyards & Steel Corp. At
bidding, land was awarded to Bormaheco, Inc. Nassco authorized GM to
sign the necessary contract.
Meanwhile, Bormaheco & Villonco continued negotiations for sale of
Buendia property. At the final conference, Villonco made a revised
counter-offer dated 4 Mar 64. This was accepted by Cervantes.
P400/sqm including improvements, P100k shall be given as earnest
money, sale shall be cancelled only if deal with Sta. Ana property shall
not be consummated & in such case, P100k earnest money will be
returned with 10% interest/annum. But if deal is finalized, P100k will
become part payment for purchase of property without interest.
Manner of payment shall be as follows: P100k as earnest money &
P650k as part of downpayment. Balance is payable as follows: P100k
after 3mos, P125k, P212,500.
Check of P100k was delivered by Edith to Cervantes. In voucher receipt
evidencing delivery, Edith indicated in her handwriting that the earnest
money was subject to the terms & conditions embodied in Bormahecos
letter of Feb 12 & Villoncos letter of Mar 4.
30 Mar 64: Cervantes returned the earnest money with interest, citing
as an excuse the circumstance that "despite lapse of 45 days from 12 Feb
64 there is no certainty yet" for the acquisition of the Punta property.
Villonco refused to accept the letter & checks. When Cervantes rescinded
the contract, he was already aware that the Punta lot had been awarded to
Bormaheco.
6 Apr 64: Cervntes alleged that 45-day period had expired & sale to
Bormaheco of Punta property had not been consummated.
Bormaheco & Sps. Cervantes contention: no contract of sale was
perfected because Cervantes made a supposedly qualified acceptance of
the revised offer, which amounted to a counter offer & because the
condition that Bormaheco would acquire the Punta land within 45 days
was not fulfilled.
ISSUE: WON there was a perfected contract of sale
Affirmative. Bormaheco's acceptance of Villonco Realty Company's offer
to purchase the Buendia Avenue property, shown in letter dated 4 Mar 64
indubitably proves that there was a meeting of the minds upon the subject
matter & consideration. On that date, sale was perfected.
Not only that Bormaheco's acceptance of the part payment of P100k
shows that the sale was conditionally consummated or partly executed
subject to the purchase by Bormaheco, Inc. of Punta property. The nonconsummation of that purchase would be a negative resolutory condition.

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Sales Case Digest

First to Third Exam Coverage

On 18 Feb 64, Bormahecos bid for Punta property was already


accepted by Nassco. On 4 Mar 64, only the approval of sale by the Econ
Coordinator was needed & that the request for such approval was already
pending.
As to contention that there Cervantes qualified his acceptance of
Villoncos revised offer: no evidence as to what changes were made by
Cervantes in the revised offer. No evidence that Villonco Realty did not
assent to the supposed changes & such assent was never made known to
Cervantes.
What record reveals is that broker, Miss Tagle, acted as intermediary
between the parties. Safe to assume that the alleged changes or
qualifications made by Cervantes were approved by Villonco Realty and
that such approval was duly communicated to Cervantes or Bormaheco,
Inc. by the broker as shown by the fact that Villonco Realty paid, and
Bormaheco, Inc. accepted, the sum of P100k as earnest money or down
payment. That crucial fact implies that Cervantes was aware that Villonco
Realty had accepted the modifications which he had made in Villonco's
counter-offer. Had Villonco Realty not assented to those insertions and
annotations, then it would have stopped payment on its check for P100k.
The fact that Villonco Realty allowed its check to be cashed by Bormaheco,
Inc. signifies that it was in conformity with the changes made by Cervantes
and that Bormaheco, Inc. was aware of such.
Truth is that the alleged changes or qualifications in the revised
counter-offer are not material or are mere clarifications of what the parties
had previously agreed upon.
Cervantes' alleged insertion in his handwriting of the figure & words
"12th and" in Villonco's counter-offer is the same as the statement found
in the voucher-receipt for the earnest money: "subject to the terms and
conditions embodied in Bormaheco's letter of 12 Feb 64 and your letter of 4
Mar 64."
As to alleged crossing out of the word Nassco & substituting it for
the word another: What Cervantes did was merely to adhere to the
wording of para. 3 of Bormaheco's original offer which mentions "another
property located at Sta. Ana." His obvious purpose was to avoid jeopardizing
his negotiation with the Nassco for the purchase of its Sta. Ana property
by unduly publicizing it.
As to alleged insertion of letters PA after word interest in same
para. 3: it is not a major alteration. It was understood that the parties had
contemplated a rate of 10%/annum since 10% a month or semi-annually
would be usurious.
As to contention that in clarifying that P100k earnest money was
subject to the terms & conditions embodied in their letters made
Bormahecos acceptance qualified & conditional: no incompatibility
between Bormaheco's offer of Feb 12 and Villonco's counter-offer of Mar
4. The revised counter-offer merely amplified Bormaheco's original offer.
The controlling fact is that there was agreement between the parties on
the subject matter, the price and the mode of payment and that part of
the price was paid.
An acceptance may contain a request for certain changes in the terms
of the offer and yet be a binding acceptance. So long as it is clear that the
meaning of the acceptance is positively and unequivocally to accept the
offer, whether such request is granted or not, a contract is formed. The
vendor's change in a phrase of the offer to purchase, which change does
not essentially change the terms of the offer, does not amount to a
rejection of the offer and the tender of a counter-offer.
As to contention that contract was not perfected because the 45-day
period condition was not fulfilled: the 45-day period was merely an
estimate or a forecast of how long it would take Bormaheco, Inc. to
acquire the Nassco property and it was not a condition/deadline set for
the defendant corporation to decide whether or not to go through with the
sale of its Buendia property.
Record does not support the theory of Bormaheco, Inc. and the
Cervantes spouses that the 45-day period was the time within which (a)
the Nassco property and two Pasong Tamo lots should be acquired, (b)
when Cervantes would secure his wife's consent to the sale of the three
lots and (c) when Bormaheco, Inc. had to decide what to do with the DBP
encumbrance.
The consummation of the sale of the Buendia lots to Villonco Realty was
conditioned on Bormaheco's acquisition of the Nassco land. But it was not
spelled out that such acquisition should be effected within 45 days from
12 Feb 64. Had it been Cervantes' intention that the 45 days would be the
period within which the Nassco land should be acquired by Bormaheco,
then he would have specified that period in para. 3 of his offer so that
paragraph would read in this wise: "That this sale is to be consummated
only after I shall have consummated my purchase of another property located
at Sta. Ana, Manila within forty-five days from the date hereof." He could have
also specified that period in his "conforme" to Villonco's counter-offer of 4
Mar 64 so that instead of merely stating "that this sale shall be subject to
favorable consummation of a property in Sta. Ana we are negotiating" he

could have said: "That this sale shall be subject to favorable consummation
within forty-five days from February 12, 1964 of a property in Sta. Ana we are
negotiating". Hence, term of 45 days was not a part of the condition that
the Nassco property should be acquired.
As to contention that lots cannot be sold because they are conjugal
properties: Cervantes, in rescinding the contract of sale and in returning
the earnest money, cited as an excuse the circumstance that there was no
certainty in Bormaheco's acquisition of the Nassco property. He did not
say that Mrs. Cervantes was opposed to the sale of the three lots. He did
not tell Villonco Realty Company that he could not bind the conjugal
partnership. In truth, he concealed the fact that the three lots were
registered "in the name of FRANCISCO CERVANTES, Filipino, of legal age,
married to Rosario P. Navarro, as owner thereof in fee simple". He certainly
led the Villonco brothers to believe that as president of Bormaheco, Inc. he
could dispose of the said lots.
The pronoun our is not clear as to whether it refers to himself & his
wife or to Bormaheco. Bormaheco, Inc. and Cervantes deliberately and
studiously avoided making the allegation that Cervantes was not
authorized by his wife to sell the three lots or that he acted merely as
president of Bormaheco, Inc.

Sale by Auction
Earnest Money
Difference between Earnest Money and Option Money
OESMER vs. PARAISO (2007)
Petitioners are brothers & sisters. They are co-owners of undivided
shares of 2 parcels of agricultural & tenanted land identified as Lot 720
834. Both lots were unregistered & originally owned by their parents.
When Sps. Oemer died, petitioners, together with Adolfo & Jesus, acquired
the lots.
Mar 89: Rogelio Paulaw, resident & former Mun. Sec. of Carmona,
Cavite, brought along petitioner Ernesto to meet with Sotero Lee, President
of Paraiso Devt Corp. Said meeting was for the purpose of brokering the
sale of Oesmers properties to the Paraiso. Contract to Sell was drafted by
Exec. Asst. of Lee.
1 Apr 89: Ernesto & Enriqueta signed the Contract to Sell. Check in the
amount of P100k payable to Ernesto was given as option money.
Sometime thereafter, Rizalino, Leonora, Bibiano & Librado also signed.
However, Adolfo & Jesus did not sign. Document was duly notarized.
1 Nov: in a letter addressed to Paraiso, petitioners informed Paraiso of
their intention to rescind the Contract to Sell & return P100k as option
money. Paraiso did not respond.
30 May 91: petitioners filed complaint for declaration of nullity or
annulment of option agreement/contract to sell with damages.
Petitioners contention: signatures of Enriqueta, Librado, Rizalino,
Bibiano & Leonora on the margins of the Contract to Sell did not confer
authority on Ernesto as agent to sell their respective shares in the
questioned properties. Hence, for lack of written authority, contract is void
as to them. Neither do their signatures signify their consent to directly sell
their shares in the properties. Otherwise, such consent was merely
conditional, subject to suspensive condition that it was approved by all coowners. Also alleged that the contract is really a unilateral promise to sell
& option money does not bind petitioners for lack of cause/consideration
distinct from the purchase price.
ISSUE: WON the contract was a unilateral promise to sell, WON P100k
was an option money
Contract to sell, P100k was earnest money. True that the signatures of
the five petitioners on the Contract to Sell did not confer authority on
Ernesto as agent authorized to sell their respective shares in the
questioned properties because of Article 1874. The law itself explicitly
requires a written authority before an agent can sell an immovable. The
contract is not sufficient to confer authority on Ernesto to act as their
agent in selling their shares in the properties in question.
However, despite Ernestos lack of written authority from the five
petitioners to sell their shares in the subject parcels of land, the supposed
Contract to Sell remains valid and binding upon the latter. It is not only
Ernesto who signed the said Contract to Sell; the other five petitioners also
personally affixed their signatures thereon. Therefore, a written authority is
no longer necessary in order to sell their shares in the subject parcels of
land because, by affixing their signatures on the Contract, they were not
selling their shares through an agent but, rather, they were selling the
same directly and in their own right.
Contract to Sell was perfected when the petitioners consented to the
sale to the Paraiso of their shares in the subject parcels of land by affixing
their signatures on the said contract. Such signatures show their

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Sales Case Digest


acceptance & was made known to Paraiso when a duplicate copy was
returned to it.
As to contention that Enriqueta merely signed as witness: contract
does not say so. No single indication that she signed merely as witness.
Fact that her signature appears on the right-hand margin is insignificant.
The Contract to Sell is couched in such a simple language which is
undoubtedly easy to read and understand. The terms of the Contract,
specifically the amount of P100k representing the option money paid by
Paraiso, the purchase price of P60/sqm or the total amount of P3,316,560
and a brief description of the subject properties are well-indicated thereon
that any prudent and mature man would have known the nature and
extent of the transaction encapsulated in the document that he was
signing.
As to contention that contract is void because Paraiso did not sign it to
indicate its consent: The Contract to Sell is not void merely because it
does not bear the signature of Paraiso. Paraisos consent to be bound by
the terms of the contract is shown in the uncontroverted facts which
established that there was partial performance by it of its obligation in the
said Contract to Sell when it tendered the amount of P100k to form part
of the purchase price, which was accepted and acknowledged expressly by
petitioners. Therefore, by force of law, Paraiso is required to complete the
payment to enforce the terms of the contract. Accordingly, despite the
absence of Paraisos signature in the Contract to Sell, the former cannot
evade its obligation to pay the balance of the purchase price.
Contract to Sell entered into by the parties is not a unilateral promise to
sell merely because it used the word option money when it referred to the
amount of P100k, which also form part of the purchase price.
The interpretation of contracts, the ascertainment of the intention of the
contracting parties is to be discharged by looking to the words they used
to project that intention in their contract, all the words, not just a particular
word or two, and words in context, not words standing alone.
Consideration of P100k was referred to as "option money." However, a
careful examination of the words used in the contract indicates that the
money is not option money but earnest money.
Distinctions between earnest money & option money: (a) earnest
money is part of the purchase price, while option money is the money
given as a distinct consideration for an option contract; (b) earnest money
is given only where there is already a sale, while option money applies to a
sale not yet perfected; and, (c) when earnest money is given, the buyer is
bound to pay the balance, while when the would-be buyer gives option
money, he is not required to buy, but may even forfeit it depending on the
terms of the option.
The sum of P100k was part of the purchase price. Although the same
was denominated as "option money," it is actually in the nature of earnest
money or down payment when considered with the other terms of the
contract.

FORMAL REQUIREMENTS OF SALE


Form not Important for Validity of Sale
NARANJA vs. CA (2009)
Roque Naranja was the registered owner of Lot 4. He was also co-owner
of an adjacent lot, Lot 2, which he co-owned with his brothers. Two lots
were being leased by Esso Standard Eastern, Inc. for 30 yrs from 62-92.
For his properties, Roque was being paid P200/month.
76: Roque, single & with no children, lived with half-sister Lucilia
Belardo. At that time, a catheter was attached to Roques body but was
subsequently removed when he was already able. Other than this, Roque
had been physically sound. Roque had no other source of income except
P200 monthly rental of his 2 properties.
21 Aug 81: to show gratitude to Belardo, he sold Lot 4 & his 1/3 share
in Lot 2 to Belardo through DOS of Real Property, which was notarized by
Atty. Sanicas. Consideration was P10k.
Roques copy of TCT T-18764 & T-18762 were entrusted to Atty.
Sanicas for registration of DOS & transfer of titles to Belardo but could not
be registered because Belardo did not have money to pay for fees. Her
only source of income was her store & coffee shop. Her children would
give her money to help with household expenses, as well as for Roques
support. At times, she also borrow money from Margarita Dema-ala. When
loan reached P15k, Dema-ala required security.
19 Nov 83: Roque executed a DOS in favor of Dema-ala, covering his 2
properties in consideration of P15k outstanding loan & additional P15k.
Dema-ala explained she wanted Roque to execute the DOS himself since
the proeprties were still in his name. Belardo merely acted as witness.
2 Dec 83: Roque died of influenza.
85: Belardo fully paid the loan secured by 2nd DOS. Dema-ala returned
the titles to Belardo, who gave them back to Atty. Sanicas.

First to Third Exam Coverage


Unknown to Belardo, children of Placido & Gabino Naranja executed an
Extrajudicial Settlement Among Heirs, adjudicating Lot 4 to themselves.
19 Feb 86: Amelia Naranja-Rubinos, accompanied by Belardo,
borrowed the 2 TCTs, together with lease agreement with Esso from Atty.
Sanicas on account of the loan being proposed by Belardo to her.
Thereafter, petitioners had the Extrajudicial Settlement Among Heirs
notarized on 25 Feb 86. They succeeded in having TCT T-18764
cancelled & TCT-T140184 issued in them.
87: Belardo decided to register the DOS dated 21 Aug 81. With no title
in hand, she was compelled to file a petition with RTC to annotate DOS,
which was granted. But she only succeeded in registering DOS in TCT T18762 because TCT T-18764 had already been cancelled.
11 Dec 89: Atty. Sanicas prepared certificate of authorization, giving
Belardos daughter, Jennylyn, the authority to collect payments from Esso
but it appeared that payment of lease rental had already been transferred
from Belardo to Amelia because of the Extrajudicial Settlement.
23 Jun 92: Belardo instituted a suit for reconveyance with damages.
RTCs Decision: in favor of Naranjas. DOS was defective in form since it
did not contain a technical description of the subject properties but
merely indicated that they were Lot 4 & 1/3 portion of Lot 2. CA reversed.
ISSUE: WON DOS was void for being defective
Negative. Section 127 of Act 496 provides that 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.
The failure of the parties to specify with absolute clarity the object of a
contract by including its technical description is of no moment. What is
important is that there is, in fact, an object that is determinate or at least
determinable, as subject of the contract of sale. The form of a deed of sale
provided in Section 127 of Act No. 496 is only a suggested form. It is not a
mandatory form that must be strictly followed by the parties to a contract.
DOS clearly identifies the subject properties by indicating their
respective lot numbers, lot areas, and the certificate of title covering them.
As to alleged nullity of DOS: petitioners failed to submit sufficient proof
to show that Roque executed the deed of sale under the undue influence
of Belardo or that the deed of sale was simulated or without consideration.
A notarized document carries the evidentiary weight conferred upon it
with respect to its due execution, and documents acknowledged before a
notary public have in their favor the presumption of regularity. It must be
sustained in full force and effect so long as he who impugns it does not
present strong, complete, and conclusive proof of its falsity or nullity on
account of some flaws or defects provided by law.
As to alleged undue influence by Belardo to Roque: undue influence
must be established by full, clear and convincing evidence, such specific
acts that vitiated the partys consent; otherwise, the latters presumed
consent to the contract prevails. No proof that Roque had lost control of
his mental faculties at the time of sale. Undue influence is not to be
inferred from age, sickness, or debility of body, if sufficient intelligence
remains. Evidence presented pertained more to Roques physical
condition rather than his mental condition.
Neither was contract simulated. Late registration of DOS and Roques
execution of the second DOS in favor of Dema-ala did not mean that the
contract was simulated. Belardo did not have money to pay for fees.
As to contention that DOS was not supported by consideration since
no receipt was shown: DOS which states "receipt of which in full I hereby
acknowledge to my entire satisfaction" is an acknowledgment receipt in
itself. Presumption that a contract has sufficient consideration cannot be
overthrown by a mere assertion that it has no consideration.
DALION vs. CA (1990)
1 Jul 65: a private document of absolute sale was allegedly executed
by Dalion in favor of Sabesaje. Dalion, however, denied this fact of sale,
contending that the document sued upon is fictitious, that his signature
was a forgery, & that the subject land is conjugal property, which he & his
wife acquired from Saturnina Sabesaje as evidenced by Escritura de Venta
Absoluta. Sps. Dalion denied that after executing a DOS in favor of
Sabesaje, they pleaded to be allowed to administer the land because they
did not have any means of livelihood. Also alleged that sale was not valid
for being embodied in a private document.
28 May 73: Sabesaje sued to recover ownership of a parcel of land,
based on a private document of absolute sale dated 1 Jul 65.
ISSUE: WON the private document of absolute sale was valid

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Sales Case Digest


Affirmative. The provision of Art. 1358 on the necessity of a public
document is only for convenience, not for validity or enforceability. It is not
a requirement for the validity of a contract of sale of a parcel of land that
this be embodied in a public instrument. A contract of sale is a consensual
contract, which means that the sale is perfected by mere consent. No
particular form is required for its validity.
Under Art. 1498, NCC, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing.
Delivery may either be actual (real) or constructive. Thus delivery of a
parcel of land may be done by placing the vendee in control and
possession of the land (real) or by embodying the sale in a public
instrument (constructive).
As to contention that proper action should have been specific
performance: suit for recovery of ownership is proper. Sabesaje's
complaint sufficiently alleged a cause of action to compel Dalion to
execute a formal deed of sale, and the suit for recovery of ownership,
which is premised on the binding effect and validity inter partes of the
contract of sale, merely seeks consummation of said contract.
As to validity of sale on the basis of Sec. 21 & 23 of Rule 132 of RRC:
Sec. 21. Private writing, its execution and authenticity, how proved. - Before
any private writing may be received in evidence, its due execution and
authenticity must be proved either: (a) By anyone who saw the writing
executed; (b) By evidence of the genuineness of the handwriting of the
maker; or (c) By a subscribing witness.
People who witnessed the execution of subject deed positively testified
on the authenticity thereof. As opposed to mere denials, the positive
testimonies must prevail.
HEIRS OF BIONA vs. CA (2001)
23 Oct 53: late Ernesto Biona, married to Soledad Biona, was awarded
a homestead patent over a parcel of agricultural land, Lot 177.
3 Jun 54: Sps. Biona obtained a loan from Rehabilitation Finance Corp
(now DBP) & put up as collateral the property.
12 Jun 56: Ernesto died, leaving his heirs.
1 Mar 60: Soledad obtained a loan from Leopoldo Hilajos in the
amount of P1k & as security, the same property was mortgaged. It was
agreed upon that for a period of 2 yrs until the debt is paid, Hilajos shall
occupy the land in dispute & enjoy the usufruct thereof.
However, two-year period elapsed but Soledad was not able to pay her
debt. Hilajos continued to occupy & cultivate the property without protest.
3 Jul 62: Hilajos paid the sum of P1,400 to DBP to cancel the
mortgage previously constituted by Sps. Biona. Thereafter, for a period of
25 yrs, Hilajos continued his peaceful & public occupation of the property,
declaring it in his name for taxation purposes & causing it to be tenanted.
19 Jun 85: Heirs of Biona filed complaint for recovery of ownership,
possession, accounting & damages against Hilajos. Alleged that Hilajos
had unlawfully been depriving them of the use, possession and enjoyment
of the subject property; that the entire parcel of land, which was devoted
and highly suited to palay and corn, was yielding three harvests annually,
with an average of 120 sacks of corn and 80 cavans of rice/hectare; that
Heirs of Biona were deprived of its total produce amounting to P150k.
19 Sep 86: Hilajos filed answer with counterclaim, alleging that
Soledad approached & begged him to buy the whole lot since it was at the
brink of foreclosure by DBP & she had no money to redeem; that Hilajos
agreed to buy the property for P4,500, which consideration was to include
the redemption price to be paid to DBP; that purchase price exceeded the
current market value of the property; that a DOS was handwritten by
Soledad & signed by her.
ISSUE: WON the DOS is valid & could convey ownership & title to Hilajos
Affirmative. Hilajos has substantially proven that Soledad indeed signed
the DOS of the said property in his favor. He categorically stated that he
himself saw Soledad affix her signature on the DOS (corroborated by
another witness, Famular). HIlajos has shown by competent proof that a
contract of sale where all the essential elements are present for its validity
was executed between the parties. The burden is on the Heirs of Biona to
prove the contrary whch they have failed to do. They were no able to
present Soledad as witness to deny.
All the requisites for a valid contract of sale are present. For a valuable
consideration of P4,500, Soledad Biona agreed to sell and actually
conveyed the subject property to Hilajos. The fact that the DOS was not
notarized does not render the agreement null and void and without any
effect. The provision of Article 1358 CC on the necessity of a public
document is only for convenience, and not for validity or enforceability.
The observance of which is only necessary to insure its efficacy, so that
after the existence of said contract had been admitted, the party bound

First to Third Exam Coverage


may be compelled to execute the proper document. Undeniably, a
contract has been entered into by Soledad Biona and Hilajos. Regardless
of its form, it was valid, binding and enforceable between the parties.
The deed of sale so executed, although a private document, is effective
as between the parties themselves and also as the third persons having no
better title, and should be admitted in evidence for the purpose of showing
the rights and relations of the contracting parties. Under Art. 1356 CC,
contracts shall be obligatory in whatever form they may have been entered
into provided all the essential requisites for their necessary elements for a
valid contract of sale were met when Soledad Biona agreed to sell and
actually conveyed Lot 177 to Hilajos who paid the amount of P4,500. The
DOS is not made ineffective merely because it is not notarized or does not
appear in a public document. Pursuant to Art. 1357, Heirs of Biona may
be compelled by Hilajos to execute a public document to embody their
valid and enforceable contract and for the purpose of registering the
property in the latter's name.
As to prescription: no merit in Heirs' contention that their right over the
land has not prescribed. The principle of laches was properly applied
against them. Laches has been defined as the failure or neglect for an
unreasonable length of time to do that which by exercising due diligence
could or should have been earlier. Soledad Biona, at the time of the
execution of the DOS on 11 Sep 61, could only alienate that portion of Lot
177 belonging to her, which is 7/12 of the entire property. She had no
power or authority to dispose of the shares of her co-owners. It is not
disputed, however, that as early as 1960, when Soledad Biona borrowed
money from Hilajos, the latter entered, possessed and started occupying
the same in the concept of an owner. He caused its cultivation through
various tenants under Certificates of Land Transfer, declared the property
in his name, religiously paid taxes thereon, reaped benefits therefrom, and
executed other acts of dominion without any protest or interference from
Heirs for more than 25 years. Even when the 5 daughters were way past
the age of majority, they did not assert their right to the share & instead,
allowed Hilajos to peacefully occupy the same without protest.
Notwithstanding the invalidity of the sale with respect to the share of
Heirs, sale is valid. Vigilantibus non dormientibus sequitas subvenit.

3. When Form Important in Sale


a. To Bind Third Parties
b. For Enforceability between the Parties: Statute of Frauds
YUVIENGCO vs. DACUYCUY (1981)
12 Jul 78: Suga Sotto Yuvienco, Britania & Marcelino Sotto, thru Pedro
Gamboa, sent to respondents a letter, selling the Sotto property for P6.5M
& giving them until 31 Jul 78 within which to decide whether to buy the
property or not.
Yao King Ong & tenants sent a letter to Atty. Gamboa in Cebu, agreeing
to buy the property proceed Tacloban to negotiate details.
27 Jul 78: Atty. Gamboa wired Yao King Ong in Tacloban City
PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH CONTRACT
PREPARE PAYMENT BANK DRAFT.
1 Aug 78: Atty. Gamboa arrived in Tacloban bringing with him the
prepared contract to purchase and to sell the property for the purpose of
closing the transactions. However, petitioners, without giving notice to
respondents, changed the mode of payment with respect to the balance of
P4.5M by imposing upon the respondents to pay the same within 30 days
from execution of the contract instead of former 90 days.
Respondents filed action for specific performance against petitioners.
Respondents allegations: the terms & conditions with respect to
payment were the following P2M to be paid in full on date of execution
of contract & P4.5M shall be fully paid within 90 days.
Petitioners filed their motion to dismiss, alleging that the claim on
which the action is founded is unenforceable under the Statute of Frauds.
ISSUE: WON the claim is unenforceable under the Statute of Frauds
ISSUE OF ACCEPTANCE: First consider what is the correct juridical
significance of the telegram of respondents instructing Atty. Gamboa to
proceed to Tacloban to negotiate details. Negotiate is the key word that
negates & makes it legally impossible to hold that respondents
acceptance of petitioners offer was the absolute one that Art. 1319
requires. The implication of "to negotiate" is practically the opposite of the
Idea that an agreement has been reached. Yao King Ong's telegram simply
says "we agree to buy property". It does not necessarily connote
acceptance of the price but instead suggests that the details were to be
subject of negotiation.
As to contention that the details to be negotiated are mere
accidental elements, no essential: alleged facts precisely indicate the
failure of any metting of the minds. It is only from the letter and telegrams

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Sales Case Digest

First to Third Exam Coverage

that one can determine whether or not such meeting of the minds did
materialize. It was precisely because of their past failure to arrive at an
agreement that petitioners had to put an end to the uncertainty by writing
the letter of 12 Jul 78. On the other hand, that respondents were all the
time agreeable to buy the property may be conceded, but instead of
"absolutely" accepting the "certain" offer if there was one of the
petitioners, they still insisted on further negotiation of details. For anyone
to read in the telegram of Yao that they accepted the price of
P6,500,000.00 would be an inference not necessarily warranted by the
words "we agree to buy" and "proceed Tacloban to negotiate details". If
indeed the details being left by them for further negotiations were merely
accidental or formal ones, what need was there to say in the telegram that
they had still "to negotiate details", when, being unessential per their
contention, they could have been just easily clarified and agreed upon
when Atty. Gamboa would reach Tacloban?
As to the 27 Jul telegram of Atty. Gamboa: it was in answer to the
telegram of Yao. Considering that Yao was in Tacloban while Atty. Gamboa
was in Cebu, it is difficult to surmise that there was any communication of
any kind between them during the intervening period. Accordingly, the
claim of respondents that there was an agreement of a downpayment of
P2M, with balance of P4.5M to be paid within 90 days, is rather
improbable to have actually happened. Hence, there was not an absolute
acceptance.
Nonetheless, the alleged subsequent agreement about the P2M down
and P4.5M in 90 days may at best be deemed as a distinct cause of
action. although there was no perfected contract of sale in the light of the
letter of Atty. Gamboa of 12 Jul 78 and the letter-reply thereto of Yao; it
being doubtful WON, under Art. 1319, the said letter may be deemed as
an offer to sell that is "certain", and more, the Yao telegram is far from
being an "absolute" acceptance under said article, still there appears to be
a cause of action of the respondents' complaint, considering it is alleged
therein that subsequent to the telegram of Yao, it was agreed that the
petitioners would sell the property to respondents for P6.5M, by paying
P2M down and the balance in 90 days and which agreement was allegedly
violated when in the deeds prepared by Atty. Gamboa and taken to
Tacloban, only 30 days were given to respondents.
ISSUE ON STATUTE OF FRAUDS: the claim of of respondents that
petitioners have unjustifiably refused to proceed with the sale to them of
the property in question is unenforceable under the SoF.
It is nowhere alleged in the complaint that there is any writing or
memorandum, much less a duly signed agreement to the effect that the
price of P6.5M fixed by petitioners was agreed to be paid not in cash but
in installments as alleged by respondents. The only documented indication
of the non-wholly-cash payment extant in the record is that the deeds
already signed by the petitioners and taken to Tacloban by Atty. Gamboa
for the signatures of the respondents. In other words, the 90-day term for
the balance of P4.5M insisted upon by respondents choices not appear in
any note, writing or memorandum signed by either the petitioners or any
of them, not even by Atty. Gamboa. Such oral contract involving the sale
of real property comes squarely under the SoF.
Payment on installments or staggered payment of the total price is
entirely a different matter from cash payment, considering the
unpredictable trends in the sudden fluctuation of the rate of interest. In
other words, it is indisputable that the value of money - varies from day to
day, hence the indispensability of providing in any sale of the terms of
payment when not expressly or impliedly intended to be in cash. Thus, in
any sale of real property on installments, the Statute of Frauds read
together with the perfection requirements of Article 1475 must be
understood and applied in the sense that the idea of payment on
installments must be in the requisite of a note or memorandum therein
contemplated. While such note or memorandum need not be in one single
document or writing and it can be in just sufficiently implicit tenor,
imperatively the separate notes must, when put together', contain all the
requisites of a perfected contract of sale. To put it the other way, under the
Statute of Frauds, the contents of the note or memorandum, whether in
one writing or in separate ones merely indicative for an adequate
understanding of all the essential elements of the entire agreement, may
be said to be the contract itself, except as to the form.
As to TC ruling that plaintiff may simply say there are documents
without either quoting them or annexing them is incorrect. To await the
stage of trial for the showing or presentation of the requisite documentary
proof when it already exists and is asked to be produced by the adverse
party would amount to unnecessarily postponing, with the concomitant
waste of time and the prolongation of the proceedings, something that can
immediately be evidenced and thereby determinable with decisiveness
and precision by the court without further delay.
A motion to dismiss invoking the Statute of Frauds may be filed even if
the absence of compliance does not appear an the face of the complaint.

CLAUDEL vs. CA (1991)


28 Dec 22: Basilio (aka Cecilio) Claudel acquired Lot 1230 from BOL.
Thereafter, his widow Basilia & later, son Jose, paid the taxes. Same piece
of land, however, became the subject of litigating 39 yrs after his death.
2 branches of Cecilios family contested the ownership over the land
children of Cecilio vs. brother & sisters of Cecilio.
72: Heirs of Cecilio partitioned this lot among themselves & obtained
TCTs on their shares. Four TCTs were issued.
7 Dec 76: Siblings of Cecilio filed complaint for cancellation of titles &
reconveyance with damages, alleging that 46 years earlier, their parents
had purchased from Cecilio Claudel several portions of Lot 1230 for P30.
They admitted that the transaction was verbal. However, as proof, they
presented a subdivision plan of said land, dated 25 Mar 30, indicating the
portions allegedly sold to the siblings.
ISSUE: WON a contract of sale of land may be proven orally
The rule of thumb is that a sale of land, once consummated, is valid
regardless of the form it may have been entered into. For nowhere does
law or jurisprudence prescribe that the contract of sale be put in writing
before such contract can validly cede or transmit rights over a certain real
property between the parties themselves.
However, in the event that a third party, as in this case, disputes the
ownership of the property, the person against whom that claim is brought
can not present any proof of such sale and hence has no means to
enforce the contract. Thus the Statute of Frauds was precisely devised to
protect the parties in a contract of sale of real property so that no such
contract is enforceable unless certain requisites, for purposes of proof, are
met.
Negative. Therefore, except under the conditions provided by the
Statute of Frauds, the existence of the contract of sale made by Cecilio
with his siblings cannot be proved.
As to WON the prescriptive period for filing an action for cancellation
of titles & reconveyance should be counted from the alleged sale or from
the date of the issuance of the titles sought to be cancelled: cited Art.
1145, oral contract prescribes in 6 yrs.
If the parties siblings of Cecilio had allegedly derived their right of
action from the oral purchase made by their parents in 1930, then the
action filed in 1976 would have clearly prescribed. More than six years
had lapsed.
We do not agree with the parties siblings of Cecilio when they reason
that an implied trust in favor of the siblings of Cecilio was established in
1972, when the heirs of Cecilio executed a contract of partition over the
said properties. The law recognizes the superiority of the torrens title.
Above all, the torrens title in the possession of the heirs of Cecilio carries
more weight as proof of ownership than the survey or subdivision plan of a
parcel of land in the name of siblings of Cecilio. The torrens title is
indefeasible.
For several years, when the siblings of Cecilio, namely, Macario,
Esperidiona Raymunda, and Celestina were living on the contested
premises, they regularly paid a sum of money, designated as "taxes" at
first, to the widow of Cecilio, and later, to his heirs. Why their payments
were never directly made to the Municipal Government of Muntinlupa
when they were intended as payments for "taxes" is difficult to square with
their claim of ownership. We are rather inclined to consider this fact as an
admission of non-ownership. And when we consider also that the heirs of
Cecilio had individually paid to the municipal treasury the taxes
corresponding to the particular portions they were occupying, we can
readily see the superiority of the Heirs' position.

SPS. ALFREDO vs. SPS. BORRAS (2003)


A parcel of land are owned by Sps. Godofredo & Carmen Alfredo.
7 Mar 94: Sps. Borras filed a complaint for specific performance
against Sps. Alfredo, alleging that Sps. Alfredo mortgaged the land for P7k
with DBP. To pay their debt, Sps. Alfredo sold the land to Sps. Borras for
P15k, they being the ones to pay the DBP loan & accumulated interest &
the balance to be pain in cash to the sellers.
Sps. Borras gave Sps. Alfredo the money to pay the loan to DBP, which
signed the release of the mortgage & returned the owners duplicate copy
of OCT to Sps. Alfredo. Sps. Borras subsequently paid the balance of
purchase price. Sps. Alfredo then delivered to Adelia Borras the owners
duplicate copy of OCT with the document of cancellation of mortgage,
official receipts of realty tax payments, & tax declaration in the name of
Godofredo. Sps. Alfredo introduced Sps. Borras as the news owners of the
land to the Natanawans, the old tenants. Subsequently, Sps. Borras took
possession.

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Sales Case Digest


Jan 94: Sps. Borras learned that hired person had entered the land &
were cutting trees under instructions of allegedly new owners of the land.
Sps. Borras then discovered that Sps. Alfredo re-sold portions of land to
others.
8 Feb 94: Sps. Borras filed an adverse claim. They discovered that Sps.
Alfredo had secured an owners duplicate copy after filing petition in court
for issuance of new copy, claiming they lost their copy.
Sps. Borras wrote Sps. Alfredo complaining about their acts but did not
reply. Thus, Sps. Borras filed complaint for specific performance.
Sps. Alfredos contentions: the action is unenforceable under the
Statute of Frauds. There was no written instrument evidencing the alleged
contract of sale over the land in favor of Sps. Borras.
ISSUE: WON the alleged sale of the land in favor of Sps. Borras is valid &
enforceable, WON the action to enforce the alleged oral contract brought
after 24 yrs from its alleged perfection had been barred by prescription or
laches
The contract between them was a perfected contract. The object of the
sale is the subject land & the price certain is P15k. Hence, there was a
meeting of the minds. The contract of sale of the land has also been
consummated because they have already performed their respective
obligations under the contract. Sps. Alfredo delivered the land to Sps.
Borras, placing them in actual physical possession. This physical delivery
also constituted a transfer of ownership. Sps. Alfredo also turned over to
Sps. Borras the documents of ownership OCT, tax declaration, receipts of
realty tax payments. On the other hand, Sps. Borras paid the full purchase
price. They fulfilled their obligation to provide the P7k to pay the DBP
obligation. The P2,524 paid under the receipt dated 11 Mar 70 was the
last installment to settle fully the purchase price. Upon payment of this,
the DBP cancelled the mortgage & returned the OCT.
Statute of Frauds is inapplicable. The existence of the receipt dated 11
Mar 70, which is a memorandum of the sale, removes the transaction
from the provisions of the SoF.
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 land, with both sellers and buyers performing their respective
obligations under the contract of sale. In addition, a contract that violates
the Statute of Frauds is ratified by the acceptance of benefits under the
contract. Sps. Alfredo benefited from the contract because they paid their
DBP loan and secured the cancellation of their mortgage using the money
given by Sps. Borras. Sps. Alfredo also accepted payment of the balance of
purchase price.
As to contention that the contract was void because it was without
marital consent of Godofredo: untenable. Godofredo also ratified the
voidable contract (under CC) when he introduced Sps. Borras to his
tenants as the new owners. Sps. Alfredo also allowed Sps. Borras to enjoy
possession for 24 yrs. If the sale was truly unauthorized, Godofredo should
have filed an action to annul but he did not. Prescriptive period had
lapsed. Also, the sale redounded to the benefit of the conjugal property.
As to contention that Sps. Alfredo did not deliver the title: raised for
the first time. They alleged that title was gotten was Julie Limon. It is not
necessary that the seller himself deliver the title of the property to the
buyer because the thing sold is understood as delivered when it is placed
in the control and possession of the vendee.
Also, the sale of subject land cannot be annulled on the ground that the
secretary did not approve the sale. The failure to secure the approval of
the Secretary does not ipso facto make a sale void. The absence of
approval by the Secretary does not nullify a sale made after the expiration
of the 5-year period, for in such event the requirement of Section 118 of
PLA becomes merely directory or a formality. The approval may be
secured later, producing the effect of ratifying and adopting the
transaction as if the sale had been previously authorized.
As to WON it has prescribed: The presence of fraud in this case created
an implied trust in favor of Sps. Borras. This gives Sps. Borras the right to
seek reconveyance of the property from the subsequent buyers. An action
for reconveyance based on an implied trust prescribes in ten years. The
10-yr prescriptive period applies only if there is an actual need to
reconvey the property as when the plaintiff is not in possession of the
property. However, if plaintiff, as real owner, also remains in possession,
the prescriptive period to recover title & possession does not run against
him.
As to WON barred by laches: negative. Sps. Borras discovered in Jan
94 the subsequent sale of the land and they filed this case on 7 Mar 94.
Plainly, Sps. Borras did not sleep on their rights.

First to Third Exam Coverage


Obligations of the Seller
SANTOS vs. SANTOS (2001)
Sps. Jesus & Rosalia Santos owned a parcel of land located at Sta. Cruz,
Manila. On it was a 4-door apartment administered by Rosalia who rented
them out. They had 5 children Salvador, Calixto, Alberto, Antonio, Rosa.
19 Jan 59: Sps. Santos executed a DOS of the properties in favor of
their children Salvador & Rosa. Rosa in turn sold her share to Salvador.
Despite transfer of the property to Salvador, Rosa continued to lease &
receive rentals from the apartment units.
1 Nov 79: Jesus died. 6 years after, Salvador died. Ff month, Rosalia
died.
Zenaida, claiming to be Salvadors heir, demanded the rent from
Antonio Hombrebueno, a tenant of Rosalia. When Antonio refused to pay,
Zenaida filed an ejectment suit against him. MTC decied in Zenaidas
favor.
5 Jan 89: Calixto, Alberto, Rosa & Antonio instituted an action for
reconveyance of property, alleging that the 2 DOS executed on 19 Jan 59
& 20 Nov 73 were simulated for lack of consideration. They were
executed to accommodate Salvador in generating funds for his business &
providing him with greater business flexibility.
Zenaida, for her part, denied & argued that Salvador was the registered
owner of the property. And that right to reconveyance was barred by
prescription & laches.
TC Decision: notwithstanding the DOS transferring the property to
Salvador, Sps. Rosalia & Jesus continued to possess the property. They
had no compelling reason to sell the property & Salvador was not
financially capable to purchase it. DOS were fictitious.
CA Decision: Affirmed. In order for execution of public instrument to
effect tradition, vendor shall have had control over the thing sold at the
moment of sale. Not enough to confer upon the purchaser the ownership
& right of possession. Thing sold must be placed in his control. DOS did
not confer upon Salvador the ownership because the Sps. continued in
possession.
ISSUE: WON Salvador acquired ownership by virtue of the execution of
DOS
Negative. Nowhere in CC does it provide that execution of a DOS is a
conclusive presumption of delivery of possession. The Code merely said
that the execution shall be equivalent to delivery. The presumption can be
rebutted by clear and convincing evidence. Presumptive delivery can be
negated by the failure of the vendee to take actual possession of the land
sold.
For the execution of a public instrument to effect tradition, the
purchaser must be placed in control of the thing sold. When there is no
impediment to prevent the thing sold from converting to tenancy of the
purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy nor make use of it himself or through another in his
name, then delivery has not been effected.
Salvador was never placed in control of the property. The original sellers
retained their control and possession. Therefore, there was no real transfer
of ownership.
The critical factor is the actual intention of the vendor to deliver & its
acceptance by the vendee. In this case, although Sps. Jesus & Rosalia
executed the DOS, they did not deliver possession & ownership of the
property to Salvador & Rosa. They agreed to executed the DOS merely to
accommodate Salvador to enable him to generate funds for his business
venture.
As to WON action has prescribed: no. The right to file an action for
reconveyance on the ground that the certificate of title was obtained by
means of a fictitious deed of sale is virtually an action for the declaration
of its nullity, which does not prescribe. The complaint file by the
respondents was for reconveyance since the DOS were simulated &
fictitious. The complaint amounts to a declaration of nullity of a void
contract, which is imprescriptible. Hence, action has not prescribed.
Also not barred by laches. The conduct which caused the complaint was
petitioners assertion of right of ownership as heir of Salvador. This started
in Dec 85 when petitioner demanded payment of the lease rentals from
Antonio. From Dec 85 up to filing of the complaint for reconveyance on 5
Jan 89, only less than 4 yrs had lapsed which is not unreasonable delay.
Further, neither petitioner nor her husband made considerable
investments on the property from the time it was allegedly transferred to
the latter. They did not enter into transactions involving the property since
they did not claim ownership of it until 85. They stood to lose nothing.

CONSUMMATION

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Sales Case Digest

First to Third Exam Coverage

Alleged 16 years of respondents inaction has no adverse effect on the


petitioner to make respondents guilty of laches.
DY, JR. vs. CA (1991)
Perfecto Dy & Wilfredo Dy are brothers. Sometime 79, Wilfredo
purchased a truck & a farm tractor through financing extended by Libra
Finance. Both truck & tractor were mortgaged to Libra as security for the
loan.
20 Aug 79: Perfecto wanted to buy the tractor from his brother so he
wrote a letter to Libra, requesting that he be allowed to purchase from
Wilfredo the said tractor & assume the mortgaged debt of the latter.
27 Aug: Libra approved Perfectos request.
4 Sept: Wilfredo executed a DOS in favor of Perfecto over the tractor. At
this time, the tractor was in the possession of Libra due to Wilfredos
failure to pay the amortizations. Despite offer of full payment by Perfecto
to Libra for the tractor, the immediate release could not be effected
because Wiflredo had obtained financing also for a truck & it insisted on
full payment for both.
Perfecto was able to convince sister Carol to purchase the truck so that
full payment could be made to both.
22 Nov 79: PNB check was issued in the amount of P22k in favor of
Libra, thus settling in full the indebtedness of Wilfredo. Since payment had
been effected through an out-of-town check, Libra insisted that it be
cleared first before Libra could release the chattels.
Meanwhile, a civil case entitled Gelac Trading vs. Wilfredo Dy, a
collection case to recover the sum of P12,269.80 was pending in another
court. An alias writ of execution was issued where the provincial sheriff
was able to seize & levy on the tractor which was in the premises of Libra.
The tractor was subsequently sold at public auction where Gelac was the
lone bidder. Gelac, later on, sold the tractor to Antonio Gonzales.
17 Jan 80: when the check was cleared, Perfecto learned about Gelac
having already taken custody. So he filed an action to recover the tractor
against Gelac. RTC rendered judgment in favor of Perfecto.
Gelacs contentions: at the time of the execution of DOS, no
constructive delivery was effected since the consummation of the sale
depended upon the clearance and encashment of the check which was
issued in payment of the subject tractor.
ISSUE: WON the execution of the DOS transferred ownership to Perfecto
Affirmative. First, no reason why Wilfredo, as chattel mortgagor, cannot
sell the tractor to Wilfredo. There is no dispute that the consent of Libra
was obtained. In letter dated 27 Aug 79, Libra allowed Perfecto to
purchase the tractor & assume mortgage debt of his brother. Sale
between the brothers was therefore valid & binding as between them & to
the mortgagee, as well.
Article 1496 states 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 Articles 1497 to 1501 or in any other manner. Hence, Art.
1498, 1499 applies.
Actual delivery of the subject tractor could not be made. However, there
was constructive delivery already upon the execution of the public
instrument pursuant to Article 1498 and upon the consent or agreement
of the parties when the thing sold cannot be immediately transferred to
the possession of the vendee.
True that the vendor must first have control & possession of the thing
before he could transfer ownership by constructive delivery. Here, it was
Libra Finance which was in possession of the subject tractor due to
Wilfredos failure to pay the amortization as a preliminary step to
foreclosure. As mortgagee, he has the right of foreclosure upon default.
The law implies that the mortgagee is entitled to possess the mortgaged
property because possession is necessary in order to enable him to have
the property sold.
While it is true that Wilfredo Dy was not in actual possession and
control of the subject tractor, his right of ownership was not divested from
him upon his default. Neither could it be said that Libra was the owner of
the subject tractor because the mortgagee can not become the owner of
or convert and appropriate to himself the property mortgaged. Said
property continues to belong to the mortgagor. The only remedy given to
the mortgagee is to have said property sold at public auction and the
proceeds of the sale applied to the payment of the obligation secured by
the mortgagee. No showing that Libra Finance has already foreclosed the
mortgage and that it was the new owner of the subject tractor. Undeniably,
Libra already gave its consent to the sale. It was aware of the transfer of
rights to Perfecto.
Where a third person purchases the mortgaged property, he
automatically steps into the shoes of the original mortgagor. His right of
ownership shall be subject to the mortgage of the thing sold to him. In the

case at bar, the petitioner was fully aware of the existing mortgage of the
subject tractor to Libra. In fact, when he was obtaining Libras consent to
the sale, he volunteered to assume the remaining balance of the mortgage
debt of Wilfredo Dy which Libra undeniably agreed to.
The payment of the check was actually intended to extinguish the
mortgage obligation so that the tractor could be released to the petitioner.
It was never intended nor could it be considered as payment of the
purchase price because the relationship between Libra and the petitioner
is not one of sale but still a mortgage. The transaction between the
brothers is distinct and apart from the transaction between Libra and the
petitioner.
The contention, therefore, that the consummation of the sale depended
upon the encashment of the check is untenable. The sale of the subject
tractor was consummated upon the execution of the public instrument on
Sep 79. At this time constructive delivery was already effected. Hence, the
tractor was no longer owned by Wilfredo when it was levied upon by the
sheriff in Dec 79.
As to contention that at the time sheriff levied on the tractor & took
legal custody, no one ever protested or filed a third party claim: It is
inconsequential whether a third party claim has been filed or not by the
petitioner during the time the sheriff levied on the subject tractor. A
person other than the judgment debtor who claims ownership or right
over levied properties is not precluded from taking other legal remedied.
This is precisely what Perfecto did when he filed an action for replevin.
Also, no sufficient evidence to show that the sale of the tractor was in
fraud of Wilfredo and creditors. While it is true that Wilfredo and Perfecto
are brothers, this fact alone does not give rise to the presumption that the
sale was fraudulent. Relationship is not a badge of fraud. It cannot be
presumed.
The actuations of Gelac were indeed violative of the provisions on
human relations. Gelac knew very well of the transfer of the property to
the petitioners on 14 Jul 80 when it received summons based on the
complaint for replevin filed with the RTC by Perfecto. Notwithstanding said
summons, it continued to sell the subject tractor to Antonio.

ADDISON vs. FELIX (1918)


11 Jun 14: A.A. Addison sold to Marciana Felix, with consent of her
husband Balbino Tioco, 4 parcels of land through a public instrument.
Felix paid, at the time of the execution, the sum of P3k on account of the
purchase price & bound herself to pay the remainder in installments.
Further stipulated that the purchaser was to deliver to the vendor 25% of
the value of the products that she might obtain from the 4 parcels from
the moment she takes possession of them until the TCT be issued in her
favor. It was also stipulated that within 1 yr from the date of the certificate
of title in favor of Felix, Felix may rescind the present contract of sale, in which
case Felix shall be obliged to return to Addisson the net value of all the
products of the 4 parcels sold, & Addison shall be obliged to return to Felix all
the sums that she may have paid together with interest at the rate of 10% per
annum.
Jan 15: Addison filed complaint, to compel Felix to make payment of
the first installment of P2k & of interest in arrears.
Felixs Answer: Addison had absolutely failed to deliver to her the lands
that were the subject matter of the sale, notwithstanding the demands
made upon him. She asked that she be absolved from the complaint &
after declaration of rescission, Addison be ordered to refund the P3k she
had paid + interest.
Evidence: after the execution of the DOS, Addison went to Lucena for
the purpose of designating & delivering the lands sold. He was able to
designate only 2 parcels & more than 2/3 of these 2 were found to be in
the possession of one Juan Villafuerte, who claimed to be the owner. In
Aug 14, surveyor Santamaria went to Lucena, at the request of Addison, in
order to survey the land sold to Felix but he surveyed only 2 parcels.
ISSUE: WON the execution of the public instrument transferred ownership
to Felix, WON Felix may rescind the sale
Record shows that Addison did not deliver the thing sold. With respect
to two of the parcels of land, he was not even able to show them to the
Felix and as regards the other two, more than 2/3 of their area was in the
hostile and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing
sold. The thing is considered to be delivered when it is placed "in the
hands and possession of the vendee." The same article declares that the
execution of a public instruments is equivalent to the delivery of the thing
which is the object of the contract, but, in order that this symbolic delivery
may produce the effect of tradition, it is necessary that the vendor shall
have had such control over the thing sold that, at the moment of the sale,
its material delivery could have been made. It is not enough to confer

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Sales Case Digest

First to Third Exam Coverage

upon the purchaser the ownership and the right of possession. The thing
sold must be placed in his control. When there is no impediment whatever
to prevent the thing sold passing into the tenancy of the purchaser by the
sole will of the vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or through another in his
name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality the delivery has
not been effected.
The execution of a public instrument is sufficient for the purposes of the
abandonment made by the vendor; but it is not always sufficient to permit
of the apprehension of the thing by the purchaser. This article "merely
declares that when the sale is made through the means of a public
instrument, the execution of this latter is equivalent to the delivery of the
thing sold: which does not and cannot mean that this fictitious tradition
necessarily implies the real tradition of the thing sold.
Affirmative. Hence, the mere execution of the instrument was not a
fulfillment of Addisons obligation to deliver the thing sold, and that from
such non-fulfillment arises Felix's right to demand, as she has demanded,
the rescission of the sale and the return of the price.
Of course if the sale had been made under the express agreement of
imposing upon the purchaser the obligation to take the necessary steps to
obtain the material possession of the thing sold, and it were proven that
she knew that the thing was in the possession of a third person claiming
to have property rights therein, such agreement would be perfectly valid.
But there is nothing in the instrument which would indicate, even
implicitly, that such was the agreement. It is true that the obligation was
incumbent upon the Felix to apply for and obtain the registration of the
land in the new registry of property; but from this it cannot be concluded
that she had to await the final decision of the Court of Land Registration,
in order to be able to enjoy the property sold. On the contrary, it was
expressly stipulated in the contract that the purchaser should deliver to
the vendor "of the products ... of the aforesaid four parcels from the
moment when she takes possession of them until the Torrens certificate of
title be issued in her favor." This obviously shows that it was not foreseen
that Felix might be deprived of her possession during the course of the
registration proceedings, but that the transaction rested on the
assumption that she was to have, during said period, the material
possession and enjoyment of the four parcels of land.

SPS. SANTOS vs. CA (2000)


Sps. Fortunato & Rosalinda Santos owned a house & lot located at Lot
7, Blk 8, Better Living Subd, Paraaque, Mla. The house & lot was
mortgaged with Rural Bank of Salinas to secure a loan of P150k maturing
on 16 Jun 87.
Sometime 84: Rosalinda met Carmen Caseda, a fellow market vendor
in Pasay. They became friends.
16 Jun 84: bank sent Rosalinda a letter demanding payment of
P16,915.84 in unpaid interest & other charges. Since Sps. Santos had not
funds, Rosalinda offered to sell the house & lot to Carmen. Carmen &
husband agreed.
Sometime Jun: Carmen & Rosalinda signed a document, Received the
amount of P54,100 as a partial payment of Mrs. Carmen Caseda to the (total)
amount of 350k (house and lot) that is own by Mrs. Rosalinda R. Santos.
The other terms & conditions were: (1) the balance of the mortgage
loan with the Rural bank amounting to P135,385.18; (2) the real estate
taxes; (3) the electric and water bills; and (4) the balance of the cash price
to be paid not later than June 16, 1987, which was the maturity date of
the loan.
Sps. Casedas gave an initial payment of P54,100 & immediately took
possession of the property, which they then leased out. They also paid in
installments the P81,696.84 of the mortgage loan. However, they failed to
pay the remaining balance of the loan because they suffered bankruptcy.
Notwithstanding, Carmen still paid in Mar 90 the real estate taxes on the
property for 81-84. She also settled the electric bills. All these payments
were made in the name of Rosalinda Santos.
Jan 89: Sps. Santos, seeing that Sps. Casedas lacked the means to pay
the remaining installments, repossessed the property. They then collected
the rentals from the tenants.
Feb 89: Carmen Caseda sold her fishpond in Batangas. She
approached Sps. Santos & offered to pay the balance of the purchase
price for the house & lot. They, however, could not agree & the deal could
not push through because Sps. Santos wanted a higher price, considering
the realty values increased.
11 Aug 89: Sps. Caseda filed an action against Sps. Santos to have
then execute the final deed of conveyance over the property or to
reimburse.

Sps. Santos contentions: the transaction was a mere contract to sell


since the sole documentary evidence clearly showed that they did not
transfer ownership of the property simultaneous with its delivery & hence,
they remained its owners pending fulfillment of the other suspensive
conditions.
ISSUE: WON the transaction was a contract of sale or contract to sell
Negative. A contract is what the law defines it to be, taking into
consideration its essential elements, and not what the contracting parties
call it. Art. 1458 obliges the vendor to transfer the ownership of the thing
sold as an essential element of a contract of sale.
Court was far from persuaded that there was a transfer of ownership
simultaneously with the delivery of the property purportedly sold. Records
show that notwithstanding the fact that the Casedas first took then lost
possession of the disputed house & lot, the title to the property has
remained always in the name of Rosalinda Santos. Also, although the
parties agreed that the Casedas would assume the mortgage, all
amortization payments made by Carmen Caseda to the bank were in the
name of Rosalinda Santos. Futher, the banks cancellation & discharge of
mortgaged dated 20 Jan 90 was made in favor of Rosalinda Santos.
These circumstances clearly show that no valid transfer of ownership was
made by the Santoses to the Casedas. Absent this essential element, their
agreement cannot be deemed a contract of sale.
Since the contract was a contract to sell, there was no rescission to
speak of. In a contract to sell, title remains with the vendor and does not
pass on to the vendee until the purchase price is paid in full, Thus, in
contract to sell, the payment of the purchase price is a positive suspensive
condition. Failure to pay the price agreed upon is not a mere breach,
casual or serious, but a situation that prevents the obligation of the vendor
to convey title from acquiring an obligatory force. If the vendor should
eject the vendee for failure to meet the condition precedent, he is
enforcing the contract and not rescinding it. When the Santoses
repossessed the disputed house and lot for failure of Casedas to pay the
purchase price in full, they were merely enforcing the contract and not
rescinding it.

SPS. SANTIAGO vs. VILLAMOR (2012)


Jan 82: Sps. Domingo & Trinidad Villamor mortgaged their 4.5 hectare
coconut land, Lot 1814, to Rural Bank of San Jacinto as security for P10k
loan.
For non-payment of the loan, bank extrajudicially foreclosed the
mortgage & was the highest bidder. When the Sps. Villamor failed to
redeem the property within the prescribed period, bank obtained a final
DOS in its favor sometime 91. Bank then offered the land for sale to any
interested buyer.
Specific Performance Case: Since the children of Sps. Villamor had
been in possession & cultivation of the land, they decided to acquire the
land from the bank. Bank agreed with them to a P65k sale, payable in
installments. They made 4 installment payments. When the bank refused
to issue a deed of conveyance in their favor despite full payment, they filed
a complaint.
Banks contention: it already issued a deed of repurchase in favor of
Sps. Villamor, that the payments made by the children & Catalina were
credited to the account of Domingo Villamor since the real buyers were
the Sps. Villamor.
RTC dismissed. CA set aside, ruling that children & Catalina made
installment payments on their own behalf & not as representatives of Sps.
Quieting of Title Case: 19 Jul 94, bank issued a DOS in favor of
Domingo Villamor Sr. 21 Jul, Sps. Villamor sold land to Sps. Santiago for
P150k.
20 Oct 94: After the children & Catalina refused to vacate, Sps.
Santiago filed a complaint for quieting of title.
Sps. Santiagos contentions: the Sps. Villamors execution of the DOS in
their favor was equivalent to delivery of the land under Art. 1458 & that
the possession of the children of the land should not be construed against
them since, by tradition & practice in Masbate, children use their parents
property.
ISSUE: WON the execution of the DOS transferred ownership to Sps.
Santiago
Negative. While the general rule is that the execution of a public
instrument shall be equivalent to the delivery of the thing, it only gives rise
only to a prima facie presumption of delivery, which is negated by the
failure of the vendee to take actual possession of the land sold. A person
who does not have actual possession of the thing sold cannot transfer

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Sales Case Digest

First to Third Exam Coverage

constructive possession by the execution and delivery of a public


instrument.
In this case, no constructive delivery of the land transpired upon the
execution of DOS since it was not the Sps. Villamor but the children &
Catalina who had actual possession of the land. The presumption of
constructive delivery is inapplicable and must yield to the reality that Sps.
Santiago were not placed in possession and control of the land.
Also, Sps. Santiago were not purchasers in good faith. They were not in
possession of the land. As prospective vendees, they have the burden of
investigating the rights of the children who were in actual possession of
the land. They cannot take refuge behind the allegation that by custom &
tradition in Masbate, the children use their parents property since they
offered no proof supporting that bare allegation. The burden of proving
the status of a purchaser in good faith lies upon the party asserting that
status and cannot be discharged by reliance on the legal presumption of
good faith.
LA FUERZA vs. CA (1968)
Associated Engineering Co. Inc. is a corporation engaged in the
manufacture & installation of flat belt conveyors. La Fuerza Inc. is also a
corporation engaged in the manufacture of wines.
Jan 60: Antonio Co, manager of AECI, called the office of La Fuerza &
told Pres. Mariano Lim that he had just visited La Fuerzas plant & was
impressed by its size & beauty but believed that it needed a conveyor
system to convey empty bottles from the storage room in the plant to the
bottle washers in the production room. He offered his services to
manufacture & install a conveyor system. At that time, Pres. Lim did not
make up his mind but suggested to Antonio Co to put down his offer in
writing on 4 Feb 60.
Mariano Lim, however, did not act on said offer until 11 Feb 60, when
Antonio Co returned to inquire about the action of La Fuerza on his offer.
Lim expressed his conformity by writing at the foot of Cos letter-offer
under the word confirmation his signature. He also added: All
specifications shall be in strict accordance with the approved plan made part
of this agreement hereof."
Few days later, Co made the demand for the downpayment of P5k in
the form of a check for said amount. After that agreement, AECI started to
prepare the premises for the installations of the conveyor system.
The work went under way during the months of March & April, during
which time Lim was duly apprised of the progress. It seems that the work
was completed during month of May 60. Thereafter, trial runs were made
in the presence of Lim, Co & others.
However, it was discovered that the conveyor system did not function to
their satisfaction because when operated, several bottles collided with
each other, some jumping off the conveyor belt & were broken, causing
considerable damage. It was also observed that the flow of the system was
so sluggish that in the opinion of Lim, their old system of carrying the
bottles from the storage room to the washers by hand carrying them was
more faster.
After the last trial run in July & after AECIs technical manager had been
advised several times to make the necessary & proper adjustments or
corrections in order to improve the efficiency, the defects were still not
remedied. When AECI billed La Fuerza for the balance, La Fuerza refused
to pay for the reason that the conveyor system did not serve its purpose.
22 Mar 61: AECI filed an action to recover the sums of P8,250, balance
of the stipulate price of the conveyors & P2k as attorneys fees.
La Fuerzas contentions: the conveyors furnished & installed by AECI
did not meet the conditions & warranties. Also prayed for contract to be
rescinded. Further alleged that there has been no delivery of the conveyors
to it & that assuming there was, the period of 6 months provided in said
Art. 1571 refers to the "period within which" La Fuerza may "bring an
action to demand compliance of the warranty against hidden defects", not
the action for rescission of the contract.
ISSUE: WON there was delivery of the conveyors
Affirmative. Article 1571 provides that an action to rescind 'shall be
barred after six months, from delivery of the thing sold". When the thing
subject of the sale is placed in the control and possession of the vendee,
delivery is complete. Delivery is an act of the vendor. Thus, one of the
obligations of the vendor is the delivery of the thing sold. The vendee has
nothing to do with the act of delivery by the vendor. On the other hand,
acceptance is an obligation on the part of the vendee. Delivery and
acceptance are two distinct and separate acts of different parties.
Consequently, acceptance cannot be regarded as a condition to complete
delivery.
Upon the completion of the installation of the conveyors, in May 60,
particularly after the last trial run, in Jul 60, La Fuerza was in a position to

decide whether or not it was satisfied with said conveyors, and, hence, to
state whether the same were accepted or rejected. The failure of La Fuerza
to express categorically whether they accepted or rejected the conveyors
does not detract from the fact that the same were actually in its
possession and control; that, accordingly, the conveyors had already been
delivered by La Fuerza and that, the period provided in said Art. 1571 had
begun to run.
Pursuant to Art. 1566 & 1567, if the thing sold has hidden faults or
defects, as the conveyors are claimed to have, the vendor or AECI shall be
responsible therefor and the vendee or La Fuerza "may elect between
withdrawing from the contract and demanding a proportional reduction of
the price, with damages in either case." In the exercise of this right of
election, La Fuerza had chosen to withdraw from the contract, by praying
for its rescission; but the action therefor "shall be barred after six months,
from the delivery of the thing sold." The period of 4 years, provided in Art.
1389 of said Code, for "the action to claim rescission," applies to contracts,
in general, and must yield to said Art. 1571, which refers to sales in
particular.
Indeed, in contracts of the latter type, especially when goods,
merchandise, machinery or parts or equipment thereof are involved, it is
obviously wise to require the parties to define their position, in relation
thereto, within the shortest possible time. Public interest demands that the
status of the relations between the vendor and the vendee be not left in a
condition of uncertainty for an unreasonable length of time, which would
be the case, if the lifetime of the vendee's right of rescission were 4 years.

SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE


TAGATAC vs. JIMENEZ
Trinidad Tagatac bought a car for $4,500 in the US. After 7 months, she
brought the car to the Philippines.
Warner Feist, who pretended to be a wealthy man, offered to buy
Trinidads car for P15k, and Tagatac was amenable to the idea. Hence, a
deed of sale was executed. Feist paid by means of a postdated check, and
the car was delivered to Feist. However, PNB refused to honor the checks
and told her that Feist had no account in said bank.
Tagatac notified the law enforcement agencies of the estafa committed
by Feist, but the latter was not apprehended and the car disappeared.
Meanwhile, Feist managed to succeed in having the cars registration
certificate transferred in his name. He sold the car to Sanchez, who was
able to transfer the registration certificate to his name.
Sanchez then offered to sell the car to Liberato Jimenez, who bought
the car for P10k after investigating in the Motor Vehicles Office. Tagatac
discovered that the car was in California Car Exchanges (place where
Jimenez displayed the car for sale), so she demanded from the manager
for the delivery of the car, but the latter refused.
Tagatac filed a suit for the recovery of the cars possession, and the
sheriff, pursuant to a warrant of seizure that Tagatac obtained, seized and
impounded the car, but it was delivered back to Jimenez upon his filing of
a counter-bond. The lower court held that Jimenez had the right of
ownership and possession over the car.
ISSUE: WON Jimenez was a purchaser in good faith and thus entitled to
the ownership and possession of the car
It must be noted that Tagactac was not unlawfully deprived of his car. In
this case, there is a valid transmission of ownership from true owner
(Tagatac) to the swindler (Feist), considering that they had a contract of
sale (note: but such sale is voidable for the fraud and deceit by Feist).
The disputable presumption that a person found in possession of a
thing taken in the doing of a recent wrongful act is the taker and the doer
of the whole act does not apply in this case because the car was not stolen
from Tagatac, and Jimenez came into possession of the car two months
after Feist swindled Tagatac.
Jimenez was a purchaser in good faith for he was not aware of any flaw
invalidating the title from the seller of the car. In addition, when Jimenez
acquired the car, he had no knowledge of any flaw in the title of the
person from whom he acquired it. It was only later that he became fully
aware that there were some questions regarding the car, when he filed a
petition to dissolve Tagatacs search warrant which had as its subject the
car in question.
The contract between Feist and Tagactac was a voidable contract, it can
be annulled or ratified. The fraud and deceit practiced by Warner L. Feist
earmarks this sale as a voidable contract (Art. 1390). Being a voidable
contract, it is susceptible of either ratification or annulment. If the contract
is ratified, the action to annul it is extinguished (Art. 1392) and the
contract is cleansed from all its defects (Art. 1396); if the contract is
annulled, the contracting parties are restored to their respective situations

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Sales Case Digest


before the contract and mutual restitution follows as a consequence (Art.
1398).
Being a voidable contract, it remains valid and binding until annulled.
However, as long as no action is taken by the party entitled, either that of
annulment or of ratification, the contract of sale remains valid and binding.
When Trinidad C. Tagatac delivered the car to Feist by virtue of said
voidable contract of sale, the title to the car passed to Feist. Of course, the
title that Feist acquired was defective and voidable.
Nevertheless, at the time he sold the car to Felix Sanchez, his title
thereto had not been avoided and he therefore conferred a good title on
the latter, provided he bought the car in good faith, for value and without
notice of the defect in Feist's title (Art. 1506). There being no proof on
record that Felix Sanchez acted in bad faith, it is safe to assume that he
acted in good faith.
As to Tagatacs allegation that lower court ignored the judgment
convicting Feist of estafa, and that it erred in not declaring that
restitution of the swindled property must follow: untenable. LC noted that
Feist was accused of estafa because of the check & not because of delivery
of the car.
EDCA vs. SANTOS (1990)
5 Oct 81: one Professor Jose Cruz placed an order by telephone with
EDCA Publishing for 406 books, payable on delivery. EDCA prepared the
corresponding invoice & delivered the books. Cruz issued a personal
check.
7 Oct: Cruz sold 120 of the book to Leonor Santos who, after verifying
the sellers ownership from the invoice he showed her, paid him P1,700.
Meanwhile, EDCA became suspicious over a 2nd order placed by Cruz.
It made inquiries with De La Salle College where he had claimed to be a
dean and was informed that there was no such person in its employ. It
also found that Cruz had no more account or deposit with Philippine
Amanah Bank, against which he had drawn the payment check. EDCA
then went to the police, which set a trap & arrested Cruz. It was found that
his real name was Tomas dela Pea.
7 Oct 81: EDCA sought the assistance of the police, which forced their
way into the store of Leonor Santos & threatened her with prosecution for
buying stolen property. They seized the 120 books without warrant.
Sps. Santos sued for recovery of the books after demand foe their
return was rejected by EDCA.
EDCAs contentions: Sps. Santos have not established their ownership
of the disputed books because they have not even produced a receipt to
prove they had bought the stock. Further, it was because Cruz acquired no
title to the books that he could have validly transferred to Santos. Since
the payment of the check bounced for lack of funds, there was a failure of
consideration that nullified the contract of sale between it & Cruz.
ISSUE: WON EDCA has been unlawfully deprived of the books because the
check issued by Cruz in payment therefor was dishonored
Negative. It must be noted that Leonor Santos first ascertained the
ownership of the books from the EDCA invoice showing that they had been
sold to Cruz, who said he was selling them for a discount because he was
in financial need. Sps. Santos are in the business of buying and selling
books and often deal with hard-up sellers who urgently have to part with
their books at reduced prices. To Leonor Santos, Cruz must have been
only one of the many such sellers she was accustomed to dealing with. It
is hardly bad faith for any one in the business of buying and selling books
to buy them at a discount and resell them for a profit. Art. 559 also
provides that the possession of movable property acquired in good faith
is equivalent to a title.
The contract of sale is consensual and is perfected once agreement is
reached between the parties on the subject matter and the consideration,
citing Arts. 1475, 1477, 1478.
Ownership in the thing sold shall not pass to the buyer until full
payment of the purchase only if there is a stipulation to that effect.
Otherwise, the rule is that such ownership shall pass from the vendor to
the vendee upon the actual or constructive delivery of the thing sold even
if the purchase price has not yet been paid. Non-payment only creates a
right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation
above noted, delivery of the thing sold will effectively transfer ownership to
the buyer who can in turn transfer it to another.
Actual delivery of the books having been made, Cruz acquired
ownership over the books which he could then validly transfer to the
private respondents. The fact that he had not yet paid for them to EDCA
was a matter between him and EDCA and did not impair the title acquired
by the private respondents to the books.

First to Third Exam Coverage


To repeat, Leonor Santos took care to ascertain first that the books
belonged to Cruz before she agreed to purchase them. The EDCA invoice
Cruz showed her assured her that the books had been paid for on delivery.
By contrast, EDCA was less than cautious in fact, too trusting in dealing
with the impostor. Although it had never transacted with him before, it
readily delivered the books. It did not verify his identity although it was
easy enough to do this. It did not wait to clear the check of this unknown
drawer. Worse, it indicated in the sales invoice issued to him, by the
printed terms thereon, that the books had been paid for on delivery,
thereby vesting ownership in the buyer. Surely, Santos did not have to go
beyond that invoice to satisfy herself that the books being offered for sale
by Cruz belonged to him; yet she did. Although the title of Cruz was
presumed under Article 559 by his mere possession of the books, these
being movable property, Leonor Santos nevertheless demanded more
proof before deciding to buy them.
AZNAR vs. YAPDIANGCO (1965)
May 59: Teodoro Santos advertised in 2 metropolitan papers the sale
of his Ford Fairlane 500. A certain L. De Dios, claiming to be a nephew of
Vicente Marella, went to Santos residence to answer the ad. However,
Teodoro Santos was out during this call & its was his son, Irineo who
received & talked with De Dios. Santos then instructed his son to see
Vicente Marella the following day at his given address.
29 May: Irineo went to said address. At this meeting, Marella agreed to
buy the car for P14.7k on the understanding that the price would be paid
only after the car had been registered in his name. Then, Teodoro together
with L. De Dios went to the office of Atty. Jose Padolina where the DOS for
the car was executed in Marellas favor. Then they proceeded to the Motor
Vehicles Office in QC where the registration of the car in Marellas name
was effected. However, purchase price had not yet been paid.
From the MVO, Teodoro returned to his house. He gave the registration
papers & a copy of the DOS to Irineo & instructed him not to part with
them until Marella shall have given the full payment. Irineo went to Marella
& demanded the purchase price but Marella asked to be allowed to secure
the shortage from a sister. He ordered L. De Dios to go to said sister &
suggested that Irineo go with him. At the same time, he requested the
registration papers & DOS from Irineo on the pretext that he would like to
show them to his lawyer. Trusting Marella, Irineo handed over the same &
went with L. De Dios.
When they were already in Marellas sisters house, Irineo was asked to
wait at the sala. However, after a long time of waiting, Irineo went down to
discover that the car was no longer there. He went back to the house &
inquired a woman he saw for De dios but was told that no such name
lived there. Irineo rushed to see Marella but found the house closed. He
reported the matter to his father who advised the police authorities.
29 May: Marella was able to sell the car to Jose Aznar for P15k. while
the car was in his possession, agents of the PH Constabulary seized &
confiscated the car. Aznar filed a complaint for replevin.
ISSUE: Who between Santos & Aznar has a better right to the car?
Santos has the better right. Citing Art. 1506, it is essential that the seller
should have a voidable title at least. It is very clearly inapplicable where, as
in this case, the seller had no title at all. Vicente Marella did not have any
title to the property under litigation because the same was never delivered
to him. He sought ownership or acquisition of it by virtue of the contract.
Vicente Marella could have acquired ownership or title to the subject
matter thereof only by the delivery or tradition of the car to him.
Ownership is not transferred by contract merely but by tradition or
delivery. Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same.
In the case at bar, the car in question was never delivered to the vendee
by the vendor as to complete or consummate the transfer of ownership by
virtue of the contract. It should be recalled that while there was indeed a
contract of sale between Vicente Marella and Teodoro Santos, the former,
as vendee, took possession of the car by stealing the same while it was in
the custody of the latter's son.
There is no adequate evidence on record as to whether Irineo Santos
voluntarily delivered the key to the car to the unidentified person who
went with him and L. De Dios to the place on Azcarraga where a sister of
Marella allegedly lived. But even if Irineo Santos did, it was not the delivery
contemplated by Article 712. For then, it would be indisputable that he
turned it over to the unidentified companion only so that he may drive
Irineo Santos and De Dios to the said place on Azcarraga and not to vest
the title to the said vehicle to him as agent of Vicente Marella.
In Art. 559, when the owner has been unlawfully deprived of the thing
or when he lost it, the possessor cannot retain the thing as against the

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Sales Case Digest


owner, who may recover it without paying any indemnity, except when the
possessor acquired it in a public sale.
the right of the owner to recover personal property acquired in good
faith by another, is based on his being dispossessed without his consent.
The common law principle that where one of two innocent persons must
suffer by a fraud perpetrated by another, the law imposes the loss upon
the party who, by his misplaced confidence, has enabled the fraud to be
committed, cannot be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559. Between common
law principle & a statutory provision, latter must prevail.

LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS

First to Third Exam Coverage


15 May: The books were delivered to & received by Tabora in his law
office. However, on same date, a big fired broke out in Naga & burned all
the buildings, including the law office & library of Tabora.
Tabora reported this event to the company. The company replied & as a
token of goodwill, it sent to Tabora volumes 75-78 of PH Reports free of
charge. Since Tabora failed to pay the monthly installments agreed upon,
it filed the present action for recovery of the balance.
Taboras contentions: Since it was agreed that title to & ownership of
the books shall remain with seller until full payment & the books were
burned immediately after transaction, Lawyers Cooperative should bear
the loss. Even assuming that ownership was transferred, Tabora should
not bear the loss because the loss occurred through force majeure.

CHRYSLER vs. CA (1984)

ISSUE: Who bears the loss?

Chrysler is a domestic corporation engaged in the assembling & sale of


motor vehicles & other automotive products. Sambok Motors was its
dealer for automotive products with offices in Bacolod & Iloilo. Miguel Ng
was Asst. Manager for Bacolod while Pepito Ng was the President.
2 Oct 70: Sambok Bacolod ordered from Chrysler various automotive
products worth P30,909 payable in 45 days.
25 Nov: Chrysler delivered said products to its forwarding agent, Allied
Brokerage Corp. for shipment. Allied Brokerage loaded the goods on board
M/S Doa Florentina, a vessel owned & operated by Negros Navigation Co.
for delivery to Sambok Bacolod. When Chrysler tried to collect from
Sambok the amount representing the price of the spare parts plus
handling charged, Sambok Bacolod refused to pay claiming it had not
received the merchandise.
4 years later, however, or in 1974, when a warehouseman of Negros
Navigation, Severino Aguarte, found in their off-shore bodega, parts of the
shipment in question, but already deteriorated and valueless.
TC dismissed the complaint against Negros Navigation but found
Sambok Bacolod liable for Chryslers claims. It found the act of Sambok
Bacolod "in refusing to take delivery of the shipment for no justifiable
reason from Negros Navigation despite having received the Bill of Lading
constituted wrongful neglect or refusal to accept and pay for the subject
shipment, by reason of which Sambok may be held liable for damages.
CA set aside the judgment and dismissed the complaint of Chrysler
after finding that it had not performed its part of the obligation under the
contract when it did not deliver the goods at Sambok Iloilo, the place
designated in the Parts Order Form & must therefore suffer the loss
because of the misdelivery

Tabora must bear the loss. While as a rule the loss of the object of the
contract of sale is borne by the owner or in case of force majeure the one
under obligation to deliver the object is exempt from liability, the
application of that rule does not here obtain because the law on the
contract entered into on the matter argues against it. It is true that in the
contract entered into between the parties the seller agreed that the
ownership of the books shall remain with it until the purchase price shall
have been fully paid, but such stipulation cannot make the seller liable in
case of loss not only because such was agreed merely to secure the
performance by the buyer of his obligation but in the very contract it was
expressly agreed that the "loss or damage to the books after delivery to
the buyer shall be borne by the buyer." Cited Art. 1504.
Neither can Tabora find comfort in the claim that since the books were
destroyed by fire without any fault on his part he should be relieved from
the resultant obligation under the rule that an obligor should be held
exempt from liability when the loss occurs thru a fortuitous event. This is
because this rule 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. Here these qualifications are not
present. The obligation does not refer to a determinate thing, but is
pecuniary in nature, and the obligor bound himself to assume the loss
after the delivery of the goods to him. In other words, the obligor agreed to
assume any risk concerning the goods from the time of their delivery,
which is an exception to Art. 1262.

ISSUE: Who must bear the deterioration?


The matter of misdelivery is not the decisive factor for relieving Sambok
Bacolod, of liability. While it may be that the Parts Order Form specifically
indicated Iloilo as the destination, Sambok, Bacolod & Sambok, Iloilo are
actually one. The order for spare parts was made by the President of
Sambok, Pepito Ng, through its marketing consultant. Notwithstanding,
upon receipt of the Bill of Lading, Sambok Bacolod, initiated, but did not
pursue, steps to take delivery as they were advised by Negros Navigation
that because some parts were missing. they would just be informed as
soon as the missing parts were located.
Sambok, Bacolod, cannot be faulted for not accepting or refusing to
accept the shipment from Negros Navigation four years after shipment.
The evidence is clear that Negros Navigation could not produce the
merchandise nor ascertain its whereabouts at the time Sambok, Bacolod,
was ready to take delivery. Where the seller delivers to the buyer a
quantity of goods less than he contracted to sell, the buyer may reject
them.
Negros Navigation was the party negligent in failing to deliver the
complete shipment either to Sambok Bacolod or to Sambok Iloilo.
However, Chrysler failed to comply with the conditions precedent to the
filing of a judicial action. Hence, it is Chrysler that must shoulder the
resulting loss. The general rule is that before delivery, the risk of loss is
borne by the seller who is still the owner, under the principle of "res perit
domino".
LAWYERS COOPERATIVE vs. TABORA (1965)
3 May 55: Perfecto Tabora bought from the Lawyers Cooperative
Publishing Co. one complete set of American Jurisprudence, General
Index, consisting of 4 volumes. He made partial payment of P300 to the
P1,682.40 purchase price. The contract between the parties provided that,
"title to and ownership of the books shall remain with the seller until the
purchase price shall have been fully paid. Loss or damage to the books after
delivery to the buyer shall be borne by the buyer."

LEVY vs. GERVACIO (1939)


10 Mar 37: Levy Hermanos, Inc. sold to Lazaro Blas Gervacio a Packard
car. After making initial payment, Gervacio executed a promissory note for
the balance of P2,400 payable on/before 15 Jun 37 with 12%/annum. To
secure payment of the note, he mortgaged the car to Levy.
However, Gervacio failed to pay the note. So Levy foreclosed the
mortgage & the car was sold at public auction. Levy was the highest
bidder for P1,800.
The present action is for collection of the balance of P1,600 + interest.
The lower court applied Art. 1454-A of CC & rendered judgment in favor of
Gervacio.
ISSUE: WON there was sale of personal property payable in installments
Art. 1454-A provides, In a contract for the sale of personal property
payable in installments shall confer upon the vendor the right to cancel the
sale or foreclose the mortgage if one has been given on the property, without
reimbursement to the purchaser of the installments already paid, if there be
an agreement to this effect. However, if the vendor has chosen to foreclose
the mortgage he shall have no further action against the purchaser for the
recovery of any unpaid balance owing by the same and any agreement to the
contrary shall be null and void.
In order to apply the provisions of Art. 1454-A, it must appear that there
was a contract for the sale of personal property payable in installments
and that there has been a failure to pay two or more installments.
Negative. While the sale was of personal property, it is not one on
installments but on straight term, in which the balance, after payment of
the initial sum, should be paid in its totality at the time specified in the
promissory note. Hence, it is not a transaction contemplated in Act 1422.
Therefore, the mortgagee is not bound by the prohibition contained as to
the right to the recovery of the unpaid balance.
The law is aimed at those sales where the price is payable in several
installments, for, generally, it is in these cases that partial payments
consist in relatively small amounts, constituting thus a great temptation for
improvident purchasers to buy beyond their means. There is no such
temptation where the price is to be paid in cash, or, as in the instant case,
partly in cash and partly in one term, for, in the latter case, the partial
payments are not so small as to place purchasers off their guard and

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Sales Case Digest


delude them to a miscalculation of their ability to pay. The difference
exists for according to the regular course of business, in contracts
providing for payment of the price in two installments, there is generally a
provision for initial payment. But all these considerations are immaterial.
A cash payment cannot be considered as a payment by installment, and
even if it can be so considered, still the law does not apply, for it requires
non-payment of two or more installments in order that its provisions may
be invoked. Here, only one installment was unpaid.
DELTA MOTOR vs. NIU KIM DUAN (1992)
5 Jul 75: Niu Kim Duan & Chan Fue Eng purchased from Delta Motor
Sales Corp. 3 units of Daikin air-conditioner all valued at P19,350,
evidenced by a Deed of Conditional Sale with the ff terms Niu Kim Duan
shall pay downpayment of P774 & the balance shall be paid in 24
installments; title to the properties purchased shall remain with Delta; if
any 2 installments are not paid on their due dates, the whole principal
sum remaining unpaid shall become due, etc.
To secure payment of the balance, Kim Duan & Fue Eng jointly &
severally executed in favor of Delta a promissory note. The air-conditioners
were delivered. After paying P6,966, they failed to pay at least 2 monthly
installments. Because of their unjustified refusal to pay their outstanding
account, Delta tried to recover the properties extra-judicially but failed.
Hence, Delta prayed for issuance of writ of replevin.
Kim Duans contention: the DOCS was contrary to law, moral, customs,
etc. The stipulation that the contract shall automatically become null &
void, & all sums already paid shall be considered as rental should the buyer
fail to pay any of the monthly installments due was iniquitous. Also that the
enforcement of the deed will unjustly enrich Delta at their expense.
ISSUE: WON
They cannot complain that their payments were treated as rentals. A
stipulation in a contract that the installments paid shall not be returned to
the vendee is valid insofar as the same may not be unconscionable under
the circumstances sanctioned by Art. 1486. The monthly installment
payable by defendants was P774. The P5,655.92 installment payments
correspond only to 7 monthly installments. Since they admit having used
the air-conditioners for 22mos, this means that they did not pay for
15mos. They were using the same for free for the said period. Hence, the
treatment of installments as rentals cannot be said to be unconscionable.
The 3 remedies under Art. 1484 are alternative & not cumulative. If the
creditor chooses one remedy, he cannot avail himself of the other two.
It is not disputed that Delta had taken possession of the three airconditioners, through a writ of replevin when defendants refused to extrajudicially surrender the same. This was done pursuant to para. 5 and 7 of
its Deed of Conditional Sale when defendants failed to pay at least 2
monthly installments. The case Delta filed was to seek a judicial
declaration that it had validly rescinded the DOCS.
Clearly, Delta chose the second remedy of Art. 1484 in seeking
enforcement of its contract with defendants. This is shown from the fact
that the computation of the outstanding account of defendants as of 3 Oct
77 took into account "the value of the units repossessed." Having done so,
it is barred from exacting payment from defendants of the balance of the
price of the three air-conditioning units which it had already repossessed.
TAJANLANGIT vs. SOUTHERN MOTORS (1957)
Apr 53: Amador Tajanlangit & his wife Angeles bought from Southern
Motors Inc. of Iloilo two tractors & a thresher. In payment for the same,
they executed a promissory note whereby they undertook to satisfy the
total purchase price of P24,755.75 in several installments payable from
18 May 53 to 10 Dec 55. Also stipulated that if default be made in the
payment of interest or of any installment, then the total principal sum still
unpaid shall at once be demandable.
The spouses failed to meet any installment. Hence, they were sued for
the amount of the promissory note.
An order of execution was issued & the sheriff levied the same
machineries. They were sold to Southern Motors for P10k. Thereafter,
Southern Motors asked & obtained an alias writ of execution for the
balance of the debt. The sheriff levied attachment on the Tajanlangits
rights & interests in certain real properties with a view to another sale.
To prevent such sale, Tajanlangits instituted this action, contending that
1) they had returned the machineries to Southern Motors, which
accepted the same & had thereby settled their accounts, 2) as Southern
Motors had repossessed the machines purchased on installment, the
buyers were thereby relieved from further responsibility in view of Recto
Law, now Art. 1484.

First to Third Exam Coverage


Southern Motors contentions: denied having repossessed the
machineries since they were attached by the sheriff & deposited in
Southern Motors for safekeeping, before the sale at public auction.
ISSUE:
There has been no foreclosure of the chattel mortgage nor a foreclosure
sale. Therefore, the prohibition against further collection does not apply. It
is true that there was a chattel mortgage on the goods sold. But the
Southern Motors elected to sue on the note exclusively, i.e. to exact
fulfillment of the obligation to pay. It had a right to select among the three
remedies established in Art. 1484. In choosing to sue on the note, it was
not thereby limited to the proceeds of the sale, on execution, of the
mortgaged good.
It must be noted that Southern Motors denied the alleged acceptance &
cancellation of the sale, asserting that the goods were deposited in its
shop when the sheriff attached them in pursuance of the execution. This
assertion is backed up by the sheriff.
ELISCO vs. CA (1999)
Rolando Lantan was employed at Elisco Tool Manufacturing Corp. as
head of its cash department.
9 Jan 80: Lantan entered into an agreement with the company,
whereby Elisco leased its car Colt Lancer for P1010.65 for a period of 5
yrs in favor of Lantan. It was also agreed upon that lease rentals shall be
deducted from his monthly salary; that all expenses & costs shall be for
the account of Lantan; that upon failure of Lantan to pay 3 accumulated
monthly rentals will vest upon Elisco the full right to lease the vehicle to
another employee. Subsequently, Lantan executed a promissory note.
81: Elisco ceased operations. As a result, Lantan was laid off.
Nonetheless, he was able to make payments as of 4 Dec 84.
6 Jun 86: Elisco filed a complaint entitled replevin plus sum of money
against Lantan, his wife Rina & 2 other persons. It alleged that they failed
to pay the monthly rentals, totaling to P39,054.86 & that despite
demands, they failed to settle their obligation.
Lantans contentions: the agreement on which the complaint was
based had not been signed by Eliscos representative, although it was
signed by Lantan. Their true agreement was to buy & sell, & not lease with
option to buy the car at a monthly amortization of P1k.
Eliscos contentions: the contract was one of lease with option to
purchase & that the promissory note was merely a nominal security. Also
contended that mere acceptance of the amounts paid was not evidence
that they agreed it to be one of purchase & sale.
ISSUE: WON the transaction was a sale or a lease
Elisco does not deny that Lantan acquired the car under a car plan for
executives of the Elizalde group of companies. Under a typical car plan,
the company advances the purchase price of a car to be paid back by the
employee through monthly deductions from his salary. The company
retains ownership of the motor vehicle until it shall have been fully paid
for. However, retention of registration of the car in the company's name is
only a form of a lien on the vehicle in the event that the employee would
abscond before he has fully paid for it. There are also stipulations in car
plan agreements to the effect that should the employment of the
employee concerned be terminated before all installments are fully paid,
the vehicle will be taken by the employer and all installments paid shall be
considered rentals per agreement.
Sale. Although the agreement provides for the payment by Lantan of
monthly rentals, the agreement also gave Lantan that the option to
purchase the motor vehicle at the end of the 5th year or upon payment of
the 60th monthly rental when "all monthly rentals shall be applied to the
payment of the full purchase price of the car." Hence, it is clear that the
transaction is a lease in name only. The so-called monthly rentals are in
truth monthly amortizations on the price of the car.
The contract was one of sale on installments. Hence, Art. 1484 applies.
The remedies are alternative, not cumulative. This limitation applies to
contracts purporting to be leases of personal property with option to buy.
The condition that the lessor has deprived the lessee of possession or
enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled
in this case by the filing by petitioner of the complaint for replevin to
recover possession of movable property.
In the case at bar, by virtue of the writ of seizure, the sheriff seized the
vehicle & thereby, deprived Lantan of its use. The car was not returned
until 16 Apr 89, after 2 yrs & 8 mos, upon issuance by CA of a writ of
execution.
Elisco prayed for the issuance of a writ of replevin & in the event that
the car could not be delivered, it prayed that Lantan be made to pay P60k

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Sales Case Digest

First to Third Exam Coverage

as the estimated value of the car plus accrued rentals. This cannot be
granted. Notwithstanding this impossibility in Eliscos choice of remedy,
this case should be considered as one for specific performance pursuant
to Art. 1484(1). In this view, the prayer for issuance of a writ of replevin is
only for the purpose of insuring specific performance by Lantan.
Lantan could no longer be held liable for P60k because he had fulfilled
his part of the obligation. The agreement does not provide for the payment
of interest on unpaid monthly "rentals" or installments because it was
entered into in pursuance of a car plan adopted by the company for the
benefit of its deserving employees. The car plan was intended to give
additional benefits to executives.
As to contention that the promissory note provides for interest
payment: no evidence that Lantan received the amount indicated in the
promissory note as its value. What was proven was the fact that Lantan
received the car from Elisco valued at P60k & for which, Lantan paid
monthly amortizations of P1010.65 through salary deductions.
His default in paying was due to the cessation of operations of Elizalde
Steel Corp, Eliscos sister company. Eliscos acceptance of payments made
by Lantan through cash & checks could have been impelled solely by
Eliscos inability to deduct the amortizations from Lantans salary which
he stopped receiving when he was terminated.

CONVENTIONAL REDEMPTION
HEIRS OF REYES VS. REYES (2010)
Antonio Reyes and wife Leoncia were owners of a parcel of residential
land in Bulacan. They constructed their dwelling on that land. They had 4
children Jose Sr., Teofilo Reyes, Jose Jr. and Potenciana.
Antonio died intestate and was survived by Leoncia and 3 sons.
Potenciana also died intestate, survived by her heirs. Jose Jr. & his family
resided in the house of the parents but Teofilo constructed on the
property his own house, where his family resided.
9 Jul 55: Leoncia & her 3 sons executed a Kasulatan ng Biling
Mabibiling Muli, whereby they sold the land & its existing improvements to
Sps. Francia for P500, subject to their right to repurchase for the same
amount sa oras na silay makinabang. Nonetheless, Teofilo & Jose Jr. & their
families remained in possession of the property & paid realty taxes.
Leoncia & her children did not repay the amount of P500. Alejandro,
the son of Jose Sr., first partially paid to Sps. Francia the amount of P265
for their obligation. Alejandro later on paid the balance of P235.
11 Aug 70: Heirs of Sps. Francia executed a Pagsasaayos ng Pag-aari at
Pagsasalin, whereby they transferred & conveyed to Alejandro all their
rights & interests in the property for P500.
21 Aug: Alejandro executed a Kasulatan ng Pagmeme-ari, wherein he
declared that he had acquired all the rights & interests of the heirs of Sps.
Francia, including ownership of the property after the original vendors
failed to repurchase within the given period. The ownership of the land
was transferred to Alejandro & he paid realty taxes.
17 Oct: Alejandro, Leoncia & father Jose Sr. executed a Magkakalakip na
Salaysay, by which Alejandro acknowledged the right of Leoncia, Jose Jr &
Jose Sr to repurchase the property at any time for P500.
Leoncia died & was survived by Jose Sr, Teofilo, Jose Jr & heirs of
Potenciana. Even after her death, Teofilo & Jose Jr continued to reside in
the same property. Eventually, all Leoncias son died intestate. Alejandro
also died.
94: Amanda Reyes (wife of Alejandro) asked the heirs of Teofilo & Jose
Jr to vacate the property because she & her children already needed it.
After they refused, she filed a complaint, seeking their eviction.
28 Sep: Amanda Reyes filed for quieting of title & reconveyance against
the heirs of Jose Jr. They alleged that Alejandro had acquired ownership of
the property by virtue of the deed Pagsasaayos ng Pag-aari at Pagsasalin.
Heirs of Jose Jrs contentions: the Kasulatan ng Biling Mabibiling Muli
was an equitable mortgage, not a pacto de retro sale. And that the Sps.
Francia could not have validly sold the property to Alejandro through the
Pagsasaayos ng Pag-aari at Pagsasalin deed.
ISSUE: WON there was a pacto de retro sale or an equitable mortgage
Equitable mortgage. No dispute that the vendors had continued to
possess the property even after the execution of the agreement. The
property had remained declared for taxation purposes under Leoncias
name, with realty taxes due being paid by Leoncia, despite its execution.
Even the heirs of Sps. Francia admitted that the property had been
mortgaged to their parents.
These circumstances are among the badges of an equitable mortgage
in Art. 1602, pars. 2 & 5. The existence of any one of the conditions

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Sales Case Digest


enumerated under Art. 1602 suffices to give rise to the presumption that
the contract is an equitable mortgage.
Q: Are the heirs of Jose Jr. now barred from claiming that the
transaction under the Kasulatan ng Biling Mabibiling Muli was an
equitable mortgage by their failure to redeem the property for a long
period of time? No.
The phrase sa oras na silay makinabang was he period of redemption
stated in the Kasulatan. However, this did not signify a definite period.
Therefore, the period to redeem should be 10 yrs from the execution of
the contract, pursuant to Arts. 1142 & 1144.
Thus, the redemption price should have been paid by 9 Jul 55. And
upon expiration of said period, Sps. Francia or their heirs should have
foreclosed the mortgage but they did not do so. Instead, they accepted
Alejandros payments, until the debt was fully satisfied.
The acceptance of the payments even beyond the 10-yr period
estopped the mortgagee-heirs from insisting that the period to redeem
had already expired. Their actions recognized the continued existence of
the equitable mortgage. Acceptance of partial payments was absolutely
incompatible with the idea of irrevocability of the title of ownership of the
purchaser upon the expiration of the term stipulated in the original
contract for the exercise of the right of redemption. Thereby, the conduct
of the parties manifested that they had intended the contract to be a
mortgage, not a pacto de retro sale.
Therefore, when Alejandro redeemed the property, he did not become a
co-owner thereof because his father was then still alive. Alejandro merely
became the assignee of the mortgage & the property continued to be coowned by Leoncia & her sons. As an assignee, Alejandro acquired only the
rights of his assignors, nothing more. He even confirmed in the Magkasanib
na Salaysay that he acknowledged the co-owners right to redeem the
property from him at any time.
Neither did the Heirs of Jose Jr.s failure to initiate an action for
reformation within 10 yrs from the execution of the Kasulatan bar them
from insisting on their rights. Records show that the parties in the
Kasulatan had abided by their true agreement under the deed, to the
extent that they and their successors-in-interest still deemed the
agreement as an equitable mortgage despite the lapse of 15 years from
the execution of the purported pacto de retro sale. Hence, an action for
reformation of the Kasulatan ng Biling Mabibiling Muli was unnecessary, if
not superfluous, considering that the reason underlying the requirement
for an action for reformation of instrument has been to ensure that the
parties to a contract abide by their true intended agreement.
The Kasulatan ng Pagmeme-ari executed by Alejandro was ineffectual to
predicate the exclusion of the petitioners and their predecessors in
interest from insisting on their claim to the property. Alejandro's being an
assignee of the mortgage did not authorize him or his heirs to appropriate
the mortgaged property for himself without violating the prohibition
against pactum commissorium in Art. 2088. Hence, the consolidation of the
ownership in favor of Alejandro was a nullity because it was an improper &
inappropriate remedy to enforce a transaction declared to be a mortgage.
Q: What was the effect of the Magkasanib na Salaysay?
The law allows a new period of redemption to be agreed upon or
granted even after the expiration of the equitable mortgagor's right to
repurchase, and treats such extension as one of the indicators that the
true agreement between the parties is an equitable mortgage, not a sale
with right to repurchase. It was indubitable, therefore, that the Magkasanib
na Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a
fresh period within which to pay to Alejandro the redemption price.
Q: Did Alejandro & heirs acquire the mortgaged property through
prescription? No.
Alejandro did not have adverse and exclusive possession of the
property, as, in fact, the other co-owners had continued to possess it, with
Alejandro and his heirs occupying only a portion of it. Neither did the
cancellation of the previous tax declarations in the name of Leoncia, the
previous co-owner, and the issuance of a new one in Alejandro's name,
and Alejandro's payment of the realty taxes constitute repudiation of the
co-ownership. The sole fact of a co-owner declaring the land in question in
his name for taxation purposes and paying the land taxes did not
constitute an unequivocal act of repudiation amounting to an ouster of the
other co-owner and could not constitute adverse possession as basis for
title by prescription.
The heirs of Alejandro can only demand from the Heirs of Jose Jr. the
partition of the co-owned property & the reimbursement from their coowners of the amount advanced by Alejandro to repay the obligation. They
may also seek from their co-owners the proportional reimbursement of the
realty taxes paid. Also, they may opt to foreclose the equitable mortgage,
considering that the heirs of Jose Jrs period of redeem the mortgaged
property had already long lapsed.
ALUDOS VS. SUERTE (2012)

First to Third Exam Coverage


Jan 69: Lomises acquired the right to occupy two stalls in the Hangar
Market from the Baguio City government.
8 Sep 84: Lomises entered into an agreement with Johnny Suerte for
the transfer of all improvements & rights over the 2 market stalls for
P260k. Johnny gave a downpayment of P45k to Lomises, who
acknowledged the receipt of the amount in a receipt. Johnny made a
subsequent payment of P23k. Hence, a total of P68k was paid.
However, before full payment could be made, Lomises backed out of
the agreement & returned the P68k to Domes & Jaime Suerte, parents of
Johnny. The return of the P68k was embodied in a handwritten receipt.
15 Oct 85: Johnny protested the return of the money & insisted on the
continuation & enforcement of his agreement with Lomises. When Lomises
refused, Johnny filed a complaint for specific performance with damages.
Lomises arguments: the agreement was merely one of loan, not a sale
of improvements & leasehold rights. In other words, what existed was an
equitable mortgage. Johnny could not afford to purchase the stalls for
P260k because he was a mere college student. The actual lender was
Johnnys mother, Domes.
ISSUE: WON there was an equitable mortgage
Sale. First, Johnny was a mere college student dependent on his
parents for support when the agreement was executed, and it was
Johnnys mother, Domes, who was the party actually interested in
acquiring the market stalls. Second, Lomises received only P48k of the
P68k that Johnny claimed he gave as down payment; Lomises said that
the P20k represented interests on the loan. Third, Lomises retained
possession of the market stalls even after the execution of the agreement.
These circumstances do not support a conclusion that the parties only
intended to enter into a contract of loan.
That Johnny was a mere student when the agreement was executed
does not indicate that he had no financial capacity to pay the purchase
price of P260k. At that time, Johnny was a 26-year old third year
engineering student who operated as a businessman as a sideline activity
and who helped his family sell goods in the Hangar Market. That he did
not have the full amount at the time the agreement was executed does not
necessarily negate his capacity to pay the purchase price, since he had 16
months to complete the payment.
That Lomises retained possession of the market stalls even after the
execution of his agreement with Johnny is also not an indication that the
true transaction between them was one of loan. Johnny had yet to
complete his payment and, until Lomises decided to forego with their
agreement, had four more months to pay; until then, Lomises retained
ownership and possession of the market stalls.
Lomises cannot feign ignorance of the import of the terms of the receipt
of 8 Sep 84 by claiming that he was an illiterate old man. It was proven
that a witness & Lomises daughter, Dolores, translated the terms of the
agreement from English to Ilocano for Lomises benefit. Lomises admitted
this fact.

PART XII: LEASE


DIZON vs. CA (1999)
23 May 74: Overland Express Lines, Inc., as the lessee, entered into a
Contract of Lease with Option to Buy with the petitioners-lessors involving
a parcel of land in QC. The term of the lease was for 1 yr commencing
from 16 May 74 to 15 May 75. During this period, Overland was granted
an option to purchase for the amount of P3k/sqm. Thereafter, the lase
shall be on a per month basis with monthly rental of P3k.
Overland failed to pay the increased rental of P8k/month. So
petitioners-lessors filed an action for ejectment. Court ordered Overland to
vacate the leased premises & pay the rentals.
ISSUE:
First. Petitioners have established a right to evict Overland from the
land for non-payment of rentals. The term of the contract was for a period
of 1 yr during which Overland was given an option to purchase said
property at P3k/sqm. After expiration, the lease was for P3k/month.
Admittedly, no definite period beyond the 1-yr term of lease was agreed
upon by petitioners & Overland. However, since the rent was paid on a
monthly basis, the period of lease is considered to be from month to
month in accordance with Art. 1687. Where are rentals are paid monthly,
the lease, even if verbal may be deemed to be on a monthly basis, expiring
at the end of every month. In such a case, a demand to vacate is not even
necessary for judicial action after expiration of every month.

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Sales Case Digest

First to Third Exam Coverage

When Overland failed to pay the increased rental of P8k/month in June


76, petitioners had a cause of action to institute an ejectment suit.
Second. Having failed to exercise the option within the stipulated 1-yr
period, Overland cannot enforce its option to purchase anymore.
Moreover, even assuming arguendo that the right to exercise the option
still subsists at the time Overland tendered the amount on 20 Jun 75, the
suit for specific performance to enforce the option to purchase was filed
only on 7 Oct 85 or more than 10 yrs after accrual of the cause of action
under Art. 1144.
The contract expired without Overland, as lessee, purchasing the
property but remained in possession thereof. Hence, there was an implicit
renewal of the contract of lease on a monthly basis. The other terms of the
original contract of lease which are revived in the implied new lease under
Art. 1670 are only those terms which are germane to the lessees right to
continued enjoyment of the property leased. Therefore, an implied new
lease foes not ipso facto carry with it any impied revival of Overlands
option to purchase the premises. The provision entitling the lessee the
option to purchase the leased premises is not deemed incorporated in the
impliedly renewed contract because it is alien to the possession of the
lessee. Overlands right to exercise the option to purchase expired with the
termination of the original contract of lease for one year.
Third. There was no perfected contract of sale between petitioners &
Overland. Overland argued it delivered the check of P300k to Alice Dizon,
who acted as agent of petitioners. It insisted that the payment of P300k as
partial payment of the purchase price constituted a valid exercise of the
option to buy. However, there was no valid consent by petitioners on the
supposed sale entered into by Alice Dizon, as agent, & Overland. The basis
for agency is representation and a person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent.
There was no showing that petitioners consented to the act of Alice Dizon
nor authorized her to act on their behalf with regard to her transaction
with Overland. The most prudent thing Overland should have done was to
ascertain the extent of the authority of Alice A. Dizon. Being negligent in
this regard, Overland cannot seek relief on the basis of a supposed agency.
SAMELO vs. MANOTOK (2012)

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