CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010
DEFINITION AND ELEMENTS OF
A CONTRACT OF SALE
CONSENT: PERFECTED CONTRACT
1. SPOUSES CONSTANTE & AZUCENA FIRME vs.
BUKAL ENTERPRISES
G.R. No. 146608, October 23, 2003, J. Carpio
Respondent, through his broker, negotiated with
petitioner for the purchase of the latters property.
The respondent rejected the first draft of the DoAS
(Deed of Absolute Sale) because of several
objectionable conditions (i.e., relocation of squatters,
payment of capital gains tax). A second draft was
issued by the respondent which was allegedly
accepted by petitioner in view of the deletion of the
previous conditions. After furnishing all necessary
conditions, and paying the squatters Php60k/family;
the respondent fenced the area and covered it with
filling materials (approx. spent Php300k for these
improvements).
However, according to the petitioners, the broker of
respondent (Teodoro Aviles) offered to buy the
property at Php2,500/sqm instead of the agreed
Php4,000/sqm; and that they are also reserving the
property for their children. Finally, a third draft was
presented by respondent but was again rejected by
petitioner for being one-sided (mortgaging the
property to the bank and use the proceeds to pay for
its amortization). Meantime, the petitioner one day
visited their property and discovered that there are
bunkers in the property, which the respondents
workers occupy. Petitioner demanded immediate
removal and vacation of occupants. On trial, the
complaint for specific performance and damages,
which was filed by respondent, had failed because
the RTC ruled in favor of petitioners. On appeal, the
decision was reversed.
Whether or not there was a perfected contract of
sale. No. According to the SC, the records
indubitably show that there was no consent on the
part of the Spouses Firme, evidenced by their
consistent manifestation that they rejected the
provisions of the 3rd draft presented by Aviles. Also,
the first 2 drafts presented by respondent show that
both contain exactly the same provisions. Obviously,
the respondent is a builder in bad faith; hence, an
award for nominal damages (Php30k) is warranted
since respondents violated the property rights of
petitioner. (Article 2221 & 2222)
Art. 449. He who builds, plants or sows in
bad faith on the land of another, loses
what is built, planted or sown without
right of indemnity.
Art. 450. The owner of the land on which
anything has been built, planted or sown
in bad faith may demand the demolition
of the work, or that the planting or sowing
be removed, in order to replace things in
their former condition at the expense of
the person who built, planted or sowed;
or he may compel the builder or planter
to pay the price of the land, and the
owner the proper rent.
Under these provisions the Spouses Firme have the
following options: (1) to appropriate what Bukal Enterprises
has built without any obligation to pay indemnity; (2) to ask
Bukal Enterprises to remove what it has built; or (3) to
compel Bukal Enterprises to pay the value of the land.
CONSENT: VALIDITY OF A SALE
2. Dr. JOSE and AIDA YASON vs. ARCIAGA
G.R. No. 145017, January 28, 2005, J. Sandoval-
Gutierrez
In 1983, respondents (Emilio and Claudia) sold a
parcel of land to herein petitioner worth Php265K,
hence, a DoAS was executed. Petitioners had the
DoAS registered in Makati and entrusted its
registration to Jesus Medina (Php15K Capital Gains
Tax). However, without their knowledge, Medina
falsified the document and made it appear that the
sale took place 4 years ago with the land having a
market value of only Php25K. As a result, the land
was then divided into 23 titles, 10 of which were
already sold to third parties. Sometime in 1989, the
children of respondent discovered the falsification
and therefore filed a complaint with the provincial
prosecutor in Makati. However, the complaint was
dismissed for lack of probable cause. Undaunted,
they again filed complaint for annulment of the 13
land titles. The RTC dismissed their complaint. On
appeal, the 13 land titles were declared null and void
being a forged document. The reason for this is that,
appellants claimed that their mother (Claudia
Arciaga) never gave her consent to the sale,
evidenced by her ill condition and only a thumb mark
was present in the DoAS at the time of its execution
(same date, 13 April 1983 when Claudia died).
Whether or not the sale was valid. Yes. A person is
not incapacitated to enter into a contract merely
because of advanced years or by reason of physical
infirmities, unless such age and infirmities impair his
mental faculties to the extent that he is unable to
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properly, intelligently and fairly understand the
provisions of said contract. Respondents failed to
show clear and convincing evidence that Claudia was
deprived of reason or that her condition hindered her
from freely exercising her own will at the time of the
execution of the Deed of Conditional Sale.
OBJECT OF SALE
3. HEIRS OF JUAN SAN ANDRES vs. VICENTE
RODRIGUEZ
G.R. No. 135634, May 31, 2000, J. Mendoza
In 1964, petitioner, after selling a property to
respondent worth Php2,415, executed a Deed of
Sale. Upon petitioners death, his judicial
administrator sent a letter to respondent and
demanded the latter to vacate the portion allegedly
encroached by him. On his answer, respondent
alleged that apart from the 345sqm land sold to him
by petitioner, the latter likewise sold to him the
following day the remaining portion of the property
consisting of 509sqm; and that the full amount of
purchase price was to be based on the result of the
survey and would be due and payable in 5 years from
its execution. While the proceeding was pending,
both the administrator and respondent died and were
substituted by their heirs. On 1994, the RTC
rendered a decision in favor of petitioners since there
was no sufficient indication to identify the property
subject of the sale. On appeal, the CA ruled in favor
of respondents, reversing the decision of RTC. The
appellate court held that the object of the contract
was determinable, and that there was a conditional
sale with the balance of the purchase price payable
within five years from the execution of the deed of
sale.
Whether or not there was a valid sale. Yes. Under
Article 1460 of the New Civil Code, 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. Article 1458 - By the contract of sale one of
the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing,
and the other to pay therefore a price certain in
money or its equivalent.
In the case at bench, all the essential elements of a
contract: consent, subject matter and consideration;
were all present. However, the CA is incorrect in
saying that the sale was conditional. The payment of
full consideration based on survey shall be due and
payable in 5 years from the execution of the formal
deed of sale is only a manner by which the full
consideration is to be computed and the time with in
which the same is to be paid. Also, the absence of a
formal deed of sale does not affect in any manner the
effectivity of a contract. [Check other digest, and add
more supporting doctrines]
VALID CONSIDERATION
4. SPS BUENAVENTURA vs. COURT OF
APPEALS
G.R. No. 126376, May 20, 2003, J. Carpio
Petitioners, seek the declaration of nullity of certain
deeds of sale and certificates of titles executed by
their parents on behalf of their co-defendant children
based on the allegations that - a. no actual valid
consideration; b. under pricing of property; c. sale do
not reflect true intention of party and; d. deprivation of
petitioners legitime.
The case was dismissed by the RTC holding that
under Article 777 of the NCC, compulsory heirs have
the right to a legitime but such right is contingent
since said right commences only from the moment of
death of the decedent. There is no legitime to speak
of because the parents (defendant) are still alive. On
appeal, the CA affirmed the decision.
Whether or not appellants has cause of action
against the appellees. No. Under the law, any person
is free to dispose their properties, provided that such
dispositions are not made in fraud of creditors. In the
case at bench, as held by the SC in Velarde, et al. vs.
Paez: The plaintiffs are not parties to the alleged
deed of sale and are not principally or subsidiarily
bound thereby; hence, they have no legal capacity to
challenge their validity.
CONTRACT TO SELL
5. SPS RAMOS vs. SPS HERUELA
G.R. No. 145330, October 14, 2005, J. Carpio
In 1980, a contract of conditional sale was executed
by petitioner, for a sale of land, with respondents. In
spite of this, 18 years after, petitioner filed a
complaint for Recovery of Ownership with Damages
against respondent alleging that respondents only
paid P4,000 out of the P15,300 consideration. Way
back 1982, the petitioners discovered that the
respondents, together with spouses Pallori (daughter
and son in law), erected another house on the land
and refused to vacate the said property. According to
the respondents, they already made down payment
and monthly payment since March 1980. In 1982,
they expressed their willingness to pay the remaining
P11,300 but the petitioners refused their offer. The
RTC ruled in favor of defendants and declared that
the petitioners failed to comply with Sec. 4 of RA
6552:
SEC. 4. In case where less than two
years of installments were paid, the seller
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shall give the buyer a grace period of not
less than sixty days from the date the
installment became due. If the buyer
fails to pay the installments due at the
expiration of the grace period, the seller
may cancel the contract after thirty days
from receipt by the buyer of the notice of
cancellation or the demand for rescission
of the contract by a notarial act.
The issues involve are whether or not the a. RA 6552
is applicable in the case (absolute sale); b. 1191 and
1592 of the NCC are applicable in the case; c.
petitioners has the right to cancel the sale; d.
respondents have a right to damages.
According to the SC, the sale is not absolute. As held
in the case of Alfonso vs. CA: It was held that the
contract should not be considered as a written but an
oral one; not a sale but a promise to sell; and that
the absence of a formal deed of conveyance was a
strong indication that the parties did not intend
immediate transfer of title, but only a transfer after full
payment of the price. Article 1191 and 1592 are
inapplicable in the case because rescission cannot
take place since there is no written contract to speak
of. The applicable law is RA 6552, as stated above
in Sec. 4, which should have been respected by
the petitioners. However, respondents are required
to pay 6% per annum on the balance of the purchase
price in consonance with their breach of contract as
stipulated in Article 2209 of the NCC. Lastly, the
petitioners have no right to cancel the sale and at the
same time the respondents have no right to
damages.
CONTRACT TO SELL
6. CRUZ vs. SPS FERNANDO
G.R. No. 145470, December 9, 2005, J. Austria-
Martinez
In 1994, Respondents filed a complaint for accion
publiciana against petitioner demanding the latter to
vacate the premises and to pay the amount of P500
as a reasonable rental. According to respondents,
they bought the land from spouses Glorioso in 1987.
Prior to their acquisition, the same rear portion of the
land was also offered to the petitioner through a
Kasunduan but the latter refused to buy, hence, the
whole property was bought by respondents. The RTC
rendered a decision in favor of the respondents. On
appeal, the lower courts decision was affirmed by the
CA.
Whether or not the Kasunduan executed by the
petitioner with the Gloriosos is a perfected contract of
sale. In the case at bench, the 1983 Kasunduan
indicated the following conditions: that the Gloriosos
agreed to sell to petitioners a portion of the property
with an area of 213 meters at the price of P40.00 per
square meter; . that petitioners will definitely
relocate their house to the portion they bought or will
buy by January 31, 1984. Hence, it is evident that
the Kasunduan did not establish a definite agreement
between the parties concerning the terms of
payment. As held in the case of Toyota Shaw, Inc.
vs. CA 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.
Also, there is another suspensive condition yet to be
consummated, as indicated in the relocation of the
house of petitioner upon payment of the desired
amount by January 1984. Hence, petitioners have no
superior right of ownership or possession to speak
of. Their occupation of the property was merely
through the tolerance of the owners. The evidence on
record shows that petitioners were able to live and
build their house on the property through the
permission and kindness of Teresita Glorioso, who
was their relative. Considering that petitioners
continued possession of the property has already
been rendered unlawful, they are bound to pay
reasonable rental for the use and occupation thereof,
which in this case was appropriately pegged by the
RTC at P500.00 per month beginning October 21,
1994 when respondents filed the case against them
until they vacate the premises.
CONTRACT TO SELL
7. URSAL vs. COURT OF APPEALS
G.R. No. 142411, October 14, 2005, J. Austria-
Martinez
In 1985, the respondents (Spouses Moneset)
executed a Contract to Sell House and Lot in favor
of Winifreda Ursal with a consideration of P130K as
its purchase price. After paying the down payment
and six monthly installments, petitioner stopped
paying due to Monesets failure to deliver to her the
TCT of the property as agreed upon. Unknown to
Ursal, the property was again sold by respondent to
Dr. Canora; and again for the third time to Bundalo
(pacto de retro) who later mortgaged the land with a
Rural Bank. The property was then forclosed upon
default of the Monesets, hence, Ursal filed an action
for declaration of non-effectivity of mortgage and
damages against the respondents. The RTC
rendered a decision in favor of the bank dismissing
the complaint against it but ordered the Monesets to
reimburse the petitioner, including damages and the
preferential right to redeem the subject house1. On
appeal, the CA affirmed in toto the decision of the
RTC.
The main issue in the case is whether or not the real
estate mortgage should have been declared non-
effective and non-enforceable. No. In the case at bar,
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what is involve here is mortgage and not a sale.
Although it was held in the case of Cruz vs. Bancom,
the bank, unlike private individuals, is expected to
exercise greater care and prudence in its dealings,
including those involving registered lands. A banking
institution is expected to exercise due diligence
before entering into a mortgage contract. The
contract between petitioner and respondent is only a
contract to sell; hence the petitioner never acquired
ownership over the property.
Under the law, A contract to sell is a bilateral contract
whereby the prospective seller, while expressly
reserving the ownership of the subject property
despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase
price. What the seller agrees or obligates himself to
do is to fulfill his promise to sell the subject property
when the entire amount of the purchase price is
delivered to him.
In contracts of sale the vendor loses
ownership over the property and cannot recover it
unless and until the contract is resolved or rescinded,
while in contracts to sell, title is retained by the
vendor until full payment of the price. As explained in
Coronel vs. Court of Appeals In a contract to sell,
there being no previous sale of the property, a third
person buying such property despite the fulfillment of
the suspensive condition such as the full payment of
the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot
seek the relief of reconveyance of the property.
There is no double sale in such case. Title to the
property will transfer to the buyer after registration
because there is no defect in the sellers title per se,
but the latter, of course, may be sued for damages
(Article 1170) by the intending buyer.
1
It cannot be denied however that petitioner is also
not without fault. She sat on her rights and never
consigned the full amount of the property. She
therefore cannot ask to be declared the owner of the
property especially since the same has already
passed to another person by virtue of a deed of
absolute sale.
CONDITIONAL SALE OF PROPERTY
8. LACANILAO vs. COURT OF APPEALS
G.R. No. 121200, September 26, 1996, J. Padilla
Eusebio Encarnacion, herein respondent, is the
owner of the land which was the subject of lease by
petitioners. From 1960s to 1988, the petitioners had
religiously paying the monthly rental of said land.
Eventually it was sold to them by Encarnacion and
agreed to execute a DoAS on June 15, 1988.
However, 4 days before the said period, a fire hit the
Quezon City hall and all the documents, including
respondents title, went into ashes. Petitioners failed
to pay the purchase price of P120K on June 15,
1988; hence the land was sold to a different buyer
(Acebo) for P145K by Encarnacion. The Acebos sent
a notice to the petitioners to vacate the property.
Petitioners then filed a complaint for alleged violation
of the tenants right to purchase. The court ruled in
favor of respondents and dismissed the complaint.
On appeal, the decision of the lower court was
affirmed.
In the case at bar, the question of law is whether or
not petitioners, on the basis of a verbal contract to
sell by Encarnacion, obtained an enforceable right to
buy Encarnacion's property superior to that of the
Acebos.
No. It is well established that where the seller
promised to execute a deed of absolute sale upon
completion of payment of the purchase price by the
buyer, the agreement is a contract to sell. In
contracts to sell, where ownership is retained by the
seller until payment of the price in full, such payment
is a positive suspensive condition, failure of which is
not really a breach but an event that prevents the
obligation of the vendor to convey title in accordance
with Article 1184 of the Civil Code.
Article 1545 of the Civil Code also
provides that "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."
OBJECT OF SALE
PERFECTED CONTRACT OF SALE
1. CAVITE DEVT. BANK vs. LIM
G.R. No. 131679, February 1, 2000, J. Mendoza
In 1988, Respondent offered to purchase the
property of CDB, which the latter acquired through a
foreclosure sale from one of its mortgagee, Mr.
Rodolfo Guansing. After paying the option money of
P30K by the respondent, Lim discovered that the
property was originally registered to Perfecto
Guansing, father of Rodolfo. Petitioner failed to
discover that Rodolfo fraudulently secured the TCT
he submitted to the bank for his loan, hence, the land
was awarded back to the father. Aggrieved, the
respondent filed an action for specific performance
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against the bank. On March 1993, the RTC ruled in
favor of Lim. On appeal, the CA affirmed the RTCs
decision.
Whether or not there was a perfected contract of
sale. Yes. In the case at bar, there was an option
contract entered by petitioner bank and respondent.
A perfected option contract does not consummate the
sale, however, if the option is exercised, the sale may
be perfected. Under Article 1482, it is clear then that
the parties in this case actually entered into a
contract of sale, partially consummated as to the
payment of the price. The decision was then affirmed
by the SC with modifications as to the award of
damages for being excessive.
VOID STIPULATIONS IN CONTRACTS
2. HEIRS OF SAN MIGUEL vs. COURT OF
APPEALS
G.R. No. 136054, September 5, 2001, J. Pardo
In 1974, Respondent, Dominador San Miguel, filed a
petition with the CFI to issue title over lots in dispute.
However, it was declared null and void upon petition
of Severina San Miguel (petitioner). In 1987, the TCT
for the land was issued in the names of petitioner.
From 1990-1991, several writs were returned
unsatisfied. Hence, the heirs of Severina did not
pursue the writs of possession and demolition, and
instead entered into a compromise with Dominador.
According to the compromise, the heirs were to sell
the land for P1.5M with the TCT conditioned upon the
purchase of another lot, which was not yet titled, at
an additional sum of P300K. It was agreed that the
300K shall be fulfilled by Dominador (2) months from
the date of the execution of sale, which is August
1993. 3 months after, Dominador filed a complaint
with the trial court a motion to deliver the owners
copy of TCT, and admitted that he did not pay the
P300K for the reason that the petitioner failed to
adduced proof of ownership. In time, petitioners
opposed stressing the condition in the Kasunduan.
The trial court and CA both ruled in favor of the
respondent.
Whether or not respondent shall be compelled to pay
the P300K despite the petitioners lack of evidence of
ownership. No. Under Article 1306. The contracting
parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient
provided they are not contrary to law, morals, good
customs, public order or public policy. To insist that
Dominador pay the price of the untitled lot, would
result in Severinas 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. In Nool vs. CA, if the sellers cant deliver
the object of the sale to the buyer, such contract may
be deemed inoperative. [Art. 1405, void contracts
par. (5)]
Article 1183 also provides that, Impossible
conditions, those contrary to good customs or public
policy and those prohibited by law shall annul the
obligation which depends upon them. If the obligation
is divisible, that part thereof which is not affected by
the impossible or unlawful condition shall be valid.
Hence, the non-payment of the three hundred
thousand pesos (P300,000.00) is not a valid
justification for refusal to deliver the certificate of title.
Besides, the P1.5M payment was for the land in
dispute, not including the untitled one. Therefore,
Severina's heirs are bound to deliver the certificate of
title covering the lots.
ASSIGNMENT OF CREDITS or INCORPOREAL
RIGHTS
3. PNB vs. COURT OF APPEALS, IEI
G.R. No. 118357, May 6, 1997, J. Romero
Check Articles 1624 and 1625 of the NCC. Industrial
Enterprises, Inc. entered a coal operating contract
with BED (Bureau of Energy Devt.) pursuant to Coal
Development Act of 1976.
4. HEIRS OF JUAN SAN ANDRES vs. VICENTE
RODRIGUEZ
G.R. No. 135634, May 31, 2000, J. Mendoza
(SUPRA)
FRAUD and BAD FAITH
5. SAMSON vs. COURT OF APPEALS
G.R. No. 108245, November 25, 1994, J. Romero
Respondent is the owner of Santos and Sons, Inc., a
haberdashery store, which occupied the subject
premises of a commercial unit building, for 20 years.
In 1984, the owner of the building, Susana Realty
Corp., informed respondents that the lease contract
will expire on July. Nonetheless, the lease contract of
respondent was extended until December 1984. In
Feb 1985, respondent was informed, through a letter,
of the increase in rentals pending renewal of his
contract until the arrival of Ms. Madrigal (Owner of
Susana Realty). A few days later, petitioner offered to
purchase the said store. The same month, the
petitioner paid half of the agreed price of P300K and
agreed that the balance shall be paid upon renewal
of the contract. All went well for the petitioner for a
few months. In July, however, he was ordered to
vacate the premises due to respondents failure in
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renewing his lease. Petitioner then filed an action for
damages against respondent for fraud and bad faith.
The RTC ruled in favor of the petitioner. On appeal,
the CA modified the judgment of the RTC finding that
the respondent did not exercised fraud, hence,
deleting the damages and attorneys fees.
Whether or not Angel Santos committed fraud or bad
faith in representing petitioner that his contract of
lease over the subject premises has been impliedly
renewed by Susana Realty. No. Under the facts
proven, private respondent cannot be held guilty of
fraud or bad faith when he entered into the subject
contract with petitioner. The letter sent to him in Feb
1985 made respondent believed that his lease
contract was impliedly renewed and that formal
renewal would be made upon the arrival of Ms.
Madrigal.
Art 1338. In contracts, the kind of fraud that will
vitiate consent is one where, through insidious words
or machinations of one of the contracting parties, the
other is induced to enter into a contract which,
without them, he would not have agreed to. (dolo
causante) It is quite obvious that the respondent did
not act in Bad Faith and that there was an honest
mistake on the part of Angel Santos.
Also, the petitioner is also at fault for failing to
exercise sufficient diligence in verifying first the status
of private respondents lease. As held by this Court in
the case of Caram, Jr. v. Laureta, the rule caveat
emptor requires the purchaser to be aware of the
supposed title of the vendor and he who buys without
checking the vendor's title takes all the risks and
losses consequent to such failure.
CONSIDERATIONS and FULFILLMENT OF
OBLIGATIONS
6. JAVIER vs. COURT OF APPEALS
G.R. No. 48194, March 15, 1990, J. Regalado
Tiro was a holder of an ordinary timber license which
he had assigned to the Javier spouses in a Deed of
Assignment for 120K, 20K of which was paid upon
execution of the contract and 100K to be paid in
installments of 10K per shipment of logs from the
forest concession. Tiro had filed an application for
another timber license to cover 2,000 hectares of the
adjoining land. During the pendency of the
application with the Bureau of Forestry, he executed
another deed of assignment in favor of the spouses;
payment would be of 30,000.00php, subject to the
condition that the transfer shall be executed upon
approval of the application. Upon assumption of the
timber license, the spouses were informed that the
license was renewed, but would not be renewed
again until they are able to create an organization
with other adjoining timber license holders for a total
of 20,000 hectares. Thus, along with de Lara, Oca
and the Sanggaya Logging Comp. the spouses
consolidated their licenses, which created a
consolidation agreement approved by the BOF. The
working unit was thereafter called the North
Mindanao Timber Corporation. The spouses failed to
pay the balance of the two assignment deeds, and
thus, Tiro filed action in the lower court for the
balances due. The lower court dismissed the
complaint, and ordered Tiro to pay 33K to the
spouses. The CA reversed and ordered the spouses
to pay Tiro 79K as the remaining balance.
Whether or not the deed of assignment dated
February 15, 1966 and the agreement of February
28, 1966 are null and void, the former for total
absence of consideration and the latter for non-
fulfillment of the conditions stated therein.
Yes. As found by the Court of Appeals, the true
cause or consideration of said deed was the transfer
of the forest concession of private respondent to
petitioners for P120,000.00. The aforesaid
contemporaneous and subsequent acts of petitioners
and private respondent reveal that the cause stated
in the questioned deed of assignment is false. It is
settled that the previous and simultaneous and
subsequent acts of the parties are properly
cognizable indica of their true intention. The deed of
assignment of February 15, 1966 is a relatively
simulated contract which states a false cause or
consideration, or one where the parties conceal their
true agreement. A contract with a false consideration
is not null and void per se. Under Article 1346 of the
Civil Code, a relatively simulated contract, when it
does not prejudice a third person and is not intended
for any purpose contrary to law, morals, good
customs, public order or public policy binds the
parties to their real agreement. As to the 2nd
agreement or assignment, the spouses are not liable
under such, as the suspensive condition, which is the
approval of the additional license, did not take place.
Thus, it did not give rise to any obligation. The said
agreement is a bilateral contract which gave rise to
reciprocal obligations, that is, the obligation of private
respondent to transfer his rights in the forest
concession over the additional area and, on the other
hand, the obligation of petitioners to pay P30,000.00.
The demandability of the obligation of one party
depends upon the fulfillment of the obligation of the
other. In this case, the failure of private respondent to
comply with his obligation negates his right to
demand performance from petitioners. Delivery and
payment in a contract of sale, are so interrelated
and intertwined with each other that without
delivery of the goods there is no corresponding
obligation to pay. The two complement each other.
Moreover, under the second paragraph of Article
1461 of the Civil Code, the efficacy of the sale of a
mere hope or expectancy is deemed subject to the
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condition that the thing will come into existence. In
this case, since private respondent never acquired
any right over the additional area for failure to secure
the approval of the Bureau of Forestry, the
agreement executed therefore, which had for its
object the transfer of said right to petitioners, never
became effective or enforceable.
COMMODITY FUTURES CONTRACT
7. ONAPAL PHIL COMMODITIES vs. COURT OF
APPEALS
G.R. No. 90707, February 1, 1993, J. Campos
Petitioner is engaged in commodity futures trading in
Cebu City. Every time a customer enters into a
trading transaction with petitioner as broker, the order
is communicated by telex to its principal in
Hongkong. The transaction either buying or selling,
once consummated the petitioner will issue a
document as Confirmation of Contract and Balance
Sheet. The order would then be sent from Cebu to
Manila to Hongkong and finally to Commodity
Futures Exchange in Japan. In 1983, private
respondent, Susan Chua, was invited to invest in the
commodity futures trading by depositing P500K. She
was then made to sign the Trading Contract and
other documents without making her
aware/understand the risks involved. 2 months after,
she was informed by the Account Executive to
deposit an additional P300K, otherwise she would
lose her original P500K deposit. Around September,
the respondent was able to get only P470K out of the
P800K, she realized that she was engaged in
gambling, hence, she filed a case to recover the loss
of P330K. The trial court and CA rendered a decision
in favor of the respondent.
The issue here is whether or not the respondent is
entitled to recover the loss of P330K. Yes. Although it
may be evident in the case that the contract signed
by the respondent was valid, because it complies
with the Rules and Regulations on Commodity
Futures Trading as prescribed by the SEC, such
contract if entered into without the intention of having
any goods/commodity pass from one party to
another, but with an understanding that at the
appointed time, the purchaser is merely to receive or
pay the difference between the contract and the
market prices, is a transaction which the law will not
sanction, for being illegal. Another point to discuss is
whether the money of respondent was actually
remitted in Hongkong and that there is an
arrangement between the petitioner and the Central
Bank for the purpose of remitting money abroad. It
was discovered by the court that petitioner failed to
prove this point.
Under Article 2018, If a contract which purports to
be for the delivery of goods, securities or shares of
stock is entered into with the intention that the
difference between the price stipulated and the
exchange or market price at the time of the
pretended delivery shall be paid by the loser to the
winner, the transaction is null and void. The loser
may recover what he has paid.
ACQUISITIVE PRESCRIPTION
8. VDA. DE RIGONAN vs. DERECHO
G.R. No. 159571, July 15, 2005, J. Panganiban
In 1921, 5 out of the 8 heirs of Hilarion Derecho sold
the subject property to Francisco Lacambra under a
pacto de retro sale, subject to a five year redemption
clause. 7 years after, one of the heirs, Dolores,
purchased the lot and immediately occupied it. In
1980, more than 5 decades after, an Affidavit of
Adjudication in favor of petitioner, Teodoro Rigonan,
(Dolores Son) was executed, declaring the
petitioners father (Leandro Rigonan) to be the sole
heir of Hilarion. During the same year, the land was
mortgaged by petitioner to a bank in Cebu. Dreading
foreclosure, he sold the land in favor of Valerio Laude
(also a petitioner in the case) and executed a DoAS.
In 1993, respondents, as the alleged heirs of Hilarion
(3 heirs, not party to the sale in 1921), brought an
action with the RTC to recover the property, annul the
deed and affidavit of adjudication, whose validity was
assailed on the ground of fraud. RTC ruled in favor of
the respondents and was affirmed by CA upon
appeal. (case was reversed by sc)
Whether or not the affidavit of adjudication and deed
were both void; and co-ownership still subsists
among the heirs of Hilarion in 1928. No. When the
Rigonan bought the land from Lacambra in 1928, it
was already a conveyance to the spouses in their
personal capacities, not as co-owners. The parties to
the contract stipulated a five-year redemption period,
which expired on July 16, 1926. The failure of the
sellers to redeem the property within the stipulated
period indubitably vested absolute title and ownership
in the vendee, Lacambra.
Under a pacto de retro sale, title to and ownership of
property are immediately vested in the vendee a
retro, subject only to the resolutory condition that the
vendor repurchases it within the stipulated period.
Also, petitioners acquired title of the land by
acquisitive prescription; hence they cannot recover
the property despite the nullity of contracts pursuant
to Article 1410 of the NCC. Even if the action does
not prescribe, LACHES would bar respondents from
asserting their claim. Laches is defined as the failure
to assert a right for an unreasonable and unexplained
length of time, warranting a presumption that the
party entitled to assert it has either abandoned or
declined to assert it. This equitable defense is based
upon grounds of public policy, which requires the
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discouragement of stale claims for the peace of
society.
Elements present in order to use laches as a
defense: (1) complaint against defendant and a
remedy sought; (2) delay in the assertion of rights; (3)
lack of knowledge and notice to the defendant
regarding the suit; (4) injury or prejudice to the
defendant.
CONTRACT OF SALE1458
Agency to Sell (Art. 1466) The delivery by a
principal to an agent of his property, the former being
an owner, has the right to control the sale, fix the
price, and terms, demand and receive the proceeds
less the agents commission upon sales made. Ker &
Co., Ltd. V. Lingad (1971)
Contract for Piece of Work (Arts. 1467, 1713
to 1715) - Under Art. 1467, 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. If the thing is
specially done at the order of another, this is a
contract for a piece of work. If the thing is
manufactured or procured for the general market in
the ordinary course of business, it is a contract of
sale.
To Tolentino, the distinction depends on the intention
of parties: if 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
a piece of work.
Barter or Exchange (Arts. 1468, 1638 to 1641)
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.; By a contract
of barter or exchange, one of the parties binds
himself to give one thing in consideration of the
others promise to give another thing. Failure of one
party to prove ownership of the thing promised, or
one who loses the thing through eviction is entitled to
recover what he has given and has the right to
damages.
Article 1458. Sale is a contract by which one of the contracting
parties obligates himself to transfer the ownership, and to deliver
possession, of a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
MISSAPPROPRIATION IN SALE
1. ROSA LIM vs. COURT OF APPEALS
G.R. No. 102784, April 7, 1997, J. Hermosisima
In 1987, petitioner was introduced by her friend
Aurelia Nadera with herein respondent. They entered
into an agreement with respondent (Victoria Suarez)
in selling 2 pieces of jewelry worth P339K.
Subsequently, Lim became uninterested with the
agreement, hence returned the jewelry to Nadera as
agreed upon by the parties. Suarez filed a complaint
against Lim for estafa against petitioner. The RTC
and CA ruled in favor of Suarez, convicting the
petitioner for estafa. However, it was later proven that
Suarez received the bracelet (P170K) from Nadera,
and the later sold the ring (P169K) to another, but
the check she issued in favor of Suarez had bounced
due to non-payment of her buyer.
Whether or not the petitioner is liable for estafa under
the RPC. No. Generally, the delivery to a third person
of the thing held in trust is not a defense in estafa.
However, this rule has already been modified in
subsequent cases. In People vs. Nepomuceno and
People vs. Trinidad In cases of estafa the profit or
gain must be obtained by the accused personally,
through his own acts, and his mere negligence in
permitting another to take advantage or benefit from
the entrusted chattel cannot constitute estafa under
Article 315 paragraph 1-b, of the Revised Penal
Code; unless there is conspiracy with the one who
carried out the misappropriation. If there is no such
evidence, direct or circumstantial, and if the proof is
clear that the accused herself was the innocent victim
of her sub-agent's faithlessness, her acquittal is in
order. Moreover, Lim is only civilly liable with respect
to the ring in the amount of P169K plus 6% legal
interest.
CONTRACT OF AGENCY
2. LOURDES LIM vs. PEOPLE
G.R. No. L-34338, November 21, 1984, J. Relova
In 1966, petitioner offered to sell respondents
tobacco (Maria Ayroso), and they agreed to the
proposition to sell tobacco consisting of 615kg at
P1.30/kg. The petitioner was to receive the overprice
for which she could sell the tobacco. The total value
was P799.50 and P240 was paid by petitioner to
Ayroso. Demands for the payment of the balance of
the value of the tobacco were made upon the
appellant by Ayroso, and particularly by her sister,
Salud Bantug. As no further amount was paid, the
complainant filed a complaint against the appellant
for estafa. The RTC and CA ruled in favor of the
respondent, convicting Lim for estafa.
Whether there exists a contract of agency to sell or a
contract of sale. As defined under contract of agency,
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see ibid. there was no transfer of ownership of the
goods to the petitioner. The agreement constituted
her as an agent with the obligation to give something
to Ayroso upon sale of the tobacco or return the
tobacco if the same was not sold. Therefore, the
courts ruling in convicting Lim for estafa is not to be
contested.
CONTRACT OF AGENCY
3. CIR vs. CTA and CONSTANTINO
G.R. No. L-25926, February 27, 1970, J. Reyes
Respondent, Cirilio D. Constantino, is engaged in the
business of selling trucks, machineries, equipment
and spare parts shipped to him by IHM (Intl.
Harvester, Macleod Inc.) He is designated as the
exclusive dealer of the company. After an
assessment conducted by CIR against respondent,
the latter protested the assessment on the ground
that he is not a commercial broker. Upon his reversal
by the Tax Court, the CIR Commissioner interposed
the present appeal.
The issue here is whether the relationship between
IHM and the respondent is one of principal and
agent, as maintained by the Commissioner, or one of
vendor and vendee, as maintained by the respondent
taxpayer. A casual examination of respondent's
evidence may give the impression that this
relationship with the company is that of vendor and
vendee, but a closer look into the actual legal effect
of the terms and conditions embodied, rather than the
names of the contracts used or the terminologies
employed, in the chain of documents shows that the
relation between the company and the respondent is
one of principal and agent.
It is proven that the dealer (respondent) merely
collects and holds the proceeds in trust, and title to
goods still belongs to IHM and not the dealer. Also,
the effect of the arrangement in the so called Retail
Financing Agreement of the dealer is that it is the
very customer who buys on credit because the
purchase money comes from him, not the dealer, and
the credit that is financed is the credit of the
customer, not that of the dealer. Although it is
expressly provided in the agreement between the
respondent and IHM that the former is not the
companys agent, it is evident in the case that the
function of respondent is one of a dealer.
PIECE OF WORK and WARRANTY AGAINST
HIDDEN DEFECTS
4. ENGINEERING and MACHINERY CORP. vs. CA
G.R. No. 52267, January 24, 1996, J. Panganiban
In 1962, Engineering and Machinery Corporation (the
Corporation) entered a contract with Almeda, the
former to fabricate, furnish and install the air-
conditioning system in the latters building along
Buendia Avenue, Makati in consideration of
P12,000.00. The Corporation was to furnish the
materials, labor, tools and all services required in
order to so fabricate and install said system. The
system was completed in 1963 and accepted by
Almeda, who paid in full the contract price. In 1965,
Almeda sold the building to the National Investment
and Development Corporation (NIDC). The latter took
possession of the building but on account of NIDCs
noncompliance with the terms and conditions of the
deed of sale, Almeda was able to secure judicial
rescission thereof. The ownership of the building
having been decreed back to Almeda, he re-acquired
possession sometime in 1971. It was then that he
learned from some NIDC employees of the defects of
the air-conditioning system of the building. Almeda
discovered the defects of the system and concluded
that it was not capable of maintaining the desired
room temperature of 76F 2F.
On the basis of this report, Almeda filed on 8 May
1971 an action for damages against the Corporation
with the then CFI Rizal (Civil Case 14712). The
complaint alleged that the air-conditioning system
installed by the Corporation did not comply with the
agreed plans and specifications, hence, Almeda
prayed for the amount of P210,000.00 representing
the rectification cost, P100,000.00 as damages and
P15,000.00 as attorneys fees. The Corporation
moved to dismissed the case, alleging prescription,
but which was denied by the Court. The trial court
rendered a decision, which ordered the Corporation
to pay Almeda the amount needed to rectify the faults
and deficiencies of the air-conditioning system
installed by the Corporation in Almedas building, plus
damages, attorneys fees and costs). Petitioner
appealed to the Court of Appeals, which affirmed the
decision of the trial court.
The Supreme Court denied the petition and affirmed
the decision assailed; without costs. Under the law, 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 . The contract in
question is one for a piece of work. It is not the
Corporations line of business to manufacture air-
conditioning systems to be sold off-the-shelf.
Check Article 1715 of the NCC.
The remedy against violations of the warranty against
hidden defects is either to withdraw from the contract
(rehibitory action) or to demand a proportionate
reduction of the price (accion quanti minoris), with
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damages in either case. While it is true that Article
1571 of the Civil Code provides for a prescriptive
period of six months for a rehibitory action, said rule
may be applied only in case of implied warranties;
and where there is an express warranty in the
contract, the prescriptive period is the one specified
in the express warranty, and in the absence of such
period, the general rule on rescission of contract,
which is four years (Article 1389, Civil Code) shall
apply.
CONTRACT of PIECE OF WORK
5. DEL MONTE vs. ARAGONES
G.R. No. 153033, June 23, 2005, J. Carpio-Morales
In 1988, petitioner (DMPI) entered into an agreement
with MEGA-WAFF for the installation of modular
pavement that shall be completed 60 days from
signing of the agreement. To supply the concrete
blocks needed by the company, MEGA-WAFF
(contractor) executed Supply Agreement with
respondent, represented by Napoleon Aragones
(supplier). The supplier shall provide the contractor
with all labor, materials, equipment etc. costing at
P7.00 per unit piece of hollow blocks. However, the
obligations was not met by MEGA-WAFF, hence the
respondent got wind up in the dispute between DMPI
and MEGA. Aragones failed to collect from MEGA
the full payments of concrete blocks, therefore, went
directly to DMPI and advising it to pay to him directly
the unpaid obligation of MEGA. However, the
petitioner, instead of following Aragones advice, sent
a check to MEGA representing its balance to the
latter. Respondent was prompted to file a case for
sum of money with damages against petitioners
contending that it was liable to him, who put labor
upon and furnished materials for a piece of work. The
RTC and CA ruled in favor of respondent. The SC
also denied the petition.
Whether or not the Supply Agreement between
MEGA and Aragones was a contract of sale. No. The
contract was decidedly a Piece of Work, under
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. Also, ART.
1729 states that: Those who put their labor upon or
furnish materials for a piece of work undertaken by
the contractor have an action against the owner up to
the amount owing from the latter to the contractor at
the time the claim is made. In addition, ACT 3959,
requires contractor to file bonds guaranteeing
payment to laborers. Lastly, as held in the case of
Velasco v. CA, a constructive vinculum or contractual
privity was created between petitioner and Aragones,
by way of exception underlying the principle of non-
transmissible rights in contracts (Art 1311).
BARTER AGREEMENT
6. TAN QUETO vs. COURT OF APPEALS
G.R. No. L-35648, May 16, 1983, J. Abad Santos
7. TAN QUETO vs. COURT OF APPEALS
G.R. No. L-35648, February 27, 1987, J. Paras
PRICE OR
CONSIDERATION of THE
CONTRACT OF SALE
MANNER OF PAYMENT OF PRICE
1. BOSTON BANK (fr. Bank of Commerece) vs.
MANALO
G.R. No. 158149, February 9, 2006, J.
In 1967, the Xavierville Estates, Inc. (XEI) executed a
Deed of Sale of Real Estate with The Overseas
Bank of Manila (OBM), subject to the approval of its
Board of Directors, and was covered by real estate
mortgage in favor of PNB and Central Bank. In 1972,
the president of XEI, Emerito Ramos, Jr. contracted
the service of respondent, Engr. Carlos Manalo, Jr.,
who was in the business of drilling deep water wells
and installing pumps under the business name
Hurricane Commercial, Inc. After installing a water
pump at Ramos residence, respondent proposed to
XEI, through Ramos, to purchase lot in Xavierville
and offered as down payment the P34K Ramos owed
him. The spouses Manalo, after choosing lots 1 and 2
of block 2 then constructed a house and installed
fence around the perimeter of their chosen lot. After
resumption of office by XEI, respondent refused to
pay the balance of the down payment because
Ramos failed to prepare the Contract of Conditional
Sale. On August 1973, the respondent received a
statement of account showing their balances and
plus interest.
On January 1974, another SOA was received by the
respondent, inclusive of interest of the purchase price
of the lots. In 1976, Manalo constructed a business
sign in the sidewalk near his house but was ordered
to remove said sign on the ground the the sidewalk
was not part of the land. Subsequently, XEI turned its
selling operation to OBM which was later acquired by
Central Bank of Manila (CBM). In 1986, CBM
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requested the respondent (Perla Manalo) to stop any
construction on the property since it was the owner of
the lot and respondent had no permission for
construction. After a conference meeting, it was
agreed that respondent will furnish, as proof of
ownership, the corresponding documents with CBM,
however, she failed to do so. The respondent offered
an amicable settlement with CBM, now Boston Bank,
to abide by the purchase price of the property.
However, petitioner bank proposed that the price of
P1,500 per sqm was a reasonable starting point for
negotiation of the settlement. The respondent filed a
complaint for specific performance and damages
against the bank and subsequently won the case,
ordering the later to execute a DoAS after payment of
the sum of P900K plus damages+. On appeal, the
CA modified the decision of the RTC changing the
price of the lot to the original price agreed upon in
1972 plus interest of 12% per annum from
September 1972, deleting the award for damages.
SC reversed the decision and ordered the RTC to
dismiss the complaint.
Whether there was a perfected contract of sale or
contract to sell between the parties. No. According
the the SC, if a material element of a contemplated
contract is left for future negotiations, the same is too
indefinite to be enforceable. And when an essential
element of a contract is reserved for future
agreement of the parties, no legal obligation arises
until such future agreement is concluded. 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 to be paid by the vendee. It is not
enough for the parties to agree on the price of the
property. The parties must also agree on the
manner of payment of the price of the property to
give rise to a binding and enforceable contract of
sale or contract to sell. This is so because the
agreement as to the manner of payment goes into
the price, such that a disagreement on the manner of
payment is tantamount to a failure to agree on the
price.
CONTRACT OF ADHESION
2. SERRA vs. COURT OF APPEALS
G.R. No. 103338, January 4, 1994, J.
Petitioner Federico Serra, owner of a lot, and private
respondent Rizal Commercial Banking Corporation
(RCBC) entered into a "Contract of Lease with Option
to Buy" in May 25, 1975 which provided that Serra
will lease the subject land to RCBC for a period of 25
years from June 1, 1975 to June 1, 2000, that the
RCBC has the option to purchase the same at
P210.00 per square meter within a period of 10 years
from May 25, 1975, the date of the signing of the
Contract, and that Serra will have to register said
land under the Torrens System to the Register of
Deeds of Province of Masbate within the same 10-
year option period.
Pursuant to said contract, RCBC constructed
improvements on the subject land to house its branch
office, while the petitioner had the property, within 3
years from 1975, duly registered with OCT No. 0-232
under the Torrens System. RCBC informed petitioner
of its intention to buy the property but petitioner
replied that he is no longer selling the property.
RCBC then filed an action for specific performance
and damages against Serra in March 1985 alleging
that during the negotiations it made clear to petitioner
that it intends to stay permanently on property once
its branch office is opened unless the exigencies of
the business requires otherwise. Although finding that
the contract was valid, the lower court ruled that the
option to buy is unenforceable because it lacked a
consideration distinct from the price (lower than
P210/sqm) and RCBC did not exercise its option
within the reasonable time. Upon motion for
reconsideration, however, the lower court reversed
itself on the 2nd issue, declared the contract as valid,
and ordered Serra to deliver the proper deed of sale
to RCBC. The Court of Appeals likewise affirmed said
decision. The Supreme Court affirmed the appellate
courts decision.
Whether or not there was a valid contract of lease
with option to buy between the parties. Was there a
consideration distinct from the price to support the
option given to RCBC? Yes. The contract of "LEASE
WITH OPTION TO BUY" between petitioner and
respondent bank is valid, effective and enforceable;
the price being certain and that there was
consideration distinct from the price to support the
option given to the lessee. Accordingly, a contract of
adhesion is one wherein a party, usually a
corporation, prepares the stipulations in the contract,
while the other party merely affixes his signature or
his "adhesion" thereto. These types of contracts are
as binding as ordinary contracts because in reality,
the party who adheres to the contract is free to reject
it entirely.
In the case at bar, the Supreme Court did not find the
situation to be inequitable because petitioner is a
highly educated man, who, at the time of the trial was
already a CPA-Lawyer. It is evident that a man of his
stature should have been more cautious in
transactions he enters into, particularly where it
concerns valuable properties. Also, in the present
case, the consideration is even more heavy on the
part of the lessee since it entails transferring of the
building and/or improvements on the property to
petitioner, should respondent bank fail to exercise its
option within the period stipulated.
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CONVENTIONAL REDEMPTION 5. RAMOS vs. HEIRS OF RAMOS

G.R. No. 14048, April 25, 2002, J.
3. ABAPO vs. COURT OF APPEALS
G.R. No. 128677, March 2, 2000, J. De Leon

In 1967, petitioner siblings Santiago and Crispula

Abapo executed a contract; a Deed of Sale under
Pacto de Retro sold for P500 with right to repurchase
after 5 years, with Teodolfo Quimada. More than 7
years after, Quimado sold the land back to Crispula
and her husband Pedro Bacalso. The spouses
Bacalso had possession, enjoyed the fruits of the
land and paid the corresponding real estate taxes
thereon to the exclusion of Santiago Abapo. In 1990,
Santiago instituted a petition for reconstitution of title
which was later granted. Upon discovery by Crispula,
she instituted a complaint for Quieting of Title with 6. MODINA vs. COURT OF APPEALS
Damages. The trial court ruled in favor of G.R. No. 10935, October 29, 1999, J.
respondents, declaring her as the absolute owner of
the property. On appeal, the challenged decision was
affirmed by the CA. The SC denied the petition.

Whether or not the contract entered in 1967 may be

considered as an equitable mortgage in view of the
unusually inadequate consideration pursuant to
Article 1602 of the NCC. No. In the case at bench,
the price of P500 is not unusually inadequate. The
extant record reveals that the assessed value of the
land in dispute in 1970 was only P400. Thus, at the
time of sale in 1967 the price of P500 is indisputably
over and above the assessed value of P400.

Besides, the mere fact that the price is inadequate

does not per se support the conclusion that the
contract was a loan or that the property was not at all
sold to Teodulfo Quimada. The price fixed in a sale
with right to repurchase is not necessarily the
true value of the land sold. The rationale is that
the vendor has the right to repurchase the land. It
is the practice to fix a relatively reduced price,
although not a grossly inadequate one, in order
to afford the vendor a retro every facility to
redeem the land. Thus, inadequacy of price is not
sufficient to set aside a sale unless it is grossly
inadequate or purely shocking to the conscience.

4. BRAVO-GUERRERO vs. BRAVO

G.R. No. 152658, July 9, 2005, J.

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