SalesCaseDigests

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1.
THE NATURE OF SALE
GAITE v FONACIER
FACTS: Fonacier was the holder of 11 iron lode mineral
claims. By a Deed of Assignment, he appointed Gaite as
his attorney-in-fact for the purpose of operating the
same. Gaite then executed a general assignment
conveying the right to develop and exploit the mining
claim to Larap Iron Mines, owned by him, and then
started to develop the same. Fonacier then decided to
revoke the authority granted to Gaite; the latter
acceded and transferred the claims back to Fonacier but
for consideration—royalties and a sum of P75,000,
P10,000 of which was already paid. A balance of P65,000
remained for which Fonacier issued 2 sureties, good for
a year. There was a stipulation that the P65,000 balance
will be paid from the 1st shipment of ores and its local
sale. Eventually, the sureties expired and Fonacier
defaulted in settling his debt. He now alleges that the
payment of the balance was subject to a suspensive
condition—being the 1st shipment and sale of iron ores.
st
ISSUE: W/N the 1 shipment and sale of iron ores are
considered suspensive condition
HELD: NO. It was only a SUSPENSIVE TERM. What took
place between Gaite and Fonacier, regarding the
transfer of the mining rights, was a sale. A contract of
sale is normally ONEROUS and COMMUTATIVE. Each
party anticipates performance form the very start. Since
a sale is essentially onerous, any doubts must be settled
in favor of the greatest reciprocity of rights—in this
case, that a period, and not a condition, was
contemplated. Had it been a suspensive condition,
Fonacier would have been able to postpone payment
indefinitely.
2.
Gross inadequacy of price does NOT affect the validity
of sale, unless it indicates either (1) a vice of consent or
(2) that the parties intended a donation or some other
contract. No evidence suggests such circumstances. The
price need not be the exact value of the property. In
fact, all the parties to the sale believed that they
received the commutative value of what they paid for.
3.
CELESTINO & CO. v COLLECTOR
FACTS: Celestino & Co. (Oriental Sash Factory) was
paying 7% taxes based on gross receipts for the
manufacture and sale of sash products. It now seeks to
pay only the 3% tax imposable upon contracts for piece
of work—as opposed to the 7% tax on sales—claiming
that they do not manufacture ready-made doors for the
public but only upon special order of the customers.
ISSUE: W/N Celestino & Co. is a contractor (piece of
work)
HELD: NO. The fact that the sash products are made
only upon the order of the customers does NOT change
the nature of the establishment. Timing is not the
controlling factor but the nature of the work done. They
habitually make sash products and can easily duplicate
and mass-produce the same. The bulk of their sales
come from standard ready-made products—special
orders are the exception and come only occasionally. If
the goods are manufactured specifically upon special
order of the customer and requires extraordinary
service, then that would be the time when it can be
classified as piece of work. But such is not the case
here. Oriental Sash is clearly a manufacturer and massproducer of doors.
BUENAVENTURA v CA
FACTS: Joaquin spouses sold 6 subdivision lots to some
of their 9 children evidenced by corresponding Deeds of
Sale. The other children, interested in protecting their
inheritance, sought to have the deeds of sale declared
null and void for prejudicing their legitimes, lack of
consideration, and gross inadequacy of price.
ISSUE: W/N the contract of sale is valid
HELD: YES. At the onset, their rights to the legitimes are
merely inchoate and vest only upon the death of their
parents; thus they have no legal interest thereof.
Payment of the price has nothing to do with the
perfection of the contract of sale; it was perfected by
mere consent. Failure to pay consideration cannot be
equated with lack of consideration, which prevents the
existence of a valid contract. The former only results in
the right to demand payment or rescission. There was
already a meeting of the minds as to the price which
was reflected in the Deed of Sale—and that was
sufficient. In fact, evidence suggests that the purchase
process have indeed been paid. The sales are thus valid.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
4.
COMMISSIONER OF INTERNAL REVENUE
ENGINEERING EQUIPMENT & SUPPLY CO.
v
FACTS: Engineering Equipment & Supply (EES) was
engaged in the business of designing and installing
central air-conditioning systems. It was assessed by the
CIR for 30% advanced sales tax, among other penalties
pursuant to an anonymous complaint filed before the
BIR. EES vehemently objected and argued that they are
contractors and not manufacturers, and thus, should
only be liable for the 3% tax on sales of services or
pieces of work.
ISSUE: W/N EES is a contractor (piece of work)
HELD: YES. EES was NOT a manufacturer of airconditioning units. While it imported such items, they
were NOT for sale to the general public and were used
as mere components for the design of the centralized
air-conditioning system, wherein its designs and
specifications are different for every client. Various
technical factors must be considered and it can be
argued that no 2 plants are the same; all are engineered
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separately and distinctly. Each project requires careful
planning and meticulous layout. Such central airconditioning systems and their designs would not have
existed were it not for the special order of the party
desiring to acquire it. Thus, EES is not liable for the
sales tax of 30%.
5.
QUIROGA v PARSONS
FACTS: Quiroga and Parsons Hardware entered into a
contract where the former granted the latter the
exclusive right to sell Quiroga Beds in the Visayas. It
provided for a discount of 25% as commission for the
sales, among other conditions. Quiroga alleged that
Parsons breached its contractual obligations by selling
the beds at a higher price, not having an open
establishment in Iloilo, not maintaining a public
exhibition, and for not ordering beds by the dozen. Only
the last imputation was provided for by the contract,
the others were never stipulated. Quiroga argued that
since there was a contract of agency between them,
such obligations were necessarily implied.
ISSUE: W/N the contract between them was one of
agency, not sale
HELD: NO. The agreement between Quiroga and Parsons
was that of a simple purchase and sale—not an agency.
Quiroga supplied beds, while Parsons had the obligation
to pay their purchase price. These are characteristics of
a purchase and sale. In a contract of agency (or order to
sell), the agent does not pay its price yet, and sells the
products, remitting to the principal its proceeds. Unsold
products must also be returned to the principal. The
provisions on commission and the use of the word
“agency” in the contract as well as the testimonies in
court do not affect its nature. Contracts are what the
law defines it to be, not what the parties call it.
6.
PUYAT v ARCO AMUSEMENT CO.
FACTS: Arco Amusement was engaged in the business of
operating cinematopgraphs. Gonzalo Puyat & Sons Inc
(GPS) was the exclusive agent in the Philippines for the
Starr Piano Company. Desiring to equip its
cinematograph with sound reproducing devices, Arco
approached GPS, through its president, GIl Puyat, and
an employee named Santos. After some negotiations, it
was agreed between the parties that GPS would order
sound reproducing equipment from Starr Piano Company
and that Arco would pay GPS, in addition to the price of
the equipment, a 10% commission, plus all expenses
such as freight, insurance, etc. When GPS inquired Starr
Piano the price (without discount) of the equipment, the
latter quoted such at
$1,700 FOB Indiana. Being
agreeable to the price (plus 10% commission plus all
other expenses), Arco formally authorized the order.
The following year, both parties agreed for another
order of sound reproducing equipment on the same
terms as the first at $1,600 plus 10% plus all other
expenses.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
Three years later, Arco discovered that the prices
quoted to them by GPS with regard to their first 2 orders
mentioned were not the net prices, but rather the list
price, and that it had obtained a discount from Starr
Piano. Moreover, Arco alleged that the equipment were
overpriced. Thus, being its agent, GPS had to reimburse
the excess amount it received from Arco.
ISSUE: W/N there was a contract of agency, not of sale
HELD: NO. The letters containing Arco's acceptance of
the prices for the equipment are clear in their terms
and admit no other interpretation that the prices are
fixed and determinate. While the letters state that GPS
was to receive a 10% commission, this does not
necessarily mean that it is an agent of Arco, as this
provision is only an additional price which it bound itself
to pay, and which stipulation is not incompatible with
the contract of sale.
It is GPS that is the exclusive agent of Starr Piano in
the Philippines, not the agent of Arco. it is out of the
ordinary for one to be the agent of both the seller and
the buyer. The facts and circumstances show that Arco
entered into a contract of sale with GPS, the exclusive
agent of Starr Piano. As such, it is not duty bound to
reveal the private arrangement it had with Starr Piano
relative to the 25% discount.
Thus, GPS is not bound to reimburse Arco for any
difference between the cost price and the sales price,
which represents the profit realized by GPS out of the
transaction.
7.
LO v KJS ECO-FORMWORK SYSTEM PHIL., INC.
FACTS: KJS Inc was engaged in the sale of steel
scaffolding. Sonny Lo, a contractor, purchased
scaffolding equipment worth P540,000. He made a
deposit of P150,000, the balance payable within 10
months. Due to financial difficulties, Lo defaulted after
paying only 2 installments. A debt of some P335,000
remained. Thus, Lo assigned in favor of KJS all his
receivables from Jomero Realty Corp. which refused to
pay and raised the defense of compensation—claiming
that Lo also had debts in its favor. KJS thus again sought
to collect from Lo who them averred that his debts have
already been extinguished by the said assignment.
ISSUE: W/N the assignment of credit extinguished the
debts
HELD: NO. The assignment of credit made by Lo in favor
of KJS was in the nature of dacion en pago, which is
governed by the law on sales. It is as if KJS bought the
credit from Lo, the payment of which is to be charged
upon the latter’s debt. Lo, as vendor not good faith,
shall be liable for the existence and legality of the
credit at the time of the sale (but not for the solvency
of the debtor). He is bound by certain warranties. In this
case, since the assignment he made in favor of KJS has
already been compensated, he should still be liable to
pay KJS for his indebtedness. He should make good the
warranty and pay the obligation.
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PARTIES TO A CONTRACT OF SALE
1.
PARAGAS v HEIRS OF DOMINADOR BALACANO
FACTS: Balancano, married to Lorenza, owned 2 parcels
of land. He was already 81 years old, very weak, could
barely talk, and had been battling with liver disease for
over a month. On his deathbed, barely a week before he
died, he allegedly signed a Deed of Absolute Sale over
the lots in favor of Paragas Spouses, accompanied by
Atty. De Guzman who proceeded to notarize the same,
alleging that it was a mere confirmation of a previous
sale and that Gregorio had already paid P50,000 as
deposit. The Paragas’ driver was also there to take a
picture of Gregorio signing said deed with a ballpen in
his hand. There was nothing to show that the contents
of the deed were explained to Balacano. Paragas then
sold a portion of the disputed lot to Catalino. The
grandson of Gregorio, Domingo, sought to annul the sale
and the partition. There was no sufficient evidence to
support any prior agreement or its partial execution.
ISSUE: W/N Balacano is incapacitated to enter into a
contract of sale
HELD: YES. A person is not rendered incompetent merely
because of old age; however, when such age has
impaired the mental faculties as to prevent a person
from protecting his rights, then he is undeniably
incapacitated. He is clearly at a disadvantage, and the
courts must be vigilant for his protection. In this case,
Balacano’s consent was clearly absent—hence the sale
was null and void. The circumstances raise serious
doubts on his capacity to render consent. Considering
that the Paragas spouses are not owners of the said
properties, it only follows that the subsequent sale to
Catalino—who was not in good faith—is likewise void.
Furthermore, the lots pertained to the conjugal
partnership—having been inherited by Balacano during
his marriage to Lorenza. Thus, it cannot be sold without
the latter’s consent.
2.
properties to each other; the same prohibitions apply
to a couple living in as husband and wife without the
benefit of marriage. As public interests dictate, to rule
otherwise would put the persons in guilt at better
position than those legally married.
3.
RUBIAS v BATILLER
FACTS: Militante claimed ownership over a parcel of
land and applied for the registration of the same with
the CFI; his counsel was his son-in-law, Atty. Rubias. His
claim was dismissed by the trial court, thus he
appealed. Pending appeal, he sold the lot to Atty.
Rubias for P2,000. Batiller, on the other hand, claimed
to have inherited the same lot from his ancestors who
have been in open, public, peaceful, and actual
possession thereof under a claim of title. Atty. Rubias
filed an ejectment suit against Batiller who assailed the
validity of the sale to Rubias. Given the dismissal of
Militante’s application, he had thus no right over the
said land that he may have validly transferred to Atty.
Rubias.
ISSUE: W/N the sale to Atty. Rubias is valid
HELD: NO. Even assuming he had title thereto, the sale
of the lot to Atty. Rubias would be null and void for
being expressly prohibited by the Civil Code. Lawyers
cannot acquire by purchase the property or rights under
litigation over which they take part by virtue of their
profession. The same rule applies to judges, clerks of
court, and other judicial officers with respect to the
same. The purchase in violation of the above provision is
not merely voidable as Atty. Rubias contends; it is VOID
and INEXISTENT from the very beginning. The right to
set up the defense of its illegality cannot be waived—
and, unlike cases involving agents, guardians, or
administrators with respect to the properties under
their charge, it is not susceptible to compromise or
ratification. It is likewise contrary to public policy
CALIMLIM-CANULLAS v FORTUN
FACTS: Mercedes and Fernando were married and had 5
children. Fernando inherited the land upon which their
house was built. Fernando left his family to live with
his concubine Corazon. He then sold the said lot with
the house in favor of Corazon for P2,000. Corazon,
unable to take possession of the house and lot, filed a
complaint for quieting of title. Mercedes objected
alleging that the properties pertained to their conjugal
partnership.
ISSUE: W/N the sale to Corazon was valid
HELD: NO. The properties pertained to the conjugal
partnership of Mercedes and Fernando, thus the sale is
null and void for lack of Mercedes’ consent and for
being contrary to morals and public policy. The law
generally prohibits spouses from selling or donating
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
4.
PHIL. TRUST CO. v ROLDAN
FACTS: Mariano Bernardo, a minor, inherited among
others 17 parcels of land from his deceased father.
Soccoro Roldan was appointed as his guardian. Soccoro
sought and was granted authority to sell the lots to her
brother-in-law Ramos for P14,700. Very shortly after,
Ramos sold back to Soccoro the same properties for
P15,000. She then sold 4 parcels to Emilio Cruz. Phil.
Trust Co. replaced Soccoro as guardian and sought to
annul all the aforesaid sales.
ISSUE: W/N the sale to Ramos was valid
HELD: NO. Guardianship is the trust of the highest order.
In this case, for all intents and purposes, it was as if
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Soccoro herself purchased the properties of her ward.
Civil Code. She indirectly sold the properties to herself.
The same applies even though there was no actual
malice or collusion proven. Since the sale to Soccoro
was null and void, it only follows that the sales made by
Soccoro to Cruz were likewise void. One cannot sell
what is not his property.
Soccoro tried to correct the problem by allowing
Mariano to re-purchase the said properties for P15,000.
However, the child would still be at a losing end
because it would not entitle him to the fruits of the
property during the time when he was not in possession
thereof. The SC annulled the sale.
CLV: Bad ruling because W/N ward is benefited is
IMMATERIAL. Advantage to ward can easily be forged.
5.
FABILLO v IAC
FACTS: Florencio Fabillo contracted the services of Atty.
Murillo to revive a lost case over his inheritance from his
deceased sister Justinia. He sought to acquire the San
Salvador and Pugahanay Properties that his sister left
behind against the latter’s husband. They entered into a
contract where a contingent fee in favor of Atty. Murillo
in case the case won was agreed upon. The fee was 40%
of the value of whatever benefit Florencio may derive
from the suit—such as if the properties were sold,
rented, or mortgaged. It was vague, however, regarding
the fee in case Florencio or his heirs decide to occupy
This falls within the prohibition under Art. 1459 of the
the house—allowing Atty. Murillo the option to occupy or
lease 40% of the said house and lot. A compromise
agreement was entered into where Florencio acquired
both properties. Atty. Murillo installed a tenant in the
Pugahanay Property; later on, Florencio claimed
exclusive rights over the properties invoking Art. 1491 of
the CC. Florencio and Atty. Murillo both died and were
succeeded by their respective heirs.
ISSUE: W/N contingent fees agreed upon are valid
HELD: YES. Contingent fees are not contemplated by the
prohibition in Art. 1491 disallowing lawyers to purchase
properties of their clients under litigation. The said
prohibition applies only during the pendency of the
litigation. Payment of the contingent fee is made after
the litigation, and is thus not covered by the
prohibition. For as long as there is no fraud or undue
influence, or as long as the fees are not exorbitant, the
same as valid and enforceable. It is even recognized by
the Canons of Professional Ethics.
However, considering that the contract is vague on
the matter of division of the shares if Florencio occupies
the property; the ambiguity is to be construed against
Atty. Murillo being the one who drafted the contract and
being a lawyer more knowledgeable about the law. The
Court thus invoking the time-honored principle that a
lawyer shall uphold the dignity of the legal profession,
ordered only a contingent fee of P3,000 as reasonable
attorney’s fees.
SUBJECT MATTER OF SALE
1.
POLYTECHNIC UNIVERSITY v CA
FACTS: The National Development Corp. (NDC) owned
the NDC Compound, a portion of which was leased to
Firestone Ceramics, which built several warehouses and
facilities therein. Since business between NDC and
Firestone went smooth, the lease was twice renewed
this time conferring upon Firestone a right of first
refusal should NDC decide to dispose of the property.
Also, under the contract, Firestone was obliged to
introduce
considerable
improvements
thereon.
Eventually though, Memo Order No. 214 was issued
ordering the transfer of NDC Compound to the
government in consideration of the cancellation of
NDC’s P57M debt. Pursuant thereto, NDC transferred the
property to Polytechnic University (PUP). Firestone sued
for specific performance invoking its right of first
refusal, and sought to enjoin NDC and PUP from
proceeding with the sale. Both PUP and NDC aver that
there was no sale involved since ownership of the
property
remained
with
the
government—both
companies being GOCCs.
ISSUE: W/N there was a sale
HELD: YES. The argument of PUP and NDC was
untenable. GOCCs have personalities separate and
distinct from the government. “Sale” brings within its
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
grasp the whole gamut of transfers where ownership of
a thing is ceded for consideration. Further, judging from
the conduct of the parties in this case, all the elements
of a valid sale attend. Consent is manifested by the
Memo Order No. 214, the cancellation of liabilities
constituted consideration; the subject matter was of
course the property subject of the dispute.
Since a sale was involved, the right of first refusal in
favor of Firestone must be respected. It forms an
integral part of the lease and is supported by
consideration—Firestone
having
made
substantial
investments therein. Only when Firestone fails to
exercise such right may the sale to PUP proceed.
2.
ATILANO v ATILANO
FACTS: Eulogio Atilano I purchased Lot 535 and had it
subdivided into 5 parts (A to E). He occupied Lot A; his
brother, Eulogio II, occupied Lot E. He then sold lots B,
C, and D to other persons. He then sold Lot E to his
brother Eulogio II. Both brothers died and their heirs
found out after a survey that Eulogio I actually occupied
Lot E and Eulogio II occupied Lot A. Thus, the heirs of
Eulogio II offered to exchange the properties. However,
the heirs of Eulogio I refused because Lot E was bigger
than Lot A.
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ISSUE: W/N an exchange of the properties was proper
HELD: NO. What took place was a simple mistake in
drafting the instrument evidencing the agreement
between the brothers. One sells or buys property as he
sees it in actual setting and not by the mere lot number
in the certificate of title. The brothers remained in
possession of their respective portions throughout their
lives unaware of the mistake in the designation of the
lots. In this case, the instrument simply failed to reflect
the true intention of the parties; thus, an exchange of
the properties is unnecessary. All the heirs should do is
to execute mutual deeds of conveyance.
3.
MELLIZA v CITY OF ILOILO
FACTS: Meliza owned Lot 1214, 9,000 sqm of which she
donated to the Mun. of Iloilo for the use of the site of
the Mun. Hall. However, the donation was revoked
because it was inadequate to meet the requirements of
the “Arellano Plan.” Lot 1214 was later divided into 4
lots. Meliza then sold Lots C and D to the Municipality;
Lot B was not mentioned in the sale. However, the
contract stipulated that the area to be sold to the
Municipality would include such areas needed for the
construction of the City Hall according the Arellano
Plan. She then sold the remaining portions of the lots to
Villanueva, who then sold the same to Pio. The sale was
for such lots not included in the sale to the Mun. of
Iloilo. The City of Iloilo, assuming that Lot B has been
sold in its favor pursuant to the Arellano Plan, then
donated Lot B to UP. Pio objected and sought to recover
the lots stating that Lot B was not included in the initial
sale made by Meliza to the Municipality—and that the
subject matter of sale should be a determinate thing.
ISSUE: W/N there was a determinate/determinable
subject matter
HELD: YES. The requirement for the subject matter to
be determinate is satisfied in this case. Simple
reference to the “Arellano Plan” would indicate that it
could determine what portions of the contiguous land
(lot B) were needed for the construction of the City
Hall. There was no need for a further agreement to
establish the lots covered by the sale; thus, the sale is
valid. Besides, the portions of Lot B covered by the sale
were practically at the heart of the City Hall site.
4.
YU TEK & CO. v GONZALES
FACTS: Gonzales received P3,000 from Yu Tek and
obligated himself in favor of the latter to deliver 600
piculs of sugar of the 1st and 2nd grade within 3 months.
He failed to deliver the sugar and refused to return the
money—thus Yu Tek sued him. Gonzales, in seeking to
evade liability, invokes fortuitous event, alleging the
total failure of his crop.
ISSUE: W/N there was perfected contract of sale
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
HELD: NO. The subject matter was not yet determinate.
The sugar agreed upon has yet to be segregated from all
other articles. That being the case, there was merely an
executory agreement—a promise of sale, and not a
contract of sale itself.
Moreover, there was no stipulation that the sugar was
to be derived from his crop; he was at liberty to get it
from whatever source he could find. The obligation he
incurred was for the delivery of the generic thing. Thus,
he cannot invoke force majeure under the maxim genus
never perishes. His obligation to deliver the sugar is not
extinguished.
Yu Tek is thus entitled to rescind the contract and
recover the money in addition to the stipulated P1,200
as indemnity for losses.
DD: This rule no longer holds true. Generic things may
now be the subject matter of a contract of sale provided
that they have the quality of being DETERMINABLE at
the perfection of the contract.
5.
NGA v IAC
FACTS: National Grains Authority (now National Food
Authority, NFA) is a government agency created under
PD 4. One of its incidental functions is the buying of
palay grains from qualified farmers. In 1979, Leon
Soriano offered to sell palay grains to the NFA, through
its Provincial Manager, William Cabal. He submitted the
documents required by the NFA for pre-qualifying as a
seller, which were processed and accordingly, he was
given a quota of 2,640 cavans of palay. The quota noted
in the Farmer’s Information Sheet represented the
maximum number of cavans of palay that Soriano may
sell to the NFA. On 23 and 24 August 1979, Soriano
delivered 630 cavans of palay. The palay delivered were
not rebagged, classified and weighed. When Soriano
demanded payment of the 630 cavans of palay, he was
informed that its payment will be held in abeyance since
Mr. Cabal was still investigating on an information he
received that Soriano was not a bona fide farmer and
the palay delivered by him was not produced from his
farmland but was taken from the warehouse of a rice
trader, Ben de Guzman. On 28 August 1979, Cabal wrote
Soriano advising him to withdraw from the NFA
warehouse the 630 cavans stating that NFA cannot
legally accept the said delivery on the basis of the
subsequent certification of the BAEX technician
(Napoleon Callangan) that Soriano is not a bona fide
farmer.
Instead of withdrawing the 630 cavans of palay,
Soriano insisted that the palay grains delivered be paid.
He then filed a complaint for specific performance
and/or collection of money with damages against the
NFA and William Cabal. Meanwhile, by agreement of the
parties and upon order of the trial court, the 630 cavans
of palay in question were withdrawn from the
warehouse of NFA. In 1982, RTC ruled in favor of Soriano
and in 1986, CA affirmed decision of RTC.
ISSUE: W/N there was a perfected contract of sale
HELD: YES. In the present case, Soriano initially offered
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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 contention that – since the delivery were not
rebagged, classified and weighed in accordance with the
palay procurement program of NFA, there was no
acceptance of the offer thus – this is a clear case of
policitation or an unaccepted offer to sell, is untenable.
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 of the New
Civil Code provides that “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.” In the present case,
there was 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 of his
produce as long as it does not exceed 2,640 cavans.
6.
JOHANNES SCHUBACK & SONS PHIL. TRADING
CORP. v CA
FACTS: SJ Industrial, through Ramon San Jose,
approached Schuback & Sons Phil. Trading (SSPT) to
purchase bus spare parts. He submitted the list of parts
he wanted and SSPT coordinated with its Germany
Office to quote the prices, and forwarded its formal
offer to SJ Industrial, containing the prices, item
numbers, descriptions, etc. SJ informed SSPT of his
desire to purchase such items and promised to submit
the quantity per unit. SJ then submitted such quantities
needed to SSPT’s GM, Mr. Reichert. San Jose indicated
the same in the Purchase Order with the inscription
“this will serve as our initial purchase order. PO will
include 3% discount.” SSPT immediately ordered the
products from Germany to avail of the old prices—
partial deliveries of which were made. Then, for his
failure to secure letters of credit, SJ failed to purchase
the same and alleged that there was no perfected
contract of sale. Thus, SSPT sought damages.
ISSUE: W/N there was a perfected contract of sale
HELD: YES. Quantity is immaterial in the perfection of a
contract of sale. What is important is the meeting of the
minds as to the object and cause of the sale. There was
already a meeting of the minds in this case from the
moment SJ manifested that he will order the parts,
although he will communicate quantities later on. In
fact, he indeed communicated such needed quantities—
this goes to the execution of the contract of sale
already. By ordering the parts, SJ acceded to the prices
offered by SSPT. On the other hand, SSPT acceded to
SJ’s request for discount by immediately ordering the
parts. SJ Industrial is thus liable for damages
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
7.
NOOL v CA
FACTS: One lot formerly owned by Victorio Nool has an
area of 1 hectare. Another lot previously owned by
Francisco Nool has an area of 3.0880 hectares. Both
parcels are situated in San Manuel, Isabela. Spouses
Conchita Nool and Gaudencio Almojera (plaintiffs)
alleged that they are the owners of the subject land as
they bought the same from Victorio and Francisco Nool,
and that as they are in dire need of money, they
obtained a loan from DBP, secured by a real estate
mortgage on said parcels of land, which were still
registered in the names of Victorino and Francisco Nool,
at the time, and for the failure of the plaintiffs to pay
the said loan, including interest and surcharges, totaling
P56,000.00, the mortgage was foreclosed; that within
the period of redemption, the plaintiffs contacted
Anacleto Nool for the latter to redeem the foreclosed
properties from DBP, which the latter did; and as a
result, the titles of the 2 parcels of land in question
were transferred to Anacleto; that as part of their
arrangement or understanding, Anacleto agreed to buy
from Conchita the 2 parcels of land under controversy,
for a total price of P100,000.00, P30,000.00 of which
price was paid to Conchita, and upon payment of the
balance of P14,000.00, the plaintiffs were to regain
possession of the 2 hectares of land, which amounts
spouses Anacleto Nool and Emilia Nebre (defendants)
failed to pay, and the same day the said arrangement
was made; another covenant was entered into by the
parties, whereby the defendants agreed to return to
plaintiffs the lands in question, at anytime the latter
have the necessary amount; that latter asked the
defendants to return the same but despite the
intervention of the Barangay Captain of their place,
defendants refused to return the said parcels of land to
plaintiffs; thereby impelling the plaintiffs to come to
court for relief. On the other hand, defendants
theorized that they acquired the lands in question from
the DBP, through negotiated sale, and were misled by
plaintiffs when defendant Anacleto Nool signed the
private writing, agreeing to return subject lands when
plaintiffs have the money to redeem the same;
defendant Anacleto having been made to believe, then,
that his sister, Conchita, still had the right to redeem
the said properties.
It should be stressed that Manuel S. Mallorca,
authorized officer of DBP, certified that the 1-year
redemption period and that the mortgagors’ right of
redemption was not exercised within this period. Hence,
DBP became the absolute owner of said parcels of land
for which it was issued new certificates of title. About 2
years thereafter, DBP entered into a Deed of Conditional
Sale involving the same parcels of land with Anacleto
Nool as vendee. Subsequently, the latter was issued new
certificates of title in 1988.
RTC ruled in favor of Anacleto Nool. CA affirmed.
ISSUE: W/N there was a valid contract of sale between
Anacleto and Conchita
HELD: NO. Article 1459 of the Civil Code provides that
“the vendor must have a right to transfer the ownership
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thereof [object of the sale] at the time it is delivered.”
Here, delivery of ownership is no longer possible. 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, under item
5 of Article 1409 of the Civil Code: “Those which
contemplate an impossible service.”
Article 1505 of the Civil Code provides that “where
goods are sold by a person who is not the owner thereof,
and who does not sell them under authority or with
consent of the owner, the buyer acquires no better title
to the goods than the seller had, unless the owner of the
goods is by his conduct precluded from denying the
seller’s authority to sell.” In the present case, there is
no allegation at all that petitioners were authorized by
DBP to sell the property to the private respondents.
Further, the contract of repurchase that the parties
entered into presupposes that petitioners could
repurchase the property that they “sold” to private
respondents. As petitioners “sold” nothing, it follows
that they can also “repurchase” nothing. In this light,
the contract of repurchase is also inoperative and by the
same analogy, void.
PRICE AND OTHER CONSIDERATION
1.
MAPALO v MAPALO
FACTS: Miguel and Candida Mapalo were illiterate
farmers and owned a parcel of land. Since Maximo
Mapalo was to be married, they donated to him the
eastern half of the land. Maximo, however, deceived
them by making them sign an instrument donating the
entire lot. There was a consideration for P5,000 stated
in the deed, but the spouses never received anything.
Miguel built a fence to divide the lot and continued to
occupy the western part. Maximo then registered the
entire lot and 13 year after, sold the same to the
Narcisos who took possession only of the eastern half.
Later on, the Narcisos sought to be declared owners of
the entire land; the spouses claimed that the sale to the
Narcisos was void for lack of consideration. The CA
declared that the sale was merely voidable and the
action by the spouses was barred by prescription, being
filed after 4 years from the discovery of the fraud.
ISSUE: W/N there was a valid contract of sale
HELD: Consideration was totally absent; the P5,000
price stipulated was never received/delivered to the
spouses. Thus, the sale to the Narcisos was VOID ab
initio for want of consideration. The inexistence of the
contract is permanent and cannot be the subject of
prescription. The Narcisos are also in bad faith—they
had knowledge of the true nature and extent of
Maximo’s right over the land.
2.
RONGAVILLA v CA
FACTS: Both spinsters and unschooled in English,
Mercedes and Florencia dela Cruz are the aunts of
Rongavilla. Dela Cruz co-owned a parcel of land (1/2
pro-indiviso) in Las Pinas with another niece named
Juanita Jimenez (elder sister of Rongavilla), who kept
the OCT, as well as the TCT after it was subdivided.
In 1976, Dela Cruz borrowed P2,000 from Rongavilla
for the repair of their dilapidated rooftop. A month
later, Rongavilla and Jimenez visited their aunts' home
and brought with them a document for the signature of
their aunts. While the document was in English and upon
inquiry by Dela Cruz what it was about, Rongavilla
answered that it was merely evidencing the P2,000
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
debt. Apparently, it was a Deed of Sale.
In 1980, Rongavilla went to Dela Cruz' place and asked
them to vacate the lot. Suprised by this, Dela Cruz
discovered the misrepresentation her niece made when
she signed the document. She the filed an action with
the RTC to have the purported Deed of Sale declared
null and inexistent for lack of consent and
consideration.
ISSUE: W/N there was a valid sale
HELD: NO. Rongavilla and Jimenez were able to secure
the signature of Dela Cruz in the Deed of Absolute Sale
through fraud and there was no consideration
whatsoever for the alleged sale. The consent was not
only vitiated, but it was not given at all. Since there was
no consent, the deed of absolute sale is null and void ab
initio.
3.
MATE v CA
FACTS: Josefina approached Fernando asking for help.
Her family was to be sued by Tan for issuing rubber
checks; thus she asked him to cede his 3 lots to Tan and
it will be Josefina who will repurchase them for him. He
initially rejected her offer. Then, Josefina issued him 2
checks, one for P1.4M, pertaining to the value of the
lot, and another for P420,000 corresponding to 6
months’ interests. He agreed, drafted the instrument
himself, and ceded his properties to Tan. Later, both
checks bounced; he sued Tan for annulment of the sale
for lack of consideration since he never received
anything. He also sued Josefina criminally, but
absconded.
ISSUE: W/N there was a valid contract of sale
HELD: YES. There was consideration in the form of the
check for P420,000. It was his fee for executing the
sale. It was not only kindness that impelled him to cede
his property, it was also his interest for profit.
That he never received money is of no moment; a sale
is a consensual contract. He also tacitly admitted to the
sale when he filed criminal charges against Josefina.
Fernando, being a lawyer, has no one else to blame but
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himself for the loss. He acted negligently our of desire
for profit.
4.
YU BUN GUAN v CA
FACTS: Yu Bun Guan and Ong are married since 1961 and
lived together until she and her children were
abandoned by him in 1992, because of his incurable
promiscuity, volcanic temper, and other vicious vices.
In 1968, out of her personal funds, Ong purchased a
parcel of land (Rizal Property) from Aurora Seneris.
Also, during their marriage, they purchased a house and
lot out of their conjugal funds.
Before their separation in 1992, she reluctantly agreed
to execute a Deed of Sale of the Rizal Property on the
promise that Yu Bun Guan would construct a commerical
building for the benefit of the children. He suggested
that the property should be in his name alone so that
she would not be involved in any obligation. The
consideration for the sale was the execution of a Deed
of Absolute Sale in favor their children and the payment
of the loan he obtained from Allied Bank.
However, when the Deed of Sale was executed in
favor of Yu Bun Guan, he did not pay the consideration
of P200K, supposedly the "ostensible" valuable
consideration. Because of this, the new TCT issued in his
name was not delivered to him by Ong.
Yu Bun Guan then filed for a Petition for Replacement
of the TCT, with an Affidavit of Loss attached. Ong, on
the other hand, executed an Affidavit of Adverse Claim
and asked that the sale be declared null and void .
RTC ruled in favor of Ong. CA affirmed.
ISSUE: W/N there was a valid contract of sale
HELD: NO. It is clear from the findings of the lower
courts that the Deed of Sale was completely simulated
and thus, VOID without effect. No portion of the
P200,000 consideration stated in the Deed was ever
paid. And, from the facts of the case, it is clear that
neither party had any intention whatsoever to pay that
amount. Instead, the Deed of Sale was executed merely
to facilitate the transfer of the property to petitioner
pursuant to an agreement between them to enable him
to construct a commercial building and to sell the Juno
property to their children. Being merely a subterfuge,
that agreement cannot be taken as a consideration for
the sale.
5.
ONG v ONG
FACTS: For an in consideration of P1 and other valuable
considerations, Imelda Ong transferred through a Deed
of Quitclaim her rights over a ½ portion of a parcel of
land to Sandra. Later on, she revoked the Deed and
donated the whole property to her son, Rex. Sanda,
through her guardian, sought to recover ownership and
possession thereof. Imelda alleged that the sale was
void for lack of consideration.
HELD: YES. There was consideration. Its apparent
inadequacy is of no moment since the usual practice in
deeds of conveyance is to place a nominal amount
although there is more valuable consideration given.
Consideration is presumed to exist. He who alleges
otherwise assumes the burden of proof. The one peso
was not the consideration, but rather the other valuable
considerations.
6.
BAGNAS v CA
FACTS: Hilario died with no will and was survived only
by collateral relatives. Bagnas (et al) were the nearest
kin. Retonil (et al) were also relatives but to a farther
extent. They claimed ownership over 10 lots from the
estate of Hilario presenting notarized and registered
Deeds of Sale (in Tagalog) where the consideration for
the lands was P1 and services rendered, being rendered,
and to be rendered. Bagnas argued that the sales were
fictitious, while Retonil claimed to have done many
things for Hilario—such as nursing him on his deathbed.
ISSUE: W/N there was a valid contract of sale
HELD: NO. At the onset, if a contract has no
consideration, it is not merely voidable, but VOID—and
even collateral heirs may assail the contract. In this
case, there was no consideration. Price must be in
money or its equivalent; services are not the equivalent
of money insofar as the requirement of price is
concerned. A contract is not one for sale if the
consideration consists of services. Not only are they
vague, they are unknown and not susceptible of
determination without a new agreement between the
parties.
7.
REPUBLIC v PHIL. RESOURCES DEV. CORP.
FACTS: The Republic brought an action against Apostol
for the collection of sums owing to it for his purchase of
Palawan Almaciga and other logs. His total debt
amounted to some P34,000. PRDC intervened claiming
that Apostol, as President of the company, without prior
authority, took goods (steel sheets, pipes, bars, etc)
from PRDC warehouse and appropriated them to settle
his personal debts in favor of the government. The
Republic opposed the intervention of PRDC, arguing that
price is always paid in money and that payment in kind
is no payment at all; hence, money and not the goods of
PRDC are under dispute.
ISSUE: W/N payment in kind is equivalent to price paid
in money
HELD: YES. Price may be paid in money or ITS
EQUIVALENT—in this case, the goods. Payment need not
be in the form of money. The prices for the goods have,
in fact, been assessed and determined. PRDC thus has a
substantial interest in the case and must be permitted
ISSUE: W/N there was a valid contract of sale
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
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to intervene—its goods paid out without authority being
under dispute in this case.
8.
NAVARRA v PLANTERS DEV. BANK
FACTS: Navarra spouses are the owners of 5 parcels of
land in BF Homes, Paranque. In 1982, they obtained a
loan of P1.2M from Planters Bank, secured by a
mortgage over these parcels of land. Unfortunately,
they defaulted to pay their obligation and thus, Planters
Bank foreclosed the property. They were not able to
redeem the property as well.
On the other hand, RRRC Dev. Corp. is a real estate
company owned by the parents of Carmelita Navarra. It
obtained a loan from Planters Bank secured by a
submit a board resolution from RRRC authorizing such,
the Bank refused to apply the excess to his repurchase.
In 1988, a portion of the lots was sold to Gatchalian
Realty. Navarra spouses filed for specific performance
against Planters Bank, alleging that there was a
perfected contract of sale (P1.8M, with P300K
downpayment).
RTC ruled in favor of Navarra spouses. CA reversed.
ISSUE: W/N there was a valid contract of sale (consider
the repurchase as a sale)
HELD: NO. While the letters indicate the amount of
P300K as downpayment, they are completely silent as to
how the succeeding installment payment shall be made.
At most, the letters merely acknowledge that the
downpayment was agreed upon by the parties. However,
mortgage over another set of properties of RRRC.
Likewise, it defaulted and the properties were
foreclosed. However, RRRC was able to negotiate with
the Bank for the redemption of the properties by was of
a concession whereby the Bank allowed RRRC to refer to
it would-be buyers of the properties who would remit
their payments directly to the Bank, which would then
be considered as redemption price for RRRC. Eventually,
these were sold and payments made directly to the Bank
were in excess by P300K for the redemption price.
In the meantime, Jorge Navarra requested that they
repurchase their house and lot for P300K, which the
Bank agreed. Accordingly, Jorge Navarra requested
further that the excess payment of RRRC be applied as
down payment for their repurchase. For his failure to
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 the payment goes into the
price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the
price.
Moreover, the letter/offer failed to specify a definite
amount of the purchase price for the sale/repurchase of
the properties. It merely stated that it will be based on
the redemption value plus accrued interest at the
prevailing rate up to the date of the sales contract.
Clearly, the lack of a definite offer on the part of the
Navarra spouses could not possibly serve as the basis of
their claim that the sale was perfected.
FORMATION OF CONTRACT OF SALE
1.
MANILA METAL CONTAINER CORP. v PNB
FACTS: Manila Metal was the owner of a parcel of land in
Mnadaluyong. To secure a P900K loan it obtained from
PNB, Manila Metal executed a real estate mortgage over
the lot. PNB later granted Manila Metal a new credit
accommodation of P1M. Manila Metal secured another
loan of P653K from PNB.
In 1982, PNB sought to have the property foreclosed
and sold at a public auction. PNB was the highest
bidder. Manila Metal requested an extension of time to
redeem the property and to repurchase such on
installment.
The Special Assets Management Department (SAMD)
prepared a statement of account and as of 1984, Manila
Metal's obligation amounted to P1.6M, which includes
the bid price, interests, advances of insurance
premiums, advances on realty taxes, etc. When apprised
of the statement of account, Manila Metal remitted
P725K to PNB as deposit to repurchase.
In the meantime, SAMD recommended that Manila
Metal be allowed to repurchase for P1.6M. PNB,
however, rejected the recommendation and offered the
property at P2.66M, its minimum market value. Manila
Metal refused and reiterated that it already acceded to
SAMD's offer, to which it remitted P725K.
In 1985, PNB accepted the offer but for P1.9M cash
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
less the P725K deposit. Manila Metal, again, rejected
this offer and filed a complaint against PNB for the
annulment of foreclosure or specific performance,
contending that there was a valid contract of sale
between Manila Metal and SAMD.
In 1993, while the case was pending, Manila Metal
offered to repurchase at P3.5M, but PNB rejected
because the market value of the property was at P30M.
Manila Metal offered again at P4.25M but was rejected
again.
ISSUE: W/N there was a valid contract of sale
HELD: NO. There was no perfected contract of sale
between PNB and Manila Metal because there was no
agreement as to the price certain. The Statement of
Account prepared by SAMD cannot be classified as a
counter-offer. It is simply a recital of its total monetary
claims against Manila Metal. The amount stated therein
could not be considered as a counter-offer since it was
only a recommendation subject to PNB's Board of
Directors' approval. Neither can the receipt of P725K by
SAMD be regarded as evidence of a perfected contract
of sale. The amount is merely an acknowledgment of the
receipt of P725K as deposit to repurchase the property.
It was accepted by respondent on the condition that the
purchase price will still be approved by the Board of
9
Directors. Pending such approval, Manila Metal cannot
legally claim that PNB is already bound by any contract
of sale with it.
2.
CARCELLER v CA
FACTS: Carceller leased 2 parcels of land owned by
State Investment Houses (SIHI), the period being 18
months at P10,000/month rent. Under the lease, SIHI
guaranteed Carceller the exclusive right and option to
purchase the said lots within the lease period for the
aggregate amount of P1.8M. Around 3 weeks before the
end of the lease period, SIHI informed Carceller of the
impending termination of the lease and the short period
left for him to purchase. He begged for an extension,
but SIHI refused. Nevertheless, SIHI offered the property
to him for lease for another year, but this time, it also
offered it for sale to the public. Carceller thus sued SIHI
for specific performance to compel SIHI to execute a
Deed of Sale in his favor.
ISSUE: W/N Carceller may still exercise the option to
purchase the property
HELD: YES. Even if Carceller failed to purchase the
property within the said period, still equity must
intervene. He had introduced substantial improvements
thereon; to rule against him would cause damage to
him—and SIHI does not stand to gain much therefrom.
SIHI clearly intended to sell the lot to him considering
that it was under financial distress, that is constantly
reminded him of the option and the impending deadline.
The delay of 18 days is not substantial. Carceller’s letter
to SIHI expressing his intent to purchase the lot is fair
notice of intent to exercise the option despite the
request for extension. Carceller should thus be allowed
to buy the lots.
3.
HELD: NO. The Deeds of Assignment were not option
contracts, which may be enforced by Tayag. Not being
the legal owners of the property, the tenants had no
right to confer upon Tayag the option, more so, the
exclusive right to buy the property.
4.
VILLAMOR v CA
FACTS: The Villamors purchased from Macaria ½ of the
latter’s land for a price considerably higher than the
prevailing market price. They then executed a Deed of
Option stating that the only reason why the Villamors
agreed to purchase the said lot is because Macaria
agreed to confer upon them the exclusive right to
purchase the other half of the land. Such sale under the
deed may be imposed whenever the need for the sale
arises on the part of either party. Macaria sought to
repurchase the land, but the Villamors refused. Instead,
the Villamors exercised their option to purchase the
other half of the property. Macaria refused, thus the
Villamors filed a case for specific performance. Macaria
averred that the option is void for lack of consideration.
ISSUE: W/N the option contract is void for lack of
consideration
HELD: NO. The Option Contract is supported by a
consideration—that being the difference of the agreed
price and the market price of the other half of the land,
which was sold to the Villamors. Thus, it is valid and
may be enforced by the Villamors. The consideration
may consist of anything of value.
The option was, in fact, the only reason why they
purchased the other half for an expensive price. Since
the Villamors exercised their option, this is tantamount
to an acceptance of the offer—a valid and obligatory
contract of sale was thus perfected.
TAYAG v LACSON
5.
FACTS: Angelica Lacson and her children were registered
owners of agricultural lands. Tiamzon and others were
their farmer-tenants. The tenants executed a Deed of
Assignment in favor of Tayag—assigning to the latter
their rights to purchase the lands as tenant-tillers of the
landholdings possessed by them at P50.00 per sqm. This
was subject to the conditions that (1) Lacson, the
landowner, would agree to sell the same parels and (2)
that there are no more legal impediments to the
assignment. Tayag invited the tenants to a meeting to
discuss the agreement, but the latter did not attend and
wrote Tayag that they have decided to sell their rights
to the Lacsons instead because he allegedly betrayed
their trust by filing a certain lawsuit. Tayag thus filed a
Complaint before the RTC asking that the court fix the
period for the payment; he also asked for a Writ of
Preliminary Injunction against Lacson and the tenants to
enjoin them from accepting any offers for sale made by
the tenants.
ISSUE: W/N the assignment was in the form of an option
contract
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
SANCHEZ v RIGOS
FACTS: Sanchez and Rigos executed an Option to
Purchase where Rigos agreed, promised, and committed
to sell to Sanchez a parcel of land in Nueva Ecija for
P1,510. In spite of the repeated tenders made by
Sanchez, Rigos refused to sell the same. Thus, Sanchez
consigned the amounts and filed a case for specific
performance. Rigos alleged that the contract between
them was a unilateral promise to sell, which is not
supported by any consideration, hence, it is not binding.
ISSUE: W/N there was a valid option contract
HELD: NO. The promisee (Sanchez) cannot compel the
promissor (Rigos) to comply with the promise unless the
former can establish that the promise was for a
consideration. The burden of proof to establish the
existence of the consideration lies with Sanchez.
Therefore, there was no valid option contract in this
case. However, an option without consideration is a
mere offer, which is not binding until accepted. But
from the moment it is accepted before it is withdrawn,
10
a valid contract of sale arises. In this case, even though
there was no option contract, there was nevertheless an
offer and acceptance enough to constitute a valid
contract of sale.
6.
VASQUEZ v CA
FACTS: The Vallejera spouses sought to recover from
Vasquez an agricultural lot, which they previously sold
to him. Along with the previous execution of a Deed of
Sale, the parties also executed a Right of Repurchase
allowing Vallejera to repurchase the said estate.
Vasquez resisted the redemption arguing that the option
to buy was not supported by any consideration—and thus
not binding upon him.
ISSUE: W/N there was a valid option contract
HELD: NO. It is apparent that the Right to Repurchase
was not supported by any consideration. Thus, in order
for the doctrine under Sanchez v Rigos to apply, giving
rise to a valid contract of sale, it must be shown that
the promissee (Vallejera) accepted the right of
repurchase before it was withdrawn by Vasquez. In this
case, no such acceptance was made. The vendor a retro
(Vallejera) must make actual and simultaneous tender
of payment and consignation. Mere expressions of
readiness and willingness to repurchase are insufficient.
Their ineffectual acceptance allowed Vasquez to
withdraw the offer through his refusal to sell the lot.
Vasquez thus cannot be compelled to sell the lot.
7.
NIETES v CA
FACTS: Nietes leased from Dr. Garcia the Angeles
Educational Institute; the contract contained an Option
to Buy the land and school buildings within the period of
the lease. It also stipulated that the unused payment
will be applied to the purchase price of the school.
Nietes paid Garcia certain sums in excess of the rent,
which Garcia acknowledged as forming partial payment
of the purchase price of the property. Later on, Garcia,
through counsel, wrote Nietes informing him of his
decision to rescind the contract due to certain violations
of the contract—such as poor maintenance, lack of
inventory of school equipment, and the use of another
name for the said school. Nietes replied by informing
Garcia that he decided to exercise his Option to Buy,
but Garcia refused to sell. Nietes thereafter deposited
the balance of the price to Agro-Industrial Bank, but he
later withdrew the said amounts. CA ruled in favor of
Garcia stating that the full purchase price must be paid
before the Option to Buy may be exercised. Thus, Nietes
brought the matter to the SC.
ISSUE: W/N actual payment is needed before one may
exercise the option to buy
HELD: NO. There is nothing in the contract that required
Nietes to pay the full price before he could exercise the
option. It was sufficient that he informed Garcia of his
choice and that he was at that time ready to pay. The
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
exercise of the option need not be coupled with actual
payment so long as such payment is made upon the
fulfillment of the owner’s undertaking to deliver the
property. This is based on the principle that such option
contracts involve reciprocal obligations—and one does
not incur delay if the other party fails or refuses to
comply with his respective obligation. That being the
case, there was no need for Nietes to deposit the said
amounts—and his withdrawal thereof does not affect his
right.
8.
ANG YU ASUNCION v CA
FACTS: The Unijeng spouses owned certain residential
and commercial spaces leased by Ang Yu. They offered
to sell the said units to Ang Yu on several occasions and
for P6M. Ang Yu made a counter offer for P5M. The
Unijeng spouses asked Ang Yu to specify his terms in
writing but the latter failed to do so. They failed to
arrive at any definite agreement. When Ang Yu
discovered that the spouses were planning to sell the
property to others, he sued them for specific
performance. While the case was pending, the spouses
sold the units to Buen Realty for P15M.
ISSUE: W/N there was a perfected contract of sale
between Unijeng and Ang Yu
HELD: NO. There was no perfected contract of sale yet
since there was yet any meeting of the minds. Thus,
there is no ground for specific performance. During the
negotiation stage, any party may withdraw the offer
made—especially if it was not supported by any
consideration.
An Option Contract of a Right of First Refusal is
separate and distinct from the actual contract of sale—
which is the basis for specific performance. The remedy
available to Any Yu, in case the withdrawal was made
capriciously and arbitrarily, would be to sue on the basis
of abuse of right. In case there was an option contract,
timely acceptance would create an obligation to sell on
the part of the vendor; but no such circumstance
attends in this case.
9.
EQUATORIAL REALTY
THEATER INC.
DEV.
INC.
v
MAYFAIR
FACTS: For its theaters, Mayfair was leasing a portion of
the property in CM Recto, which Carmelo owns. Under
the lease agreement, “if Carmelo should decide to sell
the leased premises, Mayfair shall be given 30 days
exclusive option to purchase the same.” Carmelo,
through Henry Yang, informed the president of Mayfair
that the former is interested in selling the whole CM
Recto property—and that Araneta offered to purchase
the same for $1.2M. Mayfair twice replied through a
letter of its intention to exercise its right to
repurchase—but Carmelo never replied. Thereafter,
Carmelo sold the entire property to Equatorial Realty
for some P11M. Thus, Mayfair instituted an action for
specific performance and annulment of the sale.
11
Carmelo alleges that the right, being an option contract,
is void for lack of consideration.
ISSUE: W/N the right to repurchase is an option contract
and void for lack of consideration
HELD: NO. The clause in the lease agreement was NOT
an option contract, but a RIGHT OF FIRST REFUSAL. It
was premised on Carmelo’s decision to sell the said
property. It also did not contain a stipulation as to the
price of said property. The requirement of separate
consideration does not apply to a right of 1st refusal
because consideration is already an integral part of the
lease. Carmelo violated such right by not affording
Mayfair a fair chance to negotiate. It abandoned the
negotiations arbitrarily.
Equatorial was likewise in bad faith; it was well aware
of the right conferred upon Mayfair because its lawyers
had ample time to review the contract. That being the
case, the contract between Carmelo and Equatorial is
rescissible. Mayfair should be allowed to purchase the
entire property for the price offered by Equatorial.
Rights of First Refusal are also governed by the law on
contracts, not the amorphous principles on human
relations.
the MOA, Ayala was to undertake the development of
the lands except the “retained area.” Under Par. 5.15 of
the MOA, “Ayala agreed to give Vasquez a first option to
purchase the 4 adjacent lots to the retained area at the
prevailing market price at the time of the purchase.” A
case was filed by one of the former sub-contractors of
Conduit against Ayala causing a 6-year delay in the
development of the project. Now, Vasquez comes
forward invoking Par. 5.15 claiming that it was a valid
option contract, and that Ayala should sell to him the
said property at the 1984 prevailing price. Ayala offered
to sell the said properties to Vasquez at the prevailing
prices (1990); but the latter refused to accept. Ayala
discounted the price from P6,500/sqm to P5,000/sqm,
but still, Vasquez refused.
ISSUE: W/N there was a valid option contract given to
Vasquez
HELD: NO. Par. 5.15 was NOT an option contract, but a
RIGHT OF FIRST REFUSAL. It was predicated upon
Ayala’s decision to sell the said properties. The price
was also not specified. It was also not supported by any
independent consideration. By twice refusing to accept
Ayala’s offers, Vasquez lost his right to repurchase.
Ayala did not breach its obligation.
10. PARANAQUE KINGS ENTERPRISES INC v CA
12. RIVERA FILIPINA INC v CA
FACTS: Catalina owned 8 parcels of land leased to Chua,
who assigned its rights thereto to Lee Ching Bing, who,
in turn, assigned said rights to Paranaque King
Enterprises, which introduced significant improvements
on the premises. Under the lease agreement, “in case of
sale, the lessee shall have the option or priority to buy
the said properties.” Catalina, in violation of the said
stipulation, sold the lot to Raymundo for P5M.
Paranaque King notified her of the said breach, and she
immediately had the lots reconveyed. She then offered
the lot to Paranaque King for P15M; but the latter
refused claiming that the offer was “ridiculous.”
Catalina thereafter sold it again to Raymundo for P9M.
ISSUE: W/N there was compliance with the Right of First
Refusal assigned to Paranaque King
HELD: NO. In a Right of First Refusal, the seller cannot
offer the property to another for a lower price or under
terms more favorable. It must be offered under the
same terms & conditions to Paranaque King; otherwise,
the right of first refusal becomes illusory. Only if
Paranaque King fails to meet the offer may the property
be offered for sale to another buyer—and under the
same terms and conditions as well. The Right of First
Refusal may also be validly transferred or assigned—as in
this case.
11. VASQUEZ v AYALA CORP.
FACTS: In 1984, Ayala Corp. entered into a Memorandum
of Agreement with Dr. Vasquez buying the latter’s
shares with Conduit Development—which constitute
some 50 hectares of the land in Ayala Alabang. Under
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
FACTS: In 1982, Reyes executed a 10-year (renewable)
Contract of Lease with Riivera Filipina over a parcel of
land in EDSA. Under such contract, the lessee is given a
right of first refusal should the lessor decide to sell the
property during the terms of the lease.
Such property was subject of a mortgage executed by
Reyes in favor of Prudential Bank. Since Reyes failed to
pay the loan with the bank, it foreclosed the mortgage
and it emerged as the highest bidder in the auction sale.
Realizing that he could not redeem the property, Reyes
decided to sell it and offered it to Riviera Filipina for
P5,000/sqm. However, it bargained for P3,500/sqm.
Reyes rejected such offer. After 7 months, it again
bargained for P4,000/sqm, which again was rejected by
Reyes who asked for P6,000/sqm price. After 2 months,
it again bargained for P5,000/sqm, but since Reyes
insisted on P6,000/sqm price, he rejected Riviera's
offer.
Nearing the expiry of the redemption period, Reyes
and Traballo (his friend) agreed that the latter would
buy the same for P5,300. But such deal was not yet
formally concluded and negotiations with Riviera Filipina
once again transpired but to no avail.
In 1989, Cypress and Cornhill Trading were able to
come up with the amount sufficient to cover the
redemption money, with which Reyes paid to Prudential
Bank to redeem the property. Subsequently, a Deed of
Absolute Sale was executed in favor of Cypress and
Cornhill for P5.4M. Cypress and Cornhill mortgaged the
property in favor of Urban Dev. Bank for P3M.
Riviera Filipina filed a suit against Reyes, Cypress and
Cornhill on the ground that they violated its right of first
refusal under the lease contract. RTC ruled in favor of
12
Reyes, Cypress, and Cornhill. On appeal, CA affirmed
the decision of the RTC.
ISSUE: W/N Riviera Filipina lost its right of first refusal
HELD: YES. As clearly shown by the records and
transcripts of the case, the actions of the parties to the
contract of lease, Reyes and Riviera, shaped their
understanding and interpretation of the lease provision
"right of first refusal" to mean simply that should the
lessor Reyes decide to sell the leased property during
the term of the lease, such sale should first be offered
to the lessee Riviera. And that is what exactly ensued
between Reyes and Riviera, a series of negotiations on
the price per square meter of the subject property with
neither party, especially Riviera, unwilling to budge
from his offer, as evidenced by the exchange of letters
between the two contenders.
It can clearly be discerned from Riviera’s letters that
Riviera was so intractable in its position and took
obvious advantage of the knowledge of the time
element in its negotiations with Reyes as the
redemption period of the subject foreclosed property
drew near. Riviera strongly exhibited a "take-it or leaveit" attitude in its negotiations with Reyes. It quoted its
"fixed and final" price as Five Thousand Pesos
(P5,000.00) and not any peso more. It voiced out that it
had other properties to consider so Reyes should decide
and make known its decision "within fifteen days."
Riviera even downgraded its offer when Reyes offered
anew the property to it, such that whatever amount
Reyes initially receives from Riviera would absolutely be
insufficient to pay off the redemption price of the
subject property. Naturally, Reyes had to disagree with
Riviera’s highly disadvantageous offer.
Nary a howl of protest or shout of defiance spewed
forth from Riviera’s lips, as it were, but a seemingly
whimper of acceptance when the counsel of Reyes
strongly expressed in a letter dated December 5, 1989
that Riviera had lost its right of first refusal. Riviera
cannot now be heard that had it been informed of the
offer of Five Thousand Three Hundred Pesos (P5,300.00)
of Cypress and Cornhill it would have matched said
price. Its stubborn approach in its negotiations with
Reyes showed crystal-clear that there was never any
need to disclose such information and doing so would be
just a futile effort on the part of Reyes. Reyes was
under no obligation to disclose the same. Pursuant to
Article 1339 of the New Civil Code, silence or
concealment, by itself, does not constitute fraud, unless
there is a special duty to disclose certain facts, or unless
according to good faith and the usages of commerce the
communication should be made. The general rule is
applicable in the case at bar since Riviera failed to
convincingly show that either of the exceptions are
relevant to the case at bar.
13. MACION v GUIANI
FACTS: Macion and Dela Vida Institute entered into a
contract to sell, where the latter assured the former
that it will buy the 2 parcels of land in Cotabato City on
or before July 31, 1991 at P1.75M. In the meantime,
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
Dela Vida took possession of it and promptly built an
edifice worth P800,000. However, on the said date, the
sale did not materialize. Consequently, Macion filed a
complaint for unlawful detainer against Dela Vida, while
Dela Vida countered with a complaint for reformation of
the contract to sell. These differences were eventually
settled.
In 1992, both parties entered into a compromise
agreement where Macion will give Dela Vida 5 months to
raise P2.06M and in case of failure to do so, Dela Vida
would vacate the premises. After 2 months, Dela Vida
alleged that they had negotiated a loan from BPI and
requested Macion to execute the contract to sell in its
favor. However, Macion refused, which prompted Dela
Vida to file an urgent motion for an order to direct
Macion to execute the contract to sell. In return, Macion
filed a motion for execution of judgment alleging that
after 5 months, Dela Vida was not able to settle their
obligations with Macion. RTC ruled in favor of Dela Vida.
ISSUE: W/N it was proper to execute a contract to sell in
favor of Dela Vida
HELD: YES. Although the compromise agreement (par. 7)
does NOT give Dela Vida the right to demand from
Macion the execution of the contract to sell in its favor.
From this paragraph, it is clear that Macion is obliged to
execute a Deed of Sale and not a Contract to Sell upon
payment of the full price of P2.06M. Thereafter, Macion
will turn over to Dela Vida the TCT.
HOWEVER, a review of the facts reveals that even
prior to the signing of the compromise agreement, both
parties had entered into a contract to sell, which was
superseded by a compromise agreement. This
compromise agreement must be interpreted as
bestowing upon Dela Vida the power to demand a
contract to sell from Macion. Where Macion promised to
execute a deed of absolute sale upon completing
payment of the price, it is a contract to sell. In the case
at bar, the sale is still in the executory stage since the
passing of title is subject to a suspensive condition--that
if Dela Vida is able to secure the needed funds to
purchase the properties from Macion. A mere executory
sale, one where the sellers merely promise to transfer
the property at some future date, or where some
conditions have to be fulfilled before the contract is
converted from an executory to an executed one, does
not pass ownership over the real estate being sold. It
cannot be denied that the compromise agreement,
having been signed by both parties, is tantamount to a
bilateral promise to buy and sell a certain thing for a
price certain. Hence, this gives the contracting parties
rights in personam, such that each has the right to
demand from the other the fulfillment of their
respective undertakings. Demandability may be
exercised at any time after the execution of the Deed.
14. VILLONCO v BORMAHECO
FACTS: Cervantes and his wife owned 3 parcels of land
along Buendia where he buildings of Bormaheco Inc
were situated. Beside their property were lots owned by
Villonco Realty. Cervantes entered into several
13
negotiations with Villonco for sale of the Buendia
property. Cervantes made a written offer of P400/sqm
with a downpayment of P100,000 to serve as earnest
money. The offer also made the consummation of the
sale dependent upon the acquisition by Bormaheco of a
Sta. Ana property. Villonco made a counter-offer stating
that the earnest money was to earn 10% interest p.a.
The check was enclosed with the reply letter. Cervantes
accepted and cashed the check. The Sta. Ana Property
was awarded to Bormaheco; the transfer was also duly
approved. However, Cervantes sent the check back to
Villonco with the interest thereon—stating that he was
no longer interested in selling the property. He also
claims that no contract was perfected; Villonco sues for
specific performance.
ISSUE: W/N there was a perfected contract of sale
HELD: YES. There was a perfected contract of sale. The
alleged changes made in the counter-offer are
immaterial and are mere clarifications. The changes of
the words “Sta. Ana property” to another property as
well as the insertion of the number “12” in the date,
and the words “per annum” in the interest are trivial.
There is no incompatibility in the offer and counteroffer. Cervantes assented to the interest and he, in
fact, paid the same. Also, earnest money constitutes
prood of the perfection of the contract of sale and
forms part of the consideration. The condition regarding
the acquisition of the Sta. Ana property was likewise
fulfilled; there is thus no ground for the refusal of
Cervantes to consummate the sale.
15. OESMER v PARAISO DEV CORP.
FACTS: Oesmers are co-owners of undivided shares of 2
parcels of agricultural and tenanted land in Cavite,
which are unregistered and originally owned by their
parents. When their parents died, they acquired the lots
as heirs by right of succession.
In 1989, Paular, a resident and former Mun. Sec. of
Carmona Cavite, brought Ernesto Oesmer (one of the
heirs) to meet with Lee, President of Paraiso
Development Corp, in Manila for the purpose of
brokering the sale of Ernesto's properties to Paraiso Dev.
Corp. A contract to sell was entered into between
Paraiso Dev. Corp and Ernesto as well as Enriqueta. A
check in the amount of P100,000 payable to Ernesto was
given as option money. Eventually, Rizalino, Leonora,
Bibiano Jr, and Librado also signed the Contract to Sell.
However, 2 of their brothers, Adolfo and Jesus, refused
to sign the document.
A couple of months after, the Oesmers informed
Paraiso (through a letter) that it is rescinding the
Contract to Sell and returning the option money.
However, Paraiso did not respond and thus, Oesmers
filed a complaint for declaration of nullity of the
Contract to Sell with the RTC, which ruled in favor of
Paraiso Dev. Corp. On appeal, CA modified by declaring
that the Contract to Sell is valid and binding as to the
undivided shares of the six signatories of the document.
ISSUE: W/N the Contract to Sell is valid as to all
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
signatories
HELD: NO. It is true that the signatures of the 5 siblings
did not confer authority on Ernesto as agent to sell their
respective shares in the properties, because such
authority to sell an immovable is required to be in
writing. However, those signatures signify their act of
directly (not through an agent) selling their personal
shares to Paraiso Dev. Corp.
In the case at bar, the Contract to Sell was perfected
when the petitioners consented to the sale to the
respondent of their shares in the subject parcels of land
by affixing their signatures on the said contract. Such
signatures show their acceptance of what has been
stipulated in the Contract to Sell and such acceptance
was made known to respondent corporation when the
duplicate copy of the Contract to Sell was returned to
the latter bearing petitioners’ signatures.
As to petitioner Enriqueta’s claim that she merely
signed as a witness to the said contract, the contract
itself does not say so. There was no single indication in
the said contract that she signed the same merely as a
witness. The fact that her signature appears on the
right-hand margin of the Contract to Sell is
insignificant. The contract indisputably referred to the
“Heirs of Bibiano and Encarnacion Oesmer,” and since
there is no showing that Enriqueta signed the document
in some other capacity, it can be safely assumed that
she did so as one of the parties to the sale.
In the instant case, the consideration of P100,000.00
paid by respondent to petitioners 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. “Earnest money”
and “option money” are not the same but distinguished
thus: (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.
16. FULE v CA
FACTS: Fule, a banker and a jeweler, acquired a 10hectare property in Rizal (Tanay Property), which used
to be under the name of Fr. Antonio Jacobe, who
mortgaged it to Rural Bank of Alaminos to secure a loan
of P10,000. However, the mortgage was foreclosed.
In 1984, Fule asked Dichoso and Mendoza to look for a
buyer of the Tanay property. They found one in the
person of Cruz, who owns a pair of diamond earrings.
Fule was interested to buy these earrings, but Cruz
refused to sell them to him for the price he offered.
Subsequently, negotiations for the barter between the
earrings and the property ensued. But it turned out that
the redemption period for the property has not yet
expired. Thus, Fule executed a deed of redemption on
behalf of Fr. Jacobe in the amount of P16,000, and on
even date, Fr. Jacobe sold the property to Fule for
14
P75,000. The Deed of Sale was notarized ahead of the
Deed of Redemption.
Subsequently, a Deed of Sale over the earrings was
executed and when it was delivered, Fule contends that
the earrings were fake, even using a tester to prove
such allegation. Thereafter, they decided to Dimayuga,
a jeweler, to have the earrings tested. After a glance,
Dimayuga declared them fake.
Fule filed a complaint with the RTC against Cruz and
her lawyer, Belarmino, praying that the contract of sale
over the Tanay property be declared null and void on
the ground of fraud and deceit. RTC ruled in favor of
Cruz and Belarmino.
ISSUE: W/N the Deed of Sale over the Tanay Property is
valid
HELD: YES. It is evident from the facts of the case that
there was a meeting of the minds between petitioner
and Dr. Cruz. As such, they are bound by the contract
unless there are reasons or circumstances that warrant
its nullification. The records, however, are bare of any
evidence manifesting that private respondents employed
such insidious words or machinations to entice
petitioner into entering the contract of barter. Neither
is there any evidence showing that Dr. Cruz induced
petitioner to sell his Tanay property or that she cajoled
him to take the earrings in exchange for said property.
On the contrary, Dr. Cruz did not initially accede to
petitioner's proposal to buy the said jewelry. Rather, it
appears that it was petitioner, through his agents, who
led Dr. Cruz to believe that the Tanay property was
worth exchanging for her jewelry as he represented that
its value was P400,000.00 or more than double that of
the jewelry which was valued only at P160,000.00. If
indeed petitioner's property was truly worth that much,
it was certainly contrary to the nature of a businessmanbanker like him to have parted with his real estate for
half its price. In short, it was in fact petitioner who
resorted to machinations to convince Dr. Cruz to
exchange her jewelry for the Tanay property.
Furthermore, petitioner was afforded the reasonable
opportunity required in Article 1584 of the Civil Code
within which to examine the jewelry as he in fact
accepted them when asked by Dr. Cruz if he was
satisfied with the same. By taking the jewelry outside
the bank, petitioner executed an act which was more
consistent with his exercise of ownership over it. This
gains credence when it is borne in mind that he himself
had earlier delivered the Tanay property to Dr. Cruz by
affixing his signature to the contract of sale. That after
two hours he later claimed that the jewelry was not the
one he intended in exchange for his Tanay property,
could not sever the juridical tie that now bound him and
Dr. Cruz. The nature and value of the thing he had taken
preclude its return after that supervening period within
which anything could have happened, not excluding the
alteration of the jewelry or its being switched with an
inferior kind.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
17. DAILON v CA
FACTS: Sabesaje sues to recover ownership of a parcel
of land based on a private document of absolute sale
executed by Dailon. Dailon denies the fact of the sale
alleging that the same being embodied in a private
instrument, the same cannot convey title under Art.
1358 of the Civil Code which requires that contracts
which have for their object the creation, transmission,
modification, or extinction of real rights over immovable
property must appear in a public instrument.
ISSUE: W/N there was a valid/perfected contract of sale
HELD: YES. The necessity of a public instrument is only
for convenience—not for validity and enforceability.
Such is not a requirement for the validity of a contract
of sale, which is perfected by mere consent. Dailon
should thus be compelled to execute the corresponding
deed of conveyance in a public instrument in favor of
Sabesaje. If the sale is made through a public
instrument, it amounts to constructive delivery.
18. SECUYA v VDA DE SELMA
FACTS: Caballero owned certain friar lands. She entered
into an Agreement of Partition where she parted with
1/3 of the said property in favor of Sabellona. Sabellona
took possession thereof and sold a portion to Dalmacio
Secuya through a private instrument that is already lost.
Secuya, along with his many relatives took possession of
the said land. Later on, Selma bought a portion of the
said land, including that occupied by Secuya; she bought
it from Caesaria Caballero. She presented a Deed of
Absolute Sale and a TCT. Secuya filed a case for quieting
of title. CA upheld Selma’s title considering that she had
a TCT and a Deed of Sale.
ISSUE: Who has a better right, Secuya or Selma?
HELD: The Secuyas have nothing to support their
supposed ownership over the parcel of land. The best
evidence they could have had was the private
instrument indicating the sale to their predecessor-ininterest. But the instrument is lost. Even so, it is only
binding as between the parties and cannot prejudice 3rd
persons since it is not embodied in the public document.
Selma, on the other hand, has all the supporting
documents necessary; she also acted in good faith and
thought that the Secuyas were merely tenants. They did
not even pay realty taxes and did not have their claim
annotated to the certificate of sale.
19. YUVIENGCO v DACUYCUY
FACTS: Yuvienco entered into a contract with Yao King
Ong and the other occupants, wherein the former will
sell to the latter the Sotto property in Tacloban City for
P6.5M provided that the latter made known their
decision to buy it or not later than July 31, 1978. When
Yuvienco's representative went to Cebu with a prepared
and duly signed contract for the purpose of perfecting
15
and consummating the transaction, Yao King Ong and
other occupants found variance between the terms of
payment stipulated in the document and what they had
in mind. Thus, it was returned unsigned. Thus, the
action for specific performance.
ISSUE: W/N the claim for specific performance of Yao
King Ong is enforceable under the Statute of Frauds
HELD: YES. 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
P6,500,000 fixed by petitioners for the real property
herein involved was agreed to be paid not in cash but in
installments as alleged by Yao King Ong. The only
documented indication of the non-wholly-cash payment
extant in the record is the deeds already signed by
Yuvienco and taken to Tacloban by Atty. Gamboa for the
signatures of the respondents. In other words, the 90day term for the balance of P4.5 M 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. Hence, looking at the
pose of respondents that there was a perfected
agreement of purchase and sale between them and
petitioners under which they would pay in installments
of P2 M down and P4.5 M within ninety 90) days
afterwards it is evident that such oral contract involving
the "sale of real property" comes squarely under the
Statute of Frauds (Article 1403, No. 2(e), Civil Code.)
In any sale of real property on installments, the
Statute of Frauds read together with the perfection
requirements of Article 1475 of the Civil Code 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.
20. LIMKETKAI SONS MILLING INC v CA
FACTS: In 1976, Philippine Remnants Co., Inc.
constituted the Bank of the Philippine Islands (BPI) as its
trustee to manage, administer, and sell its real estate
property, one of which was the disputed lot in Pasig. In
1988, Pedro Revilla, Jr., a licensed real estate broker,
was given formal authority by BPI to sell the lot for
P1,000/sqm. Broker Revilla contacted Alfonso Lim of
Limketkai Sons Milling (LSM) who agreed to buy the land.
LSM asked that the price of P1,000/sqm. be reduced to
P900.00 while Albano stated the price is to be
P1,100.00. The parties finally agreed that the lot would
be sold at P1,000/sqm. to be paid in cash.
Notwithstanding
the
final
agreement
to
pay
P1,000/sqm. on a cash basis, Alfonso Lim (LSM official)
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
asked if it was possible to pay on terms. The bank
officials stated that there was no harm in trying to ask
for payment on terms because in previous transactions,
the same had been allowed. It was the understanding,
however, that should the term payment be disapproved,
then the price shall be paid in cash. It was Albano who
dictated the terms under which the installment payment
may be approved, and acting thereon, Alfonso Lim
wrote BPI through Merlin Albano embodying the
payment initially of 10% and the remaining 90% within a
period of 90 days. 2 or 3 days later, LSM learned that its
offer to pay on terms had been frozen. Alfonso Lim went
to BPI and tendered the full payment of P33,056,000.00
to Albano. The payment was refused because Albano
stated that the authority to sell that particular piece of
property in Pasig had been withdrawn from his unit. The
same check was tendered to BPI Vice-President Nelson
Bona who also refused to receive payment.
LSM filed an action for specific performance with
damages against BPI. In the course of the trial, BPI
informed the trial court that it had sold the property
under litigation to National Book Store (NBS) in 1989.
The complaint was thus amended to include NBS. RTC
ruled in favor of LSM, holding that there was a perfected
contract of sale between LSM and BPI. CA reversed,
holding that no contract of sale was perfected because
there was no concurrence of the three requisites
enumerated in Article 1318 of the Civil Code.
ISSUE: W/N there was a valid contract of sale
HELD: YES. There was a meeting of the minds between
the buyer and the bank in respect to the price of
P1,000/sqm. The requirements in the payment of the
purchase price on terms instead of cash were suggested
by BPI Vice-President Albano. Since the authority given
to broker Revilla specified cash payment, the possibility
of paying on terms was referred to the Trust Committee
but with the mutual agreement that “if the proposed
payment on terms will not be approved by our Trust
Committee, Limketkai should pay in cash, the amount
was no longer subject to the approval or disapproval of
the Committee, it is only on the terms.” The record
shows that if payment was in cash, either broker Revilla
or Aromin had full authority. But because LSM took
advantage of the suggestion of Vice-President Albano,
the matter was sent to higher officials. Immediately
upon learning that payment on terms was frozen and/or
denied, Limketkai exercised his right within the period
given to him and tendered payment in full, thus
complying with their agreement.
The negotiation or preparation stage started with the
authority given by Philippine Remnants to BPI to sell the
lot, followed by the authority given by BPI and
confirmed by Philippine Remnants to broker Revilla to
sell the property, the offer to sell to Limketkai, the
inspection of the property and the negotiations with
Aromin and Albano at the BPI offices. The perfection of
the contract took place when Aromin and Albano, acting
for BPI, agreed to sell and Alfonso Lim with Albino
Limketkai, acting for LSM, agreed to buy the disputed
lot at P1,000/sqm. Aside from this there was the earlier
agreement between LSM and the authorized broker.
16
There was a concurrence of offer and acceptance, on
the object, and on the cause thereof.
21. ORTEGA v LEONARDO
partial performance, which takes the verbal agreement
out of the operation of the Statute of Frauds.
22. CLAUDEL v CA
FACTS: Ortega occupied a parcel of land. After the
liberation, the government assigned the lot to the Rural
Progress Admin. She asserted her right thereto; but was
disputed by Leonardo. Ortega and Leonardo agreed to a
compromise. The agreement was for Ortega to desist
from pressing her claim, and Leonardo, upon getting the
lot, would sell to her a portion thereof provided she
paid for the surveying of the lot. If he acquired title, she
could stay as tenant. Ortega thus desisted from her
claim, paid for the surveying of the lot and the
preparation of the plan, and regularly paid him a
monthly rental. When she remodeled her son’s house
beside the lot, it extended over the subject lot. When
Leonardo acquired title, he refused to sell the portion
agreed upon. He claims that the contract is
unenforceable based on the Statute of Frauds.
FACTS: Cecilio Claudel acquired a lot from the Bureau of
Lands. He occupied the same, declared it in his name
and dutifully paid his taxes. After his death, his heirs
and siblings contested each other claiming ownership
thereof. It was his heirs who were in possession of the
property. They partitioned it amongst themselves,
registered each portion under the Torrens System, and
each paid their respective taxes. The siblings filed a
case for cancellation of titles and reconveyance arguing
that there was a verbal sale between Cecilio and their
parents over the lot. As evidence, they presented a
subdivision plan. CA ordered the cancellation of the
TCTs in favor of the heirs.
ISSUE: W/N the contract is unenforceable
HELD: NO. As a rule, a sale of land is valid regardless of
the form it may have been entered into. However, in
the event that a 3rd party disputes the ownership, there
is no such proof in support of the ownership. As such, it
cannot prejudice 3rd persons—such as the heirs in this
case. Also, the heirs had a right to rely upon their
Torrens titles, which, as opposed to the subdivision
plans, are definitely more credible.
Further, the subsequent buyers were in bad faith
because Armando & Adelia registered their adverse
claim—this amounts to constructive notice, which
negates good faith.
The Statute of Frauds likewise does not apply
considering that Godofredo & Carmen had already
derived the benefits from the sale—such as the money to
pay for the loan. The receipt also suffices to constitute
the memorandum required by the Statute of Frauds.
Assuming that the sale was voidable because it was
conjugal property, the same was ratified by Godofredo
by introducing Armando & Adelia to the Natanawans as
the new lessors. Also, even though titled as Specific
Performance, the complaint was one for reconveyance—
and prescription does not lie of one who is in actual
possession of the property.
HELD: NO. The contract is enforceable because there
was partial performance. Ortega made substantial
improvements on the lot, desisted from her claim,
continued possession, and paid for the surveying, and
also paid the rentals. All these put together amount to
23. ALFREDO v BORRAS
FACTS: Godofredo & Carmen mortgaged their land to
DBP for P7,000. To pay their debt, they sold the land to
Armando & Adelia for P15,000. The latter also assumed
to pay the loan. Carmen issued Armando & Adelia a
receipt for the sale. They also delivered to Armando &
Adelia the Original Certificate of Title, tax declarations,
and tax receipts. They also introduced Armando &
Adelia to the Natanawans, the tenants of the said
property as the new lessors. They thereafter took
possession of the said land. Later, they found out that
Godofredo & Carmen sold the land again to other buyers
by securing duplicate copies of the OCTs upon petition
with the court. Thus, they filed for specific
performance. Godofredo & Carmen claimed that the
sale, not being in writing, is unenforceable under the
Statute of Frauds.
ISSUE: W/N the contract of sale is unenforceable under
the Statute of Frauds.
HELD: NO. The Statute of Frauds is applicable only to
executory contracts, not those that have already been
partially or completely consummated. In this case, the
sale of the land to Armando & Adelia had already been
consummated. The ownership of the land was also
transferred to Armando & Adelia when they were
introduced to the Natanawans and took possession
thereof. Therefore, when Godofredo & Carmen sold the
land to other buyers, it was no longer theirs to sell.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
ISSUE: W/N there was a valid sale between Cecilio and
his siblings
23. TOYOTA SHAW INC v CA
FACTS: Luna Sosa wanted to buy a Toyota Lite Ace. He
went to Toyota Shaw where he met Popong Bernardo, a
sales rep. Sosa explained that he needed the Lite Ace by
June 17, otherwise, he would become a laughing stock.
Bernardo guaranteed that the vehicle would be
delivered. They executed a document entitled
Agreements between Sosa & Popong Bernardo of Toyota
Shaw” where a P100K downpayment was stipulated and
that the Lite Ace would be available at a given date.
When the day of reckoning arrived, the Lite Ace was
unavailable—the explanation of Bernardo being “nasulot
ng ibang malakas.” However, according to Toyota, the
true reason was that BA Finance, which was supposed to
17
answer for the balance of the purchase price, did not
approve Sosa’s application. Toyota also returned the
downpayment. Thus, Sosa sued for damages amounting
to P1.2M due to his humiliation, hurt feelings, sleepless
nights, and so on.
ISSUE: W/N there was a perfected contract of sale
HELD: NO. Toyota Shaw should NOT be held liable for
damages because there was no perfected contract of
sale in the first place. There was no agreement as to the
price and the manner of payment—which are both
essential to the perfection of the sale. It was also clear
that Bernardo signed the document in his personal
capacity and it was up to Sosa to inquire as to the
extent of the former’s capacity. Sosa did not even sign
it. It was nothing but a mere proposal, which did not
mature into a perfected contract of sale in lieu of the
subsequent events. In fact, it made no specific
reference to the sale of a vehicle. No obligations could
thus arise therefrom. Sosa has no one else to blame but
himself for his humiliation for bragging about something
he does not own yet.
CONSUMMATION/PERFECTION OF CONTRACT
1.
SANTOS v SANTOS
FACTS: Jesus and Rosalia owned a lot with a 4-door
apartment. They sold through a public instrument the
said property to their children, Salvador and Rosa—who
sold her share to Salvador as well. Nonetheless, in spite
of the sale, Rosalia remained in possession and control
over the property. Jesus, Rosalia and Salvador died.
Zenaida, claiming to be Salvador’s heir, demanded rent
from the tenants. The other children of Jesus and
Rosalia filed a case for reconveyance averring that the
sale to Salvador was fictitious and done merely to
accommodate him.
ISSUE: W/N the sale to Salvador was fictitious
HELD: YES. While it is true that sale through a public
instrument is equivalent to delivery of the things sold
which has the effect of transferring ownership, the
delivery can be rebutted by clear and convincing
evidence. The vendor’s continuous possession makes the
sale dubious. Salvador never took possession of the
property. He surrendered the titles to his mother after
having registered the lots in his name, he never
collected rentals, neither has he paid the taxes thereon.
Thus, there was no real transfer of ownership. That
being the case, the action for reconveyance was
imprescriptible.
ISSUE: W/N Wilfredo, as mortgagor, can sell the tractor
subject of a mortgage
HELD: YES. The mortgagor (Wilfredo) had every right to
sell the property subject to mortgage—even without the
consent of the mortgagee as long as the purchaser
assumes the liability of the mortgagor.
In this case, there was constructive delivery already
upon the execution of the public instrument—even if the
tractor could not yet be delivered. Execution of the
public instrument and mutual consent of the parties was
equivalent to constructive delivery. Therefore, at the
time when the sheriff levied upon the tractor, it was no
longer the property of Wilfredo. Also the clearing of the
check was not a condition for the consummation of the
sale but only upon the extinguishment of the mortgage.
3.
ADDISON v FELIX
FACTS: Addison owned 4 parcels of land, which he sold
to Felix, through public instrument. The down payment
was made; the final installment to be paid after the
issuance of the certificate of title. Addison sued Felix to
compel the latter to pay the last installment—but Felix
refused and sought to rescind the contract due to the
absolute failure of Addison to deliver the thing sold.
ISSUE: W/N there was delivery
2.
DY JR v CA
FACTS: Perfecto and Wilfredo Dy are brothers. Wilfredo
purchased a truck and a tractor, both of which were
mortgaged to Libra Financing as security for a loan.
Perfecto wanted to purchase the tractor, he convinced
his sister to purchase the truck. Perfecto executed a
public document to evidence the sale. Libra acceded to
the sale and agreed that upon the issuance and
encashment of the check that they issued for the
purpose, the chattels can be released. However, in a
case against Wilfredo filed by Gelac Trading, the sheriff
seized the tractor on levy and sold the same on public
auction, with Gelac as the highest bidder. Perfecto thus
sought to recover the truck from Gelac.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
HELD: NO. While it is true that execution of a public
instrument is tantamount to delivery of the thing sold,
in order for such symbolic delivery to have the effect of
tradition, the vendor should have had control over the
thing and at the moment of the sale, its delivery could
have been made. In this case, the ownership was
disputed by the Villafuertes, who were in possession of
the land. Addison even failed to show the land to Felix
due to the hostile opposition; he also failed to have it
surveyed. The legal fiction of delivery thus yields to
reality—no delivery was ever made. Felix had every right
therefore to rescind the contract. Had there been an
agreement that Felix would have to undertake to evict
the Villafuertes, the result may have been different, but
there is no such agreement.
18
4.
DANGUILAN v IAC
6.
POWER COMMERCIAL AND INDUSTRIAL CORP. v CA
FACTS: Domingo owned 2 lots, which he donated
through a private instrument to Danguilan for the
consideration that the latter must take care of him for
the remainder of his life and manage his burial.
Domingo’s daughter, Apolonia, laid claim to the land,
presenting a public document allegedly executed in her
favor, the purchase price being paid for by her mother.
She however failed to take possession of the said
property after the execution of the deed. In fact, she
moved out of the farm when Danguilan started to
cultivate the same for as long as she was given a share
from the harvests. She decided to file a case only after
the deliveries of farm produce have ceased.
FACTS: Power Commercial Corp. entered into a contract
of sale with the Quiambao spouses. It agreed to assume
the mortgages thereon. A Deed of Absolute Sale with
Assumption of Mortgage was executed. Power
Commercial failed to settle the mortgage debt
contracted by the spouses, thus it could not undertake
the proper action to evict the lessees on the lot. Power
Commercial thereafter sought to rescind the contract of
the sale alleging that it failed to take actual and
physical possession of the lot—which allegedly negated
constructive delivery.
ISSUE: Who has a better title over the land, Danguilan or
Apolonia?
HELD: YES. First, such a condition that the Quiambao
spouses would evict the lessees therein was not
stipulated in the contract. In fact, Power Commercial
was well aware of the presence of the tenants therein.
Also in this case, Power Commercial was given control
over the said lot and it endeavored to terminate the
occupation of the actual tenants.
Control cannot be equated with actual possession.
Power Commercial, as purchaser, agreed voluntarily to
assume the risks involved. The public instrument
executed amounted to symbolic delivery of the property
sold and authorized the buyer to use the document as
proof of ownership. Power Commercial was deprived of
ownership only after it failed to remit the
amortizations, but not due to failure of delivery.
HELD: DANGUILAN. At the onset, the donation in favor
of Danguilan was valid even though embodied in a
private instrument, because it was an onerous donation.
The deed of sale presented by Apolonia was also
suspicious. It was only 3 years old and the consideration
was paid for by her mother. Assuming that it was valid,
still the presumptive delivery is overcome by the fact
that she failed to take possession of the property.
Ownership, after all, is not transferred by mere
stipulation butby actual and adverse possession. She
even transferred the same to Danguilan possession of
the same. She cannot have a better right in this case
than Danguilan.
ISSUE: W/N there was delivery
7.
5.
CHUA v CA
PASAGUI v VILLABLANCA
FACTS: Pasagui purchased a parcel of land form the
Bocar Spouses for P2,800, which was embodied in a
public instrument. They failed to take possession of the
property because the Villablancas illegally took
possession of the property and harvested the coconuts
therein. Thus, Pasagui filed a case for ejectment before
the CFI. The Bocar spouses were likewise impleaded.
The latter contested that the case should be dismissed
because the CFI did not have jurisdiction over forcible
entry cases.
ISSUE: W/N this is a case of forcible entry
HELD: NO. The case was not for forcible entry because
there was no allegation that Pasagui was in prior
physical possession of the land and that the
Villablancas, through force, stealth, or threat, deprived
them thereof. While the sale was made through a public
document is equivalent to delivery, this presumption
only holds true if there is no impediment to the
possession of the purchaser. Such is not the case here.
Since Pasagui had not yet acquired physical possession
of the land, the case was not one for forcible entry and
the CFI (not municipal courts) has jurisdiction.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
FACTS: Valdes-Choy is the owner of the subject matter,
when she advertised the property for sale. Chua
responded to the advertisement, and met up with
Valdes-Choy. They agreed for the purchase price of
P10,800,000, to be paid on July 15, 1989. This was
evidenced by an earnest money for P100,000, which was
put on a receipt, stating that the money will be
forfeited upon failure to pay on the dat stipulated. On
July 13, Valdes-Choy executed two deeds of absolute
sale, first, pertaining to the house and lot, valued at
P8,000,000, and second, pertaining to the movable
properties therein. The next day, Chua issued a check
worth P485,000 for the purpose paying the capital gains
tax. The value was deducted from the balance, with an
outstanding value of P10,295,000 (additional P80,000 for
the documentary stamp tax). Chua also showed a check
worth P10,215,00 to Valdes-Choy, however, he
demanded that the TCT should first be transferred to his
name before paying the check. Out of anger, ValdesChoy tore the deed of absolute sale. On the reckoning
date, Valdes-Choy tried to make a compromise with
Chua, but she did not get any response. Two days later,
Chua filed an action for specific performance, which the
trial court dismissed. A week later, he filed another
action for specific performance, where the court ruled
in favor of him. On appeal, CA reversed.
19
ISSUE:
1.
2.
Whether the agreement was a contract of sale
or contract to sell
Whether registration is needed to transfer
ownership
RULING: It is a contract to sell. First, when the
agreement was made, the earnest money is forfeited in
favor of Valdes-Choy who may then sell the land to
other interested parties. This is the nature of reserving
the ownership of the property, subject to the full
payment of the purchase price. Second, absent of a
formal deed of conveyance of the property in favor of
the buyer shows that there was no intention to transfer
ownership immediately. The non-fulfillment of the
suspensive condition, which is payment of the full
purchase price prevents the obligation to sell from
arising, where the owner retains the ownership over the
property. Art 1482 speaks of earnest money as an
evidence of a perfected contract of sale. However, in
this case, the earnest money was paid in part
consideration of a contract to sell, and therefore, art
1482 does not apply.
Delivery is effected upon execution of the sale in a
public instrument. However, registration is not needed
in order to complete the deed of sale. Delivery is what
transfers ownership, and not registration in the Registry
of Property. Registration is only necessary to bind third
persons; it is not a mode of acquiring ownership.
8.
VIVE EAGLE LAND INC v CA
FACTS: In 1987, Spouses Flores, as owners, sold 2
parcels of land in Cubao to Tatic Square International
Corp for P5.7M. Tatic applied for a loan with Capital
Rual Bank of Makati to finance its purchase of the said
lots, which the bank granted provided that the torrens
title over the lots would be registered under its name as
collateral for the payment of the loan.
In 1988, Tatic sold these parcels of land to Vive Eagle
Land Inc (VELI) for P6.3M, although the torrens titles
over the lots were still in the custody of the bank.
During the same year, VELI sold one of these parcels of
land to Genuino Ice Co. Inc. for P4M. Also, a deed of
assignment of rights in which VELI assigned in favor of
Genuino Ice all rights and interests under the Deed of
Sale executed by spouses Flores and the other Deed of
Sale executed by Tatic in VELI's favor, in so far as that
lot is concerned.
FloresTatic (2 lots)VELI (2 lots)Genuino Ice (1 lot)
Genuino Ice demanded that VELI pay its capital gains
tax amounting to P285,000. However, VELI refused
saying that the Spouses Flores and Tobias (broker of the
sale) are responsible to pay the tax. Genuino Ice filed an
action for specific performance against VELI, contending
that VELI failed to transfer title to and in the name of
Genuino Ice, to cause the eviction of the occupants, and
to pay the tax and other dues to effectuate the transfer
of the title of the property. RTC ruled in favor of
Genuino Ice, CA affirmed.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
ISSUE: W/N VELI is obliged to pay for the expenses to
transfer the title of the property to Genuino Ice
HELD: YES. Under Art. 1487 of the CC, the expenses for
the registration of the sale should be shouldered by the
vendor (VELI) unless there is a stipulation to the
contrary. In the absence of the stipulation of the parties
relating to the expenses for the registration of the sale
and the transfer of the title to the vendee (Genuino
Ice), Art. 1487 shall be applied in a supplementary
manner.
Under Art. 1495 of the CC, VELI, as vendor, is obliged
to transfer title over the property and deliver the same
to the vendee (Genuino Ice). While Art. 1498 of the CC
provides that the execution of a notarized deed of
absolute sale shall be equivalent to the delivery of the
property, the same shall not apply if from the deed the
contrary does not appear or cannot clearly be inferred.
In this case, Genuino Ice and VELI agreed that the latter
would cause the eviction of the tenants and deliver
possession of the property. It is clear that at the time
the petitioner executed the deed of sale in favor of
Genuino Ice, there were tenants in the property. It
cannot be concluded that the property was thereby
delivered to Genuino Ice.
9.
BHEN MEYER & CO. v YANGCO
FACTS: Yangco ordered 80 drums of caustic soda
“Carabao Brand” from Bhen & Meyer. The instrument
evidencing the agreement made use of the terms “FOB”
and “CIF.” The goods were detained by the British
authorities in Penang. Bhen & Meyer alleges that Yangco
had already acquired ownership of the said goods and
should thus pay for the purchase price. However,
Yangco refused to accept the same alleging that the
goods were not “Carabao Brand” and that the same
were adulterated.
ISSUE: W/N ownership is transferred/delivery is effected
with FOB and CIF from seller to buyer
HELD: NO. The terms FOB and CIF mean that the costs
of delivery are for the seller. This means that it is the
seller’s duty to make sure that the goods are duly
delivered. Until then, ownership of the goods had not
yet passed. Had the expenses been for the buyer, the
goods are deemed delivered upon delivery to the
common carrier. In this case, the delivery has not been
effected to the buyer, thus, the latter had every right to
rescind the contract of sale.
10. GENERAL FOODS v NACOCO
FACTS:
• General Foods is a foreign corporation licensed to do
business in the Philippines.
• National Coconut Corporation (NACOCO) sold to
General Foods 1500 tons of long copra under the terms:
a. Quantity: Seller could deliver 5% more or less than
the
contracted
quantity,
and
the
20
surplus/deficiency shall be paid on the basis of
the delivered weight.
b. Price: CIF New York.
c. Payment: Buyers to open an Irrevocable Letter of
Credit for 95% of invoice value based on shipping
weight.
d. Balance of the price was to be ascertained on the
basis of outturn weights and quality of the cargo
at the port of discharge.
e. Weights: Net landed weights.
• In the Philippines, the net cargo was weighed at 1054
tons, the alleged weight delivered by NACOCO. NACOCO
then withdrew 95% (or $136,000) of the amount in the
Letter of Credit in favor of NACOCO.
• In New York, the net cargo was reweighed and found
to weigh only 898 short tons. General Foods demanded
the refund of the amount of $24000.
• NACOCO’s officer’s-in-charge acknowledged in a letter
liability the deficiency and promised payment as soon as
funds were available.
• However, NACOCO was abolished and went into
liquidation. The Board of Liquidators refused to pay the
claim of General Foods.
• General Foods then filed to recover $24,000 and 17%
exchange tax plus attorney’s fees and costs.
• General Foods alleges that although the sale quoted
CIF New York, the agreement contemplated the
payment of the price according to the weight and
quality of the cargo upon arrival in New York (port of
destination). Therefore, the risk of shipment was upon
the seller.
• NACOCO alleges that the contract is an ordinary CIF,
which means that delivery to the carrier is delivery to
the buyer. Therefore, the shipment having been
delivered to the buyer and the buyer having paid the
price, the sale was consummated.
ISSUES:
1. Whether the weight in New York should be the basis
upon payment of the price of copra should be made. –
Yes. The weight in New York should be the basis.
2. Whether what is to be ascertained based upon the
outturn weights and quality at port of discharge was
only the balance due to be paid. – No. The balance due
to be paid is not the only basis.
HELD:
• Under an ordinary CIF agreement, delivery to the
buyer is complete upon delivery of the goods to the
carrier and tender of the shipping and other documents
required by the contract and the insurance policy are
taken in the buyer’s behalf. However, the parties may,
by express stipulation, modify a CIF contract and throw
the risk upon the seller until the arrival in the port of
destinations.
• In this case, the terms of the contract indicate and
intention that the precise amount to be paid by the
buyer depended upon the ascertainment of the exact
net weight of the cargo at the point of destination:
a. Net landed weights were to govern.
b. The balance of the price was to be ascertained on
the basis of outturn weights and quality of the
cargo at the port of discharge.
c. The seller could deliver 5% more or less than the
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
contracted quantity, and the surplus/deficiency
shall be paid on the basis of the delivered
weight.
• While the risk of loss was apparently placed on
General Foods after the delivery of the cargo to the
carrier, it was agreed that the payment of the price was
to be according to the “net landed weight” which is 898
(weighed in New York) and not 1054 (weighed in the
Philippines).
• NACOCO had the burden to prove that the shortage
was due to risks of voyage and not the natural drying up
of copra. In other words, if the weight deficiency was
due to the risks of the voyage, General Food would not
have been entitled to any claim in the deficiency.
• The provision on the “balance of the price was to be
ascertained on the basis of outturn weights and quality
of the cargo at the port of discharge” should not be
construed separately from the provision that the “net
landed weight” was to control.
• The manifest intention of the parties was for the total
price to be finally ascertained only upon determining
the net weight and quality of the goods upon arrival in
New York, most likely because the nature of copra is
that it dries up and diminishes weight during the
voyage.
• In fact, this intention was shown by the letter of the
officer-in-charge of NACOCO acknowledging NACOCO’s
liability to General Foods. Though this letter of
acknowledgement should not be construed as an
admission of liability of NACOCO, it is nevertheless
competent evidence of NACOCO’s intention to be bound
by the net landed weight or outturn weight of the copra
at the port of discharge.
11. PACIFIC VEGETABLE OIL CORP v SINGZON
FACTS:
• Petitioner and respondent entered into a contract in
the US whereby Singzon agreed to ship 500 tons of
copra, with the agreement CIF, Pacific Coast
• Singzon failed to deliver, but the parties entered into
a settlement, whereby Singzon would deliver 300 tons at
the same terms the contract provided that should
Singzon again default, he would pay $10,000 for
damages and the original contract would be revived
• Singzon again failed to ship the copra, and he did not
pay the fine or ship the 500 tons as originally agreed
• Pacific filed an action to recover damages
• Singzon claims that Pacific had no legal personality to
sue because it is a foreign corporation
HELD:
• The contract was perfected in the US by a broker and
representatives of the parties payment was made to a
bank in California and delivery undertaken through CIF,
Pacific Coast
• Under that arrangement, the vendor is to pay not only
the cost of goods, but also the freight and insurance
expenses, and this is taken to indicate that the delivery
is to be made at the port of destination
• Since CIF includes both insurance and freight expenses
to be paid by the seller, ordinarily, before the vessel
arrives at the point of destination the risk of loss be for
21
the account of the seller.
12. RUDOLF LIETZ INC v CA
FACTS: Buriol previously owned a parcel of unregistered
land in Palawan. In 1986, he entered into a lease
agreement with Flaviano and Tiziana Turatello and Sani
(Italians) involving a hectare of his property. This
agreement was for a period of 25 years, renewable for
another 25 years. After the paying P10,000
downpayment, Turatello and Sani took possession of the
land. However, this agreement was only reduced into
writing in 1987.
After 11 months, Buriol sold the same parcel of land (5
hec) to Rudolf Lietz Inc for P30,000. Later on, Rudolf
Lietz Inc discovered that Buriol owned only 4 hectares
with one hectare covered by the lease; thus, only 3
hectares were delivered to it. Rudolf Lietz Inc instituted
a complaint for the annulment of the lease against
Buriol, Sani and the Turatellos before the RTC. RTC and
CA ruled in favor of Buriol, Sani and Turatellos.
ISSUE: Whether the sale between Buriol and Rudolf Lietz
Inc is a lump sum or unit price sale
HELD: LUMP SUM SALE. The Deed of Absolute Sale shows
that the parties agreed on the purchase price on a
predetermined area of 5 hectares within the specified
boundaries and not based on a particular rate per area.
In accordance with Art. 1542, there shall be no
reduction in the purchase price even if the area
delivered to Rudolf Lietz Inc is less than that states in
the contract. In the instant case, the area within the
boundaries as stated in the contract shall control over
the area agreed upon in the contract.
and creates lien upon the land. The spouses acquired
their titles under the Torrens System and they acted in
good faith by exercising due diligence; thus, they have a
better right to the said property.
14. NAVAL v CA
FACTS: In 1969, Ildefonso Naval sold a parcel of land to
Gregorio; the sale was recorded under Act 3344. Also in
1969, Gregorio sold portions thereof to Balilla, Camalla
and the Moya Spouses, who thereafter took possession of
their
respective
portions.
Juanita,
a
great
granddaughter of Ildefonso, surfaced and claimed that
the land was sold to her by the latter in the year 1972;
she also presented an OCT as evidence. It must be noted
that the property was not yet registered under the
Torrens System when it was sold to Juanita and
Gregorio.
ISSUE: W/N Juanita has a better title (since it is
registered) than Balilla, Camalla and Moya spouses
HELD: NO. Art. 1544 is not applicable because the land
was unregistered under the Torrens System at the time
of the 1st sale. The applicable law is Act 3344. Under
said law, registration by the 1st buyer is constructive
notice to the 2nd buyer—and as such, the latter cannot
be deemed to be in good faith. Applying the principle of
priority in time, priority in rights, Juanita cannot claim
to have a better right. The fact that Juanita was able to
secure a title in her name does not operate to vest
ownership. The Torrens System cannot be used as a
means to protect usurpers.
15. CARILLO v CA
13. NAAWAN COMMUNITY RURAL BANK INC v CA
FACTS: Comayas offered to sell to the Lumo Spouses a
house and lot. The property was already registered
under the Torrens System that time and they made
appropriate inquiries with the RD; they found out that it
was mortgaged for P8,000, paid Comayas to settle the
mortgage, and the release of the adverse claim was
annotated in the title. Thereafter, they executed an
Absolute Deed of Sale over the subject property and
registered the same. However, it turns out that it was
already previously sold to Naawan Community Rural
Bank; it was then unregistered. The Bank foreclosed on
the property, purchased the same, and registered it
under Act 3344. Thus, the Bank sought to eject the
spouses. However, the latter countered with an action
for quieting of title.
ISSUE: Who has a better title, Naawan or Lumo spouses?
HELD: LUMO SPOUSES. Where a person claims to have
superior property rights by virtue of a sheriff’s sale, the
benefit of Art. 1544 applies favorably only if the
property is registered under the Torrens System—not
under Act 3344. Registration under the Torrens System
is the operative act that gives validity to the transfer
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
FACTS: Gonzales purchased from Priscilla, acting as
agent of Aristotle, the latter’s land. For failure to
execute the Deed of Sale, she filed a case for specific
performance and impleaded Priscilla (not Aristotle). The
latter defaulted and judgment was rendered against her
ordering the nullification of the OCT of Aristotle and the
issuance of a new certificate of title in favor of
Gonzales. The Dabons thereafter surfaced and sought to
annul the judgment of the trial court averring that they
purchased the property from Aristotle himself and they
were not impleaded as the real parties in interest.
ISSUE: Who has better title, Gonzales or Dabon?
HELD: DABON. The decision of the lower court in favor
of Gonzales was void due to extrinsic fraud. The Dabons
were deprived of their day in court and through
questionable means at that—such as the failure to give
them appropriate notice of the proceedings, and not
having them impleaded even though they are the parties
to be adversely affected. Instead, it was the agent who
was impleaded—not the principal or the subsequent
purchasers. The court never acquired jurisdiction.
It must be noted that the property was sold to
Gonzales in 1988, while the same was sold to the Dabons
in 1989; nonetheless, the requirements of double-sale
22
are two-fold: acquisition in good faith and registration
in good faith. Based on the foregoing, the case is
remanded to the lower court for further proceeding.
16. CARBONELL v CA
FACTS: Poncio, a Batanes native, owned a parcel of
land, which he offered to sell to Carbonell and Infante.
The land was mortgaged to Republic Bank. Poncio and
Carbonell agreed to the sale of the land, and the latter
assumed to pay the mortgage in favor of the bank.
Poncio and Carbonell executed an instrument where the
latter allowed the former to remain in the premises in
spite of the sale for a period of 1 year. Later on, when
the Formal Deed of Sale was to be executed, Poncio told
Carbonell that he could no longer proceed with the sale
as he had already sold the same to Infante for a better
price. Carbonell immediately sought to register adverse
claim; 4 days later, Infante registered the sale with the
adverse claim annotated thereto. Infante thereafter
introduced significant improvements on the property.
They now dispute ownership over the said land.
18. MENDOZA v KALAW
FACTS: In 1919, Federico Canet sold to Kalaw a parcel of
land under a Conditional Sale. 2 months after, Canet
sold to Mendoza the same parcel of land under an
Absolute Sale. Mendoza took possession thereof, cleaned
and fenced it, and sought to have the same registered
but Kalaw opposed. When Kalaw first tried to register
the same, he was denied but an anotacion preventiva
was annotated in the title.
ISSUE: Who has a better title, Canet or Kalaw?
HELD: CANET. While a conditional sale came before the
absolute sale, still the latter must prevail. A conditional
sale, before the happening of the condition, is hardly a
sale especially if the condition has yet to be complied
with. The anotacion preventiva obtained by Kalaw
cannot create an advantage in his favor as the same was
good for only 30 days. The court ruled in favor of
Mendoza.
ISSUE: Who has a better title, Carbonell or Infante?
HELD: CARBONELL. In order to claim the benefit of Art.
1544, the buyer of realty must register the property in
good faith. It is a pre-condition to a superior title. In
this case, Infante was not in good faith, thus the prior
sale to Carbonell must prevail. Infante registered her
claim 4 days after the adverse claim was registered, she
had notice that Carbonell paid off the mortgage debt as
the mortgage passbook was already in his possession.
She likewise ignored Carbonell and refused to talk to
here. These are badges of bad faith that taint her
registration.
17. SAN LORENZO DEV CORP v CA
FACTS: Spouses Lu owned 2 parcels of land, which they
purportedly sold to Babasanta. He demanded the
execution of a Final Deed of Sale in his favor so he may
effect full payment of the purchase price; however, the
spouses declined to push through with the sale. They
claimed that when he requested for a discount and they
refused, he rescinded the agreement. Thus, Babasanta
filed a case for Specific Performance. San Lorenzo
Development Corp. (SLDC) intervened claiming that the
lots have been sold to it by virtue of a Deed of Absolute
Sale with Mortgage and that it was a purchaser in good
faith. Both sales were not registered.
ISSUE: Who has a better title, Babasanta or SLDC?
HELD: SLDC. There was no double sale in this case
because the contract in favor of Babasanta was a mere
contract to sell; hence, Art. 1544 is not applicable. The
ownership of the property was not to be transmitted in
his favor until the full payment of the purchase price.
There was neither actual nor constructive delivery as his
title is based on a mere receipt. Based on this alone, the
right of SLDC must be preferred.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
19. ADALIN v CA
FACTS: Elena Kado and her siblings owned a lot with a 5door commercial building fronting Imperial Hotel. The
units were leased. Elena contracted the services of
Bautista, who brought Yu and Lim to her for the purpose
of buying the premises. During the meeting, it was
agreed that the Yu and Lim would buy the said units
except for the 5th which is to be bought by Adalin. They
entered into a Conditional Sale where Elena was
obligated to evict the tenants before the full payment
of the purchase price. Elena offered the same for sale to
the lessees but they refused claiming that they could
not afford; thus, she filed a case for ejectment against
them. Thereafter, the lessees decided to exercise their
right to buy the units—Kalaw ruled that since the sale to
Yu and Lim was conditional, the subsequent sale to the
lessees must be preferred.
ISSUE: Who has a better title, Yu and Lim or the lessees?
HELD: YU AND LIM. While it is true that the Deed was for
Conditional Sale, examination of the contents thereof
would show that it was one for the actual sale. During
the meeting, the property was already sold; the only
conditions were that Elena would evict the lessees
before the full payment of the price. The choice of to
whom to sell the property had already been decided.
That being the case, since the sale in favor of Yu and
Lim was the prior sale, it must be preferred.
Besides, Elena was guilty of double-dealing, which
cannot be sanctioned in law. It was, after all, her
obligation to evict the lessees. The lessees were in bad
faith as well for having knowledge of the supposed sale
in favor of Yu and Lim. Their subsequent registration of
the sale cannot shield them in their fraud.
23
20. CHENG v GENATO
FACTS: Genato owned 2 parcels of land in Paradise
Farms. He agreed with the Da Jose spouses to enter into
a contract to sell over the said parcels; it was embodied
in a public instrument annotated to the certificates of
title. They asked for and were granted an extension for
the payment of the purchase price. Unknown to them,
Genato dealt with Cheng regarding the lot, executed an
Affidavit to annul the Contract to Sell, appraised the
latter of his decision to rescind the sale, and received a
down payment from Cheng upon the guarantee that the
said contract to sell will be annulled. By chance, Genato
and the spouses met at the RD, where he again agreed
to continue the contract with them. He advised Cheng
of his decision; the latter countered that the sale had
already been perfected. Cheng executed an Affidavit of
Adverse Claim and had it annotated to the TCTs and
sued for specific performance.
ISSUE: Who has a better title, Cheng or the Da Jose
spouses?
HELD: DA JOSE SPOUSES. Both agreements involve a
contract to sell, which makes Art. 1544 inapplicable
since neither a transfer of ownership nor a sales
transaction took place. A contract to sell is premised
upon a suspensive condition—the full payment of the
purchase price. That being the case, the elementary
principle of first in time, priority in right should apply.
As such, the contract in favor of the Da Jose spouses
must prevail considering that the same had not been
validly rescinded. Besides, Cheng cannot be considered
to have acted in good faith as he had knowledge of the
prior transaction in favor of the spouses.
21. CONSOLIDATED RURAL BANK INC v CA
FACTS: The Madrid Brothers owned a parcel of land,
which was later subdivided. Rizal Madrid sold his share
to Gamaio and Dayag; the other brothers offered no
objection. The sale was not registered under the
Torrens System. Gamaio and Dayag sold the southern
half to Teodoro, and the northern half to Hernandez,
who thereafter donated the same to his daughter. They
all maintained possession of the properties. Later on,
the brothers all sold their shared to Marquez who
further subdivided the same, registered the lands, and
mortgaged portions thereof to Consolidated Bank and
Bank of Cauayan. For failure to settle his debt, CB
foreclosed the property. The successors-in-interest of
Gamiao and Dayag sought reconveyance. CB interposed
that the mortgage must be respected.
ISSUE: Who has a better title, Marquez or the
successors-in-interest of Gamiao and Dayag
HELD: The successors-in-interest of Gamiao and Dayag.
While Marquez was the 1st to register the lands under
the Torrens System, Art. 1544 does not apply as the
double-multiple sales were not done by the single
vendor—in this case by the brothers on the one side and
Gamiao and Dayag on the other. That being the case,
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
the simple rule on priority in time, priority in right
would apply. As such, the successors-in-interest of
Gamiao and Dayag would have a better right as the sale
in their favor came ahead of time. Further, Marquez was
not in good faith. He knew that the property was being
claimed by other parties who were in possession thereof
instead, he willfully closed his eyes to the possibility of
the flaws.
22. ESTATE OF LINO OLAGUER v ONGJOCO
FACTS: (Super detailed, with lots of unimportant facts,
so I'll only state whatever is related to the case at hand)
Petitioners are the children of Lino Olaguer and Olivia
Olaguer. When Lino died, Olivia became the
administrator and Eduardo Olaguer as co-administrator
of his estate. Olivia then got married to Jose Olaguer. As
administrators, Olivia and Eduardo sold 12 parcels of
land owned by Lino to Pastor Bacani, including Lot 76
which is the lot in question. A day later, it was sold back
to them, splitting to them the portion of which 6/13
went to Olivia, while 7/13 went to Eduardo. She then
made a special power of attorney in favor of Jose, giving
him the power to sell, mortgage, transfer, assign
endorse and deliver with respect to her share over Lot
76. The lot was sudivided, having Lots 76-B to 76-G in
the name of Olivia. As attorney-in-fact, Jose sold the six
parcels of land in favor of his son, Virgilio Olaguer. Lots
76-B and 76-C was consolidated and further subdivided
into a proportional share, making them Lots 1 and 2.
Jose, claiming to be the attorney-in-fact of his son, sold
Lots 1 and 2 to Emiliano Ongjoco. He further sold Lots
76-D to 76-G to Ongjoco twice on different dates, this
time evidenced by a notarized general power of
attorney. Petitioners moved for the sale made by
Spouses Olivia and Jose Olaguer to be null and void. RTC
ruled in favor of petitioners (on the subject lots), but CA
reversed.
ISSUE: Whether Ongjoco was a buyer in good faith
RULING: With respect to Lots 1 and 2, he cannot be
considered a buyer in good faith since there was no
proof that the sale on both lots was evidenced by a
written power of attorney. According to Agency Law, a
sale of a piece of land must be coupled with a written
authority of such agent, else the sale is void. Since the
respondent was not able to show proof that there really
was an existing written authority, the sale over such lots
cannot be considered valid, and must be returned to the
Estate of Lino Olaguer.
With respect to Lots 76-D to 76-G, there was a notarized
general power of attorney to show evidence that
authority had been given by Virgilio to his father to
dispose the subject lots. Since petitioners was not able
to show any proof that the lots being sold twice to
respondent show bad faith, good faith must be
presumed. Being notarized, the regularity of such
general power of attorney must also be presumed.
24
23. ABRIGO v DE VERA
FACTS: By virtue of a compromise agreement judicially
approved, Villafania sold to Rosenda and Rosita a house
and lot. Unknown to them, Villafania obtained a free
patent over the said land and sold it to De Vera. On the
other hand, Rosenda and Rosita sold the property to the
spouses Abrigo. Now De Vera and Abrigo dispute
ownership over the property—the former filing an
ejectment suit against the latter.
ISSUE: Who has a better title, Abrigo or De Vera?
HELD: DE VERA. Abrigo registered the property under
Act 3344, while De Vera registered the same under the
Torrens System. Naturally, De Vera’s right prevails.
Registration must be done in the proper registry to bind
the land. It was also proven that De Vera acted in good
faith considering that there was nothing in the
certificate of title or the circumstances, which would
have aroused suspicion and mandated her to make an
inquiry. Registration under Act 3344 does not suffice to
constitute constructive notice in order to negate the
good faith of the registrant under the Torrens System.
De Vera’s right must be upheld.
24. DAGUPAN TRADING CO v MACAM
FACTS: Sammy Maron and his 7 brothers were co-owners
of a parcel of land for which they applied for
registration. Pending the proceedings, they sold the
same to Macam, who thereafter introduced substantial
improvements thereon. Later on, the property was
levied upon and sold in favor of Dagupan Trading, which
thereafter registered the Sheriff’s Final Certificate of
Sale
ISSUE: Who has a better right, Macam or Dagupan?
HELD: MACAM. In this case, the sale in favor of Macam
was executed before the land was registered, while the
sale in favor of Dagupan was made after the
registration. In such a case, the Rules of Court will apply
such that the delivery of the Sheriff’s Final Certificate
of Sale in favor of Dagupan merely substitutes the latter
into the shoes of the seller Maron and acquires all
rights, interests, and claims of the latter. Considering
that at the time of the levy, Maron was no longer the
owner of the land, then no title can thereafter pass in
favor of Dagupan. Macam’s title is thus sustained.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
25. CARUMBA v CA
FACTS: Canuto sold a parcel of land to Carumba by
virtue of a Deed of Sale of Unregistered Land. The sale
was never registered. Thereafter, Canuto was sued for
collection of money, and the said land was levied upon
and sold to Balbuena, who registered it.
ISSUE: Who has a better right, Carumba or Balbuena?
HELD: CARUMBA. Art. 1544 does not apply in this case.
Instead, the Rules of Court are applicable. Balbuena,
the later vendee, merely steps into the shoes of the
judgment debtor and acquires all the rights and
interests of the latter. By the time the lot was sold
through the foreclosure proceedings, it was no longer
owned by Canuto by virtue of a prior sale to Carumba—
who has a better right.
26. ACABAL v ACABAL
FACTS: Sps. Acabal sold their lot to their son Villaner
Acabal who in turn transferred it to his godson-nephew
Leonardo Acabal. This was later on sold to Leonardo and
Ramon Nicolas hence a complaint was filed by Villaner
against them and his nephew arguing that what he
signed was a Lease contract and not a sales contract.
The RTC ruled in favor of Nicolas which was reversed by
the CA thus the case at bar.
ISSUE: W/N there was a valid sale
HELD: YES
It is valid only insofar as 5/9 of the land is concerned.
This is so because the property in question was bought
during the pendency of the marriage of Villaner
therefore it is presumed to belong to the conjugal
partnership. Leonarda failed to prove otherwise.
Nevertheless, when Justiniana (wife) died, her share
vested on her 8 children, and her husband vesting him
with 5/9 share on the property. Since it is not yet
partitioned, he cannot yet claim title to any definite
portion of the property but only to his ideal, abstract or
spiritual share. He may still dispose of the same for
every co-owner has absolute ownership over his
undivided interest in the co-owned property. However,
he cannot dispose of the shares of his co-owners based
on nemo dat qui non habet. Since he sold it without the
consent of the other co-owners, the sale is still valid
only insofar as his shares are concerned.
And the finding that both Leonardo and Villaner were
in pari delicto, the same is irrelevant because the
property concerned is unregistered.
25
SALE BY NON-OWNER/BY ONE HAVING VOIDABLE TITLE:
LIFE OF A CONTRACT OF SALE
1.
PAULMITAN v CA
FACTS: When Agatona died, she was succeeded by 2
sons: Pascual and Donato. She left 2 parcels of land.
Pascual died leaving 7 heirs. The titles remained in the
name of Agatona and the lots were never partitioned.
Donato, thereafter, executed an affidavit of Declaration
of Heirship—unilaterally adjudicating one of the lots to
himself. He thereafter sold the entire lot to his daughter
Juliana. For the failure to pay taxes, the lot was
forfeited and sold at a public auction, but Juliana later
redeemed the property. The Heirs of Pascual then
surfaced and sought to partition the property.
ISSUE: W/N Juliana became the owner of the entire lot
upon her redemption of the property
HELD: NO.From the moment of Agatona’s death, her
heirs, Pascual and Donato, became co-owners of the
undivided lot. When Donato died, his pro-indiviso share
transferred to his heirs. That being the case, when
Donato sold the entire property to his daughter, he was
merely co-owner thereof and transferred only his
undivided share.
If a co-owner alienates the entire property without
the consent of the other co-owners, the sale will affect
only his share. Thus, only ½ undivided share passed on
to Juliana. The fact that Juliana redeemed the property
does not operate to terminate the co-ownership. It
merely entitles her to reimbursement from the other coowners—redemption being a necessary expense. Until
reimbursement, Juliana holds a lien upon the lot for the
amount due to her. However, a partition is in order.
2.
also sell their undivided share in the co-ownership.
Otherwise, the properties sold would be subject to a
partition, which cannot happen to the properties in this
case. School equipment, as well as the buildings, are
indivisible. Thus, they cannot be subject to partition.
3.
BUCTON v GABAR
FACTS: Josefina bought a parcel of land from Villarin. By
verbal agreement, Josefina sold a ½ portion thereof to
Nicanora for P3,000. Nicanora paid P1,000 then P400—all
evidence by receipts—then she loaned Josefina P1,000
and thereafter along with her spouse, took possession of
the lot and built their house as well as apartments
thereon. Villarin then issued a Deed of Sale to Josefina,
but the latter refused to execute the corresponding
Deed of Sale to Nicanora. Josefina claimed that the
amounts paid by Nicanora were in the concept of loans.
Thus, Nicanora filed a case for specific performance.
ISSUE: W/N there was a sale between Josefina and
Nicanora
HELD: YES. Assuming that at the time when Josefina
sold the lot to Nicanora, she was not yet the owner
thereof. When Villarin executed the Deed of Sale in her
favor, title passed to Nicanora by operation of law.
Although the sale between Josefina and Nicanora was
verbal, it was as between them. Considering that
Nicanora has paid the purchase price, she became
owner of ½ of the lot. Likewise, although the complaint
was titled “specific performance” it was actually one for
quieting of title, which is imprescriptible so long as the
plaintiff is in possession of the lot.
MINDANAO v YAP
FACTS: Rosenda and Sotero were among co-owners of 3
parcels of land, which they sold to Ildefonso Yap for
some P100K without the consent of the other co-owners.
They included in the sale certain buildings and
laboratory and other educational equipment within the
said properties, which were actually owned by Mindanao
Academy. Mindanao Academy and the other co-owners
assailed the validity of the sale. The trial court declared
the sale null and void. Yap contends that Erlinda, one of
the co-owners owning 5/12 share of the co-ownership,
does not have the standing to challenge the sale for
being in bad faith.
ISSUE: W/N the sale is null and void as to its entirety
HELD: YES. Although the general rule is that if a coowner alienates the entire property without the consent
of the other co-owners, the sale will affect only his
share, such rule does not apply if the property cannot
be partitioned/subdivided. In this case, aside from the
fact that Rosenda and Sotero cannot sell the entire
property including the school equipment, they cannot
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
4.
CITY OF MANILA v BUGSUK LUMBER
FACTS: Bugsuk Lumber had an office in Manila. The City
Treasurer assessed it for license fees and mayor’s
permit—alleging that Bugsuk sold at wholesale and retail
to different lumber dealers in Manila. Bugsuk refused to
pay alleging that the lumber it produced were delivered
directly from the shipper to the buyer, that they paid
the appropriate Timber License Fees and that their
Manila Office only received orders and accepted
payments. Bugsuk alleges that it is not a dealer and its
office is not a store to warrant the imposition of the
additional taxes.
ISSUE: W/N Bugsuk is liable for the additional taxes
HELD: NO. A dealer buys to sell again; Bugsuk produced
its own lumber from Palawan. Thus, it is not a dealer.
Its Manila office is not a store as well. A store is a place
where goods are kept for sale—whether for retail or
wholesale. The Manila office only processed the orders
and payments; it did not keep goods therein or act as a
26
dealer or intermediary between the field office and the
customers. Thus, it is not liable for the said taxes.
5.
SUN BROS. & CO. v VELASCO
FACTS: Sun Brothers sold an Admiral Refrigerator to
Lopez upon the agreement that ownership will only pass
to the latter upon payment of the full purchase price.
Lopez paid only the downpayment and sold the same to
JV Trading (owned by Velasco) and was displayed in the
latter’s store. It was thereafter bought by CO Kang Chiu
from JV Trading. Sun Brothers sought to recover the
refrigerator.
ISSUE: W/N Sun Brothers may recover the thing
HELD: NO. It is true that where a person who is not the
owner of a thing sells the same, the buyer acquires no
better title than the seller has. In this case. Lopez
obviously had no title to the goods for having failed to
pay the full price. It only follows that JV Trading had no
title thereto as Velasco was not in good faith. He should
have inquired if Lopez had good title to it—the same not
being engaged in the business of selling appliances.
HOWEVER, when the refrigerator passed to Co Kang
Chiu, the latter acquired valid title thereto. The
exception to the foregoing rule is the purchase in good
faith in a merchant store or a fair or a market. This rule
fosters stability to commerce and business transactions.
Co Kang Chiu purchased the refrigerator in a merchant
store—and for value and in good faith. Thus, he is
protected by the law. Sun Brothers would not be
entitled to recover the refrigerator—not even if they pay
its value—since they were not deprived of the same
unlawfully. Lopez is the one who should be liable to Sun
Brothers for the full purchase price of the ref.
Tagatac was NOT unlawfully deprived within the context
of the Civil Code.
The sale between Feist and Tagatac was merely
voidable—valid until annulled. There was a valid
transmission of ownership. The fact that Feist did not
pay only gives rise to an action to resolve the contract
or demand payment. When Feist sold the car to
Sanchez, the sale between him and Tagatac was still
valid; therefore, good title passed to Sanchez. As
between 2 innocent parties, the one who made possible
the injury must bear the loss.
7.
FACTS: EDCA sold books to Tomas dela Pena who
fraudulently represented himself to be Prof. Jose Cruz,
a Dean of DLSU. EDCA delivered him the books, the
check Tomas issued was dishonored because he did not
have an account at all. Tomas thereafter sold the books
at a discount to Leonor Santos. EDCA, with the aid of
the police, stormed the Santos Bookstore to retrieve the
books.
ISSUE: W/N EDCA may retrieve the books from Santos
HELD: NO. Ownership of the books passed to Tomas
upon the delivery thereof. He had the right to transfer
the same to Santos. The fact that he did not pay for the
books only warrants rescission or an action for payment.
EDCA cannot be considered to have been unlawfully
deprived under the CC as to warrant recovery of the
books from Santos. Possession of movable property
acquired in good faith is equivalent to title. Santos was
a buyer in good faith, thus he is protected by the law.
8.
6.
TAGATAC v JIMENEZ
FACTS: Tagatac bought a car abroad and brought it to
the Philippines. Warner Feist deceived her into believing
that he was very rich and purchased her car. She
delivered possession thereof. Levy (another name of
Feist) issued her a postdated check, which was
dishonored. Feist then disappeared with the car. Feist
was able to register the car in his name and eventually
sold the car to Sanchez, who then sold the same to
Jimenez. Jimenez even labored to verify the car’s
records with Motor Vehicle Office. Jimenez then
delivered the car to California Car Exchange for display.
Tagatac, upon finding out, sought to recover the car,
but Jimenez refused.
ISSUE: W/N Jimenez may refuse to give the car back
HELD: YES. Jimenez was a buyer in good faith of the
car—he had no knowledge of any defect in the title of
the seller. It is true that one who has lost any movable
or has been unlawfully deprived thereof may recover
the same from the possessor. However, in this case,
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
EDCA PUBLISHING v SANTOS
AZNAR v YAPDIANGCO
FACTS: Teodoro advertised for sale his Ford Fairlane
car. De Dios approached them purporting to be a
nephew of Marella. Teodoro transacted with Marella
who agreed to buy the car, agreeing to pay the same
only after the car has been registered in his name. The
Deed was registered in his name, but Marella has yet to
pay so the documents were not delivered to him, he
pleaded with Ireneo, Teodoro’s son, that they proceed
to Marella’s sister to secure the shortage of cash. Ireneo
agreed. They proceeded thereto, Ireneo was
accompanied by De Dios and an anonymous person. De
Dios was able to induce Ireneo to hand over the
documents under the pretext that he will show them to
his lawyer, Ireneo agreed. De Dios made Ireneo wait and
thereafter escaped with the car and the deed. Marella
was then able to sell the car to Aznar. The police
thereafter seized the car in Aznar’s possession. Aznar
countered with a complaint for Replevin.
ISSUE: W/N Teodoro may recover the car from Aznar
HELD: YES. Teodoro was clearly unlawfully deprived of
the car. There was no valid delivery to Marella, hence
the latter acquired no title to the car. Delivery must be
27
coupled with intent. That being the case, Teodoro has
the right to claim the car not only from the thief, but
also from 3rd persons who may have acquired it in good
faith. The buyer would only be entitled to
reimbursement if he purchased the same in good faith
from a public sale.
9.
CRUZ v PAHATI
FACTS: Jose Cruz delivered his car to Belizo for the
latter to sell the same. Belizo forged the letter of Cruz
to the Motor Section of the Bureau of Public Works and
converted the same into a Deed of Sale. Using the
forged deed, he had the car registered in his name.
Thereafter, Belizo sold the car to Bulahan, who in turn
sold the same to Pahati. However, the car was
impounded by the police, and the sale to Pahati was
cancelled. Bulahan now contends that between 2
innocent parties (Bulahan and Cruz), the person who
made possible the injury must bear the loss—in this
case, supposedly Cruz.
ISSUE: W/N Cruz may recover the car from Bulahan
HELD: YES. It is true that both Bulahan and Cruz acted in
good faith. One who has lost a movable or had been
deprived of the same may recover it from the possessor.
This rule applies squarely to this case. Thus, since Cruz
was unlawfully deprived by Belizo through the latter’s
artifice, he is entitled to recover the same even against
a subsequent purchaser in good faith. The only
exception to this rule is if the purchaser acquired the
same from a public sale—in which case, reimbursement
is in order. It was, in fact, Bulahan who acted
negligently in failing to detect the forged Deed of Sale.
10. DIZON v SUNTAY
FACTS: Lourdes Suntay is the owner of a 3-carat
diamond ring valued at P5,500. She and Clarita Sison
entered into a transaction wherein the ring would be
sold on commission. Clarita received the ring and issued
a receipt. After some time, Lourdes made demands for
the return of the ring but the latter refused to comply.
When Lourdes insisted on the return, Clarita gave her
the pawnshop ticket which is the receipt of the pledge
and she found out that 3 days after the ring was
received by Clarita, it was pledged by Melia Sison, the
niece of Clarita’s husband in connivance with Clarita
with the pawnshop of Dominador Dizon for P2,600.
Lourdes then filed an estafa case. She then asked
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
Dominador Dizon for the return of the ring pledged but
refused to return the ring thus the case filed by Lourdes.
The CFI issued a writ of replevin so Lourdes was able
to have possession of the ring during the pendency of
the case. The CFI also ruled in her favor which was
affirmed by the CA on appeal. Thus the case at bar.
ISSUE: W/N the CA erred in ruling that Lourdes has a
right to possession of the ring
HELD: NO
It reiterated the ruling in de Garcia v. CA, that the
controlling provision is Art. 559 of the CC which states
that the possession ofmovable property acquired in
good faith is equivalent to a title. Nevertheless, one
who has lost any movable or has been unlawfully
deprived thereof may recover it from the person in
possession of the same. If the possessor of a movable
lost of which the owner has been unlawfully deprived,
has acquired it in good faith at a public sale, the owner
cannot obtain its return without reimbursing the price
paid therefor.
Lourdes, being unlawfully deprived of her ring thus
she has a right to recover it from the current possessor.
Dizon is engaged in a business where presumably
ordinary prudence would require him to inquire whether
or not an individual who is offering the jewelry by
pledge is entitled to do so. The principle of estoppel
cannot help him at all. Since there was no precaution
availed of, perhaps because of the difficulty of resisting
opportunity for profit, he only has himself to blame and
should be the last to complain if the right of the true
owner of the jewelry should be recognized.
Other issues raised:
1. Principle of estoppel = has its roots in equity, moral
right and natural justice.
 For estoppel to exist, there must be a
declaration, act or omission by the party who is
sought to be bound.
 A party should not be permitted to go against his
own acts to the prejudice of another.
Concurring opinion by J. Teehankee:
 Interpretation of the “unlawfully deprived” in Art. 559
of the CC. It is understood to include all cases where
there has been no valid transmission of ownership. If
our legislature intended interpretation to be that of
the French Code, it certainly would have adopted and
used a narrower term than the broad language of Art.
559 (formerly 464) and the accepted meaning in
accordance with our jurisprudence.
28
LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS
1.
ROMAN v GRIMALT
2.
FACTS: Grimalt transacted with Roman for the purchase
of a “schooner” called the Santa Marina. The sale was
predicted upon the condition that it was seaworthy and
that Roman would perfect his title thereto—the same
being registered to Paulina Giron. Only of the said
conditions were complied with will Grimalt purchase the
same. The terms of payment were likewise agreed upon.
Roman did nothing to perfect his title; then due to a
severe storm, the vessel sank. Roman now sues Grimalt
for the purchase price of the vessel.
LAWYERS COOPERATIVE PUBLISHING v TABORA
FACTS: Tabora purchased volumes of AmJur from
Lawyers Coop. The agreement was for ownership to
remain with Lawyers Coop until payment of the full
price. “Loss or damage to the goods after delivery to
the buyer is for the account of the latter.” The books
were delivered to his office; that same night, his office
was razed by fire. Tabora failed to pay the full purchase
price. Now Lawyers Coop sues him for the balance.
Tabora invokes force majeure.
ISSUE: Who bears the loss?
ISSUE: W/N Grimalt is liable for the loss
HELD: NO. There was yet to be a perfected contract
between them for the failure of Roman to perfect his
title. That being the case, the loss is for the account of
Roman as the owner thereof.
HELD: TABORA. While it is true that generally, loss is for
the account of the owner, the same does not apply here
because the parties themselves have expressly
stipulated that loss, after delivery to the buyer, are for
the account of the latter. Besides, the stipulation
retaining ownership to the seller is intended merely to
secure payment by the buyer. Likewise, the obligation
of Tabora consists of the delivery not a determinate
thing, but a generic thing—money. Thus, he is not
absolved from liability.
REMEDIES FOR BREACH OF CONTRACT OF SALE
1.
LEVY v GERVACIO
FACTS: Levy Hermanos sold a Packard car to Lazaro
Gervacio. Gervacio made an initial payment and
executed a promissory note for the balance of P2,400.
He failed to pay the note at maturity date so Levy
Hermanos foreclosed the mortgage and bought it at the
public auction for P800. Levy Hermanos then filed a
complaint for the collection of the remaining balance
and interest.
CFI ruled in favor of Gervacio finding that Levy can no
longer recover the unpaid balance once he has chosen
foreclosure. Thus the case at bar.
ISSUE: W/N Levy Hermanos can still collect the balance
HELD: YES
In order to apply Art. 1454-A of the CC, there must be
(1) a contract of sale of personal property payable in
installments and (2) there has been a failure to pay 2 or
more installments.
In the case at bar, although it is a sale of personal
property, it is not payable in installments. It is payable
in a straight term in which the balance should be paid in
its totality at maturity date of the PN, therefore the
prohibition does not apply.
balance payable in 24 installments. Title to the property
remained with Delta until the payment of the full
purchase price. Under the agreement, failure to pay 2
monthly installments makes the obligation entirely due
and demandable. The units were delivered, Niu failed to
pay. Thus, Delta filed a complaint for Replevin and
applied the installments paid by Niu as rentals; Niu
contends that the contractual stipulations are
unconscionable.
ISSUE: W/N the
unconscionable
DELTA MOTOR SALES CORP. v NIU KIM DUAN
FACTS: Niu Kim Duan purchased from Delta Motors 3 air
conditioning units. Niu paid the downpayment, the
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
Delta
availed
of
was
HELD: NO. A stipulation in the contract treating
installments as rentals in case of failure to pay is
VALID—so long as they are not unconscionable. The
provision in this case is reasonable.
An unpaid seller has 3 alternative (not cumulative)
remedies: (1) exact fulfillment of the obligation, (2)
cancel the sale for default in 2 installments, and (3)
foreclose the chattel mortgage (if any) but the seller
cannot anymore claim the unpaid balance of the price.
Delta chose the 2nd remedy. Having done so, it is now
barred from claiming the balance of the purchase price.
3.
2.
remedy
TAJANLANGIT v SOUTHERN MOTORS
FACTS: Tajanlangit bought 2 tractors and a thresher
from Southern Motors. They executed a promissory note
in payment thereof; it contained an acceleration clause.
Tajanlangit failed to pay any of the stipulated
29
installments. Thus, Southern Motors sued him on the PN.
The sheriff levied upon the properties of Tajanlangit
(same machineries) and sold them at a public auction to
satisfy the debt. Southern Motors now prayed for
execution. Tajanlangit sought to annul the writ of
execution—claiming that since Southern Motors
repossessed the machineries (mortgaged), he was
therefore relieved from liability on the balance of the
purchase price.
ISSUE: W/N Tajanlangit is relieved from his obligation to
pay
HELD: NO. While it is true that the foreclosure on the
chattel mortgage on the thing sold bars further action
for the recovery of the balance of the purchase price,
this does not apply in this case since Southern did not
foreclose on the mortgage but insteas sued based on the
PNs exclusively. That being the case, it is not limited to
the proceeds of the sale on execution of the mortgaged
goods and may claim the balance from Tajanlangit.
4.
NONATO v IAC
FACTS: Nonato spouses purchased from People’s Car a
Volkwagen car. They issued a PN with chattel mortgage.
People’s Car thereafter assigned its rights to the note to
Investors Finance. The Nonatos defaulted, thus Investors
Finance repossessed the car and demanded the payment
of the balance of the purchase price.
ISSUE: W/N Investors Finance may still demand for the
payment of the balance when it repossessed the car
HELD: NO. The remedies contemplated under Art. 1484
are ALTERNATIVE—not cumulative. Investors Finance in
effect cancelled the sale and it cannot now claim the
balance of the purchase price. When it took possession
of the car, it gave the spouses 15 days to redeem the
car. This could mean that their failure to do so would
constrain the company to retain the permanent
possession of the car. There was no attempt at all the
return the car—thus, it is untrue that the same was
retained merely for appraisal.
5.
RIDAD v FILIPINAS INVESTMENT (Filinvest)
FACTS: Ridad purchased from Supreme Sales 2 Ford
Consul Sedans, payable in 24 installments, for which he
executed a PN with chattel mortgage over the said
property. Another chattel mortgage was executed this
time upon a separate Chevy car, and another one upon
the franchise to operate taxi cabs. Supreme Sales
thereafter assigned its rights under the PN to Filinvest.
Ridad defaulted and Filinvest foreclosed on the
mortgage. It was the highest bidder for the foreclosure
sale of the sedans. But unable to fully satisfy the debt,
it also foreclosed the Chevy and the franchise.
ISSUE: W/N Filinvest may still foreclose the Chevy and
the franchise to fully satisfy the debt
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
HELD: NO. When the unpaid seller forecloses on the
mortgage, the law precludes him from bringing further
actions against the vendee for whatever balance, which
was not satisfied by the first foreclosure. By choosing to
foreclose on the Ford sedans, Filinvest renounced all
other rights which it might have had under the PN; it
must content itself with the proceeds of the sale of the
sedans at the public auction.
6.
ZAYAS v LUNETA MOTORS
FACTS: Zayas purchased a Ford Thames Freighter from
Escano Enterprises, the dealer of Luneta Motor Co. The
unit was delivered and Zayas issued a PN payable in 26
installments secured by a chattel mortgage over the
subject motor vehicle. Zayas failed to pay, thus Luneta
extra-judicially foreclosed on the mortgage and was the
highest bidder. However, considering that the proceeds
of the sale was insufficient to cover the debt, Luneta
filed a case for the recovery of the balance of the
purchase price. Zayas refused to pay.
ISSUE: W/N Luneta may still recover the balance
HELD: NO. When the unpaid seller forecloses on the
mortgage, the law precludes him from bringing further
actions against the vendee for whatever balance, which
was not satisfied from the foreclosure. Luneta contends
that Escano Enterprises is a different and distinct entity
and maintains that its contract with Zayas was a loan.
This is unsubstantiated as the agency relationship
between Luneta and Escano is clear.
Nevertheless, assuming that they were distinct
entities, the nature of the transaction remains the
same. If Escano assigned its right to Luneta, the latter
merely acquires the rights of the formers—hence, Art.
1484 of the CC would likewise be inapplicable.
7.
NORTHERN MOTORS v SAPINOSO
FACTS:
• Respondent Casiano Sapinoso purchased from
petitioner Northern Motors an Opel Kadett car for
P12,171 making a downpayment and executing a
promissory note for the balance of P10,540 payable in
installments
• To secure the payment of the note, Sapinoso executed
in favor of Northern Motors a chattel mortgage on the
car; the mortgage provided among others that upon
Sapinoso’s default in payment of any part of the
principal or interest, Northern Motors may elect any of
the ff. remedies (a) sale of the car by Northern (b)
cancellation of the sale to Sapinoso (c) extrajudicial
foreclosure (d) ordinary civil action for fulfillment of the
mortgage contract; additionally, whichever remedy is
chosen, Sapinoso waives his right to reimbursement of
any and all amounts on the principal and interest
already paid
• Sapinoso failed to pay the first 5 installments due from
August-November 1965; he made payments though on
November and December and on April the next year but
failed to make subsequent payments
30
• Northern Motors filed a complaint stating that it was
availing of the option of extrajudically foreclosing the
mortgage and prayed that (a) a writ of replevin be
issued upon its filing of a bond (b) it be declared to have
the rightful possession of the car (c) in default of
delivery, Sapinoso be ordered to pay the balance with
interest
• Subsequent to the commencement of the action but
before filing of his answer, Sapinoso made 2 payments
amounting to P1,250 on the promissory note; in the
meantime, a writ of replevin was issued and the car was
turned over to Northern Motors
• Sapinoso claimed that he withheld payments because
the car was defective and Northern Motors failed to fix
it despite his repeated demands
TRIAL COURT RULING
• Northern Motors had the right to foreclose the chattel
mortgage with Sapinoso failing to pay more than 2
installments
• However, the foreclosure and the recovery of unpaid
balance are alternative remedies which may not be
pursued conjunctively; Northern Motors thereby
renounced whatever claim it had on the promissory note
• Ordered Northern Motors to return of the P1,250 which
it had received from Sapinoso after filing the case and
electing to foreclose
ISSUE: W/N as under Article 1484 of the Civil Code,21
plaintiff Northern Motors is barred from recovering
unpaid balance of the debt having elected to foreclose
on the chattel mortgage. – NO.
HELD:
• In issuing the writ of replevin and upholding after trial
the right to possession of the car by Northern Motors,
the court below correctly considered the action as one
of replevin to secure possession of the car as preliminary
step to a foreclosure sale
• The court below however erred in concluding that the
legal effect of the action was to bar Northern Motors
from accepting further payments on the promissory note
• It is the fact of foreclosure and actual sale of the
mortgaged chattel that bars further recovery by the
vendor of any balance on the vendee’s outstanding
obligation not satisfied by the sale
• In the present case, there is no occasion to apply the
restrictive provision of Article 1484 as there has not yet
been a foreclosure sale resulting in a deficiency
• A mortgage creditor before the actual foreclosure sale
is not precluded from recovering the unpaid balance
although he has filed for replevin for the purpose of
extrajudicial foreclosure
• Also, a mortgage creditor who has elected to foreclose
but subsequently desists from proceeding with the
auction sale without gaining any advantage and without
causing any disadvantage to the mortgagor is not barred
from suing on the unpaid account
• And as applicable here, a mortgage creditor is not
barred from accepting before a foreclosure sale
payments voluntarily tendered by the debtor-mortgagor
who admits indebtedness.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
8.
CRUZ v FILIPINAS INVESTMENT & FINANCE CORP.
FACTS: Ruperto Cruz bought a bus from Far East Motor
Corp which was payable on installments of
P1,487.20/month for 30 months with 12% interest. Cruz
executed a PN in the sum of the purchase price. To
secure the paypent of the PN, Cruz executed a chattel
mortgage on the bus. Since no downpayment was made,
Far East required Cruz to execute another security and
for the a REM was executed on the land and building of
Mrs. Reyes which at that time was mortgaged to DBP.
Far East then assigned all its rights and indorsed the
PN to Filipinas Investment and Financing Corp. Cruz
defaulted in payment of the PN with only P500 being
ever paid. Filipinas had the chattel mortgage foreclosed
and it was the highest bidder at the foreclosure sale.
However, the proceeds were not sufficient to cover the
balance so it paid the indebtedness of Mrs. Reyes and
requested that it be sold at foreclosure sale as well.
Thus Cruz and Mrs. Reyes filed an action with the CFI to
have the REM constituted on her land cancelled.
The CFI ruled in favor of Cruz and Reyes finding that
the extrajudicial foreclosure barred further action for
recovery thus the case at bar.
ISSUE: W/N recovery from an additional security is
included in the prohibition thus allowing Filipinas to
recover the balance
HELD: NO
Art. 1484 provides that when in a (1) a sale of
personal property and (2) payable on installments there
was default in payment of 2 or more installments, the
remedies of the seller are:
1. To exact fulfillment of the obligation, should
the vendor fail to pay
2. Cancel the sale,
3. Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee’s failure to pay cover 2 or more
installments. In this case, he shall have no
further action against the purchaser to recover
any unpaid balance of the price. x x x
It has been held that these remedies are alternative
thus the exercise of one bars the exercise of the others.
This is so to prevent he abuses committed in connection
with foreclosure mortgages wherein the mortgagees
would seize the mortgaged property and buying them at
a very low price at the sale and then bringing suit for
collection of the unpaid balance resulting in the
mortgagor still liable to pay his original debt plus losing
the property.
To allow Filipinas to recover thru the additional
security would result in a circumvention of the law.
Should the guarantor be compelled to pay the balance
then the guarantor would be entitled to recover from
the debtor-vendee. In the end, it would still be the
debtor-vendee who would bear the payment of the
purchase price.
Also, the word “action” in Art. 1484 covers all types of
legal demand of one’s right whether judicial or
extrajudicial thus the barring effect applies to an
extrajudicial foreclosure.
31
9.
BORBON II v SERVICEWIDE SPECIALISTS INC.
FACTS: Daniel and Francisco Borbon issued a PN in favor
of Pangasinan Auto Mart for the purchase of certain
chattels. It was secured by a chattel mortgage. The
rights under the note were assigned to Filinvest, which
later assigned said rights to Servicewide. The Borbons
failed to pay, thus the mortgages were foreclosed. The
Borbons aver that the seller delivered chattels not
strictly in accord with their instructions; nonetheless,
they cannot evade liability because the notes have
passed to holders for value and in good faith. The trial
court sustained the foreclosure but awarded liquidated
damages and attorney’s fees in addition to the proceeds
of the auction sale.
ISSUE: W/N it was proper for the trial court to award
liquidated damages and attorney’s fees in addition to
the proceeds of the auction sale
HELD: NO. First, when a person assigns credits to
another, the latter is bound under the same law; thus,
Art. 1484 is equally applicable. In case of foreclosure,
the legislative intent is not merely to limit the
proscription to collecting the unpaid balance of the debt
but also to other claims including costs of litigation and
attorney’s fees. That being the case, the SC struck down
the award of liquidated damages, but considering the
facts of the case, the award of attorney’s fees is
reasonable and sustained.
10. MACONDRAY & CO v EUSTAQUIO
FACTS: Eustaquio bought a De Soto car from Macondray
for which he executed a PN, payable in installments,
with a stipulation of attorney’s fees, expenses for
collection, and other costs. It was secured by a chattel
mortgage over the said car. As usual Eustaquio failed to
pay, and Macondray foreclosed on the mortgage.
However, there remained a balance of some P340 for
which Macondray sues Eustaquio. Macondray also
contends that at least the stipulated interests and
attorney’s fees must be claimable.
ISSUE: W/N Macondray may still claim the interests and
attorney’s fees stipulated
HELD: NO. If the seller avails of his right to foreclose on
the mortgage, he can no longer bring an action against
the buyer for the unpaid balance—this includes all the
obligations such as attorney’s fees, stipulated interests,
expenses of collection and other costs.
11. FILIPINAS INVESTMENT & FINANCE CORP v RIDAD
FACTS:
• The RIDAD SPOUSES purchased a Ford Consul Sedan
from Supreme Sales and Dev’t. Corp. Supreme Sales was
the assignor-in-interest of FILIPINAS Investment and
Finance, appellees herein.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
• The car was worth 13,371 of which 1,160 was paid
upon delivery, and the remaining balance to be paid in
24 monthly installments. A promissory note and chattel
mortgage were executed by the Ridad’s to ensure
fulfillment of their obligation.
• The Ridad Spouses failed to pay the last 5
installments, which prompted Filipinas to file a replevin
suit in the city court of Manila, or in the alternative, to
recover the unpaid balance if delivery could not be
effected.
• The complaint of Filipinas stated that there was an
unjustifiable failure and refusal of the Ridad Spouses to
surrender the car for foreclosure. The sheriff was able
to seize the car and sell it in a public auction.
• The Ridad Spouses were declared in default during
these proceedings due to their alleged non-receipt of
summons; and the order of default included an order to
pay Filipinas 500 for attorney’s fees and 163 for
expenses incurred in seizing the car. (this is what the
case is about)
• Their motion to set aside the order of default was
denied by the city court of Manila, thus the Ridad’s
appealed to the CFI Manila. The CFI said that the only
issue to be resolved was with regard to the atty’s fees
and the expenses incurred due to the seizure of the car.
It ruled that Filipinas was entitled to recover both
amounts; for the seizure of the car, and the lowered the
attys fees of 300.
• This decision was appealed to the SC
RIDAD SPOUSES’ CONTENTIONS
• Pursuant to Art 148422 (specifically #3) Filipinas, by
opting to foreclose the chattel mortgage renounced all
rights it had under the promissory note, as well as
payment for the unpaid balance, including any amount
it would be entitled to under this action, such as atty’s
fees and costs of suit.
FILIPINAS’ CONTENTIONS:
• They are entitled to an award for atty’s fees and costs
of suit by virtue of the unjustifiable failure and refusal
of the Ridad Spouses to comply with their obligations.
• What 1484 prohibit is the recovery of the unpaid
balance by means of another replevin suit.
ISSUE: Whether under Art 1484 (the Recto Law) Fiipinas
is entitled to the award for attorneys fees and expenses
incurred due to the seizure of the car. – Yes, but with
certain qualifications.
HELD: Art 1484 is called the Recto Law, and was created
to protect mortgagors from mortgagees who wanted to
unjustly enrich themselves. No. 3 of Art 1484, discussing
the right to foreclose, means that if the vendor opts for
this remedy he shall have no further action to recover
any unpaid balance of the same.
The decided case of Macondray & Co. v Estaquio has
almost the exact facts and deals with the same issue of
this case. In Macondray, it was ruled that “the words
‘unpaid balance’ in no. 3 of art 1848 refer to the
deficiency judgement which the mortgagee may be
entitled to, when after the public auction of the
mortgaged chattel, the proceeds are insufficient to
cover the full amount of the secured obligation, which
32
include… attorneys fees and costs of suit. Were it the
intention of legislature to limit its meaning to the
unpaid balance of the principal, it would have so
stated.” In other words, the mortgagee is limited to the
property mortgaged and is not entitled to attys fees and
costs of suit.
Such doctrine prevents the circumvention of the Recto
Law. Prior to its enactment, sellers unjustly enriched
themselves at the expense of their buyers; by recovering
the goods sold upon default of installment payers, by
retaining the amounts already paid, and by claiming for
damages. Looking at the doctrine of Macondray, it
appears that in no instance may the mortgagee recover
any sum from the mortgagor after the foreclosure of the
mortgage.
But although the court agrees with the above stated
doctrine, it seems that the mortgagees are not
protected against perverse mortgagors. Examples of
perverse mortgagors are those who deceitfully hide their
mortgaged movables, or upon default of payment,
refuse to give up its possession for foreclosure. When
the mortgagor does these acts, the mortgagee has no
choice but to institute a suit for replevin to recover
possession of the chattel and enforce his rights over
such. It logically follows that the necessary expenses
incurred by the mortgagee to regain possession of what
he had a right to possess should be borne by the
mortgagor. Such recoverable expenses include attys
fees, and expenses incurred in seizing the chattel. In
this case, the court found that the amounts awarded by
the lower court were reasonable.
The ruling in this case, in so far as it conflicts with
previously established doctrines, is pro tanto qualified.
12. PCI LEASING AND FINANCE INC v GIRAFFE-X
CREATIVE IMAGING INC
FACTS: PCI Leasing and Giraffe entered into a Lease
Agreement whereby PCI Leasing leased several
machineries for a rent of P116, 878. 21/month for 36
months and P181, 362/month for 36 months for a total
of P10, 736, 647.56. Giraffe paid the amount of P3, 120,
000 as guaranty deposit. However, after 1 year, Giraffe
defaulted in its monthly-rental payment obligations.
After a 3-month default, PCI demanded a formal pay-orsurrender-equipment type but the demand went
unheeded thus PCI instituted the instant case and
prayed for the issuance for the writ of replevin. The
trial court issued a writ of replevin. Giraffe filed a
motion to dismiss arguing that PCI was barred from
pursuing any other claim since the seizure of the 2
leased equipments because the contract was in reality a
lease with option to buy. The RTC granted the motion to
dismiss ruling that it was akin to a contract covered by
art. 1485 hence can no longer pursue its claim. Hence
the case at bar.
ISSUE: W/N the contract was covered by Art. 1485 and
1484 hence barred PCI from recovering
HELD: YES
A financial lease is one where a financing company
would, in effect, initially purchase a mobile equipment
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
and turn around to lease it to a client who gets, in
addition, an option to purchase the property at the
expiry of the lease period.
In the case at bar, PCI acquired the office equipments
for their subsequent lease to Giraffe, with the latter
undertaking to pay a monthly fixed rental for the whole
36 months. Giraffe made a guaranty deposit. Their
agreement was that in case Giraffe fails to pay any
rental due, PCI will have cumulative remedies, such as,
to recover all rentals for the remaining term of the
lease and recover all amounts advanced for Giraffe’s
account.
When PCI demanded for payment of the balance, it
made a demand for either of the choices. Either to pay
the balance hence Giraffe can keep the equipment or
surrender them if he cannot. The so-called monthly
rentals were in fact monthly amortizations of the price
of the leased office equipment.
The imperatives of equity, the contractual stipulations
and the actuations of the parties, the SC has treated a
purported financial lease as actually a sale of movable
property on installments and prevented recovery. The
Lease Agreement is in reality a lease with an option to
purchase the equipment. This has been made manifest
by the actions of PCI itself.
In choosing replevin, PCI waived its right to bring an
action to recover unpaid rentals.
13. LEGARDA v SALDANA
FACTS: Saldana entered into a contract with Legarda
Hermanos. Legarda agreed to sell 2 equal lots for P1,500
each, payable in 120 equal installments over a period of
10 years at 10% per annum. Saldana paid 95 of the 120
installments over 8 years, which was recorded in his
account with Legarda, but without stating as to which
lots the payments were made. The said account stated
that Saldana still owed 1,311.72 for the 2 lots, although
he had already pain more the P1,500, the value of one
lot.
After 5 years, Saldana contacted Legardo Hermanos
stating that he was interested in building a house on the
lots, however, he was prevented from doing such
because Hermanos failed to introduce the stipulated
improvements on the subdivision (roads to his lots). He
further indicated his intentions to continue his
payments.
In his reply, Legarda Hermanos said that since Saldana
failed to complete the 120 payments in time, as they
have previously stipulated, all the amounts paid,
together with the improvements on the premises have
been considered as rents paid and as payment for
damages. Furthermore, the sale was cancelled.
Saldana then filed an action demanding the delivery of
the 2 lots and for the execution of the corresponding
deed of conveyance after payment of the outstanding
balance.
Subsequently, Legarda Hermanos partitioned the
subdivision among the brothers and sisters, and the two
lots were among those allotted to Jose Legarda (corespondent).
The lower court sustained Legarda Hermanos’
cancellation of the contracts and dismissed Saldana’s
33
complaint. The CA eventually reversed this.
The CA ordered Legarda Hermanos to deliver to
Saldana one of the two lots, at his option. Furthermore,
Hermanos was told to execute the deed of conveyance.
ISSUE: Should the claim of Hermanos Legarda be upheld?
He claims that the payment should be considered as
rent and that the sale should be cancelled? – No.
HELD: The SC applied the principles of equity and
justice, as correctly held by the CA. considering that
Saldana had already paid the total sum of P3,582.06
including interests, which is even more than the value of
the two lots.
And even if the sum applied to the principal alone
were to be considered, which was of the total of
P1,682.28, the same was already more than the value of
one lot, which is P1,500.00. The only balance due on
both lots was P1,317.72, which was even less than the
value of one lot. By this, the court ruled that Saldana
had already paid for at least one lot. And he is given the
choice as to which one.
Even considering that Saldana as having defaulted
after February 1956, when he suspended payments after
the 95th installment, he had as of the already paid by
way of principal (P1,682.28) more than the full value of
one lot (P1,500.00). Furthermore, regardless of the
propriety of applying Article 1592 thereto, Legarda
Hermanos was not denied substantial justice. According
to ART. 1234, “If the obligation has been substantially
performed in good faith, the obligor may recover as
though there had been a strict and complete fulfillment,
less damages suffered by the obligee,” and “that in the
interest of justice and equity, the decision appealed
from may be upheld upon the authority of ART. 1234.”
The Board of Commissioners of the HLURB only modified
the award. The Office of the President adopted the
findings of facts and conclusions of law by the Board
thus was elevated to the CA which likewise affirmed the
decision of the OP. Hence, the case at bar.
ISSUE: W/N Pacifico has paid at least 2 years of
installments
HELD: NO
The total payments made by Pacifico amounted to
P846, 600. What should be used as divisor is the amount
of the installment in the downpayment. The P750, 000
downpayment was to be paid in 6 monthly installments
therefore deducting it from what he paid, the remaining
balance is P96,600. Pacifico was able to pay the
downpayment in 11 months after the last monthly
installment was due. But he failed to pay at least 2
years of installments therefore he is not entitled to a
refund of the cash surrender value of his payments
under Sec. 3 of RA 6552. What is applicable is Sec 4
which provides that the buyer should be given a grace
period of not less than 60 days and if he should still fail
to do so, the seller may cancel the contract after 30
days from receipt of the buyer of the notice of
cancellation.
Pacifico admitted that the under the restructured
scheme, the 1st installment on the 70% balance of the
purchase was due on Jan 5, 1998. Although he issued
checks to cover for them, the 1st 2 were dishonored.
When he was notified of the dishonor, he took no action
hence the 60 day grace period lapsed. Hence the
cancellation was justified.
15. MCLAUGHLIN v CA
14. JESTRA DEV AND MANAGEMENT CORP v PACIFICO
FACTS: Daniel Pacifico signed a Reservation application
with Fil-Estate Marketing Assn for the purchase of a
house nad lot and paid the reservation fee. The
Reservation application contained the amounts to be
paid in installments with interests. Unable to comply
with the schedule of payments, Pacifico requested
Jestra to allow him to make periodic payments which
the latter granted. They later on executed a contract to
sell when the remaining balance was only P260K.
Pacifico requested twice for a restructuring of his
unsettled obligation which Jestra granted subject to
certain conditions of additional penalties et al. As
compliance to the condition, Pacifico issued 12 postdated checks however he is unable to pay so he
requested that he be allowed to dispose the property to
recover his interest and he could recover the 12 post
dated checks, which was this time was denied by Jestra.
Jestra then sent a notarial notice of cancellation that
they are giving him until a certain date to pay or else
the contract will be automatically cancelled.
Pacifico then filed a complaint before the HLURB
claiming that despite his full payment of the
downpayment, Jestra failed to deliver to him the
property and instead sold it to another buyer. HRLURB
Arbiter decided in Pacifico’s favor finding Jestra liable.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
FACTS: Petitioner Luisa McLaughlin (seller) and private
respondent Ramon Flores (buyer) entered into a
contract of conditional sale of real property. The total
purchase price is P140,000. P26,550 should be paid upon
execution of the deed and the balance not later than
May 31, 1977 with an interest of 1% per month until fully
paid.
Flores failed to pay and hence petitioner filed a
complaint for the rescission of the deed of conditional
sale. Eventually, the parties entered into a compromise
agreement, which was accepted by the court.
The parties agreed that Flores shall pay P50,000 upon
signing of the agreement and the balance in 2 equal
installments payable on June 30, 1980 and December
31, 1980. Flores also agreed to pay P1,000 monthly
rental until the obligation is fully paid for the use of the
subject matter of the deed of conditional sale. They
also agreed that in the event Flores fails to comply with
his obligations, the petitioner will be entitled to the
issuance of a writ of execution rescinding the deed of
conditional sale and all the payments made will be
forfeited in favor of the plaintiff.
On October 15, 1980, petitioner wrote to Flores
demanding payment of the balance on or before October
31. This demand included the installment due on June
30 and December 31, 1980. On October 30, Flores sent a
letter signifying his willingness and intention to pay the
34
full balance.
On November 7, petitioner filed a motion for writ of
execution alleging that Flores failed to pay the
installment due on June 1980 and also failed to pay the
monthly rentals from that date. She prayed that the
deed of conditional sale be rescinded with forfeiture of
all payments and payment of the monthly rentals and
eviction of Flores. The trial court granted the motion.
On November 17, Flores filed a motion for
reconsideration tendering at the same time a certified
manager’s check payable to petitioner and covering the
entire obligation including the December 1980
installment. The trial court denied the motion.
On appeal, the CA ruled in favor of Flores holding that
the delay in payment was not a violation of an essential
condition which would warrant a rescission since On
November 17 or just 17 days from the October 31
deadline set by petitioner, Flores tendered the certified
manager’s check and that it was inequitable for Flores
to forfeit all the payments made (P101,550).
ISSUE: WHETHER it is inequitable to cancel the contract
and to have the amount paid by Flores be forfeited to
petitioner particularly after Flores had tendered the
certified manager’s check in full payment of the
obligation. – YES.
HELD: There is already substantial compliance by Flores
with the compromise agreement. More importantly, the
Maceda law recognizes the vendor’s right to cancel the
contract to sell upon the breach and nonpayment of the
stipulated installments but requires a grace period after
at least 2 years of regular installment payments.
But in cases where less than 2 years of installments
were paid, the seller shall give the buyer a grace period
of not less than 60 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 the receipt by
the buyer of the notice of the cancellation or the
demand for rescission of the contract by a notarial act.
Assuming that under the terms of agreement the
December 31 installment was due when on October 15
petitioner demanded payment of the balance on or
before October 31, petitioner could cancel the contract
after 30 days from the receipt by Flores of the notice of
cancellation.
Considering petitioner’s motion for execution filed on
November 7 as a notice of cancellation, petitioner could
cancel the contract after 30 days from the receipt by
Flores of said motion.
Flores’ tender of payment together with his motion
for reconsideration on November 17 was well within the
30 day period granted by law.
The tender made by Flores of a certified bank
manager’s check was a valid tender of payment. It
covered the full amount of the obligation. However,
although he had made a valid tender of payment which
preserved his rights as a vendee, he did not follow it
with consignation or deposit of the sum due with the
court. Hence he remains liable for the payment of his
obligation because of his failure to deposit the amount
due with the court.
REMEDY OF RESCISSION IN SALES CONTRACT COVERING IMMOVABLES:
CONTRACT OF SALE VS. CONTRACT TO SELL
1.
ADELFA PROPERTIES INC v CA
FACTS: Rosario Jimenez-Castaneda, Salud Jimenez and
their brothers, Jose and Dominador Jimenez, were the
registered co-owners of a parcel of land in Las Piñas. In
1988, Jose and Dominador sold their share consisting of
1/2 of said parcel of land, specifically the eastern
portion thereof, to Adelfa Properties. Subsequently, a
“Confirmatory Extrajudicial Partition Agreement” was
executed by the Jimenezes, wherein the eastern portion
of the subject lot, was adjudicated to Jose and
Dominador Jimenez, while the western portion was
allocated to Rosario and Salud Jimenez. Thereafter,
Adelfa Properties expressed interest in buying the
western portion of the property from Rosario and Salud.
Accordingly, in 1989, an “Exclusive Option to Purchase”
was executed between the parties, with the condition
that the selling price shall be P2.86M, that the option
money of P50,000 shall be credited as partial payment
upon the consummation of sale, that the balance is to
be paid on or before 30 November 1989, and that in case
of default by Adelfa Properties to pay the balance, the
option is cancelled and 50% of the option money shall be
forfeited and the other 50% refunded upon the sale of
the property to a third party.
Meanwhile, a complaint was filed by the nephews and
nieces of Rosario and Salud against Jose and Dominador
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
for annulment of the deed of sale in favor of Household
Corporation and recovery of ownership of the property.
As a consequence, Adelfa Properties held payment of
the full purchase price and suggested that they settle
the case with their nephews and nieces.
In 1990, Adelfa Properties caused to be annotated on
the TCT the exclusive option to purchase. On the same
day, Rosario and Salud executed a Deed of Conditional
Sale in favor of Emylene Chua over the same parcel of
land for P3M, of which P1.5M was paid to the former on
said date, with the balance to be paid upon the transfer
of title to the specified 1/2 portion. Atty. Bernardo
wrote Rosario and Salud informing the latter that in
view of the dismissal of the case against them, Adelfa
Properties was willing to pay the purchase price, and he
requested that the corresponding deed of absolute sale
be executed. This was ignored by Rosario and Salud.
Jimenez’ counsel sent a letter to Adelfa Properties
enclosing therein a check for P25,000.00 representing
the refund of 50% of the option money paid under the
exclusive option to purchase. Rosario and Salud then
requested Adelfa Properties to return the owner’s
duplicate copy of the certificate of title of Salud
Jimenez. Adelfa Properties failed to surrender the
certificate of title.
Rosario and Salud Jimenez filed a petition for the
annulment of contract, while Emylene Chua, the
subsequent purchaser of the lot, filed a complaint in
35
intervention. RTC ruled in favor of the Jimenezes and
CA affirmed.
ISSUE: W/N the contract between the Jimenezes and
Adelfa Properties is an option contract
HELD: NO. The alleged option contract is a contract to
sell, rather than a contract of sale. The distinction
between the two is important for 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 the vendor to convey title
from becoming effective. Thus, a deed of sale is
considered absolute in nature where there is neither a
stipulation in the deed that title to the property sold is
reserved in the seller until the full payment of the
price, nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay
within a fixed period.
The parties never intended to transfer ownership to
Adelfa Properties to completion of payment of the
purchase price, this is inferred by the fact that 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 Properties is obliged to
return possession or ownership of the property as a
consequence of non-payment. There is no stipulation
anent reversion or reconveyance of the property in the
event that petitioner does not comply with its
obligation. With the absence of such a stipulation, it
may legally be inferred that there was an implied
agreement that ownership shall not pass to the
purchaser until he had fully paid the price. Article 1478
of the Civil Code does not require that such a stipulation
be expressly made. Consequently, an implied stipulation
to that effect is considered valid and binding and
enforceable between the parties. A contract which
contains this kind of stipulation is considered a contract
to sell. Moreover, that the parties really intended to
execute a contract to sell is bolstered by the fact that
the deed of absolute sale would have been issued only
upon the payment of the balance of the purchase price,
as may be gleaned from Adelfa Properties’ letter dated
16 April 1990 wherein it informed the vendors that it “is
now ready and willing to pay you simultaneously with
the execution of the corresponding deed of absolute
sale.”
2.
CORONEL v CA
FACTS: In 1985, Coronel executed a document entitled
"Receipt of Down Payment" in favor of Alcaraz for
P50,000 dp of P1.24M as purchase price for an inherited
house and lot promising to execute a deed of absolute
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
sale as soon as it has been transferred in their name.
The balance of P1.19M is due upon the execution of the
deed. When title to the property was finally transferred
to their names, the Coronels sold the property to
Mabanag for P1.58M after she paid P300K dp. Because of
this, they cancelled and rescinded the contract with
Alcaraz by returning the P50,00 dp.
Alcaraz filed a complaint for specific performance
against the Coronels and cause the annotation of a
notice of lis pendens on the TCT. Mabanag, on the other
hand, caused the annotation of a notice of adverse
claim with the RD. However, the Coronels executed a
Deed of Absolute Sale in favor Mabanag. RTC ruled in
favor of Alcaraz. CA affirmed.
ISSUE: Whether the “receipt of downpayment” serves a
contract to sell or a conditional contract of sale
HELD: NO. The agreement could not have been a
contract to sell because the sellers made no express
reservation of ownership or title to the subject parcel of
land. Furthermore, the circumstance, which prevented
the parties from entering into an absolute contract of
sale, pertained to the sellers themselves (the certificate
of title was not in their names) and not the full payment
of the purchase price. Under the established facts and
circumstances of the case, had the certificate of title
been in the names of petitioners-sellers at that time,
there would have been no reason why an absolute
contract of sale could not have been executed and
consummated right there and then. Moreover, unlike in
a contract to sell, petitioners did not merely promise to
sell the property to private respondent upon the
fulfillment of the suspensive condition. On the contrary,
having already agreed to sell the subject property, they
undertook to have the certificate of title changed to
their names and immediately thereafter, to execute the
written deed of absolute sale. What is clearly
established by the plain language of the subject
document is that when the said “Receipt of Down
Payment” was prepared and signed by petitioners, the
parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful
transfer of the certificate of title from the name of
petitioners’ father to their names. The suspensive
condition was fulfilled on 6 February 1985 and thus, the
conditional contract of sale between the parties became
obligatory, the only act required for the consummation
thereof being the delivery of the property by means of
the execution of the deed of absolute sale in a public
instrument, which petitioners unequivocally committed
themselves to do as evidenced by the “Receipt of Down
Payment.”
3.
PNB v CA
FACTS:
• PNB owned a parcel of land which Lapaz Kaw Ngo
offered to buy. Events under the first letter-agreement
• PNB accepted Lapaz’s offer subject to certain
stipulations. The important ones are the following:
1. The selling price shall be P5.4million. Lapaz had
already paid P100,000 as deposit.
36
2. Upon failure to pay the additional deposit worth
P970,000, the P100,000 shall be forfeited and PNB shall
be authorized to sell the property to another.
3. The property shall be cleared of its present tenants at
the expense of Lapaz.
4. Sale was subject to other terms and conditions to be
imposed.
• Lapaz agreed, so she proceeded to clear the lot of its
tenants at her own expense.
• However, due to difficulties in money, she requested
for adjustment of payment proposals, which the bank
denied. PNB also reminded her that she had not yet sent
her letter of conformity to the agreement reached and
told her to pay the full price of P5.4million. If not, the
lot will be sold to other parties.
• Lapaz requested for a reduction of the price as the
size of the land was substantially reduced. PNB agreed.
• PNB still did not receive payment from Lapaz, and
gave the latter the last chance to pay the balance of the
down payment. If she failed to pay, the sale shall be
cancelled and the P100,000 payment shall be forfeited.
• Lapaz failed to pay, so P100,000 was forfeited and the
sale never materialized. PNB leased the premises to a
certain Rivera.
• Lapaz requested for a refund of her deposit in the
total amount of P660,000 and asked that the forfeited
P100,000 be reduced to P30,000. PNB agreed. Events
under the second letter-agreement
• Lapaz requested for a revival of the previously
approved offer to PNB. PNB approved.
• All conditions as in the first agreement were the same,
except for the purchase price and deposit. The price
was P5.1million, the deposit was P200,000.
• Lapaz refused, however, to conform to the condition
of vacating the premises at her expense as she had
already done so under the first agreement. (She
apparently considered this second letter-agreement as a
continuation of the first so she said that she was no
longer required to evict the tenants as she had already
done so.) Besides, according to her, the occupants of
the property were tenants of PNB. PNB refused this
offer.
•To prevent the forfeiture of her P200,000 deposit, she
signed the letter-agreement. She told PNB that she was
willing to pay the remaining deposit of P800K as long as
it was PNB who would clear the property. PNB refused,
and forfeited the P200,000 of Lapaz.
• PNB informed Lapaz that they had already decided to
sell the property for not less than P7M.
ISSUES:
1. Whether or not there was a perfected contract of
sale. – No. There was no perfected contract of sale.
2. Whether or not the P100,000 or the P200,000 was
earnest money. – No. They were not earnest money.
HELD:
• It is important to note that the first letter-agreement
was cancelled and thereafter no longer existed. The
second letter-agreement is not a contract of sale but a
contract to sell whose conditions were not fulfilled,
which prevented the obligations therein from obtaining
obligatory force.
• A contract to sell is one where the obligatory force of
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
the vendor’s obligation to transfer title is subordinated
to a 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
never existed.
• In the instant case, the second letter-agreement was
replete with conditions that Lapaz had to fulfill before
the sale could be executed. The sale was dependent
upon Lapaz’s compliance with certain conditions (i.e.,
payment, eviction of occupants). It was stipulated in
the contract that her failure to pay the additional
deposit would allow PNB to forfeit the price and allow
them to sell the property to other parties.
• This stipulation took the nature of a reservation of
title in the vendor until full payment of the purchase
price, or giving the vendor the right to unilaterally
rescind the contract the moment the buyer fails to pay
within the fixed period.
• In addition, Lapaz’s refusal to evict the occupants on
the ground that she had already done so under the first
agreement was not justified as the two letteragreements were different transactions all together.
Her fulfillment of the conditions in the first one did not
carry over to the second one despite the identity of the
stipulation.
•The P100,000 and the P200,000 were not also earnest
money. Article 1482, which defines earnest money,
gives only a disputable presumption that prevails in the
absence of rebuttal evidence. In the instant case, the
letter-agreements themselves were the evidence that
proved the intention of the parties to enter into
negotiations leading to a contract of sale mutually
acceptable to both as to absolutely bind them. The
P100,000 and the P200,000 could not have been proof of
the perfection of the sale as the letter-agreements were
full of condition precedents before the sale could be
executed. The money thus given could be considered as
part of the consideration of PNB’s promise to reserve
the property for Lapaz.
4.
BABASA v CA
FACTS: In 1981, a contract of “Conditional Sale of
Registered Lands” was executed between the spouses
Vivencio and Elena Babasa as vendors and Tabangao
Realty Inc. (Tabangao) as vendee over 3 parcels of land
in Batangas. Since the certificates of title over the lots
were in the name of third persons who had already
executed deeds of reconveyance and disclaimer in favor
of the Babasas, it was agreed that the total purchase
price of P2,121,920.00 would be paid in the following
manner: P300,000.00 upon signing of the contract, and
P1,821,920.00 upon presentation by the Babasas of
transfer certificates of titles in their name, free from all
liens and encumbrances, and delivery of registerable
documents of sale in favor of Tabangao within 20
months from the signing of the contract. In the
meantime, the retained balance of the purchase price
would earn interest at 17% per annum or P20,648.43
monthly payable to the Babasas until 31 December 1982.
It was expressly stipulated that Tabangao would have
the absolute and unconditional right to take immediate
possession of the lots as well as introduce any
37
improvements thereon. On 18 May 1981 Tabangao
leased the lots to Shell Gas Philippines, Inc. (SHELL),
which immediately started the construction thereon of a
Liquefied Petroleum Gas Terminal Project, an approved
zone export enterprise of the Export Processing Zone.
Tabangao is the real estate arm of SHELL. The parties
substantially complied with the terms of the contract.
Tabangao paid the first installment of P300,000.00 to
the Babasas while the latter delivered actual possession
of the lots to the former. In addition, Tabangao paid
P379,625.00 to the tenants of the lots as disturbance
compensation and as payment for existing crops as well
as P334,700.00 to the owners of the houses standing
thereon in addition to granting them residential lots
with the total area of 2,800 square meters. Tabangao
likewise paid the stipulated monthly interest for the 20month period amounting to P408,580.80. Meanwhile, the
Babasas filed Civil Case 519 and Petition 373 for the
transfer of titles of the lots in their name. However, 2
days prior to the expiration of the 20-month period,
specifically on 31 December 1982, the Babasas asked
Tabangao for an indefinite extension within which to
deliver clean titles over the lots. They asked that
Tabangao continue paying the monthly interest of
P20,648.43 starting January 1983 on the ground that
Civil Case 519 and Petition 373 had not yet been
resolved with finality in their favor. Tabangao refused
the request. In retaliation the Babasas executed a
notarized unilateral rescission dated 28 February 1983
to which Tabangao responded by reminding the Babasas
that they were the ones who did not comply with their
contractual obligation to deliver clean titles within the
stipulated 20-month period, hence, had no right to
rescind their contract. The Babasas insisted on the
unilateral rescission and demanded that SHELL vacate
the lots.
On 19 July 1983 Tabangao instituted an action for
specific performance with damages in the RTC Batangas
City to compel the spouses to comply with their
obligation to deliver clean titles over the properties.
The Babasas moved to dismiss the complaint on the
ground that their contract with Tabangao became null
and void with the expiration of the 20-month period
given them within which to deliver clean certificates of
title. SHELL entered the dispute as intervenor praying
that its lease over the premises be respected by the
Babasas. RTC ruled in favor of Tabangao and Shell. CA
affirmed.
ISSUE: W/N there was a contract of absolute sale
between the Babasa and Tabagao
HELD: YES. Although denominated “Conditional Sale of
Registered Lands,” the contract between the spouses
and Tabangao is one of absolute sale. Aside from the
terms and stipulations used therein indicating such kind
of sale, there is absolutely no proviso reserving title in
the Babasas until full payment of the purchase price,
nor any stipulation giving them the right to unilaterally
rescind the contract in case of non-payment. A deed of
sale is absolute in nature although denominated a
conditional sale” absent such stipulations. In such cases,
ownership of the thing sold passes to the vendee upon
the constructive or actual delivery thereof. In the
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
instant case, ownership over Lots 17827-A, 17827-B and
17827-C passed to Tabangao both by constructive and
actual delivery. Constructive delivery was accomplished
upon the execution of the contract of 11 April 1981
without any reservation of title on the part of the
Babasas while actual delivery was made when Tabangao
took unconditional possession of the lots and leased
them to its associate company SHELL which constructed
its multi-million peso LPG Project thereon.
In Romero v. Court of Appeals and Lim v. Court of
Appeals, the Court distinguished between a condition
imposed on the perfection of a contract and a condition
imposed merely on the performance of an obligation.
While failure to comply with the first condition results in
the failure of a contract, failure to comply with the
second merely gives the other party the option to either
refuse to proceed with the sale or to waive the
condition. In the present case, the spouses’ contract
with Tabangao did not lose its efficacy when the 20month period stipulated therein expired without the
spouses being able to deliver clean certificates of title
such that Tabangao may no longer demand performance
of their obligation.
5.
VALDEZ v CA
FACTS: Carlos Valdez Sr. and Josefina Valdez were
owners of a parcel of land. When Carlos Sr. died,
Josefina subdivided the property into eight lots. On May
1, 1979, she executed a special power attorney,
authorizing her son Carlos Jr, who was a practicing
lawyer, to sell a portion thereof (lots 3-C and 3-D) to
Jose Lagon for P80,000. Part of consideration was also
for Lagon to transfer the Rural Bank of Isulan to the
subject property, and to construct a commercial
building beside the bank. Without knowledge of
Josefina, Carlos Jr. entered into a different agreement,
selling the property for P40/square meter, and it was
indicated in the deed that the P80,000 had already been
paid in cash. A downpayment of P20,000 was paid by the
wife of Lagon, to which Josefina issued a receipt. Carlos
Jr. prepared an affidavit, signed by Lagon, the transfer
of the bank and the construction of commercial building
as part of the condition, else the deed of absolute sale
shall be null and void without need of demand. Lagon
failed to comply with the considerations stated in the
deed, to which the Valdez refused to deliver the torrens
title. Lagon had Lot 3-C to be subdivided into three
separate lots, to which he paid the professional
services. Josefina used the subdivision survey, and sold
Lot 3-C-2 to PCIB, evidenced by a deed of absolute sale,
exectued a real mortgage over Lot 3-C-3 to DBP, and
executed a deed of absolute sale in favor of Carlos Jr.
over Lot 3-C-1. She also sold lot 3-D to Engr. Rodolfo
Delfin. Lagon filed a complaint against Josefina and
Carlos Jr for specific performance and damages. Trial
Court ruled in favor of Lagon. CA reversed, but reversed
itself, ruling in favor or Lagon.
ISSUE: Whether the agreement was a contract of sale or
contract to sell / Whether the contract was ratified
RULING: It is a contract of sale. The nature of the
38
contract must be inferred from the express terms and
agreement and from the contemporaneous and
subsequent acts of the parties thereto. When Josefina,
through her son acting a an attorney-in-fact, executed a
deed of absolute sale in favor of Lagon, she did not
reserve the ownership of the property, subject to the
completion of payment of the consideration. However,
Carlos Jr. exceeded his authority when he entered into a
different agreement with Lagon, making the contract
unenforceable, unless ratified. In this case, it was
ratified when Josefina accepted the downpayment of
P20,000 and issued a receipt as a consequence of
ratifying the contract. It must be noted, however, that
an affidavit was signed by Lagon as part of the
consideration, to transfer the Rural Bank of Isulan as
well as constructing a commercial bank beside the bank,
both failed to perform by Lagon, making the deed of
absolute sale null and void. It cannot be considered as
an afterthought contrived by Carlos Jr. since Lagon
admitted in court the authenticity of the affidavit, and
its binding effect against him. There was no need to
rescind the contract because it was clearly stipulated
that failure to comply with such obligation makes the
deed null and void, though petitioners are obliged to
refund the respondent's partial payment of the subject
property.
6.
DIGNOS v CA
FACTS: Dignos is the owner of a parcel of land in LapuLapu City, which they sold to Jabil for P28,000, payable
in 2 installments and with an assumption of
indebtedness with First Insular Bank of Cebu for
P12,000. However, Dignos also sold the same land in
favor of Cabigas, who were US citizens, for P35,000. A
Deed of Absolute Sale was executed in favor of the
Cabigas spouses.
Jabil filed a suit against Dignos with CFI of Cebu. RTC
ruled in favor of Jabil and declared the sale to Cabigas
null and void. On appeal, CA affirmed RTC decision with
modification.
ISSUE: W/N the contract between Dignos and Jabil is a
contract of sale (as opposed to a contract to sale)
HELD: YES. A deed of sale is absolute in nature although
denominated as a “Deed of Conditional Sale” where
nowhere in the contract in question is a proviso or
stipulation to the effect that title to the property sold is
reserved in the vendor until full payment of the
purchase price, nor is there a stipulation giving the
vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period. In
the present case, there is no stipulation reserving the
title of the property on the vendors nor does it give
them the right to unilaterally rescind the contract upon
non-payment of the balance thereof within a fixed
period.
While there was no constructive delivery of the land
sold in the present case, as subject Deed of Sale is a
private instrument, it is beyond question that there was
actual delivery thereof. As found by the trial court, the
Dignos spouses delivered the possession of the land in
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
question to Jabil as early as 27 March 1965 so that the
latter constructed thereon Sally’s Beach Resort also
known as Jabil’s Beach Resort in March, 1965; Mactan
White Beach Resort on 15 January 1966 and Bevirlyn’s
Beach Resort on 1 September 1965. Such facts were
admitted by the Dignos spouses.
7.
UNIVERSITY OF THE PHILIPPINES v DELOS ANGELES
FACTS:
• UP was given a land grant which shall be developed to
obtain additional income for its support.
• UP and ALUMCO entered into a logging agreement
where ALUMCO was granted the exclusive authority for
an extendible period of 5 years (by mutual agreement),
to cut and remove timber from the land grant
inconsideration of royalties and fees to be paid to UP.
• ALUMCO incurred an unpaid amount of P219,363. UP
demanded payment but it failed to pay. ALUMCO
received a letter that UP would rescind or terminate
their logging agreement. They executed an instrument
“Acknowledgement of Debt & Proposed Manner of
Payment” which the UP President approved. ALUMCO
agreed to give their creditor (UP) the right to consider
the logging agreement as rescinded without necessity of
any judicial suit and creditor will be entitled to P50,000
for liquidated damages.
• ALUMCO continued logging but still incurred unpaid
accounts. UP then informed them that as of that date,
they considered rescinded the agreement and of no
further legal effect. UP then filed for collection of the
unpaid accounts and the trial court gave them
preliminary injunction to prevent ALUMCO from
continuing their logging.
• Through a public bidding, the concession was awarded
to Sta. Clara Lumber Company and a new agreement
was entered into between them and UP.
• ALUMCO tried to enjoin the bidding but the contract
was already concluded and Sta. Clara started its
operation.
• Upon motion by ALUMCO, UP was declared in
contempt of court for violating the writ of injunction
against them.
• ALUMCO’s contentions are the following:
a. It blamed its former general manager for their
failure to pay their account.
b. Logs cut were rotten; thus, they were unable to
sell them.
c. UP’s unilateral rescission was invalid without a
court order.
ISSUE: W/N UP can validly rescind its agreement with
ALUMCO even without court order. –Yes. UP can
unilaterally rescind the agreement.
HELD:
• UP and ALUMCO expressly stipulated in their
“Acknowledgement of Debt” that upon default of
payment, creditor UP has the right and power to rescind
their Logging Agreement without the necessity of a
judicial suit.
• There is nothing in the law that prohibits the parties
from entering into agreements that violation of terms of
39
the contract would cause its cancellation even without
court intervention.
• Act of a party in treating a contract as cancelled on
account of any infraction by the other party must be
made known to the other and is always provisional,
being subject to scrutiny and review by the proper
court.
If the other party deems the rescission unjustified, he
free to resort to judicial action. The court shall, after
due hearing, decide if the rescission was proper, in
which case it will be affirmed and if not proper, the
responsible party will be liable for damages.
• A party who deems the contract violated may consider
it rescinded and act accordingly, even without court
action but it proceeds at its own risk. Only the final
judgment of the court will conclusively settle whether
the action taken was proper or not. But the law does not
prohibit the parties from exercising due diligence to
minimize their own damages.
• UP was able to show a prima facie case of breach of
contract and default in payment by ALUMCO. Excuses by
ALUMCO are not proper for them to suspend their
payments.
• Thus, the Supreme Court lifted the injunction.
8.
PALAY INC v CLAVE
FACTS: In 1965, Palay Inc., through its President
Onstott, executed in favor of Dumpit (respondent) a
Contract to Sell a parcel of land in Antipolo, RIzal. The
sale was for P23,300 with 9% interest p.a., payable with
a downpayment of P4,660 and monthly installments of
least, there was a written notice sent to the defaulter
informing him of the rescission. Par. 6 cannot be
considered a waiver of Dumpit's right to be notified
because it was a contract of adhesion. A waiver must be
certain and unequivocal and intelligently made; such
waiver follows only where the liberty of choice has been
fully accorded.
Moreover, the indispensability of notice of
cancellation to the buyer is protected under RA 6551. It
is a matter of public policy to protect the buyers of real
estate on installment payments against onerous and
oppressive conditions. Waiver of notice is one such
onerous and oppressive condition to buyers of real
estate on installment payments.
2. YES. As a consequence of the rescission of the
contract, right to the lot should be restored to Dumpit
or the same should be replaced by another acceptable
lot. However, considering that the lot had been resold
to a third person, Dumpit is entitled to refund of the
installments paid plus legal interest of 12%.
9.
LIM v CA
FACTS: In 1965, Orlinos (3 co-owners) mortgaged a
parcel of land in Diliman, QC to Progressive Commercial
Bank as security for a P100K loan. They failed to pay the
loan and the mortgage was foreclosed, where the bank
acquired the property as the highest bidder at the
auction sale. The bank transferred all its assets,
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
P246.42 until fully paid. Par. 6 of the contract provided
for automatic extrajudicial rescission upon default in
payment of any monthly installment after the lapse of
90 days from the expiration of the grace period of a
month, without need of notice and forfeiture of all
installments paid.
Dumpit was able to pay the dp and several
installments amounting to P13,722.50, with the last
payment made on Dec. 5, 1967 for installments up to
Sept. 1967.
In 1973, Dumpit requested Palay Inc to update his
overdue accounts and sought its permission to assign his
rights to Dizon. However, Palay informed him that his
Contract to Sell had long been rescinded pursuant to
Par. 6 and that the lot had already been resold.
Dumpit filed a complaint with the NHA for
reconveyance with an alternative prayer for refund.
NHA ruled in favor of Dumpit, stating that the rescission
is void for lack of either judicial or notarial demand.
Office of the President affirmed.
ISSUE:
1. W/N notice or demand may be dispensed with by
stipulation in a contract to sell
2. W/N Palay should be liable for the refund of the
installment payments made by Dumpit
HELD:
1. NO. Although a judicial action for rescission of a
contract is not necessary where the contract provides
for its revocation and cancellation for violation of any of
its terms and condition, jurisprudence has shown that at
including the said land, to Pacifico Banking Corp. (PBC).
In 1975, the Orlinos, who remained in possession of the
land, made a written offer to PBC to redeem the
property. In response, the bank agreed provided that
P160K should be paid in full upon signing of the Deed of
Absolute Sale and that as additional consideration,
Orlinos' share on a property in Caloocan City should be
conveyed to the bank.
After a year, PBC advised the Orlinos that if the
transaction will not be finalized in 30 days, it would be
offered to other buyers. However, negotiations ensued
between them until 2 years after, PBC sold the land to
spouses Lim for P300K.
The Orlinos filed a complaint against PBC and Lim for
the annulment of the deed of sale on the ground that
the subject land had bee earlier sold to them. RTC held
that PBC and Lim acted in bad faith knowing that there
was a cloud in the status of the property. CA affirmed.
ISSUE: Whether the transaction between PBC and the
Orlinos is a contract to sell or a contract of sale
HELD: CONTRACT TO SELL. There was no immediate
transfer of title to the Orlinos as what would have
happened if there had been a sale. The supposed sale
was never registered and there was no new TCT in favor
of the Orlinos. They also acknowledged that the title to
the property would remain with the bank until their
transaction shall be finalized. Moreover, the
consideration agreed upon was never paid to convert
the agreement into a contract of sale. As payment of
40
the consideration was a positive suspensive condition,
title to the property never passed to the private
respondents.
Thus,
the
property
was
legally
unencumbered and still belonged to PBC when it was
sold to Lim.
On RESCISSION: Although a contract to sell imposes
reciprocal obligations and cannot be terminated
unilaterally by either party, judicial rescission is
required under Art. 1911 of the CC. However, this rule is
not absolute. Jurisprudence has shown that a party may
take it upon itself to consider the contract rescinded
and act accordingly albeit subject to judicial
confirmation, which may or may not be given. It is true
that the rescinding party takes a risk that its action may
not be approved by the court. The Orlinos obligated
themselves to deliver to PBC P160K and their share on
the property in Caloocan City. However, the Orlinos did
not act on their obligations. PBC could not be required
to wait for them forever. Thus, PBC had the right to
consider the contract to sell between them terminated
for non-payment of the stipulated consideration.
10. AFP MUTUAL BENEFIT ASSN INC v CA
FACTS: This case involved Solid Homes Inc's MR of the
SC's decision reversing the CA's decision and ordering the
RD to cancel the notice of lis pendens on the titles
issued to AFPMBAI, declaring it as buyer in good faith
and for value.
Investco Inc and Solid Homes Inc entered into a
contract to sell. During this time, the titles to the
Quezon City and Marikina properties had not been
transferred in the name of Investco Inc as asignee of the
owners, Angela Perez Staley and Antonio Perez. Thus,
Investco Inc merely agreed to sell and Solid Homes to
buy the former's rights and interest in the properties.
However, Solid Homes Inc. reneged or defaulted on its
obligation. Thus, Investco Inc rescinded extra-judicially
such contract to sell. After such event, AFPMBAI and
Investco Inc entered into a contract of absolute sale,
wherein the former paid in full, causing the transfer of
titles in its name.
ISSUE: W/N Investco Inc properly rescinded its contract
to sell and buy with Solid Homes Inc
HELD: YES. Upon Solid Homes Inc's failure to comply
with its obligation under the contract, there was no
need to judicially rescind the contract. Failure by one of
the parties to abide by the conditions in a contract to
sell resulted in the rescission of the contract.
CONDITIONS AND WARRANTIES
1.
LA FORTEZA v MACHUCA
FACTS:
* The disputed property in this case consists of a house
and lot located at Marcelo Green Village, Paranaque,
which is registered in the name of the late Francisco
Laforteza, although it is conjugal in nature
* Lea Zulueta-Laforteza executed a Special Power of
Attorney in favor of Robert and Gonzalo Laforteza,
appointing both as her attorney-in-fact authorizing them
jointly to sell the subject property and sign any
document for the settlement of the estate of the late
Francisco Laforteza
* Michael Laforteza also executed a Special Power of
Attorney in favor of Robert and Gonzalo Laforteza
granting them the same authority. Both agency
instruments contained a provision that in any document
or paper to exercise authority granted, the signature of
both attorneys-in-fact must be affixed
* Dennis Laforteza executed an SPA in favor of Robert L.
for the purpose of selling the subject property. A year
later, he executed another SPA in favor of Robert and
Gonzalo L. naming both attorneys-in-fact for the
purpose of selling the subject property and signing any
document for the settlement of the estate of the late
Francisco LAforteza. Both agency instruments contained
same provisions as that mentioned above.
* In the exercise of the above authority, the heirs of the
late Franciso L. represented by Robert and Gonzalo L
entered into a Memorandum of Agreement (Contract to
Sell) with Machuca over the subject property for the
sum of 630,000 payable as follows:
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
-30,000 –earnest money, to be forfeited in favor of
Lafortezas if the sale is not effected due to the fault of
Machuca
-600,000 – upon issuance of the new certificate of
title in the name of late Francisco Laforteza and upon
execution of an extra judicial settlement of the
decedent’s estate with sale in favor of Machuca
* Paragraph 4 of the Memorandum contained a provision
that: upon issuance of the new title, the Machuca shall
be notified in writing and he shall have 30 days to
produce the balance of 600k which shall be paid to
Laforteza upon execution of the extrajudicial
settlement
* Machuca paid earnest money of 30k plus rentals for
subject property
*Upon failure of Machuca to comply with the payment of
the balance, Lafortezas informed the formed that they
were canceling the contract
* Machuca requested that he intends to tender payment
of the balance which was refused by the Lafortezas who
insisted for the rescission of the memorandum.
* Machuca filed an action for specific performance
* TC: ruled in favor of Machuca which the CA affirmed
ISSUES: W/N THE CONTRACT EXECUTED BY THE PARTIES
IS A CONTRACT OF SALE OR A CONTRACT TO SELL
RULING: CONTRACT OF SALE AND LEASE
The Memorandum of Agreement shows that the
transaction between the petitioners and respondent 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
41
minds upon the thing which is the object of the contract
and upon the price. From that moment the parties may
reciprocally demand performance subject to the
provisions of the law governing the form of contracts.
In this case, there was a perfected agreement
between the petitioners and respondent whereby
Lafortezas obligated themselves to transfer the
ownership of and deliver the house and lot and Machuca
to pay the price amounting to 630k.
All the elements of a contract of sale were thus
present. However, the balance of the 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,
Machuca was already placed in possession of the house
and lot as lessee thereof for 6 months at a monthly rate
of 3,500k. It was stipulated that should the issuance of
the new title and execution of the extrajudicial
settlement be completed prior to expiration of 6month
period, Machuca would be liable only for the rentals
pertaining to the period commencing from the date of
the execution of the agreement up to the executon of
the extrajudicial settlement.
It was also expressly stipulated that if after the
expiration of the 6 month 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 and use the
premises until the subject condition was complied with
by Lafortezas.
The 6-month period during which Machuca would be in
possession of the property as lessee, was clearly not a
period within which to exercise such option. An option is
a contract granting a privilege to buy or sell within an
agreed time and at a determined price.
In this case, the 6-month period merely delayed the
demandability of the contract of sale and did not
determine perfection for after the expiration of the 6
month period, there was a absolute obligation on the
part of Lafortezas and Machuca to comply with the
terms of the sale.
The fact that after the expiration of the 6-month
period, Machuca would retain possession of the house
and lot without need of paying rentals for the use
therefore, clearly indicated that the parties
contemplated that ownership over the property would
already be transferred by that time.
What further indicated that this was a contract of sale
was the payment of earnest money. Earnest money is
something of value to show that buyer was really in
earnest, and given to the seller to bind the bargain.
Whenever earnest money is given in a contract of sale,
it is considered as part of the purchase price and proof
of the perfection of the contract.
2.
HEIRS OF PEDRO ESCANLAR v CA
FACTS: The Heirs of Cari-an executed a Deed of Sale of
Rights, Interests, and Participation over a parcel of
undivided land in favor of the Heirs of Escanlar. It was
stipulated that “the contract shall become effective
only upon approval of the CFI of Negros Occidental.”
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
The Heirs of Escanlar failed to pay the balance of the
purchase price, but the Heirs of Cari-an never
demanded payment and continued to accept belated
payments. They later on sold their interests over the
same land to the Chuas and assailed the validity of the
Deed of Sale they executed with the Heirs of Escanlar.
The lower courts annulled the contract for not having
the approval of the court as stipulated.
ISSUE: W/N the Deed of Sale to the Heirs of Escanlar is
valid
HELD: YES. There is a distinction between the validity
and effectivity. Only the effectivity was made subject to
the condition. So long as all the requisites (consent,
subject matter, and price) are present, as in this case,
the contract is already perfected. Nonetheless, the
intent of the parties clearly manifests their intention to
give efficacy to the contract. In fact, the vendors
continued to accept payments. That being the case, the
sale in favor of the Heirs of Escanlar must be preferred
as it is a valid and subsisting one.
3.
POWER COMMERCIAL AND INDUSTRIAL CORP. v CA
FACTS: Power Commercial Corp entered into a contract
of sale with the Quiambao spouses. It agreed to assume
the mortgages thereon. A Deed of Absolute Sale with
Assumption of Mortgage was executed. Power
Commercial Corp failed to settle the mortgage debt
contracted by the spouses, thus it could not undertake
the proper action to evict the lessees on the lot. Power
Commercial Corp thereafter sought to rescind the
contract of sale alleging that it failed to take actual and
physical possession of the lot.
ISSUE: W/N there was a breach of warranty on the part
of the spouses that it would evict the lessees
HELD: NO. First, such condition that the Quiambao
spouses would have to evict the lessees was not
stipulated in the contract. Thus, it cannot be considered
a condition imposed upon its perfection. In fact, Power
Commercial Corp. was well aware of the presence of the
tenants therein. It was also given control over the said
lot and it endeavored to terminate the occupation of its
actual tenants. Also, since it was Power Commercial
that knowingly undertook the risk of evicting the
lessees, it cannot now claim that there was a breach of
warranty on the part of the vendor.
4.
GUINHAWA v PEOPLE
FACTS:
* Jaime Guinhawa was engaged in the business of selling
brand new motor vehicles, including Mitsubishi vans,
under the business name of Guinrox Motor Sales. His
office and display room for cars were located along
Panganiban Avenue, Naga City. He employed Gil Azotea
as his sales manager.
42
* Guinhawa purchased a brand new Mitsubishi L-300
Versa Van from the Union Motors Corporation (UMC) in
Paco, Manila.
* The van bore Plate no. DLK 406. Guinhawa’s driver,
Olayan, drove the van from Manila to Naga City.
* However, while the van was traveling along the
highway in Daet, Camarines Norte, Olayan suffered a
heart attack. The van went out of control, traversed the
highway onto the opposite lane, and was ditched into
the canal parallel to the highway. The van was
damaged, and the left front tire had to be replaced.
* The van was repaired and later offered for sale in
Guinhawa’s showroom.
* Spouses Ralph and Josephine Silo wanted to buy a new
van for their garment business; they purchased items in
Manila and sold them in Naga City.
* Unaware that the van had been damaged and repaired
on account of the accident in Daet, the couple decided
to purchase the van for 591k. Azotea, sales manager,
suggested that the couple make a downpayment of
118,200, and pay the balance of the purchase price by
installments via a loan from the United Coconut Planters
Bank (UCPB), with the van as collateral.
* Azotea offered to make the necessary arrangements
with UCPB for the consummation of the loan transaction
wherein the couple agreed.
* The spouses executed a Promissory Note for the
amount of 692,676 as payment of the balance on the
purchase price, and as evidence of the chattel mortgage
over the van in favor of UCPB.
* The couple arrived in Guinhawa’s office to take
delivery of the van. The latter executed the deed of
sale, and the couple paid the 161,470 downpayment, for
they were issued a receipt. They were furnished a
Service Manual which contained the warranty terms and
conditions.
* Azotea instructed the couple on how to start the van
and to operate its radio. Ralph Silo no longer conducted
a test drive; he and his wife assumed that there were no
defects in the van as it was brand new.
* Josephine Silo, accompanied by Glenda Pingol, went to
Manila on board the van, with Glenda’s husband as the
driver. On their return trip to Naga from Manila, the
driver heard a squeaking sound, which seemed to be
coming from underneath the van. The squeaking sound
persisted and upon examination at the Shell gasoline
station, it was found out that some parts underneath
the van had been welded.
* Guinhawa insisted that the defects were mere factory
defects. As the defects persisted, the spouses requested
that Guinhawa replace the van with 2 Charade-Daihatsu
vehicles within a week or two, with the additional costs
to be taken from their downpayment.
* The spouses brought the car to Rx Auto Clinic for
examination wherein the mechanic discovered that it
was the left front stabilizer that was producing the
annoying sound, and that it had been repaired.
* Josephine Silo filed for rescission of the sale and
refund of their money.
* They instituted also a criminal complaint for other
deceits made by Guinhawa by making fraudulent
representations about the car being brand new and that
it never encountered an accident.
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
ISSUE:
W/N
THERE
WERE
FRAUDULENT
REPRESENTATIONS MADE BY THE SELLER, GUINHAWA BY
VIRTUE OF THE CONTRACT OF SALE EXECUTED BETWEEN
HIM AND THE COUPLE
RULING: YES
Article 1389 of NCC provides that failure to disclose
facts when there is a duty to reveal them constitutes
fraud. In a contract of sale, a buyer and seller do not
deal from equal bargaining positions when the latter has
knowledge, a material fact which, if communicated to
the buyer, would render the grouns unacceptable or, at
least, substantially less desirable.
If, in a contract of sale, the vendor knowingly allowed
the vendee to be deceived as to the thing sold in a
material matter by failing to disclose an intrinsic
circumstance that it vital to the contract, knowing that
the vendee is acting upon the presumption that no such
fact exists, deceit is accomplished by the suppression of
the truth.
In this case, Guinhawa and Azotea knew that the van
had figured in an accident, was damaged and had to be
repaired. Nevertheless, the van was placed in the
showroom, thus making it appear to the public that it
was a brand new unit. Guinhawa was mandated to
reveal the foregoing facts to Silos but they even
obdurately declared when they testified that the court
did not figure in an accident, nor had it been repaired.
Even when Guinhawa was apprised that Silos had
discovered the van’s defects, the former agreed to
replace the van, but changed his mind and insisted that
it must be first sold.
Guinhawa is not relieved of his criminal liability for
deceitful concealment of material facts, even if Silos
made a visual inspection of the van’s interior and
exterior before she agreed to buy and failed to inspects
its under chassis.
5.
ANG v CA
FACTS:
* Under a car-swapping scheme, Bruno Soledad sold his
Mitsubishi GSR sedan 1982 model to Jaime Ang by a
Deed of Absolute Sale
* For his part, Ang conveyed to Soledad his Mitsubishi
Lancer model 1988 also by a Deed of Absolute Sale
* As Ang’s car was of a later model, Soledad paid him an
additional 55,000
* Ang, a buyer and seller of used vehicles, later offered
the Mitsubishi GSR for sale through Far Eastern Motors, a
second hand auto display center. The car was even sold
to a certain Paul Bugash for 225k.
* Before the Deed could be registered in Bugash’s name,
however, the vehicle was seized by virtue of a writ of
replevin on account of the alleged failure of Ronaldo
Panes, the owner of the car prior to Soledad, to pay the
mortgage debt constituted thereon.
* To secure the release of the vehicle, Ang paid BA
Finance the amount of 62,038.47. Soledad refused to
reimburse the said amount, despite repeated demands,
drawing Ang to charge him for estafa with abuse of
confidence.
43
ISSUE: W/N THE COMPLAINT HAD PRESCRIBED HINGES ON
A DETERMINATION OF WHAT KIND OF WARRANTY IS
PROVIDED IN THE DEED OF ABSOLUTE SALE
RULING: YES
A warranty is a statement or representation made by
the seller of goods, contemporaneously and as part of
the contract of sale, having reference to the character,
quality or title of the goods, and by which he promises
or undertakes to insure that certain facts are or shall be
as he then represents them.
Warranties by the seller may be express or implied.
In declaring that Soledad owned and had clean title to
the vehicle at the time of the deed of absolute sale was
forged, he gave an implied warranty of title. In pledging
that he “will defend the same from all claims or any
claim whatsoever and will save the vendee from any suit
by the government of the Republic of the Phils, Soledad
gave a warranty against eviction.
Given Ang’s business of buying and selling used
vehicles, he could not have merely relied on Soledad’s
affirmation that the car was free from liens and
encumbrances. He was expected to have thoroughly
verified the car’s registration and related documents.
Since what Soledad, as seller, gave was an implied
warranty, the prescriptive period to file a breach
thereof is 6 months after the delivery of the vehicle,
following Art. 1571. But even if the date of filing of the
damages. Various expert witnesses were presented
during the trial.
ISSUE: W/N Nutrimix should be held liable for the death
of the livestock
HELD: NO. In alleging that there was a violation of
warranty against hidden defects, the spouses assumed
the burden of proof. However, this they failed to
overcome. Under the law, the defect must exist at the
time the sale was made and at the time the product left
the hands of the seller, which the spouses failed to
prove. The feeds were belatedly tested—3 months after
the death of the broilers and hogs. This means that at
action is reckoned from the date, Ang instituted his first
complaint for damages and not when filed the complaint
subject of this case, the action just the same had
prescribed, it having been filed 16 months after the
date of delivery of the vehicle.
On the basis of breach of warranty against eviction,
essential requisites thereof were not met. For one,
there is no judgment, which deprived Ang of the
vehicle. For another, there was no suit for eviction
which Soledad as seller was impleaded as co-defendant
at the instance of the vendee.
Even under the principle of solutio indebiti, Ang
cannot recover from Soledad the amount he paid BA
Finance. For, Ang settled the mortgage debt on his own
volition under the supposition that he would resell the
car. It turned out that he did pay BA Finance in order to
avoid returning the payment made by the ultimate
buyer Bugash.
6.
NUTRIMIX FEEDS CORP v CA
FACTS: Evangelista spouses purchased feeds from
Nutrimix. They refused to pay their unsettled debt
claiming that thousands of their livestock were poisoned
by the Nutrimix feeds. Nutrimix sued them for collection
of money. The spouses countered with a suit for
that time, they may have already been contaminated.
They failed to prove that the feeds delivered to be
tested were the same feeds that allegedly poisoned the
animals. It is also common practice for them to mix
different kinds of feeds. The mere death of the animals
does not raise a prima facie case of breach of warranty.
In this case, the evidence presented by the spouses are
only circumstantial.
The remedies of breach of warranty against hidden
defects are either withdrawal from the contract or to
demand a proportionate reduction of the price plus
damages in either case. In this case, though the spouses
failed to make out their case, hence they should be
liable for their debt.
EXTINGUISHMENT OF SALE
1.
ROBERTS v PAPIO
FACTS:
* The Spouses Papio were the owners of a 274 sqm
residential lot located in Makati. In order to secure a
59k loan from the Amparo Investments Corp, they
executed a real estate mortgage on the property. Upon
Papio’s failure to pay the loan, the corporation filed a
petition for the extrajudicial foreclosure of the
mortgage.
* Since the couple needed money to redeem the
property and to prevent the foreclosure of the real
estate mortgage, they executed a Deed of Absolute Sale
over the property in favor of Martin Papio’s cousin,
Amelia Roberts.
* Of the 95k purchase price, 59k was paid to the Amparo
Investments Corp, while the 26k difference was retained
by the spouses. As soon as the spouses had settled their
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
obligation, the corporation returned the owner’s
duplicate TCT which was then delivered to Amelia
Roberts.
* The parties (A. Roberts as lessor and Martin Papio as
lessee) executed a 2-year contract of lease. The
contract was subject to renewal or extension for a like
period at the option of the lessor, the lessee waiving
thereby the benefits of an implied new lease. The lessee
was obliged to pay monthly rentals of 800 to be
deposited in the lessor’s account.
* A new TCT was issued in the name of Amelia Roberts
as owner. Martin Papio paid the rentals and thereafter
for another year. He then failed to pay rentals, but he
and his family nevertheless remained in possession of
the property for almost 13 years.
* A. Roberts reminded Papio that he failed to pay
monthly rentals amounting to a total liability of 410k.
She demanded that Papio vacate the property within 15
44
days from receipt of the letter in case he failed to settle
the amount.
* A. Roberts filed a complaint for unlawful detainer and
damages against Martin Papio
ISSUE: W/N THE DEED OF ABSOLUTE SALE AND
CONTRACT OF LEASE EXECUTED BY THE PARTIES IS AN
EQUITABLE MORTGAGE OVER THE PROPERTY
RULING: NO
An equitable mortgage is one that, although lacking in
some formality, form or words, or other requisites
demanded by a statute, nevertheless reveals the
intention of the parties to charge a real property as
security for a debt and contain nothing impossible or
contrary to law. A contract between the parties is an
equitable mortgage if the following requisites are
present: a. the parties entered into a contract
denominated as a contract of sale and b. the intention
was to secure an existing debt by way of mortgage. The
decisive factor is the intention of the parties.
In an equitable mortgage, the mortgagor retains
ownership over the property but subject to foreclosure
and sale at public auction upon failure of the mortgagor
to pay his obligation.
In contrast, in a pacto de retro sale, ownership of the
property sold is immediately transferred to the vendee a
retro subject only to the right of the vendor a retro to
repurchase the property upon compliance with legal
requirements for the repurchase. The failure of the
vendor a retro to exercise the right to repurchase within
the agreed time vests upon the vendee a retro, by
operation of law, absolute title over the property.
One repurchases only what one has previously sold.
The right to repurchase presupposes a valid contract of
sale between same parties. By insisting that he had
repurchased the property, Papio thereby admitted that
the deed of absolute sale executed by him and Roberts
was in fact and in law a deed of absolute sale and not an
equitable mortgage; he had acquired ownership over the
property based on said deed.
Respondent, is thus estopped from asserting that the
contract under the deed of absolute sale is an equitable
mortgage unless there is an allegation and evidence of
palpable mistake on the part of respondent, or a fraud
on the part of Roberts.
2.
MISTERIO v CEBU STATE COLLEGE OF SCIENCE AND
TECHNOLOGY
FACTS: Asuncion sold to Sudlon Agricultural High School
(SAHS) a parcel of land, reserving the right to
repurchase the same in case (1) the school ceases to
exist, or (2) the school transfers location. She had her
right annotated. She died. By virtue of BP 412, SAHS was
merged with the Cebu State College, effective June
1983. In 1990, the heirs of Asuncion sought to exercise
their right to redeem, claiming that school has ceased to
exist.
ISSUE: W/N the heirs of Asuncion may still exercise their
right to redeem the property
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
HELD: NO. Their right has already prescribed.
Considering that no period for redemption was agreed
upon, the law imposes a 4-year limitation. This means
that from the time the school was merged to Cebu State
College, they had 4 years, or until June 1987 to redeem
the property. However, they failed to do so within the
period. Failure to redeem automatically consolidates
ownership in favor of the vendee. The fact that the right
to redeem was annotated does not make it
imprescriptible, it only serves to notify third persons.
3.
SOLID HOMES INC v CA
FACTS:
* Solid Homes executed in favor of State Financing
Center a Real Estate Mortgage on its properties
embraced in the TCT, in order to secure the payment of
a loan of 10M which the former obtained from the
latter.
* A year later, Solid Homes applied for and was
granted an additional loan of 1, 511,270.03 by State
Financing, and to secure its payment, Solid executed an
amendment to real estate mortgage whereby the credits
secured by the first mortgage on the abovementioned
properties were increased from 10M to 11,511,270.03.
* Solid homes obtained additional credits and
financing facilities from State Financing in the sum of
1,499,811.97 and to secure its payment, the former
executed the amendment to real estate mortgage
whereby the mortgage executed on its properties was
again amended so that the loans or credits secured
thereby were further increased from 11,511, 270.03 to
13,011,082.00
* When the obligations became due and payable, State
Financing made repeated demands upon Solid homes for
the payment thereof, but the latter failed to do so.
* State Financing filed a petition for extrajudicial
foreclosure of the mortgages who in pursuance of the
petition, issued a notice of sheriff’s sale whereby the
mortgaged properties of Solid homes and the
improvements existing thereon, including the V.V.
Soliven Towers II Building were set for public auction
sale in order to satisfy the full amount of Solid homes’
mortgage indebtedness, the interest thereon, and the
fees and expenses incidental to the foreclosure
proceedings.
* Before the scheduled public auction sale, the
mortgagor Solid homes made representations and
induced State Financing to forego with the foreclosure
of the real estate mortgage. By reason thereof, State
Financing agreed to suspend the foreclosure of
mortgaged properties, subject to the terms and
conditions they agreed upon, and in pursuance of the
said agreement, they executed a document entitled
MEMORANDUM OF AGREEMENT/DACION EN PAGO.
ISSUE:
1.
2.
W/N THE MEMORANDUM OF AGREEMENT/
DACION EN PAGO EXECUTED BY THE PARTIES IS
VALID AND BINDING
W/N SOLID HOMES CAN CLAIM DAMAGES
ARISING FROM THE NON-ANNOTATION OF ITS
45
RIGHT OF REPURCHASE IN THE CONSOLIDATED
TITLES
RULING: 1. YES | 2. NO
The Memorandum of Agreement/Dacion En Pago was
valid and binding, and that the registration of said
instrument in the Register of Deeds was in accordance
with law and the agreement of the parties.
Solid homes utterly failed to prove that respondent
corporation had maliciously and in bad faith caused the
non-annotation of petitioner’s right of repurchase so as
to prevent the latter from exercising such right.
On the contrary, it is admitted by both parties that
State Financing informed Solid homes of the registration
with the register of deeds of their memorandum of
agreement/dacion en pago and the issuance of the new
certificates of title in the name of State Financing.
Clearly, petitioner was not prejudiced by the nonannotation of such right in the certificates of title issued
in the name of State Financing. Also, it was not the
function of the corporation to cause said annotation. It
was equally the responsibility of petitioner to protect its
own rights by making sure that its right of repurchase
was indeed annotated in the consolidated titles of State
Financing.
The only legal transgression of State was its failure to
observe the proper procedure in effecting the
consolidation of the titles in its name. But this does not
automatically entitle the petitioner to damages absent
convincing proof of malice and bad faith on the part of
private respondent-corporation
4.
A. FRANCISCO REALTY v CA
FACTS: A. Francisco Realty and Development Corp.
granted a loan worth P7.5M in favor of spouses
Javillonar, to which the latter executed three
documents: a) a promissory note containing the interest
charge of 4% monthly, b) a deed of mortgage over the
subject property, c) an undated deed of sale of the
mortgaged property. Since the spouses allegedly failed
to comply with the payments, petitioner registered the
sale in its favor, getting a TCT issued in its name
without knowledge by the spouses. Subsequently, the
spouses obtained another loan worth P2.5M, signing
another promissory note in favor of petitioner.
Petitioner demanded the possession of the property, as
well as the interest payments, to which the spouses
refused to comply. Petitioner filed an action for
possession in the RTC. RTC ruled in favor of petitioner,
but CA reversed.
ownership, b) the alleged new liability of the spouses c)
the alleged continuing liability of the spouses. It is clear
that the petitioners had other issues which involve more
than just a simple claim of of immediate possession, and
thus the RTC had jurisdiction over the case.
However, the transfer was in the nature of pactum
commissorium, since the sale was really considered as
an equitable mortgage. It was really intended by the
spouses to make such undated deed of sale a security.
Also, when petitioners transferred the title in its name,
the spouses was never informed of such action. Such
transfer was therefore void, making the TCT held by
petitioners null and void as well.
5.
ABILLA v GOBONSENG
FACTS: Spouses Abilla instituted against Spouses
Gobonseng an action for specific performance, recovery
of sum of money and damages, seeking the
reimbursement of the expenses they incurred in the
preparation and registration of 2 public instruments-Deed of Sale and Option to Buy. As a defense, Spouses
Gobonseng contended that the transaction covered by
these instruments was a mortgage. RTC ruled in favor of
Spouses Abilla, stating that it was a sale giving Spouses
Gobonseng until Aug. 31, 1983 within which to buy back
the 17 lots subject of the sale. CA affirmed and held
that the transaction was a pacto de retro sale, and not
an equitable mortgage.
In 1999, Spouses Gobonseng filed with the RTC an
urgent motion to repuchase the lots with tender of
payment, which was denied. However, after the judge
inhibited himself from the case, it was reraffled to a
different branch, which granted the motion to
repurchase.
ISSUE: W/N Spouses Gobonseng may exercise the right
to repurchase, as stipulated in Art. 1606 (3)
HELD: NO. Sellers in a sale judicially-declared as pacto
de retro may NOT exercise the right to repurchase
within the 30-day period provided under Art. 1606,
although they have taken the position that the same was
an equitable mortgage, if it shown that there was no
honest belief thereof since: (a) none of the
circumstances under Art. 1602 were shown to exist to
warrant a conclusion that the transaction was an
equitable mortgage; and (b) that if they truly believed
the sale to be an equitable mortgage, as a sign of good
faith, they should have consigned with the trial court
the amount representing their alleged loan, on or before
the expiration of the right to repurchase.
ISSUE:
1.
2.
Whether the RTC had jurisdiction over the case
(property issue)
Whether the sale was considered as an
equitable mortgage
RULING: Even though the case was filed less than one
year after the demand to vacate, making it an action of
unlawful detainer, there were other issues to be
considered such as: a) the validity of the transfer of
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
6.
FRANCISCO v BOISER
FACTS:
• Petitioner Adalia Francisco and three of her sisters,
Ester, Elizabeth, and Adeluisa, were co-owners of four
parcels of registered land in Caloocan City
• On August 1979, they sold 1/5 of their undivided share
to their mother, Adela Blas, for PhP10,000, making her a
co-owner of the real property to that extent
46
• 7 years later, in 1986, however, Adela sold her 1/5
share for PhP10,000 to respondent Zenaida Boiser,
another sister of petitioner
• In 1992 or 6 years after the sale, Adalia received
summons with a copy of a complaint by Zenaida
demanding her share in the rentals being collected from
the tenants of the Ten Commandments Building, which
stands on the co-owned property
• Adalia then informs Zenaida that she was exercising
her right of redemption as co-owner of the subject
property, depositing for that purpose PhP10,000 with
the Clerk of Court
• The case was however dismissed after Zenaida was
declared non-suited, and Adalia’s counterclaim was thus
dismissed as well
• 3 years after, Adalia institutes a complaint demanding
the redemption of the property, contending that the 30day period for redemption under Art. 1623 had not
begun to run against her or any of the other co-owners,
since the vendor Adela did not inform them about the
sale, which fact they only came to know of when Adalia
received the summons in 1992
• Zenaida on the other hand contends that Adalia
already knew of the sale even before she received the
summons since Zenaida had informed Adalia by letter of
the sale with a demand for her share of the rentals
three months before filing suit, attaching to it a copy of
the deed of sale
• Adalia’s receipt of the said letter is proven by the fact
that within a week, she advised the tenants of the
building to disregard Zenaida’s letter-demand
• The trial court dismissed the complaint for legal
redemption, holding that Art. 1623 does not prescribe
any particular form of notifying co-owners on appeal,
the CA affirmed
ISSUE: Whether the letter-demand by Zenaida to Adalia,
to which the deed of sale was attached, can be
considered as sufficient compliance with the notice
requirement of Art. 1623 for the purpose of legal
redemption
HELD:
• The petitioner points out that the case does not
concern the particular form in which such notice must
be given, but rather the sufficiency of notice given by a
vendee in lieu of the required notice to be given by the
vendor or prospective vendor
• The text of Art. 1623 clearly and expressly prescribes
that the 30 days for making the redemption shall be
counted from notice in writing by the vendor it makes
sense to require that notice be given by the vendor and
nobody else, since the vendor of an undivided interest is
in the best position to know who are his co-owners, who
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
under the law must be notified of the sale
• Notice by the co-owner likewise removes all doubt as
to the fact of the sale, its perfection, and its validity by
not immediately notifying, or not notifying at all, a coowner, the vendor can delay or even effectively prevent
the meaningful exercise of the right of redemption
• However, it would be unjust in the case at bar to
require the vendor Adela to serve notice of the sale,
when the fact has already been established in both
lower courts Adalia has effectively exercised her right
when she deposited the PhP10,000 redemption price 7
days after receiving the summons
Fallo
• Petition granted, decision of the CA reversed
• The decision in Etcuban v. CA is abandoned, and the
one in Butte v. Manuel Uy and Sons, Inc., as affirmed in
Salatandol v. Retes, upheld
NOTE
• The Court failed to negate or possibly appreciate the
fact of Adalia’s knowledge of the sale prior to the
summons, as proven her letter-advise to the tenants of
the building
• The period given by the Court to Adalia was 30 days
after the receipt of the summons on 5 August 1992,
which is 4 September 1992
7.
SORIANO v BAUTISTA
FACTS: Bautista spouses mortgaged their lot to Soriano,
who took possession thereof and cultivated the same.
Pursuant to Par. 5 of their agreement, Soriano decided
to buy the lot. Bautista refused to sell claiming that
being mortgagors, they cannot be deprived of their right
to redeem the property.
ISSUE: W/N Soriano may buy the mortgaged property of
Bautista
HELD: YES. True that the transaction is a mortgage,
which carried with it a customary right of redemption.
However, the mortgagor’s right to redeem was rendered
defeasible at the election of the mortgagees by virtue of
Par. 5, allowing them the option to purchase the said
lot. There is nothing immoral or illegal about such
stipulation. It was supported by the same consideration
as the mortgage contract and constituted an irrevocable
continuing offer within the time stipulated. That being
the case, Bautista spouses must be compelled to honor
the sale.
47
ASSIGNMENT
1.
NYCO SALES CORP v BA FINANCE
FACTS: NYCO Sales Corp extended a credit
accommodation to the Fernandez Brothers. The
brothers, acting in behalf of Sanshell Corp, discounted a
BPI check for P60,000 with NYCO, which then indorsed
the said check to BA Finance accompanied by a Deed of
Assignment. BA Finance, in turn, released the funds,
which were used by the brothers. The BPI check was
dishonored. The brothers issued a substitute check,
which was also dishonored. Now BA Finance goes after
NYCO, which disclaims liability.
ISSUE: W/N NYCO, as the assignor, is liable for breach of
warranties
HELD: YES. The assignor (NYCO) warrants both the
existence and legality of the credit, as well as the
solvency of the debtor. If there is a breach of any of the
2 warranties, the assignor is liable to the assignee. That
being the case, NYCO cannot evade liability. So long as
the credit remains unpaid, the assignor remains liable
notwithstanding failure to give notice of dishonor that is
because the liability of NYCO stems form the
assignment, not on the checks alone.
2.
LICAROS v GATMAITAN
FACTS: Abelardo Licaros invested his money worth
$150,000 with Anglo-Asean Bank, a money market
placement by way of deposit, based in the Republic of
Venatu. Unexpectedly, he had a hard time getting back
his investments as well as the interest earned. He then
sought the counsel of Antonio Gatmaitan, a reputable
banker and investor. They entered into an agreement,
where a non-negotiable promissory note was to be
executed in favor of Licaros worth $150,000, and that
Gatmaitan would take over the value of the investment
made by Licaros with the Anglo-Asean Bank at the
former's expense. When Gatmaitan contacted the
foreign bank, it said they will look into it, but it didn't
prospered. Because of the inability to collect,
Gatmaitan did not bother to pay Licaros the value of the
promissory note. Licaros, however, believing that he had
a right to collect from Gatmaitan regardless of the
outcome, demanded payment, but was ignore. Licaros
filed a complaint against Gatmaitan for the collection of
the note. The trial court ruled in favor of Licaros, but
CA reversed.
ISSUE: Whether the memorandum of agreement
between petitioner and respondent is one of assignment
of credit or one of conventional subrogation
RULING: It is a conventional subrogation. An assignment
of credit has been defined as the process of transferring
the right of the assignor to the assignee who would then
have a right to proceed against the debtor. Consent of
the debtor is not required is not necessary to product its
legal effects, since notice of the assignment would be
enough. On the other hand, subrogation of credit has
been defined as the transfer of all the rights of the
creditor to a third person, who substitutes him in all his
rights. It requires that all the related parties thereto,
the original creditor, the new creditor and the debtor,
enter into a new agreement, requiring the consent of
the debtor of such transfer of rights. In the case at
hand, it was clearly stipulated by the parties in the
memorandum of agreement that the express conformity
of the third party (debtor) is needed. The memorandum
contains a space for the signature of the Anglo-Asean
Bank written therein "with our conforme". Without such
signature, there was no transfer of rights. The usage of
the word "Assignment" was used as a general term, since
Gatmaitan was not a lawyer, and therefore was not
well-versed with the language of the law.
BULK SALES LAW
1.
CHIN v UY: CA case contained in O.G.
DOCTRINE: A sale made of all the effects in the vendor's
store without the buyer being furnished a sworn list of
creditors as required by Sec 3, is null and void
irrespective of the good or bad faith of the buyer, and
judgment creditors may treat such sale as never having
been made and proceed to have execution levied on the
properties thus sold.
2.
DBP in a "deed of cession of property in payment of
obligation" or dacion en pago. In turn, DBP sold these
assets to Union Glass that same year.
In 1983, Yu instituted an action against Pioneer Glass,
DBP, and Union Glass, asserting that the transfer of the
assets to DBP was void by reason of fraud.
•
DBP v HON JUDGE OF RTC OF MANILA
FACTS: In 1978, Pioneer Glass Manufacturing
Corp.purchased from Yu (under Ancar Equipment Parts
and Tonicar) equipment parts worth P7,000. However,
Pioneer failed or refused to pay upon demand. Without
informing Yu, Pioneer Glass transferred all its assets to
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
•
•
Pioneer Glass: denied liability to Yu on the
ground that by virtue of the dacion en pago in
favor of DBP, the bank assumed liability to its
creditors including Yu under a payment
scheme,
which
is
under
pending
implementation
DBP: denied liability to Yu on the ground that
there being no proof that the unpaid
merchandise purchased by Pioneer Glass were
among those transferred to it
Union Glass: denied liability to Yu on the
48
ground that there was no privity of contract
between them, or assuming applicability of the
Bulk Sales Law, no liability attached to Union
Glass.
MTC denied the motions to dismiss filed by Union
Glass and DBP and ruled in favor of Yu. RTC affirmed
MTC's decision.
ISSUE: W/N the Bulk Sales Law covers the conveyance in
question (its violation would make DBP, Union Glass, and
Pioneer Glass liable to Yu)
HELD: NO. Under the Bulk Sales Law, the terms "goods"
and "merchandise," having acquired a fixed meaning,
refer to things and articles, which are kept for sale by a
merchant. Likewise, the term "fixtures" has been
interpreted to mean the chattels, which the merchants
usually possess and annex to the premises occupied by
them in order to store, handle and display their goods
and wares. The technicality of these terms conveys the
intention of the law to apply it to merchants who are in
the business of selling goods and wares and similar
merchandise.
In this case, Pioneer Glass manufactured glass only on
specific orders and it did not sell directly to consumers
but manufactured its products only for particular
clients. Thus, Pioneer Glass was NOT a merchandiser.
Moreover, the dacion en pago between Pioneer and DBP
transferred and conveyed the bulk of its corporate
assets to extinguish its outstanding debts to DBP. Thus,
the subject matter of the deed of cession was the
assets, not stock-in-trade. Such conveyance was clearly
outside the ambit of the Bulk Sales Law.
SC ordered Pioneer Glass, not DBP and Union Glass, to
pay Yu the price of the equipment purchased plus
interest.
RETAIL TRADE LIBERALIZATION ACT OF 2000
AND RELATED PROVISIONS OF THE ANTI-DUMMY LAW
1.
KING v HERNAEZ
FACTS: Macario King, a naturalized Filipino, owned the
grocery store Import Meat & Produce. He employed 3
Chinamen, one as purchaser and 2 others as salesmen.
He sought the permission of the President to retain the
services of the 3, but was denied based on the Retail
Trade Law and the Anti-Dummy Law, which prohibit
aliens from interfering in the management and
operation of retail establishments. King contends that
the 3 aliens are employed in non-control positions and
do not participate in the management, thus, they are
not covered by the Anti-Dummy Law.
ISSUE: W/N the employment of the 3 Chinamen is
covered under the Anti-Dummy Law
HELD: YES. The prohibition covers the entire range of
employment, regardless of whether they are control or
non-control positions. Thus, employment of aliens for
evening clerical positions is prohibited. The reason is
obvious: to plug any loopholes that unscrupulous aliens
may exploit for the purpose of circumventing the law.
2.
BALMACEDA v UNION CARBIDE PHILIPPINES INC
FACTS: Union Carbide was a manufacturer having 2
divisions: the Consumer Products Division and the
Industrial Products Division.
“consumption goods.” They are sold to manufacturers
and industries as raw materials. They are intermediate
goods, not consumption goods.
3.
GOODYEAR TIRE v REYES SR
FACTS: Goodyear, a corporation not wholly owned by
Filipinos, was engaged in the manufacturing and sale of
rubber products such as tires, batteries, conveyor belts,
soles of shoes, etc.
ISSUE: W/N Goodyear is covered by the Retail Trade Law
insofar as the prohibition against aliens from engaging in
retail trade is concerned.
HELD: NO. “Retail” pertains to the direct selling to the
general public of merchandise of goods for consumption.
They pertain to goods for personal, family and
household consumption. A manufacturer who sells his
products to industrial and commercial users so that the
latter may use the same to render some general service
to the public is clearly not covered by the prohibition.
The enterprise of Goodyear clearly falls within this
category. The sale to proprietary planters and persons
engaged in the exploration of natural resources is also
included in the said classification and cannot be
considered “retail” as to come within the ambit of the
prohibition. But insofar as sale to employees and
officers is concerned, this may be considered “retail”
and comes under the prohibition.
ISSUE: W/N the Industrial Products Division is engaged in
the retail business
HELD: NO. “Retail” pertains to the direct selling to the
general public of merchandise of goods for consumption.
They pertain to goods for personal, family and
household consumption. The products sold under this
division are clearly not covered by the term
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
4.
DBP v HON JUDGE OF RTC OF MANILA
FACTS: In 1978, Pioneer Glass Manufacturing
Corp.purchased from Yu (under Ancar Equipment Parts
and Tonicar) equipment parts worth P7,000. However,
Pioneer failed or refused to pay upon demand. Without
49
informing Yu, Pioneer Glass transferred all its assets to
DBP in a "deed of cession of property in payment of
obligation" or dacion en pago. In turn, DBP sold these
assets to Union Glass that same year.
In 1983, Yu instituted an action against Pioneer Glass,
DBP, and Union Glass, asserting that the transfer of the
assets to DBP was void by reason of fraud.
Pioneer Glass: denied liability to Yu on the ground that
by virtue of the dacion en pago in favor of DBP, the
bank assumed liability to its creditors including Yu under
a payment scheme, which is under pending
implementation
DBP: denied liability to Yu on the ground that there
being no proof that the unpaid merchandise purchased
by Pioneer Glass were among those transferred to it
Union Glass: denied liability to Yu on the ground that
there was no privity of contract between them, or
ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA
assuming applicability of the Bulk Sales Law, no liability
attached to Union Glass.
MTC denied the motions to dismiss filed by Union
Glass and DBP and ruled in favor of Yu. RTC affirmed
MTC's decision.
ISSUE: W/N the Pioneer Glass is a merchandiser, covered
under the Retail Trade Act
HELD: NO. There was an undisputed evidence that
Pioneer Glass manufactures glass only on specific orders
and does not sell directly to consumers but
manufactures its products only for particular clients. As
such, it cannot be said the Pioneer Glass is a
merchandiser within the meaning of the Retail Trade
Act.
50
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